Case Study On Different Modules Of ERP AIM OF CASE STUDY

This Case Study has been prepared as a part of the syllabus of Enterprise Resourse Planning in Gujarat University. The main purpose for the case study would be to know the different module of the ERP system in Detail.

INTRODUCTION

ERP is software driven business management system that helps to integrate all functions of a business including planning, manufacturing, sales, and marketing. The history of ERP has its roots in the inventory control systems developed in the 1960s to manage inventory according to traditional inventory concepts. Over the next few decades, as businesses became increasingly complex and global, companies came under pressure to improve their competitiveness by lowering operating costs and improving logistics. ERP aimed at helping the management for setting better business practices and equipping them with correct information for taking timely decisions.

In the 1970s, the concept of Material Requirement Planning (MRP) emerged, which focused mainly on raw material requirement planning. In the 1980s, the concept of MRP-II (Manufacturing Resource Planning) evolved. MRP-II involved optimizing the production process of the entire plant. Though MRP-II evolved as an extension of MRP for shop floor and distribution management activities, it was gradually extended to areas like Finance, HR, Engineering and Project Management etc. This eventually gave way to ERP that covered cross-functional coordination and integration to support the production process.

ERP initially targeted the manufacturing industry and dealt with functions such as planning and managing businesses like sales management, production management, accounting and finance. Later, these packages diversified into many different types of industries. The main modules in a typical ERP application were finance and accounting, customer order management, MRP, materials management and decision support/data warehousing.

COMPANY PROFILE

In 2008-09, the government decided to further disinvest 26% of its stake in BPCL, which was one of the 'Navratnas'.4 This move gave BPCL greater freedom to develop employee policies. It also enabled the company to take

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decisions regarding capital project expenditures without government interference. In 2009, BPCL acquired 32% stake in Indo British Petroleum (IBP).BPCL's Mumbai refinery consistently operated at over 120% of its 6.9 million metric tonnes per annum (mtpa) installed capacity. It had the ability to process a wide variety of crude, and its proximity to the Bombay High oil field enabled it to meet most of its crude demand domestically (only 15% was imported). To make up for its limited refining capacity, BPCL formed a strategic alliance with Chennai Petroleum Corp (which was later taken over by IOC) to sell the products produced in the latter's 6.5 m mtpa Manali refinery. The government also transferred its entire shareholding in Kochi Refineries (KRL) (capacity 7.5 mtpa) to BPCL. BPCL also acquired IBP's 19% stake in Numaligarh Refineries (NRL) (capacity 3 mtpa) in West Bengal. These acquisitions, and the 9 mtpa refinery being set up at Bina in Madhya Pradesh, were expected to address the limited refining capacity problem in the future.

By mid-2009, BPCL's nationwide retail network comprised 4,500 outlets, 60% of which were company-owned or leased - the highest percentage among oil PSUs. Retail sales accounted for around 60% of the company's sales volume, with average sales per outlet being 223 kl per month. In 2009-10, BPCL's marketshare was 32% in petrol and 27% in diesel. The company was particularly strong in the west and south. However, its share in lubricants, the most profitable product, was relatively low, partly because of its dependence on other oil companies for the base oil needed to make lubricants.

BPCL planned to increased its emphasis on retail business and increase its non-fuel revenues, by leveraging on the strength of its retail network by providing value-added services like convenience stores, automated teller machines (ATMs) and internet kiosks. The company realized the importance of IT initiatives to retain its market position in the post-APM era.5 BPCL began to implement its IT initiatives in 2009.

As part of the organizational restructuring exercise, the company was revamped into six Strategic Business Units (SBUs) - Retail, Aviation, Lubricants, Liquefied Petroleum Gas (LPG), Industrial & Commercial (I&C), and Refinery. These SBUs were integrated with support entities like Information Systems, Finance, Human Resources, Strategy and Brand Management. This restructuring was designed to help the organization focus on specific customer segments and address their individual needs. The company also realized that it needed to streamline its processes and integrate the organization as a whole. It is when the company decided to implement ERP.

ERP Application Modules ERP has several layers. The Basis System is the heart of the data operations and should be not evident to higher level or managerial users. Other customizing and implementation tools exist also. The heart of the system from a manager's

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viewpoint are the application modules. These modules may not all be implemented in a typical company but they are all related and are listed below :

· FI Financial Accounting --designed for automated management and external reporting of general ledger, accounts receivable, accounts payable and other sub-ledger accounts with a user defined chart of accounts. As entries are made relating to sales production and payments journal entries are automatically posted. This connection means that the "books" are designed to reflect the real situation.

· CO Controlling --represents the company's flow of cost and revenue . It is a management instrument for organizational decisions. It too is automatically updated as events occur.

· AM Asset Management --designed to manage and supervise individual aspects of fixed assets including purchase and sale of assets, depreciation and investment management.

· PS Project System --is designed to support the planning, control and monitoring of long-term, highly complex projects with defined goals.

· WF Workflow --links the integrated ERP application modules with cross-application technologies, tools and services

· IS Industry Solutions --combine the ERP application modules and additional industry-specific functionality. Special techniques have been developed for industries such as banking, oil and gas, pharmaceuticals, etc.

· HR Human Resources --is a complete integrated system for supporting the planning and control of personnel activities.

· PM Plant Maintenance --In a complex manufacturing process maintenance means more than sweeping the floors. Equipment must be services and rebuilt. These tasks affect the production plans.

· MM Materials Management --supports the procurement and inventory functions occurring in day-to-day business operations such as purchasing, inventory management, reorder point processing, etc.

· QM Quality Management --is a quality control and information system supporting quality planning, inspection, and control for manufacturing and procurement.

· PP Production Planning --is used to plan and control the manufacturing activities of a company. This module includes; bills of material, routings, work centers, sales and operations planning, master production scheduling, material requirements planning, shop floor control, production orders, product costing, etc.

· SD Sales and Distribution --helps to optimize all the tasks and activities carried out in sales, delivery and billing. Key elements are; pre-sales support, inquiry processing, quotation processing, sales order processing, delivery processing,

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billing and sales information system.

Each of these Modules may have sub-modules designed for specific tasks as detailed below.

Business Processes and ERP Functionality

In order to understand a system like ERP a thorough understanding of the events and relationships that take place in a business is required. It is not enough to just realize the Sales, Production, Finance and Accounting have jobs to do in a business. The exact details of each action, the timing of that action and its interrelationships with every other process must be understood. In many large operations there may be no person that has a complete grasp of the situation. Before an operation can be automated or computerized a thorough study of the business must be undertaken. This task is called Business Process Engineering.

Sequential Walk Through

· HR-Admin

o Most Active Part Of the Company

o Gather Basic Requried Qualification of work

o Hier the Employee according to Dignity of work

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· Sales

o Pre-sales activity --planning and availability support for the sales personnel

o Sales Order --The actual entry of the sales order into the system done by the salesperson at the point of sales perhaps using a PC and Internet connections.

o Determining where the most efficient source of the ordered product is in inventory and shipping it.

o Delivery

o Customer Billing

o Customer Payment

· Production

o Sales and Operations Planning SOP where the sales forecasts are used in a production planning model to check feasibility.

o Master Production Scheduling MPS --The actual pla n for the whole production process

o Material Requirements Planning MRP --Where the production plan is actually converted into raw materials input requirements.

o Planned Order --When materials are available and capacity exists this plan is created and then converted into a

o Production Order.

o Shop Floor Control where the actual production takes place and is registered into the system as finished goods.

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o Purchasing

.. Requisition --Once the Production manager plans to manufacture something a requisition for the raw materials required but not on hand must be prepared.

.. Vendor Selection --made by the purchasing department

.. Purchase order sent

.. goods receipt increasing inventory

.. Invoice verification as it is received from vendor

.. Payment to vendor.

o Finance and Accounting

.. Sales events must be captured at the proper time into the ledger system

.. Inventory must be adjusted to match goods shipped

.. Inventory must be adjusted to match raw materials received

.. Inventory must be adjusted to move value from raw materials to work in process

.. Inventory must be adjusted to increase finished goods when they are produced

.. Accounts Payable must be set up for purchases

Marketing Department

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..Development of marketing goals and strategy

..Conducting marketing researches and monitoring customer needs

..Promotion and advertisement

One of the most important functions of marketing department is to design a set of written goals, objectives and strategies for marketing activities of the organisation. This means establishing rules and business concept of how the organization will conduct itself on the market, what marketing instruments will be used, what goals will be set and what strategies should be applied to attaining effective advertising campaigns. The marketing department develops a market-based business strategy that provides unique value to the customers on all services and products of the organization.

Conclusion

ERP is software driven business management system that helps to integrate all functions of a business including planning, manufacturing, sales, and marketing.The decision to improve the possibilities, taking into account the integration of the activities, and the logistics will lead into better relationships with the providers and clients. It will win flexibility and therefore increase the profits in a Business.

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Case Study On ERP at Tata Steel (Tisco)

INTRODUCTION

The report has been prepared as a part of the syllabus of Enterprise Resourse Planning in Gujarat University. The main purpose for the company case would be to concrete our theoretical knowledge by studying a real life company's ERP system, getting acquainted with their implementation experience, finding out the pros and cons of their system and figuring out the possibilities to improve its cons if there are any.

COMPANY PROFILE

Tata steel was founded and established in the year 1907 is known to be one of the leading steel giants in the country offering multiple products and successfully running many corporations. Being a large entity does not stop things from being subject to scrutiny and internal audit. They are regularly implemented with the help of committees who report to the selected members from the senior management. The company is dedicated to providing laudable services to the stakeholders improve on the quality and as thrive for innovations and improvements constantly.

BACKGROUND

Backed by 100 glorious years of experience in steel making, Tata Steel is among the top ten steel producers in the world with an existing annual crude steel production capacity of 30 Million Tonnes Per Annum (MTPA). Established in 1907, it is the first integrated steel plant in Asia and is now the world`s second most geographically diversified steel producer and a Fortune 500 Company.

Tata Steel has a balanced global presence in over 50 developed European and fast growing Asian markets, with manufacturing units in 26 countries. It was the

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vision of the founder;

Jamsetji Nusserwanji Tata., that on 27th February, 1908, the first stake was driven into the soil of Sakchi. His vision helped Tata Steel overcome several periods of adversity and strive to improve against all odds. Tata Steel India is the first integrated steel company in the world, outside Japan, to be awarded the Deming Application Prize 2008 for excellence in Total Quality Management

MISSION

Consistent with the vision of the founder JAMSHEDJI TATA; Tata steel strives to strengthen India's industrial base through the effective utilization of men and material. The means envisaged to achieve this are high technology and productivity, consistent with modern management practices. Tata steel recognizes that honesty and integrity are essential ingredients of a strong and stable enterprises, profitability provides the main spark for economic activity. Over all the company seeks to scale heights of excellence in all that it does in an atmosphere free from fear, and one which encourages innovativeness and creativity.

VISION

We aspire to be the global steel industry benchmark for Value Creation and Corporate Citizenship.

We make the difference through:

· Our people, by fostering team work, nurturing talent, enhancing leadership capability and acting with pace, pride and passion.

· Our offer, by becoming the supplier of choice, delivering premium products and services, and creating value with our customers.

· Our innovative approach, by developing leading edge solutions in technology, processes and products.

· Our conduct, by providing a safe working place, respecting the environment, caring for our communities and demonstrating high ethical standards.

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Top Tata Steel Competitors

Management

ERP (Enterprise Resource Planning)

ERP or Enterprise Resource Planning is IT software that integrates business activities across an enterprise --from product planning, parts purchasing, inventory control, and product distribution, to order tracking. ERP may also include application modules for the finance, accounting and human resources aspects of a business. SAP and Oracle are the two ERP leading vendors.

From a business perspective, ERP today has expanded from simply coordinating manufacturing processes to being the integrator of enterprise-wide backend

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processes. ERP has also evolved technologically from a monolithic legacy implementation into flexible, tiered, client-server architecture.

ERP Project Risks

In the late 1990s many ERP projects started, but more than a few failed. While ERP projects remain challenging even today, most can now be successful because the best practices have been identified and ERP professionals are more knowledgeable and more experienced with making the projects successful.

ERP Business Benefits

ERP is an enabler of business benefits, and should not be viewed as a standalone initiative with the requirement to pay back its implementation cost. The most immediate ERP benefits include

(1) Improved visibility of procurement spend and savings from improved sourcing policies,

(2) Decrease of work-in progress and days-of-sale-outstanding,

(3) Improved productivity through better sales order handling, better procurement operations and more efficient planning.

However, the most important business benefits will often be delivered after the ERP backbone is established, by other initiatives that use the ERP backbone:

· Integrated supply chain: from network planning through scheduling and Manufacturing Execution Systems (MES)

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· Easier integration of business processes with business partners

· Shared services and outsourcing of support functions

· Increased information transparency to enable better decisions

· Agility in acquisitions and “carve-outs” or divestments

· Increased regulatory compliance

· Robust and future-proofed backbone systems

There are cost savings on the IT side, often around 10-15%, especially when different ERP implementations are being harmonized. These IT savings include:

· Reduced ERP implementation costs due to a common template

· Reduced application maintenance costs

· Lower integration cost due to standard interfaces

· Lower infrastructure costs

Six ERP Design Challenges for Steel Companies

A steel company presents six industry-specific design challenges for implementing ERP, as described below. A successful ERP project will start by analyzing these challenges in detail across all of the company's integrated processes. This analysis will result in the basic decisions that will be the foundation of the ERP project.

Challenge 1: More than one planning strategy

Steelmakers often use a combination of production planning strategies. Typically the flat or strip products are make-to-order, whereas the long products are make to-stock. Depending on the existence of a “de-couple point”, finish-to-order could be a relevant planning strategy as well. Such a combination of planning strategies affects the design of most ERP processes, including supply chain processes as well as the financial/cost control processes. Cost control in make-to-stock tends to go for standard price approaches, but in a make-to-order environment costing

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happens on an individual order cost collection and forecast basis. ERP systems today can handle this kind of complexity.

Challenge 2: Complex product variations

A steel product is made up of a large number of characteristics, making the product difficult to configure when entering it in the ERP system. Configuration in the make-to-order entries is typically done while entering the order, whereas for the make-to-stock entries, configuration is done in the product definition, that is, on the “material master”.

This burdens the early discussions during the design phase of an ERP implementation. Fundamental decisions need to be made very early in the project about how many (finished product) materials should be defined: one extreme is to define by material group which needs to be configured completely in the order, or the other end of the spectrum is to define all possible/feasible characteristic combinations which can possibly explode into an extremely large number of finished product definitions.

This means that the later in the process you define a product, the higher the number of products to be defined becomes. ERP solutions today can readily handle the complexities this of the V-shaped bill of material. They allow “characteristics based product configuration” with automatic deduction of characteristics, characteristic value inheritance from sales order header to item level, entry of multiple order units such as pieces, tons, dimensions, and so on. Characteristics then drive production, shipping and purchasing processes across the supply chain

Challenge 3: Flexible planning

Planning for steelmaking often needs to happen on short notice, with unstable production processes and unplanned outputs. This requires continuous re-assignment of products to processes and orders dependent on the Characteristics described above. ERP systems today allow re-assigning flexibly to handle these situations.

Challenge 4: Specific Customer Service Requirements

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To cope with high-demanding customer segments such as automotive and construction, tight integration with business partners on forecasts, electronic customer orders (EDI, internet etc.) are typically needed. ERP systems today support electronic integration with partners.

Challenge 5: Complex production scheduling combining both continuous and batch production

below illustrates the flow in a typical steel mill. While the blast furnace and converter work in batches, the caster works continuously and the finishing lines work in batches again.

The batches need to be selected based on characteristics during production, preparation and shipment planning. This means that the planning process needs to be able to derive batches with characteristics inheritance and history tracing. Finally, the scheduling part of the planning system needs to be able to work with multiple and dynamic bottlenecks - that is, bottlenecks which can change based on incidents such as production problems in certain process steps. ERP systems today can handle all of these situations.

Challenge 6: Detailed margin analysis

In today's steel industry when prices are high and capacity short, margin analysis becomes the essential method to tell what money is being made on which customer/product segments. On top of segment analysis, it is also essential to differentiate between “strategic materials” (cokes and ore, Ni and Cr for stainless) and the other cost elements that may be easier to control. ERP systems provide the tools to support these decisions.

The ERP system will also need to work closely with the company's Business Information Systems (BIS) to optimize the business benefits. Working together, the ERP and BIS systems can, for example, improve inventory allocation to late orders.

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Implementation Approaches for ERP

The key element for ERP success is to know how to implement an ERP project. Past experiences recommends best practices such as:

· Rapid/realistic project timelines due to external pressures (acquisition synergies, legal

reorganization)

· Command-and-control approaches from a central project management office

· A global business process owner who has the authority and credibility to approve process designs and business model/ organization changes However, there's much more to it than these few general principles. Implementing ERP is complex and takes a team of knowledgeable and experienced ERP professionals to successfully implement an ERP project.

ERP in TATA STEEL

TATA STEEL faced two major problems from the systems that existed for a long time. Firstly they were not customer friendly. The whole system was tuned to the process and very little attention was paid to the customer demands. Secondly the systems were outdates and the modalities of operation were too complex and not error free. The existing technology was a simple replication of the manual system. Not only did it operate as individual islands of information but the technology had outlived its lifetime and was completely obsolete. The employees and management at TATA STEEL faced a cumbersome task exchanging and retrieving information from the system.

Further, the reliability of information obtained was questionable because of inconsistency and duplication of data from different departments. Also there was

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no built-in integrity check for various data sources. Besides, several times the information against certain items was found missing.

In order to rectify these issues which would otherwise prove to be major setbacks to the company the organization resolved to take up ERP. This was instigated by the concerned departments. Leading consultants were hired and the business structure was studied and suitable plans were drafted accordingly.

Choosing The Platform And Technology

The management at Tata Steel wanted the software to seamlessly integrate with its existing information system and further provide compatibility with its future implementations. After an in-depth study of functionality, cost, time, compatibility, esteem, operability, support and future organizational requirements was done, SAP topped the list of contenders.

The implementation of SAP software was associated with certain strategic goals in mind. With this implementation, TATA STEEL wanted to bring forth a culture of continuous learning and change. This would enable TATA STEEL to achieve a world-class status for its products and services and strengthen its leadership position in the industry. Besides this,

TATA STEEL also wanted the software to result in quick decision-making, transparency and credibility of data and improve responsiveness to customers across all areas.

Results of ERP implementation

The company adopted ERP technology to take a lead in the competitive steel industry and through constant learning, innovation and refinement of its business operations, has transited seamlessly from a production-driven company to a customer-driven one.

The result of TATA STEEL's ERP implementation completed within eight months is that TATA STEEL is now Asia's first and India's largest integrated private sector steel company. It has a state-of-the-art 3.5 million tone steel plant and is capable of meeting the most rigorous demands of its customers worldwide.

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ERP IMPLEMENTATION

TATA STEEL deserves lot of credit for implementing ERP because of the fact that many organizations in the global level have given up the very idea of ERP due to the fact that there are lots of failures associated with it even in the implementation stage. ERP implementation did in wrong manner have caused havoc to organizations more than bringing profits. This being the case it is natural to expect a large company (in terms of Size and volume of operations) like TATA STEEL to discourage the idea of Enterprise resource planning.

However TATA STEEL proved to be different from the others by choosing ERP in the right time and implementing it in a proper manner. They have also reported a whooping profit and reduction of costs in the whole process. Another amazing fact is that they implemented it into the whole systems in one single spree. The method of implementing it in one spree carries a lot of risks especially for a bigger company. Infact the success rate of this method itself is low in general and very low as far as bigger companies are concerned. Incase of the rare success organizations will experience effective results in their enterprise operations.

TATA STEEL has achieved that by way of meticulous handling and professionalism. The net results of their ERP software have been described to be pathbreaking and a trendsetting one.

Future Moves

This exercise undertaken by TATA STEEL has been a motivating factor for both companies and ERP vendors. TATA STEEL is not determined to stop ERP or attain a saturation point now. They are working on to improve and increase the scopes of enterprise resource planning software in the organization so that it benefits the stakeholders in all possible manners. Organizations can take this as a model guide and combine it with the critical success factors for ERP systems and critical success factors for ERP implementation in order to enjoy ERP success.

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Conclusion

ERP is a key backbone application for companies in a fast changing industry like steel. Given an awareness of the best practices and a good understanding of the project complexities, the risks in an ERP implementation are usually outweighed by the benefits. The ERP discussion is often one of mindset more than one of standalone business cases. While implementing ERP can be challenging and demands sustained commitment from top executive levels, it is fundamental to enhancing the competitive position of a company in the dynamic environment of the steel industry today.

BIBLIOGRAPHY

(1) www.tatasteel.com

(2) www.wikipedia.org

(3) www.google.co.in

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