Field W ork ofERP
Im plem entation Process
Presentation by
D evendra
43
Supriya
47
Snigdha
19
Arvind
27
Parikshit
16
Introduction
Tata Ryerson is a 50:50 joint venture between Tata Steel and
Ryerson Tull of the US which manufactures hot and cold-rolled
coils, strips, plates, sheets and blanks.
Head quartered in Kolkata
Manufacturing facilities in : Jamshedpur, pune
Distribution points: Howrah, Pune, Jamshedpur, Faridabad,
Chennai, Raipur and Bangalore.
Plans to open 50 new sales offices by 2006.
The company went live with SAP in 1997.
ERP History
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SAP provides:
Inventory and stockyard m anagem ent
Sm alllot deliveries
Just In Tim e supplies.
Tata Ryerson has upgraded its ERP package
tw ice in the past seven years as a result the
com pany has grow n from 10 crore in 1999 to
335 crore in 2004 and its transaction has
doubled in the past 2 years.
SAP: The Package of choice
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Tata Ryerson undertook a evaluation
exercise to select on R/3 3.0 F version.
The core package had sales and
distribution,m aterials
m anagem ent,finance,production planning
and application link enabling m odules.
It had w elldeveloped queries,reports and
graphicalpresentation of data.
The need for localization
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Tata Ryerson upgraded from Sap R/3 3.0F
to R/3 4.0 B
3.0 version lacked localization feature such
as excise reporting and enhanced sales
tax feature suited to Indian m arket.
4.0 version enabled to sm oothly integrate
Tata Steel’s SAP and Tata Ryerson’s ERP.
Evident Results
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Tata Ryerson added substantialvalue to
m aterials supplied by Tata Steelbefore it is
dispatched to the custom er.
R/3 4.0 Version helped to share inform ation
about the m aterials and custom ers online.
It also enables sharing of alldocum ents from
Tata Steel’s SAP system w hich accom pany
the m aterialw hen it is shipped.
Enterprise Upgrade
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Product support w as no longer available
for 4.0 version.
Transactions volum e w ere doubling year
on year.
Change ofcom plete hardw are
infrastructure to handle large scale
transactions.
Hence they decided to adopt SAP R/3 4.7
Version.
Handling the Blackout
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Before going live w ith 4.7 version the
entire application and developm ental
server had to be shut dow n for 48 hours.
During this period the com pany had to
ensure that the system is up and running
and is not affecting the business.
Business Gains
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The Q uantitative goals of the com pany w ere
achieved w ith
Increased efficiency of business processes
Im proved productivity
Reduced Costs
O ptim ized w ork flow
Reduction in errors
Transaction speed w as accelerated m any fold
because of availability of realtim e inform ation
Business Gains (Contd.)
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Custom ers could query the quantity of
m aterialavailable at a particular tim e and
plan their production and scheduling
flexibly.
Com pany could change the production
cycle as per custom er requirem ents at any
given tim e w hich translated into im proved
custom er service and quality control.
Future Rollouts
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Tata Ryerson is planning to bring into the ERP
system its 10 new ly opened offices.
It intends to im plem ent the Hum an resource and
Payrollm odules of ERP package and looking for
an appropriate partner.
Also they m ight consider the CRM and SCM
packages
Incase VAT com es into picture this version
w ould need to m ake only m inor changes to the
existing excise m odule.
IT INFRASTRUCTURE AT TATA RYERSON
INDUSTRY
Steel: hot and cold rolled
steelcoils,strips,plates and
sheets
HARDW ARE
Production Server: HP M L570 w ith
Pentium III
Developm ent Server: HP DL 380
SO FTW ARE
SAP R/3 3.0 F upgraded to R/3 4.0 B and
later to R/3 4.7
O PERATING SYSTEM
W indow s 2000
DATABASE
O racle 9i
IM PLEM ENTATIO N PARTNER
Tata Technologies,Pune
CO ST
Rs 3,47,50,000
Questionnaire
1.
Which ERP solution are you using?
SAP R3 4.7 version
2.
When do you started using this ERP system?
1997
3.
What made you think to go for ERP solution (need for ERP
solution)?
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For better inventory and stock management
To differentiate itself through product and service quality
Integrate various units throughout the country
Lack of real time information resulted in inefficient management of
working capital
4.
Are you using readymade ERP or custom build ERP?
Ready made
5.
Why do you went for readymade or Custom ERP?
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The need for localization such as exercise reporting and
enhanced sales tax features.
Better integration with Tata steel’s SAP system.
What was the average amount of investment in terms of
hardware, software, networking, consulting and training
expenses etc?
ERP Package implementation of R/3 3.0 F Version
Upgrade to version R/3 4.0 B
Upgrade to version R/3 4.7
Total
: Rs. 3,00,00,000
: Rs.
2,50,000
: Rs. 45,00,000
: Rs. 3,47,50,000
7.
How long the implementation duration of this work was?
8 Months
8.
Was there any cost overrun and time overrun for ERP module
and why (if any)?
No
9.
What are the problems faced during implementation? What
were the change management issues?
Handling of black out for 48 hours.
Training for employees.
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10. Was there any retrenchment of employees, if yes, in how
many numbers?
No
11. Business Process Reengineering was done before ERP
implementation or it was done as per ERP package?
BPR led ERP implementation.
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12.
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What are the benefits received by the organization after ERP
implementation?
Company growth from Rs 10 crore in 1999 to Rs 335 crore in
2004.
Its transaction has doubled in the last 2 years.
Increases efficiency of business processes
Improved productivity
Reduced costs
Optimized workflow
Reduction in errors
Availability of real time information accelerated transaction speed.
Flexible production and scheduling plans
Change in production cycles as per customer requirements at any
given point has improves customer service and quality control.
13. What is the technology platform used for
this system?
ν Hardware: The production server is a HP ML570
with a Pentium III Xeon
processor, a 240 GB
hard disk and 2.4 GB of memory.
ν Operating System : Windows 2000
ν Database :
Oracle 9i
ν Implementation Partner : Tata Technologies.
Nestle SA
An ERP odyssey
History
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Nestle SA is a Sw itzerland based consum er goods giant that
w anted to use SAP system to help in centralize 200 com panies
and subsidiaries in 80 countries.
It had signed a m uch publicized $200 m illion contract w ith SAP
and an additional$80 m illion for consulting and m aintenance— to
installan ERP system for its globalenterprise.
ERP Odyssey
•Nestlé's global SAP project, which is tied in to a larger
$500 million hardware and software data center rehaul,
will be integrated with its American subsidiary's soon
-tobe completed ERP.
• In 1997, Nestle USA, the Glendale, Calif.-based
company embarked on an SAP project code-named
Best .
• Best took 6 years for implementation completion and
cost around $200 million. The last rollouts were in the
first quarter of 2003.
• To date the Best project has saved the company $325
million.
The Problems faced by Nestle
USA
• An gr y em ployees
• E x pen s i ve r een gin eer i n g
• L on g per iods of w ait i n g
• R es is t an ce t o ch an ge
The Problem:
29 Brands of Vanilla
• B efor e 1991, Nes tlé was s imply a collection of
independently oper ating br ands , s uch as
S touffer 's and Car nation, owned by the S wis s bas ed par ent. I n 1991, the br ands wer e unified
and r eor ganiz ed into Nes tlé US A.
• Divis ions s till had geogr aphically dis per s ed
headquar ter s and wer e fr ee to make their own
bus ines s decis ions
• T he new company was tr ying to intr oduce
economies of s cale and common pr actices , but
year s of autonomous oper ation pr oved an
almos t ins ur mountable hur dle.
• Among many other tr oubling r edundancies , that
Nes tlé US A's br ands wer e paying 29 differ ent
pr ices for vanilla—to the s ame vendor
• T he r eas on was becaus e ever y divis ion and ever y
factor y got to name vanilla whatever they wanted
to. S o one could call it 1234, and it might have a
whole s pecification behind it, and I t might be called
7778 by s omebody els e. T her e was no way of
compar is on.
• T he s olution was to have a common s ys tem
acr os s the Nes tle empir e which would cr eate
s avings thr ough gr oup buying power and facilitate
data s har ing between s ubs idiar ies .
The Proposal: One Nestlé,
Under SAP
One Nes tlé r eflects the goal of tr ans for ming the
s epar ate br ands into one highly integr ated company
The Trouble:
• Nes tle US A us es nine differ ent gener al ledger s and
28 points of cus tomer entr y
• I t had multiple pur chas ing s ys tems with no r ecor d
of how much volume it was doing with a par ticular
vendor becaus e ever y factor y s et up their own
vendor mas ter s and pur chas ed on their own.
• T her e was need for bus ines s Pr oces s Reengineer ing
to change the way of doing bus ines s .
T h e S ol u t ion pr opos ed:
• Recommendation for S AP Package
• Maj or changes in the nex t 3 to 5 year s in bus ines s
pr oces s es .
The Solution Im plem entation
• B y October 1997, a team of 50 top bus ines s
ex ecutives and 10 s enior I T pr ofes s ionals had been
as s embled to implement the S AP pr oj ect.
• T he team's goal was to come up with a s et of bes t
pr actices that would become common wor k
pr ocedur es for ever y Nes tlé divis ion. All the
divis ional functions —manufactur ing, pur chas ing,
accounting and s ales —would have to give up their
old appr oaches and accept the new pan- Nes tlé
way.
• T he S AP s ys tem would be cus tomiz ed ar ound the
unifor m bus ines s pr oces s es .
• B y Mar ch 1998 the key s takeholder s had a plan
in place. Nes tlé would implement five S AP
modules —pur chas ing, financials , s ales and
dis tr ibution, accounts payable and accounts
r eceivable—and the Manugis tics ' s upply chain
module.
Development wor k began in July in
1998.
• T he deadline for four modules was
Y2K .T he new s ys tems would have to
double as code fix es and be in place
for the millennial change
• Nes tlé US A made the deadline. B ut
its has te cr eated almos t as many
pr oblems as it s olved.
The Process: Nestlé's Crunch
• Even befor e thr ee of the S AP and the Manugis tics
modules wer e r olled out in late 1999, ther e was
r ebellion in the r anks .
• Employee r es is tance becaus e none of the gr oups that
wer e going to be dir ectly affected by the new pr oces s es
and s ys tems wer e r epr es ented on the key s takeholder s
team.
• Dunn(CI O) s ays , " We wer e always s ur pr is ing [ the
heads of s ales and the divis ions ] becaus e we would
br ing s omething up to the ex ecutive s teer ing committee
that they wer en't pr ivy to." Dunn calls that her near fatal
mis take.
• B y the beginning of 2000, the r ollout had collaps ed into
chaos . Not only did wor ker s not under s tand how to us e
the new s ys tem, they didn't even under s tand the new
pr oces s es . And the divis ional ex ecutives , who wer e j us t
as confus ed as their employees — and even angr ier —
didn't go out of their way to help.
• Nobody wanted to lear n the new way of doing
things . Mor ale tumbled.
• T ur nover among the employees who for ecas t
demand for Nes tlé pr oducts r eached 77 per cent;
the planner s s imply wer e loath or unable to
abandon their familiar s pr eads heets for the
complex models of Manugis tics .
• A technical pr oblem s oon emer ged as well. I n
the r us h to beat the Y2K deadline, the B es t
pr oj ect team had over looked the integr ation
points between the modules .
• I n its has te to unify the company's s epar ate
br ands , the pr oj ect team had es s entially
r eplaced divis ional s ilos with pr oces s s ilos .
The R em edy:
• I n June 2000 the pr oj ect was halted. T he
company r emoved Mar c Richender fer as pr oj ect
coleader and gave Dunn full r es pons ibility.
• I n October 2000, Dunn gather ed 19 Nes tlé US A
key s takeholder s and bus ines s ex ecutives for a
thr ee- day offs ite at the DoubleT r ee Hotel in
Pas adena, Calif., about 10 miles fr om Nes tlé
headquar ter s .
• T he offs ite gr oup member s eventually decided
that to finis h the pr oj ect they would need to begin
at the beginning, s tar ting with the bus ines s
r equir ements then r eaching an end date, r ather
than tr ying to fit the pr oj ect into a mold s haped by
a pr edeter mined end date.
• T hey als o concluded they had to do a better j ob of
making s ur e that they had s uppor t fr om key
divis ional heads and that all the employees knew
ex actly what changes wer e taking place, when,
why and how.
Lessons learnt
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No m ajor softw are im plem entation is about
softw are.Its about change m anagem ent.
Shortcuts in ERP im plem entation is shortest route to
unem ploym ent.
M oving to SAP is about challenging the principles
and beliefofthe em ployees and the w ay things
have been done tillnow ,hence its very risky.
The End Game:
Sadder But Wiser
• B y Apr il 2001, the end- s tate des ign was complete,
giving the pr oj ect team a highly detailed r oad map
to follow.
• A month later , T om James came on boar d as
dir ector of pr oces s change for the B es t pr oj ect,
having the s ole r es pons ibility of acting as a liais on
between the divis ions and the pr oj ect team. James
s ays that he was s hocked by the s till poor
r elations hip between the divis ions and the pr oj ect
team.
• Nes tlé US A's pr oj ect has achieved s ignificant ROI ,
with the lar ges t chunk of s avings fr om better
demand for ecas ting.
• T he B es t pr oj ect has s aved $325 million till date.