Implementation At Indo Rama Synthetics Information Technology Essay

Implementation At Indo Rama Synthetics Information Technology Essay Before the year 2000, at INDO RAMA SYNTHETICS LTD., individual department worked independently to achieve its predefined corporate objectives. Every department used different tools and software. For example, the production department used MIMS software, accounts department used FoxPro and KICKS for its functionalities, while marketing department used tools which were not robust enough to support overall marketing functions. Lots of paper work in Human resource management was mind boggling and time consuming. This lacked inter-departmental coordination and hampered information sharing. For example, a department found it difficult to know about the stock kept by another department even in times of urgency due to lack of information. Inventory management always plays an important role in manufacturing industry, Indo Rama wanted to handle it more effectively. All these were the matters of concern for a company aspiring to be the best in its business globally. There was a need of cross-fu nctional and business process integration. So that company could react to changes in the market and economy in the most effective way. To overcome such problems, Indo Rama decided to go for Enterprise Resource Planning (ERP). The company decided to implement ERP from SAP (System Application Product). Indo Rama has been on SAP ERP platform since 2000, one of the earlier companies in India to migrate to the SAP platform. Also, recognizing core competence principles, the company outsourced its IT functions to ACCENTURE TECHNOLOGIES LTD., a global outsourcing firm, in July 2001. Accenture provides IT infrastructure management for all company locations, all legacy systems and ERP. All locations are connected on Wide Area Network (WAN) to the central server located at Butibori, Nagpur. INDO RAMA SYNTHETICS LTD. has implemented four major modules in SAP ERP: Sales Distribution (SD) Finance Costing (FICO) Material Management (MM) Plant Maintenance (PM) All major sites have been fire-walled; all locations have anti-spam and anti-virus software installed. The ERP and the internet have clearly defined password, tables of authorities and levels of access. Indo Rama Synthetics has also launched an intranet facility, Antarnaad, where internal policies, notices and other relevant organizational information are stored. Other application software that are in operation at Indo Rama include the Leave Management System, EMIS (where management reports for various levels are generated) and an auction site for vendor management. For its communications backbone, Indo Rama uses a Virtual Private Network (VPN), through which all locations are linked. The company has adopted Outlook Express for mail communications with a Linux-based back-end. During 2007-08, the IT team at Indo Rama undertook several projects. The key ones are detailed below. IRSL IRPL merger project Indo Rama Synthetics Ltd. has merged Indo Rama Petrochemicals Ltd into itself. The necessary changes needed to integrate the two entities in the ERP platform have been completed. Data Center The company built a new state of the art data centre at Butibori, Nagpur. All servers, the WAN and other network equipment are housed in this data center. The data center has been protected against unauthorized access and potential mishaps. Biometric security systems ensure that only authorized person can enter and access the data servers. Sophisticated systems have been installed for fire detection and suppression, water leakage, rodent damage and variations in ambient temperature and environment. Data backup of the SAP system is taken on tapes attached to SAP servers. One copy of the tapes is stored in a fireproof safe at data center and another at a location away from the factory. Every month, a set of tapes are also sent to the New Delhi office for safe storage. Packing System The legacy packing and recording system, which records the carton / box information and prints the labels, was on a FoxBASE database management system. This application has been converted onto an Oracle platform with enhanced features and functionality. Attendance Tracking System An attendance tracking system is installed at each department, which read the finger print responses of the employees every time they enter or leave the premises. It reduces the paper work and man power required to track the attendance. Significance of the study A Study was carried out keeping the functional working of IT department in view and its integration with other departments. Working and spending time with major departments helped us in drafting this report in the context of over all company objectives and strategies that necessitate a holistic approach cutting across various functional areas Marketing, Human Resource, Operations, Finance and Business environment. By implementing SAP ERP modules, manufacturing companies can attain Cross-Functional and Business Process integration required for information and data sharing across the organization. These functionalities save resource, cost and valuable time enabling the company to react fast enough to changes in market, competition and economy. Introduction Company Profile The journey of Indo Rama group began with the establishment of Ashok Textiles Limited, Nepal in year 1969. Indo Rama Synthetics ( I ) Ltd. as a cherished dream of Mr. O. P. Lohia (Chief Managing Director, IRSL) came into inception at Pithampura, Indore in year 1989. Indo Rama group have its subsidiaries in Indonesia, Srilanka, Malaysia, Nepal and India. ISO9001, 9002 certified Indo Rama, is among the leading producers of polyester with its products namely Poly Staple Fiber, Partially Oriented Yarn, Draw Textured Yarn, Fully Drawn Yarn and Polyester Chips are exported to Germany, Portugal, Greece, Turkey and Italy. Company believes in product technological advancements and is under technical collaboration with USA based DuPont and Japan based Toyobo. It uses most sophisticated machines from a German manufacturer Barmag and USA based Chemetex Intl. Indo Rama is highly committed to environmental regulations and best practices. Its priorities include minimizing waste, recycling, reusing effluents, controlling emissions, and plantation. The company invests significantly to reduce workplace accidents and ensure safety. Housing colonies, schools and health centers are built by the company as a part of corporate social responsibility. Objectives of the study To understand IT infrastructure management and study SAP ERP modules Material Management, Sales and Distribution, Order Processing, Financial Management, Plant Maintenance at Indo Rama Synthetics Ltd. Study shall help Indo Rama by providing the preliminary work, steps and evaluation required to go ahead in integrating the existing and proposed initiatives, through IT infrastructure management and SAP ERP modules. Study shall help in understanding the importance of Cross-Functional and Business Process integration by adopting IT tools and functionalities, so that manufacturing companies can react fast enough to changes in the market and economy. Brief description of the concepts ERP: An overview In the manufacturing industry, MRP (Material Requirement Planning) became the fundamental concept of production management and control in the mid 1970s. At this stage BOM (Bill of Materials), which is purchase order management that utilizes parts list management and parts development, was in the mainstream. And this concept (MRP) unfolded from order inventory management of materials to plant and personnel planning and distribution planning, which in turn became MRP-II (Manufacturing Resource Planning). This incorporated production management, financial accounting, human resource management, sales and distribution management functions and management accounting functions. It came to globally cover all areas of enterprise mainstay business and eventually came to be called ERP. Enterprise Resource Planning covers the techniques and concept employed for the integrated management of business as a whole, from the viewpoint of the effective use of management resources, to improve the efficiency of an enterprise. ERP packages are integrated software packages that support sales management, production management, accounting and financial affairs. ERP System Manufacturing Inventory Management Sales and Distribution Finance Human Resource Logistics Management Operations Quality Management ERP Implementation: Its relevance The basic idea of ERP is to assimilate companys data at some central location or repository where it can be checked, matched, and shared across the organization. This data is then used for resource planning within the organization in conjunction with the decision systems. Here, INDO RAMA SYNTHETICS aimed at eliminating wasteful duplication of data with the help of ERP. There are various techniques to improve production and efficiency across an organization such as Lean Manufacturing, Six Sigma Quality, Employee Involvement, Factory Automation, etc. These are excellent tools with enormous capabilities to support the business. But one can not achieve the full potential of business with these tools and technique unless they are backed by proper IT strategy, which helps in effective forecasting, planning, and scheduling process. ERP implementation is derived from factors such as the cost benefit analysis, decision making through pros and cons, defining performance goals, data integrity issues and solutions, defining operational environment and software selection. Business planning, strategy development Budgeting and forecasting Production plan and programme Material requirement Work load calculation and resource planning Monitoring operations and overall execution Performance measurement, learning and feedback Figure 1: ERP-related process in manufacturing industries. Mapping IT strategic initiative to ERP A few essential steps should be taken while deploying ERP in business process: Visualization: Visualization of need for ERP and impact on production and organization. Strategy formulation: Formulation of a strategy for ERP implementation and the need for the organization to respond to the changes. Planning of resources: Planning the resources and the overall business. Structuring and prioritization: The structuring of the organization and objectives along with prioritization of business initiatives needs to be outlined in detail before embarking on ERP. Transition: The organization ought to be readied for its transition to ERP paradigm. Deployment: Deployment of the system and new technologies. It also includes deployment of new tools. A proper ERP system selection and implementation helps the management to a large extent. There are various phases in the lifecycle of ERP; the major parts of which are planning, implementation and operation phases. IT enables communication between various parts of ERP and establishes an integrated ERP system. Understand the product requirement Solution planning Design phase SLA presentation and acceptance Implementation, testing Delivery Operation Plan Implement Operate Figure 2: ERP project life cycle implementation Supply Chain Management Supply chain management (SCM) refers to the coordination of activities involved in making and moving a product. SCM encompasses planning and management of all the activities involved in sourcing, procurement, conversion, and logistics management. Importantly, it also includes coordination and collaboration with the extended organizations and channel partners, who can be suppliers, intermediaries, third party service providers, and customers. SCM integrates and act as a balancing agent between supply and demand within and across companies. SCM brings value to business in terms of innovation, service, cost, and quality. Innovation: It brings value on table through unique technology or new conceptual products. Innovation gives an organization a competitive edge over other competitors. SCM helps in this process by allowing/producing optimal volume (raw material or products) and also by increasing efficiency, thereby ultimately reducing the time to market. Cost: An efficient operation with better resource management reduces the overall cost. Service: Better service can always attract customers. It is definitely a competitive advantage and SCM fundamentally contributes to it by its very nature. Quality: The quality strategy dictates production of the best-in-the-class products. SCM can also contribute to it through quality control and excellence in production. SCM, ERP and IT Infrastructure are inter-related. ERP begins with the Material Requirement Planning as depicted in following figure. Using intranets and extranets, all members of the supply chain can instantly communicate with each other, using up-to-date information to adjust purchasing, logistics, manufacturing, packaging, and schedules. A standard set of tools that are used by companies all over the world to coordinate global supply chains that include participants from many countries. Following figure explains intranet and extranet for SCM. Figure 3: Intranets and Extranets for Supply Chain Management Intranets integrate information from isolated business processes within the firm to help manage its internal supply chain. Access to these private intranets can also be extended to authorized suppliers, distributors, logistics services, and, sometimes, to retail customers to improve coordination of external supply chain processes. Inventory and Purchasing Management system MRP (Material Requirement Planning) ERP (Enterprise Resource Planning) ERP and SCM within the organization ERP and SCM across organizations Figure 4: Evolution of ERP and SCM The ERP functions from the perspective of supply chain optimization are shown in following flowchart. Overall process optimization Expense optimization Revenue and Profit optimization Logistics optimization Knowledge optimization Figure 5: ERP optimization at various stages of supply chain The business value of supply chain management systems includes: Streamlined supply chain and accurate information. Reduced supply chain costs. Increased sales through accurate product availability. IT plays a very important role in developing various functionalities and building an integrated system. Following figure highlights IT components in ERP, IT infrastructure and resources in SCM. The SCM planning is the input for ERP. Operating system Data warehouse Retail Link Data, account, analysis Forecast Inventory plan ERP SCM Manufacturing planning Feedback S E R V E R S Intelligent Systems Internet Figure 6: ERP, IT Infrastructure and resources in SCM Customer Relationship Management Customers can be seen as an enterprises most valuable asset, and customer relationship management enable large firms like Indo Rama Synthetics to understand and work with their customers. CRM can also be called a business strategy to select and manage the most valuable customer relationships. It supports effective marketing, sales and service processes. CRM is the process that manages the interaction between company and its customers. With the advent of sophisticated relation databases and data-mining techniques, CRM has enabled Indo Rama to specifically target customers to determine what products, services and values they want. CRM necessitates the alignment of initiatives such as e-business, sales force effectiveness, customer service, customer relationship planning, enterprise resource planning, and supply chain management with customer-accepted value propositions. But to enable CRM to meet the business objectives, it should be backed by IT strategies. The most telling benefit of IT-powered CRM is Return on Investment (ROI). The ROI from CRM typically comes in two forms. The first is cost reductions from increasing the efficiency. For example, when customer data helps an inside sales team maintain productivity levels with fewer resources, cost reductions do result. When the sales agents in the field spend less time manually entering data into slow legacy systems, companies do save time and money. CRM systems capture and integrate customer data from all over the organization, consolidating the data, analyzing the data, and then distributing the results to various systems and customer touch points across the enterprise. A touch point (also known as a contact point) is a method of interaction with the customer, such as telephone, e-mail, customer service desk, conventional mail, Web site, or retail store. CRM systems provide a single enterprise view of the customer and provide customers with a single view of the company regardless of the touch point the customer uses. Figure 7: Customer Relationship Management CRM systems examine customers from a multifaceted perspective. These systems use a set of integrated applications to address all aspects of the customer relationship, including customer service, sales, and marketing. Good CRM systems provide data and analytical tools for determining the financial lifetime value of a customer and customer loyalty and for identifying profitable customers and their needs. Commercial customer relationship management (CRM) software packages range from niche tools that perform limited functions, such as personalizing Web sites for specific customers, to large-scale enterprise applications. The more comprehensive CRM packages contain modules for: Partner relationship management (PRM): PRM software uses many of the same data, tools, and systems as customer relationship management to enhance collaboration between a company and its selling partners. It provides a company and its selling partners with the ability to trade information and distribute leads and data about customers, integrating lead generation, pricing, promotions, order configurations and availability. Employee relationship management (ERM). ERM software deals with employee issues that are closely related to CRM, such as setting objectives, employee performance management, performance-based compensation, and employee training. CRM typically provide software or tools for: Sales force automation (SFA): SFA modules help sales staff increase their productivity by focusing sales efforts on the most profitable customers. They provide sales prospect and contact information, product information, product configuration capabilities, and sales quote generation capabilities. Customer service: Customer service modules provide information and tools to make call centers, help desks, and customer support staff more efficient. They have capabilities for assigning and managing customer service requests and may include Web-based self-service capabilities. Marketing: Marketing modules support direct-marketing campaigns with capabilities for capturing prospect and customer data, qualifying leads, and scheduling and tracking campaign mailings. They include tools for analyzing marketing and customer data-identifying profitable and unprofitable customers, designing products and services to satisfy specific customer needs and interests, and identifying opportunities for cross-selling, up-selling, and bundling. Cross-selling is the marketing of complementary products to customers. Up-selling is the marketing of higher-value products or services to new or existing customers. Bundling is cross-selling in which a combination of products is sold as a bundle at a price lower than the total cost of the individual products. Figure 8: How CRM supports Marketing Customer relationship management software provides a single point for users to manage and evaluate marketing campaigns across multiple channels, including e-mail, direct mail, telephone, the Web, and wireless messages. The major CRM products support business processes in sales, service, and marketing, integrating customer information from many different sources. Following figure includes supports for both the operational and analytical aspects of CRM. Figure 9: CRM Capabilities CRM software can also be used to increase customer loyalty through customer service by identifying valued customers and providing them with special services or offers. Following process map shows how a best practice for promoting customer loyalty through customer service would be modeled by customer relationship management. The CRM software helps firms identify high-value customers for preferential treatment. Figure 10: Customer Loyalty Management process map Thus, the business value of CRM systems which benefits companies includes: Increased customer satisfaction Reduced direct-marketing costs More effective marketing Lower costs for customer acquisition and retention Increased sales revenues through identifying profitable customers Reduced churn rate: The churn rate measures the number of customers who stop using or purchasing products or services from a company and is an important indicator of the growth or decline of a firms customer base. Order Processing As soon as the clerk enters the order into the system, system checks the inventory records and finds out whether the items are available or not. If the item are available, procedures are triggered automatically that will inform the people in the sales and distribution department and the finance department. The information will contain the details of the items to be shipped, the most economic route to the customer and so on. Also, the system will trigger procedures in the financial module so that the invoices are sent to the customer. The information is transferred Electronic Data Transfer (EDT) and the payments are received electronically through Electronic Funds Transfer (EFT). If the items are not available, then the production-planning module makes a production schedule, which is made available to the production, materials management and plant maintenance modules so that everybody is prepared to start production as per the production schedule. The material requirement planning is done and any item that is not in stock is ordered. If the supplier is connected to the company, the ordering and the associated processes happen electronically. The plant maintenance gets the list of machines required and ensures that all of them are available. Thus, the production of the item goes on without any hitches. An order entered into the ERP system by the order entry clerk triggers a whole lot of procedures and automatically performs a host of functions. All these processes take only a few minutes to complete. ERP in Order Processing After the order is received, within a very short period of time the goods are on their way to the customer. If the goods are not readily available, the customer is informed about it and is given the delivery schedule. Other than the order entry clerk and the people in the distribution, production and maintenance departments, all the other tasks are done by the system and that too automatically. In a non-ERP environment, these tasks could take days or even weeks to complete. Since the ERP system stores all the data in a central database and since the database is updated by all the modules on a real-time basis, the information available in the database is up-to-the minute. This integration of the different business functions and the automation of the business processes and the availability of information is what make the ERP systems capable of producing dramatic improvements in productivity and profitability. Following flowchart explains the order process: In stock? Finished Goods Inventory No Order Production Planning Material Management Production Plant Maintenance Sales Distribution Finance Invoice/Bill Yes Figure 11: Order Processing in an ERP System Finance and Costing The financial application components of the ERP solutions work hand-in-hand to improve the bottom line and the financial goals of organizations. Financial functionalities are integrated across all business areas and all geographic areas. This integration includes all other modules, from material management to human resources to logistics. Because the ERP system automatically links related areas, it eliminates the need to repeat procedures. Data is entered only once. Within the ERP system, all areas work in concert, creating a new level of efficiency in handling financial data. The financial modules of most ERP systems provide financial functionalities and analysis support to thousands of business in many countries across the globe. These ERP systems include not only financial application components, but also Human Resources, Logistics, Business Workflow and links to the internet. Financial modules of most ERP systems will have the following subsystems: Financial Accounting: General ledger, Accounts Receivable/Payable, Special Ledgers, Fixed Asset Accounting, Legal Consolidation. Investment Management: Investment Planning/ Budgeting/ Controlling, Depreciation Forecast/ Simulation/ Calculation. Controlling: Overhead Cost Controlling, Activity-Based Costing, Product Cost Accounting, Profitability Analysis. Treasury: Cash Management, Market Risk Management, Funds Management. Enterprise Controlling: Executive Information System, Business Planning and Budgeting, Profit Center Accounting. Purchasing (Quantity, Value) Sales (Order, Bill) Vendor (Payable) Customer (Receivable) Fixed Assets Employees (Salary, Wages) GENERAL LEDGER Figure 12: General Ledger in ERP Financial Module. Material Management The Material Management module of ERP optimizes all purchasing processes with workflow-driven processing functions, enables automated supplier evaluation, lowers procurement and warehousing costs with accurate inventory and warehouse management and integrates invoice verification. The main modules of Material Management module are: Pre-purchasing Activities: This system supports the complete cycle of bid invitation, award of contract and acceptance of services. The pre-purchasing activities include maintaining a service master database, in which the descriptions of all services that are to be procured can be stored. Requirement Calculation Requisition for Quotations Quotation Evaluation Vendor Selection Vendor Ratings Contracts Figure 13: The Pre-purchasing activities module Purchasing: Purchasing system performs tasks like procurement of materials and services, determination of possible sources of supply for a requirement identified by materials planning and control system or arising directly within a user department, monitoring of deliveries and payments to vendors and so on. Vendor Evaluation: Vendor evaluation component has been completely integrated into the Material Management module. Information such as delivery dates, prices and quantities can be taken from purchase orders. Vendor evaluation also uses data from Quality Management, such as the results of incoming inspections or quality audits. It also access basic data in Material Management, such as goods receipt data from Inventory Management. The Vendor Evaluation system supports the optimization of the procurement processes in the case of both materials and services. It provides accurate information on prices, terms of payment and delivery. By evaluating vendors, company can improve competitiveness. Inventory Management: Inventory Management system allows company to manage its stocks on a quantity and value basis, plan enter and check any goods movements and carry out physical stocks reflect all transactions resulting in a change in stock and thus, in updated inventory levels. The user can easily obtain an overview of the current stocks of any given material. For each material, not only are the stocks in warehouse shown, but also the stocks ordered but not yet delivered, reserved for production or for a customer, and the stocks in quality inspection can be monitored. The stocks are managed not only on a quantity basis but also by value ­Ã‚ ­Ã‚ ­Ã‚ ­-a prerequisite for cost accounting. With every goods movement, the following values are updated: Stock value for inventory management Account assignment for cost accounting Invoice Verification and Material Inspection: The invoice verification component provides the link between Material Management module and the Financial Accounting, controlling and Asset Accounting components. Invoice verification in Materials Management serves the following purposes: It completes the materials procurement process-which starts with the purchase requisition, continues with the purchasing and goods receipt and ends with the invoice receipt. It allows invoices that do not originate in materials procurement (for example, services, expenses, course costs, etc) to be processed. It allows credit memos to be processed, either as invoice cancellations or discounts. Sales and Distribution A Sales and Distribution module will contain the following subsystems: Master Data Management: Every company will have products, customers, and will require raw materials and will have suppliers. The task of the Master Data management module is to keep information about all these entities, so that these can be made available to the decision-makers and also for the automatic generation of reports, contracts, invoices and so on. Order Management: This module includes Sales Order Management and Purchase Order Management and supports the entire sales and purchase processes. Warehouse Management: Components of a good Warehouse Management application include following: Inventory Planning: It comprises all planned inventory movements, which enable the accurate forecasting of trends and the consequent adjustment of reordering points, safety stock, lead-times for orders and service levels. Inventory planning also allows the commitment of inventory to a specific customer order-so that customer receives the right order in the right quantity at the right time. Inventory Handling: Allows for monitoring of all warehouse order scenarios such as receipt, issue and transfer of inventory. To ensure fast communication with suppliers and customers, advanced shipping notifications can be received or sent by means of Electronic Data Interchange (EDI),