Using ERP to meet the challenges of running an organisationAlpha Pneumatics is a manufacturing company that is based in Mumbai. This is a company that is engaged in the manufacture of pneumatic tools for pumps and the marine industry, operating on tight margins and a turnover of less than Rs 10 crore.
Before going in for Ebizframe, manual data entry in each department caused major worries for the management as no data, either in sales, purchase or inventory tallied with the actuals at hand. This made decision-making for the management of the company impossible or a huge risk.It got out of hand when technical specifications followed by the production team, suppliers, sub-contractors and customers were not coordinated and went a little haywire. This in turn caused complications what with the supplies and materials taken from sub-contractors. The same lead to rejections from the customer’s side therefore causing cost inputs to increase again.
Challenges of understanding the concepts and quick adaptability by staff during implementation of Ebizframe were tackled well by the team from both sides. All specifications for raw material, semi-finished and finished goods are now incorporated into the system. The turn-around time of delivery against order is reduced by 12 to 15 days. Also, the company has now got the required controls over suppliers and sub-contractors. The company has got clear MIS reports of receivables and payables. As of now, sales (including exports), purchase, inventory, production and finance are live.
Correct, uniform and smoother flow of information across suppliers, sub-contractors and customers caused delight in each due to timely receipts and payments against deliveries with precision. Even dead stock has come down by 18% to 20% of the whole. Stock tracking at inventory and sub-contractor’s site was accurate due to live inventory-related reports. Production processes are streamlined, based on the production advice from sales as per order-bookings made.
Improving communication of an organisation by IT
V venkata rao, professor, IIM AHMEDABAD
ALPHA Pneumatics, the Rs 10-crore-engineering company specialising in manufacture of pneumatic tools has been plagued with the problem of inadequate, inaccurate computer applications.
Several of these applications were perhaps developed using old technologies, which did not permit the software to share the same data. Hence, when two or more tasks required the same data, the information had to be entered over and over again leading to several mistakes and inconsistencies in the output of different computer applications. For example, the raw materials and components procured or manufactured by the company were not compatible with what was required in the products ordered by the customers.
This led to extreme dissatisfaction among users, who would return what they received from Alpha Pneumatics against their orders placed. Further, Alpha’s systems were not linked appropriately with that of their partners, and hence communication and control between them was poor.
To improve the situation, Alpha purchased and installed the Ebizframe package, which is a web-enabled enterprise resource planning (ERP) solution. The ERP package enables an organisation to store, retrieve and analyse data related to all its activities apart from offering integrated transaction-processing capabilities too. Additionally, the web-enabled package facilitates data exchange between the ERP system and organisation’s allied partners. Because of the integrated nature of the package, a task inputted need not be separately entered, but can be directly retrieved by the system.
Despite the power and promise of an ERP system, its implementation is not easy: successful execution requires a lot of involvement, determination and the will to change on the part of the company. An implementation team consisting of representatives from different departments of the company needs to work closely with the vendor or consultant.
All users need to be trained appropriately in using the system and should be prepared to adopt a new way of processing information required by the package. Looking at the business outcome from the package, Alpha seems to have stood up well to the demands of ERP implementation. The quality and timelines of deliveries have dramatically improved, and the information exchange of Alpha with its partners has yielded the expected results.
Customers could be placing and tracking their orders online. Alpha is not only able to track its purchase and sub-contracting orders online, but also control its suppliers better. Alpha could have gone in for a custom-built solution, instead of an ERP, but such a solution would be long in the making, as the required programming would have to be done from scratch. Besides, a customised solution is costly not to mention that the product may not be the best in terms of quality. Upgrading custom-built solutions is an expensive affair too.
The task at hand for Alpha is to move to the next level of ERP implementation. Functions like human resources and payroll management, equipment maintenance and customer care have not been implemented in the first phase. Further, Alpha needs to analyse the gaps in the ERP package, and close them with appropriate off-line solutions.
Full potential of the web-enabled system can be realised only when all its partners are able to use the features effectively. If necessary, Alpha has to train all its partners in using the ERP.
ERP integrates the factory with the customer
pinakiranjan mishra, associate director, ernst & young
ONE of the most difficult decisions which the relatively small companies face today is whether to implement an ERP. More often than not, ERPs are considered as a solution for the very large companies with complex business processes prevalent in need of improvement.
Contrary to this belief, Alpha Pnuematics, a Rs-10 cr business entity has successfully implemented an ERP to achieve significant improvement in its business. The company recognised the challenges and introduced ERP to overcome issues and gain an edge in the market.
The company realised that technical specifications provided by customers were not accurately translated through Production Planning to Procurement resulting in customer rejections.
It is clear why an ERP works well in such situations. By providing a tight integration between what the factory produces and what a customer orders, modern-day ERPs are able to eliminate the different ‘‘views’’ of the same product in various departments. Thereby reducing customer rejections and costs.
This brings us to the larger question— ‘Can small companies like Alpha Pneumatics actually implement an ERP and gain an edge in the market?’ While there are several issues that organisations can solve through ERP implementation, however it is not an answer to all challenges.
A detailed analysis of the cause of the problems and an evaluation of probable solutions paves the way for the right decision towards ERP implementation. Alpha Pneumatics rightly identified lack of information visibility as a key business issue, which could be addressed by ERP. The second issue was to understand what an ERP could offer and how quickly the company could adapt to the changed processes and measures.
This is critical especially for SMEs as the margin of error is small. If the implementation takes longer than expected or the employees are not able to adapt to the new envronment, the same ERP could end up being a drain on the company’s resources. Thirdly, it is also important to implement the core business processes together as an ERP is an enterprise-wide solution.
There is little value in piecemeal implementation since it gets limited just to automation or computerization of existing processes and information. For Alpha Pneumatics, the key to success was to indentify and integrate the core processes viz. Sales, Purchase, Inventory, Production and Finance.
This ensured one version instead of multiple versions of truth. Decision-making not only improved, but the credibility of the decisions was also high. In conclusion, many decisions which Alpha took for its ERP implementation were right, thereby resulting in a successful experience. The company selected a solution based on its size and requirement. Further, they clearly understood the business linkages and how an ERP could help establish them.
With these insights, it was able to both mobilise and motivate employees and the service provider to work jointly towards the successful implementation. Alpha Pneumatics clearly sets an example for many smaller organizations who are aspiring to implement an ERP.