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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.

L.J. INSTITUTE OF ENGINEERING & TECHNOLOGY

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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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