ERP Implementation Implementation for Steel Industry
Critical Success Factors and SAP ASAP
Contents Introduction ........................................................................................................................................ 3 About SAP ........................................................................................................................................... 3 Literature Review ................................................................................................................................ 4 ASAP
Methodology....................................................................................................................... 4
Critical Success Factors ................................................................................................................... 5 Analyzing SAP ERP's success in Steel Industry .................................................................................... 8 Case Study: Tata Steel ..................................................................................................................... 8 Case Study: Jindal Stainless Ltd. .................................................................................................... 15 Conclusion......................................................................................................................................... 17 References ........................................................................................................................................ 18
Introduction In order to eliminate the problems associated with legacy systems, a new breed of software systems, called Enterprise Resource Planning (ERP), was created. These s ystems provide a single source of data with designed integration between different functional modules (for example, Accounting, Sales and Distribution, Materials Management, Production planning, etc.). These ERP systems are customized using the table-driven customization method, which provide a common set of data source to the whole organization. Due to table settings instead of oldfashioned hard-coded program logic, new and changed business requirements are rapidly implemented and tested in the system. There are various ERP products available today for example from SAP, Oracle, PeopleSoft, JD Edwards, Salesforce.com, Baan, Microsoft, and HP to name a few. With hundreds of companies implementing the ERP systems to make their business more efficient only few are very successful in implementing them. According to a survey done by Gartner only 60% of companies implementing ERP system claim they got expected benefits. In general an implementation is considered successful if it is done within budget and time with meeting all the preset implementation goals as measured by ROI, etc. Also, it is important to understand that delivering an ERP system on time and budget doesn’t make sense if no one in the company uses it.
In any ERP implementation lots of variables are involved like personnel (business side, technical side, support side, users), implementation partner (for e.g., IBM, Accenture, Cap Gemini, Delloite, Wipro, independent consultants, etc.), software and hardware vendor (SAP, Oracle, QAD, Peoplesoft, JD Edwards, Baan, Salesforce.com, Baan, HP, Microsoft, etc.), and implementation strategy. With so many things coming together in a matter of few months to a year or so for implementation it is important to know the critical factors for success and failures of an implementation. This project is a study in depth of SAP ERP implementations at Tata Steel to determine critical success factors and what needs to be done and what mistakes to avoid for a successful implementation.
About SAP SAP AG founded in 1972 is the world’s largest Enterprise Resource Planning (ERP) software with 82,000 customers / 91,500 installations / 12 million users in 120 countries. The SAP system comprises of a number of fully integrated modules:
Financials Human Resources Customer Relationship Management Supplier Relationship Management Product Lifecycle Management Supply Chain Management Business Intelligence
These modules or solutions, as SAP would like to call them, cover virtually every aspect of business management. SAP provides standard business application software which reduces the amount of time and money spent on developing and testing all the programs.
Literature Review Literature review is divided into two sections: ASAP Methodology, Critical Success Factors
ASAP Methodology SAP ERP implementation is the group of processes that defines a complete method to implement SAP software in an organization. The two methodologies used to implement SAP ERP are Conventional and ASAP. Conventional methodology also known as SAP Procedure Model was widely used initially. In recent past years SAP Procedure Model has been overshadowed by the ASAP methodology as implementations with later methodology are fast and provide flexibility. Most of the companies implementing SAP ERP system use ASAP methodology with the exception of very large companies with revenues in billion dollars. Therefore, in this project ASAP is used as the reference methodology. In 1996, SAP AG introduced the ASAP (Accelerated SAP) methodology. This methodology provides an excellent tool for small and midsize companies to rapidly implement SAP and take advantage of its integrated business processes. ASAP provides content, tools, and expertise based on thousands of successful implementations by SAP and its partners. The ASAP methodology consists of a roadmap that defines the five phases of SAP implementation process and supports these with a comprehensive project plan. ASAP Roadmap Phase 1: Project Preparation - This phase provides initial planning and preparation for the
implementation which includes project plan, project scope, and project team organization. In this phase the initiation of the SAP ERP project, which includes the overall goals, detailed task plans, and processes is formally announced to the company Phase 2: Business Blueprint - In this phase the scope of the implementation are documented and
defined and the Business Blueprint is created. The Business Blueprint is a detailed documentation of the company’s requirements. Application consultants and the Business
Process Teams achieve a common understanding of how the enterprise intends to run its business within the SAP ERP System, by carrying out requirements-gathering workshops. The Business Blueprint is created by detailed documentation of the results gathered during these requirements workshops. Furthermore, the Business Blueprint serves to document the business process requirements of the company. On this basis, a common understanding of how the company intends to run their business within the R/3 System is achieved. A Business Blueprint comprises the following structure elements in a hierarchy:
Organizational Units; Master data; Business scenario; Business processes; and Process steps.
Phase 3: Realization - In this phase, all the business and process requirements gathered in the
Business Blueprint are implemented. System configuration is done step by step in two work packages, Baseline and Final configuration. The consultants validate and update the configuration and demonstrate processes. The project team updates the work instructions (business process procedures, for example) and performs unit and integration tests. The major milestones of Realization phase are:
Software installation and customization based on the business blueprint; Data migration (if applicable); Validation of system setup; System testing; Definition of training and cutover plan; and Project phase review and sign-off from customer.
Phase 4: Final Preparation - In this phase, testing and end user training is completed with
system management and cutover activities to finalize the readiness to go live. Furthermore, the Final Preparation phase serves to resolve all critical open issues. Upon successful completion of this phase, you will be ready to run your business in your live SAP ERP System.
Phase 5: Go Live and Support – This phase achieves the transition from a project-oriented, pre-
production environment to successful and live production operation. The going-live and support phase consists of two distinct sub phases. First, the project is completed with a formal project closing. During this time, the software is used productively in day-to-day operations, all issues and problems are resolved, transition to the production support team is finalized, knowledge transfer is completed, and the project is signed off. Subsequently, the continuous improvement sub phase begins during which the production support team provides on-going support and assistance for post go-live. It covers solutions for those activities which are standard in a productive environment: business changes; technology changes; or changes in the user community. The major milestone of Go Live and Support phase is full production implementation of SAP ERP software
Critical Success Factors Critical Success Factors are the limited number of areas in which results will ensure successful competitive performance. There is a plethora of research and data available for critical success factors contributing to a successful ERP implementation. Based on the research paper reviewed following CSFs were found and is explained in detail below based on organizational and technological perspective. Organizational Perspective
a) Sustained management support Various studies on ERP implementations have shown that for any ERP implementation to succeed sustained support from top management is critical. An organization goes through a major transformation during ERP implementation, and the management of this change must be carefully planned (from a strategic viewpoint) and meticulously implemented. b) Good project scope management Poorly defined specifications and a lack of change control procedures are one of the prime causes of ERP project failure. Senior management must ensure project scope
changes are managed and documented in a formal manner. This includes, but is not limited to, delays in the schedule or requests for additional money. c) Effective organizational change management and business process engineering Any organization implementing SAP software must consider the organizational, human resource and business process issues associated with an implementation. There is the need to understand how the organization intends to run its business within the SAP system and the changes in the organization. d) Project team composition A typical SAP implementation team consists of Project Manager, Project Leads, and SAP consultants, technical team, and testing team. Project team composition is more relevant in the first phase because it is when the project team is established, although it can be re-structured along the implementation phases and according to the implementation needs. e) User involvement and testing It is one of the most important CSF in SAP ERP implementation User involvement is relevant in the phases where their know-how is important to achieve a good customization of the system to organizational needs. They participate in the defining of business requirements, help in the analysis of the SAP configuration and in conversion of data and the testing of the system. Testing can be done by end users or by a quality assurance team depending on the setup at the company. f)
Project champion role
It is the role of project sponsor and/or project manager. The project sponsor is devoted to promoting the ERP project and has the ownership and responsibility to obtain the project resources; the project manager is required to plan, lead and control the project on the run in its several tasks.
g) Trust between partners During SAP ERP implementation different parties involved are the client or the company implementing the SAP ERP system, and the implementation partner which brings the SAP ERP implementation knowledge (e.g., IBM, Cap Gemini, Accenture, Deloitte, SAP etc.) and, in some cases, some independent consultants. It is very important that trust is maintained between them throughout the implementation. h) Strong communication inwards and outwards One of the reasons behind ERP implementation failure is poor communication between the team members. Poor communication may include failure to announce the reason for the up and coming effort, and continuing to advise the organization of the progress and importance of the ERP implementation to the company. Poor communications prevent different parts of the organization from assessing how they will be impacted by changes in processes, policies, and procedures.
i)
Formalized plan and schedule
Good planning and scheduling is the key to a successful SAP ERP implementation. A good project plan will ensure better monitoring and coordination of activities during the whole implementation phase.
j)
Adequate training program
Business users (end-users) training is necessary to make sure business ownership is within business units, not the technology team. k) Preventive troubleshooting Although not a very exciting part of implementation it is important. Tracking and fixing problems before they go into production can save lot of time and money. l)
Usage of appropriate consultants
It is important since the consultants should be well versed in the SAP modules being implemented and have knowledge / work experience in the industry in which company operates. This prevents costly mistakes from occurring which could have been avoided otherwise.
m) Empowered decision makers Include a group of people with business and technical knowledge at an expert level. This group of people may be senior level project members from within the company or from the implementation partner. In real world situations, most companies expect that their provider will proactively suggest best practices based on what they've learned from projects with other clients. n) Adequate ERP implementation strategy A good implementation strategy is required for a successful implementation. A poor implementation strategy will not only result in higher implementation cost but may lead to a product that can break the company processes
Technological Perspective
a) Avoid customization SAP AG provides products that are industry specific and this eliminates the need for costly customization most of the time. These products are tested working solutions which are industry specific. Customization or any changes to the customized product is not supported by SAP AG. Customization should always be taken into account when managers are making decisions. b) Adequate ERP version As the new version comes out, SAP AG stops supporting the older version after certain period of time. Selection of SAP software version is very critical as a company may not want to select an older version which won’t be supported by SAP AG or jump into a latest version which has not been tested in the market thoroughly. c) Adequate software configuration Software configuration should be geared towards creating a seamless and integrated value chain. The software configuration should follow the business requirements defined in the previous phase.
d) Adequate legacy systems knowledge The need of knowledge of legacy systems is more relevant in order to minimize the effort of configuration and help in conversion of data and the creation of interfaces.
Analyzing SAP ERP's success in Steel Industry Case Study: Tata Steel Company Profile
This company was founded and established in the year 1907. It is known to be one of the leading steel giants in the world offering multiple products and successfully running many subsidiary 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. It is the first integrated steel company in Asia and is now the world`s second most geographically diversified steel producer and a Fortune 500 Company. 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. 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 it proved to be different from the others by choosing ERP in the right time and implementing it in a proper manner. In 2001, Tata Steel started implementing an SAP ERP system with the primary goal of improving its financial accounting, costing, procurement, and plant maintenance. The primary objective was better revenue management through improved gross margins. SAP implementation at Tata Steel was a success with increased online order confirmations from 55% to over 90%, reduced finished-goods inventory from 29 to 23 days of sales, lowered MRO inventory by 24%, and reduced breakdowns in the Hot Strip Mill by 768 hours. The net results of their ERP software have been described to be path breaking and a trendsetting one. Why 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. 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. Information Systems for a Quickly Changing Steel Industry
In a quickly changing industry like steel, one need information systems which quickly provide them the data they need. We believe that ERP, especially in its mature implementations today, is the crucial component for a company’s IT data backbone. ERP can play an essential role in:
Driving accurate and fast decisions (product profitability, procurement spend) with consistently defined data Running broadly known and supported applications Harmonizing and optimizing back-office processes across the enterprise that comply with finance requirements such as SOX and IFRS
Enabling best-practice demand planning for supply-chain processes Future-proofing global applications that support global enterprises
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
Improved visibility of procurement spend and savings from improved sourcing policies, Decrease of work-in progress and days-of-sale-outstanding, 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) 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
With an awareness of the best practices and a good understanding of ERP project complexities, the risks in an ERP implementation are usually outweighed by the benefits. The ERP discussion on investment return is one of mindset more than one of standalone business cases. 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
Steel makers 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 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. A steel product tends to explode towards the end of production processing; in other words, the bill of material “stands on its head” or is “v -shaped”. 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 steel making 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
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
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.
Integrated IT Model for Steel
An integrated IT model as in the figure below is important because it lets you see the systems involved in planning and production. A typical flow would be:
The Supply Chain Management (SCM) application provides the rough-cut planning in “Demand Planning.” The result is planning blocks of similar products which are then handed over to production planning.
When orders are being entered, availability checks assign the order to a block (unless inventory already exists that meets the order) and feeds back a promise date (at the end of the block to allow for the flexibility of possibly moving to an earlier date).
The mill optimizer then typically would re-shuffle orders in between the blocks, and feed results back into the SCM application in order to optimize the load balancing.
Right before production starts, planned orders from the SCM application are converted into production orders and, via the ERP system, are transferred into the MES layer. It is at that time when quantities are being translated into pieces (slabs, coils etc.).
Detailed scheduling then takes place, sequencing and combining pieces from various orders throughout the mill into lots for optimization.
Production completion then posts an updated status of the orders into the ERP system, including stock receipts of finished products, and so forth.
Figure above is also important because it lets you identify gaps among a company’s different IT systems. A typical gap occurs between the ERP and MES (process control and machine control) systems, where the “system” is actually combination of custom -built applications and manual spreadsheets. “Bridging this gap” properly is essential for realizing the business benefits of the IT investments. If the applications in Figure 3 are to provide true value, they need to be robust, integrated and cost efficient. A recent IBM survey indicates that steel clients process control and MES systems are custom-built applications 66% of the time, and that these custom-built applications usually differ from mill to mill. Clearly, this risks creating sub-optimal processes and leaves the company open to all the problems of maintaining custom-built, legacy applications. 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.
Implementation Process at Tata Steel
The company knew well that they had a tough time especially to implement the software in one stroke. They had to choose top ERP software in order to ensure that it meets the demands of a big firm like Tata Steel. They went ahead with associating and implanting Tata Steel to all the stakeholders so that they become compatible. These ideas also contributed to the success. They were also shrewd enough in adopting the modern and most recent technology available in the market. The period set for implementation seemed to be another major challenge. The time granted for the process was 8 months. The business process was divided into two main segments. The core functions were denoted to be major ones. Similarly the supporting functions were named minor ones. A plan of action on the proposed ERP's impact was drafted depicting their relation to one another and to the business process. All of them were made to bear in mind the fact that ERP's implementation was imperative and that the deadlines were not very comfortable. The company took all efforts to ensure that the change did not produce any sort of resentment in the organization. This was done by educating everyone on the need and desirability of change. In addition all apprehensions relating to change were discussed and clarifications made to the fullest satisfaction. 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 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 no built-in integrity check for various data sources. Besides, several times the information against certain items was found missing. An Early Response
Response to changing customer needs started as early as 1991, with a study on cost competitiveness and a formal business plan, followed by ISO 9002 certification and benchmarking initiatives. Realizing the need to further support the re-engineered core processes and quickly align the business processes to radical changes in the market place, Tata Steel decided to go for a new robust solution. Design
In 1998-99 a small cross-functional in-house team along with consultants from Arthur D. Little (Strategy Consultants) and IBM Global Services (BPR Consultants) redesigned the two core business processes: Order Generation & Fulfillment and the Marketing Development processes. This was done to improve customer focus, facilitating better credit control, and reduction of stocks. In keeping with this commitment it adopted the latest production and business practices to offer innovative processes that meet the changing demands of its global and local customers.
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. The Real Challenge
B Muthuraman, MD (Designate), said, "Implementing any ERP system is a challenge for an organization because of the declining success rate of ERP implementations world- wide.” The challenge is compounded if the ERP provider is a world leader - SAP. At Tata Steel however the real challenge for us did not lie in successfully implementing SAP or in rolling it out to our 46odd geographic locations across the country under a big bang approach in just eight months. The real challenge lay ahead in building an environment where SAP will be embedded in the hearts and minds of the people and the customers of Tata steel. They all looked forward to knowledge-based, successful organization. It is inspiring to know that our TEAM ASSET with support from Price Waterhouse Coopers and SAP successfully lived up to our axiom and truly demonstrated leadership skills by going live across 46 locations within a record time frame of eight months. Mapping Technology to Business Processes
The path was set to achieve success through SAP. All the branches, which had huge numbers of transactions and complexity, were identified as a HUB while the smaller branches along with the consignment agents were defined as SPOKES which were attached to these branches. In January 99 the team from Tata Steel was decided and christened 'TEAM ASSET' an acronym for Achieve Success through SAP Enabled Transformation. The TEAM ASSET had two simple axioms: Go-Live date - 1st November 1999 There are only 24 hours a day Preparatory task forces activities were conducted and core business processes were mapped to SAP modules. Also another parallel activity called 'Change Management' was initiated within the company. The prime objective of 'Change Management' was to reach out to people involved non-directly in the project to apprise them of the developments taking place. Tata Steel planned a big-bang approach of going live with all the modules at the same time, in just a span of eight months. Driven against the speed of time, the pace of implementation was fast with all activities backed by a lot of thought process and meticulous planning. On 1st November 1999 Tata Steel pulled off a big bang implementation of all SAP modules at one go across 46 countrywide locations, as per the set deadline.
THE OUTCOME
SAP ERP solutions produced a remarkable result to the company in terms of financial technical and managerial parameters. The effective handling and speed delivery resulted in greater sales. Similarly there was a drastic fall in the amount owned to creditors. The systems were made more user friendly without any complexities and procedural lacunas. This improved the quality of work and lessened the time taken for work and thereby increased the productivity. This was followed by a massive change in terms of accountability administration and control. "Post the introduction of the ERP solution, the results have been terrific. Tata Steel has spent close to Rs 40 crore on its implementation and has saved Rs 33 crore within a few months," said Ramesh C. Nadrajog, Vice President, Finance. "The manpower cost has reduced from over $200 per ton two years ago, to about $140 per ton in 2000. The overdue outstanding has been brought down from Rs 5,170 million in 1999 to Rs 4,033 million by June 2000. The inventory carrying cost has drastically deflated from Rs 190 per ton to Rs 155 per ton. To add to this, there have been significant costs savings through management of resources with the implementation of SAP. With SAP's solution Tata Steel can now update their customers on a daily basis and provide seamless services across the country improving customer management. The availability of online information has facilitated quicker and reliable trend analysis for efficient decisionmaking. Besides the streamlined business process reduces the levels of legacy system and also provides consistent business practices across locations and excellent audit trail of all transactions. CSFs for Tata Steel
Critical success factors in Tata Steel’s implementation were that the SAP implementa tion was
backed up by appropriate change initiative measures and organizational realignment with support from top management. A great deal of effort was put on extensive and comprehensive training as well as proper communication on process changes throughout the organization.
Case Study: Jindal Stainless Ltd. Company Profile
Name – Jindal Stainless Ltd. Location – Hisar, India Industry – Process – Mining and Metals Products & Services – Stainless steel Revenue – INR 6,000 crores Employees – 5,000 Jindal Stainless is India’s largest integrated stainless steel manufacturer. With control over 35% of domestic market share, it is also one of the four global specialty steel manufacturers. Established in 1970, with a single Plant in Hissar, Haryana, where it al so has India’s only composite stainless steel plant which apart from producing Hot and Cold rolled coils, also manufactures precision strips, blade steel and coin blanks. It has a Ferro Alloy plant at Vizag, Andhra Pradesh and is now constructing the largest Greenfield Integrated Stainless Steel Complex in the world, in Kalinga Nagar, Distt. Jajpur, Orissa. Apart from having a Stainless Steel
Cold Rolling plant in Indonesia, the ISO: 9001 and ISO: 14001 company has global presence in over 30 countries
ERP Implementation
Jindal Stainless opted for the best in class ERP system, SAP, in 2002 to integrate its processes and get a proper hold over its operations across all locations which in turn have enabled the organization to make smarter strategic decisions. Challenges
Jindal had restricted access to crucial information in silos, lack of comprehensive view of multiple operations, basic home-grown IT solutions stringed together incapable of matching the organization’s growth. In a little over 30 years, Jindal Stainless has grown from an indigenous single unit steel plant in Hisar, Haryana, into a multibillion, multinational and multi product steel conglomerate. One of the core beliefs of the organization has been to implement the best-inclass technology – be it for manufacturing processes or for organizational management. Ajay K. Dhir, Chief Information Officer, says, “A sound technological platform is one of the basic
requirements for running a business well. The rate at which our organization is growing, outstripped whatever home-grown IT solutions we had stringed together. The need to migrate to a stronger IT foundation was palpable. There was no point delaying this decision, or our growth would have been affected”. He further explains, “Our productio n portfolio consists of varied products and we need the flexibility to produce all grades of stainless steel to be able to service a larger market. In addition, manufacture of specialty products such as precision strips and coin blanks requires extra effort and skills. The lack of visibility of real time information across locations was proving costly as we lacked a holistic view of our operations. Multiple products across multiple locations in addition to dealing with multiple partners, suppliers and dealers just added to information chaos. A robust database coupled with streamlined processes working across locations, seamlessly, was the need of the moment”. A fourteen-month implementation period saw SAP MII getting deployed in the Cold Rolling Plant in Hisar. The SAP MII implementation kicked off in March, 2007 and Go-Live took place in May, 2008. With Schneider Electric as the implementation partner, the project scope consisted of integration of process parameters (Line PLCs) with production and quality information (SAP) along with historical process data storage in technical database (Historian). Before the SAP MII deployment, information about sensors and devices used to be carried through PLCs and enabled local visualization. But there was disconnect between Process and Business Information. However, this deployment enabled the process information to be transferred to a SCADA server, which further connected to a technical database and then fed into the Integrator. This enabled the process information being integrated with the business data to give a wholesome view of operations. The deployment included steps such as installing Ethernet communication hardware modules in Plant PLCs in Cold Rolling Division Plant; establishing plant-wide network by connecting all Electrical Control Rooms by Fibre Optics; Integration of plant level application servers with Historian; seamless integration of Historian data with business information at ERP through MII and analysis of plant data and business data at MII and SAP. “A dedicated team of 15 people deployed the solution. Change management was an issue, but since the directive to employ the
best of technology had come from the top management, the whole organization adapted to the change eventually” says Ajay. Benefits
Transparent manufacturing processes with real time information available across locations, quality and efficiency analysis results in reduction of costs, improved monitoring and control. The introduction of a solid technological platform has consolidated the organization’s fragmented processes, giving a clear holistic view of the overall growth. SAP has provided them a contemporary, integrated platform to conduct our business with speed, flexibility and a customer-centric approach. State-of-the-art technology has enabled global expansion and real time integration with their manufacturing systems, eliminating inefficiencies and reducing costs. Saving time and having access to authentic information. Be it monitoring and control of process deviations, tracking the source of a defect or analysis of customer complaints, the deployment has enabled Jindal to address their business growth in a 360 degree manner. All these factors ultimately help the company achieve a level of Plant intelligence and offer a significant competitive advantage. The tracking of coils in storage, for instance, used to be a challenge. Each coil, worth several lacs, is modeled after the customer’s needs and takes around three weeks to be manufactured. In the absence of a proper database, they lacked an accurate overview of their stock. Secondly, there was no way to distinguish new coils from the old, resulting in older coils lying in disuse. With the new technology that involves bar coded system being read using hand-held scanners, coils are automatically scanned and one can keep tab on the type, quantity, and quality and separate the old from the new. They have accurate records of how many coils they have of what kind, and can decide how many they need without jeopardizing costs. “The beauty that we found in SAP is not just the robustness of the solution, but the add-ons.
Sitting anywhere in the world, one can find out the exact stocks that we have in our Plants, and this makes the deployment very unique”, he adds. The way forward
Having used SAP across the organization horizontally, Jindal now plans to enhance its use vertically. They will streamline and align the supply chain and explore the possibility of introducing SAP in other areas. SCM and SRM are targeted as the next strategic levers. Their organization has adopted SAP as the only application on which we shall transact and conduct business. CSFs for Jindal Stainless Ltd.
Trust between partners Sustained management support Adequate training program User involvement and testing
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. In this project a successful implementation has been identified as the one which was completed within time and budget and gave a predetermined ROI. Implementation is only the beginning of the adventure with a new ERP system. A well chosen system will, with time, become the pillar of company’s operations. It will set the standards and epitomize the best business practices. In order for this is to happen, companies need to choose an option that will not only suffice for the time being, but which will have the potential to accommodate the various growth paths the company has as it evolves. Choosing an option that works for now, but does not allow for growth may seem cheaper, but when one factor in the amount company will eventually spend to extend the system and make changes to functionality; a company will end up paying more for this temporary solution than for a system that can grow. It is a real challenge for a company to plan and execute a long term implementation strategy as both the internal business scenario and the software from the vendors are evolving continuously.
References Sood, B. (2002) An ERP and a steely resolution. Network Magazine. Retrieved August 14, 2006 from http://www.networkmagazineindia.com/200210/case5.shtml SAP ERP customer references. Retrieved (2009, March 15) from
http://www.sap.com/usa/solutions/businesssuite/erp/customers/ Tanmay Roy, IT interventions in the Steel Industry . Express Computer. Retrieved August 02, 2010 from http://www.expresscomputeronline.com/20100802/casestudy01.shtml SAP ERP customer successes Jindal Stainless Ltd. Retrieved (2012, March 09) from
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Bourgault and Robert Pellerin, Business Process Management Journal, Vol. 15 No. 3, 2009 Project management: a case study of a successful ERP implementation, Fergal Carton, Frederic
Adam and David Sammon, International Journal of Managing Projects in Business Vol. 1 No. 1, 2008 So you’re thinking of buying an ERP? Ten critical factors for successful acquisitions, Jacques
Verville and Christine Bernadas and Alannah Halingten, Journal of Enterprise Information Management Vol. 18 No. 6, 2005 Successful enterprise resource planning implementation: taxonomy of critical factors, Shahin
Dezdar and Ainin Sulaiman, Industrial Management & Data Systems Vol. 109 No. 8, 2009
