MTR Foods Deploys SAP, Records Rise In Margins

by Sohini Bagchi    Aug 04, 2005

MTR Foods Limited, a total meal solutions provider has implemented SAP’s ERP solution, which has not only led to the improvement in working capital but also helped control costs and raised its gross margins from 45 to 49% per month in the process.

However, all was not roses in the MTR-land until it used the right technology. B G Shenoy, head of finance at MTR Foods Ltd., in an exclusive with CXOtoday spoke on how adoption of new technology has helped the company in revamping the overall working strategy.

According to Shenoy, “In the pre-SAP environment, we used to buy 65% of our annual raw material during the agricultural seasons, which would lower the working capital, as some percentage of this raw material used to rot away. This had to be discounted leading to a loss. After the ERP implementation, this has not only come down to 45%, but has also helped in releasing working capital.”

The company was relying on historical data to forecast demand for the raw materials before it went for a SAP solution. “It was a time consuming task and prone to errors. Moreover, inter-category product profitability could not be determined as much of the data was not even available. R/3 has helped achieve cost control, category- as well as region-wise,” stated Shenoy.

Earlier lot of applications were developed in-house, such as a FoxPro-based package for purchase orders and inventory. Recalled Shenoy, “The lack of control and check mechanisms allowed anybody to alter data and goods receipt notes. Production flow and warehousing were also handled by a FoxPro application. None of these applications was linked, and duplicate entries flourished whenever there was a transfer of materials from one plant to the other.”

Another transformation was that the company has reduced its defaults to Rs 15 lakh per month as against a loss of Rs 45 lakh per month due to payment defaults by its distributors. Today, it has been able to cut its losses by blocking the release of fresh orders until a distributor clears the previous invoice and falls in line with the company’s directions.

The company deployed SAP R/3 Enterprise 4.7 version. The modules implemented were: production planning, material management, quality assurance, sales & distribution, financial accounting.

With Sun Microsystems Sun Fire 480R (2 CPUs) used as production and backup servers, Sun Fire 280R is used as a development server, Oracle 9i for maintaining database and Solaris 9 as operating system in its silo, Shenoy commented, “Once we have settled with SAP, we can keep upgrading and deploying a lot of new and allied technology with ease.”

On investing approximately Rs 3 crore, including 100-user licences, hardware and software costs, apart from implementation and training, the company plans to achieve its Rs 500 crore sales target by the year 2006.

On being quizzed as to why the company chose SAP, Shenoy promptly replied, “After exploring a couple of options, we zeroed down on SAP because it permitted online updating using VPN as against a competing product that required additional investment in a VSAT network. The solution was also found to be more economical.”

With 15-20% export in US, Canada, Europe and Australia, the company further plans to strengthen its supply chain management. Shenoy feels that managing stocks and forecast demand has become the need of the hour. Hence, the company plans to automate its entire network of stockists. He further points that CRM is another new trend in the food industry and MTR will settle on it soon.

Said Shenoy, “Technology and competition are the two major factors driving the exploration and adoption of CRM by the food industry today. Technology is enabling retailers to track purchases by individual households through bar code scanning and customer identification cards. CRM can improve the way employees can interacts with its customers through all the critical stages of the customer life cycle.”

From a local food haunt, the company has evolved at a global level, with more than 200 of its products that can be classified into seven categories