SMEs Turn To SAP In Full Force
What does a food processing industry and an industrial filter making company have in common? Seemingly nothing, given their line of business, business policy and process complexity. Even their worries are different; while the former has a constant worry for it’s raw materials which are extremely volatile due to seasonal variations, the latter’s challenge is centered around having a uniform costing mechanism for its group companies. But the commonality lies in the way that those worries are met. And that has been achieved by tweaking existing business processes to meet the best practices suggested by SAP - the latest craze in the small and medium enterprise space.
The enterprises in discussion are Bangalore based MTR Foods Ltd., and John Fowler (India) Ltd. (a group company of Mumbai based MAHYCO).
Below are some excerpts from exclusive interviews with the CXOs of these enterprises:
MTR Foods manufactures seven distinct types of food products - all highly vulnerable to seasonal variations and carry a very short shelf life.
Says B.G. Shenoy, Head Finance & IT, MTR Foods, “The legacy at our company comprised of Tally, Excel Spreadsheets and even some manual verification processes which were inadequate in monitoring the age (date of manufacturing and date of delivery) of the stocks online, crucial for ascertaining their freshness. We also wanted a mechanism to find out the capacity utilization of stocks.”
While MTR Foods battled the stock freshness scourge, John Fowler had different issues to address. Says Veena Jade, manager-IT, John Fowler (India) Ltd., “We are one of the group companies of Maharashtra Hybrid Seeds Corporation (MAHYCO), with Dickinson Fowler and Fowler Westrup as other group companies. Dickinson Fowler manufactures tobacco filters whereas Fowler Westrup manufactures oil filters. The most important issue we had was to get a uniform view, especially, of the costing process of all the group companies.”
Thus, once the challenges are identified, both enterprises started earnestly looking for appropriate system. Shenoy waxes eloquent about the visionary zeal of the chairman of MTR Foods, who was always in favor of any system that provides end-to-end solution for challenges. He says, “Having evaluated many branded products, we reached a conclusion that only SAP was best suited for our type of needs.”
The company spent close to 15 months to finally zero in on SAP ERP. Elaborated Shenoy, “Initially the SAP module experts were called in to present their capability, after which various implementation partners were asked to present implementation success stories in the FMCG and manufacturing division of FMCGs. At the next step, clearing and forwarding (C&FA) sections of other SAP users (for example Marico, Tata Telecon, Britannia) were also meticulously studied.”
It seemed as if the study of a few users of SAP, especially in SME segment, were neglected. Shenoy clarifies, “We did not find any other enterprise in the SME segment that had a similar volatility aspect with their raw materials. Thus it was the study of complexity of processes at peer enterprises, which was more important than just studying similarities in technology usage. In fact we restructured many of our business processes to meet the specifications of SAP.” The company went for 75 user licenses (MTR Foods had gone live on SAP in 2003) and rolled out SAP R/3 4.8 to it’s 15 hubs across the country through HCL Infinet’s VPN.
In case of John Fowler, Jade informs, “Since our parent company had been a SAP user our selection of SAP ERP became that much easier. But, nevertheless we had evaluated other players like Ramco, Navision, Peoplesoft (Now acquired) and Oracle. We found SAP to be database independent unlike a few other ERP applications.” It is just close to a month now that the company has gone live on SAP R/3 4.7 at an expense of close to Rs. 1.5 crore.
But both the enterprises recognized that it is the discipline that SAP brings into the day-to-day carrying out of businesses that play a very significant role in enhancing performance of each individual in the organization. Moreover, since the enterprises were open to incorporating best practices, it ensured very little customization of the ERP package, that resulted in speedy deployment of the ERP across all locations.
Initiating a debate as to what stage should a SME deploy an ERP, Shenoy suggested, “It is always better to go for an ERP of the stature of SAP, at a stage when the business is about to take off for an SME, since it becomes easier to manage and monitor the business growth rather than at a later stage when rearranging business process becomes cumbersome.”
Jade added, “ERP is a must for a SME since it allows for harmonizing work discipline with business processes. But what is even more important is that the IT team has to constantly monitor the function and aberrations of the system and keep on improving them.”