When Godrej & Boyce decided to make its processes Y2K compliant, it ended up migrating from a labour-driven manufacturing company to implement a complete ERP solution. Chitra Padmanabhan & Rajneesh De report on how the Baan implementation for ERP has transformed the company

Pradeep Kapoor says integrating the vital areas of business was the prime motivation to bring about the ERP implementation

Established way back in 1897, the Godrej group, along with the Tatas and the Birlas, is not only looked upon as one of the early pioneers in the history of India Inc, but at nearly Rs 3,500 crore it is also one of the largest privately held conglomerates in India. Godrej & Boyce, the flagship of the group, valued at Rs 800 crore, has today come a long way from being a purely labour-driven manufacturing company to one of the showcases for Enterprise Resource Planning implementation in India Inc. Considering the sheer size of the company, with its sprawling campus at Vikhroli in Mumbai; the myriad products that the company churns out; and the huge number of dealers and suppliers, implementing ERP in this company was quite a mammoth task.

Godrej Infotech, a group company that incidentally also is one of the system integrators for Baan in India, carried out this huge task of integrating Godrej & Boyce’s 17 operations—ranging from furniture manufacturing to security equipment to electronic devices. The overall investment touched Rs 25 crore, and it integrated 28 branches and 800 dealers spread out across the entire country.

On the ERP threshold
The decision to adopt a full-fledged ERP implementation gathered momentum when the company was contemplating on the ways and means to make their systems Y2K compliant in January 1998. The legacy systems consisting of COBOL and Ingres were standalone systems, which served the purpose of individual departments but were not integrated with the manufacturing, marketing and accounts systems. “Lack of integration in these vital areas resulted in delays in reconciliation efforts and lack of responsiveness, which propelled the company to bring about a complete turnaround in the ERP implementation,” says Pradeep Kapoor, chief executive officer, Godrej Infotech.

After establishing the necessity for a complete turnaround in operation, the next step was to decide on the modus operandi of the task. To integrate the systems of such a behemoth organisation and to choose a package that would prove to be apt for such varied kind of businesses was one of the crucial tasks. “We decided to seek the opinion of people from manufacturing, finance, logistics of individual divisions who would be actually working on the systems,” says Ajay Pimparkar, general manager, Godrej Infotech. A team of 100-odd employees formed from various divisions were considered the ultimate deciding authority on the package that would be suitable for optimisation of their work processes. “Each division evaluated the packages from SAP, BPCS, Ramco, QAD and finalised on Baan since it was considered the best for a hardcore manufacturing sector,” says Mehernosh Pithawalla, assistant manager - marketing, Godrej & Boyce Manufacturing.

Implementation
After deciding to adopt the Baan 4c4 version, the ERP implementation progressed through various stages. The first phase involved mapping the different business processes, which showed that the entire cycle commenced with manufacturing and terminated with other functions like sales and finance. Therefore, it was decided to first implement the manufacturing module in 25 sales and warehousing offices. The mapping phase ensured smooth functioning of various business processes like delivery of raw materials in time, manufacturing of the product as per the product specification or its shipment to the various sales and warehousing points all over the country.

“The ERP system in the plants demanded rich functionality in the areas of inventory management, production purchase, distribution logistics and external transportation,” says Sachin V Joshi, manager-manufacturing, security equipment division, Godrej & Boyce Manufacturing. The preparatory work carried out was MRP I and MRP II (Materials Resource Planning) through Business Process Re-engineering exercise, which extends to engineering, finance, human resources, project management, etc. The mapping of the various aspects of inventory also involved the ABC analysis, which determines the relative value of a group of inventory items and the rankings assigned to items according to the order of importance. EOQ (Economic order quantity) and MOQ (Minimum order quantity) were the other functions completed this stage.

The second phase dealt with regularising the financial needs. For a company of such magnitude it is very crucial to keep track of accounting entries that occur as a result of each transaction in all the 25 locations. “Previously, during year-ending, the accounts needed to be closed on the basis of certain estimates due to lack of information in goods-in-transit, etc. But now the availability of real-time information has resulted in much higher accuracy,” says Rahul Naik, manager-finance at the security equipment division of the company, who was also a part of the initial ERP team. “Baan leaned heavily on standard costing which was not very suitable for Indian standards. Indian companies have to strictly adhere to Indian accounting standards,” says Naik. The company also built a uniform costing system, which was further integrated with iBaan so that all data related to inventory, shop floor, etc, comes directly from the Baan system with no need for data-entry. With iBaan for finance, the company has been able to centralise its accounts payable operations, and now 12 users can handle almost a thousand bills daily. Baan identified 19 discrete logistics companies within Godrej & Boyce’s 25 operating locations and mapped each of these on to iBaan as a separate warehouse before being linked to the company’s centralised finance operations.

The entire implementation, during the first and second phases, took about a year-and-a-half. And then it was time for the third phase, when the entire system was to go live. The systems were completely implemented in another year-and-a-half, by mid-2000. This was followed by a stabilising period, wherein the systems were assessed in terms of the cost-benefit advantages being realised.

Integrating with ERP
In order to protect the investment against obsolescence, the company has adopted a system on the concepts of datawarehousing. Datawarehousing is done through Data Mart Technology, through which the data can be retrieved when there is a need to perform strategic analysis through online transaction processing (OLTP). According to Kapoor, the system will provide a single-point MIS platform for all users within the company. The data is then consolidated and an analytical view is presented through online analytical processing (OLAP). Further, the system will enable users to perform multi-dimensional analysis. “A simple interface like Excel 2000 can be used to select, extract, process, format and analyse the information,” says Kapoor.

One innovative feature of the Godrej implementation is “Godrej SMS”. This unique SMS service integrates the information system to the cellphones of selected employees of Godrej at the managerial level. Be it information of collections on a daily basis, order booking on a weekly basis or the billing position at the end of the month, the employees can get information on their cellphone as an SMS message, while it is being processed. Godrej Infotech has connected an ordinary cellphone with a computer and has developed software that integrates the information system with a cellphone. “A Web-based application records your requirement to provide information to your cellphone periodically. The software then retrieves the information and sends it to the cellphone,” says Kapoor. Adds Pimparkar, “We have scripts running at the ERP end which takes the data out from ERP database. We use DTS to load data in OLAP cubes. Godrej SMS is integrated with the ERP system as well as other systems.”

Ajay Pimparkar says that the company decided to seek the opinion of actual users to decide on the ERP package

Payoffs
Godrej & Boyce’s 28 locations can now view their account status and sales order delivery status online by enabling stockists to directly access information from the Baan system. Registered vendors are also able to view their purchase orders, delivery status and payment outstanding. iBaan for finance helps Godrej & Boyce handle close to a thousand bills daily and enables it to optimise, analyse and evaluate the flow of resources throughout its financial supply chain, including all accounts receivable and accounts payable information.

This helps the company keep the payables limited to the promised credit days, and means that payments can now be released on the due date through an automatic payment method, with nearly 300 cheques on pre-paid stationery produced daily, complete with cheque memo and cheque printing register. The entire accounts receivable is also handled in the finance department of the head office in a similar manner, with all collections updated against the invoices from the appropriate sales and warehousing points. “The payoffs on such a huge amount of investment turned out to be almost instant. We recovered around 45 percent of the investment, that is about Rs 12 crore, in one year’s time during the stability period after the implementation,” says Naik. The implementation brought about scores of other drastic improvements, with the working capital shooting up over Rs 2 crore. The inventory level came down to almost one-third. “Our customer delivery increased by 98 percent flat with better systematisation as far as the scheduling of the despatch is concerned,” says V S Ramesh, manager for international business at the security equipment division of the company.

Connectivity and networking
Along with a full-fledged ERP implementation, the company has also developed a strong communication network. This led to inter-connectivity between the various units in order to ensure uniform and timely flow of consistent information. Godrej & Boyce has set up a countrywide Virtual Private Network (VPN) through Wipro. The company has an optic fibre network running through 14 kilometres within the campus. There are redundancies, which channelise the traffic in case of malfunction, diverting it through another route within the same campus. All in all, the ERP implementation at Godrej & Boyce has been a stupendous success, one of which even Baan can be justifiably proud.