Asia’s leading manufacturer of air compressors went in for a complete ERP implementation using Baan’s solution. Prashant L Rao finds that Elgi picked Baan based on the ERP major’s strength in handling discrete manufacturing as well as the superior after-sales support module

After looking at other solutions, Elgi felt that discrete manufacturing was handled best by Baan, says Arathi Varadaraj

Elgi is Asia’s largest manufacturer of air compressors and automobile service station equipment. Its products are used in a wide range of applications in areas ranging from mining, defence, transport, pharmaceuticals, power, oil, railways, chemicals, textiles and printing to ship building, paper, electronics, telecommunications, medical, plastics and food and beverages. Established in 1960 as a service station equipment and reciprocating compressor-manufacturing company, Elgi has become a multi-product, multi-market company. Its product lines today broadly comprise rotary compressors, reciprocating compressors, centrifugal compressors, automotive equipment and diesel engines. The company’s two manufacturing plants and its head office are located in Coimbatore, India. Elgi is gradually implementing Six Sigma in all its divisions.

In 1997, Elgi decided to implement an ERP system. It chose Baan. “Baan gave us a special price. We looked at SAP and other solutions and concluded that discrete manufacturing was handled best by Baan,” says Arathi Varadaraj, vice president organisation development, Elgi.

“Elgi went in for a complete ERP implementation, including stock control, planning, accounting and sales and purchase,” says Gopal Madnani, country manager, Baan India. Initially three modules were installed—manufacturing, finance and distribution (purchasing, inventory, sales and stock management). There was one consultant per module.

A pilot was undertaken. “The pilot showed us what kind of data can be made available to end-users from the existing data store,” says Varadaraj.

Ashok Leyland Information Technology (ALIT) was chosen as the implementation partner. The initial roll out was confined to two product lines with a team of four from Baan and eight from Elgi. Elgi chose a team of 20 members drawn from different functions like production, planning, purchase, sales, accounting and finance and excise for the purpose of implementation. This team worked full-time on implementation of the ERP solution along with Baan implementation consultants. The initial implementation took a year from November 1996 to November 1997. This was due to a long parallel run over four months.

In April 1998, Elgi implemented a multi-company setup integrating data coming from its ten branch offices across the country. The Elgi implementation was significant for Baan. Being new in India at that time, Indian localisation was a challenge (excise duty, sales tax) for the company. Localisation was integrated with Elgi’s input. Baan used its Openworld middleware.

After implementing ERP, Elgi found some gaps in Baan’s product. It went in for a custom solution developed in Perl on Linux. For Business Intelligence, the company evaluated Business Objects and MicroStrategy. It finally went with Microsoft SQL Server with Excel as the front-end.

Challenges
Business process documentation and reengineering was a hurdle. Earlier the company had an in-house system in Ingres that suffered from disconnection. The company had to clean up existing data to make it ERP friendly. In an ERP system, the composition and the process of making a product have to be entered into the system to take advantage of features such as Availability to Promise (ATP) and planning.

Localisation was a critical area. “We had to stumble our way through that,” says Varadaraj. “It was one of the shortest implementation cycles, we used Baan out-of-the-box as much as possible,” she adds. Change management was complex, as Elgi had to manage the shift from paper-based systems to ERP.

The implementation Baan’s goal is to transfer ownership of the implementation to the customer. The company starts by putting some product lines in the system, and gets it to a point where it is acceptable and trains the users. “The initial implementation was one-fourth the size that it is today,” says Madnani. Most of the subsequent work has been undertaken by Elgi, which has extended the system. In 1998, the system started off with 16 users. Today there are 125.

Baan does its implementations in terms of business process reference models. It has templates of business models that companies can implement rapidly; a recent implementation was done in 12 to 15 weeks.

With a stable system at the backend, Elgi started its e-business initiatives in June 2001 to integrate suppliers through a supplier portal. By mid-2002 the dealer portal went live. By vendor consolidation, cost reduction and improved material control was achieved and the number of vendors dropped to 400 from 1,200. Its new procurement system helped the company save on purchase of raw materials and improved inventory management. Elgi’s vendor rating system is integrated with its Baan system. Elgi has implemented Level 4 of Baan ERP.

A customer care system that went live in April 2001 ensures that any complaint logged by a customer, if unresolved within a stipulated time, will get escalated to the top management.

Benefits
By implementing Baan’s ERP solution, Elgi has benefited in terms of improved accounting, material planning, integrated track receivables and inventory management. Earlier, duplicate items were created and there was no systematic search for duplicates. Now there is better control on inventory. “Baan supported us well, issues got resolved,” says K Manoharan, GM-IT, Elgi.

With the ERP system in place Elgi has ATP; a view into the production pipeline that tells the company when products will be available in advance so that it can fix up delivery dates accordingly. Product configuration lets it manage new product development and customer specific customisation. Activity-based costing is another feature. Elgi has been able to consolidate its suppliers and improve inventory management and control.

Future plans
Elgi is thinking of adding scheduling, business intelligence and Product Lifecycle Management (PLM). Elgi wants to extend the implementation to real-time scheduling on the shop floor. Another feature that Elgi proposes to add is a product data management view from design to order. Elgi is also contemplating an e-biz initiative of self-service sales with orders being placed through the Net.