Thermax: Steaming ahead with IT

What is it that powers TBW, a name synonymous with industrial steam generation, to provide optimum solutions? Stanley Glancy finds that continuous technological advancement is the secret

One can’t survive in the engineering industry unless one has an integrated system, says k k Diwakar

If you have ever been to a large manufacturing plant you would have probably seen gargantuan machines the size of which puts many multi-storeyed buildings in our cities to shame. Powering these behemoths are boilers whose mammoth proportions belie one’s imagination at times. And the power behind these juggernauts is nothing but information technology. One organisation that has demonstrated the power of IT in this space is the Rs 100 crore Thermax Babcock and Wilcox, (TBW) India. The company, with installations in more than 15 countries across the world, claims to be the first project company in India to have implemented ERP to increase efficiency and cut costs.

The company
Babcock and Wilcox (B&W) had implemented ERP in all its branches globally much before entering into a partnership with Thermax. Because of this relationship with B&W, TBW had got into the process of thinking about ERP right since inception. Says K K Diwakar, group general manager for marketing and business development, “B&W being an American company was IT savvy, and had introduced various processes in all its locations globally before entering into a partnership with Thermax.

They also influenced us into thinking in terms of the benefits that judicious deployment of IT can provide to an organisation. The management at Thermax was also open to the idea of a system to streamline the manufacturing and installation processes.”
A joint venture between Thermax and B&W, TBW has been in the business of manufacturing and installing steam generation systems for captive power and co-generation since the late-80s. TBW caters to a range of industries like sugar, cement, chemicals, fertilisers and petroleum and process plants. The company acquired ISO 9001 certification in 1994, with the latest revision in 1997 for the design, manufacture, supply, erection and commissioning of boilers.

Agenda
The main objective behind TBW’s IT plan was to cut down the time taken to complete processes, reduce chaos during project execution and control costs. The first item on the agenda was to eliminate non-value-adding work through the deployment of IT tools. The company wanted to increase its turnover using available manpower. All of TBW’s projects are worth more than Rs 5 crore. Since cost is a major issue with any project, the company had to ensure that it was kept as low as possible.

There was scope for savings in many areas. Inventory was a key issue. The company had more than Rs 7-8 crore worth of inventory at the time of formulating its IT strategy. The aim was to reduce inventory by at least 30 percent. Implementation of ERP is not for redundancy creation but for increasing capacity. TBW aimed at tripling capacity once the system was in place.

Site shortages were another major problem faced by the company. A shortage or delay in delivery of any particular component at the project site would lead to further delays in completion. And as there was no standard delivery mechanism or system in place for tracking components, the company usually ended up placing a new order for the same components. This, in turn, lead to an increase in inventory. Elaborates Diwakar, “Our business is engineered to make customised products. Hence, most of the components we use are unique to that particular project and not reusable. This in turn escalated the cost of the end product.”

Lack of an integrated system was the actual reason for this state of affairs. The company assigned a part number to every component bought. But since the systems were not integrated, different systems generated different part numbers for the same item. Says Diwakar, “In the engineering industry, unless you have an integrated system, you can’t survive. Also, standalone systems didn’t offer us enough control over processes. This was when we realised the need for a system that would not only ensure reliable supply of raw materials, control costs, handle accounting, track material movement but also handle complete project management.”

Standalone systems created another problem for the company. Little control over processes led to delays in project completion. Most projects took a minimum of 14-16 months to reach completion. The company felt that automating its processes would help in reducing project durations. The aim was to reduce the cycle time taken to commission the boiler by at least 6-8 weeks. Explains Diwakar, “For project-oriented companies like ours, time is of the essence. Otherwise you are bound to suffer heavy losses.”

Implementation process
No other process company in the country had undertaken a project of this magnitude. This made TBW all the more cautious about its approach. A team constituting 25-30 of the top people from all departments was formed. After much deliberation the team prepared a document on IT strategies, which laid out the roadmap for IT implementation. One major advantage that the company enjoyed, according to Diwakar, was that at the top-level there was clarity and unanimity about what was needed.

Says he, “Usually the need for IT deployment is proposed by the CTO or CIO of a company. But in our case instead of a CTO the CEO took the initiative. The whole culture was IT savvy. But the systems were not connected and hence the information didn’t flow.” Another advantage the company enjoyed was that it was ISO-certified.

The first step towards automation was the selection of a reliable vendor. The IT team went through a beta testing phase to select the one that best suited the company. At that point of time there were only four or five players in the market offering an ERP solution. Each of the solution providers was rated not only on the basis of quality of software, but also on the probability of the companies’ survival. Explains Diwakar, “We didn’t want to deploy a solution from a vendor who would shut shop at the first signs of a slowdown. This was important because we wanted the company to handle our maintenance and upgradation needs.” TBW had two options, SAP and BaaN. In keeping with the formulated strategy, TBW tested the offerings of both these companies.

One demand TBW had was that the vendor should provide a turnkey solution. Says Diwakar, “We were not just buying the software but we also wanted it installed end-to-end.” Though SAP had a good solution on offer they were not ready to implement a turnkey solution. SAP was ready to provide the software and bring in SISL as the implementation partner. Also, there were certain customised features that TBW required and that were not available from SAP. BaaN on the other hand had its roots in the construction industry. Also, they were ready to provide a turnkey solution with all the modules required by TBW. BaaN was thus the obvious choice.

The next stage of implementation involved dividing the IT team into various groups, based on their functionalities. The management team comprised the MDs of BaaN and TBW. The apex group that formed the second layer comprised people from engineering, manufacturing and five heads of departments. The third and the most important layer was that of the project manager. TBW had very stringent demands with respect to who the project manager should be. Says Diwakar, “The project manager was personally selected by us. We wanted a person who had experience with at least three implementations.”

BPR
TBW also adopted ERP-enabled BPR (business process restructuring) processes. The idea was to use this opportunity to implement global practices. Says Diwakar, “The management didn’t want to customise the source code to meet the company’s demands. Instead, it was decided to change our style of functioning to meet the demands imposed by the solution.”

TBW purchased around eight modules of BaaN, including logistics and finance, common, manufacturing, enterprise modular, enterprise information systems (EIS), tools, projects and distribution.

The BaaN common module captures common utilities like suppliers, units used, etc. The BaaN tools module is concerned with administration and development. The enterprise module deals with configuration of employees’ roles, business process and the standards practised globally. The top management uses EIS more as a health check for the organisation. For instance, if the inventory crosses a certain pre-set level—which can be configured—then the top management will be sent a warning.

The entire IT team was trained in all modules of the system. The reasoning behind this was to effectively integrate the company’s processes with the ERP modules being implemented.

Big bang approach
Instead of following the usual phased manner of implementation TBW decided to go in for what it calls the big bang approach. Though this meant stopping all activities in the company for almost 10 days, the management in keeping with its philosophy of total change management decided to go through all the phases of deployment at one go. Says Diwakar, “Most organisations generally follow a parallel method of deployment so as to allow employees to work on the old system while getting adjusted to the new one. The problem with this is that there is a lot of duplication of work. We went in for the clean-cut approach of implementation, thus avoiding this problem.”

The subcontracting module offered by BaaN was highly cumbersome. The reason for this being that the US and UK do not follow the subcontracting process. So the company decided to change its processes to meet international standards by buying material instead of subcontracting. This has also helped the company to reduce inventory.

Benefits
The implementation of BaaN’s ERP solution cost the company Rs 6 crore in terms of total investments. But it has helped the company in achieving tremendous cost savings. Process optimisation has now been enabled and planning has become concrete. This has reduced turnaround time from 16 months to less than 10 months. TBW now has a very evolved and fine-tuned system of cost control. With the centralised Oracle database in place, duplication of work has been completely done away with. This has reduced the problem of site shortages to absolute zero. Control over processes has also helped the company in reducing the inventory level. From the previous Rs 8 crore the inventory has been cut down to less than Rs 1 crore. Site purchase has now come down to less than a lakh.

Automation of material tracking and planning has helped in drastically cutting down the cycle time. As soon as an order is received it is passed to the execution group. The design is then prepared, followed by the materials list. The designs are converted into drawings. For generating a drawing all the requisite variables are entered into the system and a drawing, which is 90 percent accurate, is generated. Generating drawings was a tedious process earlier with most projects taking up more than 1500 manhours of work. But after being parameterised the work has been cut down to less than 300-400 manhours. The parametric driven software deployed by TBW is based on templates. The templates are the same for all drawings but the parameters vary depending on the needs of the project. Manual error has been completely done away with.

Other solutions
Other than BaaN’s solution TBW has also integrated various other software, which have been customised to meet internal needs. The company uses Object ARX for parametric automation, 2000i AutoCad for designing, Staad for structure analysis, mechanical desktop for 3D modelling, Primavera for project planning, Botus for remote performance management and Lotus Notes for messaging. ProcNet TM, the completely customisable solution, has been devised specially to suit TBW’s diverse procurement needs.

TBW has also developed a host of proprietary software for various in-house needs. This software helps the company in its performance and circulation programme, renovation and modernisation work and for prediction of component life. For knowledge management TBW has developed its own Lotus Domino 4.6-based knowledge repository and collaborative platform. The company has also developed an extranet system for supply integration.

Roadmap
TBW aims to create a virtual office and is currently integrating its field sites to the central system. The company is also integrating its supply chain with the main system. This, the company hopes, will enable customers to order spares online. The company plans to be the frontrunner in the process manufacturing industry as far as IT is concerned. It plans to leverage IT to expand its base and optimise its resources to achieve greater growth and expand its base to countries other than the 15 in which it is already present.