Sona leverages IT to bring about functional efficiency

In response to the economic downturn, stagnant sales and the need to expand its customer base, the Rs 320 crore Sona group streamlined its operations and implemented Oracle’s ERP package. The power of relevant and timely information has helped the company incorporate efficiencies into its business processes, says Shipra Arora

Ajeet V Garde says that the Sona group opted for Oracle as it had a clear post-ERP implementation roadmap

Some organisations believe that IT is core whereas others say that IT is an enabler. With everything in place, the world has witnessed that more of those who adhere to the latter succeed and achieve targets more efficiently.

A leading provider of automotive components to companies like Maruti Udyog, Toyota Kirloskar, Hyundai, Mahindra & Mahindra, Eicher and Hindustan Motors, the Rs 320 crore Sona Group is an ardent follower of this philosophy. The group’s IT initiatives stand testimony to lessons that the slowdown has taught the IT industry—IT investments are going to be driven by business needs. With both the CIO and CFO functions vested with the same person, this philosophy is followed to its hilt within the Sona Group.

The Sona group comprises five companies: Sona Koyo Steering¸ which is also the flagship company, Mahindra Sona (a joint venture with M&M), Sona Okegawa Precision Forgings and Sona Cold Forgings. Sona Koyo is the biggest company with Rs 220 crore in revenues, followed by Mahindra Sona at Rs 55 crore, with the other three companies accounting for the rest.

While Sona Koyo has been operational since 1987, the rest came into being only after 1998. Except for Mahindra Sona, which is in Mumbai, all the other group companies are located in Gurgaon, within two kilometers of each other. The group has four manufacturing plants, apart from Sona Koyo’s two production facilities in Gurgaon and Chennai.

Legacy set up
The company had developed an in-house Oracle-based application in 1992 for its business applications. This home grown system addressed functional areas like sales, maintenance, inventory, receivables, purchasing and finance. But it did not cover areas like production, MRP (manufacturing resource planning), costing and quality in its ambit. While purchase, inventory and accounts modules were integrated, sales, maintenance and payroll were stand-alone modules. The in-house system was implemented in Sona Koyo only. As and when the other four companies came into existence they started using Tally and other software packages.

According to Ajeet V Garde, chief finance and information officer at Sona Koyo Steering Systems, the development of the system in Sona Koyo was hard-coded and not soft-coded because of which it could not be extended automatically to new group companies. A lot of changes were also required and in between there was the Y2K issue, so a lot of re-writing of the programs was done at that stage. On the product development side, Sona Koyo was working on AutoCAD, which was used mainly as a drafting tool. The drawings were prepared and then given to suppliers and the corrections incorporated.

Requirement
After a fantastic growth curve from 1987 to 1992, growth started tapering off and became almost flat for Sona Koyo. The company then outlined its business restructuring plans on the financial front and expansion of its customer base, as a solution to dipping revenues. According to Garde, one of the three strategies identified by the company was to leverage IT to increase commercial and engineering efficiencies and take faster decisions based on accurate information. "During that period there was a boom of IT in terms of dot-coms, but what we learnt from it was elimination of intermediaries, in terms of buying or selling," he adds. Some of the business challenges faced by the organisation were increasing pressures on suppliers to remain price-competitive, ensure ‘just-in-time’ supplies to its customers and increase profitability. On the development side, the company found that the main bottleneck in addressing new customers was time taken in development of new products, which was almost 24 months.

There was a need to reduce the delivery period, which meant integration between the company, customers and suppliers. "We took it up as a challenge to integrate the entire supply chain, including our customers and suppliers and integrate them in terms of business as well as product development," explains Garde. The problem with the legacy system was that there was no visibility across functional areas. Because of this, there were problems in inventory management and production planning. Also, the in-house system was designed keeping the flagship company in mind, while the management wanted to have a consolidated view of the entire group’s operations.

Hence, the key drivers for the new initiative were focused on cost reduction, integration of all business processes across functions and across group companies, availability of timely and accurate information on a common platform, increase in productivity and inventory control.

Functional
One of the interesting aspects of all the IT initiatives in the Sona group is that the functional units spearhead the IT initiative rather than the IT team. Instead, the IT team provides support in terms of technical competencies. The group even conducted a survey for ERP, which made them realise that in companies which have failed to draw the full benefit of ERP it was the IT and not the functional team spearheading the effort.

Oracle ERP
Lesson learnt, a cross-functional team was formed, consisting of a representative from all departments across the board in January 2001. This ERP effort had just one person from IT to make comparative tables on which hardware to buy. This team conducted an evaluation study of the ERP packages before finally zeroing upon Oracle, MFG Pro and SAP. The final decision in favour of Oracle E-business suite was made on the basis of the fact that Oracle was the only software that was then Web-enabled.

Further, Oracle provided software in bits and pieces, which could be implemented on top of the ERP, like supplier portal, customer portal and business intelligence, which Sona had on its future roadmap. In other words, it had a clear post-ERP implementation roadmap available. "Although integration was one of our issues, yet we wanted flexibility in the system. For example, if an external package has to integrate with SAP, there were lot more integration issues as compared to Oracle," explains Garde. Oracle’s database strength also woked to its advantage. Sona then hired PricewaterhouseCoopers as its implementation partner. Even though it was the most expensive of those available, the decision was made on the premise that PwC had the maximum implemented base of Oracle in both India and worldwide.

Having decided on the vendor a team of nine functional people and one IT expert was formed. When choosing the core team, those who knew the processes and problems at the grassroots level in each functional area were asked to join the group. The core team was then sent for a two-month training stint at PwC’s Kolkata facility on aspects like software integration, how it works internally, what is the logic of its working—to ensure that users understand what the software can and cannot do.

Sona decided to go for a three-tier implementation team comprising the business team and steering committee apart from the core team. The business team’s objective was to review the proposals made by the core team, accepting, rejecting or modifying them and ensuring that the organisation’s objectives in implementing the ERP solution were met. There were eight business teams like purchase, R&D, etc. On top of these was the steering committee consisting of the top management, with the objective of resolving differences between the business team and core team, to allocate resources and monitor the progress of the project.

Oracle’s participation was also sought at both the policy and operational level in order to benefit from Oracle’s perspective on other implementations it had undertaken. "The presence of Oracle was also very important during implementation from the software side," adds Garde. Progress was constantly monitored every 15 days.

In the true spirit of business- led IT objectives, all the teams were asked what they wanted from the new systems and that was documented, following a mapping of what Oracle can and cannot deliver. Since Sona had implemented TQM and Toyota production systems, the need for information was being felt by the entire organisation, which was driving the ERP effort. It was thus necessary to understand the exact information being sought. "It was important to know what information is to be captured at the initial stage itself so that it was possible to get what was wanted," feels Garde. Being clear on what was expected made the planning process far easier.

The products from Oracle’s E-business suite implemented at Sona included Financials, Discrete Manufacturing, Order Management, Purchasing, Isupplier Portal, Sales Analyser and Discoverer. The implementation process also included writing reports, around 300 customised reports were generated, out of which almost 130 are in regular use currently.

Before the final rollout, Sona went for two pilot sessions, wherein the system’s functionality was demonstrated, followed by user training. Oracle ERP finally went live on June 1, 2001 in Sona Koyo, taking just five months to implement. One of the interesting aspects was that there were no parallel runs alongside the legacy system. This successful implementation was then replicated in other three group companies by October the same year.

Benefits
Some of the key benefits realised through Oracle E-business suite were the creation of a centralised information repository with decentralised access across the group, reduction in inventory and avoidance of shortages, improvement in inventory turnover ratio from 17 to 21 days, finalisation of audited accounts within 10 days as opposed to 60 days earlier and transparent business practices.

Oracle ERP has further helped Sona in bringing down rejection levels by almost 80 percent across all types of customer returns, supplier rejections and in-house rejections. A reporting tool has been added on to the ERP, which analyses rejections across different dimensions—by machines, by products, by customer, by defect.

Garde however says that ERP has been only one of the factors leading to these benefits. "We have to recognise that ERP is only an enabler and indicates where things are going wrong; ultimately it is people who have to take the initiative to solve problems," he clarifies. On the flip side, with ERP implementation work at the data entry level has increased by almost 28 percent. But the organisation is fine with it as long as the objectives are achieved.

Engineering side
Having a long product development cycle, the organisation felt the need to upgrade its engineering side as well. On the engineering side, Sona asked PTC to automate its engineering function after a thorough evaluation by the R&D team. According to Garde, PTC had a range of products covering the entire spectrum of Sona’s engineering activities and not just the designing aspect. It implemented Pro Engineer, the engineering software and Pro Mechanica, the simulation software. PTC also did the implementation work for Sona.

However, after implementing these applications it was found that they were implemented on individual desktops and even though desktops were connected through a LAN, sharing was a major issue as it slowed down the system. There was also the issue of wasted effort as changes made in the drawings were not available to everyone, leading to time loss.

To address this issue, Sona implemented Intralink software from PTC, where the data is centralised on a server with access to users.

The next step for the organisation was to convert all the 2D Auto CAD drawings into 3D. Further, all these drawings were linked into a bill of material (BOM). This was done through PTC’s product development management software called Windchill and all the new product development was shifted to Windchill thereon. All the members of the development team access the central server and each one knows where the other is and can sequence the activity accordingly. The implementation brought down the product development lifecycle from 24 months to 17 months.

Then Sona implemented PTC’s Project Link software, which was an improvement upon Windchill. Project Link sits on top of Windchill and does only project management.

Implemeting Project Link, which was completed in mid-2002, rectified some of the shortcomings in Windchill. The software now allows Sona to provide access to its suppliers and customers. "This works to the organisation’s advantage in bagging prestigious projects," feels Garde. Sona has now developed an integration tool, which links Windchill to ERP.

Other applications
As part of the IT initiative, Sona implemented a central messaging server. It also initiated its website called www.sonagroup.-com. For messaging Sona uses Postmaster software at the server-end and Outlook Express at the client-end.

Core IT backbone
Sona has set up a strong IT backbone in order to run various applications. It has laid optic fibre cables throughout the campus for running a 10/100 Mbps LAN. Nortel switches are used at the core backbone. The organisation has deployed Sun servers for the ERP application with the engineering applications running on Windows NT servers.

In all, Sona has a total of 11 servers. Since 1994, the organisation has used various generations of Sun servers. The WAN connectivity is RF- (radio frequency) based. All the five locations—corporate office, three group companies and Sona Koyo—access the central server through RF. This was made possible because all these locations are in close vicinity, within a 30 km radius. RF works on the principle of line-of-sight. All the suppliers and customers connect through dial-up Internet.

The Chennai plant, which presently does not connect to the server, will be provided connectivity by the end of this year. There are around 223 nodes in Sona, excluding Chennai.

In order to concentrate fully on design and product development, the annual maintenance contract has been given to Wipro to manage all IT implementations across companies.

Future roadmap
Next on Sona’s roadmap are popularising its supplier, customer and employee portals. Through the supplier portal, suppliers are able to connect and see their purchase orders, schedules and other operational level details.

Similarly, the customer portal informs customers about delivery schedules and inventory status on their products. The employee portal gives information on organisational procedures, rules, structure, etc.

Apart from popularing these initiatives, Sona will also work on a workflow project this year. Implementing the workflow will digitise areas like leave applications, travel vouchers and other HR-related paper work, which at the same time will be integrated with the ERP solution.

Informs Garde, "This will complete the entire work of digitisation of data across all the group organisations in Sona."