Enterprise Apps Special: ERP Case Study

Triveni gets a handle on project costing with SAP R/3

Triveni Engineering’s turbine spares are its most profitable business. These machines require servicing over their long lifecycle of 25 to 30 years. The company wanted to enhance its after-sales support for spares and improve its bottom line. Akhtar Pasha says that deploying SAP R/3 4.6C has let the company control inventory costs, track projects online and put a number to the total project cost

Triveni Engineering & Industries started in the sugar business in 1933. Today it is a Rs 750 crore enterprise with diverse business lines. Along the way, the group diversified from sugar to sugar machinery in the 1960s. In 1964 the company began manufacturing steam turbines in technical collaboration with Peter Brotherhood, UK to provide turbines for mill drives and power generation. Today, it has over 2,500 installations across a range of industries, which include sugar, fertilisers, petrochemicals, chemicals, carbon black, solvent extraction, paper, pig iron and sponge iron. With a production capacity of over 200 turbines a year, Triveni has emerged as a leader in the Indian market for turbines rated at a capacity of up to 6 MW. Triveni now manufactures turbine models up to 15 MW. It also manufactures high-speed gearboxes.

Business challenges

The Spares Sales division of Triveni Group sells spares for steam turbines that are used in power plants of companies such as Samtel Color, Modipon Fibre Co, Alembic Chemical Works and MTZ Polyesters and whose businesses directly depend on keeping power plants available 24x7x65. An hour of downtime could cost them pots of money and since the shelf-life of the machines is high, between 25 to 30 years, they need to be supported by new spares and more importantly maintained on a regular basis (every three months).

But the task was not easy as it may seem. There were three areas where Triveni wanted to improve. In the recent past, the company has shifted its focus from being a product-oriented company to a services company. The spares sales business was Triveni’s most profitable business, it wanted to focus on solving three business challenges that it faced.

The first was customer support (CS). Critical information such as the case history of spares at customer premises were maintained manually and the systems were paper-based. Occasionally, spares changed were not recorded. Other areas such as the number of complaints closed, number of open complaints and preventive maintenance schedule (similar to an AMC contract), were all paper-based. In the absence of an engineer who attended the last problem, a follow-up action could not be planned in advance nor could the root cause of the problem be traced. Rajiv Jain, DGM-Operations, Triveni Engineering & Industries says, “Because of the data being unavailable we ended up overstocking spares. Additionally, PMC would not be prepared for follow-up action. As data was unavailable online we could not analyse the root cause of the problem.”

The second area of concern was project systems (PS)

for tackling projects. Each item/spare is tracked with the associated project. Triveni manufactures some of the items/spares and partially outsources/procures from a third party. A purchase order is issued against each item/spare directly bought out. Triveni had to deal with large number of items at a time (on an average, 80 to 90 items); there was no means of tracking these projects.

Cost of project was the third area that Triveni wanted to calculate. It was necessary to determine how much Triveni was investing in a given project. Jain explains, “It was easy for us to calculate the cost of the spares but because of longer shelf life of spares (25-30 years), it was difficult for us to calculate the travel expenses incurred while getting to the customer premises, spares supplied during warranty conditions and the like.

Issue of legacy applications

Triveni wanted to avoid unnecessary cost and delays and hence decided to take the Big Bang route for implementation. It was due to this reason that Triveni took two years to implement SAP’s ERP solution, says Rajiv Jain

Over a decade the company has spent money on in-house legacy applications [prepared by NIIT with Sybase on Unix]. These applications, such as inventory, production planning, purchase and spares, were not integrated with finance. Tally 6.3 version was used for accounting. While the range of applications covered almost every facet of business operations, the mechanism to integrate islands of computing was rather crude. No standard or unifying processes could be established to provide seamless integration and the methodology was paper-based and it depended on manual entries. Thanks to this, every application system became function-specific. This resulted in a great deal of time and resources being spent reconciling these functional figures. Due to non-integration of data across various functions, sometimes an item was booked twice or it was difficult to trace where material was lying.

In 1999, Triveni with the help of Accenture decided to go in for business process engineering to improve its customer support, project systems and to analyse project costs. Triveni took the decision to have an ERP system in place to solve business problems. Three enterprise application software vendors were identified—SAP, Baan and Oracle.

SAP, a natural choice

Although the solutions from SAP, Baan and Oracle were equally good, Triveni was looking at a solution that needed the least amount of customisation. Jain adds, “Customisation of the package meant shelling out more dough and delaying the implementation, which we wanted to avoid. Besides, we wanted to deal with a company that can provide future upgrades and whose solution gels with our future plans. Hence SAP was a natural choice as we have plans to invest in a PLM and CRM solution soon after implementing ERP.” SAP R/3 4.6B was identified as an ERP package that could provide Triveni Engineering with the following:

• An ability to provide full visibility of information as against pockets of information;
• Modular, scalable and integrated architecture based upon best practices in the consumer products industry. In-built features to support optimisation of supply chain, richness in functionality, including India-specific requirements of excise and taxation and a growth platform. Triveni picked SAP’s R/3 4.6B ERP solution in 2000.

TCS as implementation partner

Having identified the package and modules required for meeting its business requirements, the choice of implementation partner for the project was a difficult decision to make. The likes of TCS, HCL, Satyam and Tata Infotech were all bidding for this project. Triveni chose TCS as its implementation partner because of its end-to-end solution offerings and due to the company’s close association with F C Kohli, ex-deputy chairman of TCS, who is now among the board of directors of Triveni Engineering.

Big Bang route for implementation

After the first round of assessment, Triveni took a call on the modules it wanted to implement. It was collectively decided that the company would go ahead and implement 11 modules taking the Big Bang approach. The modules picked were sales & distribution, project systems, financial, cost accounting, product planning, quality management, customer support, executive information system (EIS), workflow and payroll.

The package [R/3 4.6B] implementation began in January 2001. During the implementation, SAP brought out a new version, R/3 4.6C, with some value additions such as improved customer support and India payroll. The first step of the implementation was to convert all existing data from the legacy application into SAP’s preferred format. Due to a large inventory of bill of materials (BOM) (consisting of 60,000 to 70,000 items), it took five months for data conversion. Nearly 120 people from various departments and functional heads were trained on the new SAP environment. Triveni Engineering went live with R/3 4.6C on March 2003 after an implementation that took all of two years.

Jain justifies the delay by stating that Triveni is into the ETO (engineering to order) business and very little has been done to understand its requirements. “It took time for SAP to understand our requirements and make adjustments accordingly. Additionally we picked up 11 full-fledged modules to implement in one go instead of implementing fewer modules in phases. We wanted to avoid unnecessary cost and delays and hence decided to take the Big Bang route for implementation.”

Triveni Engineering has invested Rs 2 crore for the entire R/3 4.6C implementation, including the cost of the package, hardware, software, training and implementation. Today there are 55 users of SAP R/3 4.6C.

Benefits

Barely seven months into implementation, Triveni is seeing early benefits. Jain says, “We are already seeing hidden profits.” As data is now available online, Triveni can trace where its materials are lying in the factory. The company no longer needs to overstock spares; this has led to a reduction in inventory cost. Duplication of entries has stopped. The core objective of investing in R/3 4.6C to improve project systems, project cost analysis and improve the customer support experience is already paying dividends. The company is now able to get to the root cause of a particular problem, rectify it and leave behind follow-up instructions that need to be looked at during the next visit. From the time a tender is floated to manufacturing, each item is tracked online on a project basis, helping calculate the total cost of the project.

Future plans

Having implemented all 11 modules of R/3 4.6C at its Bangalore office, the company is planning an all-India rollout of R/3 in seven offices—Delhi, Allahabad, Hyderabad, Vijayawada, Pune, Mumbai and Latur in the next two months. After that the company plans to invest in a PLM solution to reduce the product life cycle and associated change management. CRM too is high on the agenda.

Snapshot of implementation
Industry	Triveni Engineering Industries is a manufacturer of sugar machinery, steam or gas turbines and high speed gear boxes.
Solution	The company deployed SAP R/3 4.6C with 11 modules—sales & distribution, project systems, financial, cost accounting, product planning, quality management, customer support, executive information system (EIS), workflow and payroll.
Hardware	Sun SPARC E450 server with two CPUs, 2 GB memory and a Sun E250 with one CPU and 1 GB memory
Operating systems	Sun Solaris 2.8
Database	Oracle 8.1.7

Snapshot of post-implementation benefits

Reduction in inventory costs. Triveni is now able to identify the root cause of the problem and troubleshoot the same. The implementation will help calculate the total lifecycle cost of a project, including travel trips to customer premises, warranty replacements and the like. The company is now able to track projects online. Triveni can avoid duplication of entries in the bill of materials.

akhtar@expresscomputeronline.com