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Why Hitachi Koki turned to ERP

Using Ramco e.Applications has helped Hitachi Koki India eliminate duplicate entries and save 5 percent of its inventory costs. Akhtar Pasha reports.

Ramco e.Applications, an ERP solution, has helped Hitachi Koki India, a Rs 35-crore company that manufactures electric power tools, eliminate the duplication of 2,500 transaction entries—that’s one month of records—from the company’s five branch offices. It has streamlined its daily billing operations—leading to greater transparency—and reduced four months of inventory (worth Rs 8 crore) to two and half months. According to Dattatraya Joshi, Finance Controller and Secretary, Hitachi Koki, “We have been able to save 5 percent of the total inventory cost that directly adds to its bottom line.”

Hitachi Koki had been using Tally, and information from its five branch and sales offices used to be sent to the Head Office (HO) in Bangalore as hard copies for entry and consolidation. The company faced issues such as duplication of entries, duplication of work, and irregularities in adherence to company policies at branch offices.

Duplication of entries

It was time we automated all our branch offices and used a business solution that gave insight into our transactional systems Dattatraya Joshi Finance Controller & Secretary Hitachi Koki India

Says Joshi, “Between our branch offices, we used to churn a huge number of sales invoices. Each branch office used to do 500 transactions per month, which translates to 2,500 transactions per month across branches. We used Tally to manually consolidate data from branch and sales offices, and sent the same to our HO as hard copies. The data had to be re-entered and reconciled, requiring additional manpower.” He adds that it was a complex and tedious process for the company to track transactions online; this led to discrepancies in daily billing. It used to take two weeks to get the final data after re-entry and reconciliation. He cites the fact that from the HO, they were unable to know the order status or details of unsold products in branch offices, or trace product deliveries. Further, end of the day’s sales, collection reports, and inventory levels couldn’t be determined. All of this was hampering the company from taking corrective measures and business decisions.

Maintaining uniformity in compliance with company policies regarding its suppliers and dealers across its branch offices was also an issue. For example, Hitachi Koki wasn’t able to track and monitor whether the branch offices were adhering to policies. Joshi says that they had to monitor each policy manually. “We fixed a credit limit for supplies, but sometimes branch offices used to over-sell, leading to collection issues. Sometimes even if a dealer had not reached the target, the branch used to give the target discount and pass it. It was like having all our eggs in the same basket. We then realised that it was time we automated all our branch offices and used a business solution that gave insight into our transactional systems,” Joshi explains.

Making a choice

In 2003 Hitachi Koki decided to deploy an ERP solution. It considered products from various companies including Wings Enterprise and Bangalore-based Sofex System. After evaluating several products, the company decided to implement Ramco e.Applications on the Microsoft platform. Joshi says, “Being a small manufacturing outfit, deploying SAP or Oracle was beyond our budget. We chose Ramco’s product because it had the desired functionality that met most of our requirements. In addition, Ramco had Indian extensions to Value Added Tax (VAT) and excise.”

A quick implementation

Hitachi signed a contract with Ramco in April 2004, and it took the latter one month to study Hitachi’s business processes. The implementation began in May 2004. Ramco’s implementation partner, Winware, took charge of implementing modules such as Inventory, Purchasing, Sales, Shipping, General Ledger, Fixed Assets, Accounts Receivables, Accounts Payables, Costing, and Indian Extensions—excise and VAT. Hitachi bought 12 concurrent user licences, and ten people from the branch offices were trained to use Ramco e.Applications. Hitachi first piloted the implementation in Bangalore, and later rolled it out in other locations such as Chennai, Ahmedabad, Delhi and Mumbai in a phased manner. It went live with e.Applications in August 2004.

Payback

With the implementation of e.Applications, Hitachi Koki is now able to manage inventory in an organised and efficient manner. The Inventory Module helps to keep track of materials across the supply chain including stocks with vendors, customers and branch sales offices. It has enabled higher efficiencies on the shop floor and timely supplies, all of which have resulted in improved sales and enhanced customer satisfaction levels.

Better inventory management has also led to better planning and production. e.Applications is enabling the company to analyse sales data and forecast future demand for its power tools, enabling efficient management of production and procurement lead times while providing supply chain visibility.

Eliminating duplication

The earlier process of manually consolidating transactional data from all branches has been eliminated. Along with this, human errors are now history. Ramco e.Applications has helped in automating the entire transactional process, providing visibility into the company’s core business.

Real-time co-ordination

“We are now able to monitor online from the HO transactions at all our branches across the country. Generating various reports pertaining to inventory, stocks, dealer-supplier credit notes and the like is now possible. Ready access to information across branches and departments has reduced business cycle times, boosted sales, and brought complete transparency in the processes,” informs Joshi.

Re-deploying employees

By automating its operations, Hitachi Koki’s management has been able to rationalise its human resources. It has re-deployed its employees who are now able to focus on their core functions and add value to the system.

With e.Applications in place, Hitachi is expecting a 25 percent jump in revenues in 2005-06. Joshi says, “Of that 25 percent growth, 10 percent will be attributed to e.Applications.”

Next: CRM

Hitachi Koki is not ruling out the possibility of going in for a CRM solution for its spare parts business, which deals with 4,000 different spare parts. CRM integrated with ERP will monitor the timely availability of spare parts and keep track of orders. In turn, the timely availability of spare parts will improve customer service.

akhtar@expresscomputeronline.com