Project Log

The new ERP system at Jindal Vijaynagar Steel

JVSL’s acquired two more steel plants. Now it’s relying on a new ERP solution to manage its increased production capacity. Seshagiri Rao MVS, its Director of Finance, talks about the project to Abhinav Singh.

When Jindal Vijaynagar Steel Limited (JVSL) set up its steel plant in 1997 at Torangallu, Karnataka, it was using the Steel Process Tracking System (SPTS) developed by USIT, a joint venture between US Steel and the Steel Authority of India. We had issues with the system which had its limitations and was not providing information such as the exact cost of production. Data on credit control and accounts payable was inaccurate. This was because everything was manual. As far as manufacturing was concerned the SPTS was giving us efficient service, so we thought that an ERP system integrated with the existing system would give us the desired information.

Legacy system

To solve our financial management issues, we went in for Oracle Financials. We also opted for a Materials Management System (MatMan) developed by USIT to solve our inventory management issues. We thought that the MatMan would perfectly integrate with the SPTS because the same vendor had developed both. However, after the implementation, we found that there were certain deficiencies such as consumption entry valuations which were not done properly. For instance, when valuation was done for a particular day, it was difficult to correlate with the valuation for another day. Analysing valuations done on different days was difficult. It was also not possible to do ageing analysis of inventory.

Two more plants

Then JVSL acquired two more steel plants from another group company at Vasind and Tarapur in Maharashtra. The two plants were running the Ramco Marshall ERP system. After the acquisition, we were left with different systems running across the three steel plants, leading to integration issues. Since we were embracing new projects, we needed a package to do project cost analysis which is quite a complex process. Additionally, the production capacity in our steel plant at Torangallu in Karnataka had increased from 1.6 million tonnes in March 2004 to 2.5 million tonnes in March 2005. It was likely to touch 4 million tonnes by March 2006. Hence we urgently needed a system to handle the increased production capacities.

The winning package

We wanted a package that could solve our integration issues. Evaluating packages took us about six months, from April to September 2004. We checked out various packages with the help of IBM and Wipro, and finally closed in on Oracle E-Business Suite 11i.10 as it had unique modules such as project module, costing module, financial module and procurement module; in all, it had over 20 modules and was able to solve our problems. The Oracle suite was also a cost-effective proposition when compared to other packages. We piloted the implementation at our steel plant in Karnataka in the first phase, and plan to roll out the package in the other two plants in Maharashtra thereafter. We have decided to do away with Ramco Marshall, except for the manufacturing module as it has been analysing the cold rolling and galvanising processes. The SPTS system for the manufacturing processes at our plant in Karnataka will continue as the Oracle suite is not particularly customised as per the specifications of the steel industry.

Smooth implementation

Before implementing the package, we ran a pilot with a team of 20 people. In addition, there were representatives from the finance, procurement, production, planning and commercial departments. There were also about seven people from IBM, our systems integrator and implementation partner. Since most implementation hurdles were solved during the pilot stage, there were no major challenges as such. We faced minor issues as far as training was concerned, but IBM took excellent initiative in solving the problems. The whole project, including the extension of the package to the other two steel plants in Maharashtra, including software, implementation and hardware, is estimated to cost Rs 3 crore. We went live at our Torangallu plant in March 2005.

Noticeable improvement

Although we are still new to the system, we have started accruing benefits and are expecting more profits as the Oracle package settles down. Since the package is scalable, we expect that the new system will meet the requirements of our additional production capacity. Though we have increased this capacity, we have not increased the number of our employees; we expect that manual tasks will now be automated with the Oracle system. The system has taken care of various control mechanisms and has streamlined the decision-making process. Earlier, we used to calculate specifications manually, which was tedious and error-prone. Implementing the Oracle suite has helped us take decisions on product prices as we are now able to determine the thickness levels and specifications of a particular product through the data generated from the system and then price our product accordingly. Through the system, we have also been able to get our ageing analysis and daily cost of production accurately; net sales realisation has also become easy. We are now able to close our books of accounts for the month within 10-15 days as against 45 days with the earlier system. The Oracle E-Business Suite also has a Business Intelligence tool, and it helps us analyse past data which contributes to effective decision-making.

CRM is our next move

Within the next nine months we will extend the system to the other two plants. We also plan to have a CRM system in place for better customer interaction, but we haven’t decided the time frame as yet.

abhinav@expresscomputeronline.com