Peer to Peer

Growing with IT

LG has adopted a new system to help it reach its target of $6.5 billion sales by 2010. Abhinav Singh on a continuing success story.

Since 1999, LG Electronics India Limited (LGEIL) was running its business on a home-grown ERP system called Millennium. The system was originally developed by LGEDS—now LGCNS—and was meant for the overseas sales subsidiaries of LG Electronics (LGE). The system was strong in sales, finance and service. However, over time, the scenario changed, and with the liberalisation of the economies of countries like Mexico and India, LGE decided to have multiple production bases outside Korea. LGEIL gained greater importance after it set up two manufacturing facilities in Greater Noida (near New Delhi) and Ranjangaon (Pune) within a span of five years.

Out with the old

The company has been on an ambitious growth path ever since it started operations in India in mid-1997, and its sales targets are becoming bolder by the day. For instance, it reached a $1 billion turnover just seven years after commencing operations. With a current annual turnover of $1.4 billion, it aims to touch $1.8 billion by 2006 and $6.5 billion by 2010. By that year it also plans to export goods worth $1.5 billion.

Where does information technology figure in all this? Explains Arindam Bose, chief information officer of LGEIL: “The Millennium system was not enough to handle our growing business requirements, and since the system could not scale up and was meant to manage only limited transactions we had to look for a standardised ERP package.” With the emergence of LGEIL as a major manufacturing hub for LGE, a lot of focus was given to quality contract manufacturing or the electronic manufacturing service (EMS); close to 30 percent of LGEIL’s domestic turnover is manufactured by EMS.

There were also data integration issues which LGEIL had with the Millennium system. Recalls Daya Prakash, Senior Project Manager, LG CNS India, “Millennium was not catering to the efficient flow of information across functions such as sales and material planning. All this was resulting in inaccurate data flow and hampering data integrity.”

Moving ahead with Oracle Apps

There was thus a need for LGEIL to adopt an ERP system which could meet the growing requirements of its expanding business and also smoothly integrate with the LGE Global SCM. In addition, LGEIL needed a robust platform to connect the entire information chain from its customers’ customers to its suppliers’ suppliers.

LGEIL was quick to decide on Oracle Apps11.5.10 version since LG has a global relationship with Oracle. Moreover, the Millennium system which LGEIL was using was also based on the Oracle database. This made it easy to integrate other systems running at LGEIL with Oracle Apps. Says Prakash, “We also found the architecture of Oracle Apps to be highly scalable…it is easy to scale it up by 20 to 30 percent without making changes in the application.” LGEIL found that the package had certain in-built security features which could sense any leak of information and also prevent any tampering of sensitive data.

Mammoth exercise

The implementation of Oracle Apps was a big challenge for LGEIL as it had to be done within seven months and the scale of operations was vast. The package had to be customised as per different processes running across the organisation. Notes Prakash, “We had the task of rolling out four modules of the Oracle Apps package simultaneously—sales, manufacturing, finance and service—across 225 locations in seven months.” Around 200 people were part of the implementation exercise, along with the system integration partners like HCL, Wipro and TCS.

There were a number of things that needed to be customised to meet the company’s requirements. For instance, the package had to be altered to suit the kind of production planning which LGEIL does in India; there were also certain administrative control processes which needed to be customised in the new system. Overcoming all challenges, the package went live as per the schedule on August 1, 2005, thus ending an exercise that had started in January 2005.

Many a benefit

Ever since Oracle Apps has gone live, there has been a steady flow of data across functions, plus there is better data integrity. Adds Prakash, “With the new package we have witnessed accurate ‘What If’ analysis, EMS planning, forecasting accuracy, easy implementation of policy changes, and reduced data interface issues.”

LGEIL has found that the package has efficiently integrated with the global systems of the parent company. The package has also resulted in 30 percent reduction in inventory due to better flow of information and better planning. The material idle time has gone down from the earlier 1.2 percent to 0.6 percent. Oracle Apps has led to a reduction of export lead-time from 14 to 10 days because the new system is perfectly integrated with the supply chain systems. The package has also resulted in 50 percent report reduction though more than 2,000 people have access to the system.

The entire cost of the project came close to $5 million. LGEIL is now considering the HR module, which may become part of the system in the near future.

abhinav@expresscomputeronline.com