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Tatra Vectra’s journey from legacy to ERP

Migrating from a legacy application to mySAP All-in-One has brought complete transparency to operations at Tatra Vectra Motors, and is helping the company grow faster, says Akhtar Pasha.

"Over a period of time we aim to improve inventory turns by 30 percent and reduce dead stocks by 40 percent" - N Ethiraj General Manager Production & Systems Tatra Vectra Motors

To automate core manufacturing processes you need solutions that are highly scalable and modules that are tightly integrated, leaving no room for guesswork. Says N Ethiraj, General Manager, Production & Systems, and Project Manager of mySAP at Tatra Vectra Motors, “The legacy manufacturing resource planning application, Maarsman from Chennai-based Maars Software that we were using, was not providing white-collar productivity because of which our production was getting affected. Additionally, the total cost of ownership of the legacy system was high, it was not highly secure, and did not provide any integration with different departments.” Given the nature of the business that Tatra Vectra (earlier known as Tatra Trucks India) is in, the legacy system was a major hurdle to its business growth.

Prone to errors

Tatra Vectra has 12 regional warehouses, and there was a need for Web-based access from remote locations; this was lacking in the legacy system. “In the absence of online availability of data, records had to be manually collected by mail and sent to a central location for updation. Since the entire process of data collection was manual, it was prone to errors at the headquarters and warehouse,” recalls Ethiraj. Upgrades of the legacy application were tough and expensive as getting domain expertise on this technology was difficult.

Missing MIS reports

In the absence of an accurate MIS, the decision makers could not view key finance, inventory, payables / receivables and warehouse reports, leading to delays in decision making and taking a market position. Moreover, preparing reports was a cumbersome process that used to take anywhere from two weeks to a month. Worst of all, after all this time spent, the reports were not accurate.

Opaque inventory and dead stocks

Tatra Vectra’s production inventory is of 30-45 days, and worth anywhere between Rs 7 crore and Rs 10 crore. The spare parts inventory is worth between Rs 18 crore and Rs 20 crore. “Raw materials are held by us as well as by our large vendor base (through sub-contractors). The materials pass through 4-5 processes before becoming the finished product. Tracking the inventory of raw materials in the entire supply chain was inaccurate. We used to lose materials and were unable to track wastage,” explains Ethiraj. Stock reconciliation at both ends (company side and vendor side) was manual. He adds, “We were not able to identify the spares that were ‘not moving.’ Since data on non-moving spares was not available, the spares ended up as dead stock. Had we been able to identify the spare parts that weren’t moving, we would have consumed them and saved some money.”

Long spare parts cycle

Spare parts are required by the company’s Hemang and T-815 dump trucks, which have a significant presence in the construction and mining sectors, and are working in the harshest of terrains across India such as Tehri Hydroelectric Power Project in Uttaranchal, Jindal Mines, Tara Mines, Ledo Mines, and with Gammon India. Many spares parts are imported; these require four months of planning right from placing the order to dispatching the parts to remote locations. The spare part is imported and dispatched from a central location to a bonded warehouse. It is then moved to the headquarters from where is dispatched to branch warehouses and then to the remote site. The number of spares at each site is different. “We wanted to shrink the spare parts delivery time to improve customer satisfaction,” informs Ethiraj.

Fitting the bill

It needed a year to evaluate ERP vendors. The company took the help of an external agency to study its existing systems and document the process. Documentation took five months. Tatra Vector evaluated top ERP vendors such as SAP (mySAP), Oracle (E-Biz), Microsoft, PeopleSoft and Ramco. “Since ours is a mid-sized enterprise, SAP’s mySAP All-in-One (for SME) had most comprehensive modules catering to our automotive industry.” The decision to finalise on SAP in September 2005 was based on three factors—cost of the software, implementation time / cost, and post-sales support. SAP had a distinct price advantage based on the number of user licences, type of user licence, and the developmental, professional and limited professional licencing system. There was a wide choice of implementation and hardware partners, and SAP had vertical-specific best business practices that reduce implementation time and cost. Nevertheless, Ethiraj states that SAP’s implementation cost is still very high, and that the vendor should standardise base implementation charges billed by its implementation partners. Reason? Between two prospective SAP implementation partners, Tatra Vectra found one charging x amount, while the other was asking for almost twice that for the same implementation.

But the company moved ahead, bought 35 concurrent user licences from SAP, and the project began on October 6, 2005. It took a big-bang approach to the implementation. The modules selected were sales & distribution, production planning, materials management, quality management, finance, customer service and plant maintenance. Discloses Ethiraj, “We have as many as 280 processes. mySAP All-in-One is a pre-configured package (about 85 percent), and only 15 percent customisation was done. This has helped in going live faster.” Caritor was chosen as the SAP implementation partner because of proximity, good exposure to automotive implementation, better price, and post-sales support. The project went live on March 1, 2006.

Early benefits

It’s only four months since Tatra Vectra has gone live, and therefore the quantification of benefits will take some more time, say one or two cycles. That said, there are a few immediate benefits the company has received:

• Users owning the processes and better access control. Users have started owning the processes, which brings accountability and transparency into the system. There is no scope for playing the blame-game. In the earlier system, there was no user control, but in the SAP set-up, materials management users cannot access other processes such as finance, production or inventory.
• Faster closing of accounts. In the SAP system, users cannot carry forward transactions to the next month, which eventually means that all users are forced to close transactions in the same month since backlogs cannot be carried forward. This is helping to close accounts faster.
• Transparency in inventory. Tracking of inventory across the entire supply chain is online, and therefore the accuracy of inventory is 100 percent. Tatra Vectra can now track the entire stock online leading to transparency in accounts receivables / payables through a single database for geographically dispersed warehouses. There is complete visibility of dead stocks, and hence further production of the same type of spare is stopped, or the production of slow-moving spares can stopped, or they can be re-consumed. Ethiraj says, “Over a period of time we aim to improve inventory turns by 30 percent and reduce dead stocks by 40 percent.”
• Reduction in product cycle time. Because of better scheduling, the company expects to reduce the throughput cycle from receipt of order to delivery by 25 percent. This will automatically boost customer experience and satisfaction.
• Better material planning. With materials resource planning now being driven through SAP, it expects to reduce time for generating schedules to suppliers by 90 percent, and improve material availability to 95 percent.