Project Log

Productivity at L&T

K Venkataramanan, President, Operations, E&C, and Member of the Board, L&T, talks about the company's ERP deployment at its E&C Division.

Technology can be leveraged to improve business processes. The IT implementation at the E&C Division of L&T falls under this category. The company’s business spans several locations, and the projects are vast, making IT a critical part of the company’s agenda. To consolidate various applications and processes the E&C Division implemented SAP R/3.

The implementation began in January 1998. All 12 SBUs at Mumbai and Vadodara were covered in a phased manner, and the implementation was completed in October 2000. Currently, the Enterprise version is in place. The modules implemented are finance, controlling, materials management, project systems, sales and distribution, quality management, asset management and imports.

We believe that the SAP R/3 implementation at E&C is unique for the following reasons:

• The implementation encompasses our entire business cycle including business development, receipt of the project order, engineering bills of material, procurement, project management, deliveries, control of materials and drawings at site, quality control at all stages of project execution, financial accounting, cost monitoring and control.
• Construction site management was implemented for the first time, where the monitoring and control of site activities, materials and drawings have been integrated using SAP R/3. Online information-sharing is enabled between the head-office and site offices. Construction site management involves the control of activities at the project site. This comprises receipt of incoming materials, deployment of expensive resources (both skilled manpower and tool/tackle to install and commission various equipment), and machinery received in a knocked-down condition.
• The implementation also successfully tackled the complex issue of billing processes, and enabled both resource-related and milestone-billing functionality using SAP.
• It addresses issues of quality management in projects.
• Most importantly, the implementation provides the top management with online project monitoring and control features, enabling the top management to make faster decisions.

L&T-E&C Division’s SAP Core Team worked closely with SAP’s technical team to develop add-on functionality to enable works contract tax, excise duty, project imports and some engineering procurement and construction (EPC)-specific requirements to be part of the implementation.

By providing up-to-date and integrated information online, the SAP R/3 package has enabled E&C personnel to gain control of their projects.

Post-implementation, business grew and dependency on IT rose. An online user survey was conducted towards the end of 2004 across SAP users in the division; the survey revealed that the actual usage of deployed functionality varied from 40 to 80 percent across business and service units.

As part of the survey, feedback was collected from users about the functionality that they did not use, the alternative adopted, and how that was better suited to meet the division’s business objectives. These findings were then discussed in a group of power users of SAP and internal consultants from corporate IT, and a view was taken on the changes in configuration and customisation that needed to be done.

Once this was defined, the original users were given a presentation on the proposed changes, and feedback obtained from them as to whether they would be happier using SAP after these changes were made. The user teams and SBU heads signed off on an acceptance statement before changes were incorporated into SAP. For example, staff involved in invoice preparation preferred an Excel-like template, but when the data from the fields was entered it would be stored in a SAP-friendly format. After the customisation, users get data in the format of their choice.

This initiative was known as the SAP Usage Risk management and Yield Advancement programme, or SURYA. This was done under the Lean Agile Knowledge Speed Humane Yielding value Action, or LAKSHYA, which is an L&T-wide programme across divisions to bring about substantial growth and operational efficiency.

We made use of SAP’s NetWeaver technology, which, with its user-friendly face and XI technology, permits integration with external applications.

In November 2005, SURYA was launched with four priority sub-projects:

• SAP to Prima Vera Project Planner (best of breed) integration. Prima Vera Project Planner is a scheduling software for planning and monitoring all the activities involved in a project. This is a crucial element as it takes care of all the three phases of EPC. Each phase has a number of inter-related activities which are mapped into Prima Vera for tracking the progress made and for identifying and managing critical activities.
• Integration of ALPS (a home-grown construction management software) with SAP.
• Simplification of SAP usage to suit user demands. Eg. Integrating existing Excel-based systems for invoice management.
• Bring MFF Hazira and Oman under the umbrella of the SAP system.

As of date, SURYA is 50 percent completed; it will be fully completed by March 2007. Supported by a training and e-learning drive, we expect usage to increase to 50 to 90 percent by March 2008 and 100 percent by March 2009.

RFID-based inventory management

Although the SAP implementation has been our biggest IT deployment, we have used other technologies in innovative ways. An example is the RFID system that we use for inventory management.

At our Modular Fabrication Yard at Hazira, we have been using an RFID-based component inventory management system for the past one year. RFID has replaced the old Bin Card system. Each storage location in the warehouse has an RFID tag affixed to the rack.

This tag is updated based on the addition or removal of materials from a location, and the data is simultaneously fed into the stores inventory management system.

Hardware & infrastructure

As the E&C Division needs to be connected at all times, we have a 24x7 data centre, broadband WAN connectivity to all work centres including project sites, and a campus area network that has recently been upgraded to a 10 Gigabit Ethernet backbone with one Gigabit switched Ethernet to the desktop. The campus also has secure wireless connectivity for mobile engineers.

To facilitate collaboration with project leaders and others, we have invested in Econnect. This is a collaborative Internet-enabled software to share project drawings and documents with project team members. Project status is monitored and reported monthly to all participating sub-team leaders and customers or consultants—the details are available through an online system

We use advanced three-dimensional image generation design software like PDS Intergraph and AutoCAD, as well as advanced design and analysis software packages such as Aspen, HYSYS, STAAD, SACS and Fluent which are used for process simulation, structural design and computational fluid dynamics.

Knowledge Management

For continually increasing productivity and reducing the amount of re-working that is required, the E&C Division has set up an advanced Knowledge Management (KnowNet) system. The IT system was enhanced this year to effectively disseminate best practices by forming Communities of Practice in all the key areas of the division’s operations.

The focus of the KM programme is slowly shifting to building and improving the knowledge level of employees by introducing e-learning modules on the selected areas of knowledge needed; this is in place of focussing on capturing past learnings, as is the case with traditional KM. A recent addition is the ‘Innovation Channel’ to capture the creative and transformation dimension of KM.

IT security

With the increasing dependence on IT systems for transactions, storage and collaboration E&C has implemented an elaborate Information Security Management System that complies with international standards. E&C was certified against a new International Standard (ISO/IEC 27001 dated October 15, 2005) on the day it was published.

e-Procurement

Procurement is an integral part of our business. An e-Procurement solution, a reverse auction engine, enables transparent and simultaneous negotiations with multiple suppliers in the span of a couple of hours across geographies. Procurement is also speedy and cost-effective as it leverages our IT systems despite the distances between our global supplier base and the project offices and construction sites.

— as told to Vinita Gupta