Peer-to-Peer

Making an impression with tiles

NITCO Tiles rolled out an ERP system to integrate its business processes and meet its aggressive growth plans. The implementation has brought in efficiency in its accounting and inventory systems. By Abhinav Singh

NITCO Tiles is a well-known brand in the glazed tiles industry and is a major manufacturer and importer of a wide variety of tiles. Having achieved a turnover of Rs 311 crores [in March 2006] the company has big plans. It has done away with its legacy and manual systems and has embraced SAP, integrating its operations at manufacturing plants and depots across the country in the process. The standardised ERP system has helped the company to embark on a successful growth path.

Legacy systems hampered growth

NITCO Tiles was using a legacy application built in Power Builder with Sybase as the backend database, which was customised by a third party. The legacy systems were inadequate for the company, as these were limited in their capabilities. Moreover the company wanted to go in for an IPO and get listed on the BSE and the NSE in the aftermath of said IPO. The legacy system catered solely to business areas such as accounting, purchase and billing and there was no integration of these business areas with the company’s manufacturing plants. For instance all the reports generated by various manufacturing plants had to be manually complied and the legacy system could not generate reports required by the operational or top management. This was a big concern especially as it hampered timely decision making. NITCO’s business had grown to six business divisions namely Ceramic Tiles, Vitrified Tiles, Marble, Mosaic products, Cement Terrazzo Tiles, Marble Processing Unit and Windmill Power Generation. With disparate legacy systems, integrating all functions, departments and processes getting complete visibility and control of operations was proving to be a difficult task for the company. The company was also considering rationalising organisation-wide role definition and fixing of accountability. It also wanted to re-engineer key processes and decentralise decision making while introducing the right checks and validations to ensure seamless operations. Additionally the company had decided to raise money through an IPO and the stringent statutory compliance requirements reiterated the need for a scalable and standardised ERP system.

Satej Revankar, general manager-IT, NITCO Tiles Limited says, “Our outsourcing business was also growing and the legacy system was completely incapable to handle outsourced manufacturing processes. The logistics and the materials movement of the new business was not under the control of the legacy system. The system was also incapable of generating accurate MIS reports.” The legacy system was leading to delays in report generation, lack of inventory control, slower finalisation of accounts, which was taking months to compile after each quarter, and there were discrepancies in account generation as accounts had to be manually compiled.

NITCO Tiles conducted a thorough evaluation and SAP, Oracle, JD Edwards and PeopleSoft were evaluated. Revankar says, “We invited these EAS vendors and also took the help of some of their implementation partners to evaluate the packages for us. We wanted to see the suitability of the solution as per our requirement. These were followed with customer site visits to the references provided for each of the solutions to check the performance with regard to hardware and connectivity.”

The company finally zeroed in on SAP due to its comprehensive nature, scalability and expertise in SMB implementations. Revankar says, “SAP had a strong focus on R&D and it also had a strong reference customer in the tiles industry. The package also had a good proven track record, including localisation aspects. We also found that the package had strong capabilities in financial integration and logistics and production control.” The evaluation exercise, which began in Jan 2005, was completed in four months.

Customisation for key processes

The most challenging aspect during the SAP implementation came up when it coincided with the launch of its IPO by the company. Additionally the tile industry requires some key processes which needed to be customised as per requirements. Quality-wise segregation of the stocks is one such key process, as discounting schemes for customers are based on it. All this involves batch-control and product-costing to be of a high quality. Tile is manufactured in different stages and it is important to know the tile inventory by the quality grades and then the MRP is planned following which the discounting schemes are finalised. This required heavy customisation as the ERP package did not have a standard process to manage this. Additionally the cost of transporting tiles is high as the product is bulky. Freight costing had to be done in real-time as it meant that the company could get its profitability online after the transportation cost was taken into account.

Data migration from the legacy to the new system was another challenge as it was tedious and time consuming. Training people on the new system was also challenging.

SAP ECC 5.0 ERP went live in January 2006 with seven modules—Sales and Distribution, Materials Management, Production Planning, Quality Management, Plant Maintenance, Finance and Inventory. Coconut Software was the implementation partner for this project. A dozen people were involved in the exercise.

Streamlined core processes

• Faster account closure
  One of the foremost benefits, which the company saw from the SAP ERP implementation, was that account closure was streamlined. Explains Revankar, “Account closure prior to the ERP deployment was a long process taking 45 to 90 days. It now takes 15 days after each quarter ends.”
• Visibility into product costing and faster settlements
  Product costing has also been streamlined as earlier it used to take lot of time to determine the cost of each product based on the quality parameters but now it is spontaneous. The company has been able to streamline credit notes, which it gives to some of its customers. At the end of each month’s sales cycle the credit note has to be generated as to what kind of discount a customer is to be given based on his purchase order. After the ERP rollout, the credit note is linked with sales inventory. A credit note is automatically generated and it picks up the customers who have qualified for the discount incentive. Previously the generation of the credit note was done manually, now it is done online in real-time.
  
• Reducing order cycle
  Now all the outsourcing operations including transportation of raw materials and finished goods are under the ambit of the ERP system. The order processing cycle has now been decentralised to the depot level, and the cycle time has been reduced to one to two days from the earlier four to five days. This the company feels has helped in improving customer satisfaction. NITCO Tiles has complete visibility across its operations. Product costs are now available online facilitating quick decisions and action. The supply chain operations of the Vitrified Tiles division have been completely integrated through SAP, resulting in better control and speed. Additionally various process controls have been achieved through source data entry enabling the sales month to be closed exactly as per the calendar month.

Plans: HCM, BI and mobile

Up next, NITCO Tiles is looking at SAP’s Human Capital Management (HCM) module to better manage its human resources, as well as Business Intelligence (BIW) and Mobile Computing modules in the coming months.