Project Log

Kores India gets on the fast track

Suffering from excess inventory, legacy systems that required manual consolidation of information at the HO and lack of real-time data about the success or failure of its marketing schemes, the company went in for an ERP implementation that has made it more agile and responsive. By Akhtar Pasha

The Kores brand is synonymous with a wide range of office products and it is a household name in that space. As the company was growing it developed its own solution to manage its operation— these were mostly discrete applications that did not provide complete business insight. Over time the company has diversified into a dozen lines of business and it has a significant presence in market segments such as sealants & adhesives, art material, business & computer systems, pharmaceuticals & chemicals, exports, foundry, textiles, IT distribution, real estate, and polymers. Today Kores has 59 branches across India and over 2,000 dealers.

Legacy systems weighing it down

Over several decades the company had put a set of manual systems in place. These worked well enough until the company began to expand its operations. Each division of Kores was using its own legacy system developed using FoxPro, Creeper, Tally and the like for its transactions and operations across its divisions. Accounts were first prepared at the division-level in the legacy system and later consolidated at the Head Office for the entire company. These legacy systems meant that various manual operations had to be undertaken for many activities within each division and, as we have noted, it was necessary to manually consolidate data at the corporate level. Further, these manual operations resulted in time going a wasting and efforts being duplicated.

VK Marathe, Head IT, Kores India Ltd recalls, “There was no common platform across our divisional offices. We used to consolidate all our balance sheets using Lotus Notes and this process used to take a minimum of 5 to 6 months.”

Prior to its SAP deployment, Kores used to close its sales for the current month, on the 15th of the following month. Additionally its inventory was humongous as were its outstandings. Marathe says, “The Office Products division used to tell us that ‘inventory is tight’ although there used to be stock worth Rs eight crores at any point of time. In the absence of real-time data we never used to know the exact inventory holdings of each division. The same was true of the company’s outstanding dues. Although Marathe can’t recall the exact outstanding value, he says that in the case of the Art Material division headed by the managing director’s wife, the lady had to travel from branch to branch and from one plant to another to get reports on outstandings.

The company’s business was being affected due to the lack of online data a problem compounded by the fact that discrete applications were running each of its business processes. “Earlier, when we came out with marketing schemes for Office Products, we could get information on the response to such schemes only after 35 to 45 days, that too on paper. Even if a particular scheme was not working, we could stop or modify it only 45 days or so after getting the report. This used to affect product sales,” says Marathe.

The company realized that the timely availability of data was a crucial issue. It decided that it needed a solution for its operations across multiple divisions and lines of business.

One platform

“We wanted a single platform that would work for all divisions,” says, Marathe. Kores evaluated nearly 22 ERP products including the likes of Movex, JD Edwards, Baan, Oracle, Orion and SAP among others. It finally shortlisted six and, in the end, chose SAP. Marathe says, “We created a chart and mapped different parameters such as business functionality, price, support, required bandwidth, hardware requirement, databases and commercial status of vendors globally and found SAP suited us the best.” After evaluating system integrators such as Wipro, HCL Technologies, Patni, Bristlecone and Tata Consultancy Services, the company zeroed in on CVS-IT as its implementation partner. This was largely due to the fact that CVS-IT met its need of understanding end-users and communicating with them in Hindi.

The implementation began on 11th July 2005 and was completed in nine months. Kores went live on 6th April 2006 with all the modules of SAP ERP barring HR and payroll in 59 locations across multiple divisions, each of which has a different set of products and services, processes and regulatory requirements.

Transformed and transparent

• Faster generation of reports: By implementing SAP ERP, the company has integrated data, and the availability of real-time information has facilitated speedy decisions. “Now, we have ready access to data. Information is available to everybody at any point of time, and there is no need to send any information from one point to another in the organization,” says Marathe. The system has also facilitated the timely generation of reports. As the company has a complex network of distribution divisions as well as a number of business segments, the MIS and the generation of reports were a time-consuming process. With SAP, these are now available online. The monthly MIS on business operations which used to be ready by the 10th or 12th day of the following month is now available on the 3rd.
• Savings add to the bottom line: The SAP solution has standardized and improved the operational processes, enhanced control, minimized duplications and is leading to reduced costs. Earlier, the inventory and the outstandings were very high. Marathe says, “We have reduced inventory by 10 percent. The Office Products division that had Rs 8 crores of inventories now has just under Rs 6 crores. Similarly the overall outstandings have been reduced 10 to 15 percent and in the case of the Art Material division the reduction is as high as 25 percent. These savings have directly impacted our bottom line. Production planning which was on paper is almost online.” The company now has faster access to accurate, consistent information on its sales figures.
• Faster closure of sales: “Before SAP, we used to close our sales for the month, on the 15th of the next month. Now, we can close sales on the last day of every month. Additionally the company also has data on the quantity of dead and slow-moving stock. It was through the ERP system that the management found out about Rs 15 lakhs worth of stock that was not moving. “It was a shocking discovery and we have already started to dispose of both dead and slow-moving stock,” he adds.
• Visibility in marketing schemes: Data with regard to the efficacy of marketing schemes is now readily available on a daily or a monthly basis leading to quicker decision-making. “Now, we can take decisions immediately and can stop or continue such schemes accordingly depending upon the response,” adds Marathe.
• Faster Logistics Cycle: Kores operates through an all India branch (sales depots) network. The logistics cycle which includes indents from branches, procurement, supplies and inter-depot transfer and effective delivery to customers has become faster with SAP. Prior to SAP, the company required 10 to 12 days for dispatch and receipt of goods and materials at the branch offices. Now, the logistics personnel verify the stock, plan in advance, and they are able to dispatch goods and materials to the branch offices in just two to three days to dealers. Non-availability of goods and materials at the branch offices has become a thing of the past.
• Centralized control of Masters/Pricing: Kores has 3,000 SKUs (stock keeping units) and over 15,000 customers and 3,500 vendors. With a common system in place, the whole process of master creation has been centralized at the company’s Head Office. There is also an effective control mechanism over the pricing structure in the system mapped with the pricing policy of the company. All State/Central taxes and structures have been mapped in the system and are controlled at the Head Office.
• 20 percent savings in telephone expenses: Kores annual telecom annual expenditure was around Rs 1.5 crores (purely on voice) because there was no mechanism to consolidate telephone bills. Post-ERP Kores found that it had around 1,100 lines of which 700 were mobile and 400 landlines. “The master data gives us information on phone expenses across business area, across regions and locations. This is especially useful since some expenses may come under the reimbursement account or under the company account. With the availability of plant-wise and branch-wise data, along with segregation like landline, mobile and type of account, we have been able to reduce our annual telecom expenditure by 20 percent,” says Marathe.

The system has been set up in such a manner that Kores can have an employee-wise budget and a department-wise budget against actual expenses data which are employee-specific in nature. For instance, there are expenses to which an employee is eligible such as vehicle reimbursement. Now, it can find out which department or division is exceeding the budget, as expenses get posted and all information is available online.

Future Plans

Kores currently is implementing the HR module across its divisional offices. After this, the company plans to take up BI, CRM, SCM and APO in the future.