Vertical Focus

Manufacturing Excellence

An industry-specific look at business challenges and IT response. By N Geetha

Shrikant Karode, IT Head, Crompton Greaves

Discreet manufacturing, which was until recently labeled as a low-volume and highly complex business, is no longer a low-volume business. It has now become a high-value and large-volume segment where the time-to-market is very critical. A high-growth oriented industry segment such as discreet manufacturing, which includes large and small automobile manufacturing, auto components, consumer lifestyle, consumer home products, large commercial vehicles etc., is prone to organic and inorganic growth, through mergers and acquisitions. Most of the organizations falling under this segment drive growth through major exports, owing to the globally competitive nature of their products. McKinsey in its study, Vision 2015, states that the auto component industry could grow to $ 20-25 billion in exports by 2015. Analysts have attributed a significant growth figure to each industry under discreet manufacturing. For instance, the automobile industry in general is said to have grown between 15 to 20 percent during the current year, in spite of challenges such as increasing inflation, increasing crude oil prices, US economic slow down, etc.

Similarly, the consumer products segment has also witnessed a 20 percent growth in the current year, the electrical product sector is witnessing a 30 percent growth, while every vendor has an ambitious growth figure going forward. The optimism is not unfounded: most enterprises opine that there are many factors fuelling demand for the products in the segment and this could translate into a good growth.

Most CIOs of discreet manufacturing companies confirm that their organization's growth is linked to IT investment and technology deployments. Sanjeev Kumar, CIO of Philips India, believes that tactful IT deployments bring in business agility, which is especially important in the world of changing market conditions.

Shrikant Karode, IT Head of the Rs 3,600 crore Crompton Greaves, an electrical product company, finds discrete manufacturing to be a big business, where the demand is increasing, despite the challenges. Karode maintains, "While competition is heating up both globally and locally, and there is an increased price war, we have seen the consumer product grow between 25 and 30 percent, while the high-end products grow at 35 percent on an average."

Likewise, VVF, a Rs 1150 crore global player, which manufactures Oleochemicals and personal care products and is a contract manufacturer of toiletries and cosmetics for popular brands, has charted a high growth target of Rs 2000 crore for the year 2008-09. Globally, the company plans to be a US$1 billion firm by 2011 through organic and inorganic growth. As Mahesh Kasbekar, global IT head of VVF observes, "the factor fuelling growth is the increasing demand for the products."

Growing inflation, increasing oil prices and high interest rates have posed as growth challenges for Honda Motors. Hilal Isar Khan, Head, Corporate IT, Honda Motors India, finds that he is facing a tough time meeting the growth numbers of the previous few years, which were hovering around 54 percent. However, according to Khan, the demand for the midsize cars continues to be on the rise and this has added to the growth.

Chennai-headquartered TVS Motors witnessed a seasonal dip in the growth of its automobile segment. T G Dhandapani, CIO of TVS Motors, which manufactures motorbikes, cars and trucks, finds that there has been a slowdown this year. The yearly growth in recent years has been to the tune of 10 to 12 percent. "While the mobikes business is growing at 18 percent, the large truck business is seeing a single digit growth owing to constraints in credit availability, increased oil prices, high interest rates, etc." says Dhandapani. However, the trend of middle-income groups invest in cars continues, and this has been adding to the growth.

Agreeing with his peers, Arvind Tawde, senior vice president & CIO of Mahindra and Mahindra, finds increasing cost of vehicles to be a hurdle for growth. "Owing to this, the four-wheeler segments have seen an 8 to 10 percent growth in the high range," maintains Tawde. Philips, which manufactures consumer lighting, healthcare and consumer lifestyle products, has witnessed a 20 percent organic growth. Sanjeev Kumar of Philips finds increasing awareness about electronics and large format retail to be fuelling good growth even in the rural markets. The green lighting concept is also driving growth and demand. Godrej Industries, leading manufacturer of consumer products, has observed a top line growth of 25 percent, despite pressures on the bottom line owing to the economic recession. Given the propellants of growth in the discreet manufacturing sector, this vertical is very IT savvy and quick in terms of technology adoption.

Techno focused

Mani Mulki Executive Vice President-IT, Godrej

Unlike other industry verticals, discreet manufacturing has been an early adopter of various technologies. The CIOs of this sector have adopted various ERP systems-in-house developed and outsourced from the local vendors-to bring in operational efficiencies. Technology has been used for streamlining varied business processes including those of manufacturing, distributor management, dealer management, supply chain, inventory and stock and customer relations. In most cases, CRM, PLM, ERP and specific functional software applications have been used to achieve best business results. For instance, according to Kasbekar, VVF's main business is run through DCS (Distributed Control System) and SCADA systems which were deployed quite early on.

Godrej's Executive Vice President-IT, Mani Mulki believes that the sector were pioneers of ERP during the early 90s. "During the early 90s, MFG Pro ERP was a popular solution and all the business processes including supply chain, collaborative tools with distributors and inventory control were run with this on a real-time basis," he says.

With most companies in this sector having a global presence and being complex in nature, they are always process driven-where technology becomes key. As Mahindra's Tawde explains, "Technology is used to bring operational efficiency across assembly operations, quality being a priority. Everything including accounting, inventory, finance, materials supply, shop floor integration, supply value chain links etc., need greater automation and large-scale ERP is the answer for these," he confirms.

T G Dhandapani, CIO, TVS Motors

TVS's Dhandapani opines that technologies revolving around SCM, CRM and PLM play a major role. These systems involve selling, distribution, top line and bottom line growth, demand planning etc. in the discreet manufacturing segment, which is next in line after banking, insurance and retail in technology adoption.

Honda Motors' Khan also agrees with his peer when he says that the automotive sector adopts all kinds of technology including telematics, GPS and navigation tools and even in running day-to-day business to have a competitive edge and to get to the market faster. "At the OEM level, most companies deploy design tools and PLM, ERP for other business process, business intelligence and data warehousing solutions and certain tailor-made solutions such a dealer management software and portals.

Hilal Khan CIO, Honda Motors

With the concept of "Green" business practices becoming more ubiquitous, consumer lifestyle segments are using technology to the fullest extent to improve manufacturing capability and heavy investments are being made in R&D. CIOs at large opine that in a sector like this, IT is critical to improve customer relationships, strengthen supplier and partner integration and also to innovate continuously. Given the strategic nature of IT as a business enabler, the CIO's business challenges also escalate with time in deriving the best profitability.

Soaring Business Challenge

The discreet manufacturingsegment does pose its CIOs with great business challenges, particularly when business growth and increased productivity is tied to IT. Every IT investment calls for a business case ensuring profitability, which is when it is approved. For Philips' Sanjeev Kumar, the top challenge is to deploy the best technology at a par with the peer group to create a global synergy in terms of increased productivity and profitability.

Dhandapani as the CIO faces the challenge of deploying technology-ahead of others-at a quick pace, with business insight. "This calls for major forecasting both technologically and of business growth," he says.

While the need og the hour is to become more flexible and agile in technology deployments, Tawde's core business challenge is to connect all partners including suppliers, distributors, stockists etc. through an integrated tool and to orchestrate the same efficiency into business growth. "Meeting such a challenge calls for focused expertise, effective IT tools and intelligent forecasting," says Tawde.

An interesting challenge that Godrej's Mulki is confronted with is how to streamline the massive data that is locked in an organization to enable faster decision making and enhance business processes. Honda Motors' Khan finds the vital challenge to be bridging the gap between users and IT while using IT as a tool to meet day-to-day expectations of the organization and its management, without disrupting the existing working style.
Crompton Greaves' Karode's challenge is to take cognizance of every business process in the organization-be it manufacturing, planning, designing, supply, stock etc and the distributors' stack-and ensure smooth functioning of the business, including products and delivery. The prime challenge that Kasbekar of VVF faces is to derive optimum business value from IT, given the inorganic growth that the company believes in. "I need to ensure reduction in wastage in the manufacturing processes and reduce operational cost with effective IT tools," he maintains.

The business challenges facing CIOs drive them into deploying intelligent technologies, tools and applications which have the potential to justify their cost and also become catalysts for growth in business and profitability.

Smart IT

CIOs have initiated the best IT deployments to suit their business needs. Most of them have also experimented with varied applications and evolved the best mix for global synergy and growth. This sector-including automotive, consumer lifestyle, consumer healthcare, commercial products, components etc.-has seen adoption of traditional application software and also migration to standardized ERP with specific business functionality. Companies like Philips which operates in various business segments, zeroed in on SAP in line with its global requirements and implementation, but with a great amount of localization to suit market needs.

Seeing momentum in growth, Sanjeev Kumar of Philips decided to migrate from the traditional JD Edwards and Oracle platforms to SAP, with implementation being done in a phased manner. "We have deployed varied applications such as GPM (Global Product Model) at our two manufacturing plants, developed in-house based on the .Net platform. Philips's core systems include business intelligence, APO for supply chain management and CRM for which a common template was created. The company recently implemented SAP in its consumer lifestyle product division across its finance, sales and operations, product, supply chain, inventory planning businesses, while it found PeopleSoft to be ideal for the HR process.

Kumar believes in being at the forefront of technology deployment and found no constraints on investment-the company invested Rs 70 crore on its IT, with Rs 40 crore going toward the SAP implementation.

Philips' Lighting division is undergoing expansive implementations, which are expected to go live in a few months time. Though the project is outsourced to IBM, Kumar finds it worthwhile, since deploying SAP involves a lot of changes and challenges. Data being critical, Kumar had to meticulously handle the current working style and make for a smooth transition. The company's 40 depots and 2000 customers who are channel partners were taken into consideration while implementing the new systems. To make the trade channel more effective, Philip deployed an 'e-ordering system'. To enable partners to maintain required stock, a software application was developed using Tally with the help of which a minimum stock level could be maintained. "We provided 50 percent funding to the partners to use this Tally software package," says Kumar.

Complete automation, absolute transparency in communication and integration efficiency is key to automotive companies such as TVS Motors. While security, networking, application and hardware deployment were key components for the company, its CIO, T G Dhandapani believed ERP was the ideal platform for the varied businesses in the organization. "We started with in-house developed ERP called 'LEAN management software' for our varied business needs. We then decided to migrate to SAP and customized it to integrate with all our other functionalities including products, planning, supply chain and so on", he says. However, the priority for him was digitizing entire systems to reap the benefits that technology offered. By moving to standardized software, TVS Motors saw reduction in transport cost by five percent, reduced packaging and manpower costs, an efficient tracking system, clearance monitoring of stock and other benefits.

In line with global technology evolution, Mahindra & Mahindra focused on standardizing its software application deployments for the back-end and front-end. According to Mahindra's Tawde, SAP/R3 was used as the back-end and foundation for all value chain initiatives specific to HR, corporate and finance. To address the suppliers, dealers and end-customer transaction processes, M&M rolled out SAP's SRM (Supply Relationship Management) for supplier enablement, SCM for demand planning, production, scheduling, supply network planning and global availability. Integration being key, Tawde rolled out PLM solution from Siemens across its nine plants, besides evolving a dealer management system for dealer transactions.
Mahindra Connect, an intranet, is the common interface for sharing information developed on the Microsoft SharePoint platform. However, for Tawde, the significant deployment has been the APO (Advanced Planning Optimization) deployment on the supply function of the business, where a major investment was made. His core initiatives have been promoting the Green concept M&M's datacentre, where server virtualization has been deployed to drive conservation of energy.

Godrej, which invests one percent of its total revenues on IT, focused on bringing stability across business units and hence Mani Mulki envisioned a platform which could integrate all units. Being an early adopter of various technologies including ERP-when very few companies deployed this during early 90's-Mulki deployed MFG Pro and the in-house developed 'Sampark' solution for various business transactions, with collaboration with distributors being critical. "We also deployed 'Botree' stocking solutions from a Chennai-based company customized to our requirement, which addressed all distribution needs", maintains Mulki.

The need was to centralize Godrej's infrastructure and architecture to extract greater uptime. Hence, Mulki initiated SAP, integrating all processes incuding supply, C&F agents, distributors, stockists etc. under a single platform. While the challenges were daunting, Mulki and his team saw vital benefits to the extent of a 50 percent reduction in inventory cost and reduced stocks. Another SAP-empowered organization is VVF, where SAP R/3 is used for material management, supply and demand, production planning, quality management, finance etc., and BW for business intelligence is deployed. The distribution channel is being supported by a sales portal-VNet.

For Kasbekar, a cherished implementation was in creating a complete IT infrastructure for the SAP business suite implementation-done in seven months time with the help of Siemens Information Systems.

A Japanese company like Honda Motors calls for a different approach and its CIO, Hilal Khan took up a consulting role, taking a snapshots of IT requirements at a micro level. "Getting into the depth of IT deployment to get better benefits which could help growth, we looked at varied solutions," he says. Honda Motors preferred to go in for Oracle Financials, DMS software, a CRM package and a PLM solution called Catia. For core business functions, an ERP package called Hi-pack was deployed for production, planning and control and bill of materials, which was customized for Honda Motors. The company saw greater advantages in outsourcing its entire IT deployment strategy and partnered with Infosys, Satyam, Wipro and IBM, and will soon be adding TCS to its list.

The most prized moment for Khan was when he roped in all 100 top dealers under the dealer total support pack, where they could take stock of their sales and spares. Call centre integration, on-line drawing collaboration systems and the vehicle-quality-management system were key projects for Khan.

The main challenge for Karode in Crompton Greaves was that of ensuring quality of products across the portfolio and leveraging IT to its fullest potential. His solution was to roll out SAP across business functions and customize according to the company's needs. Integrating its online application portal CGHR4U for HR needs with SAP was critical, and enhanced the system's impact. "About 2500 employees came under the purview of this application, which delivered effective results. Besides, we extendex this to our workforce constituting about 7,500 spread across remote locations," avers Karode.

CIOs have been smart in their choices of solutions and have reaped tangible and intangible benefits, which include reduction in production losses, inventory, monitoring and controlling fixed overheads, reduction in communication cost, reduced document processing time, savings in manpower cost due to outsourcing, greater asset management and tracking of payment through a regularized system. Adoption of varied solutions and technologies has changed the competitive landscape for each company, where the CIO has played a key role.

Not stopping at this, the IT heads are identifying new technology trends which could hold great potential going forward, while mapping their projects and solutions in the pipeline.

Technologies that matter

While being early adopters, the CIOs of this sector look forward to more in the coming years and are experimenting with emerging technologies which could add value. The most commonly observed trend is the emergence of RFID, Product Lifecycle Management solutions, mobility solutions, unified communications and security solutions.

TVS Motors' Dhandapani is developing a business case to look at RFID as the next area of deployment for field force automation. "While this is in the pipeline and also an emerging trend, we are also looking at virtualization solutions for our datacentre to increase our operational excellence," he says. Web-based technology and solutions around the concept are also on the cards for TVS.

From a trend perspective, Mahindra's Tawde finds unified communication with voice and data integration, along with IP telephony a suitable solution going forward. Web 2.0 for intranet will be extensively used and expanded to various sites. Outsourcing is another trend for Tawde and his team of 25 on the technical front, which will be handled by Tech Mahindra. SoA will be deployed for projects across platforms, while virtualization as a concept will be evolved across the desktop, servers and storage to drive Green IT at the datacentre level.

However, as an immediate action, M&M will automate the entire shop floor across its plants and RFID will be deployed at the Nasik branch, besides implementing 'Manufacturing Executive System', a software application.

Business Intelligence and analytics are becoming ubiquitous, finds Mulki, besides the increasing use of mobility solutions for the field force. While he finds RFID to be a promising trend, the cost of acquisition is quite high and is inhibiting CIOs looking at it on a large scale. Server virtualization is a growing need for CIOs across industries and Godrej has also felt the need to virtualize both server and storage-it will do so in about six months time. As an immediate plan, Mulki is looking at digitizing all data through shared mobility solutions within the company.

While evolving security solutions is the next step for Crompton Greaves' Karode-who has implemented 'Chor & Sepoy', a software application for internal use-Web-based security will be the next level of deployment. "New modules of SAP such as servicing and costing are in the pipeline, besides which I have the task of standardizing each solution," he says.

Hilal Khan of Honda Motors intends to grow PLM solutions beyond the OEM level and extend them to the supply chain. "Total integration is the need of the hour and a trend which is increasingly observed," he says. Honda Motors also is looking at RFID, GPS, barcodes and mobility in the coming months. However, as an immediate initiative, while a test drive is being done for RFID and wireless, Quality Information Control systems are being deployed to see the actual performance of products and solutions.

At Philips, Kumar is experimenting with SOA to bring in certain changes within the company for enhanced leveraging of IT. BI is another area emerging for Philips for its marketing channel initiatives. Increased focus on storage solutions including SAN, NAS, backup is part of the plan, as virtualization is on the cards for Kumar.

As more technologies invading the market,VVF's Kasbekar is working on IT strategy to map out the next three years' IT requirements aligned with business strategy. "My task ahead is to create SAP global template, create standard systems and processes and deployment road map," he says. Tank farm automation, integrating SAP with DCS systems and a plan to have strategic procurement as a core business are being evaluated at VVF. The company will implement SAP R/3 for transaction processing across the globe including Europe, US, Dubai and Indonesia, with an upgraded version of ECC 6.0 with Unicode.

As an immediate plan of action, Kasbekar and his team have opted to implement a suitable HRMS and Payroll software to take care of VVF's new PMS system, designed by Accenture.