Indus Motor Company

Shifting quality control into top gear to win sales, nurture

loyalty and overtake the competition
If you had to choose between hundreds of vehicles from dozens of well-known
international brands, how would you pick your next car? As competitors surged into
Pakistans auto market, Indus Motor Company knew quality would be key to stand out
from the crowdand the company is transforming its business to inspire customers with
superior-quality cars.

Business challenge

To compete with a surge of foreign entrants to Pakistans auto market, Indus Motor Company
wanted to improve the customer experience by delivering high-quality vehicles rapidly and at the
lowest cost.

Transformation

Indus Motor Company is transforming front-to-back operations with SAP S/4HANA on

high-performance IBM POWER8 serversempowering its data-driven decision-makers to
boost manufacturing efficiency.

Results

95%
faster material requirements planning will reduce risk of supply-chain disruption
10%
improvement in sales order accuracy will enable timely manufacturing to meet
demand
20%
reduction in defects per unit will accelerate manufacturing and boost satisfaction

Business challenge story

Challenge in detail

With competition in its domestic market intensifying, Indus Motor Company aimed to capture
sales by delivering high-quality vehicles rapidly. With more than 60 suppliers and three-month
procurement lead times for imported parts, forecasting demand accurately is vitalbut using
many separate systems and processes in the value chain made it difficult for the company to
predict the most popular vehicle models in each region in a timely manner, leading to missed
sales opportunities.

The previous approach also meant the company was unable to detect and respond to defective
components early in the manufacturing process, increasing the risk of delays to customer orders.
To solve these challenges, Indus Motor Company decided to integrate its value chain from end to
end, and looked for a way to enable this new way of working.

Driving growth in a competitive market

In recent years, the exploding popularity of e-commerce, social media and review aggregators
means that consumers can make purchasing decisions more carefully than everespecially for
big ticket items like a new car.

Thanks to our IBM and SAP solutions, we are achieving the digital transformation that
will help us strengthen our competitiveness in a fast-moving marketplace.

Faizan Mustafa, CIO/Head of IT, Indus Motor Company Ltd

For automotive manufacturers such as Indus Motor Companya leading manufacturer of Toyota
vehicles based in Pakistanbuilding high-quality products is essential to cultivate a strong brand
image, nurture loyalty and inspire new customers to buy.

Faizan Mustafa, CIO/Head of IT at Indus Motor Company Ltd., takes up the story: Over our 25
years serving Pakistans consumer and business market, we have driven very successful growth.
In the early 1990s, we were producing around 20 vehicles per dayand that figure has now
increased to 240 per day. In June 2016, we recorded our highest ever sales and profitability, and
our goal is to continue that rapid growth.

Legislation has now been introduced to further stimulate the automotive industry in Pakistan,
which means that numerous foreign players are entering the market. Increased competition is
extremely positive for domestic innovation and economic growth, but it also creates new
challenges.

With more choice available to consumers than ever before, it is essential that we differentiate
ourselves by enhancing the quality of our products and services, while maintaining competitive
prices.

Like all major automotive manufacturers, Indus Motor Company operates a complex value
chain. In total, the company receives parts from more than 60 suppliers across Pakistan, and key
components from manufacturing plants in Japan and Thailand, all operating on a just-in-time
basis.
Mustafa adds: The cumulative lead time for procuring local and imported parts, manufacturing
and delivering a new vehicle is around three months, which means accurate forecasting is
essential to ensure that we have sufficient quantities of each model to meet demand on the
dealership forecourt.

In the past, our dealerships entered their forecasts manually into spreadsheets and sent them
back to our planning team for further processing. However, because it was a time-consuming
process, it was practically impossible to gain the insights we needed to optimize our
manufacturingleading to missed sales.

Our previous way of working also made it very difficult to identify defects in parts from our
suppliers quickly. If we detect issues downstream in the manufacturing process, we need to alert
our supplier, remove the affected parts from all the vehicles on the factory floor and then replace
them with functioning componentsall of which drive up our operational costs and increase the
risk of delaying our deliveries to customers.

In order to deliver higher-quality vehicles to our customers fast enough to meet demand, we
looked for a more efficient way of working.

Transformation story

Solution delivery

To put its sales-driving strategy into action, Indus Motor Company partnered with IBM Global
Business Services to create standardized business processes, supported by SAP S/4HANA
software running on high-performance IBM POWER8 processor-based systems.

When its new business systems go live, the company will ensure complete front-to-back
integrationenabling sales forecasts from its dealerships to flow seamlessly to the primary
suppliers and manufacturers in its value chain. Combined with real-time insight into the results
of parts inspections, Indus Motor Company will gain the ability to detect defects at the earliest
possible opportunity, reducing the risk of costly delays downstream in the manufacturing
process.

Transforming end-to-end operations

For more than a decade, Indus Motor Company has relied on SAP enterprise applications to
manage its workflows for manufacturing, production planning, finance and controlling. To
achieve its business goals, Indus Motor Company decided to build on its success with SAP
solutions by seamlessly integrating its entire value chain using SAP S/4HANA.
In the past, it took months to deliver reports to our managers about what was happening on the
ground, which is simply too long to make competitive decisions, recalls Mustafa. We realized
we needed to collect information about forecasting, manufacturing and suppliers faster, and
cruciallydeliver reports to our decision-makers immediately.

He continues: One of the things that impressed us most about SAP S/4HANA was its built-in
real-time analytics capabilities. We knew that achieving our goal would demand a full-scale
digital transformation, and we were confident that the SAP solution would deliver the flexibility
the business needs to make timely, proactive decisions.

Collecting data is vital, and SAP S/4HANA offers fully integrated SAP Fiori apps to help us
capture, validate and deliver information to mobile users in real time across the business. Better
still, SAP S/4HANA is a central aspect of SAPs long-term product development roadmap, which
offers us the security of a solution that can support our business growth for years to come.

To deliver a high-performance platform to support the new SAP solution, Indus Motor Company
selected IBM POWER8 processor-based systems virtualized with IBM PowerVM for IBM
PowerLinux and running SUSE Linux Enterprise Server for SAP applications.

We have been using IBM Power Systems as the basis for our SAP applications landscape for
more than ten years, and Indus Motor Company was one of the first companies to implement
Power technology in Pakistan, comments Mustafa.

Of all the infrastructure solutions we considered for the SAP S/4HANA software, IBM Power
System S824L servers stood head and shoulders above the crowd in terms of high availability,
flexibility, manageability and performance. Whats more, IBM offered us a level of local service
and support that none of the other providers we considered could match.

Indus Motor Companys SAP S/4HANA environment is based on high-performance IBM Power
System S824L servers connected to IBM Storwize V5000 storage arrays. Built on IBM
Spectrum Virtualize software, the IBM Storwize V5000 solution can automatically migrate hot
and cold data between storage tiers based on real-time usage patterns. Combined with automated,
intelligent backups to a resilient IBM TS3200 Tape Library managed by IBM Spectrum
Protect software, Indus Motor Company has peace of mind that its mission-critical data is
always protected.

To accelerate implementation and reduce its exposure to risk as it drove its digital transformation
process, the company decided to partner with IBM Global Business Services to help size,
deploy and configure its new SAP solutions.

After our initial request for proposals, we created a cross-functional committee to quiz each
vendor on their proposed scope and implementation plan, case studies of previous
implementations and their teams qualifications, says Mustafa. After we totaled up the scores,
IBM Global Business Services was the clear leader of the quadrant for the quality of their work,
 expertise and global reach. We knew that our transformation effort was an envelope-pushing
project, and we determined that the IBM team possessed the skills we needed to move to the new
way of working successfully.

To drive the implementation process, Indus Motor Company decided to mix the IBM Ascendant
methodology with the SAP Activate frameworkcombining the structure of traditional
waterfall-based processes with the responsiveness of agile development.

For the most part, we are utilizing the IBM Ascendant methodology to steer the business
through the planning, blueprinting, configuration and use acceptance stages of the deployment,
which is a powerful way to ensure that each work stream is completed on time and within
budget, Mustafa explains. However, because many parts of the business were already familiar
with the way that SAP solutions work, we used the SAP Activate methodology to accelerate the
blueprinting phase for our quality assurance and project system modules. By showing our users
prototypes based on pre-defined SAP S/4HANA workflows, we could make minor tweaks to the
underlying business logic quickly based on their feedback.

Working together with IBM Global Business Services, Indus Motor Company is now deploying
SAP S/4HANA with applications for materials management, production planning, materials
requirement planning, finance and controlling, project management and quality assurance. The
new platform leverages SAP Fiori to personalize and simplify the user experience, making it
even easier for business users to consume and leverage real-time business insights.

All of our business and technology projects stem from our goals to improve customer
experience, drive up product quality and ensure timely delivery, adds Mustafa. Our
collaboration with IBM and SAP is perfectly aligned with those three strategic pillars, and we are
confident that we will start realizing the benefits as soon as our new SAP S/4HANA solution
goes live.

Results story

Benefits in detail
10 percent improvement in sales order accuracy will ensure that Indus Motor
Company can manufacture the optimal quantity of each modelreducing the risk of
a customers chosen model being out of stock, and delivering a seamless
purchasing experience.
20 percent reduction in defects per unit will reduce the risk of delivery delays
and nurture increased customer satisfaction.
Instrumented vehicles will enable Indus Motor Company to track customer
deliveries in real time, ensuring they are within service-level agreements
delighting customers with a highly responsive service.
95 percent faster materials requirements planning will enable greater agility
to switch to alternate vendors in the event of supply-chain disruption, reducing
sourcing risks.
Instrumented manufacturing equipment will help reduce unplanned
downtime, maximize manufacturing capacity and minimize costs.
Racing ahead of competition

With SAP S/4HANA on IBM Power Systems servers at the heart of its new digital business
processes, Indus Motor Company will be in a strong position to drive competitiveness as new
players enter its domestic market.

SAP S/4HANA will become the nervous system that collects and analyzes data from across the
business, and transforms that data into actionable insight, explains Mustafa. Our decision-
makers will have up-to-the-minute information at their fingertips to make better-informed
strategic decisions.

Currently, our quality management team inspects all new components and records the
information manually, and later enters it into a standalone system in batches. Because our
production volumes are so high and we work in a just-in-time environment, this manual
approach limits our ability to detect patterns of defects that indicate a manufacturing fault at one
of our suppliers.

Soon, our team will record information on defects directly into a SAP Fiori app from a mobile
device, enabling us to use real-time predictive analytics to detect and alert our suppliers to issues
before the parts have time to move into our downstream manufacturing process. We see that
closer collaboration with our suppliers will enable us to work together to help develop their
capabilities, ultimately enabling them to improve their quality assurance processes, work more
efficiently and reduce operating costs.

On the Indus Motor Company side, we anticipate that real-time analytics will help us reduce our
defects-per-unit metric by 20 percentboosting quality, reducing the risk of delivery delays, and
delighting our customers with more responsive services.

By providing full integration across the value chain, Indus Motor Company will ensure greater
accuracy in its forecasting process, enabling it to optimize manufacturing processes to capture
every sales opportunity.

Mustafa comments: In the future, our dealerships will enter their three-month sales forecasts
straight into the SAP bolt-on solutionreplacing todays manual, spreadsheet-based processes.
By having accurate, complete and up-to-date information at our disposal, we predict that we will
improve the accuracy of our sales orders by 10 percent. Our procurement lead times are more
than three months long and our manufacturing process is operating at almost full capacity, so
accurate forecasting will be a key capability to capture sales.

Additionally, the IBM and SAP solutions will enable Indus Motor Company to enhance its
supplier management process, reducing its exposure to supply chain risks.
In the past, it would take us almost half a working day to complete a materials requirement
planning report, says Mustafa. The risk was that if demand fluctuated, we found it quite
difficult to alter our production planning process. This ultimately resulted in missing delivery
commitments to customers.

In the new solution, we will be able to calculate our materials requirements in near-real time,
and any changes we make will automatically flow through into dependent data in other systems,
such as production planning. As a result, if one of our suppliers is disrupted or market demand
fluctuates for any reason, we can adjust our materials requirements quickly to keep things
movingmaximizing our manufacturing capacity utilization.

Indus Motor Company plans to use the internet of things to drive further improvements to
manufacturing efficiency.

We are currently instrumenting our manufacturing plants with sensors to detect conditions such
as humidity and temperature, adds Mustafa. Any downtime in our assembly lineseven if its
only a few hourscan increase our operational spend significantly.

By feeding data on the condition of our assets into SAP S/4HANA, we will be able to move
towards a predictive maintenance model to maximize the availability of our assets and keep our
operational costs lean.

He continues: Our internet of things strategy doesnt stop at the factory gates. We also plan to
use RFID tags on our vehicles to track how long our logistics network is taking to deliver them
to our dealerships, which will enable us to ensure we are meeting our service-level agreements.

Looking to the future, we see that our IBM and SAP solutions will put us in a strong position to
embrace the emerging connected car paradigm.

Mustafa concludes: We are now living in a world where consumers are better-informed than
ever.

We see that the best way to win sales and nurture loyalty is by building a reputation as the most
trusted, highest-quality automotive brand in the market. Thanks to our IBM and SAP solutions,
we are achieving the digital transformation that will help us strengthen our competitiveness in a
fast-moving marketplace.
 About Indus Motor Company

Founded in 1989 as a joint venture between the House of Habib, Toyota Motor Corporation and
Toyota Tsusho Corporation, Indus Motor Company is a manufacturer, assembler, distributor and
importer of Toyota and Daihatsu vehicles, spare parts and accessories in Pakistan. Employing
more than 2,300 people, the company operates a dealership network with 45 locations across the
country, and generates gross annual revenues exceeding USD1 billion.

Solution components
SAP Fiori
SAP S/4HANA
SUSE Linux Enterprise Server for SAP applications
IBM Global Business Services
IBM Power System S824L
IBM PowerVM for IBM PowerLinux
IBM Spectrum Protect
IBM Storwize V5000
IBM TS3200 Tape Library