Improving Operational Efficiency with ERP at BEML : E-Governing the growth of a PSU

N. Balasubramanian
Chief Information Officer BEML Limited

Agenda
About BEML Limited E-Governance
E-Governance initiatives

E-Procurement through SRM

Key Challenges Solution: E-Procurement System E-Procurement at BEML Why SAP SRM? Implementation of Best Practices SAP SRM Implementation at BEML Strategies Adopted Financial and Strategic Benefits Operational Benefits

Enterprise Resource Planning

Key Challenges SAP ERP Implementation at BEML ERP modules implemented Strategies Adopted Operational Benefits Functional Area Wise Benefits

Supplier Network Collaboration

Benefits of Collaboration Operational Benefits

Conclusion

About BEML LIMITED

BEML Ltd., leading multi-technology and multi-location, Miniratna-Category-1 company under the Ministry of Defence. BEML supplies high-quality products for diverse sectors of economy such as Defense, Metro & Railways, Mining, Construction, Aviation, Coal, Steel, Cement, Power, Irrigation and Road Building. BEML emerged as the fore runner of heavy engineering industry with a track record of growth and revenues for over four decades. Three Major Business verticals viz., Mining & Construction, Defense and Rail & Metro along with Aerospace, Technology, Trading and International Business Division. Nine manufacturing units located at Bangalore, Kolar Gold Fields (KGF), Mysore, Palakkad and Subsidiary-Vignyan Industries Ltd, in Chikmagalur District.

E-Governance

E-Governance
E-Governance the process of carrying out the Business, Operations and Activities more efficiently and effectively through the application of ICT so as to ensure highest quality and standard of services and making the life easy for all the stakeholders involved like the Customers, Vendors, Employees, Auditors, Government Agencies, Investors, Management and the Citizens of the society.

E-Governance initiatives
Year Major ICT initiative
2007 2008 2009 Integration, Harmonization and Standardization of all business processes through SAP ERP implementation Integrating the Supply Chain through Supplier Network Collaboration (Inventory Collaboration Hub) Automation of procurement process e-Procurement through SAP Supplier Relationship Management Analytics, Optimization and Forecasting of Spare Parts Inventory Management of Product Life Cycle Management (PLM) Implementation in progress

2010 2011

Enterprise Resource Planning (ERP)

Enterprise Resource Planning

Enterprise Resource Planning (ERP) integrates internal and external management information across the entire organization, embracing finance/accounting, management, sales and service, etc. through an integrated application. It facilitates the flow of information between all business functions inside the boundaries of the organization and manages the connections to outside stakeholders.

Key Challenges
Different units following different processes and functioning as silos. Non-standard business practices across the various divisions / units. Significant paperwork and manual administrative work. Duplication/Redundancy of operations/data. Time and effort spent on the non value added activity. Higher level of Inventory. Delay in compilation / submission of MIS information.

SAP ERP implementation at BEML

Broad Objective: Integration, Harmonization and Standardization of all business processes through ERP across the company. To bring activities online, real time data processing. Quick and accurate analysis of MIS data to achieve reduction in Manufacturing lead time, Reduction of Inventory, Optimization of Resources, and drive paperless concept. Project Started: November 2006 Gone Live: October 2007.

ERP Modules implemented

Production Planning Module Material Management Module Sales and Distribution Module Quality Management Module Plant Maintenance Module Financial Accounting Module Cost Controlling Module HR and Payroll Module

Strategies Adopted
Implementation of an integrated ERP system across the entire organization. Big Bang approach covering all the locations, units and offices in one go. Study of the all the business processes and modification of the same as per needs. Adoption of global best practices for optimization. Harmonisation of the all business processes across various manufacturing locations. Standardisation of procedures and reports.

Strategies Adopted
Strong support from senior management. Formation of core-team from in-house domain expertise. Best Implementation partner SISL ASAP Methodology Creation of a detailed blueprint based on discussions with all relevant stakeholders and analysis of the processes. Use of Standardized processes based on industry best practices. Extensive training. Change Management.

Operational Benefits
9 Manufacturing units and all marketing divisions are connected through SAP. Enhanced management decision making due to Realtime information from single data source. Redundant data is eliminated by unifying master records from all divisions. Manual intervention in processing data is eliminated. Tight control on authorization to ensure data integrity at all levels. Control on closing procedure in FI and MM to meet report deadline.

Operational Benefits
Improvement in quality of work life of employees. Enhanced productivity of work force. Improved Efficiency of work force and processes redundancy eliminated. Considerable reduction in paperwork due to automation. Instant availability of complex reports. Instant processing of transactions without any time lag. Better Inventory Management. Meeting of the customers demands on time. Settlement of vendors payments on time. Meeting employees requirements on time.

Functional Area Wise Benefits

Production Planning Material Management Sales and Distribution Quality Management Plant Maintenance Financial Accounting Cost Controlling HR and Payroll

Supply Chain Management (SCM) Supplier Collaboration Network (SNC)

Supplier Network Collaboration

Supplier Network Collaboration (SNC) is an Internet-based solution connecting business partners (suppliers / customer) on a shared (inventory information / real time data), easy-touse platform. It is designed to enhance visibility, collaborate more effectively with suppliers and increase the overall speed, accuracy, and adaptiveness of supply network.

Benefits of Collaboration
For the Manufacturer / Customer: Complete transparency on the stock situation. Alerts on Stock out situation, Triggering replenishment Process. Simplifying internal processes. Reducing safety stock. Reducing delivery times. Increased sales turnover. Lower administrative costs.

Benefits of Collaboration
For the Supplier: Reduced stock. Reduced delivery times. Reduced supply risks. Reduced down time and overtime. Reduced transportation costs through possible transport consolidation. Improved order fulfillment rate. Lower administrative costs. Improved service.

Operational Benefits
Purchase orders seen online immediately after approval. Acceptance of purchase orders done online. Online challan creation and no hardcopy to be attached. Report of dispatches seen by suppliers/ customers. Report of late dispatches can be enabled. In bound processes made easy. Overall cycle time reduced significantly. Totally SCM enables a paperless office.

E-Procurement through Supplier Relationship Management (SRM)

E-Procurement
E-procurement (electronic procurement, known as supplier exchange) is the B2B or B2C or B2G purchase and sale of supplies, Work and services through the Internet as well as other information and networking systems, such as EDI and ERP.

Supplier Relationship Management

SRM is a Web based application involving processes like e-procurement, reverse auction, supplier registration etc. This is PrePO process involving activities like sending of bid invitation (RFQ) to prospective suppliers electronically, processing of bids submitted online, generating comparative statement and creation of P.O. in backend SAP R/3 system (ERP).

Key Challenges
Time taken for procurement processes across manufacturing divisions. Manual and paper-based systems. Considerable paper work. Transparency of procurement processes Dependence on intermediaries for carrying out reverse auctions. Access to real-time information. Reports on procurement. Collaboration and information sharing with suppliers.

Solution: E-Procurement System

e-Procurement application at BEML Website (www.bemlindia.com) facilitate the transformation process and enable BEML to sustain benefits.

E-Procurement at BEML
Pre P.O. Process Post P.O. Process

SUPPLIER RELATIONSHIP MANAGEMENT (SRM)

SAP R/3 (BACKEND SYSTEM)

SUPPLIER NETWORK COLLABORATION (SCM-SNC)

VENDOR

Why SAP SRM?

Ease of integrating the SAP Supplier Relationship Management application with the existing SAP ERP application. Satisfactory services from SAP during ERP implementation. Continuous product upgrades and support given to customers. Potential of product to address the tendering processes BEML followed.

Implementation of Best Practices

Project driven and monitored by top management. Involvement of core team that implemented ERP. Creation of detailed blueprints after discussion with all relevant stakeholders and analysis of processes. Standardized processes based on industry best practices. Performed extensive training and change management. Concentration on the most important, processes to achieve rapid implementation. most-often-used

SAP SRM Implementation at BEML

The implementation work started in the month of Nov 2008. Successfully achieved the Go-Live target of 30.03.2009. All the business processes are mapped in the e-Procurement system. Core-team members of BEML visited major Public Sector Units and gained significant inputs. During the last two years of implementation of e-Procurement module in BEML, about 8000 e-Bidding Tenders and about 250 Reverse Auctions were processed. Around 850 vendors submitted bids in the e-Procurement system with their Digital Signatures.

Strategies Adopted
Customizations were carried out in the e-Procurement module by BEML to suit organizational needs. Tight Integration was ensured with the ERP system. e-Bidding to get bids online from the bidders before the specified due-date. Supports multi-stage bidding coupled with government laid procedures. Reverse Auctions are conducted for certain items where competitive prices can be obtained.

Strategies Adopted
Integration of Digital Signature with the system to comply with IT Act 2000. Generation of Comparative Statement with Tax Calculations for arriving at Purchase Decisions. Approvals process made available in the e-Procurement system, which reduces the procurement time considerably. To achieve the goal of paperless office, BEML enabled incorporation of notes/text by the users in the e-Procurement system.

Financial and Strategic Benefits

Automated and simplified the procurement process. Significantly reduced procurement cycle due to ease of publishing tenders with attachments. Reduced administrative work with immediate accessibility of documents. Enabled vendors to access the documents/drawings and view the status of submission online. Improved transparency in the bidding process through live auction. Increased competition leading to better prices in reverse auction. Savings on charges otherwise paid to reverse auction service providers.

Operational Benefits
Increased Buyers reach. Increase in Vendor Satisfaction. Reduction in procurement cycle time by 65% to 80%. Employee Productivity increased by 20%. Direct cost reduction - due to elimination of hidden inefficiencies inherited in generic tendering/negotiation process. Buyer able to undertake more professional, value added activities beyond traditional negotiations. Considerable reduction in material cost due to competitive reverse auctioning process. Ability to meet material requirement for increased business.

Conclusion
Implementation of E-Governance has automated and simplified the whole business processes while achieving improved operational efficiency, increased productivity and total transparency.
- V RS Natarajan, Chairman & Managing Director, BEML Ltd.

Thank you

N. Balasubramanian cio@beml.co.in

Production Planning
CMR consolidated material request for group of orders. CGI consolidated material issue request for group of orders. Job cards order wise, splitting of job cards. Incentives based on job cards. Customized engineering change management. DMR daily movement reports. Special subcontract processes for in-process operation. Detailed reword & rejection procedures. Shortage list for equipments (multi level). Tool movements between plants, tool tracking.

Material Management
Stock Consolidation can be viewed across all division, regions & district offices. Procurement based on MRP. Centralized corporate purchase reducing the procurement cost and material cost. Online inventory valuation. Physical Inventory processing and differences made easy. Posting of differential valuation to stock at the time of invoice verification. Control on material return to vendor through notifications and credit memo. Complete monitoring of sub contracts processes with excise challans.

Material Management
Extensive Subcontracting handling through system. Inbound delivery tracking and tag printing. Development of material gate pass / vehicle /vendor entry pass. Development of dispatch advices. Weighment cards. Vendor freight calculation based on tonnage and destination. Mass conversion of PRs to RFQ. Picking list for GIs. Tender enquiry summary. Customized invoice verification for imports.

Sales and Distribution

Determination of accurate delivery date to customers (through ATP). Shorter sales cycles and reliable forecast. Spare parts requirements will flow directly to manufacturing. Spare parts shorter lead times. Warranty requirements identified and tracked for priority delivery. Sales turnover division and region wise. Alternate parts incorporated. Warranty for all major aggregates. Spares and warranty ordering process. Customized reports and printouts. Customized pricing.

Quality Management
Increased Quality improvements due to better visibility of business process. Standardization of quality inspection process across the plants. Increased visibility across logistics supply chain by closely integrating MM, PP, FI & PM. Online status of inspection lots pending. Unification of defect codes has helped for better analysis of defects. Control of payment to the vendors based on the acceptance of inspection lot has been brought in. In process quality for Critical to Quality (CTQ) parameters is being done through SAP.

Plant Maintenance
Preventive / Breakdown / Corrective maintenance. Notifications. Spare Parts (Tools) Planning.

Financial Accounting
Monthly Business Reporting. Division wise account balances. Balance Sheet & Profit and Loss statement at company code and division level. Real time reconciliation of inter division accounts. Automatic vendor payments can be processed centrally or at division level. Online updation of customer payments and real time availability customer balances. Real time integration of general ledger with inventory, pay roll and sub ledgers. Automatic bank accounts reconciliation and availability of bank balance.

Financial Accounting
Planning and budgeting of capital expenditure at division level and company code level. Approval of capital expenditure proposals through workflow. Availability of real time reports for analysis of actual capital expenditure Vs plan and budget. Complete management of assets under construction. Automatic periodic depreciation calculation and posting. Repots for depreciation simulation for the coming years. Fully integrated with investment management module for the capital work orders.

Cost Controlling
Online availability of product cost and contribution for all equipments and aggregates. Production variance can be analyzed against standards facilitating decision making. Work in progress can be obtained online. Controlling and monitoring of expenses based on Planning & Budgeting for Cost / Profile centers. Automatic Allocation of overhead cost periodically. Online Profitability analysis for profit center or business segment or product or customer.

HR and Payroll
Pay roll processing is centralized. Centralized control of master data. Integration of time data for pay roll processing. Access to all statutory reports. Transparency of resource.