SAP case studies: Total transparency in textiles

Gujarat Heavy Chemicals Ltd or GHCL is into two primary verticals namely Home Textiles and Chemicals (Soda Ash). It implemented mySAP ERP to automate and streamline its transactional systems and supply chain.

In 2006, GHCL had successfully set-up a new Home Textiles manufacturing unit in Vapi located in the Bhilad district of Gujarat. The unit has a production capacity of 1.25 lakh meters per day. Being a green-field set-up, GHCL wanted to implement ERP for automating the operational processes. The macro objective for implementing SAP was to achieve integration between the various businesses within GHCL and to provide support for decision-making across all levels.

The manufacturing of home textiles is a complicated process that required coordinated planning, scheduling and monitoring at each stage of production. It starts with basic yarn weaving, goes through spinning followed by dyeing and printing. It is then cut and sewed as per the customer’s instructions before it is packed and shipped to the concerned customer. Chandan Sinha, CIO, GHCL Ltd, said, “Our home textile manufacturing goes through a complex procedure right from preparing the Bill of Materials (BOM), to procurement of materials to manufacturing. 50-60% of our business profitability was dependent on grey fabric manufacturing.”

Another complex procedure in manufacturing grey fabric is production planning where the grey fabric is routed from machines to dyeing to printing. The company had to carefully plan its production so that machines were fully utilized and that production was done in the least amount of time.

Similarly, in the cut and sew stage grey fabric had to be kept in such a way so that the company got the maximum length of table cloths, curtains and bed sheets from its fabric rolls.

The problem

Sinha said, “We were using spreadsheets (Excel) to manage all five stages of grey fabric manufacturing, which did not provide any real-time data regarding our business operations because of which we were unable to take decisions quickly and this was affecting our growth plans.”

Procurement (material resource planning for inventory for BOM) was again a complex process. GHCL was sourcing many raw materials, spare parts and chemicals and it did not know the exact status of raw materials procured in the absence of real-time data. Getting a fix on total consumption of raw materials annually was a difficult task as one had to go through a number of files. Sinha said, “We couldn’t locate certain chemicals, raw materials and finished goods inside the plant. To search 500 rolls it used to take two-three days. We saw our inventory load swelling and it started blocking our cash flow.”

Further GHCL’s challenge was to track the Work-in-Progress against a Sales Order at the various production stages of Weaving, Processing, Cut-Sew, Packaging and Shipment. This was again done using Excel sheets.

In the absence of real-time data, generating MIS reports on monthly stocks, quality, product planning and BOM used to take a lot of time. GHCL had to download the Excel files and physically do the consolidation of procurement, inventory, production planning and financial accounting, which was a cumbersome and resource intensive procedure. Tally was used for accounting and closure of books.

The non-availability of business data across its supply chain led to an increasing inventory load. Sinha said, “There was a lot of inventory in our warehouse and goods in transit between plants. Keeping track of inventories was difficult and this was blocking revenues.” He added that sales revenues and sales dispatch were getting delayed due to improper information flow. “We wanted to have an integrated solution across all business areas and online information tracking.” Monitoring and control checks were absent, which used to lead to a situation of overstocking or stock-out, machine breakdowns etc.

In the textile business, activities such as costing and getting the Bill of Materials (BOM) in place have to be perfect. If you have these two critical aspects mapped correctly in the system, then you can achieve about 85-90% accuracy. GHCL wanted an ERP system that would automate and streamline its transactional systems as well material resource planning, manufacturing and dispatch.

Raman Chopra, CFO, Textile India unit, GHCL, added, “We are basically an end-to-end textile manufacturing company—from manufacturing of yarn, finished fabric, global sourcing and retail and have operations in India and abroad. Since the plant was new, we wanted to automate the processes right from the beginning and bring in a lot of process discipline. One of our aims was also to have lean and competent manpower resources in place to achieve the desired economies of scale.”

GHCL fully understood that centralized management of business operations across the entire value chain and optimization of key business processes would be imperative in a fast-changing business scenario. Its strategic decision to select SAP’s ERP solution was deemed the right business-fit and suitable across all types of business verticals.

Sinha said, “The new talent that we hired for our Vapi plant came from a SAP background and they were finding it extremely difficult to deal with multitudes of Excel sheets. They had solid exposure in working with automated, up-to-date systems. Hence, I thought that it would make business sense to use SAP ERP as it would speed up the deployment and would not require training.” He sold the idea of having a standard automated system such as SAP ERP to his Managing Director, R. S. Jalan and CFO Raman Chopra. They were both pro-IT and, as they believed in automated systems for process improvement, they approved the project.

“GHCL is a growing company having businesses in various industrial verticals, both within India and abroad. SAP offers one of the best fit solutions that would allow us to implement a homogeneous platform across all the business verticals of GHCL and achieve overall integration,” said Sinha. Earlier, since the company had only the Vapi unit, it was contemplating opting for some home-grown applications and then gradually moving to a high-end ERP solution. But once the acquisitions (it acquired a new plant in Madurai) firmed up and retail integration became a requirement, GHCL decided that it needed a globally proven ERP solution and selected SAP.

The deciding factors were the simplicity of the SAP architecture, loading, the integration that would be possible etc.

A seamless implementation

GHCL chose OBT Global Pvt. Ltd., (later acquired by Zensar Technologies) as its implementation partner to implement mySAP ERP ECC 6.0 at its Vapi plant. The GHCL IT team was convinced that OBT had the right domain knowledge, could custom-build various textile-specific applications and had the experience of having carried out similar implementations in some well-known companies in the Indian textile industry. To address all the core areas of its business process, GHCL implemented FI, CO,MM, PP, QM, SD and OBT Global's own module EMS (Export Management System). OBT global provided overall program management, scope and design, build and test, business process alignment, system data conversion, organizational rollout, communication, training and ongoing application management support.

The GHCL steering committee was involved with the technical evaluation and vendor selection criteria from July 2006. A Project Team was formalized consisting of steering committee, functional users, consulting agency, end users and IT support. The team had 24 members with 18 dedicated to the project on a full time basis. The team was in place by September 2006. The formal order to implement SAP was given in October 2006. GHCL took the big-bang approach for implementation and took six months to complete it. The project went live on 1st March 2007. Sinha added, “Though we went live in 2007, it was only in mid-2009 that our systems stabilized and we achieved 85% of the MIS requirement.”

In the first phase, GHCL implemented Sales & Distribution, Materials Management, Production Planning, Quality Management, Finance and Costing modules. SAP modules are basically accessed by all hierarchies. For instance, there are 50 users at the Vapi unit.

Synopsis of the ERP deployment at GHCL
Solution deployed	mySAP ERP ECC 6.0
User licenses	50 concurrent licenses
Production Server	IBM p550 2.1GHz dual Power processor with 8 GB memory and 800 GB hard disk
Application server	IBM p520 server with 24 GB memory
Quality & development server	IBM p520 (2 x 2.1 GHz) with 8 x 146 GB hard disk and 8 GB memory
Operating System	AIX 5.3 V
Database	Oracle 10.2
Cost of the project	Rs. 4 crores including license, hardware, software and implementation costs

Total transparency in operations

There is coordinated planning, scheduling and monitoring at each stage of the production of grey fabric. With an intelligent information system in place, tracking the Work-in-Progress against a Sales Order at the various production stages of weaving, processing, cut-sew, packaging and shipment which was challenging earlier has now been adequately addressed. Sinha explained, “mySAP has allowed us to centralize information to be entered into the system for the correct and accurate flow of information across various departments such as sales, material management, production planning and finance and costing.”

GHCL has seen a clear improvement in tracking work-in-progress. The mySAP ERP system tracks right from incoming raw material till outgoing finished goods with thorough quality approval. Raw materials received, quality parameters recorded and vendor-wise date details are available instantaneously at the click of a button. Sinha added, “With this automated system (mySAP) the moment we receive a PO, all the processes involved get released directly from the system and there is no running around to get the details of inventories, stocks, production planning, machine scheduling and the like.”

Materials issued by the stores dept and the same consumed by the shop floor are readily available at any point of time and there is accurate tracking. For example, online material consumption for all the material in any department at the plant level can be visualized, checked and monitored. Department-wise production plans for a given sales order are readily available for that time period. The daily production report is directly generated from mySAP ERP. The same is being retrieved from the production confirmation against machines in all departments. Further, the production status of any sales order can be visualized at any moment with regards to production order quantity issued, produced and percentage completion of that process or department.

Sinha added that online availability of information meant that it was available to the top management at anytime via VPN connectivity.

Earlier, getting a fix on product costing was a complex process and the company never got it right. For example, when it used to get a PO from a customer, it used to spend at least 15-20 days looking into Excel sheets to get the product costing and quote a price (to the customer) and in the process the figures would deviate from the actual ones. Today, as soon as the PO is entered into mySAP, the company gets the product costing and BOM with a few clicks.

Similarly, lead time from sourcing of raw materials to production has decreased significantly. GHCL gets a consolidated view of its annual consumption of all types of raw materials and gets better pricing through reverse auction.

Sinha said, “Since we have total transparency into our business process, we have reduced our inventory carrying costs by 40%. Additionally, we can now know exactly how old our inventory is, quantities of raw materials and their whereabouts etc.”

Sinha informed that GHCL is also planning to nurture its retail business, (referred to as Rosebys stores) with 65 stores across India. He said that since the economies of scale do not demand integrating mySAP into its retail chain, the company continues to use a legacy ERP system.

Reference: http://www.expresscomputeronline.com 

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