Tata Refractories: Another ERP success story

In the wake of the downturn in the refractory space, Tata Refractories turned to IT to push itself ahead of the competition. Today, the entire business process of the company is designed and driven by technology. CHITRA PADMANABHAN looks at how the company brought about a synergy between technology C D KAMATH says the and business processes A perfect synergy between IT systems and business processes is considered the ideal technology investment. Any investment in technology can only be justified if the user company experiences significant benefits to its overall business. After all, what would be the purpose of IT in a business if it fails to become a business facilitator? Tata Refractories (TR) faced a similar question when it embarked on its IT initiative three years ago.
implementation of Baans system increased the companys responsiveness to changing business environments thereby resulting in greater customer satisfaction

TR had to literally start from scratch. The situation was such that the companys employees were not very familiar with the use of sophisticated IT systems. But the company wanted to stay ahead of competitors, which was impossible without the use of IT. Its managers were plagued with questions such as, Will training initiatives be fruitful? and Will we be able to justify the investments made in IT? All this because the RoI (return on investment) could be assessed only after a certain point of time, while qualitative benefits would be experienced as soon as the company went live with the new system. Market reality TR is in the business of providing refractory (heat resistant) products used in various industries like steel, copper, cement, aluminium, glass and petrochemicals. In this space, the need for using better technology is fuelled by various conditions pertaining to user industries. During the late nineties the refractory industry went through a downturn because of poor demand from various user industries and also due to an irrational duty structure. There was an urgent need to spruce up business. The refractory industry has always been heavily dependent on the business conditions of industries like iron and steel. During that phase, the refractory industry was undergoing a major change wherein user industries were looking for total refractory solution providers over and above firms that catered only to individual products, says C D Kamath, the companys managing director. The refractory industry needed to keep pace with rapidly developing industries like iron and steel. These industries were looking to enhance their manufacturing capabilities, which called for drastically cutting down consumption of refractory products. As a result, refractory companies were forced to enhance their internal technologies to suit the everincreasing demands of steelmakers. All these initiatives forced TR to re-engineer and streamline its complete business process to get a competitive edge. In the beginning TR started its IT initiatives with a definite purpose. Right from the beginning, the management of the company knew that there was a need for an integrated system covering all the processes in the organisation to achieve its objectives. After evaluating several packages, the company decided to implement Baan IV C4. We were looking for a solution having a module that could be localised to Indian taxation and duty structure norms. Baans solution met most of our requirements, says Kamath.

The big task ahead was to reach a sophisticated level of technology with very little experience. Apart from selecting key users, the ERP implementation process was considered an opportunity to re-engineer business processes. We were keen on a solution that did not need too much customisation, explains Kamath. The preimplementation process also involved creating awareness and allocating budgets. Change management The first step to implementation was to familiarise employees with the changes that were likely to take place post-implementation. In order to create a wave of change within the organisation, TR called the initiative Parivartan (change). The implementation also involved coordination with all concerned user departments to iron out any gaps in the implementation. Baan typically follows a two-tier approach to any big-bang implementation. The first is the as is approach, which studies existing processes in the organisation and suggests various changes that would speed them up. The second is the to be approach that outlines details of the changes that are likely to happen in the workflow process. Both our approaches are basically meant to suggest the best alternative based on reference models picked up from all over the world. The system provides a birds eye view of the workflow existing within the organisation, says Ravi Kathuria, Baans director of Marketing. With Baan being the implementation partner, TR focused on business issues rather than technical issues. There was a clear synergy between what we wanted to achieve in terms of processes and the use of the right technology to achieve the same, says Kamath. The implementation took place in a span of seven months with intensive knowledge transfer from the technology consultant to users, together with postimplementation handholding and stabilisation. Benefits Apart from achieving a complete turnaround in internal processes, TR benefited in other ways from its ERP implementation. From an organisation where the use of computers was confined to a few key people, TR emerged as an organisation where the entire business was driven by the use of IT. Easing the whole process was some excellent training, change management initiatives, and the advantage of not having to deal with legacy systems. By going in for a big-bang implementation, TR adopted the best business practices followed the world over to cut costs, streamline core activities, and gain significant competitive advantage. An integrated ERP solution automates the entire business process and helps decision makers get a holistic view of the organisation. The implementation of Baans system increased the responsiveness of the company to changing business environments, thereby resulting in greater customer satisfaction, concludes Kamath. There have been several noticeable benefits for TR, including finalisation of monthly accounts by the second day of the next month, transparency of inventory, enabling faster turnover; and reduction in communication costs. TRs change from a supplier of refractory products to a complete service provider was thus successfully mapped and delivered through the Baan ERP system.

Benefits of implementation
Material planning and procurement Inventory & WIP (work-in-progress) control Finalisation of monthly accounts by the second day of the subsequent month Monitoring the control point Transparency of WIP & inventory, enabling faster inventory turnover Reduction in communication costs (by Rs 20 lakh per annum) since the output data relating to customers and suppliers is hosted on the Internet Helps in minimising inefficient processes, and thereby aids smartsizing SSA Baan ERP IV C4 Compaq Dec Alpha 40E True Unix Oracle 8.0.5 Baan India 200 (approx.) 60 600 Q2 2000 7 months Implementation of e-procurement from SSA Global

IT infrastructure at Tata Refractories

Software Hardware Operating Platform Database Implementation Partner No. of Users No. of Licences No. of Employees Implementation Started Implementation Time Current Project