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Mahindra & Mahindra thrives on SAP

Mahindra & Mahindra was SAPs first supply-chain implementation in the Asia-Pacific region and the second SCM implementation in India by any vendor. Prashant L Rao finds that using mySAP APO has helped M&Ms farm equipment business improve demand planning and reduce the inventory carried in the supply chain by 56 percent The Mahindra Group operates in diverse industries like automotive, farm equipment, trade and financial services, automotive components, infrastructure development and IT sectors. In the farm equipment (tractor) business, cutthroat competition from global players like John Deere New Holland, etc, prompted Mahindra to overhaul its supply chain. Cost-conscious customers were demanding variety with quality. They wanted product features, value for money and timely delivery. Rapid changes in demand in the short term and the need to quickly respond to these changes, plus pressure on the bottom line with competitive market prices, resulted in a demand for overall supply chain cost reduction to improve the bottom line. Earlier shortcomings The legacy IT environment required us to stock high inventory levels in each part of the supply chainlike tractors with the dealers and at the stockyards, raw materials and work in progress in the plant as well as with vendors and in transit. The planning cycle was very long. It included everything from the start of the demand plan to the production plan, and also to informing the vendors of supply schedules. Moreover, once production plans were finalised, they could not easily be adjusted to changing market demand. The planning was done in monthly buckets, says Satish Moorjani, head-Supply Chain Planning & Control, Mahindra & Mahindra - Farm Equipment Sector. With 450 small and medium suppliers, 490 dealers and three plants to manage, collaborative planning with small and medium scale suppliers and customers across the supply chain was required. For this, Mahindra needed a robust supply chain solution. We evaluated i2 and SAP and finally chose SAP as their solution matched our requirements completely. Also, we had already implemented SAP R/3 as our ERP. In addition, with i2 there would have been issues of interfacing with SAP, which would have not only increased the costs but would also have created accountability issues for either vendor in case problems cropped up during operations, says Moorjani. The implementation The project team comprised a lead manager from Mahindra Consulting and required team members from SAP to provide product and business knowledge, associate with company personnel and garner IT inputs. The project

System Landscape
Back-end SAP R/3 servers in a distributed environment linked through Application Link

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started in February 2001 and went live in November 2001. Since then M&M has done pilot implementations of demand planning, supply network planning and deployment and production planning and detailed scheduling. Rollout has happened for supply network planning, which is being stabilised before rolling out the other modules.

Enabling (ALE) APO Live Cache Server APO Database + Application + Optimisation Server CIF: Core Interface for real time transfer of data from the distributed SAP R/3 servers to APO and back

The first step was to make a detailed supply chain Number of Users: opportunity assessment study to identify the potential - Demand Planning 30 benefit areas in M&Ms supply chain that would give the - Supply network planning: 4 company an assured RoI for its planned investments. This - Production planning & study was based on SAPs Value SAP methodology and Detailed Scheduling: 4 the SCOR (Supply Chain Opportunity Reference) model. We faced lots of competition from i2 at that time. It took three to four months for the initial study of the processes to find potential savings and map those to our product. During that time we met the senior management and plant heads and they were convinced that we meant business, says Alok Srivastava, industry manager, Manufacturing Sector, SAP India. HP provided the hardware, HCL Comnet did the networking and SAP the software Advanced Planning Optimiser (APO), the SCM component of mySAP.com. M&M purchased forty mySAP supply chain user licenses. The company already had a SAP R/3 back-end in place. A core team from M&M took care of the business side of the implementation. Training During the course of the implementation, the SAP team trained the core team from M&M. We got three to four key people from stores, materials and other departments and conducted a three-week training program. We wanted them to understand the software so that they could marry the business processes and the software effectively. Toward the end of the implementation, users from area offices were trained by the core team, says Srivastava. There were four phases in this project: Phase 1: Project preparation including core team training (two months) Phase 2: Business blueprint (two months). Here a wish list was compiled and the vision derived from it. This in turn was mapped to the products features. The business blueprint stage was where objectives were stated as to why M&M wanted to go in for SCM. Phase 3: Realisation. The blueprint was implemented in software; pre go-live checks were executed. Consultants from SAP AG logged in and checked the configuration. Phase 4: Go-live. The system went live. Supply chain software operates in three areasdemand planning (monthly forecasts, plant production), capacity constraints and optimisation and logistics (on which truck to load, optimum loading, calculating the best route). Of these, M&M has implemented the first two. Route planning will be implemented in the next phase. Key drivers

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1. Improve demand planning by doing it bottom up and get more accurate forecasts. 2. Optimise inventory (raw materials, work in progress, finished goods). The aim is to 3.
have a just-in-time system where raw material reaches the factory when it is required and carry the optimum inventory on the plant floor. Reduce loss of sales due to non-availability of products by producing exactly what the dealers want. To do this, M&M would need to know the market demand for each and every model.

Once the modules were implemented, the sales guys were esquipped with very good forecasting information. This has been extended with a Web template that lets dealers put in demand figures, creating a sales funnel for top management. The Key Performance Indicators (KPIs) identified as measurable benchmarks were order fulfilment lead time, supply chain costs, cash-to-cash cycle times, inventory in days in the supply chain (raw material, packing material and work in progress material) and logistics cost. The key benefits in reporting came from designing customised alerts to enable timely action and decision making. Further benefits accrued from designing appropriate KPIs to continuously monitor and identify areas for improvement. In addition to standard reports, a data warehousing solution from SAP was implemented mySAP BI. The team configured the autocubes for the data warehousing solution. Challenges For SAP, this was the first site in the Asia-Pacific region that went in for SCM. The customer was not very convinced, SAP had the reputation of being an ERP company and there were doubts regarding our capability to implement SCM. Three years ago we did not have the mindshare that we have today. To convince M&M we had to overcome this perception, says Srivastava. At that time, SAP India did not have a team in place that was trained on APO. To overcome that particular hurdle, consultants from Germany came to India to train the team. Overseas consultants spent around one month of consulting in the overall implementation. Implementing a supply chain management solution required us to change the business processes across the entire supply chainfrom dealers to company to suppliers. The implementation also required organisational alignmentchanges in structure, mindsets and alignments, says Moorjani. Benefits M&M succeeded in reducing inventory in the supply chain of finished goods from 18,992 tractors before implementing mySAP SCM to approximately 8,400 units today. The order fulfilment rates improved from 51 days before the implementation to 19 days (planned). The demand fulfilment time dropped from earlier 51 days (max) to 19 days (max). The complex web of suppliers and dealers combined with business pressures made a supply chain solution a necessity at M&M. Having an R/3 ERP system in place contributed to the choice of APO. M&M achieved a reduction in inventories and improved its demand and order fulfilment through this implementation.

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