Studying The Erp System Problems
Hindustan Unilever Limited is India’s largest fast moving consumer goods company. The common HUL brands include Kwality Wall’s icecream, Knorr soups and meal makers,Lifebuoy,Lux,Pears,Breeze,Sunsilk and Dove shampoo’s, Vim dishwash, Lakme beauty products etc.
Problems faced by the company before ERP implementation:
There was an arrival of modern trade in India. Its business infrastructure and various legacy systems were unable to meet the requirement for transactions and process capabilities of the modern trade.A legacy system means the computer has been in operation for a longer time and so its functions. Hindustan Unilever was not able to streamline its business operation. There was a need of much more smooth flow of information. HUL was facing a challenge of ensuring the optimization of business to have solutions to changing market needs.Company was also facing the challenge of reducing its stock replenishment cycle.
Need for ERP implementation:
To optimize business process and simplify IT management.
2. Consolidation of process is necessary.This must be done internally as well as across the value chain.
3. For the preservation of investment related to legacy inventory and cash-to-order management system.Cash to order management system is for the business partners.
4. Integrate with business partners’ IT infrastructure quickly and seamlessly.
5. To improve information sharing with partners even if they are not using SAP’s solution.
6 .Increasing Supply Chain efficiency through process centric collaboration across the enterprise-internally and externally.
7. Enhancing the value of legacy system.
8. ERP system was also needed to ensure the distribution of goods at the right time at right places
In this period of modern trade one needs to deliver a service level that is higher than what the industry provides right now and their supply chain has to be such that it is superior to its competitors.
Their older version of ERP system was such that it was not able to meet these needs.Hence they were in search of a system which would help in catering like meeting future transactions of modern trade.
HUL also realized that good communication skills and tight communication links was necessary for the optimization of its business and achieving higher efficiency of their supply chain . However, ensuring good connectivity between HUL’s IT system with its distributors was not an easy.
Earlier the company was using an e-business system which was developed inhouse. This was to manage the processes of replenishment and order fulfilment. This was done by exchanging inventory and sales data between itself and their distributors. Synchronization was also necessary. But because their customers had multiple, different systems of their own, integrating their system with those customers to and ensuring smooth data exchange was a challenging task for them . Furthermore, the module of the E-Business system was customized..So as their business experienced growth, there were problems managing themselves with changing business needs.
HUL has developed a standard distributor management system in a distributed general trade environment. If one wants the extended supply chain to be covered, the operations of the distributor needs to be integrated tightly with its internal Enterprise resource planning solutions .The system is functioning quite good, Hindustan Unilever Limited wants to its investment t be preserved in this area. Therefore the new ERP application must be able to integrate itself with this back-office application, so that the company can continue to use its borrowed money well or leverage and maximise this into the future.
It was in 2004 when HUL decided to renovate its IT system with SAP. By utilizing SAP as their provider of standard IT solutions , utilizing its enterprise which is full of different features, solutions and it fine experience in the consumer goods industry,thy will be able to execute their global transformation strategy. This strategy was aimed at streamlining and standardising the business processes across all its operations including global operations.It was to accelerate their transformation of business and simplify their IT department.
The deal for HUL was SAP NetWeaver Process Integration (SAP NetWeaver PI) which enabled process-centric collaboration internally and across HUL’s extended value chain.
SAP NetWeaver PI facilitated communication and an transfer of info between different applications together or multiple applications irrespective of whether it is an SAP or non-SAP solution.
Why SAP implementation?
It supported wide range of integrated Advanced Business Application Programmiing(ABAP) and SAP applications which are based on Java
used throughout Hindustan Unilever
Provided opportunity to drive new enhanced change and transport system functionality of SAP Solution Manager
Phase 1 of HUL’s SAP implementation
It was in Sept 2007. It was marked with the end of its legacy ERP and its e-business systems. The solutions which were deployed included SAP ERP Central Component (SAP ECC), SAP NetWeaver PI, SAP NetWeaver Business Intelligence (SAP NetWeaver BI), SAP NetWeaverComposition Environment (SAP NetWeaver CE), SAP NetWeaver Portal, SAP Solution Manager and SAP Supply Chain Management (SAP SCM).
The most important thing for them is that by implementing SAP NetWeaver platform, they are fit to consolidate and exchange data which is critical for business across their internal processes and also externally with their partners,their various suppliers and different partners too. For eg, HUL is now able to retain or hold back its investment in Central Unify and Unify which is also their aim.It is possible due to SAP NetWeaver PI.
It is due to this software that integration of the the legacy inventory and order-to-cash management system is now possible with the rest of the SAP-based system. SAP NetWeaver Portal is another SAP NetWeaver component that HUL is most impressed with , which is right now used for customer collaboration. Integration of HUL’s IT system with its
distributors’ IT systems is now possible by replacing its e-business system with this portal. This therefore results in the replenishment and order fulfilment process. With SAP NetWeaver PI, we have finally streamlining, advancement and integration of their process capability hs finally become possible because of their SAP NetWeaver PI. This also has resulted in the enhancement of HUL’s ability in meeting modern trade’s demand.
Phase 2 of SAP implementation:
Includes implementation of SAP Customer Relationship Management, SAP Transportation Planning and Vehicle Scheduling, SAP Advanced Planning & Optimisation Production Planning and Detailed Scheduling.
The Distribution Module of MFG / PRO offers users Functionality in the areas of Purchase, Inventory, Sales and Distribution, Configured Products and SCM are offered in the Distribution Module of MFG/PRO.
This software is useful in the following areas :
Ø Quotations of sales
Ø Orders of sales and Invoices
Ø Inventory & Physical Inventory
Ø Analysis of sales
Ø Configured Products
Ø Enterprise Material Transfer and Enterprise Operations Plan
MFG/PRO Financial Services
It includes General Ledger, Accounts Receivable , Accounts Payable, Multiple Currency, CostManagement, Cash Management , Fixed Assets , Global Tax Management
Benefits of MFG/PRO
1.There are highly qualified team members with advanced technical skills and they also possess international exposure.
2.Team scalability is as per the business requirements
3.For ensuring that the expectations are met on time and within budget,a tactical methodology is followed.
4. Fluctuation in manpower is low.
5. Customer satis and nightfaction level is at its peak as the helpdesk is open for the whole day and night.
6. Economical Benefits are considerable.
MFG-PRO Process :
The first step is getting the orderâ€¦.
a. One gets the order online.
b. All orders are consolidated from website to excel sheet
c. The excel sheet is then send to the Operations Department
d. Material Requirement Planning is then done in MFG/PRO
Calculation how much inventory is in the stock & how much inventory is required will be done by MFG/PRO
Step -2 :
Step 2 includes management of raw materials
Supplier is informed about the quantity of raw materials to be supplied ordering is done here)
Raw material is then received from supplier.
Goods Receipt Report(GRR) is then prepared by MFG/PRO.
Qulity Control is done here
Material is then transferred to the Quality Control Department:
Different stages are
(1) Q.C. Pending (2) Q.C. Accepted (3) Q.C. Rejected
The one which is accepted is transferred to warehouse. One which is rejected is sent back to suppliers.MFG/PRO does the accounting entry of it.
Step – 4 :
Also called production stage
Raw Material is Transferred to Production unit.
MFG/PRO prepares Production Report is prepared by MFG/PRO –
Daily Production is recorded
Step – 5 :
The process reaches the dispatch stage
Guidiance how much to dispatch will be done by MFG/PRO.
The Remaining is stored in warehouse.
3. A mail to the customer will be sent by MFG/PRO.
Step – 6 :
Payment to the supplier is done here :
A Message to the central department is sent by MFG/PRO, after 1 week of receipt of material & payment will be done centrally. The entry of it will be done by MFG/PRO when the payment is done..
Payment from Customer:
After the 3 weeks of dispatch of the finished goods to customer, central department will be messaged by MFG/PRO to ask for payment from the customer. Entry will be automatically done by MFG/PRO when the customer does payment.
Manual method is followed for capturing the waste.
MFG/PRO will compare Material reduced & Finished Stock Increased and theri difference would be calculated as waste.
Profit Statement will be prepared by MFG/PRO every month.
There will be comparisons of previous profit statements.
PAY GINI Software
Used mostly for HR department
Various services provided by this Software:
â€¢Calculation of salary
â€¢Provident Fuud Calculations
â€¢Accounts of all Employees
Customer Relationship Management:
It is done through CRM software that manages various processes that the company always uses for tracking and organising its contacts with its current and future or prospective customers. Hindustan Unilever uses it to manage front end operations,backend operations,various business relationships,analysis and operational CRM.
The growing information needs have to be met and the business practices have to be standardised.For HUL implemented Secondary Sales Force Automation (SSFA) Application across its redistribution stockists. Computer Manufacturing Company (CMC) has already implemented the Dealership Management Application Software for HUL distributors as part of earlier engagement. Connection between the redistribution stockists with the
central database takes place through Internet-based network for online interaction on orders,
information sharing,dispatches and monitoring.
Company’s Existing Scenario :
Their existing environment consists of
SAP ERP application , SAP NetWeaver® Exchange Infrastructure Component , SAP NetWeaver Business Intelligence Component , SAP NetWeaver Portal component, SAP Supplier Relationship Management Application , SAP Customer Relationship Management
The company now enjoys
–70% speedier transports for non-ABAP (Advanced Business Application Programming) software
–Greater degree of automation and accuracy
— Elimination of disruptions and mistakes almost completely in ABAP and non-ABAP change transports
–Reduction in costs through reduced dependency on specialists which possess specialist skills
â€¢ Database: Oracle
â€¢ Hardware: IBM
HUL Before ERP
There were 1,000 suppliers and 7,000 stockiest in over one million retail outlets.HUL has 100 factories, 121 warehouse depots, 13 sale branches and 93 third-party manufacturing sites. It has 23 central offices, two research centers . C&F agents used to Planning of distribution was done by C&F agents based on the demand which was raised by stockists. 60-90 days credit for the goods were given to C & F agets and stockists.
In 1995, 44% was the HUL’s net current assets as a percentage of capital employed, and
inventory was 20% of divisional turnover for detergent and for personal products it was 24% divisional turnover.
HUL after ERP
HLL previously had a stock replenishment cycle time of two weeks after ERP implementation, it came down by three and half days, which translates into substantial savings in inventory costs. After ERP current assets as a percentage of capital employed was down to 8 percent, and inventory in key divisions was down to 5-6% of turnover.
In the case of detergent,the stock level decreased to less than 3 weeks of sale from 6 weeks of sale. Finish goods stock level at distribution decreased from three weeks to one week. The stockists of HUL who were habituated to get 60-90 days of credit from HUL are now offered a special discount if the payment is in advance. As a result, orders are placed by stockists only for those stocks that can be replenished quickly. The channel inventory has drastically reduced in the entire network.Order Now