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A Make And Make Situation

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DQI Bureau
New Update

manufacturing.JPG (34127 bytes) vspace="2" align="right" width="483" height="276">The

manufacturing segment accounts for nearly 25 percent of the total IT spending in the

country, which makes it the largest segment. Together, the process and discrete

manufacturing segments spent a total of Rs 2,605 crore on IT in the year 1997-98. Discrete

manufacturing accounted for nearly 11.3 percent of the total segment spending and the rest

came in from process manufacturing. The process manufacturing sector traditionally spends

more on IT because of the larger population of companies engaged in this activity as well

as their scale of operations. In general, the business and IT priorities of both process

and discrete manufacturing are the same-controlling inventory, production costs, marketing

costs, and improving supplier and delivery channel relationships on the business front;

and improving IT infrastructure, automating internal and external processes, and better

decision-making using IT, on the information technology front. At the same time there are

differences in the emphases that are given to the various aspects of IT usage. In this

analysis, we take the segments together when discussing areas where they exhibit

similarity, and separately when we discuss areas that distinguish them from each other.

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IT investments by large manufacturing organizations were on

the decline last year, with many industries like automobiles, steel, cement, and others

facing a downturn in their business. Overall, many of the smaller manufacturing

organizations which have been traditionally poor in IT usage turned towards IT.

Traditional large buyers like Bajaj Auto, Ashok Leyland, and Tata Iron & Steel Co. to

name a few didn't have any major IT project underway. Public sector steel companies slowed

down their IT investments, whereas private sector ones spent on ERP and plant automation.

In the pharmaceuticals industry, the WTO agreement on patents has forced companies to get

patents on their formulations. Clinical trials, a very data-intensive area, is fast

emerging as an application in the pharma industry.

The major investment heads for a manufacturing company are:

Infrastructure, which includes systems, connectivity, messaging; Design;

Applications-databases, application development and packaged application implementation

services; Consulting and other services; External Connectivity-connecting to dealers and

suppliers and; Some emerging applications like datawarehousing and ecommerce.

Many manufacturing organizations, especially in the private

sector have messaging and groupware in place for intra-organizational communication.

Network-centric applications continue to be developed. Maruti Udyog is moving from its

e-mail-based messaging with dealers to an Internet-based one. A Calcutta-based

manufacturing organization is setting up a sophisticated intranet with countrywide fax

routing capabilities. Companies like IBM and Digital, which have a portfolio of solutions

for the manufacturing industry through years of global experience, will bring forth newer

application areas like ecommerce for Indian manufacturing organizations.

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Three-Letter Magic



ERP is the watchword in the manufacturing industry and the term has gained mindshare more
than marketshare in the past two years. With almost all the global players present in the

country, the stage is set for the launch of Indian manufacturing sector into the age of

integrated applications. ERP is a high-impact area because it leads to a bottom-up change

in the organization. That is, it is by no means an incremental technology. While many

companies do not even understand the full implications of using an

ERP, they are nevertheless enchanted by the concept of

integrated applications. But a mad rush into ERP without the necessary business process

discipline will lead to more flops than hits.

The move to ERP is a high-investment proposition with

accompanying investments in hardware, connectivity, and implementation services, apart

from a lot of invisible costs involved in process change, change management, and training.

There are more than 130 ERP implementations underway in the country presently. SAP, the

largest ERP vendor, has around 75 customers in the country, of which 52 are in the

manufacturing industry, with a dominance by the discrete manufacturing companies. Most of

these are first-generation ERP, which addresses the area of integration of financials with

logistics. These companies are looking at the first phase of integrating financials with

logistics using a packaged application. The next phase taken up is either sales and

distribution or production, depending upon the priority of the company. Demand-driven

industries like automotive sector, consumer goods, processed foods and the like would take

up sales and distribution. There are presently around 40 companies which are in the

process of implementing solutions in this area. Possibly, an equal number of companies are

looking actively at production as the next application to be integrated. But it has been

observed in the last one year that companies are willing to take up both the phases

together right in the beginning. This is due to the fact that there is a lower perceived

risk in implementation because of codeless implementation becoming the order of the day,

thereby leading to better implementation maturity. Another reason is that there are enough

process models available now in the country itself. Taken together, the total time taken

for roll-out is shortened.

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The process industry focus is on integrating business

applications with the plant floor. The major areas under consideration are finance,

materials, and sales and distribution. Since production in the case of process industry is

plant-oriented, it falls within the realm of distributed digital control systems. Further,

there are no multi-stage assemblies as in discrete. The most important area after this is

the maintenance function.

Selection of the proper ERP package is based solely on the

business needs and the fit that the product offers. An interesting example is that of

L&T Group which uses two ERP solutions-from SAP and Baan-for two of its divisions. One

of these, the Unit Equipment Division, uses Baan ERP solution with the finance,

manufacturing, distribution, shopfloor scheduling, and budgeting modules. It helps the

company gain competitiveness in global deals.

ERP presently is restricted to being a transaction-oriented

operations system in the country. As of now, there are few examples in the country of

strategic information systems built around an ERP solution. There are quite a few areas of

refinement to ERP that are being actively looked at by some of the progressive companies.

Called as extended ERP, it seeks to encompass the suppliers and delivery channel partners

into the organization's enterprise information system. Constraint-based planning tools for

supply-chain planning and demand-chain planning are being actively looked at by companies

that operate in specific markets.

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Six-Letter Magic



CAD/CAM is the other major focus area for the manufacturing sector. Traditionally, the
automotive and aerospace industries are the largest consumers of CAD/CAM. With the

automotive sector in the doldrums, vendors were not able to meet their expectations from

this industry. On the other hand, the farm auto sector did better in comparison. Mahindra

& Mahindra (Tractor Division) has grown considerably in the last three years and their

manufacturing capacity has doubled. This is accompanied with significant enhancement in

design capacity. Increasing design capacity is also a competitive edge for a company. For

example, Tata Johnson Controls, which makes seating systems, started off by designing

seats solely for Ford and then, with increased design capacity using advanced CAD/CAM,

went on to supply seating systems to many other auto majors. The major focus area in

CAD/CAM is on design analysis, development, and manufacturing. Styling and ergonomics are

the refinement areas to achieve design excellence.There were only marginal investments in

modeling. There is also a trend towards reverse engineering, especially in the engineering

and appliances industry. Many companies in the BPL Group have taken up reverse

engineering.

Product data management is another leading edge CAD/CAM

philosophy. Telco and Mahindra Ford have integrated many of their suppliers. For the

supplier, it means enhanced competence and improved competitiveness. Many of these

suppliers with their improved design capacity and integration with OEMs have also started

exporting. Brakes India is supplying brakes to many of the European auto manufacturers.

Another reason which prompts a company to make design an

imperative is the improved alignment that many manufacturing organizations have acquired

due to business process reengineering. An important trend is the integration of tier 1 and

tier 2 suppliers with OEMs for standard product information.

In the heavy engineering sector, many companies have signed

up multi-year contracts with global majors like SDRC and PTC. BHEL has a five-year CAD/CAM

contract across all units with SDRC. Similarly Siemens, L&T, and Lakshmi Machine Works

are investing in CAD/CAM to beef up their research capability.

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