Fact File |
Business Bicycle manufacturing Turnover Requirement Solution Investment Benefits Concern |
Barely three years ago, the Avon Cycles’ plant on the outskirts of Ludhiana,
spread over some 25 acres, used to resound with the cacophony of 60 typewriters
clattering away in unison. Most of the accounting was done on big fat ledgers,
which were also the only means of checking inventories, preparing production
schedules and notching down parts’ lists; the same processes which had been in
place since the company’s inception in 1952 as a bicycle parts’
manufacturer.
It was in 1997, 45 years after Avon Cycles was set up, that a next-generation
scion of the Pahwa family (promoters of Avon), executive director O S Pahwa,
decided to change gears and bring in computerization to streamline operations.
"The biggest task was not selecting the right systems and software, but
convincing my family that IT was the way to bring radical and futuristic changes
in the business management process of our family-run enterprise," Pahwa
recalls.
He admits that his desire to computerize and modernize the business stemmed
from his constant trips abroad, where such practices had already made businesses
and life much simpler. And so it was in 1997-98 that computers entered the Avon
premises. After that there was no looking back and within three years Avon
becxame one of the first in the bicycle manufacturing business in India to
implement an Enterprise Resource Planning (ERP) solution successfully.
The IT strategy of Avon is typical of a multitude of Indian companies. One of
the few companies that were established in a new independent Indian, Avon Cycles
started off making only cycle components, but in a short span of three years,
the company was into making complete bicycles. Of the many small-scale
industries that began cycle-manufacturing at that time, Avon is one of the two
families that remain today.
"Those were the days when we were buying raw material from the gray
market and made about 50 cycles a day," says Pahwa. Today, Avon makes its
own components and produces 5,000 cycles a day, incorporating more than 100
models. Prior to the ERP solutions in 1997, the company was turning out
3,000-odd cycles a day with the same systems and manpower in place.
The beginning
It was at the age of 54, when most people prefer to work according to set
business practices or plan their retirement that Pahwa took up the mammoth task
of convincing his family to embrace ERP. "With all work being done
manually, it was not a surprise that things use to happen at a sluggish pace at
Avon. Even raising an invoice required several processes and meant that pieces
of paper crossed numerous tables. There was a desperate need for a solution that
could put an end to this chaos," Pahwa says.
Recognizing the global trend towards computerization and the growing
importance of the Internet, Avon Cycles–which employs more than 3,000 people
and has a turnover of Rs 200 crore–was on the lookout for a solution that
could integrate all internal and external business processes, build up quality
and hasten decision-making as well as reduce costs. This is when they were
introduced to Ebizframe, an e-commerce-enabling tool that allows an organization
to conduct its entire business from its portal.
"Initially, we got some computers and had our own programmer handle
them, then we used Tally for accounting purposes, but there was still a lot to
be desired. It was during this period that we came across Ebizframe, which,
though being a readymade product, could be customized to suit our
requirements," he says. The suggestion to implement ERP came as a result of
a BPR study conducted by Eastern Software Systems–the company behind Ebizframe–in
collaboration with Avon Cycles.
While the debate was on with regard to which ERP package to implement, SAP
was also a consideration. But on evaluating the utility aspect and the costs
involved, Avon narrowed down to Ebizframe. A System Requirement Study was
conducted for Avon by GMA Infosys, business associates of ESS, where they
interacted with the users to find out what kind of solution was needed to
customize Ebizframe to suit Avon’s special requirements.
The process
O S Pahwa executive director, Avon Cycles
Involving an investment of Rs 75 lakh, including the ERP package and related
hardware, implementation of Ebizframe was to be carried out in two phases. After
the completion of the Phase I, which began in early 2000, Avon is now live on
sales, exports, purchase, inventory and the HR modules. In Phase II, the company
would be looking at production and production planning. "Once their
transaction engine has been established, we will operate and work with them to
push them onto the Net so that their dealer management can become a
reality," says ESS director Sanjay Agarwala. This means that it would be
another four to five months before Avon can actually move on to e-commerce.
The production and production-planning module will be developed receiving
inputs on Avon’s own processes. For instance, if the company forecasts how
many cycles it has to make in any given period, it would be easy to calculate
the raw material requirement. Once this is achieved, it would also automate the
entire process of plant scheduling and worker scheduling. Another benefit that
would accrue from this would be that each time a particular item falls below
required levels, Avon would be in a position to shoot off an automatic purchase
order to its suppliers.
Though only one phase of the ERP package has been implemented, Avon is
already raving about the accruing benefits in terms of time and cost saving.
"Although we have not carried out any quantified evaluation so far, the
benefits are obvious and more than satisfactory," says Pahwa. There has
been about 80-per cent saving in terms of time involved for a particular task,
he points out. "A chore that took 10 days earlier now does not take more
than one or two days." Also, this has helped the senior management track
all transactions that happen in the company by pressing a few keys.
Typically in the SME segment, every transaction requires the approval of the
director, and he signs every invoice, challan or bill. Life today is simpler at
Avon, as Pahwa reveals. "Earlier, I used to spend about four hours a day
just signing bills and invoices for making any purchase, but now we just sign
the purchase order since all accounts relating to any purchase are controlled by
Ebizframe. This leaves me with enough time to plan the direction that future
expansion at Avon should take." This perhaps is one of the biggest benefits
that Avon will derive from ERP.
Initially, there had been employee apprehensions about the advent on
computers and the subsequent impact on them. However, Avon made a concerted
effort to train employees to adapt to the new environment, with the training
being given to most within the factory itself, while some were sponsored to
learn the use of computers. Also, onsite software professionals from ESS are
always upgrading the skills of the Avon team as the ERP implementation
progresses. Currently there are 22 users of Ebizframe in the sales, purchase,
inventory, exports and accounts departments.
The future
In the medium level where employees are not very IT-savvy, Avon has taken the
first steps toward modernizing business practices. Earlier, there were only 15
computers used by the accounting department. Today, Avon’s IT infrastructure
boasts over 60 computers and three servers and employs a state-of-the-art ERP
solution. The senior management at Avon admits that up till now, the investment
in IT has been need-based. Of the turnover of Rs 200 crore, less than 0.5 per
cent has been utilized to implement the ERP package, and the company has not
ruled out the possibility of deploying more software solutions in the future.
With a vision to be completely web-enabled by early 2002, a lot needs to be
done. "Unfortunately for us, only 5-10 per cent of our dealers in India
have access to computers or place their orders through e-mail. The majority
still use fax or courier to send purchase orders. But, yes, in the exports
arena, all work is being done via e-mail." Orders for exports are placed
through the Net, using the Ebizframe platform, and Avon hopes that customers
abroad will soon be able to track their order positions–whether in the
production or shipment stage etc.
In any environment, it is first essential to automate and then to push
suppliers and distributors to become part of a real-time business model. The
implementation of Ebizframe would enable all transactions, whether
customer-related or purchase-related, to happen concurrently online, through
their portal. Although it has taken a little longer in the happening, Avon has
realized the need of real-time transactions.
By installing the ERP solution, Avon is all geared up to take on the global
challenge. A well-integrated working environment has not only boosted employee
confidence but also left the senior management with ample time to plan ahead.
Process integration is also bringing in major behavioral and cultural changes
amongst the employees, with a lot of them coming forward themselves to
understand the technology. Being among the first to implement such a solution in
its industry, Avon has paved the way for others in the medium enterprises
segment to follow suit and learn form the benefits they have derived.
Meghna Sharma in New Delhi