AVON CYCLES: From munims to ERP

Fact File

Business Bicycle manufacturing Turnover Rs 200 crore, March 2000 Requirement Integration of internal and external business processes Solution Ebizframe (ERP software) Investment About Rs 15 lakh on ERP and another Rs 60 lakh on infrastructure Benefits Reduced paperwork and clutter and up to 80% time saving. Also, once the portal is in place customers and vendors would be able to track their orders online Concern Lack of IT penetration among their dealers and distributors in India.

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

"Although we have not done any quantified evaluation so far, the benefits are obvious and more than satisfactory. A chore that took 10 days earlier now does not take more than one or two days" 

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