In the Driver’s Seat

Manufacturing in India, particularly in the automobile sector, has always

been a challenge, especially as it calls for huge infrastructural investments

and fine-tuning. Right from sourcing individual components and assembling them

on the shop-floor and putting an IT setup in place, the process is tedious and

calls for precision planning. In such cases, time is the key to meeting delivery

schedules and ensuring a smooth flow along the production line. So what is the

IT infrastructure and processes that auto majors in the country have in place?

What is the competitive advantage that IT brings into a market driven by tight

margins? The Dataquest-Citrix CIO Panel Discussion in Chennai was aimed at

addressing some of these issues. On the panel were V Thyagarajan, senior manager

(systems) at Ashok Leyland; S Srinivasan, GM (business strategy and systems) at

Sundaram Fasteners; M Suresh, DGM (IT) at Hyundai Motor India; Anand Rangachary,

marketing consultant (Asia-Pacific) at Frost and Sullivan; Prasanto K Roy, chief

editor of the Dataquest Group and the moderator of the discussion; S Balu,

executive director at Ford Information Services India (FITSI); R Srinivasan, V-P

(financial services) at Rane Group; and A V Ram Mohan, president (e-business) at

Satyam Infoway. Some excerpts from the discussion:

The E-Enabler

Ram Mohan (Satyam Infoway): We are at the supplier end. Satyam Infoway

is the largest ISP after VSNL. This comprises the relatively unglamorous or

invisible part of our activity, but what is more important is what we do in the

industry arena. We provide end-to-end Internet solutions. At the infrastructure

level, we provide services like corporate connectivity, operate the largest

corporate network in India, the first and perhaps the largest corporate data

network in the country.

We provide corporate security of data services using Versign. We are the

exclusive associates of Verisign in India. We provide B2B solutions. We run and

operate ten marketplaces covering industries like Automotive, Electrical etc.

And we provide e-business services to wide ranging industries. On the

manufacturing side, we provide e-procurement as well as e-distribution services

to a number of companies. Closer home in the automotive industry, we work with

Toyota and the Kirloskar group for distributor connectivity and with Robert

Bosch, that is MICO for e-procurement and e-distribution.

We provide e-marketing services through interactive web sites for impacting

customers and building brand loyalty. One of our significant sites is www.fordikon.com,

which is an extensive user oriented site. The site gives information about the

vehicles, comparison, driving and maintenance tips and acts as a hub for josh

club kind of activities. These are supported by our relationship with package

providers like Commerce One, Oracle, Broad Vision etc. We believe even though

there is a substantial drop in the number of dotcoms, the coming quarters could

witness the resurgence of some dotcoms. The impact of the dotcoms in the long

run is unquestionable. And whatever investments we make so far in terms of

manpower or building infrastructure, will pay off in the coming quarters.

Anand Parthasarathy (Frost & Sullivan): We focus on three industry

verticals — IT and Telecom, Industrial (of which automotive practice is a

part), healthcare and medical devices. We have a dedicated team monitoring the

impact of change enablers like IT on the industry. Regarding IT and the auto

segment, We have been stressing on the need to harness the power of Internet. To

this end, we suggest custom specific solutions aimed at enhancing operational

efficiency to our clients.

Looking Beyond Legacy

Prasanto Kumar Roy (Dataquest): I think we have come out with a very

interesting set of pictures in terms of platforms, applications, deployment,

background etc. Lets take up this interesting area of what is the kind of

backbone companies are deploying. For instance, we looked at scenarios where

some companies are deploying standard packages, but then there are issues like

homegrown, best of breed solutions etc. Lets take up certain basic questions: A)

Is it purely the legacy which is defining the application direction? B)Today, if

you are planning systems would you say a home grown custom solution is the most

flexible for me or would you look at a standardized platform that is easier to

integrate with home grown solutions? For instance, the Rane group does not have

a single standardized system across seven companies; rather they have a fairly

heterogeneous mix of solutions. Is this a major challenge, especially when you

are stepping up operational efficiency? Is this is the effect of a legacy system

or is this the preferred option today?

R Srinivasan (Rane Group): The key issue for us is manufacturing. In

order to build a customer driven approach, our manufacturing systems must

integrate with the customers requirements. Frankly, this was not how systems

were developed a decade ago. The focus at that time was more on payroll,

accounting, eliminating drudgery or minimizing, rather than on building a true

information driven platform. Today we are faced with huge volumes of

information, and the surprising aspect is that any information is fairly easy to

get, provided you have the will to get it. The fundamental aspect again is that

data integrity has to be ensured only by making sure that data is captured at

the emanating or starting point and nowhere else. This does not call for a

complicated ERP solution. For instance, at Rane TRW Steering Systems, we have a

BaaN solution working exceeding well. The issue here is at what cost are we

going to replicate this across the group companies. The cost factor is driving

us to settle for home grown solutions. Yes to a certain extent, the homegrown

legacy is a kind of constraint for us. Having said that, we would rather accept

that constraint with a low cost solution than go for anything at the higher end.

V Thyagarajan (Ashok Leyland): Legacy systems only address processes

like production planning, inventory, materials, purchase etc. They do not cover

major areas like HR, supply chain and CRM. To this end, we are centralizing the

database to reduce the latency in data transfer, because we have around 40

locations in the country with a lot of sales happening on any given day. Hence,

we have to get a consistent view of what is happening across all locations. In

the supply chain area we are making our own software. We are asking our

suppliers to computerize first so that they will be able to connect to our site

and do the transactions. We are trying to put some CRM software on our site for

sales force automation.

For and Against ERP:

S Srinivasan (Sundaram Fasteners): Given a chance to redefine our IT

infrastructure, we would clearly go in for an enterprise wide solution. I

believe it is absolutely essential. However, we have not adopted an enterprise

wide solution due to certain inhibiting factors. To begin with, there is

clear-cut statistical evidence that only one thirds of all enterprise

implementation cases succeed.

So why would ERP fail? No ERP by itself is a defective product. But the

problem is we are in no position to implement it, the way it has to be. Take for

instance that there are several types of bills of material. Even in well-managed

professional companies, you have a situation where duplication of data exists.

This is largely because of certain attitudinal problems. The reason why it does

not get resolved by converging into a single database is that people do not come

together. If you try to implement ERP in places where there are defective

databases, the solution is bound to pick up the wrong composition of materials

and issue them automatically. The worst aspect is that physical stocks often do

not tally with the theoretical stocks.

This has happened in at least two of very well managed professional companies

that I know of and there might be several other examples as well. Furthermore,

the automotive sector is in an acute crisis. Barring possibly Hero Honda, the

rest of the industry is not in very good shape. In fact, some of them are even

facing a very bleak situation. Given this scenario, large investments on IT are

not possible. This is the primary reason for very large companies not going for

an ERP. Even auto majors like Maruti, Bajaj and the likes have not gone in for

ERP. It is the same in the auto ancillary sector. Hence we see that ERP vendors

should, in some way, make things much more palatable in terms of durability,

cost, degree of success etc. An ERP solution would then be a far better bet.

Satyam Infoway: The mood in the automotive industry is not very great

today. But this was not the case few years ago when the industry was booming.

Even during that time, companies did not invest in systems. My explanation is

that only in the last two or three years with the so-called IT boom, IT has

commanded top management attention. Only in recent times has it been viewed as a

change enabler. I believe that IT has been neglected for several years and that

is the reason why we see many top companies banking on legacy systems. This

becomes evident when we look at the percentage of turnover spent on IT software.

The figures are surprisingly low. And talking about standardization or the

implementation of enterprise resource planning packages during these challenging

economic times is totally non-viable.

Frost & Sullivan: The issue of standardization versus sticking to

legacy systems will be influenced by market trends rather than the choice made

by companies. The competition will ultimately lead to vendors migrating to newer

technologies like supply chain management that will play a critical role and

will be a competitive advantage.

Quantification of IT Investments

PKR: It seems that the major impediment in terms in

migration from legacy systems to newer technologies is the cost factor. This

leads to quantification of IT investments. Let us for instance look at Ford,

which is in a segment where information is critical in terms of supply chain,

dealerships and competitor tracking. However, if you have a very stiff situation

in the market, you have to justify IT spending. The issue here is - does the CIO

have to quantify the benefits of IT investments?

S Balu (Ford): Quantification has always existed at

Ford whether there is stiff competition or not. I think in general we have a lot

of legacy systems in the auto sector. Most of the companies when they started

operations, were actually operating with an in-house IT team. After actually

establishing the solutions, they did not know what to do with the team and it

ultimately ended up as an IT division within the companies. To a large extent, I

blame the CIO’s of some of these companies where there are a lot of legacy

systems. They did not want to look at the ERP systems when ERP packages came in.

At that time, the CIOs said that the legacy systems were good enough. But today,

the same CIOs go back to the management and say that the ERP system will take

care of almost all the processes. The problem here is that today CIOs say that

an end to end ERP system is needed and that legacy systems should be scrapped. I

think success can be achieved with a good blend of legacy and ERP systems. CIOs

should clearly tell the management about what ERP can and cannot do, rather than

recommending the scrapping of the entire existing system. In Ford, CIO’s are

told to be business savvy rather than technology savvy. Technology is just the

enabler for gaining business advantage. The moment you adopt that kind of

culture, you will able to quantify things and instead of going blindly towards a

ERP or SCM, the CIO would take a balanced view from a functional perspective and

come out with an IS road map taking all the issues into consideration.

M Suresh (Hyundai): Our investments are not based

primarily on ROI. We do plan our investments based on how IT helps us in

day-to-day operations. Regarding investment there is no constraint and is based

on market situations.

MarketPlaces

PKR: How important is the market place going to be in

reaching out to clients?

Sundaram Fasteners: I have strong views on this

subject. About four years back, there was an initiative taken by Telco and Bajaj

towards market places. They started off with EDI. But it soon ran into trouble.

It flopped because individually each of the organizations were looking at it at

the operational level in different ways. Now it has became clear that we are

heading towards a situation where every supplier organization has to operate in

different styles to suit different OEM’s. Besides each of the EDI service

providers have their own methods of operation. They are not able to co-ordinate

among themselves. Companies are not willing to share information. For EDI to

succeed, we need to be transparent in the first place. Perhaps the solution lies

in creating an electronic exchange. But for that, at least a handful of

suppliers should come together.

Satyam Infoway: One can create private market places,

like for instance Telco has myvaluechain.com. Similarly, companies and its chain

of suppliers can be in one marketplace. The cost of such a solution is also very

minimal. EDI in India failed not because of the lack of common standards or

formats, it failed because it is a very clunky system. It is essentially

machine-to-machine communication. However, there are notable examples of success

in EDI. One of the companies in the Rane group- Rane Brake Linings was using EDI

to interact with 11 distribution depots and the factory. It has not succeeded,

because it requires a certain degree of discipline on the part of the users.

Frost & Sullivan: One of the reasons most of the

market places fail is that a market place is seen as a place where the company

wants to reduce procurement costs. Big buyers often get together, bully

suppliers and force them to reduce the price points. So, this is one of the

reasons for the reluctance of auto component manufactures hesitating to enter

market places.

Shop-Floor Automation

Hyundai: We have a factory automation system, which

tracks the shop floor production. Scheduling and sequencing is based on the

marketing requirements. We do have a refining system where any change in market

requirement is further fed into the shop floor automation system, which gives

the leverage to the shop floor people to change the production sequence.

Ford: Especially with the kind of competition today,

the customer is in a demanding position. Given this, we need to have good

systems in the shop floor that can actually be synchronized with the customers

requirements. For example, a customer orders for a white car. After a week he

comes back and opts for a red one. Hence, the systems have to be efficient in

such a way that the information reaches the shop floor before the body enters

the paint shop. And in Ford, we use a mix of systems.

For instance, we use MFG — PRO for capturing the dealer

orders and then those orders are sequenced and segmented every night and

transferred to digital VAX platform. This system is called Plant Vehicle

Scheduling (PVS); it is running in Ford factories across the world. PVS has

interfaces with the MFG and the MRP system in mainframes. PVS enables dealers to

actually log into the system and change the color of the car or find out where

the car is at that point in time in the production cycle.

CRM:

PKR: How do auto manufacturers view the concept of

customer relationship management? What happens after a complaint comes in and

how are customers’ buying patterns analyzed? How quickly are these customers’

complaints addressed and how effective is the feedback information acquired

after that, especially given that this is critical in this sector?

Ashok Leyland: We have thousands of customers. We

concentrate on the top few customers who contribute to 50% of vehicle sales. We

ensure that we get repeat orders from them.

Ford: We actually have a concept called intensive

customer concern definitions (ICCD). This transmits unfiltered feedback from the

customers directly to the quality and the manufacturing department. intensive

customer concern definitions keeps calling the customers once the car is

actually sold and records the customer concerns and recommendations. The

feedback is then used by the concerned departments to enchance the production

process. Ford uses the web extensively and has value additions like the Josh

club to monitor the preferences of customers.

Hyundai: Complaints are captured through dealers and

marketing offices. Since we have centralized servers, complaint capturing from

the dealers is Web-enabled. They transfer the information to our systems. We

have a full-fledged customer complaint monitoring and closing system in place.

Dataquest Report