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:
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.
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
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.
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.