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Follow UsThinking global,
acting local,' goes the mission statement of New Holland tractors,
like most other international companies which wish to make a mark
in the country's local market. But unlike the other manufacturing
industries, the challenge here is much greater.
The product
may offer world class technology, but it has to find a place in
the highly traditional rural market of India. The farmer here can't
be swayed by hi-tech gimmicks-he means business. Unless he is assured
of significant returns in income and productivity, he will not easily
part with his money. "Being the latest is not necessarily an
advantage for us because agriculture all over the world is still
a very traditional industry," admits T.L. Palani Kumar, Managing
Director, New Holland Tractors.
The company,
which manufactures Ford tractors worldwide, and boasts of a global
market share of 20%, came to the country about two years ago with
ambitious plans. Along with the mammoth task of establishing a tractor
unit, it also wanted to create a self-contained knowledge base through
information systems. "We did not have the luxury of first putting
our project in place, letting the company become operational and
then look at the management of information. We were clear that a
knowledge base was also important and had to be created along with
the project. This was an ambitious move because there is so much
to be done in setting up a business-making a plant, creating the
supply chain and putting the best practices in everything that you
do," says Palani Kumar.
Power
of knowledge
The idea behind creating such a knowledge-oriented culture in the
company was obviously to understand the real needs of the consumer
through information from dealers and suppliers. There was a need
to create product-related databases that were relevant specifically
to the Indian farmers. The company was also seeking a complete customer
database, which has much more detailed information compared to a
traditional invoice. This would enable the company to provide much
better service. "The fact is that rural marketing even in the
West is logistically a nightmare. So, when you have to deliver a
service to the farmer in a large country like India, it is even
more difficult because practically every region has its own specialized
farm practices, says Palani Kumar.
Gradually, New
Holland went on to create an entire set of databases including ones
that contained information about business associates, employees,
customers and so on. Based on the knowledge base it created, the
company had to devise a structure and focus for its operations.
The emphasis was on having a flat organization, where the process
of decision making was decentralized. For this, it was important
to have total connectivity, which would allow people in any location
to share information on a day-to-day basis. At present there are
four locations in and around Delhi- the corporate office, spare
parts center, training farm and factory, including the research
and design center. Each of these has its own local area network,
which allows access to information from the database. Says Palani
Kumar, "This has promoted a culture which allows the company
to follow the best business practices while setting up the supply
chain."
Driving
with IT
IT was identified as the major business driver right from the start.
The IT plan had to be in conformity with the broad marketing and
business goals. Apart from leveraging on knowledge management, information
systems at New Holland had to put the best business practices in
place. Integration of all the operations was essential to create
an environment for growth. Although the network systems had to be
in tune with worldwide operations, the decision to go for ERP software
at the project stage itself was taken entirely by the local management.
An investment of Rs 11 crore was planned for Baan ERP and Lotus
Notes groupware.
Rajesh Kharbanda,
Chief of Information Systems, New Holland, says, "For selecting
the suitable ERP package, a team of users from different areas was
formed and the objective was to select a package suitable for the
manufacturing business." SAP, Baan and Oracle were the main
packages that went through evaluation. Besides going through detailed
presentation of these vendors, the team visited various sites where
these solutions were being used.
Baan's advantages
were:
- Orientation
towards a manufacturing environment and more functionality.
- With limited
time for understanding and implementation, simplicity was an essential
prerequisite and Baan was found qualified in this regard.
- After inclusion
of implementation costs and consultation fees, Baan was found
comparatively more cost effective.
- The parent
company had a legacy of a variety of systems and Baan was one
of them. Although selected locally after evaluation, the decision
was also supported by the parent company.
The ERP project
began in October 1997 with basic modules such as sales and purchase,
inventory, finance and manufacturing. It went live in the beginning
of this year and at present, there are 75 licenced users of Baan.
The number is likely to increase to 125 in the next two years. It
runs on RS/6000 F50 model Unix servers from IBM, which have been
divided into database server and client-server architecture. They
work together in a cluster mode, which means one can take up the
job of the other in case of any failure. Both systems have about
1 GB memory each and 50 GB storage space. Besides the ERP servers,
there are two NT servers for each location. One of them is used
for running network services and the second is used for Notes. They
have been segregated to avoid overloading. Each location runs on
a switched ethernet-based LAN, which rests on fiber optics cables.
In
partnership
Following its decision to focus on IT from the beginning itself,
New Holland worked out a strategy to optimize on resources. Instead
of devoting a number of employees in software development, the company
has decided to outsource the task. The strength of the IT department
is maintained at about seven people who act as a bridge with the
technology partners. Internal support is available for some amount
of customization, but the moment this grows beyond capacity, it
is offloaded to the technology partners. For instance, if one person
is dedicated to Notes, he can at best monitor the applications and
ensure that it is fully exploited. But developing more applications
would require long manhours, which one person cannot provide.
Explains Kharbanda,
"With rapidly changing technology, in-house maintenance becomes
difficult. Developing in-house skills and providing regular training
to keep abreast with the change is also not easy."
By developing
long term partnership with experts in every area, one can save a
lot of time and minimize the internal expenses. Moreover, it guards
you against the turnover of employees, which is a perpetual problem
in the IT industry. Although IT services, at present, are a relatively
new concept, more and more companies will gradually realize their
benefits, believes Kharbanda. "People need the maturity to
accept it," he adds.
The two main partners of New Holland are IBM and Sonata Software
for Lotus Notes and again IBM for ERP.
While selecting
the right consultant, the other available options such as PriceWaterhouse
and Arthur Andersen were ruled out due to lack of experience. When
the company went for Baan, it was a fairly new package and these
companies didn't have implementation experience. IBM, on the other
hand, had already done two projects, including an in-house one.
Kharbanda explains, "For an ERP, you need a right mix of management
and technical experience, and IBM had both." It not only provided
a cost advantage, but also proved the one-stop shop for all hardware
requirements as well.
Their role is
to develop applications according to requirements, manage the network
and assist in other activities involved with facility management.
The company is talking to other partners who can be stationed in-house
for managing the plant network and take care of day-to-day administration.
The in-house team also meets regularly to solve the problems that
crop up from time to time.