ESCORTS AMG’S ERP UPGRADE

Summary of the case:

Escorts Limited's, Agri Machinery Group had deployed Avalon's ERP systems and faced
challenges like inability to upgrade, lack of vendor support, and buggy software. It used tools
from the Oracle 11i suite and now performs its critical operations with better productivity levels.

Escorts Limited's Agri Machinery Group (EL-AMG) manufactures agricultural machinery, and
has four manufacturing plants in Faridabad. It manufactures three lines of tractors, imports and
sells various other farm equipment, and consequently accounts for around almost two-third of
Escort's revenues (Rs. 900 crore in FY 2002-2003). The use of an ERP thus plays a significant
role in the business operations of this busy manufacturing company.

EL-AMG had already deployed ERP systems from Avalon, but was plagued with a number of
challenges. The company was unable to draw a future roadmap and upgrade its technology. And
to make matters worse, the ERP vendor Avalon had shut shop in India. This prompted EL-AMG
to look for an alternative enterprise applications solution for its business. As a solution, it
deployed a number of modules of the Oracle 11i suite of products and can now make better and
more informed decisions, and enjoy a bug-free software performance.

Business challenges:

Despite using an ERP, the toughest challenge was the inability to draw a future roadmap by
leveraging the latest technologies. This was impeding the scope for future growth. The company
could not leverage the benefits of the Internet by offering e-commerce and other Web initiatives.
Since the Avalon ERP could not be Web-enabled. To make matters worse, Avalon had shut shop
in India, shutting down chances of upgrades and making use of the latest technology
developments.

"The Avalon ERP system had outlived itself and had become a dead product," said Vinay Mehta,
IT Head, EL-AMG. The product had inadequate documentation, which made maintenance very
difficult. It was a headache to incorporate frequent changes in the application.

EL-AMG also had to deal with the problems of software bugs, which could not be resolved due
to lack of proper documentation. The company feels that the bugs appeared due to over-
customization of the product. The central systems department, which took charge of applications
maintenance, spent most of its time tackling these bugs.

The system was not very user-friendly. The users were not able to run queries on their own. The
responsibility of running the large amounts of queries and reports was delegated to the central
systems department. This created a huge backlog of work.
EL-AMG also had a certain amount of legacy, which included i2 SCM, demand planner, factory
planner, warehouse management software for the spare parts division, HR and payroll
applications, after-sales and warranty systems, and Auto-Matrix Exchange for collaboration with
vendors. The group wanted an end-user-driven system that would empower the users and allow
them to run their own queries, reducing the burden on the systems department. This made the
company decide to implement a new ERP system, which could take care of the future growth
strategies of the company and provide the needed functionalities.

Choosing the ERP system

In early 2001, EL-AMG began to look for a new ERP system to replace the existing one. The
company chose Oracle among other vendors keeping in mind the organization's functional and
technical requirements. Since the ERP project was very significant for company, it was named,
'Pragati'.

A lot of time was spent in planning and deciding upon the right software. And the entire
proceedings were conducted in an elaborate and phased manner to ensure efficiency.

The company laid down three ground rules for vendors willing to participate.

They were:

• The vendor had to conduct a three-month Business Process Re-engineering (BPR)

exercise at EI-AMG.
• The ERP vendor would be the technology implementation partner and handle the sole
responsibility of the project.
• The ERP systems had to integrate seamlessly with the company's legacy software
systems.

An important highlight in the selection process was the involvement of end users. A team of
around 70 members was created during evaluation. Almost 80 percent of the members belonged
to functional areas. The rest were from the IT department.

"This was a key learning from the earlier ERP implementation, which was largely IT-driven. If
the selection process is not end-user-driven, you'll have a hard time convincing users about the
benefits. In our new ERP implementation, we made sure that it was the choice of the end users,
so that they accepted the decision easily," explained Mehta. The Gartner group was also involved
in providing consultancy at each stage.

Each member of the team gave ratings to the vendor. The evaluation was finally done on the
following criteria:

• Functionality
• The ability to integrate third party software
 • Type of feedback from existing user base (through visits to other company's ERP sites)
• Presence in India
• Localization of modules
• Cost
• Time taken to implement.

In March 2002, Oracle was chosen for the applications, an Accenture was chosen to conduct the
BPR exercise.

Implementing 'Pragati'
The rollout of Oracle's products began in March 2002. EL-AMG is present in five locations,
which comprised four manufacturing plants and an R&D setup, all within distances of three Km
in Faridabad.

The company decided upon the 'big bang' approach to implementation in the five locations. It
went live on Oracle 11i in March 2003. The modules implemented were Oracle Financials,
Oracle Discrete Manufacturing, Oracle Purchasing, Oracle Order Management, Oracle
Workflow and Alerts, Financial Analyzer (OFA), Purchasing and Manufacturing Intelligence,
Teleservice, iReceivables, and Oracle Treasury.

An important set of exercises during implementation was on data cleansing and migration.
Earlier, different finance divisions used various items, parts, and vendor codes. With the
unification of the different divisions, standard codes were created for simplification and more
efficiency. The data was taken from legacy system and the coding scheme was revamped.

Reporting and MIS systems had different formats and had to be revamped. The Bill of Materials
(BOM) systems also had to be re-done during implementation.

The company network

The heart of the network is at the second plant (Plant 2) in Faridabad. Around 40 servers, some
of which are PCs configured as servers, act as a centralized system. The servers range from NT,
Windows 98, Windows 2000 to Linux and Solaris.

A set of four HP severs (HP-Ux 11i) run the core Oracle application modules. These are
connected to a SAN box. The other three plants and the R&D locations connect to these servers
through 2 Mbps leased lines. The area offices are able to connect to the servers located in Plant 2
through a VPN provided by HCL Infinet using a PSTN dial-up.
BPR
"If one goes for an ERP without BPR, there is a chance the company will miss out on a lot of
benefits of BPR," said Mehta. The BPR exercise was closely aligned with the ERP
implementation, ensuring that 'best practices' were incorporated. Accenture was involved in
defining the re-engineered processes and convincing the end users of the future benefits. Oracle's
role was to map the processes into their products.

The processes involved in re-engineering included finance, procurement, materials, plant

maintenance, and quality assurance.

How the new tools helped

A significant benefit of the new Oracle-based systems was the resolution of the problems with
present in the earlier Avalon ERP. Due to the bugs, the company could not use its database
(Oracle) for generating any meaningful MIS. So, the MIS for the top management was generated
through Excel sheets instead of being generated directly through the system.

With 11i, the MIS is generated through the system and standard reports are created. Currently,
there are around 250 reports generated for the middle management and operational people.

The company has also deployed Business Intelligence (BI) tools from Oracle for the top
management. While earlier the focus was on the middle management and operational personnel,
the present focus is on the top management so that they can perform informed planning and
better decision making activities.

With the help of the new tools, the company was able to shorten the time taken to close the
annual accounts. It was able to close the year end accounts of FY 2002-2003 within two months,
an improvement from four months time taken earlier. By next year, the company hopes to bring
the time taken down to one week. It is also able to close the accounts each month by the first
week of the next month.

At any time the company is aware of its inventory status. According to R.K. Jain, Dy. General
Manager, AMG (Information Systems), there has been elimination of a lot of non-value added
activities as well, translating into benefits for the group.

ROI
The company feels that it's a little early to calculate ROI, and the results are already visible in the
lowered inventory value. According to Mehta, the system has already brought down the value of
inventory by around 30 percent. There has been substantial savings in terms of inventory and
manpower resources.
The future roadmap
Within the next three months, the company will extend its ERP system to its area offices, which
number 25. It will roll out the ERP to 15 nationwide depots. And will implement product data
management systems. It will also integrate its R&D systems, designing, and product
development systems in the plants in the next few months.

Solution:

In early 2001, EL-AMG began to look for a new ERP system to replace the existing one. The
company chose Oracle among other vendors keeping in mind the organization's functional and
technical requirements. Since the ERP project was very significant for company, it was named,
'Pragati'.

A lot of time was spent in planning and deciding upon the right software. And the entire
proceedings were conducted in an elaborate and phased manner to ensure efficiency.

The company laid down three ground rules for vendors willing to participate.

They were:

• The vendor had to conduct a three-month Business Process Re-engineering (BPR)

exercise at EI-AMG.
• The ERP vendor would be the technology implementation partner and handle the sole
responsibility of the project.
• The ERP systems had to integrate seamlessly with the company's legacy software
systems.

An important highlight in the selection process was the involvement of end users. A team of
around 70 members was created during evaluation. Almost 80 percent of the members belonged
to functional areas. The rest were from the IT department.

"This was a key learning from the earlier ERP implementation, which was largely IT-driven. If
the selection process is not end-user-driven, you'll have a hard time convincing users about the
benefits. In our new ERP implementation, we made sure that it was the choice of the end users,
so that they accepted the decision easily," explained Mehta. The Gartner group was also involved
in providing consultancy at each stage.

Each member of the team gave ratings to the vendor. The evaluation was finally done on the
following criteria:
 • Functionality
• The ability to integrate third party software
• Type of feedback from existing user base (through visits to other company's ERP sites)
• Presence in India
• Localization of modules
• Cost
• Time taken to implement.

In March 2002, Oracle was chosen for the applications, an Accenture was chosen to conduct the
BPR exercise.

Benefits:

A significant benefit of the new Oracle-based systems was the resolution of the problems with
present in the earlier Avalon ERP. Due to the bugs, the company could not use its database
(Oracle) for generating any meaningful MIS. So, the MIS for the top management was generated
through Excel sheets instead of being generated directly through the system.

With 11i, the MIS is generated through the system and standard reports are created. Currently,
there are around 250 reports generated for the middle management and operational people.

The company has also deployed Business Intelligence (BI) tools from Oracle for the top
management. While earlier the focus was on the middle management and operational personnel,
the present focus is on the top management so that they can perform informed planning and
better decision making activities.

With the help of the new tools, the company was able to shorten the time taken to close the
annual accounts. It was able to close the year end accounts of FY 2002-2003 within two months,
an improvement from four months time taken earlier. By next year, the company hopes to bring
the time taken down to one week. It is also able to close the accounts each month by the first
week of the next month.

At any time the company is aware of its inventory status. According to R.K. Jain, Dy. General
Manager, AMG (Information Systems), there has been elimination of a lot of non-value added
activities as well, translating into benefits for the group.

Submitted By:
Apoorva Bhateja
A1802009027
MBA-IB
Section D