Benefits of implementing erp in lucky tex

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COMPANY PROFILE

The foundation of Lucky Tex was laid by Mr. Ahmed Tabba in 1993. Its Stitching unit became operational in 1995 and then in 1997, a 10-acre site was bought for the erection of a complete in-house production facility from Weaving in 1997 to the Processing Division in 2003. A Power Generation Plant was also installed in 2000 to make Lucky Tex independent of any outside power source.

The quality provided has always been of world class standard and hence Lucky Tex was among the first few who were ISO certified. Lucky Tex is known all over the world for its good business. We provide our customers with Quality, Complete Satisfaction and Trust.

PRODUCTS:

  1. Fabric.
  2. Bed Linen.
  3. Curtains.
  4. Kitchen Articles.

FACILITIES:

  1. Weaving: Monthly production is approximate 1.4 million meters
  2. Processing.
  3. Stitching Division: designed and equipped for a daily production of about 5,000 curtain pairs and 10,000 bed sets (Filled / Unfilled / Embroidered)which includes:-
    • Cutting
    • Sewing
    • Embroidery
    • Quilting

A Theoretical Perspective

Let's go back to the very beginning, to the origins of Enterprise Resource Planning (ERP). The system is in fact, a much more sophisticated and highly evolved version of a previously popular system known as the Material Requirement Planning (MRP). Used during the 1970s by some organizations. MRP is a production planning and inventory control system that was used to manage most manufacturing processes. Although most of these were software based, it was also possible to do them by hand. It was created to simultaneously achieve three objectives:

  1. Ensure that materials are available for production, and that products are available for delivery to customers.
  2. Maintain the lowest possible level of inventory
  3. Plan manufacturing activities, delivery schedules, and purchasing activities.

Companies found that with this new software, it was becoming easier to control and maintain their productions at the most effective and efficient manner. With the help of computers to drive the basic mathematics of planning and control, the MRP became very popular. By using product information in the form of a bill of material (BOM), and with demand information in the form of a master of production schedule (MPS).

With the increase in more powerful desktops, it became advantages to have an MRP system in the organization, but it was still lacking in reaching its full potential. This is when the Manufacturing Resource Planning came on the scene (MRPII). It was described as a method for the effective planning of all resources of a manufacturing company. It addresses operational planning in units, financial planning in dollars, and has a simulation capability that allows it to answer "what-if" questions.This meant that the software could be used to explore the consequences of any changes that were made to an operations method. Meaning if demand were to change the MRP would be able to calculate all the ‘knock off' effects, and issue instructions accordingly. This is not exclusively a software function, but a marriage of people skills, dedication to data base accuracy, and computer resources. It is a total company management concept for using human resources more productively.

As time progressed, and the internet became a big power player in the way that organizations were run, the MRPII was again upgraded into what we know today as Enterprise Resource Planning (ERP). It applies much of the same principles of the MRPII, but on a much wider scale, by integrating both external and internal management functions across the entire organization. It encompasses accounting/finance, manufacturing, sales, operations, etc. the ERP system is able to automate all of these activities, and with the help of an integrated software application. The main purpose of this system is to facilitate the flow of information between all the business functions within the boundaries of the organization, and to manage the connections with the stakeholders outside. Most ERP Systems include:

  1. An integrated system that operates in real time (or next to real time), without relying on periodic updates.
  2. A common database, which supports all applications.
  3. A consistent look and feel throughout each module.
  4. Installation of the system without elaborate application/data integration by the Information Technology (IT) department.

The ERP system further improved upon the ‘what-if' scenario scheme, by allowing decisions and data bases from all parts of the organization to be integrated, this allowed for the consequences of actions taken in one part of the organization to be reflected in the planning and control systems of the remainder of the organization. Web-Integrated ERP is the next step in the evolutionary chain of the ERP system. Since all organizations are built on collaborations with suppliers, customers, and other businesses, this system will allow for the access of predetermined information among all necessary parties that have an ERP system present already. However this system can only fully come into its own and reach its full potential when Web-Integrated ERP becomes widely implemented by most organizations.

Problems faced before implementing ERP

  1. As most of the work is done manually like taking of the order from the customers, production planning, accounting entries etc. this results in inaccuracies—both incorrect and missing entries.
  2. When the customers requested for their order status, it was difficult to track the stage of completion of the orders and it required a lot of time to ask the relevant departments as to which process exactly was the order going through.
  3. Lucky Tex was facing huge costs in terms of overlapping activities, inefficiencies, and poor planning.
  4. The organization was facing difficulties in communication and decision making process due to the unavailability of accurate and on time data.
  5. Each department was using a standalone outdated system and it was very difficult to synchronize all the information to meaningful reports which could help in decision making.
  6. There were problems of traceability to identify materials in any manufacturing phase, from raw materials, through work in progress and up to finished goods.
  7. It was difficult for the management to keep track of the resources that the firm owns and how to use them effectively and efficiently.
  8. Due to huge administrative overhead profitability is reduced substantially
  9. Costs like operating costs, admin overheads, disorganized inventory system and lower customer retention
  10. There are over employment of administration and over stocked inventory which leads to high cost and low revenue for the business.
  11. Inventory system is ineffective because of poor inventory management software. Also Just in time inventory is not managed properly. Bad tools are used to manage huge inventory levels which result in poor inventory management like irresponsible ordering of inventory by the management.
  12. Customers are not sorted properly from A to Z and high priority is also not given to valuable customers.
  13. Unnecessary cost is either hidden for the top management or nobody is taking care for the unnecessary cost or somebody is doing favors to certain “big” and “important” customers/ vendors, this means company prefers to keep it under the table. ERP will not miraculously make those customers profitable for you; it will expose them and pinpoint the reason for low profitability.
  14. There is no transparent item profitability structure which results in lack of effort to turn accounting habits upside down to attach all costs, whatever they may be, to items.
  15. Lack optimized purchase plans which mean that employees are unwilling to maintain & plan parameters for all of the items in company's item catalog.
  16. Ineffective optimized inventory levels in all locations of the business. Employees are unprepared to handle the stock keeping units.
  17. Workers are unable to pick the right item, for the right job, from many identical items.

BENEFITS OF IMPLEMENTING ERP IN LUCKY TEX

  1. Implementing ERP in Lucky Tex has been very beneficial for the organization, the internet & intranet system within the organization are used to deliver all type of online information because of which they are able to significantly reduce the unnecessary time loss due to manual operations.
  2. The ERP system not only provides timely information to the company, but also helps for better decision making & planning.
  3. The company manages all relevant information and integrating all core functions using world renowned Oracle Database. All information is centrally located , which helps in eliminating duplication which enhances the system and employee efficiency.
  4. Business driven automation (BDA ) reduces risk and human error by automating complex processes. The Lucky Tex ERP solution is being design and implemented in accordance to the Business Driven Automation Techniques which helps in minimizing the costs through optimization and utilization of physical assets, which in return help in reducing unnecessary costs. Through implementing BDA many labor intensive tasks are being atomized.
  5. The company's' ERP solution is an integrated system that allows information to enter at a single point in process & updates a single shared database for all functions that directly or indirectly depend on this information.
  6. All the modules of Weaving, Processing and Stitching are fully integrated which enables efficiency and ease of work to the user of the software. The Human Resources Module is also being implemented by the management to maximize the utilization of human resources.
  7. Finally all the information and flow of transactions within the software ends at the Finance module and accounting transactions are made. This procedure allows the company to gain maximum benefit of ERP solution.
  8. The software solutions has helped in improving ways to coordinate, communicate and to keep track of the materials, warehouse inventory, supply chain, and logistics matching orders to deliveries.
  9. It helps in resolving customer inquiry and concerns can quickly be resolved and handled because the correct information is at hand.
  10. To lucky Tex ERP helps in the major functions such as product planning, maintaining inventories, parts purchasing, tracking orders, communicating with suppliers, developing relations with customers. once everything is intedrated with ERP, everything is within reach of the senior management where they are aware of the different processes, developments which in turn helps them to allocate resources better.
  11. Implementing the ERP system adds value to the small textile industries. Majority of the textile industries are competing each other against cost. The majority of the medium-scale organizations are trying to go forth and increase in size, but are not able to because of the intensely low costs being offered by large-scale organizations. What the large-scale firms are losing is quality and value. Through ERP, better quality control can be established, which can assist organizations in ensuring a quality standard.
  12. ERP will enhance the efficiency of the organization. Efficiency gained by the textile business will be allocated or shared throughout the organization like suppliers to customers. In the Pakistan textile industry, the general mindsets of the workers have prevented any new system to be mutually beneficial and shared by the organization. The ERP makes the working of the organization extremely transparent, the roots and scale of any benefits would then be clear and could be enjoyed by everyone in the organization.
  13. ERP can identify the possible benefits of the product (fabric) being purchased by the customer, what value they can get and what might be the problems encountered by the customer. This makes the customer more comfortable with the organization and the textile industry will end up with higher customer retention.
  14. ERP is not implemented at once, this is not a disadvantage. The ERP system is implemented module by module to different functions of the business, this means the firm do not have to heavily invest at once. The ERP implementation being inducted module by module helps the firm and the ERP provider to effectively customize and induct the module.
  15. The most important Benefit of an ERP system is that the firm that has acquired the ERP system will realize its business potential.
  16. ERP systems can be further expanded by building a superior supply chain management systems and also better customer relationships for the textile industry.

CHALLENGES/PROBLEMS FACED DURING AND AFTER IMPLEMENTING ERP BY LUCKY TEX.

  1. Complexity and inflexibility: implementing ERP in an organization can be very complex and difficult to handle. Lucky Tex had to search many ERP software that could fulfill their business requirements and objectives, once they found the right software than they had to test run it so they could find possible problems or vulnerabilities that they could face.
  2. COST: According to the survey conducted by META Group in 2002, the average cost of ERP ownership was $ 15 million ranging from half a million to $300 million. This would include the cost of packaged software, professional services for (ongoing maintenance, upgrade and optimization), hardware, and internal cost. Considering this cost it was a very crucial and critical decision by Lucky Tex whether to implement ERP or not, because at the back of the mind management had seen Fear of past implementation failures of.
  3. Time taken to implement:it takes a lot of time to implement ERP and the company personal to get used to the new procedures and way of doing work. Management needs to make sure that they understand this dimension that using ERP will not reap results in short term infact it's a long term benefit to the company
  4. Textiles businesses need tointegrate ERPwith supply chain management software, and business intelligence systems. Instead, right now a non-integrated methodology exists.
  5. Resistant to Change: Another major problem that Lucky Tex was facing was from the employees and some senior staff who were not in favor of the idea of ERP instead they preferred of the procedures and processes that were running for almost past 10 years. They did not want to change as they thought it would bring their position into jeopardy.
  6. Training of Employees: as we know that Pakistani workforce is not that technology savvy and don't know much about how to understand computer language other than Microsoft office. So another challenge for the implementation of ERP to the firm was to train the employees of how to use this software and how it would help them in efficient and better decision making.
  7. Data quality issues: this issue was faced by Lucky Tex when they used ERP for the first time, while transferring their manual and excel spreadsheets into the new system. The basic problem was that when the data was entered into the new system some of the data appeared to be incorrect in new system.
  8. Cost is the major factor in deciding about implementing an ERP system. ERP is out of reach for many small businesses due to high cost of acquiring the system, installing it, configuring it and customizing it according to the functions of the business.
  9. Implementing the ERP system is also very time consuming, it could take 3-4 years for the system to be fully incorporated into the functions of the business.
  10. There is miscommunication between the management and employees about how the new ERP system is going to benefit the employees themselves and the organization on a whole. Also ERP will make the job of employees much easier on a daily basis, once they learn and get used to the new ERP system.
  11. A team which is committed and easier to communicate with, is needed and keep the business objectives at the fore front of their minds and also adapt to changes in the business when the process of implementation is going on.
  12. The employees need to be educated and trained before the implementation of ERP system because once the system is implemented the staff need to utilize the system effectively to ensure smooth running of the business function. If the employees are not used to the new system then the business can suffer immense losses and the huge investment on ERP would be of no use.
  13. The top management needed to be very careful when deciding about the particular ERP system because once that huge investment is made, there is no turning back. The management needs to pick the right ERP system provider to get the maximum benefit out of the new system.

Conclusion:

What we learned and observed from Lucky Tex, at the conclusion of this report, is that although they were able to implement the ERP system, and found that there were many benefits, that made life for them much easier. As is the case with most organizations that have implemented the ERP system, without the proper guidance and control, the system can become quite hectic, and problematic. However like most other organizations Lucky Tex has found that the benefits far outweigh the costs and problems faced. In retrospect when a company has finally overcome the difficulties that first arise, with the implementation of the system they find that not only is their organization more efficient, but also far more effective in regular everyday operations. This in turn leads to lower turnover, and higher profitability, as well as a decrease in lost time due to miscommunication, and misunderstandings, and like any organization will tell you, ‘Time' is the most precious commodity.

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