ERP And Network At Dabur - Essay

Dabur is a Indian’ consumer goods company with interests in Oral Care, Hair Care, Skin Care, Health Care, Home Care and even in foods. From its humble first phase in the bylanes of Calcutta in the year 1884 as an Ayurvedic medicines company. Dabur has come a stretched way today to become among the top companies. Dabur India Limited is the 4th largest FMCG Company in India. Dabur had a turnover of approximately Rs. 3390.9 Crore FY 09-10 & Market Capitalisation of over Rs 15500 Crore which clearly shows the company’s stand. The company has kept an eye on new generations of customers with a variety of products that provide to a modern lifestyle, while supervision not to estrange past generations of faithful customers.

Dabur’s network is in the form of star topology with 6 DAMA (Demand Assigned Multiple Access) links from Hughes Escorts Communications Limited (HECL). There are approximately 40-50 Time Division Multiple Access (TDMA) VSATs (Very Small Aperture Terminals), which will be used for linking the distribution network. Then there is Virtual Private Network (VPN) connectivity involving Dabur’s offices at various places like Delhi and Mumbai, moreover the corporate office. This link will soon be un-mitigated to other locations, also.The choice of the network depends upon location and feasibility runs on multiple media. The company uses IDSN connectivity as a support for its prime connectivity. Astonishingly, contrary to the current trend, Dabur doesn’t have various leased lines to hold up its datacom network.

The Situation: Problem Faced By The Company Before ERP Implementation

For many years, Dabur had been using Fox Pro based systems for its handling logistics but as the network has grown the distribution pressure rises technology development was necessary. Fox Pro was a database in which each of the department likes sales, finance etc had a separate database for their respective departments. It was not a relational database. The company faced a lot of problem because this like data inconsistencies etc. It become necessary to integrate the fragmented distribution network for the benefit of the company. This was the time when Dabur felt the need to implement some kind of ERP system.

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ERP Implementation in 4 stages till now

1st ERP implementation – Baan

Dabur implemented Baan’s ERP system in 1999 for automation of the manufacturing process. This was the first ERP system which was implemented by the company in the major plants at Sahibabad and Baddi respectively. The server used for this was Alpha Unix servers and this was situated at the commercial office are used for Baan and around 200 concurrent users can login from in cooperation with plants using PAMA VSATs and fibre in the distant Baddi plant. In Baan ERP system the key modules includes finance, manufacturing,master production planning, intelligent resource planning,dealer planning and costing. The various modules keep the track of the material as the inventory moves through the plant and they are synchronised to each other. The primary distribution plan becomes a very important component of the manufacturing system. The planning process of the compnay includes one month’s stable Rolling Production Plan (RPP) of the company and two month’s rolling plan later on, based on a Rolling Sales Forecast (RSF) of Dabur.

Problem in case of Baan

The operation of the manufacturing system has been very difficult as raw materials for Dabur’s products are mostly sourced from the various unorganised sectors where fruits and herbs and other natural recourses are procured. The other challenge was of extensive customisation which was necessary to meet stringent FDA regulations in the quality circle in Pharma product lines. Not only this, BaaN requires a central server which was also a problem for the company.

As with the majority companies, sales at Dabur crest in the last 4-5 days of the particular month which leads to more load on the server. If the company dabur in this case,depends on this sort of central server architecture, which would be associated through VSATs, the network would be extremely overburden during each and every month-end. However, Dabur never required making the network a serious component in the automation of the outbound logistics.

The company determined to go for an ERP answer which was Network Independent and it found that MFG/PRO could be run on independent servers at every location it was a good choice that suited its unique needs.

2nd ERP implementation MFG/PRO ERP

Dabur therefore initiated automation of the outward logistics system in April, 2001 by means of its primary circulation system named ‘Project Synergy’, which involves the execution of the MFG/PRO ERP system. The MGF/PRO system was running in greater than a dozen Carrying and Forwarding Agents (CFAs) and the major warehouses all over the country. It had covered more than 90 sites in the main Distribution will be finished by 2002.

Implementation

Once it was decided that MFG/PRO it will be to lever the outbound logistics then a core implementation team was made which includes end users from dissimilar departments, like IT, sales, distribution and planning, finance and was set up in order to work. The deployment was made in four stages. In the first stage a requirement study was done here a model was developed. Dabur has many other strategic business units each one of it is having a different need in terms of outbound logistics. It is a traditional FMCG company into family units and healthcare products, pharmaceutical products, food products, which is a perishable products division, ayurvedic products for both the medicine and home segments. All these divisions have diverse requirements. The heart team had its job to cut out plus it had to develop a ordinary business model, which could supply to each and every segment at the identical time.

Significant benefits were visible in locations where the ERP system had been implemented. These include:

Improvement occur in sales dispatches to the carrying and forward agents (CFA). The sales earlier were greatly overloaded with 80 percent of sales taking place in the last week of the month which led to a number of trouble such as cheque bouncing and sales returns from ‘pushed’ sales to meet sales targets.

Improvement was seen in collections process also. Collections have recorded an improvement of about 6 days after implementing ERP and now are more evenly spread more than the month which leads to substantial savings on working capital protected up in out-bound logistics.

Reduction in unsold stock inventory nad sales returns. Stocks in carrying and forwading agents are noticeable to fundamental distribution planners in commercial and un-saleable categories most important to better distribution nad management.

fundamental management of sales schemes. The corporate office manages the schemes and free issues and the ERP system keeps a tough test on schemes most important to decline in misuse of schemes in the field.

Reasons: why the shifted to another ERP system (SAP)

By 2005 Dabur felt the need of maintaining two independent ERP systems for the company. They were facing some of the issues like there were still data redundancies and inconsistencies in the database system. Substantial amount of rework was essential in just data format translation between the two systems. It still did not provide a holistic image and thus posed troubles in formulating a policy or taking business significant decisions. Maintenance cost of MGF/PRO was also very high. Dabur realized that it is not just the operational excellence it needed but in also needed decision support infrastructure and as a result of this the proposal of a solitary organization wide ERP implementation was planned in Dabur. So, with the help of Accenture, Dabur implemented strategic and operational changes by implementation of organization wide SAP core modules.

3RD ERP implementation – SAP (major change)

Migrated from standalone Enterprise Resourse Planning systems which includes Baan and Mfg to centralized SAP ERP system from 1st April, 2006 for all the business units of dabur. Dabur implemented a country wide new Wide Area Network infrastructure for running centralized Enterprise resourse planning system and setting up of new data center at KCO head office in Ghaziabad. Addition of system to the distributors for capturing Secondary Sales Data information to collect near real-time pipeline information was done by 2004. Dabur decided to turn round out the IT services to the latest plants in the country. Dabur is no immunity with respect to other industries and realized it needed to execute enhanced and quickly and make more rapid decisions in order to outpace its upper class in revenue and prosperity growth. Accenture projected infront of dabur that Dabur to improve its supply chain management, to meet such goals and sales and distribution capabilities should also be improved and use IT as a strategic enabler for its business strategy. This incorporated migration to a nimbler outsourcing model that would create significance through quickness and sustain business initiatives and safeguarding of its SAP ERP system. SAP basically, was selected due to the extensive experience in India and it is used by its competitors also.

How Accenture helped Dabur

Accenture proposed that Dabur improve its sales and distribution services and supply chain management capabilities and use information technology as a tactical enabler for its business strategy. From an IT standpoint, Accenture suggested a two-pronged strategy to Dabur that includes resettlement to a nimbler outsourcing model that would create value through nimbleness and hold up business initiatives and protection of its SAP enterprise resource planning system. Accenture assembled a group of extremely trained industry experts so that it can bring these initiatives to life, as well as some professionals who have widespread SAP design and implementation experience in this field which was an important factor.

It implemented a new sales and distribution strategy and in this Accenture helped in developing a widespread strategy that was noticeable as Dabur’s first significant endeavour to identify key customer segments in urban and rural markets, customize sales programs for key accounts and reorganize Dabur’s sales teams by one of four trade channels. There was some profit from these initiatives like increase in annual sales by 17% whereas amplify in profits by over 40% performance more operational effectiveness and cutting down of costs.

Operational Benefits

Impact

Lost Sales

-40%

Forecast Error

-53%

Full, on – time delivers

+7%

Rolling production plan adherence

+73%

Accenture supported this business approach with a lucrative IT solution. It has developed in-house over several platforms, which captured actionable information crosswise the national footprint of practically 500 distributors. In the area like that of product distribution, the desired team focused on bolstering the efficiencies and rural market diffusion and designed a channel-specific strategy for chemist , modern trade, wholesalers and convenience stores.

In just the beginning of a supplementary efficient sales program, Accenture paid special consideration to how Dabur might recover service to Indian extra-large retailers, which are likely to account for an additional 15 percent of consumer product sales by 2010. For this group of customers, the group recognized a totally new operating model that includes a pricing architecture framework to aid negotiations and revised role and odd jobs for each and every one members of the trade field force. In devising this strategy, the Accenture and Dabur team optimized the company’s distribution processes and internal logistics for mega retail customers, and put incentives in set to drive definite goals such as uniformity of sales in grocery stores, increased sales via wholesale channels.

4th ERP implementation SAP – APO (Current Scenario)

Automating forecasting: Dabur hence decided to automate the procedure to develop its forecasting procedure. The company was already running SAP ERP from 2006 and decided to put into practice SAP’s Advanced Planner and Optimizer (APO).To guarantee the precision of SAP APO, chronological data was deconstructed to originate the baseline sales and impact of ATL/BTL inputs. Dabur has to a great extent gets benefits from SAP APO with enhanced business outcomes.

Project was divided into four different phases. The first phase was Diagnosis in which design and organisation structure was done. It also established the potential opportunity size and the business case. In the second phase the design of the supply chain took place. The third phase the actual implementation of APO modules took place. In the last phase the actuall running took place (April 2010). Once you have input the growth target the entire sales volume plan will be generated. All the other calculations are in real time like required capacity planning, markets where we can get more business. The ERP system will then convert the sales which was forecasted into the real/actual sales at factory level.

Changes experienced in top line, bottom line and inventory turnover due to ERP implementation

Before the deployment, the lost sales which were earlier accounted to 6% were decreased to 3.75%. More-over the company’s error forecast was also reduced from 85 to 40 percent and its forecast accuracy amplified from 25 to over 60 percent. Achieving this act in less than eight months was a enormous success for Dabur. This would not have been possible exclusive of a business benefit-led move towards to the exercise moderately than an IT-led approach. With the recent execution of ERP, the effectiveness of the distribution and logistics network is expected to advance more in the future. Consumer health division grew by 12.5%, that division has been impacted in the first quarter by the ERP platform changeover.

Future Challenges

• Forward integration of SAP with distributors and stockists is a big challenge.
• Implementation of SAP HR and payroll has to be done.
• Along with this backward integration os SAP suppliers.

Conclusion

The implementation of ERP system in a consumer goods company is an enormous complex undertaking, ERP system can effect every aspect of organizational functioning and design.ERP system lead to highly standardised and highly computerised information. A strong program management approach and an implementation partner having good business understanding and proven experience were other factors that served as catalysts.