India’s manufacturing sector is as diverse as the country itself. Barring a few areas like silicon fabs or commercial aircraft, Indian companies today have the capability to undertake the manufacturing of most items. The Indian manufacturing sector’s giant strides towards global competitiveness—at least in terms of process and design if not in terms of cost, product quality and marketing—have been enabled by the large-scale deployment of IT. The culture of using global packaged software applications is now prevalent even among the bottom of the manufacturing pyramid, which is made up of scores of fabrication and process houses.
IT solutions in the form of ERP for handling business transactions and CAD/CAM for product design still make up the chunk of technology deployed by Indian manufacturing organizations. An end-user survey, which was conducted by IDC India, of 200 organizations indicated that the top three factors while selecting an ERP solution are:
Industry specific/mission specific functionality
Compatibility with current platforms, that is the ability to handle different types of databases
Degree of customization possible
The right ERP solution should be able to deliver well on the following objectives: consistency and reliability of data across the organization, streamlined transaction processing, operations-level reporting, integrated financial information, integrated customer order information, standardized and faster core business process like manufacturing and financial services, a reduction in inventory and non-performing assets, and standardization of HR information. President of enterprise solutions at ICICI Infotech, Hari Padmanabhan, says: “Organizations, large and small, find ERP the best tool to move money from the cost-line to the bottom-line.”
The IDC India report further states that post the Internet meltdown and the economic slowdown, many organizations have realized that operational efficiency is critical for survival. The Indian economy has become increasingly integrated with the world economy and, therefore, Indian businesses need to respond faster to changing business conditions. Some of the key trends given in the IDC report are:
Large organizations are trying to extend their ERP systems’ reach to cover the supply chain as well as automate customer interfaces
Small and medium organizations are trying to automate business processes
Organizations are exploring Internet usage to manage some business processes
Mid-tier vendors are aggressively expanding the market through extended offerings and adding functionalities to existing products
Explaining the adoption of ERP by mid-market companies, Padmanabhan says: “These organizations have the required global mindset, the linkages are well understood, the appreciation is there are the top level, the suffering under a silo-based approach—all are understood. A suitable product that is easy to acquire and deploy therefore helps.” Microsoft Business Solutions’ Navision, ICICI Infotech, Eastern Software Systems, Amerihind and SoftBrands are the new breed of vendors that have mid-market ERP products on offer for the domestic market, and are experiencing galloping growth.
For manufacturing companies, management of their supply chains provides the greatest benefit. Supply chain management (SCM) is a complex discipline in itself; a science practiced at the level of an art. At the very basic, SCM by definition covers the following areas:
Strategy for meeting customer demand
A set of pricing, payment and delivery processes with chosen suppliers
Scheduling activities necessary for production, testing, packaging and delivery
Logistics dealing with the entire delivery channel for meeting customer demand
A network for receiving defective products and excess inventory returns
Extracting intelligence Business intelligence (BI) is now becoming popular as a mainstream application and is often used in the business context for
performance management, executive dashboards and the like. The technology holds potential in the manufacturing area too.
All the solutions—CAE, ERP, SCM, PDM and CRM—which are used in the various stages of the manufacturing value chain, hold a lot of data that warrants further analyses. The utility of these analyses holds the key to effective decision-making in manufacturing. This area is called enterprise manufacturing intelligence (EMI). In a nutshell, EMI mines a company’s existing business data (production, accounting and quality) and then, using sophisticated analysis techniques, transforms it into reliable, intelligible facts that support decision-making.
EMI systems are web-based applications that provide real-time analyses of key information, and being inherently web-based, EMI systems are able to provide analyses tools with both an intranet and extranet focus. With intranet capabilities, manufacturing companies can supply their decision makers, sales force, engineering staff and purchasing departments with real-time access to business information collected at any time. The extranet aspect of EMI gives manufacturers the option of allowing customers to perform their own customer service. In addition to self-help customer service, EMI’s groupware functionality provides customers with the opportunity to collaborate with manufacturers on corrective actions, preventive measures and future projects.
Best of the links Many forward-thinking manufacturing organizations have now begun to appreciate that the link between design and manufacturing is critical and have began putting in place processes to facilitate their collaboration. Products are to be designed with optimum manufacturability in mind and manufacturing engineering is being given increasing opportunity to inspect and approve designs during the review process.
There is still more scope for integration between manufacturing and engineering through mature solutions that are now available in the market. These are categorized as product lifecycle management (PLM) solutions. PLM solutions enable product data management (PDM), collaboration and workflow tools. Undoubtedly, one of the most critical issues facing manufacturing companies today is integrating PDM and ERP: two different technologies that manage overall product definition and production lifecycles.
The biggest barrier in integration efforts is finding the right way to tie PDM and ERP systems together in a world with no off-the-shelf answers or single best solutions for all organizations. The areas that pose the most challenges are decisions regarding the roles of the two technologies; what task each should handle, who controls information and how systems can be linked. Technical challenges in integration are daunting. Add to this the cultural and political issues within organizations, similar to those felt when ERP was first implemented. But, in the end, it would be well worth the effort with enterprise-wide benefits far beyond those possible using each technology alone.
The SME factor The manufacturing industry has been forced to wake up and get more competitive and efficient owing to the “global market” phenomenon where companies have to compete with companies across the globe. To be able to successfully compete in such a business environment, it is becoming imperative for companies to take the help of IT to:
Reduce cost while improving quality
Improve plant efficiency and output
Improve time-to-market
Improve market responsiveness
Improve customer service
Improve communication internally as well as across the supply chain
These apply not only to large companies but also to small- and mid-sized companies that are increasingly supplying to global companies. The horror stories of ERP implementations going bad and the lack of clarity on the RoI of IT investments are major deterrents for SME players. Despite these fears and apprehensions, it has been observed that the manufacturing segment had the highest IT spend in 2002. According to an IDC survey, the manufacturing sector is the highest IT spender, accounting for more than 30% of IT spending done in vertical markets. It is followed by the services sector and the financial services sector.
Why companies are buying The SME segment, in particular, is seen as the major growth driver owing to these factors:
The segment is still nascent from the IT point of view—most of them are just about discovering the power and need for IT since exposure to global markets has increased
Companies are increasingly facing demands from clients for better connectivity and response times
They are faced with greater competition as larger companies get more competitive, matching their rates along with offering better quality
So, in what solutions does the SME segment invest? For starters, most SME companies have implemented in ERP solutions, as they consider it to be a basic requirement, which can be built upon based on future requirements. The main considerations that these companies have while going in for an enterprise solution are:
Sustainability of the company in the long term: An ERP is considered to be a major expenditure and while taking a decision in this regard, companies are increasingly questioning the long-term sustainability of the company. This concern stems from the recent spate of acquisitions as also from the fact that many local companies that undertook ERP implementation at rock bottom prices have closed down.
Price: India is an extremely price sensitive market where the customer demands the best of quality at the lowest price. Companies are now looking at not just the cost of the software, but at the total cost of ownership (TCO), which includes the cost of the implementation, hardware and support.
Implementation: This is a major contributor to the cost as well as the success of a software. Companies are now realizing that implementation is not only a major cost component, but also a time consuming process. Hence, they are looking at systems that can be implemented fast and that are also low on resource requirements
Support: The quality and cost of post-sale support is also an important consideration because an ERP is a long-term investment
