Incorporated in 1947, Atul Ltd. is a member of Lalbhai Group, one of the oldest companies in India. Atul operates in the textiles and chemicals industries and manages one of Asia’s largest integrated chemical manufacturing complexes. The company has six business divisions: agrochemicals, aromatics, bulk chemicals, dyes, pharmaceuticals, and polymers.
Atul has grown rapidly in the last 10 years. Its colors business division is the largest supplier of dye products in India. It manufactures a vast array of dyes for the textile, leather, paper, wool, and silk industries and exports nearly 40% of its products to more than 40 countries. Atul is also a world-leading manufacturer of the antibacterial product Datone. It exports its expanding range of agrochemicals to more than 35 countries, including Australia and Spain.
With manufacturing divisions expanding significantly and most divisions using separate systems to record their manufacturing, inventory, sales, and financial information, it was becoming harder to effectively manage and consolidate financial and inventory data and processes, such as cost sheets and inventory counts.
The company needed to integrate business-critical information regarding accounts, purchasing, manufacturing, and inventory, so it could better record and manage data, for examples, regarding the proportion and weights of ingredients required to produce a certain chemical, and to generate consolidated related reports, such as statutory reports required by the Indian government. It also wanted to reduce time-consuming manual data entry, so the company decided to implement Oracle E-Business Suite Release 12.
“We have been growing significantly and expanding our capacity and product portfolio on a domestic and international level,” said Rajat Sharma, president of IT, Atul Ltd. “To do this, we needed a robust, scalable, and sustainable enterprise resource planning (ERP) system, as we were finding it difficult to meet the organization’s goals and requirements with our legacy, hybrid, ERP systems.”
“Upgrading to Oracle E-Business Suite Release 12 has streamlined critical business processes in our manufacturing divisions and changed the roles of staff and managers, who can now use their time to more efficiently perform and manage manufacturing and sales activities, rather than having to constantly prepare statements and reports,” Sharma said.
Atul manufactures more than 60 types of agricultural, pharmaceutical, industrial, and dye-related products, such as herbicides, epoxy resins, and chloride, under its six manufacturing divisions. Each product has a complex list of chemical ingredients, and most of the ingredients and finished chemicals, dyes, or medicines need to be measured by chemical solution strength, as well as by volume or weight.
“The processes involved in manufacturing these chemicals are long and complex and require an intricately balanced combination of chemical and procedural equations,” Sharma said. “We must measure ingredients and finished goods by chemical weight as well as actual weight and record both units of measure to help us maintain stock levels and continually improve our chemical recipes.”
Oracle E-Business Suite Release 12 has enabled Atul to record and manage this dual-unit measurement data from across its six manufacturing divisions in a central, integrated database, rather than on disparate Excel spreadsheets.
“We have more than 300 inventory categories organized by process and around 4,000 finished chemical products,” Sharma said. “In the past, we could not record this level of detail in our legacy systems and had to rely on manual spreadsheets. As a result, we could not run regular reports showing the cost of chemicals and actual volume of the ingredients used to produce pesticides or a certain type of plastic. Now we can see the exact item cost for each finished product after allocating for overheads, such as manufacturing wages and other expenses.”
Without an integrated ERP system in which to record the dual weights of chemical ingredients and finished chemical products, Atul had to rely on manual spreadsheets for four of its six manufacturing divisions. It could only run cost sheets once a year.
“At the end of every financial year, we’d produce a company cost sheet and then rely on that information to help us make decisions regarding the price to pay for chemical ingredients and how much to sell our products for, for the following year. This meant our information quickly became out of date,” Sharma said.
“Now, we use Oracle Financials to generate cost sheets from every division monthly, which enables us to make better informed purchasing and sales decisions,” Sharma said. “We can also generate monthly reports showing our balance and overall profits broken down by chemical product or manufacturing division 60% faster—by the 8th or 9th day of the following month, rather than the 20th. This gives us a much better understanding of our costs and investment capabilities. Previously, the financial information on the reports was almost a month out of date by the time we received it and couldn’t be used.”
Using Oracle Financials, Atul completes and publishes its accounts two months faster at the end of every financial year. Previously, it took until July 20 to consolidate the necessary costs, balances, and profit data from all six manufacturing divisions and prepare it for publication in the company’s annual report. Now, the company can publish the financial figures by May 18.
“Our financial year finishes at the end of March,” Sharma said. “Before implementing Oracle, we had to consolidate all our cost, balance, and profit information from our six manufacturing divisions and generate our annual financial statistics manually. Oracle Financials’ integrated database enables us to close our books by April 28, generate the necessary profit and loss reports by May 4, and publish them much more quickly.”
“Publishing our annual report and financial statistics quickly shows we are efficient and transparent, which improves our customer relationships and makes our stocks and shares more attractive,” Sharma said.
Atul is also using Oracle Financials to meet the Indian government’s statutory reporting requirements in a more timely and efficient manner. Previously, it was impossible to calculate the company’s profits and costs required for statutory reports, such as the annual cost accounting record rules (CARR) report, using the financial and inventory information recorded in the various divisions’ spreadsheets. Now, information for the company’s 4,000 products and 2,000 product batches is available in the company’s integrated ERP system, so Atul can generate more accurate reports and submit them up to three months faster.
“To generate the CARR report, we have to record information, such as actual costs, profit margins, and the prices of various ingredients in both actual weight and chemical weight,” Sharma said. “Most divisions were recording this profit and cost information separately and in varying levels of detail, which meant we had to manually compile the data and work out profit margins and the annual average rate data required on the reports from the spreadsheets. Now all this information is integrated in Oracle Financials, so we can generate the reports and return them to the government by the first week of July every year, rather than at the end of September.”
Many of Atul’s 4,000 chemical products go through up to 30 complex stages during their production cycle. Intermediary companies perform some of these processes, so the chemical product needs to be sent to external manufacturing plants. Every time a product is sent out for external processing, the company needs to record how much has been sent in dual weight measurements, what processes were completed, and when the product was returned.
By integrating all this information in Oracle Process Manufacturing, Atul can immediately map the chemical product’s progress, from the moment it leaves Atul’s manufacturing plants, to the moment it returns. This enables the company to generate external chemical product processing reports automatically every month.
“Previously, we couldn’t see how much external processes were costing us for over a month, as it meant manually consolidating the information from the majority of our divisions,” Sharma said. “We had to compare and integrate cost and inventory information from the manufacturing and financial departments, which was very time-consuming as we often had to debate and correct discrepancies between the two departments.
“Having external, integrated processing and costing information available immediately has enabled us to generate corresponding reports by the 3rd or 4th day of the following month, rather than up to two months later. We have redeployed the staff members who spent that time compiling the information, which has supported our expansion without needing to hire new staff,” Sharma said.
Atul uses Oracle Process Manufacturing to record detailed daily information about the exact quantities of ingredients used to produce each chemical. By collecting this information daily in the integrated system, rather than sporadically on separate spreadsheets, the company can regularly update and adapt the recipes for each chemical to ensure using the most effective ratios to produce the chemicals. As important, the company does not purchase more ingredients than necessary. This insight has enabled Atul to save money on unnecessary stock and improved its standard production procedures.
Atul has created 800 tailored, manufacturing, sales, and financial forms and reports and 150 statutory reports using Oracle E-Business Suite. For example, the company uses Oracle Purchasing to generate a vendor registration form that has fields for localized information, such as a permanent income tax account number and tax information network identification number.
“Previously, when purchasing and sales staff registered a new supplier or vendor in our legacy system, they didn’t need to enter these numbers for the entry to be accepted,” Sharma said. “This often led to problems when we were shipping our products to new vendors or placing new orders for chemical ingredients. Now we have standard, user-friendly procedures to follow when onboarding new suppliers, and they can’t be processed without the correct information in place. This ensures we never lack vital information needed to process orders and shipments and helps our sales, purchasing, and manufacturing managers make informed decisions regarding the most cost-effective supplier.”
Atul also makes more informed decisions regarding sales and marketing strategies based on a customized, bottom-line pricing function developed in Oracle Order Management. Each chemical product has to be sold for 15% more than the cost of producing it. The customized, bottom-line, pricing function enables sales and marketing teams to immediately see a price list based on this information for each chemical, so they know the minimum selling price.
Sales managers can then generate a monthly profit margin report showing the profit each product makes and the markup percentage for each sale. This helps generate pricing and marketing strategies for the coming month and better guides sales teams.
Oracle Order Management is also helping Atul with its sales and marketing capabilities by giving sales staff immediate access to online sales reports detailing sales information broken down by customer, region, and chemical product. The reports show sales, profits, and pending payments for each category, which enables sales team members to better monitor and target their customers and allows sales managers to see each team member’s sales margin.
“Staff can use this integrated information to generate a range of their own sales and customer reports and spreadsheets, so they don’t need to enter the same information repeatedly,” Sharma said. “We can also send overdue payment e-mail alerts to customers and the corresponding sales staff every week, rather than relying on monthly cost sheets to pick up on late payments.”
Atul developed an integrated text message and e-mail feature through Oracle Order Management, which sends out a text message and e-mail to the sales and marketing team every day at 7 a.m. detailing the previous day’s and month’s sales and revenue. This information enables sales teams to better target customers and promote particular chemicals depending on success rates. Previously, this level of sales and revenue information was only available in a monthly sales report that took a month to produce, rendering the information irrelevant.
Atul is using Oracle Inventory Management to integrate accounts-receivable information from across its five warehouses to more efficiently reclaim product taxes on chemical ingredients and other materials. The automated receipt and invoicing procedures and an electronic device are now used in each warehouse to record all deliveries, and they have enabled the company to reclaim US$19.8 million in FY2010.
“In the past, it took 10 to 12 days for receipts to get from the warehouses to accounts receivable departments, so that financial staff could generate the necessary invoice,” said Sharma. “Invoices then had to be duplicated and sent in the mail. We had occasions when receipts or invoices were lost, which reflected badly on the company and also made us unable to reclaim our product tax.
“Now, we have multifunctional, integrated electronic scanning devices that record receipts and Inland Revenue tags as soon as the inventory arrives in the warehouses. Financial staff can immediately see this information, generate the appropriate invoices, and reclaim the product tax,” Sharma said. “By reclaiming this tax we are adding up to US$665,000 to our working capital every day and have greatly improved our accounting efficiency.”
Increased Data Security
Oracle E-Business Suite Release 12 has enabled Atul to improve data security and access by providing a defined and structured roles and responsibilities capability. By only authorizing certain users to enter and access business-critical data, such as chemical recipes and product price lists, the company has secured its data and ensured that the information remains accurate and up to date at all times.
Atul was already using Oracle Financials 11.5, so when the company decided to implement an integrated ERP system, Oracle E-Business Suite Release 12 seemed the natural choice.
“We didn’t look at any other solutions because we already trusted Oracle to provide the best financial system for us,” Sharma said. “We could see that Oracle E-Business Suite Release 12 would offer the best integration between ERP modules and were impressed by the reputation Oracle has in offering ongoing implementation advice and support.”
With the help of Atul Infotech Private Limited, it took Atul 12 months to implement Oracle E-Business Suite Release 12. The implementation began in February 2008, and after engaging Atul Infotech Private Limited in March 2008, the applications went live in February 2009.
Atul took a big-bang approach to the implementation, rolling out all five Oracle E-Business Suite modules at once.