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Established in 1992, Privi Organics is a leading Indian manufacturer and supplier of aroma chemicals. Since its inception, Privi Organics has developed more than 50 aroma products, which are supplied worldwide. The company often develops aroma chemicals based on a customer’s own specifications. Its head office is in Mumbai, and there are two manufacturing sites in Mahad.
Prior to 2007, Privi Organics used a home-grown accounting application that required a lot of manual processing to meet the organization’s needs. After several years of an average annual sales growth of 30%, Privi Organics realized it needed a new enterprise resource planning (ERP) system that would streamline the management of its financials, purchasing, inventory control, and manufacturing functions.
“Our chart of accounts was not reflecting the business as a whole, we were having difficult generating timely financial statements, and our manufacturing processes were cumbersome and very labor-intensive,” said Kaushal Shah, IT head, Privi Organics.
In 2010, Privi Organics engaged Arihant Adroit InfoSystems to implement Oracle E-Business Suite R12.1.1 modules Oracle Financials, Oracle Inventory Management, Oracle Process Manufacturing, Oracle Discrete Manufacturing, and Oracle Procurement.
“The Oracle E-Business Suite R12 business transformation program helps Privi Organics achieve tighter production control, detailed visibility into product costing, and desired financial reporting with the use of an optimal chart of accounts and subledger accounting functions,” said D.B. Rao, executive director, Privi Organics.
Privi Organics is expecting to generate revenue of around US$100 million (INR 450 Crores) from its aroma business for the financial year ending March 31, 2012. The company also hopes to generate revenue of US$11 million (INR 50 Crores) from sales in the life sciences market during the 2011-2012 financial year.
“We will do this by developing new molecules to create products for sale to the aroma, biotechnology, and agriculture markets to help drive this growth,” said R. S. Rajan, president, Privi Organics.
Privi Organics uses Oracle Financials to create a chart of accounts best suited to the business, to better analyze revenue, and view the costs and profits generated by various products across many locations.
“Oracle Financials is scalable and will support our future growth,” said Narayan Iyer, vice president, finance, Privi Organics.
“We manufacture 50 different aroma products for sale to organizations in India, the United Kingdom, the United States, and other countries,” said Shah. “Oracle E-Business Suite R12 enables us to easily identify the products and locations that are the most profitable, so we can decide where to allocate our resources to meet our annual financial goals. This will help us increase sales by 125% over the next four years.”
According to Shah, Oracle E-Business Suite also adheres to specific Indian taxation laws, allowing the company to automate complex statutory requirements, which have undergone sweeping changes over the past few years. This ensures the company’s financial accounts always comply with local tax laws.
“The system allows us to work with more complex accounting rules leveraging subledger accounting functions that provide us with more detailed cost and liability information, allowing managers to make better business decisions,” said Iyer. “It also provides robust internal controls that enable us to reconcile our accounts quickly.”
Oracle Process Manufacturing and Oracle Discrete Manufacturing provide Privi Organics with better control over its manufacturing processes.
The system has automated the entire manufacturing process, and allows users to automatically select raw materials for production batches.
“The system allows us to create specific rules that ensure the right amount of chemicals for each production batch run,” said Shah. “We can properly allocate the direct and indirect costs of utilities, such as power, to the cost of the final product. This is important in our industry where cost leadership is the key to being competitive.
“Our staff can also easily view and manage operating costs related to the use of power, water, and various chemicals, so they can better control the manufacturing processes,” he added.
The system will also enable Privi Organics to reduce manufacturing costs by 3% to 5% over the next three years due to improved control over production processes.
“We know exactly which raw material to buy and what are the most efficient manufacturing processes,” said Shah.
Privi Organics is a process manufacturer and faces constant cost pressures due to seasonal variability of raw material prices. Oracle Procurement is a centralized system that relieves this pressure by allowing buyers at its two manufacturing plants to purchase raw materials and chemicals in bulk and better plan for production runs.
“We also have greater visibility into the type and quantity of raw materials that are being purchased, so we can easily determine the overall lead time from demand to procurement,” said Iyer. “This reduces our inventory holding period by 15 to 20 days. As a result, working capital cycle is also reduced, which means we have extra money to fund our expansion.”
Oracle Inventory Management has also streamlined the management of the company’s discrete inventory, such as spare parts and tools used to maintain machinery, as well as items for capital projects. Stock management and visibility has improved, which is expected to reduce wastage and cut discrete inventory costs.
Privi Organics has used Oracle E-Business Suite since 2007, and it made sense to continue using the system, said Shah.
Competing application suites would also require more customization at a significant cost to the organization.
“Oracle E-Business Suite is a cost-effective suite of applications that will address our requirements as we grow to a US$225 million company by 2015,” said Shah.
“Oracle also has a strong base of technical specialists throughout India, which ensures there is always someone available to help out if there’s an issue. For instance, Arihant Adroit InfoSystems’ team has a great deal of experience working with organizations in the process manufacturing industry.”
Amit Jain, operations head at Arihant Adroit InfoSystems added, “The successful implementation at Privi Organics is a testimony to Arihant’s expertise and strong focus on Oracle solutions, as well as our ability to work closely with Privi’s own IT team.”
In late 2010, Privi Organics engaged Arihant Adroit InfoSystems to implement the system. Initially, Arihant Adroit InfoSystems conducted a proof-of-concept to ensure the new deployment would meet the needs of the chemical manufacturer and help mitigate risk.
During the implementation, Privi Organics selected a few experienced staff members from each functional area to define user requirements, and ensure they were being met. Arihant Adroit InfoSystems’ project team also trained business users to use the new system.
“Arihant Adroit InfoSystems implemented this system with a robust application design that delivered optimum value to the organization,” said Shah.
“The company has a unique approach to implementing Oracle E-Business Suite R12 in that they simplified our complex manufacturing processes to ensure the system was deployed within the shortest possible time.”
The implementation took approximately five months and went live in early April 2011.