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Incorporated in 1987, Sandhar Technologies Limited assembles and sells automotive systems and components. Its products include locking devices, rear view mirrors, door handles, sheet metal components, intricate PDC components, plastic IM components, tools and dies, handle bar assemblies, rims and wheel assemblies, and clutch and brake components.
Before September 2008, Sandhar Technologies’ 20 factories across India used standalone systems to manage financials, customer orders, procurement, inventory, manufacturing, and asset maintenance. This meant senior managers at the Gurgaon head office did not have a real-time, consolidated view of the company’s operations, hampering their ability to make informed purchasing, production, and inventory decisions.
To address this issue, Sandhar Technologies engaged Oracle Platinum Partner PwC to implement an integrated enterprise resource planning (ERP) system based on Oracle E-Business Suite Release 12. The Oracle system enabled the company to cut month-end reporting time, improve inventory and asset management, negotiate more favorable arrangements with suppliers, ensure customer orders are fulfilled as per their requirements, and deliver orders on time.
Sandhar Technologies has 20 factories across India assembling and supplying automotive components, such as brakes and clutches, locks, and rear-view mirrors to customers that includeHonda, Hero Honda Motors Ltd., TVS Motors, GM, and Tata Motors. The company buys raw materials and parts from suppliers and combines them with in-house manufactured products to produce finished goods for customers. Factories are typically located near customers’ manufacturing facilities to ensure the fast and efficient delivery of automotive components on a just-in-time basis.
According to KK Malhotra, advisor, Information Technology, at Sandhar Technologies, the company needed to replace disparate systems with a single ERP platform to gain an integrated, real-time view of its business.
“We need to track every step in the supply chain, from the moment we order material from suppliers to assembly and dispatch to customers,” he said. “Previously we were using manual processes and standalone systems to track raw materials, inventory, production output, work in progress, finished goods, dispatch, and customer billing. This was inefficient and open to errors; for example, if a customer changed its specifications, it was difficult to communicate the modification to the production team quickly because the change may have been recorded on a piece of paper or in a system that the production staff could not access.”
Inventory control was also an issue. With up to 70% of the company’s value tied up in inventory, Sandhar Technologies needed to know the exact levels of raw materials, components, and finished products held at each factory. This would assist managers to ensure a high inventory turnover to prevent waste and minimize costs.
In September 2008, Sandhar Technologies went live on Oracle E-Business Suite. According to Malhotra, the system has fundamentally changed the company’s business.
“Previously, each factory was following its own processes and using its own systems,” he said. “Now, everyone is using the one platform and following standard workflows. People are more organized and follow the same thought processes. Oracle E-Business Suite has completely transformed the way we work.”
He cites month-end consolidation as a key improvement. In the past, the use of disparate and manual systems meant financial and other data had to be collated and checked by staff.
“In the past it could take days, weeks, or even months to put together a consolidated profit and loss account and monthly balance sheet, depending on how many inaccuracies or inconsistencies the reports contained,” explained Malhotra. “Now, account consolidation has become very easy at a corporate level as we can produce monthly reports at the touch of a button using Oracle Financials. Our senior managers have the detailed, accurate data they need to better manage the business.”
In automotive assembling companies such as Sandhar Technologies, inventory can account for up to 70% of the value of the business. Companies must make efficient use of inventory to reduce costs, minimize waste, and increase profitability. In the past, when Sandhar Technologies was using standalone systems, the head office did not know how much and what type of stock was being held at its factories, and if the company was making the best use of its resources.
With Oracle Inventory Management, Sandhar Technologies has complete visibility of its inventory, including raw materials, in-house and third party components, packing materials, and spare parts for machines. It knows the type and quantity of inventory at each of its factories, from the raw materials and components scheduled for assembly, to the finished goods for dispatch to customers.
“We have reduced inventory costs considerably by increasing inventory turns from 72 to 96 per year,” said Malhotra. “Earlier we had no idea what our inventory turnover was; now we are averaging six to eight turnover cycles a month. Our aim is to have nine or ten turnover cycles a month.”
Sandhar Technologies purchases raw materials and parts to produce automotive components. Before it makes a purchasing decision, the company gets quotes from at least three suppliers. It then conducts an internal costing exercise by reviewing the parts record, which displays historical prices for a particular product.
“Oracle Purchasing allows us to assign a code to each product,” explained Malhotra. “We simply click on the code to find out what we paid for a particular product in previous transactions.”
Using this data and its knowledge of the automotive market, Sandhar Technologies can decide on an optimal price and enter into negotiations with suppliers.
“The aim is to negotiate a price that is close to or below the last price we paid,” said Malhotra. “Very often, our suppliers will agree to the price we want. The data held in the Oracle system is valuable in helping us make quick, informed purchasing decisions.”
Oracle Purchasing also ensures that every purchase is properly recorded. A purchase order is issued with every transaction so that it can be cross-checked against supplier invoices. “Payments will not be made until everything lines up,” said Malhotra.
As part of the Oracle implementation, Sandhar Technologies developed detailed workflows for its manufacturing and assembly operations. The company described the processes required to make different types of finished goods and related them back to the bill of materials.
“Oracle Discrete Manufacturing correlates processes with the resources―raw materials, components, labor, even the power needed to operate the equipment―required to produce the finished good,” said Malhotra.
“Currently we are in the process of standardizing our bill of resources as a backup to the above process, then actual versus standard analysis will give us the cost saved or incurred.”
Sandhar Technologies offers a built-to-order service, where customers provide details of specifications, quantities, and their commercial terms. In the past, it was difficult to track changes in quantity or pricing as such modifications were captured on paper or in systems not accessible to all relevant staff.
Now, all customer sales order changes are electronically recorded in Oracle Order Management for easy access by staff.
Machine maintenance is highly important to Sandhar Technologies. If assembly machines break down or are not working at optimum levels, the company will miss production deadlines and be unable to supply finished products to customers.
Each factory uses Oracle Enterprise Asset Management to manage preventative and breakdown maintenance activities and required for each machine. Employees can use Oracle Inventory Management to see if the required part is available, and if not, order it.
The system also allows the head office to determine how much the company is spending on maintenance each year, by factory and individual machine.
“We can find out how much we are spending to maintain each machine, and this allows us to determine if we should continue maintaining the machine, or if it has reached the end of its life and it would make more financial sense to replace it,” said Malhotra.
Sandhar Technologies chose Oracle E-Business Suite over SAP for three reasons: Oracle’s track record, ease of use, and adaptability.
“During our due diligence, we found out that most of the major Japanese automotive companies use Oracle Financials, which is considered to be the best product for financial reporting,” said Malhotra.
“Oracle was more user-friendly than SAP, since, as a German product, we felt some of the terminology in SAP would not be as familiar to our users as an English-oriented product such as Oracle,” he said “The manufacturing module within SAP also included features that we did not require as an assembly operation.
“Finally, we liked Oracle’s modular structure, which could be easily adapted to suit our changing requirements.”
Sandhar Technologies engaged PwC to carry out the implementation, providing the firm with detailed “To Be” processes developed by Malhotra, based on his 35-plus years’ experience in the automotive manufacturing sector. To ensure a smooth deployment, the company asked PwC to put together a team of people who had rolled out at least two large-scale Oracle ERP projects.
The Oracle implementation began in January 2008 and was rolled out progressively, beginning with head office and followed by each factory in turn. The Oracle system is centrally managed at Sandhar Technologies’ Gurgaon data center.
Advice from Sandhar Technologies
Be very clear in your mind about what you want to achieve from your ERP implementation. Familiarize yourself with the ins and outs of your supply chain, as it will help you develop comprehensive “To Be” processes.
Avoid customization if possible. If you still want to customize the system, do it after you receive the desired reports.