Case Study : IS Implementation at Arvind Mills Limited

Case Study
IS Implementation at Arvind Mills Limited
The flagship company of the Lalbhai group manu-
factures and exports denim (over 150 varieties) and
shirting. Through its subsidiaries, it also manu-
factures and markets Arrow shirts and Flying
Machine, Lee, Newport, and Ruf & Tuf casual wear
for the domestic market. The company has a tie-up
with Alamac Knits Fabrics Inc., USA, to manufacture
knits.
Critical Business Factors for ERP-based IS at Arvind
Mills The critical business factors which lead Arvind
Mills to the adoption of the ERP packaged IS can be
listed as follows:
/. The inefficiency of the existing market information
systems: The existing market information systems
were inefficient to handle the day-to-day increasing
workload of the firm. This was mainly because most
of the legacy systems (existing systems) were
isolated (island) systems and had very little or no
interface between them. Also the legacy systems
were developed by in-house software engineers,
whose retirement from the firm has resulted in
inefficient handling of the systems. Also another
major drawback of the legacy systems was that
modifications/updates were not possible to them,
whereas most of the ERP packages offered high
flexibility in modifications and adding of updates.
2. The modernization of the production process demanded
the need of an ultra modern market information system:
During 1997 Arvind Mills underwent major
modifications in the production process and set up
an ultra modern plant in Santej. So the manage-
ment felt that as they are having the most
advanced production technology in the world, their
management information system should also be of
state-of-the-art technology.
3. Difficulty in integrating various island systems: The
Arvind mills management found it extremely diffi-
cult to integrate the existing in-house developed
information systems. Most of these systems were
suitable to the particular business function it was
made for and could not interface well with other
systems.
4. The requirement of a better CRM: CRM is gaining
importance day by day and has become essential
for the survival of any business. The textile market
is becoming more and more competitive day by
day, which necessitated the need of better
customer relationship management. This will help
the firm to cater to the needs of the customers
more efl ciently and thus retain them. The most
important feature in this case is the trackability
factor. The customer at any point of time can log
into the system and find out where his order is?
What is the status of the order at present and how
long it woul'1 take to process and likewise.
5. Business advantages (marketing advantages): The
adoption of a state-of-the-art information system
would give Arvind mills a competitive edge over its
competitors. The marketing manager can con-
fidently take orders by just logging to the system
and find out the different order status and can tell
the customer when he can deliver the order.
6. The advantages of a better SCM—reducing inventory
costs: The package facilitated an efficient supp.
chain management environment, which would help
in coordinating supply with production and avoid
extra inventory build up in the raw material stores.
Also the package supported efficient imple-
mentation of other operations management
techniques such asJIT (just in time), logistics man-
agement, and production scheduling.

. .4 better production planning process: The production
planning in Arvind Mills was an extremely tedious
job as most of the production was MTO (made to
order). Coordinating the production process and
stream lining the production function with other
departments could be handled more efficiently by
an ERP package like SAPR R/3. Also the package
helped in defining the capacity limits to utilize the
capacity to the maximum.
8. Tamperproofness: As the system requires data
inputs at all the stages and identifies orders
through
primary keys over different functionalities, the
system is absolutely tamperproof. Each and every
bale opened should be reported and reentry in the
database requires to be done in a very difTicult
method '(only through the knowledge of the
concerned supervisor. This makes the system all
the more tamperproof.
The Selection of the Consultancy After the idea of
upgrading to a better ERP package was thought
about, the management went for a search of a well-
known and well-experienced consultancy. After
evaluating the different consultancies based on
their track record of experience in successful ERP
implementation, Price Water House was selected.
The Reason for Selecting SAP RI3 Once the
management felt the need for a State-of-the-art
information system, they searched for the best ERP
package available in the market with the market
that suited their business requirement. One other
thing that weighed heavily on them while selecting
the package was that implementing a world-
renowned package will bring more advantages in
terms of functionality and recognition in the global
industry.
The different packages considered include
SAPR/3, BaaN, PeopleSoft, ORACLE, RAMCO, and
TIM. These packages were evaluated on the basis of
certain criteria. After evaluating the different
options based on the criteria and their suitability to
the condition of Arvind Mills, SAP R/3 was selected.
SAP R/3 was preferred over others mainly for the
following reasons:
• Suitability to the business environment of Arvind
mills
• Across the board functionality

Plant
maintenance
Telephone
-> Fax
Data mart
OLAP
Data I
mining
Querry
CRM
Strategic
planningFinance
Production plan
BusinessMM&WM

Figure IS architecture at Arvind Mills

• Global presence of the company (software
provider)
• More suitable for processing industry than other
software packages (one of the major problems
faced by Arvind Mills was capacity planning at
the Loom shed. The legacy systems and other
packages could not efficiently carry out the
capacity planning process.)
• Successful track record (SAP is one of the
earliest available ERP packages and has proven
its consistency and efficiency over the years.)
• The largest sold ERP package
• Rich repository of best business processes and
practices
• Mark of quality for the customers
The stepwise implementation of SAP R/3 in Arvind
Mills SAP R/3 was implemented in Arvind Mills in
four steps, over a period of 3 years from 1997 to
2000.
1st Phase: Time period-1997 Oct To 1998 April. The
first phase included commissioning of SAP R/3 in
Santej mainly the shirting dimission, bottom
weights, knits demission, etc.
2nd Phase: Time period—1998 Oct-February 1999.
The second phase included commissioning of SAP
R/3 in Khatrej plant, Arvind Mills Limited, Arvind
Exports, Rope Dimission, Arvind International, etc.
3rd Phase: Time period—May 1999-August 1999.
The third phase included commissioning of SAP R/3
in Ashoka-Spintex, Cotsyn, Rohit Mill, DDSP, sop,
etc. and logistics information systems.
4th Phase: Time period—Sep 1999-2001. The
fourth phase focused mainly on translating the
information collection (data generated) into
decision making. The data mining tools are used for
the same.
Networking in Arvind Mills The entire organization
is connected through:
• WAN (VSAT, Radio link and DoT, ISDN)
. VSAT—KOLHAPUR, Mumbai, Bangalore.
Delhi . Radio link—Santej, Arvind Intex, Rohit,
Ankur Textiles
• LAN with in the plant
• Helpdesk Singapore—OSS Server X-.25 Some of
the Hardware used in the organization
are:
• Server—Dec UNIX
• Router—Cisco 3640
• Switch, Hub
• Firewall
• Application Server—E3K Sun Solaris, E450Sun
• Database server—Sun E4K
• Magnetic Tapes—DLT
Some of the important components of the net-
working system are the 'hub', 'switch', and 'gate-
way' of the network. The essential hardware for the
central hubs, switches, and gateways are provided
by Cisco, which is the world leader in networking
equipment.
IS Impact Analysis We see IS not as a technology
solution, but as a business solution.
This was the mission of the company while up-
grading their information system technology with
the implementation of integrated IS. The objective
was to build an information system that would link
up the organization with the management as well
as the information technology adopted by the
group. This system was supposed to help them
operate real-time through innovative business solu-
tions that would help the company face the com-
petitive environment and new business challenges.
One more critical reason for the company going the
whole hog in implementing the ERP system was
that they wanted the state-of-the-art system to be
installed so that it would give them a leverage with
their national and international clients. They also
wanted their customers, both national as well as
international, to find the system convenient and
comfortable to work with.

*

With these objectives in mind the imple-
mentation of SAP R/3 was done in the following
functions:
• Finance and Control (FIGO)
• Production Planning
• Plant maintenance
• Materials management
• Sales and distribution
• Quality management
• Warehouse management
Finance and control are central to any organ-
ization while implementing an ERP package.
Production planning (PP) was a very critical area,
which contributed the major process in the entire
organization.
Problem Areas Where the Company went wrong?
• In the selection of the consultants-Should in-
stead of directly consulting a software consultant
Arvind Mills should have consulted a
management consultant like McKinsey or some
management institute which will be in a better
position to judge the business needs of the in-
dustry and then suggest the best option that the
company could take with regards to the desired
package as well the vendor the company should
choose. This will also remove the biases as this is
an independent consultant with no motive for a
sales pitch.
• In selecting SAP R/3, it gave more weightage to
the reputation of the package as well as deciding
upon the package to enhance the image of their
Santej plant which is of global standards.
• Security related issues were cropping up as
people from different plants were accessing the
secure database area of the systems. More
efficient security systems should be put up.
• No follow up on data analysis using data mining
tools.
• No one is responsible in case of multi login name
entry problems. By giving a single login to
multiple employees, the exact cause of the
problem with regards to information input
cannot be located by the management in the
production system as workers change in the
shifts. • Lack of proper orientation of the
employees
Right now the senior management of the
company feel that they have not achieved such
significantly high benefits that they had expected
prior to the implementation of SAP /3. On the
various interviews we had with the management
and the department heads we found out that the
major area of concern is in the production depart-
ment. With the implementation of SAP R/3 they
had put in systems that necessitated standard
costing procedures for the textile production. The
issue here was more of that relating to the human
resources management.
The operators in the production line were not
enthused nor or willing to key in the data required
to be entered in the system so that it can help out
in getting better information about the process as
well as the costing. As mentioned earlier the
human resource issues are very critical to any
radical change in the processes of the organization.
This indicates a lax on part of the team to properly
take stock of all critical angles of the change issues.
Adoption to the new organizational structure
Though the top management had made a success-
ful transition to the new organizational structure,
problems still persisted when it came to changes in
the lower management and operator level. This
indicates a lacuna in the entire process of training
and managing the change process.
Changes in the Current Goals As the perceived
benefits have not been accrued by Arvind Mills,
there has to be a radical change in the entire out-
look starting from restating their mission with
regards to the new environment. When the Santej
plant was being constructed 'denim' was having a
surging market globally. Now everything has
changed and the world over the demand for denim
has drastically fallen. This needs to be reflected
upon as well.

Effectiveness of the Overall Performance of the
Reengineered Group Plant maintenance module helped
in automatically updating the required material in the
plant as and when required. It also has an automatic
stock and process update which helps the supervisor to
do his tasks. Materials management (MM) benefits the
entire process by keeping track of all the goods required
by the various processes of textile manufacture. Quality
management keeps track of all the testing done on the
product, which is available in the database. This is a
major advantage as the complaints, if any, from the
customers can be tracked back to the source of the
product, the materials that went into it as well as the
persons involved in the process. It can also help in
verifying the claims made by the customers regarding
the complaints and is proving to be quite handy.
The warehouse module helps by predefining the
destination of all the rolls of textile in the huge company
warehouse, thus making it convenient for marking the
lot. This also helps during shipment of the lot. The
tagging ensures that proper tracking of the product is
done. The sales and distribution module has become
one of the leading performers in the entire package.
The main benefits have been in making life a lot easier
for the marketing manager who can now keep track of
the entire process of manufacturing. On request of the
customer, the manager can, at the tap of his hand, get
information regarding the production facility status and
thus convey the exact date of delivery. This will also
enable the mangers to perform according the workload
on the plant while getting orders. It also ensures
reliability on part of the plant. The major advantage the
customers get is that they can keep track of their order
instandy.
There has also been a reduction in the number of
employees in non-core areas like software development.
The legacy systems had forced a heavy expenditure in
the maintenance of excess workers in the systems
department for a long time.
Centralizing of the entire system has reduced the
workforce required in various non-core activities.
With regards to strategic positioning, the company
has an advantage as it can ensure that its internal
customers do work in a more efficient way. They are also
made responsible for achieving results. Redefining the
way the managers handle the work can create new
benchmarks. They have access to the whole lot of
information that can be put to use by the better
management of resources and time. Implementation of
various processes like data warehousing and business
intelligence systems are going to prove even more
helpful in making the organization more proactive.
The main strategic advantage for the external
customers is that they will have better assurance about
the availability of the product as well as the reliability of
the system, and will be able to find out where exactly
their product is in the entire manufacturing process. This
makes the system more convenient and dependable for
the customers.
This will ensure more satisfied customers, which can
be translated into more business. International clients
need sourcing from players of global standards in
reliability. The implementation of SAP R/3 will definitely
make the internationa customers prefer Arvind Mills to
other players in the sector who have not implemented a
state-of-the-art technology to make their systems more
dependable.
In summary, the observed benefits of IS imple-
mentation at Arvind Mills are:
• System integration
• Avoidance of duplicate requests
• Savings made in labour—removal of in-house system
development team
• Savings made by stopping the services of the WAN
service provider
• Improved system efficiency through tracking of orders
• Increased number of customers
• Improved efficiency of the marketing department.