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NARSEE MONJEE INSTITUTE OF

MANAGEMENT STUDIES, MUMBAI

ERP SYSTEMS AT DALMIA CEMENTS


________________________________________________


Group 9

Venkatesh G E011
Mithil Mehta E038
Harish MK E040
Shyam Ramkumar E044
Prabhu S E047
Gokulnath S E048

Contents

1. Organization An overview

2. Cement Business The Overall Process

3. Need for an integrated Information System

4. Evolution of SAP in the overall business

5. Implementation of ERP in the Organization

a. Materials Management

b. Production Planning

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c. Quality Control

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d. Logistics & Warehouse Management

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e. Sales and Distribution

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f. Financial Accounting

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6. ERP Implementation Challenges & Obstacles

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7. Benefits of Implementation

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8. Future prospects

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9. References

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1.Organization An Overview
Dalmia Cement, the cement division of Dalmia Bharat Enterprises
Limited(DBEL), headquartered in Delhi was formed in the year 1939 and enjoys a
heritage of 70 years of expertise and experience. DBEL, apart from the cement
business has its business operations in the area of sugar, travel agency, magnesite,
refractory, electronic operations etc.,
The Dalmia Group had established four cement plants in pre-independence
years, two of which were affected by the partition and Independence. The two
remaining plants operate as Dalmia Cement and the firm have also made a recent
strategic investment in Orissa Cements Limited(OCL).

Dalmia Cements has cement plants in southern states of Tamil Nadu


(Dalmiapuram & Ariyalur) and Andhra Pradesh (Kadapa), with a cement
production capacity of 9 million tonnes per annum. With the addition of OCL, its
total cement production capacity clocked to 14.5 million tonnes per annum.
Dalmia Cements is also a multi spectrum Cement player with a significant market
share and a pioneer in super specialty cements used for Oil wells, Railway sleepers
and Air strips.
The cement plants are located close to the raw materials thereby keeping the
freight and transportation costs low. The company also has captive thermal power
plants and wind farms with a total supply of 116 MW to support its plants.

The Organization Chart is as described below. The organization has a functional


structure with autonomy to individual divisions.

Unit Head

Head HR

Head -
Training

Head
Technical

Head -Mines
& Materials

Head -
Finance &
Accounts

Head -
Systems

Head -
Production &
QA

Head-
Internal Audit

Head -
Marketing

Head -Safety

Head -
Logistics

Organizational Chart

2. Cement Business The Overall Process


The cement industry is one of the main beneficiaries of the infrastructure boom.
With robust demand and adequate supply, the industry has bright future. The
Indian Cement Industry with total capacity of 165 million tones is the second
largest after China. Cement industry is dominated by 20 companies who account
for over 70% of the market. Individually no company accounts for over 12% of the
market.
While adding fresh capacities, the cement manufacturers are very conscious of
the technology used. In cement production, raw materials preparation involves
primary and secondary crushing of the quarried material, drying the material (for
use in the dry process) or undertaking a further raw grinding through either wet or
dry processes, and blending the materials. Clinker production is the most energyintensive step, accounting for about 80% of the energy used in cement Production.
Produced by burning a mixture of materials, mainly limestone, silicon oxides,
aluminum, and iron oxides, clinker is made by one of two production processes:

wet or dry; these terms refer to the grinding processes although other
configurations and mixed forms (semi-wet, semi-dry) exist for both types.
The major processes thus involved in the production of cement are as follows:
Raw material Preparation
Raw Grinding
Pyro processing
Finish grinding and Distribution
Thus, the overall end to end
flowchart for a typical cement
manufacturing organization is as given below:
Materials
Management(Li
mestone,
Gypsum and
Clay)
Production -
Crushing,Grindi
ng,Heating

Packing &
Storage

Logistics &
Warehouse

Sales and
Distribution

Cement Business Overall Flowchart

3.Need for an integrated Information System


Dalmia Cements had limited use of computers and other technological
systems in its place for a long time. It was mainly used in the finance and
accounting departments for the daily ledger activities.
The existing system went on well till the late 90s when the firm was
pushed to expansionary mode due to the heavy competition in the industry.
The organization began its expansion in 1999 by expanding their cement
production capacity from 1.5 MTPA to 4 MTPA. As of 2011, the
organization had a production capacity of 14.5 MTPA.
This rapid expansion made the firm to adapt to the information systems for
the smoothening of the whole process.
Dalmia Cement started its process of using Information Systems as early
as in 2003 with the introduction of IBS Integrated Business Solutions
provided by Tata Consultancy Services.
IBS was a user-friendly system designed and developed specially for the
Dalmia Cements. The finance and accounting system was wholly integrated
first with IBS in late 2003.
Slowly, the IBS was moved to various other modules over the years.
Since, the software was tailor made to the firm, it could not handle the
increasing needs of the firm in the forthcoming years. Another drawback of
the IBS module was that it was not able to integrate the information
systems in the various departments into a single entity thereby causing
complexities in the whole process.
Hence, due to the inflexibility and lack of integration of IBS, Dalmia
Cements started to prefer for a single integrated enterprise wise information
resource system that can cater to the needs of all the departments in the
organization and provide a real time monitoring and tracking system of the
whole firm.

4.Evolution of SAP in the Overall Business


After consultation with various industry experts in late 2007, it was decided
by the management of Dalmia Cements to bring in the SAP- ERP owing to
the following advantages:
Integrated application for the entire firm
Better monitoring and tracking mechanism
Low cost over the other competitors
Standardization of resources
Lesser inventory and reduced stock obsolescence

Ability to reach more vendors/ increased competition in bids

MM-Materials Management
PP-Production Planning
SD Sales & Distribution
PS Project System
HR- Human Resource
FSCM- Financial Supply Chain Management
CO-Controlling
FI- Financial Accounting
QM Quality Management
PM-Project Management
LE-Logistics Execution

The implementation process was started in the mid 2008 by first introducing
the FICO module.
It took totally 16 months for the organization to implement the system to
almost every department in the plant and integrate it. The technological
assistance was provided by LeadSoft Solutions (P) Ltd., for the integration.

5.Implementation of ERP in the System


As explained, the ERP is integrated into the whole system and is used
as a better monitoring and tracking tool. The overall implementation of SAP in
Dalmia Cements is as explained below.

Materials Management

Production and Planning

Quality Management
Logistics and Warehouse
Management
Sales and Distribution
Management
Financial Accounting

This involves the purchase and movement of raw materials


and the subsequent change in the godown stocks.

Production Planning consists of all master data, system


conWiguration, and transactions to complete the Plan to
Produce process.

Quality Management (QM) assures that products meet


stringent regulatory standards, are safe and uniform, and
meet company product speciWications.

This involves the movement of the Winished goods from the


plant to the warehouse and the storage needs at the
warehouse.

The Sales and Distribution consists of all master data, system


conWiguration, and transactions to complete the Order to Cash
process

The Financial Accounting module is designed to capture


organizations business transactions in a manner that will
satisfy external reporting requirements.

5.1 Materials Management


The Materials Management module consists of all master data, system
configuration, and transactions to complete the Procure to Pay process. This
process map spans from MRP generated procurement proposals through final
invoice receipt and verification.

Materials Management Flowchart

In Dalmia Cements, the SAP Module takes care of the following in the MM
module.
i. Purchase requests
ii. Goods Received
iii. Invoice Generation
iv. Material Movements
v. Cheque Payments
vi. Specific Reports
5.1.1 Purchase Request Order
A request sent internally within the company to obtain purchased goods
and services, including stock.
The request is a document which tells the purchasing department or
manager exactly what items and services are requested, the quantity,
source and associated costs.

Purchase Request Order

5.1.2 Purchase Order


It is the commercial document issued indicating the types, quantities
and prices for the products the seller will provide to the buyer.

Purchase Order

5.1.3 Goods Receipt Document


It is the document used to record the inward entry of any goods
received at the premises of the organization.
The practice of preparing GRNs is important as it promotes proper
inventory control and restricts the unwanted, unauthorized entry of
goods in the organization.
The GRN preparation is a part of effective Inventory Control
Management.

Goods Receipt Material Document

5.1.4 Goods Issue Reservation


It is the request to the warehouse to keep materials ready for
withdrawal at a later date and for a certain purpose. This simplifies
and accelerates the goods receipt process.
The purpose of a reservation is to ensure that a material will be
available when it is needed.

Goods Issue Reservation

5.1.5 Entering Invoice Order


It is the document from an invoicing party which contains the payments
to be made based on business transactions performed in Purchasing and
Inventory Management.
An incoming invoice can be an invoice or a credit memo.

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Entering Invoice Order

5.1.6 Weighment Report:


This report checks for the discrepancies between the actual and
reported weights of the materials delivered.

Weighment Report

5.1.7 Material Movement Report


This document checks for the current stock availability of a particular
material
The movement of material for a particular period can also be checked
in this report.

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Material Movement Report

5.1.8.Check Register:
This Data Source provides sub-ledger accounting payments based on
checks and the corresponding vendor line items.

Check Register

5.2. Production Planning


Production Planning consists of all master data, system configuration, and
transactions to complete the Plan to Produce process. An MRP system is intended
to simultaneously meet three objectives:

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Ensure materials are available for production and products are


available for delivery to customers.
Maintain the lowest possible material and product levels in store
Plan manufacturing activities, delivery schedules and purchasing
activities.

Production Planning - Flowchart

In Dalmia Cements, the production planning and control module is


subdivided in the following major processes

Process-01 - Production of fine coal


o Production of fine coal follows the repetitive manufacturing with
back flush (confirmation, issue and receipts) .Operations are coal
grinding with work centers like coal mills.

Process-02 - Production of clinker


o Production of clinker follows repetitive manufacturing with back
flush (confirmation, issue and receipts).Operations are lime stone
crushing, raw meal grinding and clinkrization with work centers
like Crusher, VRM and Kiln.

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o Production of cement follows the repetitive manufacturing with


back flush (confirmation, issue and receipts).Operations are
cement grinding with work centers like CVRM and Ball mill.

Process-03 - Production of cement

Process-04 Loose Cement delivery


o The cement loose cement delivery follows the discrete
manufacturing with service sheet entry for loading operation.

Process-05 Bag Cement packing and delivery


o The cement packing follows the discrete manufacturing with
operation level confirmation for packing. Operation Carried on
work centers like Rotos and Heaven Bocker. The loading operation
is carried out with service sheet entry.

5.3 Quality Management


Quality Management (QM) assures that products meet stringent regulatory
standards, are safe and uniform, and meet company product specifications. SAP
QM processes are thoroughly integrated into the manufacturing process.

Quality Management - Flowchart


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A few Quality Control Procedures that are implemented in Dalmia Cements are as
follows:
5.3.1 Inspection Lot Moisture Value Report
The inspection lot status is maintained by the system and is changed
whenever the processing status of the inspection lot changes
In the organization, only the dry cement is taken. Hence, the weight of
the physical stock gets reduced.
The Quality Control department takes care of this system and the
report helps in monitoring the differences.

Inspection Lot Moisture Value Report

5.3.2 Master Inspection Characteristic


An inspection characteristic describes what needs to be inspected. It defines
the inspection requirements for materials, parts and products.
To facilitate and standardize inspection planning, one can create master
records for inspection characteristics in the Quality Management (QM)
system. These characteristics are called master inspection characteristics.

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Master Inspection Characteristic Creating Inspection Plan

Master inspection characteristics can be used in

Task lists
When creating a task list, one can either create characteristics specific to the
task list or use a master inspection characteristic. A master inspection
characteristic can either be referenced by an task list characteristic or copied
into it.

Material specifications
A master inspection characteristic can be used with or without a reference to
a general characteristic from a batch class in material specifications.

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Master Inspection Characteristic Changing Inspection Plan

5.4 Logistics & Warehouse Management


It is a key part of the supply chain and primarily aims to control the
movement and storage of materials within a warehouse and process
the associated transactions, including shipping, receiving, put away
and picking.
The systems also direct and optimize stock put away based on realtime information about the status of bin utilization.

Logistics & Warehouse Management - Flowchart


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In Dalmia Cements, the Depot Rollout System has been implemented using
SAP and is integrated with the other modules.
The following storage locations are defined in SAP for respective category of
stocks:
Storage Location

Fresh
Cut & Torn
Clotted
Loss-in- Transit
Shortage

Stock Category

Fresh Cement Bags


Cut & Torn Bags and Loose Cement
Clotted Cement
Loss-in-Transit
Losses at the depot during repacking, storage
and handling

The objective is to have category-wise visibility of stocks at Depot without


any difference in physical and book stock.
The below figures shows the daily logistics report card showing the goods
available in a particular warehouse, the orders placed, the goods in transit, the
service delays etc.,

Service Delays in the Transportation

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Warehouse Daily Report Card

Real time position of Stocks


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5.5 Sales and Distribution


The Sales and Distribution consists of all master data, system
configuration, and transactions to complete the Order to Cash process.
It has the mechanisms to execute the business processes used in selling,
shipping and billing of products and services.
It also has the mechanisms to tightly couple the data with the other
modules and integrating.

Sales and Distribution Management - Flowchart

In Dalmia Cements, the SAP for the Sales & Distribution module takes care of
the following:
i. Order Creation
ii. Delivery Creation
iii. Shipment Creation
iv. Packing Screen Operation
v. Invoice Creation

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5.5.1 Order Creation


Order Creation refers to the process of making the sales order which can
either be a stock-to-transfer order creation or a sales order creation.

Sales Order Creation

5.5.2 Delivery Creation


After the sales order, it is necessary to create the outbound delivery to
create the shipment.

Order Delivery Creation


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5.5.3 Shipment Creation


The delivery order needs to be shipped accordingly.

Shipment Creation

5.5.4. Package Creation


Packaging Department takes care of the logistics part. The information
regarding the shipment goods and its corresponding truck that transports
are fed by the packaging department.

Package Creation

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5.5.5. Invoice Creation


Finally, the invoice is created for the goods that is to be shipped
accordingly.

Invoice Creation

5.6. Financial Accounting:


The Financial Accounting module in SAP is designed to capture
organizations business transactions in a manner that will satisfy external
reporting requirements.
Local legal considerations are pre-delivered with the system and the
ability to manage and report on multiple companies in multiple countries
with multiple currencies is part of standard functionality.
Integration with Sales and Distribution, Purchasing and Materials
Management allows for the ability to select any financial transaction and
"Drill Down" to the originating transaction whether it is a purchase
Order, Sales Order or material movement.

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Financial Accounting - Flowchart

5.6.1 Master General Ledger Accounts:


The master ledger account is used to locate all the ledger accounts
centrally. All the credit and debit balances are classified under the
appropriate codes.
GL masters are maintained at Company code level. Apart from generally
used codes for company as a whole individual business areas can opt to
open specific GL accounts applicable.

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Master G/L Account

5.6.2 Handling Vendors:


Vendors are also handled at the company level.
New vendors can be created after checking for non-duplicity.

Vendor Creation

5.6.3. Cost Centers:


Cost centers are 8 digit codes and available at Business Area level. Cost
centers are created for capturing transactions of a particular
machinery/process/nature. The cost centers of various business areas for
Dalmia Cements and their respective codes are as below:
o 1XXXXXXX Dalmiapuram cost centers.
o 2XXXXXXX Kadapa cost centers
o 3XXXXXXX Ariyalur Cost Centers

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Cost Center

5.6.4. Internal Orders


Internal orders are created for capturing transactions of a particular
GL/process/production orders etc.
The report generated using Internal Orders will give the Internal order
wise/ cost center wise expenses booked in various GL accounts during a
given period.

Internal Orders

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5.6.5 Asset Explorer:


Creation of new assets and handling of the current assets can be
monitored using the Asset Explorer option.

Asset Explorer

The key functions that are handled using the Asset Explorer are
Asset Codes
Asset Under Construction
Asset Transactions
Asset Balances

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Asset Balances

5.6.6 Financial Statements:


All the financial statements over the years can be accessed using this
module.

Financial Statements

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5.6.7 Cash Journals:


This module provides the Cash Book Viewing and entering both the
receipts and payments.
The GL and the cash book are monitored and verified on a
weekly/fortnightly basis.

Cash Journals

Thus the implementation and integration of the SAP ERP System in the
organization is as shown. It is also to be noted that for every change in any
functional module, the corresponding change in the FICO is reflected thus
providing integration among the divisions within the organization.

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6.ERP Implementation Obstacles & Challenges


Though the SAP ERP had a lot of advantages when compared to
the previous IBS Systems, there were a lot of challenges in the firm while
implementing it which is explained below.
The employees were not aware of the usage of ERP and since
there was not any proper training system in place, the users of
the system felt the whole process a complicated and tiresome.
Data migration was the biggest issue that the organization
faced. Migrating the legacy data i.e., the process of importing
the recorded data and information into the new system took
more time and labor than expected. The data entry process
became too large at a point of time.
Lack of synchronization at the initial stages was also a big
challenge that the organization faced. E.g., The inventory
figures in the module did not match with the physical inventory.
The sales figures and its corresponding entry item at accounting
did not match.
The manpower challenge was also another hindrance that the
organization faced. Many employees initially feared in working
with the new system.
These challenges increased the total integration time from the expected
12 months period to the actual 16 months and most of the employees felt
that the SAP ERP project was a failure for the organization.
A variety of new methods and strategies were adopted by the
organization to tackle the various issues that arouse during the
implementing the project.
The technological assistance from LeadSoft was called off in mid
2009 and Wipro Infotech was pulled on to the smoothening of the
entire process.Wipro Infotech made the technological process more
user friendly and helped in the proper synchronization of data.
Training programmes were frequently conducted to the users of the
module and hands-on experience were provided to them.
SAP ERP was put on hold in the main cement plant at Trichy,
Tamil Nadu and was introduced in the newly built plants at
Ariyalur, Tamil Nadu and Kadapa, Andhra Pradesh. Based on the
experiences gained from the implementation in the new plants, the
same was adapted to the main plant later in Trichy at a later period.

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7.Benefits of Implementation
Some of the significant changes that ERP brought to the organization are
as follows
Significant reduction in manual work and further significant
reduction in paper works.
Better inventory control and hence better management of
resources.
Faster creation of reports and hence informed decision making.
Complete visibility among the important processes and resources
thereby increasing the transparency and accountability.
Single database is implemented on the back-end to store all the
information required and that enables centralized storage of all the
enterprise data.

8. Future Prospects
Though the ERP System has been in place for more than 2 years and has
provided fruitful results off late, there is still a long way to go for the
organization to attain the complete benefits of the SAP ERP.
Some of the future prospects that the organization is currently looking at
are as mentioned below:

i.

ii.

Business Intelligence Warehouse Implementation: As a core


component of SAP NetWeaver, the SAP Business Information
Warehouse (SAP BW) provides data warehousing functionality, a
business intelligence platform, and a suite of business intelligence
tools that enable businesses to attain these goals. Relevant business
information from productive SAP applications and all external data
sources can be integrated, transformed, and consolidated in SAP
BW with the toolset provided. SAP BW provides flexible reporting
and analysis tools to support you in evaluating and interpreting
data, as well as facilitating its distribution. Businesses are able to
make well-founded decisions and determine target-orientated
activities on the basis of this analysis.
Moving to a real-time MIS: Currently, the SAP is mainly used as a
data entry tool for better monitoring services. Implementation of
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iii.

iv.

further technology will help in moving the system to a real time


MIS System.
Seamless integration of Reports: A report that is currently
generated is converted to other formats(like MS Excel) and is sent
to the management for better decision-making. A new process is
set up in place to integrate this process seamlessly for better
efficiency.
Implementation of CRM Project Module: The current SAP module
does not provide significant customer activity functions. Hence, the
organization has started a CRM project, which is currently
working on the better client dealer relationship services.

9.References
Inputs from Dalmia Cements:
1. K.V. Gopal Manager, Accounts & Finance
2.V.R.Pechiappan Senior Executive, Finance
Web References:
htttp://help.sap.com
www.erptips.com
www.dalmiabharat.com

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