Almost nine years after Radico Khaitan deployed SAP ERP, the liquor maker is still working to attune itself to the system. An early mover on to the SAP platform, Radico had implemented the ERP system with basic modules that included quality management, HR and plant maintenance in addition to Sales and Distribution, Materials Management, Production Planning and Finance & Control.
However, looking at the scale of business and the processes involved, Neeraj Srivastava, Joint General Manager- IT, Radico Khaitan, felt that the solution was not sufficiently mature to deal with the requirements of a highly regulated business. The company has to deal with complex processes and it needed a more efficient solution to consolidate the same. To this end, it decided to implement SAP–BPC (Business Planning and Consolidation).
According to Srivastava, the company had access to data from its R3 days. Despite that, it was never able to exploit the true potential of this data as it hardly generated any reports. The BPC solution would help it plan its production and sales, consolidate the information and arrive at the expected profitability, which could be brand or unit wise. BPC is an end-user financial and enterprise performance management applications that will help the company arrive at function/cost ratio for profits. When used with a Business Warehouse, it would help the company analyze its productivity and profitability.
This time around, Radico has been quite meticulous in its choice of partner for the implementation. The company’s IT team, along with partner KPMG, has been working for over two months now and the roll out will be completed by end October 2012.
The greatest challenge for Radico has been that it operates in the liquor industry, one that’s highly regulated, controlled as it is by various government agencies including Central Excise and many state governments that have their respective regulatory frameworks. All of this has ensured that the company’s processes are pretty complicated. Moreover, the BPC deployment is across the country since it is impractical to have different sets of applications for each and every state and business. Radico has production and bottling units across the country. Besides liquor, the company also manufactures PET (Polyethylene terephthalate) bottles.
“When we began planning the implementation, the early indications were that we might have to change our processes in order to be able to implement BPC. Nevertheless, our partner advised against this approach. The experts believed that playing with the existing processes would result in further complications and that we would have ended up spending several years in adapting to the new system,” he explained.
The company had taken several other measures to raise its profitability and plug crevices in the processes. Recently, it also implemented a transportation management module in order to analyze or predict freight costs. This helped it estimate the freight cost per consignment. The company deals with local bottling units and transportation vendors. In the absence of a system, parameters like truck load or the consideration for deciding on freight charges were not known to the company.
“We now know what the truck load is going to be, the distance it has covered and the cost incurred on each consignment. This has helped us save significantly on transportation charges,” said Srivastava.
In addition, by using the Sales and Distribution module along with the Transportation Management System (TMS), Radico gets a transparent view of these costs and derives better margins.
In the past, there were issues with regard to procurement cost while raising purchase orders as the concerned employees had to rely on approximations. With the TMS in place, once the material reaches the production unit, employees clearly know the freight vendor and the cost involved.
Till some years back, Radico raised a sales forecast based MRP. The upshot was that, at times, the inventory would fall short while at other times, it ended up with an excess of packing material. The company experimented with MRP based on material consumption with dynamic safety stock to take demand fluctuations into account. This proved to be a practical approach. Going forward, the company intends to enhance MRP and implement a performance appraisal system as well as improve on the Employee Self Services (ESS) system. According to Srivastava, the company’s only focus is successful execution of BPC, so that it can further enhance its BI and analytics capabilities.