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How EMTL Bounced Back from Its Initial ERP Failure

Shubhra Rishi | April 3, 2013
here’s no such thing as a “one size fits all ERP system”. The Senior Manager for IT at Electronica Machine Tools—a 40-year old manufacturing company, realized it in 2007, when their new implementation partner declared the ERP system to go live.

With a current demand of Rs 11,000 crore, the machine tools industry is expected to grow by over 15 percent in 2013. According to a report by IndiaMart, nearly 70 percent of this sector is filled with small and medium enterprises (SMEs), one of whom is Electronica Machine Tools (EMTL). With an annual turnover of Rs 100 crore, the company has manufactured and exported a diverse range of products over a span of four decades. But in the last decade, the company saw a failed ERP-rollout (2004), demerger of its operations, shutting down of overseas operations, and the economic slowdown of 2008--in that order.

But even after rolling back to the legacy system that existed in 2004, the company wasn't ready to accept defeat as far as ERP was concerned.

Business Problem:

In early January 2007, EMTL decided to roll out SAP yet again; this time, with the help of a different implementation partner. But their efforts were met with little success. They were still not able to generate any invoices using SAP until May 2007. Enter Chandrashekhar Jain--the company's senior manager--IT, who took over the position in June 2006, understood that the plain-vanilla SAP declared go-live by the implementation partner required ruthless customization. But he refuses to call it customization. "Normally, SAP sells as a solution, but it's only a framework. You have to build your own solution with it," says Jain. And that's exactly what Jain did. He built his own SAP ERP system.

There's no such thing as a "one size fits all ERP system". The Senior Manager for IT at Electronica Machine Tools--a 40-year old manufacturing company, realized it in 2007, when their new implementation partner declared the ERP system to go live.

The Project:

"Whenever organizations starts using SAP ERP, most of them equate SAP to Sab Aadmi Pareshan," quips Jain.

However, EMTL had another reason to worry about too.

After the demerger in 2008, the company codes were reduced from four to two, number of plant codes, from 14 to six, but mainly, the company was broadly divided into two business divisions: Manufacturing, and trading.

All these changes had to be incorporated into the SAP system. "The taxation treatment is different for the two divisions, so we had to configure the SAP system accordingly," informs Jain.

For instance, in a usual domestic sales and purchase process at EMTL, the raw materials get debited and the supplier gets credited when new materials arrive at a plant. There's a liability on excise duty. In case of import, instead of the excise, the customs duty is credited. This amount becomes critical in a manufacturing setup because it has to be adjusted against the excise duty as well as the finished goods that get dispatched. So the excise entries have to be accurate on all levels because the excise department traces the Central Value Added Tax (CENVAT) availed against each raw material entry vis-à-vis the CENVAT payable by the company on finished goods.

 

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