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Mapping markets: The H&R Johnson story

Capricious customers compelled the Rs 416 crore H&R Johnson India to collate data gathered from its various branches and convert it into intelligible data for its planning experts to develop new designs and products. The wall and floor tile major, which boasts a production capacity of 15 million square metres across four plants spread across the country, had more than 15,000 stock keeping units (SKU) under its belt, making the task even more complex.

In the highly volatile manufacturing sector, it is quite common for products to be killed by an equally good or better offering from an aggressive competitor. But H&R Johnson, one of India’s largest manufacturers of wall and floor tiles, faced a unique problem. In the process of constantly innovating to meet market demands, instances of H&R’s own new products killing the market for its existing ones were on the rise.

What was needed was an alleviator that would reduce, if not eliminate this phenomenon, which was having an adverse effect on the bottom line. In other words, a business intelligence solution that would enable better planning and effective decision making. Subsequent to considerable deliberation, the management decided to implement SAP R/3 across the organisation. It was expected that a robust ERP system would capture and deliver data that would provide real-time visibility across the enterprise. As of date the company has invested Rs 10 crore in IT-enabling the company.

Product and sales
For H&R business intelligence in two key areas—products and sales—were of paramount importance. And this was the area where SAP BIW’s expertise lay. SAP’s solution combined state-of-the-art warehousing technology with pre-configured business content and gave the management a clear overview of the company’s internal as well as relevant external data. The SAP business information warehouse (BIW) provided a wide selection of predefined reports that could be used for making strategic and operational decisions.

There are various factors that could kill a product, including the launch of new products, competition, new size preferences and newer designs. This made it imperative to analyse product lifecycle. Elaborates Gopinath Krishnan, general manager-information technology, H&R Johnson India, “Product lifecycle analysis gains much importance in our business segment. Erosion of sales value is very high when a product moves in to the slow moving category.” On an average the erosion of value in the sales price could be as high as 20 percent. This called for a reduction in the production of slow moving stock. The company is looking at reducing this by 30-40 percent. But Krishnan believes this is bound to take time.

Equally important to the company was an analysis of its customers and the market scenario, i.e. realisation by markets or distribution channels. Customer preference vary in different parts of the country, both in terms of shades preferred as well as the size of the tile. For instance, customers in the South generally prefer darker shades. This also holds true with reference to the size of tiles.

The percentage of sales also varies from region to region. This information could prove vital when it comes to dispatch of products, as freight is a big component of the total cost. Hence, it was important to provide planners with this crucial information to enable them to gain quicker insights into the business, which would in turn enable them to take more effective decisions. Says Krishnan, “When we initially set about implementing the solution we were looking at generating information that could improve our contribution by focusing on value-added items.”

Customer and market
The problem now was providing employees with a cost-effective means of accessing the data from its ERP system. The finance department needed access to reports on accounting, general ledgers, profit and loss, etc. Also there were certain reports which couldn’t be defined in advance.

There were several limitations with the system the company had in place, such as limited flexibility in generating reports, high cost of developing customised reports and intensive manual effort of generating composite reports. Adds Krishnan, “We were also given to understand from our discussion with vendors and partners that cross modular reports and reports based on calculated value (e.g. average realisation) were not available on SAP.”

80 percent of the information required was from past data relating to sales and finance. The company didn’t want to put an extra burden on the ERP system, which would have been the case when the number of users accessing the system increased.

The company initiated a project based on Office XP as a Smart Client (OSC) for customer and market-related reports. OSC is a solution for unified reporting and business analytics. User can gain access to data from the ERP system through pre-defined reports and on-line analytical processing (OLAP) cubes using Microsoft Office as the front-end. The solution is currently being used by around 300 users and will eventually be rolled out throughout the organisation.

Benefits
While the sales and product-related reports proffered by SAP BIW would be accessed by the planners and the top management, OSC reports would cater to middle managers who require operational data. OSC has enabled an enhanced flow of information across the organisation. It enables a user with even basic computer knowledge to view and understand the reports, as most of the reports are presented in Excel format.

According to Krishnan, it has reduced employee time in manually generating reports. Says he, “The system has enabled us to have information at quicker intervals of time. The factor of time in providing information in the correct format to the right people is now no longer an issue.”

Road ahead
H&R is currently putting in place a system which would enable dealers to log in to the system and check the status of their accounts and access other information. E-procurement facilities will also be provided to key dealers. In the final phase of the implementation the company will look at improving the systems at the dealer-end. This will enable the company to collect information about secondary sales. According to Krishnan, this will enable the company to pinpoint regional preferences and plan new products accordingly. The company will also be able to classify customers in greater detail. The information generated can then be passed on to dealers and field staff through wireless devices like a mobile phone or other handheld devices. Krishnan expects to see this plan coming to fruition by April 2004.

This article first appeared in Express Computer

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