SAP

With an increased focus on environmental impact of industrialization, most organizations are trying to take-up initiatives to improve their 'Green Image'. Most of these initiatives have been in trying to reduce the energy consumption in their facilities/operations. While these initiatives are good, we all know that these are not 'good enough'. To drive real environmental consciousness through the society, there needs to be a way, to generate the need to be 'Green', ground-up. What this implies is that business leaders/goverment leaders should help create an environment where 'Green' Products are made attractive to consumers and there is ground-up demand generated for 'Greener' products. This will make manufacturers see an incentive to reduce their carbon footprint or in other words make their products greener.

As could be seen from the deliberations at the Copenhagen Summit on climate change, any effort towards securing sustainable efforts for controlling climate change is still looked as a top-down effort. The success of capitalism as a form of social structure proves that a sustainable model can only be achieved through a largely bottom-up demand fulfillment, incentivized by a due framework of reward for performance through top-down legislations/corporate environment. If we apply the same logic of bottom-up demand generation and fulfillment to the area of climate change and Green products, the foremost effort has to be able to create a demand for Green products through a strategy of

·         Educating consumers about the availability of green products

·         Branding using the carbon footprint of the products

·         Providing the right infrastructure for measurement of carbon footprint

·         Incentivizing Green Products by providing incentives through appropriate legislations

In spite of the increased awareness of environmental impact of technology today, the level of awareness about Green products itself is not very high. To increase the awareness about green products, brand owners have to bring the carbon footprint into the core branding strategy. This would mean that the CPG companies have to be able to communicate the carbon footprint of the product to the consumers in an articulate and indisputable way. This requires a formal framework for measurement of the carbon footprint of products and then a appropriate IT system geared to be able to measure and track the carbon footprint at an SKU level. With SAP being the primary ERP system in CPG industry, with the ability to provide a view of all the energy consuming activities from sourcing, to manufacturing, to warehousing, to shipping and other overheads, it could potentially provide the ability to track the carbon footprint of products.

In combination to above, if the government agencies are able to bring in legislations to provide the appropriate incentives for CPG companies to promote green products, we could have a winning formula for giving a boost to climate protection effort.

Watch out for the next post to see how SAP can provide an appropriate infrastructure for tracking carbon footprint across the supply chain.

Posted by Vijay Mishra at 10:35 AM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

Part I of this 3 part series discusses about why Customer opt for customization in even in a matured package applications and how it can impact your cost of ownership.

When package applications were introduced, they brought about a revolution in the way Information Technology was consumed. Packaged applications redefined how applications were implemented by offering Industry best practices and hence focusing on process rather than on technology. These solutions had reduced the cycle time for implementation and hence the cost associated with it. The risk of going wrong with a packaged solution was very low when compared to the then prevalent custom-built-from-scratch applications. Theoretically, a package could be used by just configuring it.

As we see now, many customers are going for extensive customization during package implementations and hence enormous development requirements. The defined processes in the package do not seem to meet the requirements and there are gaps that have to be addressed. Users imposed a lot of legacy burden and the management backing wasn't enough to strictly adopt out-of-box processes.

Key reasons for extensive customization are:

1. Mandatory requirements due to regulatory or compliance reasons, where not supported by the package
2. Not able to adopting the best practices as provided by the package vendor
3. Must have processes specific to the customer/industry/geography

Product companies have been playing i-will-catch-you with its customers by bringing out more and more functionality in the standard package but are continue to have significant gaps. Few packaged vendors went ahead and published best practices localized for a industry and region in an effort to bridge the gap and minimize custom development. This has met with limited success.

Custom development to address the gaps is the most prevalent practice in package implementations. Often gaps continue to evolve over a long period of time and developments fail to address the gaps fully.  All this again leads to a longer realization phase, higher implementation costs and a risk of the unknown: will this development actually address the gap? Sometimes testing and documentation effort is compromised on developments to meet the go-live timelines. We also need to understand the fact that a development requiring x amount of effort to create one,  will take 25x time to maintain during its lifecycle before embarking on customization.

So what is the solution to this? How can a customer adopt a package that requires least amount of customization in terms of development and accelerate realization?

Let us try to discuss the above in the next part of this series.

Posted by Sathyanarayana Krishnamurthy at 2:25 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

The  US  House  of  Representatives  passing  the  health  care  reforms  Bill was a top  news recently.  In  many  international  fora  it was received with applause. Although centered in the US, the event is viewed with global implications. Let us look at it with the IT perspective.

The  Bill  proposed  to  create  Electronic  Health  Records  (EHR)  for  every  American in the coming  few  years.  This  has  been  viewed  as  a  multi-billion  opportunity  for the IT service industry.  This is expected to involve IT tasks like systems integration, common database set up, Data Exchange within hospitals and so on, spread over years.

The Bill also proposes to reduce the cost of health care in the US which is comparatively way ahead  of  other  developed  countries.  The  Pharmaceutical  industry understands this as an encouragement to Generics over patented drugs that have been causing higher cost of health care   in   the  US.   In   order   to  reduce  cost  of  production  in  the  developed  world,  the Pharmaceutical  businesses  usually  opt for contract research and manufacturing (CRAM) in developing  countries  like  India  which has considerable number of US FDA approved export oriented  units  for  supplying  to  the  US. And  the  scaled  up activity in Generics stands for higher investment by them in IT to manage supply chain better and set up control systems for increased  operations,  for  example.  Some of the IT applications for these functions are ERP for  managing  enhanced  business  processes and Manufacturing Execution Systems (MES) for carrying out higher production volumes.

Another notable aspect of the Bill is it mandates the coverage of the health care insurance to a   larger  base  of  US citizens. Companies with more than 50 employees will now be legally obliged to provide health insurance for their workers. Interpretation of this can be easily drawn as  increased  more  people  have  access  to insured health care and more demand for even expensive  medicines.  More players may get attracted to such increased potential business. If they want to supply or sell drugs in the US, they need to ensure compliance to the stringent regulatory requirements set by US FDA. IT can help the businesses here by streamlining the compliance  aspect  of  the operational  processes and having electronic documentation. The Pharma  businesses  should  invest  in Technology to be competitive in such growing market.

Continuing the outcome of increased demand, the other factor is increased number of hospital bed capacity. Spurt in hospitals' activity would require IT systems to do 'patient management' effectively  along  with  the  mandated electronic health records. ERP systems are gearing up with ready deployable functionalities for hospitals and medical practitioners.

As  an  extrapolation  of this event, it may be looked at as a bellwether for health care reforms in other developed countries like Japan and Germany. Let's stay tuned.

Your views are welcome.

Posted by Hemant Pathak at 11:27 AM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

I have to admit that I have always been enthralled by SAP's industry specific solutions and it is this driving curiosity that lead me to recently take a peek into their highly promising business solution, tailor made for today's apparel and footwear industry. Yes, I am referring to SAP Apparel and Footwear (SAP AFS) solution.

To start-off let us look at the history and characteristics of this industry which might have propelled development of this solution. We all know that Apparel & Footwear Industry is a highly challenging one where trends are created overnight and fashion changes are inevitable, leading to tremendous pressure on companies to efficiently synchronize the supply chain and related operations. Major companies are dealing with seasonal fluctuations, abundance of design and volatile demand, resulting in uncertain forecast, shortage of stocks etc. Another unique characteristic is that it is striving continuously to strike a balance between domestic production and global procurement, offshoot of which is an extremely complex operation, very difficult to manage and monitor. This is because, division of labor is today a common practice, through which companies in this industry aim to achieve substantial cost-cutting, by transferring production to low-cost countries. While critical activities like product development, raw material and finished goods requirements planning, production planning, and quality control are retained at the headquarters. Thus, with production sites being located around the world, supervision and monitoring of these have become difficult and expensive. This has also proved that information flow and collaboration among partners in the supply chain, is of paramount importance for eventual success.

SAP's Apparel and Footwear package is the ideal solution for the issues mentioned above, which caters to diverse business challenges, for example, managing huge volume of data arising from continuous design and seasonal variations, and handling vertical integration as manufacturers venture into retailing and retailers tread into production. To give you a brief idea, following are the three salient features of this package, which distinguishes it from standard SAP R/3, and probably makes it special:

Grids: This is the most important functionality of this module, which provides the capacity to handle sizes, and has been conceptualized keeping in mind the complexities involved in production, procurement, sales & distribution and materials management in an Apparel environment. This is defined in the system as Grids.

Seasonality: As mentioned earlier, season plays a very important role in the product life cycle of the apparel industry and planning and production carried out needs to be aligned with the demand of the individual seasons. Thus, this seasonality feature, which has been built into the Sales & Distribution Module of the AFS Solution is integrated together with the grid functionality described earlier, making the package more robust. Seasons also allows maintenance and storage of collections and themes for each season which help in further classification of the offering for a season and provides a concept for each category of product range.

Categories: Material master maintenance for this industry involves huge amount of data, for which concept of categories has evolved to logically segment materials. These categories are usually maintained in the AFS Industry based on the quality level, type of customer and regional requirements.

Thus we can conclude that to meet the unique wish-list of this industry, SAP AFS provides a system, which is simple to use, easy to maintain and highly flexible to accommodate future requirements, and also empowers all stakeholders to collaborate successfully.

Posted by Prabuddha Kumar Biswas at 10:01 AM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )

This post will be the concluding one for the series on SAP in Transition Economies. Here, I would like to take you through the possible challenges that await organizations in this part of the world, as they embark on their ERP journey, and also, the likely benefits they can look forward to, once operational on SAP.

Let us first look at the probable challenges, which I envisage, will be coming their way. Most important challenge would be to educate users to use and understand a new business application like SAP and its offerings, for which adequate time should be devoted to ensure effective end-user training. A related issue is how to meet diverse needs across an organization i.e. adopting SAP's standard functionality and customizing wherever absolutely essential to meet unique business requirements. Next would be managing master data and the issues around it, along with data integration aspects between external systems and SAP. Another obvious challenge would be meeting local regulatory requirements, while adhering to the organizational standards and policies. One more potential problem can arise from rapidly evolving business needs due to key business functions being re-established, leading to fine-tuning of the final system to be developed. Last but not the least, would be to handle financial consolidation of local subsidiaries efficiently right from the onset, so that it doesn't become a pain point later.

So, what are the potential advantages these companies will have, once they have successfully moved on to an SAP environment? Yes, without doubt organizations will see a dramatic improvement of their business, and let us evaluate few of them:

Process Automation leading to improved Business Model: Automation of business processes definitely boosts business growth, by ensuring reduction of cost of additional business transactions. And as we all will agree, ultimate evidence of business automation is the ability to increase business volume with limited growth in overhead costs. This transformation will actually have a positive impact on all the affected business processes from order reception and confirmation, to production and inventory turnover, delivery and customer service. One can conclude with assurance that automation of all procurement, supply chain and finance processes would ensure that data is captured and stored centrally, in turn minimizing duplication and error prone data and enhancement of visibility across geographies.

Business on the Web: In today's date, self-service based offerings require an open and modern business application with high quality of transaction and master data. Once on SAP, these companies will be able to open up their systems for customers, partners or suppliers to service themselves. It should be noted here that, many self service features, if designed and implemented correctly, will eventually prove as extra service provided to external stakeholders, contributing positively to customer delight. We might actually visualize a dynamic change, with significant portion of orders placed through portal, and customers will also have the option of checking their delivery status at their convenience.

Efficient Reporting Mechanism: An eternal issue has always been that existing legacy systems provide limited or no support for effective real-time decision making due to low data quality. Such barriers to business intelligence have headed the issue list of many organizations for year, for which often critical business decisions had to be based on experience, rather than on factual data. However, things are bound to improve once there is SAP in place as reliable and precise data will be used for decision making. For example, there will be quantitative information available at the finger tips, for analyzing inventory turnover, profitability, revenue growth and supplier evaluation, just to indicate a few.

Thus, despite all the challenges related to implementation of an SAP system mentioned earlier, companies in and around the Caspian Sea region can eventually expect a robust IT system, enriched with SAP's best practices, to cater to their day-to-day business needs. And let me wish them all the very best in their exciting journey ahead.

Posted by Prabuddha Kumar Biswas at 8:01 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )