JK Cement Ltd ,India

SAP Implementation

A snapshot……..Indian Cement Industry

Growing demand requires capacity

expansion from current level of 190

Million tons per annum

Market spread throughout country with

market leadership in each region by the

leaders

Government indirectly regulates price

and capacity….hence control of fixed

costs key to success

Increasing Power cost and shortage of

power poses threat to production to meet

the demands. Prices have spiraled in the

past 24 months due to increase in inputs

costs of fuels.

Due to large geographical spread in the

country, managing transportation cost is a

major key components for success

About JK Cement

Second largest White Cement producer in India

with 0.3 millions tons per annum

Sixth Largest Grey Cement producer in India since

1975 with 7.5 million tons per annum

Sell cement and cement derivatives like wall filler

Sales of $ 425 million backed by strong brands

Well developed distribution net work…..23 offices,

60 warehouses, 4000 retailers , 1500 industrial

customers

Five manufacturing plants with five captive Power

plants

More than 3000 employees with excellent labour

relations and a professional management

ISO Certified process framework and product ranges

Current Environment

Factory - Nimbahera Factory - Mangrol Factory - Gotan

Depots Marketing Office Corporate Office

Systems

-Varied legacy systems:

Oracle

Fox Pro

Excel

-Heavy usage of manual

procedures

-- Key calculations like cost

are manual

Organization

-Not able to integrate various

functions

-End users do not get a

holistic picture of business

-Operational control is restricted

-Key business activities like

fund flow/cash flow

management run on

approximations

Information/Processes

-Information is not available

online

- Business analytics are very

limited

-Processes are not

standard for many functions

across the organization

Overview of the Technical Scope

• Implementation of SAP ERP (FI, CO,

PS, SD, MM, PP-PI, QM and PM) for all

existing manufacturing facilities / auxiliary

plants / offices / branches / depots of JK

Cement Limited

• PS, FI-CO and MM for erection and

commissioning of green field project of

new cement plant in Karnataka

• HR, Payroll and ESS Implementation for

all the organizational elements

• Business Warehouse for strategic

reporting and analysis

• Enterprise portal for Management

Dashboard and alerts

• Solution Manager for project

management, knowledge repository

• ABAP development for custom objects

Organizational Scope

• Companies:

• JK Cement Limited and other four legal entities for sales and distribution

• Manufacturing Plants:

• Five Cement Plants

• Greenfield implementation

• Jaykaycem Limited,,Karnataka Plant –

• Project System Implementation for mapping of erection and commissioning of green-field project of Cement plant.

• Captive Power plants - 5

• Registered Office - Kanpur

• Corporate Office – Kanpur

• Central Marketing Office for Gray and White - Delhi

• All Regional Offices – 23

• Depots – 60 Numbers (Depots and RO – 83)

About The Project

Project commencement : May 2008

Project Completion date: Feb 2009

Total Efforts : 240 man months

Team size : Regular 18; Peak 32

Custom Objects : 150

Approach : Big Bang for all modules in scope

Key Business Drivers

Market Focused

Accelerate Revenue growth

Increase market share with timely availability products at market

Facilitate Order capture and order fulfillment by integrating all depots . Sales staff to

have information anytime, anywhere

Organization Focused Improved financial management with timely information for management decisions

Improve operating margin with optimized procurement, production and distribution costs

with focus on power, transport and delivery costs

Reduce idle inventory through efficient distribution

Enhance controls with unified process across the organization

Improve Efficiency of Asset management through improved Inventory turns, Accounts

Receivable turnover and working capital optimization

Key Challenges • Change management transforming organizational processes in to an integrated

environment

• Fast growth through acquisitions and expansions to be provided for

• Capturing the complex business processes which have developed over a period of

time

• Consignments use all modes of transport namely Road/Rail/Ship and reallocation/

rerouting become complex

• Implementing best practices without losing local flavor

• Enabling end users to participate in the project generally perceived as an IT project

• Cement prices are market driven and volatile. Retrospective changes including

Transporter Billing

• Market share is highly dependent upon Price and hence, “Cost control” in

Production as well as Logistics is very important

• Prices include taxes & freight hence realization calculation is complex

Our Approach

Revenue

Growth

Acquire New

Customers

Retain & Grow

Existing Customers

COGS

SG&A

Operating

Margin Value Potential

Inventory, Assets

Receivables

Asset

Efficiency

• Reduction in selling expenses due to better /

updated information with sales team, more

efficient and integrated processes

• Back Office Shared Services / Centralization

• 5% reduction in selling

expenses

• Benefits arising from Shared

Services / Centralization

• Reduction in Freight costs due to better

delivery / schedule planning (resulting from

enhanced data visibility / availability)

• Improved operational processes (planning.

Scheduling, production, etc.)

• Freight costs reduced by

0.2% (from19.69% to 19.5%)

• Increased recoverability of disputed debts

due to billing process efficiency

• Interest on cash collected earlier - data

visibility for collections follow up

• 5% reduction in disputed

debts 33% of disputed debts

are recovered

• 10% reduction in overdue

debts – (8% interest rate; 30

days additional interest

earned)

• Reduced inventory carrying costs due to

increased turns. SAP provides updated

information on current inventory levels (RM, WIP,

FG) – potential for consolidation

• Reduction in plant & machinery maintenance

costs due to automation / availability of data

regarding planned / unplanned downtime etc

• Current marketing strategy is to target high

value / potential customers in various

territories. SAP enables this through data

visibility & insights into customer behavior and

buying patterns

• Increase in sale of white cement due to

improved sales processes. Capacity utilization

would increase in this case.

• 2% additional realization for

5% of the sales due to better

pricing

• 1% increase in sale of white

cement

Improvement Lever Assumption

• 10% reduction in inventory

turnover (in days) for white

cement (from 96.9 to 87.3 days)

• 1% reduction in plant &

maintenance costs

We follow a Value potential approach aimed to realize benefits as

depicted below

Project Phases & milestones

May08 Feb09

• SAP’s ASAP methodology followed throughout the project

Way for Sustenance

Once the post go-live support commences we will

put in place our service maturity model

Time tested and proven model for steady service

improvement

This model will lead to :-

Low maintenance cost

Improvement in the capabilities of

team/individual

Call reduction over a period of time

Reduction in average resolution time

Upkeep of knowledge repository

Managed Service Desk

Thank you

for your time & interest