MPPKVVCL INITIATIVES FOR ERP
The Project is for procurement, customization, implementation and subsequent support of Enterprise Resource Planning (ERP) System across key offices in Madhya Pradesh Poorva Kshetra Vidyut Vitaran Company Limited, Jabalpur under loan facility of Asian Development Bank. It covers the overall implementation and support for ERP application software in the Company with an initial implementation plan of 24 months and subsequent support for 3 years. The modules which will be implemented are Finance, Project Management, Material Management & Procurement and Human Resource Management.
This project rcovers the overall implementation and support for ERP application and the total investment projected is Rs. 27.71 Cr. over 4 years.
The project is expected to be implemented over a period of 24 months including an initial 7 months period for selection of ERP product along withits implementation partner
Project Scope of Work
This project report covers the overall implementation and support for ERP application software in the Company with an initial implementation plan of 24 months and subsequent support for 3years. The key activities to be undertaken are as follows:-
Identification of key issues being faced by the Company and possible areas where ERP may be implemented.
Finalising the business requirements for the ERP implementation project.
Selection of an implementation partner as well as procurement of ERP application software through QCBS – two envelop bidding approach
Business blueprinting and identification of customization requirement as well as ‘to-be’ business processes along with the selected implementation partner.
Customization of the ERP application software by the selected implementation partner.
Finalization of hardware and networking equipment for the project.
Procurement of hardware and networking equipments.
Installation and commissioning of the hardware and network.
Training of Core team, IT team and users.
Acceptance testing of the ERP application software.
Implementation of the ERP application in the identified offices across the organization.
Initiation of “Go Live” in pilot offices.
Roll out in the remaining offices.
Setting up of help desk facility to support users.
The key features of the project are highlighted below:
- ERP systems use shared databases and controls related to business data such as projects, finance, purchasing, inventory, human resources, etc. As a result, any transaction data will be captured at source and will be subsequently shared with all other users in a seamless manner across modules. ERP implementation in the Company will therefore ensure integrated approach amongst various departments and improved control systems.
- ERP implementation will result in streamlining of the Company’s operations and reduction in bureaucracy. For example, procurement process involves documentation, reconciliation and approvals at various levels before the purchase order is issued in the current manual environment. In the ERP environment, this may involve 2 steps only.
- ERP applications are deployed globally by most of the leading companies including those in the utilities sector. They, therefore have built-in best business practices which may be adopted by the Company with necessary customization.
- ERP system will provide the backbone for decision support systems. It will ensure access to relevant data with minimum efforts based on level of authorization. With built in drill down tools and reporting tools, senior managers will be able to spot critical issues and generate reports dynamically.
- ERP system will ensure standardized business processes in the various offices across the Company. For example, the procedures for inventory management vary from store to store across the Company. A person may be transferred from one office to another & may face initial difficulties in adopting procedures in new office in present setup. In standardized ERP environment, such issues will not arise.
- Implementing ERP will substantially shorten and simplify the annual/ half yearly account closing activity.
- Similarly, ERP will lead to better project planning and management with substantial reduction in project overruns.
- With ERP in place, there will be reduction in repetitive tasks and administrative overhead, enabling staff to concentrate on analysis and reporting.
- ERP system will usher in Workflow based decision making and anywhere access
Key modules being implemented
ERP systems are integrated applications where the user is provided alicense to use the entire application depending on their business needs. However, there may be various constraints due to which companies may choose to implement only certain modules and functionalities. The modules we propose to implement are as follows:
- Finance and Budgeting
- Human Resources
BENEFITS OF ERP
The ERP project will directly impact the way the Company operates. There will be many intangible benefits to the management, staff and other stakeholders as a result of this implementation. Some of the key benefits are mentioned in the earlier section. Many of these will translate into financial benefits over period of time but which cannot be quantified at present. However, it is imperative to estimate the possible direct financial benefit of the project in view of the loan being taken for financing it and keeping the same in mind, we have evolved the following framework:
Savings in Inventory Carry cost
Presently,the Company has 5 stores operating in isolation in geographically dispersed locations. In addition, there are many site stores wherethe Project Department engineers keep their items after drawing from Stores. This ERP implementation will help in two ways:
- Presently, many items are being drawn in advance due to fear of unavailability or being purchased in advance due to fear of stock out. These will get optimised in ERP enabled organization.
- Presently, the procurement section at a particular location may be initiating purchase of items without having clear idea of abundant availability of stock in another location. Similarly, some of the items may be appearing in duplicate in the stock master. These will be reduced substantially on ERP implementation.
Savings in Communication Cost
Based on studies on ERP implementation globally, it has been found that ERP implementation will lead to 25% savings in communications cost.
Savings As A Result of Depreciation Benefits
Further,this initiative will also enable the Company to capitalise the assets much earlier – at present this capitalization is delayed by more than 1 year. As a result, the Company will be able to enjoy depreciation benefits of these assets on timely manner to the tune ofat least 1 year overall.
Savings on Account of Improved Manpower Utilization in Projects
Presently in a manual environment, substantial effort is involved in decision making, documentation, monitoring and reconciliation of the projects.Once the project management module is operational, ERP can lead to30% more output for the same workforce even without any Business Process Reengineering.
The payback period will work out to about 2 years 8 months after complete implementation of the project.