Going that extra mile

Using information technology has helped to streamline engine manufacturing and marketing strategy significantly, says this company.

R. Savitha

Companies are racing to become IT-savvy and stay that way, often opting for costly solutions. Not to be left behind, engine manufacturer Kirloskar Oil Engines Ltd (KOEL) has invested a tidy sum towards getting IT-oriented.

``But there is one difference. We would like others to see how we have used IT as an enabling tool'' says Vijay Varma, Vice-President, Business Development, KOEL. The contribution of IT to business as a whole is close to 15 per cent while the rest is from back-end operations, he says. ``But we have transformed ourselves from being a brick-and-mortar company to a click-and-mortar company.''

The company began its IT initiative in 1998 with the implementation of Oracle's Enterprise Solution followed by the ebusiness initiative in 1999. About 70-80 per cent of business comes from dealers connected electronically. The company has almost 1,100 dealers across the country.

The question that follows, naturally, is what about the cost savings? ``For us, the cost savings is not in terms of value or money but to be in a position which allows the dealers, suppliers and everybody connected to have information at their fingertips and help them take decisions without wasting time,'' says Varma.

Other benefits for the company? KOEL, which had an inventory turn of about four times a year, now has an inventory turn of about 50 times, a substantial savings on cost. It has also scrapped its raw material storehouse and now works on the principle of just-in-time. That doesn't mean the company has no stock with it, it means that it maintains only the basic or essential supply while daily material requirements land up at the gate in the morning.

Taking stock of advantages

What about the other side -- the suppliers? They have reported some benefits from the IT implementation -- for instance, less inventory stock compared to what prevailed earlier. Bhide of ACC Ferrous, a KOEL supplier, says ``since the company gives us advance intimation about its requirements, we are able to deliver the goods at the specified date. The best part about this system is that there is no inventory-pile up like we used to have before.''

``Of course, adapting to this system has not been easy. It has been in operation for about five to six months, the mindset has changed. Now we find it useful.''

Kadu, another KOEL supplier, says as far as cost savings go, he has been able to save up to 10 per cent on total expenses. Inventory is down from three months earlier to about one month, saving on warehouse space and cutting down on inventory pile-up.

With regard to supply chain management, the company earlier used to depend on 625 suppliers for different parts to be fitted into the engine. This was a big problem since the lack of one or two parts stalled the whole process. Now, with the aggregation of suppliers, it is down to 150 suppliers.

Ajay Brahme, a KOEL dealer, agrees that using IT has been useful and cost reduction has also been achieved. ``But to ensure that substantial cost reduction is possible, the company will have to make some provision wherein the orders to be fed can be compiled offline and then sent across in one shot,'' he says.

Now, it takes about two hours of Internet time for the full process since about 200 to 300 components have to be keyed in and accepted. Shailesh Rao, Manager, Marketing Transcreek Engineers Pvt Ltd, concurs. But he is unsure whether such a solution can be found.

Both agree that time savings has been tremendous as earlier they had to prepare the invoice, send it across and then wait for the company to respond which took about 15 to 20 days. This has been reduced to two to three days, pruning expenditure by 30-35 per cent.

Do suppliers see any drawbacks? Kadu feels that if payment time, currently 90 days, is brought to 30-50 days, it will help. Bhide says as with hiccups in other things, here too a problem may arise if a person forgets to punch in data, especially at the time of shifting stock. ``But it gets sorted out immediately when we bring it to the notice of the company, so it is not much of a hassle. On the whole we are satisfied with the implementation of IT in the company,'' he adds.

As another value addition, KOEL is tying up with banks for easier and faster transactions. This facility, under testing, will cover the dealer network and the suppliers too, eventually.

On the transaction side, Bhide feels if the company is able to implement what it has set out to do, then the minor hassles here would also be removed. But, of course, all this depends on market conditions, he adds.