by Zen
ERP is what the doctor recommends for the local textile industry.
65% of Pakistan’s revenue comes from the textile sector, which is more than the rest of the sectors combined. By the end of 2005, the local textile industry will face tough competition because of the WTO. Hence, the government and textile industries are trying to get on par with the international standards. Enterprise Resource Planning (ERP) is just what the doctor recommends.
The implications of the WTO Agreement, that come into effect in 2005, present an ever looming threat to the local textile industry as they face tough competition not just from the international market but from within the country as well. It has become imperative and a matter of survival for the local industries to come up to international standards. For this purpose, they not only need to upgrade their machinery, as suggested in the Textile Vision 2005 document presented by the Government of Pakistan; but also need to increase their productivity, adopt industry standard best practices and optimize their performance in all aspects starting from Supply Chain Management to Production Planning and Customer Relations. In order to do this, ERP is just what they need.
Needless to say, the benefits of implementing ERP are immense. Not only would the industry’s best practices be implemented but their processes would be streamlined, domains which were previously working independently would be integrated and data would be made available to them, so that they would be able to plan their operations in a better manner, and thus work to the optimum.
ERP Costs
In spite of all these benefits, not many textile companies are considering the implementation of ERP. The most common reason cited for this is that the ‘Seths’ running the industries are reluctant to ‘waste’ money on huge IT initiatives. ERP usually does burn a hole in the finances of the company especially when going for proven, off-the-shelf ERP packages such as SAP R3. But this doesn’t necessarily have to be the case, as many of the local ERP vendors promise ERP products especially customized for the textile and apparel industry at a fraction of the cost. Plus, there are free Open Source Solutions, such as Compiere, though not textile industry specific, provides integration across processes and the Customers relationship management (CRM) module, to get the basics running. The key is to finding the product that works for you whether it is local or branded/off-the-shelf. Even if the initial investment is huge, most successful ERP implementations show a Return of Investment (ROI) within 1.5 years, justifying the initial cost.
According to Razzak Paracha of Universal Textile Mills, “Cost is the prime factor for not opting for renowned ERP packages. The textile and apparel sector is no different than any other manufacturing process. It is different based on the processing requirements, but the apparel industry of China/Thailand is no different than that of Pakistan. If Thailand can opt of ERP for the entire textile industry, then Pakistani companies should at least think of doing so on a company basis.”
The main problem seems to be the lack of awareness. There are no major success stories doing rounds in the industry either, which would encourage other companies to follow suit.
ERP Consultation
Technical issues such as choosing the right ERP product confound even those companies that realize the importance of ERP and are risking being the first to venture into it. For this purpose, they require the expertise of ERP Consultants. ACCPAC, Accrologix, SAP/Siemens, Oracle/Techlogix, Algorithm Consulting, ClaruSoft and KalSoft are some of the local ERP vendors.
Unfortunately, there is a dearth of impartial ERP Consultation Firms, as most of the consultants are in one way or another endorsing some ERP product. Siemens, for example, are the authorized vendors of SAP. Similarly, most consultation firms have their own ERP products. In most cases, ERP vendors themselves carry out the requirements elicitation exercise and do everything from consultation to implementation, deployment, testing and training.
Not undermining the credibility of the consultants, in such cases, as has become an industry norm, it becomes hard for the companies opting for ERP to get a balanced and objective opinion. Getting the right ERP is critical to the success of the project. However, the company owners are not technically qualified to judge this and with no other reliable consultants to turn to, the fate of the project remains in doldrums. Internationally, consultation takes a major chunk of finances in ERP implementation with the ratio of licensing cost to the cost of consultation being 1:5, yet here we found no major companies specializing in consultation.
Branded Off-the-shelf ERP
SAP R3 is the first choice for ERP as it has a brilliant track record and has its own comprehensive application development workbench that can satisfy the requirements through custom developments, which is very easy and produces more accurate and suitable results. Unlike the local ERP solutions, it is not a pre-configured solution.
But as far as the textile industry is concerned none of SAP/Siemens projects have been in this sector. SAP/Siemens has success stories in ICI Pakistan, Pakistan State Oil, Pakistan Petroleum and Pak Refinery, etc, but none whatsoever in the textile and apparel industry.
Fortunately, we found two SAP success stories in the textile industry not far from home. In Tripur, India, two garment export companies, Jupiter Knitting Company and Network Clothing Company, successfully completed the deployment of SAP 4.7 in March 2004. The basic aim of shifting over to SAP was to automate their supply chain, integrate various processes and improvise their inventory management system. Since garment export companies have a small planning horizon and the delivery dates are quicker and made to order; they thought it best to deploy SAP, given its prow-ness in planning and integration.
The same can be true for Pakistani textile companies. If they want to go international, the availability of information becomes a major issue along with handling complex business processes on a real time basis, communicating faster, manufacturing the products on time and procuring raw materials on just-in-time basis, making vendor payments, balancing the finance sheet and production planning. If SAP can work in India, then why not here?
Local ERP Products
In the last five years, we have seen a shift in the local software industry from e-commerce solutions to full-scale enterprise solutions, with some companies entering into partnerships with established giants like Oracle and SAP or developing their own ERP to beat their foreign counterparts on cost such as Abacus Consulting, Algorithm Consulting, Clarusoft and KalSoft.
The most common argument used by some of these companies is that textile manufacturing is integrated with a wide range of manufacturing processes and management requirements; thus generic ERP products are unable to cater to the intricacies involved. According to this philosophy, generic branded ERP such as SAP is developed considering the dynamics of a typical manufacturing industry model. The raw material scenario and other processes in the textile industry are strikingly different, as a single piece of yarn can be used to manufacture a wide range of products whereas Textile ERP have standard processing formulas hard coded and parameters that can be changed. This makes such ERP easier to use and maintain.
Some others argue that textile industry is no different from any other manufacturing industry and that its processes can easily be accommodated by the branded ERP.
A true ERP
There are arguments and counter arguments as to what actually constitutes an ERP. According to the basic definition, the basic purpose of an ERP is the integration and implementation of the industry’s best practices.
According to a general opinion held by industry insiders, the local ERP companies are relatively new and their products are premature. What they are churning out in the name of ERP are just sub-sets of an actual ERP. They replicate the processes already in place instead of emphasizing on business process re-engineering to adopt the best practices.
Usually ERP developers are successful in getting projects because they schedule a flexible implementation timeline, as compared to the major players of the industry. Furthermore, they don’t make incessant demands on user involvement, which seasoned companies wisely stress on. This sort of implementation requires a firm grip on change management on part of the vendors because the customer does not want to waste its critical and indispensable human resources’ time with the ERP Company but at the same time demands a fully customized solution. This leads to the creation of generic solutions without keeping the customer’s requirement attributes in mind. Mostly, ERP vendors start with the deployment of the Finance Module not just because finance is the main focus of the company, but also because accounting is generic for all businesses and can be re-used with other companies with only slight changes in system parameters. More difficult modules such as Production Planning and Order Planning, which require high levels of integration, are usually left as promises.
If an ERP consists of stand-alone modules and covers if not all, then most of the business processes; it is not considered a true ERP. Although local ERP developers are able to build ERP packages to answer the generic activities of business processes, they are usually unable to cater to industry specific requirements that call for good expertise in the domain. While branded ERP products have a wider vision to accommodate changes in technology and business process requirements and can overcome geographical barriers; local developers find it very difficult to cope up in these areas. Building an ERP package does not just require programming expertise and diligent coders, which in comparison is easier to get; but domain knowledge in textile business.
Specialized ERP Products
One ERP product, which claims to cater to the textile industry specific demands and has a good track record in over 380 countries, is Textile Integrated Manufacturing (TIM). TIM is the product of a Swiss based company Datatex, which ‘understands’ the need of the industry and at the same time has domain knowledge, technical expertise as well the capability to parameterize and customize the ERP as per clients needs and furthermore. It also has enough breathing space to accommodate any unforeseeable hierarchical and organizational changes, which might incur in the future. According to Mr. Barry Edwards, the CEO of Datatex who visited Pakistan last year; they don’t have any success stories in Pakistan as yet, but have prospective clients lined up who are interested in implementing TIM.
PSEB’s ERP Initiatives
Last December PSEB invited companies for starting work on the automation of four industries, three of which are directly or indirectly related to the Textile Industry. Project Facilitation Committee is overlooking All Pakistan Textile Processing Mills Association (APTPMA), Pakistan Readymade Garments and Exporters Association (PRGMEA) and Pakistan Hosiery Mills Association (PHMA).
The selected companies, NetSol Lahore for APTPMA and PrisLogix for PRGMEA & PHMA have started gathering the Software Requirement Specifications (SRS) from January 2005 and would be working on it till March 2005. According to the Project Manager (Bridge-OS) Kamran Kamal, “The main objective of separating development of SRS document is to address the negligence of SRS phase of software development in our local software industry. Requirement specifications are usually omitted during the software development due to lack of funds or time. Software developed without requirement specifications often result in increased operational problems, lost code and nothing upon which to base user training.”
Furthermore, once the final SRS document is accepted, these IT consulting companies will be relieved of the major task assigned to them, however, they would be responsible for the final Quality Assurance (QA) testing of the developed and deployed software before their final payment and performance bond can be released.
The project plan marks the selection software companies for development through open bidding by June 2005 and it is expected that by February 2006, software will be developed and deployed in 10-15 model SME units within each selected industrial sector. They will be distributed freely to the interested SME units with help of the concerned trade union, and the code would be freely available. However the SME unit will have to provide the required hardware support as well as bear the implementation and training costs.
However, Mr. Kamal concedes that the usage, utilization and adherence to the software and its guidelines by SME units, cannot be ensured and monitored by PSEB. “We expect the industrial sectors to make the best use of this opportunity to promote the culture of automated administration and integrate the new system into the mainstream industrial processes. The successful outcome of the project is hence moderately dependant on the target industrial sectors and their reaction to the proposed solutions.”
PSEB is a little late with the ERP initiative since the WTO quotas kick off in 2005, and ERP projects take a long time for development, let alone deployment, but as they say, it’s better late than never.
//This article appeared in SPIDER Magazine’s February issue
The Sites
Abacus Consulting www.abacus-global.com/news_events.asp
Algorithm Consulting www.algorithm.com.pk
Acrologix www.acrologix.com
All Pakistan Textile Mills Association (APTMA) www.aptma.org.pk
Clarusoft www.clarusoft.com.pk
CXO Today www.cxotoday.com
Compiere www.compiere.org
Datatex www.datatex-tim.com
Kalsoft www.kalsoft.com.pk
Pakistan Cotton Ginners Association www.pcga.org
Siemens www.siemens.com
Sidat Hyder www.sidathyder.com.pk
Time Online- Hanging by the Threads
www.time.com/time/magazine/article/0,9171,1101041213-880289,00.html
9 comments
Comments feed for this article
February 17, 2005 at 1:18 am
Merlinx
This post has been removed by the author.
February 17, 2005 at 1:20 am
Merlinx
One of the core components missing in the ERP “yellow-brick road” for the textile industry is BPR or Business Process Re-engineering. Deploying an ERP system requires a combination of high-tech and high-thinking at the same time. Then it works. Just deploying an ERP system won’t solve any organization’s problems. It needs to go through a process of BPR to adopt and adapt its business processes so that they can be used with a high-tech integrated automated solution like an ERP system. The people using the ERP system have to get used to managing their business processes in a way that makes using the ERP system in their midst conducive and productive. Else they’ll just end up doing twice the workload — once on paper in their old way then data entry clerks will be punching that into the ERP system akin to what has happened in many government departments that went for automated solutions without BPR and training initiatives in place.
The flip side of the coin is that the vendor doing an ERP implementation must also understand these things. I.e. doing a successful ERP implementation is not just learning the tool and installing it. The ERP vendor needs analysts capable of studying a business, carrying out BPR and at the same time providing a blueprint to the ERP technical team on how to install and configure it. The same analysts then need to work with the tech team to conduct trainings both in the tool and process aspects with the end users so they know how to effectively use it.
Right now, our textile industry is in the stoneage. They have thrived thus far taking advantage of global quotas, which have been abolished by the WTO. Many are family owned businesses despite their sizes or turnovers and decisions are ultimately taken at the “family level” in a father-and-son setup. The core focuses in most textiles is on improving production and manufacturing aspects rather than streamlining operations and supporting areas. As a consequence IT is a stepchild. Textile companies in Pakistan cannot be compared with corporations in the pharma, oil and gas sectors or MNCs despite whatever they contribute to the economy. Many of them don’t have proper boards of directors and stockholder control that drive their growth. Many are run in a very “feudal” manner. That is why they are in trouble and jittery with the disappearance of quotas, because they’re not at par with other peers in the global textile industry and are thus threatened. When you know you can beat someone on pure merit, you don’t worry about quotas. That is pure common sense.
Some of the worst mess-ups in IT history are in the deployment of ERP projects. ERP systems maybe powerful, all-encompassing solutions for enterprise management but they are not panaceas and they also require substantial skill and experience to successfully deploy and understand. It is not everyone’s ballpark to toy with.
February 22, 2005 at 9:51 pm
Zen
This post has been removed by the author.
February 22, 2005 at 9:53 pm
Zen
Mail from MK “ERP Enterpreneur” . Somebody please knock some sense into him…I’ll post my reply next week
Re: Need some advice regarding marketing
Assalam-u-alaikum,
Dont know if u would be able to find time, but I am sure u will have some brilliant idea.
The problem is in marketing ERPs. I have found out that all the decision making powers reside in the
managing director or director operations so it is a tough route to go through a merchandiser or production incharge.Infact it increases the chances of somebody
not having the vision rejecting your proposal because they did not liked the presentation .
Anyways I was just wondering that if you as a journalist have to get some time how do you track the big guys, is it always the name of your magazine that clears the way or u have ever used some research to track and contact the decision maker.Any brilliant idea to get the power bearer’s atention would be welcome.
thanks.
MK
February 22, 2005 at 10:34 pm
Merlinx
I think he has a valid question for you, how do you get all those big brasses to listen to you…? {…sneaky, smartass grin…}
February 23, 2005 at 2:08 am
Merlinx
Dear Mr./Ms. MK, aside from pulling Zen’s leg, if you are planning on selling an ERP product then all roads lead through the CFO, VP (Finance), Finance Director or whoever is the head of finance. An organization capable of buying an ERP will invariably have a head-of-finance and it is usually this role that makes the
decision in the case of enterprise scale solutions. So make sure when you pitch you have the finance top guy at the presentation or in your sales loop. Finding out who it is is your job.
Also the same rules that apply for someone like Zen trying to line up an interview or such does not apply in your case. Zen doesn’t go to an organization trying to sell a multi-million rupee/dollar IT solution but you do. Her goal is information-gathering, not sales. Even if she is selling something it is worth RS. 275 per year if it is a magazine subscription or a few thousand if it is an ad; your deal maybe worth hundreds of times this amount that directly affects their revenue. Her deals don’t affect the company’s revenue flows and business foundations. You have different “in-roads” in an organization, and different destinations. I think you’re pitching to the wrong people.
February 23, 2005 at 6:23 pm
Faraz Khan
None of the local textile mills (extremely large players aside) can afford SAP, TIM or even anything developed in Oracle developer for that matter (due to oracle’s licesnsing cost). What any third-world country needs is a lightweight open-source product that functions as a ERP/CRM. The ‘local industry developing products from scratch’ approach has obviously failed worldwide as solutions developed by a small group of individuals for commercial reasons cannot be kept bug-free and supported completely.
There are open source solutions available. Web-ERP is one (www.weberp.org) and so is Compiere as you mentioned. Compiere will soon go database independent and function with Mysql.
Web-ERP for accounting,AP,AR,GL,Order entry and Inventory is a great solution for the SME Manufacturing shop. For Sales we have Sugar and XRMS. For Help desk management we have Request Tracker (RT) and for project micro-management we have Dot-Project. These are all Production quality stable systems that are being used professionally world over. Any GAAP compliant accounting system (which pakistan is) can easily make benefit of these standardised systems.
February 23, 2005 at 6:27 pm
faraz khan
One thing that might become an issue is “integration” of all the peices we have mentioned, implementation and support.
All solutions are developed either in Java or php with a Mysql backend. Integration, implementation and support of these systems can be carried out as a paid for service by a open source consultant such as Emergen Consulting (www.emergen.biz)
February 26, 2005 at 12:56 am
yasirmemon
Faraz, I would agree that the open source implementations ERP and CRM software would cost (in terms of money) a fraction of what SAP or Oracle might cost.
However even if you opt for a paid service to help you in the integration and support of such ERPs, I dont think you would be anywhere close to an implementation having the sort of BPR performed for SAP and similar ERPs.
Personally, im not in the favor of any ERP solution in which the ERP builder (or its affiliate) doesnt personally perform a BPR process. In case of these off the shelf open source ERPs we lack the “Best Practices” part of developing new processes to replace older inefficient ones. The makeup of the company of the ERP often becaomes something close to a new software skin that allows you to do all the work from the same screen rather than a true ERP that changes the processes altogether…
When choosing an off the shelf ERP, it might be succesful at times with the right BPR, however mostly its a succesful deployment but not something that can be called a succesful implementation of an ERP. It fail to produce optimzation and efficiency in the company processes due to the fact that much of the so called new processes are actually the same old “Business” processes , only that now they are automated.
This is exactly what the local (Pakistani) made ERPs for our own market lack. Having had worked for a local ERP firm, I believe what the local ERPs are lacking badly is that they arent able to convince the “Saeeith” sitting on the big chair ti think about changing the way his company is run. (making the companies do a Business Process Re-Engineering process)
Software firms often dont focus on bringing in more efficient processes and instead strive to automate and integrate every department and the old processes that the company holds.