In the highly competitive cement sector, the implementation of SAP’s flagship product, SAP S/4 HANA will help Mangalam Cement reduce fuel, production and sales and distribution costs significantly
According to a recent cement sector report by Religare, cement volumes will grow 7-8% CAGR over FY16-FY18. This will be primarily driven by a renewed government thrust on big-ticket projects such as the dedicated freight corridor, state metros and low-cost housing.
On the back of this positive macro outlook, cement majors like Mangalam Cement, have been boosting their production capacity. The firm has expanded its production capacity to 4.0 MTPA from 3.25 MTPA, at its factory in Kota, Rajasthan.
To further boost their efficiencies, cement manufacturers like Mangalam Cement, are trying to improve the productivity of the entire value chain using the latest technology. The firm is among the first few firms in India to take the lead and implement SAP S/4 HANA ERP. “Among all, the tool will bring in tremendous benefits in saving fuel, production and sales & distribution costs,” says Yaswant Mishra , President(Corporate) & CFO , Mangalam Cement. High freight and fuel costs are some of the costs that directly affect margins for cement manufacturers, and a technology like SAP S/4 HANA ERP, will help in improving efficiency.
After going live on SAP S/4 HANA on 1 April, 2016, the company’s CFO, Yaswant Mishra is upbeat about the implementation. He says, “After implementing, SAP S/4 HANA, the management is expecting a minimum 2-3% of savings on logistics-related costs. Advanced information availability will enable us to take decisions about how, when and where to send the material”.
SAP S/4 HANA: The power of real time for the entire value chain
The real time availability of data guides the firm to take the right decisions at the right time. “The S/4 business suite will also help us in sending the right material to the right location, which will help us in reducing the number of godowns in a particular location, which in turn will lead to reduction in costs” says Mishra.
The gate entry system at the company’s factory in Morak, Rajasthan and Aligarh , UP have been completely automated. “We have got rid of the manual system of registering the incoming and outgoing material. The visibility of the goods in transit (GIT) is also a major benefit. For example, in case the goods has left the Morak factory for Jaipur, the related person can view the GIT “ says Sandip Pradhan- IT Head of Mangalam Cement Ltd.
Taming freight and production costs
The cement prices see swings on a daily basis. “The main cost for us is the freight cost. If we use SAP S/4 HANA and optimize the routes taken by the vehicles to deliver the consignments, and go by destination pricing mechanism, it will result in a definite reduction in the freight costs which has a direct bearing on the bottom line,” says Pradhan. The greatest advantage with online and real time monitoring of raw material consumption allows the management to take appropriate decisions to reduce the production costs.
After implementing SAP S/4 HANA, both the freight and sales & distribution costs – the top two cost items will reduce to a considerable extent and production costs will also reduce.
In the legacy ERP system, the production, plant maintenance and Quality management modules were absent but in the SAP S/4 HANA system, these three modules are also integrated. In the long run, this will help us big time in improving the operational efficiency to a great extend,” says Yaswant Mishra.
Faster decision making by the top management
Mangalam cement has also implemented, the Decision Support System (DSS) tool, Business Objects (BO). It is composed of near to real time dashboards – logistics, commercial, production available on laptops and mobile. This is useful for the top management to take decisions quickly and also find root cause analysis of various challenges.
Due to the disconnected processes, there was a requirement to do a lot of reconciliation at the month end. The MS-Excel has been eliminated and access to any financial reports is possible in a matter of clicks. The ‘SAP Fiori’ makes SAP S/4 HANA available to the top management on mobile for faster decision making.
Mangalam cement has bought about 320 licenses of SAP S/4 HANA and 30 separate licenses for Business Objects and SAP S/4 HANA. This marks the beginning of becoming a true digital Organization.
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