Hatsun Agro Product Limited integrates its entire supply chain with IBM and SAP

Published on 01-Jun-2012

Validated on 06 Dec 2013

"Our experience of working with IBM Global Business Services during this implementation has been an extremely productive one, and it was their committed and flexible approach that guaranteed the success of this project. As well as delivering an excellent SAP implementation, IBM Global Business Services has stood by our side through every stage to support our business and process requirements – this involvement makes IBM a partner of choice." - Sathyan Chandramorgan, Executive Director, Hatsun Agro Product Limited

Customer:
Hatsun Agro Product Limited

Industry:
Wholesale Distribution & Services

Deployment country:
India

Solution:
BA - Business Intelligence, Business Process Management (BPM), Enterprise Resource Planning, Information Integration, Small & Medium Business, Supply Chain Management

IBM Business Partner:
SAP

Overview

Based in Chennai, India, Hatsun Agro Product Limited (Hatsun) is India’s largest private dairy. Hatsun manufactures and distributes a very wide range of dairy products including fresh and long-life milk, cheese, butter and ice cream. Formed in 1970 as a small ice cream company, Hatsun has grown to become a $300 million business.

Business need:
Hatsun manages a large and complex milk procurement and production network. Legacy systems did not offer the high levels of integration and insight needed to manage its supply chain efficiently, and for perishable foodstuffs this leads to wastage and financial loss.

Solution:
Working with IBM Global Business Services®, Hatsun transformed every aspect of its business process management by implementing comprehensive SAP ERP solutions. IBM deployed a customized solution for milk procurement and production based on the SAP ERP platform, and enabled a web-based single point of access to information, enterprise applications and services using SAP NetWeaver Portal.

Benefits:
Increased frequency of procurement payments to suppliers from a fortnightly basis to a daily basis, providing greater confidence to the supplier community. Integrates a complex supply chain and streamlines business processes, helping to improve process efficiency. Introduces greater organizational rigor – Hatsun is now able to focus on areas of wastage and inefficiency, allowing it to reduce company overheads. Offers enhanced visibility of the entire procurement and production system, and provides higher quality data, enabling senior management to make more effective business decisions.

Case Study

Based in Chennai, India, Hatsun Agro Product Limited (Hatsun) is India’s largest private dairy. Hatsun manufactures and distributes a very wide range of dairy products including fresh and long-life milk, cheese, butter and ice cream. Formed in 1970 as a small ice cream company, Hatsun has grown to become a $300 million business.

Through a large and complex procurement and production network, Hatsun procures an average of 1.8 million liters of milk every day from a network of approximately 240,000 farmers. The milk is collected from 8,500 villages and transported to dairy units for processing and packaging, before finally being shipped to distributors. Due to the short lifespan and stability of many of its products, Hatsun works within very strict deadlines to ensure that its products meet stringent quality standards.

Sathyan Chandramorgan, Executive Director of Hatsun Agro Product Limited, explains, “Supply chain and logistics are particularly important in the Indian market, as the warm climate makes our customers very sensitive to shelf life. If a customer sees two products on the shelf at a similar price, he or she will be more likely to choose the item with the later expiration date. It is critical for us to get our products onto the shelves as soon as possible, to ensure that we are providing customers with the freshest products.”

Integration and functionality challenges
Hatsun wanted to accelerate its supply chain and improve logistics, in order to reduce product losses, identify and correct process inefficiencies, and increase profitability. Its existing IT architecture, however, hampered this as it comprised a number of decentralized software systems that were not tightly integrated and required significant manual intervention for reconciliation among the systems.

B. V. Nath, Head of Accounts and Systems at Hatsun Agro Product Limited, comments: “Managing our supply chain, especially procurement and pricing, is a complex process. Previously, we were handling this with a legacy solution, which comprised a number of disparate applications that had been added over the years and were poorly integrated with one another.”

“We introduced this system when the company was much smaller, and it really was not configured to meet the demands of the business as it grew. Many of our processes and structures changed, but the solution was not flexible enough to change with them, and it was starting to hold us back.”

For perishable foodstuffs, lack of information on product location, logistics and use-by data can lead to wastage and financial loss. Hatsun wanted to better manage the complex logistics involved in milk procurement and production, gain greater visibility of its supply chain and ensure the smooth flow of information between all areas of the business.

Tailor-made solution
After carefully evaluating a number of options, Hatsun worked with IBM Global Business Services and selected a comprehensive SAP solution for its milk procurement and production processes. Sathyan Chandramorgan states: “We believed that SAP ERP would be able to provide us with the highest levels of integration across all of our business processes, more so than any other solution. What really won us over was the fact that the IBM Global Business Services team already had experience installing SAP ERP systems at other large dairies in India, and that they could develop a custom milk procurement module for us that would integrate seamlessly with the new SAP platform.”

IBM Global Business Services had developed a custom solution for the Milk Procurement and Payment for Hatsun based on the SAP ERP platform. The IBM team used this solution to form the basis of a custom-built milk procurement module for Hatsun. In a way that was simply not possible before, the fully integrated solution gives Hatsun end-to-end process visibility of the quality, quantity and price of the milk the company procures from farmers.

Hatsun implemented a comprehensive suite of SAP ERP applications covering all of its line-of-business processes, including modules for Materials Management (MM), Sales and Distribution (SD), Logistics Execution (LE), Production Planning and Control (PP), Quality Management (QM), Plant Maintenance (PM), Financials (FI) and Controlling (CO). It also installed SAP ERP Human Capital Management (SAP ERP HCM), as well as SAP NetWeaver Portal and SAP NetWeaver Business Warehouse.

“We found the IBM team to be extremely competent and professional in their approach to this project,” notes B. V. Nath. “The IBM Global Business Services consultants were very flexible and open to receiving ideas from our end, and made sure to take our specific business requirements into consideration, which helped to ensure that we got a solution that was precisely tailored to our needs.”

The project implementation was completed over a period of one year, and covered Hatsun’s corporate office at Chennai, nine production plants, 78 chilling centers, and 40 depots, for a user base of approximately 600 employees.

All of the SAP applications (development, quality and production instances) run on six HP servers, and bundled IBM DB2® software is used for managing SAP application data in the Linux environment.

Seamless integration, from grass to glass
The new SAP solution provides tight integration across Hatsun’s entire milk procurement and production chain, and has streamlined and transformed company processes. Whereas in the past, the company struggled to manage multiple decentralized systems, there is now a definite process flow across its supply chain, which has significantly increased operational efficiency.

Hatsun considers the tight integration of its SAP ERP Financial Accounting application with the rest of its SAP ERP software to be a particularly valuable benefit. Real-time integration of Financial Accounting with Controlling has improved efficiency and accelerated the delivery of accurate, quality information to company executives, helping to drive more informed decision making.

“We are now seeing much more seamless integration between the different aspects of our supply chain, which helps us to get our products out to the customer much faster,” says Sathyan Chandramorgan. “By streamlining and accelerating our procurement and production process, SAP ERP is helping us to remain on top of the competition by delivering fresher products to consumers more quickly.”

Additionally, the new milk procurement module designed by IBM Global Business Services for SAP ERP has helped to integrate what were once isolated processes. Hatsun is now well-placed to manage the complexities of procurement, including activities such as measuring the fat quantity and quality of procured milk at the source and managing payments to farmers. It has now increased the frequency of procurement payments to suppliers from a fortnightly basis to a daily basis, providing greater confidence to the supplier community.

“We consider the custom milk procurement module designed by IBM to be the most valuable component of this project,” states Sathyan Chandramorgan. “Our business runs on the availability of milk, so it is vital for us to be able to smoothly manage all aspects of the procurement process. It has integrated procedures and given us an improved picture of our procurement network, which helps us to work more quickly and efficiently, so that we can deliver the freshest, best quality products to our customers at a lower cost.”

Improving operational visibility
Hatsun benefits from enhanced visibility of its entire supply chain, and the integrated SAP applications accurately measure key information about the products that it has procured and produced.

For example, it is now easy for Hatsun to produce daily figures on exactly how much milk it has collected, the rate at which it is collected, as well as the fat content and quality of each batch. The improved data visibility and quality from SAP ERP applications helps senior management to make more informed business decisions, based on the latest, most accurate information, and results in improved operational efficiency and effectiveness.

The SAP ERP software also gives the business a much clearer breakdown of cost structures at each stage of the production and distribution process. “Previously, we were only able to draw up a general overview of cost figures, such as the total cost of supplying milk to the market,” notes B.V. Nath. “Now, we have precise details of different cost segments from all of our activities, and we are now able to create monthly costing sheets, which allow us to track our costs over time and make useful comparisons.”

Targeting areas for improvement
The enhanced insight available from the SAP ERP applications and the tailored milk procurement and production application allows Hatsun to concentrate on areas for improvement, and see where overheads can be reduced or profit margins can be improved.

Accurate, validated information has also brought about a shift in business culture at the company, by introducing greater organizational rigor at all levels. Now that there is greater visibility across its business processes, Hatsun has become more conscious of costs and efficiencies. Armed with data, managers are able to target areas of wastage and inefficiency, and introduce strategies for change, which helps to make the business more productive and profitable.

“The new SAP ERP solution allows us to understand what we need to be doing better, and has significantly improved our operations,” concludes Sathyan Chandramorgan. “Our experience of working with IBM Global Business Services during this SAP implementation has been an extremely productive one, and it was their committed and flexible approach that guaranteed the success of this project. As well as delivering an excellent SAP implementation, IBM Global Business Services has stood by our side through every stage to support our business and process requirements – this involvement makes IBM a partner of choice.”

Products and services used

IBM products and services that were used in this case study.

Service:
IBM-SAP Alliance, IBM Global Business Services

Legal Information

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