TCS Transformers - Dec 2010

An IDG Custom SOLUTIONS initiative IN ASSOCIATION WITH

Transforming Business Through Judicious Application of IT

DIESL DRIVES FORWARD WITH TECHNOLOGY

The story of how technology helped the third party logistics company transform from a trading unit to a full fledged logistics partner with country wide presence.

PLUS INTERVIEW Manish Choksi, Chief - Corporate Strategy & CIO, Asian Paints, shares insights on how CIOs can meet the multiple challenges that today’s business is bringing before them.

TRANSFORMERS CASE STUDY

DIESL DRIVES FORWARD WITH TECHNOLOGY

Here’s the story of how technology helped the company transform from a trading unit to a full fledged logistics partner with country wide presence.

Company DIESL Industry 3rd Party Logistics (3PL) Offering Primary and secondary transporation services.

IESL, short for Drive India Enterprise Solutions Ltd., a TATA group company, started operations in 2003 as a trading unit with presence in 6 states, importing and reselling handsets for Tata Teleservices. In 2006, the company started its second line of business – logistics services, which has now become a core offering. Today, DIESL provides logistics and material handling services in 4000 cities and towns dotting 90% of districts in India. The company has 176 warehouses to cater to logistics requirements of a wide range of industries like telecom, consumer durables, FMCG, retail, automobiles, etc.

On the trading side of its business, DIESL’s SAP ERP had matured and was well aligned to that business need. For instance, the system helped in achieving nil variances in finance across all the business units; the company was able to declare results on time.The confidence levels in the IT system was high. When a new

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line of business was spun, however, it soon became evident that technology had to be relooked.

From Trading to Transport Transformation

Since DIESL started off as a trading company, its IT systems and solutions were geared towards the typical operations of a trading business. As DIESL grew in scale to the logistics giant that it is today, its CEO Ajay Chopra realized that making the right technology choices was critical to keep the business sustainable as it grew. Ajay was no stranger to the concepts of utilizing technology to improve business processes and bring in transformation. In the early days of DIESL, when the company was predominantly into trading, he saw the dramatic shift in finance operations that an SAP ERP brought, compared to a standard Tally package that they running earlier. As the logistics business grew, it would become near impossible to mange the tedious and complex operations like fleet management and warehouse inventory management manually.

The first SAP ERP was deployed in 2005 and was configured to support DIESL’s trading business. A year later when the logistics business started, the company continued using the existing ERP, but many processes were manual / only semiautomated. For instance, the ledger records were created by hand and then entered into the ERP; log records were Excel based, and so on. Processes like billing were running in isolation and the transactions had to be input manually in order to generate bills. In the early days of DIESL’s logistics business, the company was in fact, using their customers’ warehouse management and allied systems to manage their respective shipments.

Though the ERP was not configured for the nuances of a Third Party Logistics (3PL) company, DIESL managed to ‘keep the lights on’, until 2009.

At this point, the limitations of the system were beginning to show. “It was difficult for us to check revenue leakages or be up to speed with receivables from customers and payables to transporters”, Ajay explains. The introduction of logistics specific tools became a business imperative.

From Drawing Boards to Execution

TCS, the knowledge partner for DIESL started the IT journey for the new business by studying global best practices in the logistics industry and drafted an IT roadmap. The IT architecture was conceived with three main blocks – transportation management, warehouse management, and track and trace. TCS and DIESL then evaluated various options for each of the components that

The OTM tool enables us to optimize fleet operations and thereby maximize the benefits of scale.

Ajay Chopra, CEO,DIESL.

would make up the entire IT landscape. Since an SAP ERP was already in place since 2005, DIESL decided to continue with the SAP backend and build or integrate logistics specific components into it.

DIESL and TCS zeroed in on the Oracle Transportation Management (OTM) tool for fleet management and Infor WMS for warehouse management. To manage the fleet of trucks that navigate the country’s highways, DIESL has also decided to build a track and trace module on top of a Oracle portal, which will interface with the transport and warehouse management systems.

This will allow the company to build a web frontend which its customers can use to check the status of their cargo. They would gain visibility by being able to locate the warehouse where their shipment is stored, or check if it is in transit.

This feature would go a long way in earning the trust of their customers.

Technology Boosts Benefits of Scale

As a 3PL (Third Party Logistics) provider, DIESL’s customers see value in its offering because the company is able to harness the benefits of scale.

From transportation fleet to warehouses, the company is able to share its resources to service more than one customer at a time. Currently, the company has rolled out OTM in 110 of 170 of its warehouses. In these 110 locations, the transportation planning capability of OTM has come into play. The tool enables optimizing the capacity of the fleet by carrying shipments of multiple customers along a given route. For instance, if a customer has a 2 tonne load which a truck with 5 tonne capacity is carrying, the remaining 3 tonnes

TRANSFORMERS CASE STUDY

can be utilized to move cargo of a second customer.

In the absence of a tool to prompt the manager with information on additional loads that can be picked up, it would be a Herculean task to coordinate and plan routes manually. With the source and destination of all customers available in the database, the tool maps all pending pickup and drop off points on a given route that a truck takes. The benefit for business is easy to see – with each truck running optimally, without human errors of judgment, DIESL’s benefits of scale go up – meaning, more value to the customers and more revenue for the company.

DIESL has plans to deploy OTM across the remaining locations in the coming months, which will then make possible the best load optimization of every truck along every route.

The Infor WMS tool deployed at the company now extends to each of their customers. The people managing the Infor WMS are now ‘flexible’, as in, being able to cater to any of DIESL’s customers. To illustrate this with an example – to cater to a retail customer who sees a high demand during festive times, DIESL can easily reallocate resources from its pool during crunch times to manage the additional transactions of that customer. In the days before this tool was deployed, the warehouse staff had to be crosstrained on various customers’ ERP, and hence

Business users now get a dashboard view of the transactions of the previous day along with associated revenue figures.

We now optimize the load in the trucks we ply thereby reducing the costs associated with sometimes running multiple trucks on the same route. shirish gariba CIO, DIESL.

their ability to be assigned to work on different customers was limited.

The Visibility Advantage

At the time of blueprinting the OTM before implementation, the ability to generate reports and provide a dashboard view of daily transactions was added to it. The system now provides a 360 degree view to the business users. It is now possible to view on a dashboard the transactions carried out and the associated revenue figures at any of the warehouses where OTM is currently implemented.

“This (OTM) has led us to plan better and have much better controls, develop cost consciousness by being able to pick up trucks (for hire) from the market at competitive rates, and achieve timely revenue realization.” says Ajay. The company is using the tool’s built-in capability to generate reports to allow senior business executives to get a summary of the previous day’s performance, including information on the number of trucks run, the capacity utilization of those vehicles, the cost incurred and the revenue generated. A full fledged BI solution is on the cards as well. For now, Ajay says, the reports that he is able to generate out of the existing system is giving him and his team the insights they require manage and grow their business.

OVERCOMING Challenges

Training for Change Management: Not unlike many projects of transformational nature, DIESL too had to tackle change management issues. For example, during implementation, the warehouse staff had to work on the earlier semi-manual system, as well as learn and use the new Infor WMS tool. Accustomed to a relatively simple spreadsheet style, the users faced a learning curve in the initial days. The management provided trainings and impressed upon the employees the benefits of the new IT solution. ‘Super trainers’ were identified as evangelists amongst the field staff and were specially trained to impart peer-to-peer level guidance to other employees. These efforts paid off – at times, employees were seen staying back in the warehouse beyond office hours in order

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The Transport Planning and Optimization component of OTM is at the heart of DIESL’s fleet management.

DIESL’S I.T. LANDSCAPE

OTM

( ORACLE TRANSPORT MANAGEMENT )

TRANSPORT EXECUTION

PLANNING & OPTIMIZATION

INFOR WMS

TRACK & TRACE

This module of the OTM prepares receivables and payables for each vehicle in the fleet.

The critical tasks of optimizing truck load capacity and choosing optimal route for delivery is done by this module.

DIESL extends this warehouse management tool to all of its customer locations to manage cargo and inventory.

When fully implemented, this will enable GPS-GPRS based location tracking of vehicles.

to complete the transactions for the day as they learnt their way around the system.

DIESL is looking to continue the training process in the future as well, and “making OTM a way of life in the company”, in the words of Ajay.

Connectivity Issues: Since DIESL operates out of customer locations, connectivity was a cause of concern during the early days of implementation. “India is still not at a state where one can confidently assume that all locations will meet a minimum connectivity criteria. You have to learn to make do with whatever is available”, Ajay remarks on a difficult reality. In some cases where connectivity is so poor that it takes more time to connect to the remotely hosted ERP than doing the same task manually, DIESL has found a workaround in the form of wireless data cards that connet to a USB port on a PC.

Track and Trace The Road Ahead

The ability to track the location of a truck and hence the shipment it carries, provides two advantages to DIESL. One, it brings in visibility within the company and two, the ability to see whether a cargo is in transit or in a particular warehouse enhances the customers’ confidence in the company.

Depending on the customer requirement and the kind of transport and logistics support required, the company plans to implement different levels of tracking. Since DIESL uses trucks from transport-

ers, it is not practical to install full fledged GPS / GPRS devices on them. A solution that is worked out comes in form of swipe cards being issued to drivers plying on major routes and instructing them to swipe them on tracking devices placed in predetermined fuel stations. The tracking device is in turn set to talk to the track and trace solution to enable the company see a truck’s progress along the waypoints. DIESL is looking at a six month window to roll this system out.

Apart from primary distribution (movement between factory and depot or between warehouses), DIESL also undertakes secondary distribution. A typical example would be that of a retail customer, for whom, the company also manages seeding a showroom, as well as home deliveries. In cases like this, DIESL has plans to install a GPS location sensing tracking receiver in combination with a GPRS transmitter that sends the location information to the OTS. The OTS has the ability to receive inputs from location based device and combine that data with the shipment associated with the respective delivery vehicles. This will enable DIESL to know the exact number of pieces of good delivered, the pending deliveries, idle time of the vehicle, etc. This will bring in much needed transparency in the field operations.

From capacity and route optimization, to business reports, technology is powering integral processes of this 3PL company and is set to do more with the proposed track and trace mechanisms.

TRANSFORMERS INTERVIEW

Redefining TECHNOLOGY

Roles Manish Choksi, Chief - Corporate Strategy & CIO, Asian Paints, shares insights on how CIOs can meet the multiple challenges that today’s business is bringing before them.

Manish Choksi

Chief - Corporate Strategy and CIO, Asian Paints, Mumbai

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The increasing focus on business-IT alignment also implies an increasing dependence on technology for core business processes. Should a CIO then be a technology expert first or is understanding business more important?

I don’t think there’s a single right answer to this dilemma.

In today’s business, there is not a single role in a C-level executive’s charter that is devoid of some business acumen. So, being a ‘pure technologist’ is no longer sufficient. Having said that, a CIO should be able to visualize the scope and reach of a given technology and gauge just what can be delivered to the business in a given time frame and budget. Therefore, there is no choice but to find a combination of both. Should the ratio be 5050 between technology and business skills? Not necessarily so.

Individuals come with their own blend of skill sets – a package.

IT heads who come from a business background will harness their teams’ capability with technology and hence deliver in their role. And those with technology skills may take a bit of a handson approach. Depending on his best strengths and background, different CIOs approach their role differently.

To reiterate, I don’t think there is a choice but to have a CIO whose strengths include some amount of technology, some amount of business, the ability to effectively handle change management and deal with ambiguity at times.

Do you think this business – technology mix in a CIO depends on the industry vertical?

Yes, but not to a large extent, and in ways that are less obvious. For example, the financial services space is all about technology powering business processes and customer offerings. In industries like this, it’s even more critical for the technology leadership to have very strong grounding in what business wants to achieve. IT can play a role in helping achieve those objectives. In an FMCG company, issues pertaining to supply chain & distribution and customer relationships become more critical. So, while the requirement to understand specific business areas may vary according to the industry, the need for an overall business understanding is constant.

Not all technology projects can be measured with a numbers yardstick (for instance, security). Some business heads argue that all projects need to have demonstrable RoI. What is your take on that issue?

At the outset, let me say that there is no IT task that can be carried out with business in isolation. Aside from the proverbial keeping the lights on function, IT projects have to result in some change in business, either in terms of process or by bringing in visibility. You should not be saying ‘IT RoI’ – it is actually ‘Business RoI’. When business overall benefits from a project, it is not always possible to quantify a percentage contribution coming from either technology or as a resulting change in business process itself. In such cases the benefits might be seen as being ‘indirect’ while in other instances the benefits maybe more direct and measurable. Rather than

being preoccupied in measuring RoI, IT should view their goals as benefiting a business process with the help of technology, rather than saying IT alone, or in the greatest part, brought about a business change.

What do you feel about the total outsourcing of IT? Why do you think large enterprises in India are still hesitant to take the plunge?

As far as total outsourcing is concerned, the manner in which it was done a few years back is pretty much dead.

I don’t think even in the West anyone is talking about total outsourcing today. Everybody is doing selective outsourcing of some areas of their IT, where there is an affinity to leverage the scale benefits of service providers. Another driver for outsourcing is, if a technology or solution adopted is new and the required skills to manage it are not available internally.

Every organization has key business differentiators that give it a competitive edge. IT solutions that provide the business with competitive differentiation are least likely to get outsourced. The total IT outsourcing which was adopted in the Western countries a few years ago failed to deliver the promised benefits and I don’t think businesses are going to repeat the same mistake.

When IT has to cater to multiple internal stake holders, and at the same time there are fewer people to do it, how do you think your IT Head should prioritize his projects?

Like in other business functions, IT too will always have competing demands - you have to try and meet all of them. Just like business requirements are prioritized during an annual plan, IT too should be looked at in the same perspective.

If there is a business objective that the organization has signed up for, and technology is the answer to that objective, then in order of that business priority, the associated IT project has to be executed. Hence, it is easy to prioritize the big projects – the ones tied directly to top priority business goals.

The routine maintenance tasks that people refer to as ‘keeping the lights on’ are expected to be executed. A CIO does not need to be told to keep his ERP running, for instance. It’s a given. It is the projects in between – neither large enough to be tied to a business goal, nor part of routine maintenance that often queue up on a CIO’s to-do list. IT heads have to take discretionary calls on these projects based on the prevailing priorities at the time of execution.

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