ERP Report Hinopak_Completed

To:

Mr. Ameer Rizvi

By:

Sheikh Bilal YousufRana KashanSafdar JangMurtaza AbbasTanveer MukhtarSalman ArjumandMuhammad Shafqat

CONTENTS1. About the Company......................................................................................................................4

2. Business of the Company..............................................................................................................4

Salient Features...............................................................................................................................5

3. Hinopak’s Products.......................................................................................................................6

Buses...............................................................................................................................................6

Trucks and Prime Movers.................................................................................................................6

Specialized Vehicles..........................................................................................................................7

4. Hinopak’s Mission Statement.......................................................................................................7

Vision...............................................................................................................................................7

Mission............................................................................................................................................7

5. STRATEGIC DIRECTION..................................................................................................................8

6. COMPANY'S CUSTOMER COMPETITIVE STRATEGY........................................................................9

7. Hinopak’s Position in the Industry..............................................................................................10

8. Hinopak’s Market Share..............................................................................................................10

9. Current Market Issues.................................................................................................................10

10. Company Structure and Organizational Structure....................................................................11

11. Competition............................................................................................................................11

12. Prior Implementation Scenario...............................................................................................11

13. Information System Implementation at Hinopak.....................................................................12

14. Issues Faced During and after Implementation........................................................................13

Top Management Issues.................................................................................................................13

Departmental Issues.......................................................................................................................13

IT Dept Issues.................................................................................................................................14

15. Need for ERP...........................................................................................................................15

16. ORGANIZATIONAL OBJECTIVE AND ERP COMPATIBILITY.........................................................19

17. ERP SELECTION PROCESS AT THE COMPANY............................................................................20

18. ERP Industry in Pakistan..........................................................................................................20

Future of ERP in Pakistan................................................................................................................22

19. Major Vendors in Pakistan and their Market Share.................................................................23

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AMR Report Findings and Analysis..................................................................................................23

20. CONTRACT AWARD.................................................................................................................24

21. ERP Implementation Approach...............................................................................................25

Pre-implementation Approach.......................................................................................................25

ERP implementation phases...........................................................................................................25

22. ERP Implementation Methodology.........................................................................................26

23. Modules implemented............................................................................................................27

Financials.......................................................................................................................................27

Supply Chain & Manufacturing.......................................................................................................27

Human Resource............................................................................................................................27

24. ERP Project Management and Change Management...............................................................29

25. Post Implementation of ERP in Hinopak..................................................................................30

26. Impact of ERP implementation on Hinopak.............................................................................31

27. Employee Satisfaction Survey.................................................................................................32

Satisfaction Results (Intended / Accomplished)..............................................................................34

28. Conclusion..............................................................................................................................34

29. APPENDIX...............................................................................................................................36

Business Processes.........................................................................................................................36

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1.1. ABOUT THE COMPANYABOUT THE COMPANY

Hino Motors Japan and Toyota Tsusho Corporation in collaboration with Al-Futtaim Group of UAE and

PACO Pakistan formed Hinopak Motors Limited in 1986.

In 1998, Hino Motors Ltd., and Toyota Tsusho Corporation obtained majority shareholding in the

company after disinvestments by the other two founding sponsors. This decision to invest in Hinopak at

a time when the country's economy was passing through a depression and the sale of commercial

vehicles was at an all time low reflects the confidence our Principals have in our company and their

commitment to the Pakistani market. Hinopak is the trusted market leader with over 65% share in the

Pakistani Truck and Bus industry. Hinopak a vital contributor in saving of foreign exchange is also

providing jobs and plays a pivotal role for the development of the local industry through its progressive

manufacturing.

By continuing to move forward and staying alert to the ever-changing market & social needs, Hinopak

will continue to be a successful and respected corporate citizen of Pakistan, reflecting their commitment

and belief in the Hinopak corporate philosophy to "contribute to the development of a more prosperous

and comfortable society by providing the world with a new set of values".

(source: www.hinopak.com)

2.2. BUSINESS OF THE COMPANYBUSINESS OF THE COMPANY

Assembly Operations Plant, Body Operations Plant, and Product Support constitute three main working

units of Hinopak Motors Limited.

Assembly Operations Plant (AOP) is used to assemble Bus and Truck Chassis. Head Office is also located

inside this plant. Quality Assurance Department, Material Operations Department, and Production are

the main areas of AOP.

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Body Operations Plant (BOP) is used to fabricate and assemble Bus and Truck Bodies. It is at a 1km

distance from Assembly Operations Plant and has its own Quality Assurance and Material Operations

Departments. BOP has its own Engineering and Design Department as well.

Product Support Department (PSD) provides 2S services to customers. It is responsible for providing

Spare Parts and Services. PSD has three branches in Karachi, Peshawar, Multan, and Lahore.

Organization has Managing Director who is supported by Deputy Managing Director, Directory

Marketing, Director Personnel and Administration, Director Production, and Director Material

Operations. General Manager Finance reports directly to Deputy Managing Director. GM Finance is also

heading MIS department.

It was in 2002-03 that the management realized the need for an integrated solution to cater to the

needs of the company. The first idea was to build an integrated system by its own IT staff. MIS started

working on this idea and it worked on HR module and along with that they started working on the

analysis of various modules as well. Four months down the road it found out that it was not physically

possible for MIS department alone to build a whole integrated system for the entire organization. It was

taking too much time and there were various software issues and bugs which couldn't be handled at

that point in time. So management started looking for pre-packaged software available in the market.

SAP and Oracle both were evaluated. Company went for Oracle, due to cost benefits and availability of

local consultants. Sidaat Hyder Murshid and Land Marked Resources (LMR) did the implementation from

2005-07.

Hinopak’s Products

BUSES

The largest Manufacturer of Buses in Pakistan, Hinopak is fully-equipped to design and manufacture a

wide range of Bus Chassis and all types of Bus Bodies. Hinopak’s Bus Line Up includes the Roadliner

Supreme Luxury Bus for long journeys, Citiliner Intercity Buses, Citiliner Urban Buses and the luxury

Senator Coach and Rapidliner Deluxe Coaches.

Hinopak delivers only the safest most reliable products and remains the Pioneer in supplying the largest

number of Urban Buses those are successfully facilitating the commuters of Punjab and Sindh. Hinopak

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is fully-equipped to design and manufacture a wide range of Bus Chassis and all types of Bus Bodies.

Hinopak’s Bus Line Up includes the Roadliner Supreme air-condition Super Luxury Bus, Citiliner Intercity

Buses, Citiliner Urban Buses, Senator Pride, air-condition luxury coach and Rapidliner Deluxe Coach.


TRUCKS AND PRIME MOVERS

Hino 500 Series

The 500 series consist of vehicles that are in line with global Euro emission standards making Hinopak

the first Pakistani commercial vehicle manufacturer to introduce a complete range of environment

friendly vehicles. It has been especially developed and designed keeping in mind the rugged terrain in

order to meet the requirements of the diverse Pakistani automobile market.

DUTRO – Light Duty Truck

Hino 300 Series

Dutro is Hino’s globally renowned light duty truck with high-performance direct-injection engine that

delivers power with high-fuel economy and lower and cleaner emissions for minimum impact on the

environment. The Euro1 emission standards are adhered to through employment of electronically

controlled common rail fuel injection device.


SPECIALIZED VEHICLES

Our versatile range of special purpose vehicles play an important role in meeting the transportation

needs of our customers. These vehicles are engaged in prompt and safe hauling of a variety of supplies

like food, equipment and machinery, virtually from any location to any destination. Hinopak has been

able to successfully develop and market various buses and super structures satisfying the needs of

different customers.


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3.3. HINOPAK’S MISSION STATEMENTHINOPAK’S MISSION STATEMENT

VISION

“Total Customer Satisfaction, a set vision for the company. In pursuit new concepts have been

introduced such as a mobile workshops, 3S/2S dealership facilities, training and free service camps for

the vehicle owners and drivers”.


MISSION

"The mission of Hinopak Motors Limited is to provide the society with safe, economical, comfortable

and environment friendly means of transportation by manufacturing and supplying commercial vehicles

and services".


4.4. STRATEGIC DIRECTIONSTRATEGIC DIRECTION

Building on 22 years of success, the Hinopak continues to play a leading role in marketing commercial

vehicles with superior and advanced Japanese technology.

Market Leader in Pakistan, holding over 65% of the truck and bus market share.

First Pakistani automobile company and Hino affiliate to receive ISO-9001 certificate.

First Pakistani automobile company and Hino affiliate to receive ISO-14000 certificate.

First company to export buses from Pakistan.

Recipient of Quality Excellence Awards.

First automotive company to introduce "3S" concept in heavy-duty commercial vehicles market.

First company to supply busses under "Urban Transport Scheme" in Pakistan.

Recipient of Employers' Federation of Pakistan's Golden Jubilee Award for Human Resource and

Industrial Relations.

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Recipient of Corporate Excellence Award from Management Association of Pakistan.

Recipient of Employers' Federation of Pakistan's Golden Jubilee Award for "Excellence in

Productivity".

By continuing to move forward and staying alert to the ever-changing market & social needs, Hinopak

will continue to be a successful and respected corporate citizen of Pakistan, reflecting their commitment

and belief in the Hinopak corporate philosophy to "contribute to the development of a more prosperous

and comfortable society by providing the world with a new set of values".

5.5. COMPANY'S CUSTOMER COMPETITIVE STRATEGYCOMPANY'S CUSTOMER COMPETITIVE STRATEGY

Hinopak supplies not only high-quality and environment friendly trucks and buses but also provides the

best backup support including after sales service and training to all their valued customers throughout

Pakistan to achieve the goal of “TOTAL CUSTOMER SATISFACTION”.

To achieve its mission, Hinopak commits itself:

To individual institutional and international customers: to deliver high quality, safe, durable,

reliable, comfortable, environment–friendly and economical products and services to their total

satisfaction.

To employees: to foster corporate culture of mutual trust; respect for fundamental human

rights at work; opportunities for professional growth and personal welfare so that they are

proud of being a member of the “Hinopak Family”.

To the community and the nation: to contribute in economic and social development by

providing means of transportation and by progressive localization of the vehicles.

To the shareholders: to act in compliance with the norms expected of a subsidiary of the Toyota

Group of companies and make a meaningful financial return to the shareholders.

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6.6. HINOPAK’S POSITION IN THE INDUSTRYHINOPAK’S POSITION IN THE INDUSTRY

Hino Pak has been the market leader in heavy commercial vehicles since last 17 years. It deals in diesel

based busses, heavy commercial vehicles like trucks and special vehicles like fire truck or cement and oil

tankers.

Hino manufactures/assembles buses locally and enjoys 30% of the market share in the LCV range and

25% of the market share in the coach range. It, however dominates the heavy commercial vehicles by

holding on to 75% of the market, its overall share of the market is 66%.

Right now the company and the industry itself is facing a lot of pressure but it still retains its market

share and position as the leader in sales of heavy and light vehicles.

7.7. HINOPAK’S MARKET SHAREHINOPAK’S MARKET SHARE

Hino manufactures/assembles buses locally and enjoys 30% of the market share in the LCV range and

25% of the market share in the coach range. It, however dominates the heavy commercial vehicles by

holding on to 75% of the market, its overall share of the market is 66%.

8.8. CURRENT MARKET ISSUESCURRENT MARKET ISSUES

Security issues in the north and Baluchistan have started hindering heavy vehicle sales

significantly.

Prices of goods are increasing due to lack of sales and more storage

Lack of over all goods business in country has also hindered transport business and as such has

affected Hino’s sales

Leasing companies have very high rates which discourages investment

Maintenance has become costly due to lack of business

Imports have decreased due to devaluation.

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9.9. COMPANY STRUCTURE AND ORGANIZATIONAL STRUCTURECOMPANY STRUCTURE AND ORGANIZATIONAL STRUCTURE

It consists of One Assembly plant a Headquater, body operations plant and Product Support constitutes

of product parts and service. Its distributors consist of 1S (Sales only), 2S(Sales and service) and 3S

(Sales, Service and Spare Parts) dealers, brokers etc.

Organization has Managing Director who is supported by Deputy Managing Director, Directory

Marketing, Director Personnel and Administration, Director Production, and Director Material

Operations. General Manager Finance reports directly to Deputy Managing Director. GM Finance is also

heading MIS department.

10.10. COMPETITIONCOMPETITION

Second greatest market share belongs to Nissan which is approx 20%. It is not giving Hino much of a

hard time since its value for price is of no competition to Hino.

New entries threatening Hino are the refurbished cars which are being imported from foreign countries

and being sold at very low price and good condition.

Another few new entrants of noticeable activity are Daewoo in the light vehicle and Fa in the heavy

vehicle industry. Although both of these companies have not had a significant effect till now but their

specialization in their respective vehicle category allows them much maneuverability.

11.11. PRIOR IMPLEMENTATION SCENARIOPRIOR IMPLEMENTATION SCENARIO

Prior to the implementation of Oracle at Hinopak, the following systems were being used in the

organization:

Finance: Mini ERP solution(CP) and customized fox-pro based solution

Inventory: There are three different inventory departments each department has its own

custom built software

Sales & Marketing: Customized Visual Basic/SQL Server software

Human Resource & Payroll: Fox-pro based system not integrated with general ledger

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The existing systems had a lot of issues, following is a list of the major problems and limitations that

those systems brought:

1. The systems were iron based there were no integration between the systems

2. The company also using a mini ERP system called CP and there was no local support for this

system due to that for any system crash or bug the business continuity was at risk.

3. Most of the systems were customized and built according to the user requirements which were

made fifteen years ago therefore software were not updated.

4. The software was built on old technology like fox pro based systems. Fox pro based system has

some inherent problems

1. Data integrity

2. Data security

For these reasons, company planned to work for an integrated system. The first idea was to build an

integrated system by its own IT staff. MIS started working on this idea and it worked on HR module and

along with that they started working on the analysis of various modules as well. Four months down the

road it found out that it was not physically possible for MIS department alone to build a whole

integrated system for the entire organization. It was taking too much time and there were various

software issues and bugs which couldn't be handled at that point in time. So management started

looking for pre-packaged software available in the market.

12.12. INFORMATION SYSTEM IMPLEMENTATION AT HINOPAKINFORMATION SYSTEM IMPLEMENTATION AT HINOPAK

Pre-packaged software provided certain benefits. It would be based on best industry processes and it

would be already tried and tested in similar companies. The disadvantages were the rigidity and lack of

customization of prepackaged software. Hinopak studied and analyzed various ERP solutions and finally

decided to go for Oracle Applications.

ERP implementation started in April 2004. Target Completion time was 9 months. 30 months had passed

and so far only 70% implementation had been completed. All Project Stakeholders, namely Project

Owners (Finance Department), Project Coordinators (MIS), End-Users and Project Implementers

(Consultants), were losing patience. However, even though late, once the system went live, everyone

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seemed to be happy, as one would say ‘It was worth the wait’. A detail of what modules were

implemented is given in heading number 24.

13.13. ISSUES FACED DURING AND AFTER IMPLEMENTATIONISSUES FACED DURING AND AFTER IMPLEMENTATION

TOP MANAGEMENT ISSUES

a. DGM Production that he or his department weren’t actively involved or asked for their

opinion during the whole ERP implementation exercise.

b. Since it is an enterprise project, the ownership of the project should be at the highest

level not at the level of finance department. So, ideally the managing director or deputy

managing director should have been the project owner; it should have been across the

board to all the functional areas not only the finance department.

c. The rationale for the implementation of the ERP system was not inculcated in the major

stakeholders, most seemed adherent to start with.

d. The top management didn’t communicate well within the organization regarding the

implementation of Oracle.

e. The top management didn’t actively involve themselves in the implementation and left

it mostly to the Finance departments, who were the project owners

DEPARTMENTAL ISSUES

a. The project is owned by the finance department so when one talks about

implementation in the finance department, it went well but when one goes to other

departments, like inventory stores, production or even to the extent purchasing , major

difficulties were faced.

b. The difficulties to other department was such that it was not compelled by their own

senior management to attend and if they had any grudge against finance that grudge

could be taken out in the face of this project implementation.

c. Since it is an enterprise project, the ownership of the project should be at the highest

level not at the level of finance department.

d. Even after implementation of HR module, there was still no sign of attendance data

being monitored by the system.

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e. The implementation also did not cover areas like shop floor planning, shop floor quality

or rejection, where there were issues even after the Oracle’s implementation. According

to the DGM Production the production cycle initially was not according to the system.

f. Similarly, when production completes a job, then in that scenario not only the material

is consumed, the labor is also consumed and at the end of the month production has to

identify how much labor is consumed for a specific job, which would be impossible to do

until and unless the attendance data is made available.

g. The stores in-charge felt very disappointed with the Oracle system at the time it was

being implemented. He said, we are already running two systems, one is called PC and

the second is called CP. The reason for using two systems is that the CP system is also

used by finance. To fulfill the requirements of finance we have to run the CP systems

and CP does not completely fulfill our own requirements so for that purpose we have

developed our own system called PC and we have to feed data and maintain it, the two

systems at the same time. Now the MIS people have come with another system which is

oracle system and they are kind of imposing that system on us.

h. Since finance department owned the system, the store incharge felt it was useless for

him

i. Hinopak faced problems with the implementation methodologies. For example they

started BPR and as a as is and to be processes so the team of consultants which did as is

and to be process, were not feasibly equipped with oracle applications, as felt by the

GM Finance

j. At the end of the day Oracle application were catering to 80% of Hinopak’s business

processes and rest 20% of the business process were not being catered upon and there

were no work-around solutions available as well. These 20% of the business processes

were initially not identified in the process Gap Analysis conducted by the Consultants.

IT DEPT ISSUES

a. To coordinate between the end users and the consultants and to ensure that each knew

what the other expected from it.

b. Had principal responsibility of conducting user-acceptance training sessions.

c. Monitoring the overall progress of the project, and having to bear the heat incase

something went wrong.

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d. Once the system was up and running, IT was responsible for Data Migration and back

up.

e. Another important task was the development of customized reports on Oracle.

f. There were issues with data migration initially, as it required study of the oracle

interfaces with which data had to be uploaded, and it became a very tedious task.

g. Having to constantly be reminded that the project was running behind schedule and

having to do everything in a hurry.

14.14. NEED FOR ERPNEED FOR ERP

Some of the issues resulting from the Legacy systems, prompted Hinopak to consider looking for an

integrated solution to their business problems. Some of the major problems are stated below:

MIS/IT

Support of legacy system without proper documentation

Since there was no proper documentation, there was lack of proper internal control

There was no contingency planning in place, in order to tackle unexpected situations, such as

system crashes, which could lead to data losses

The company also using a mini ERP system called CP and there was no local support for this

system due to that for any system crash or bug the business continuity was at risk

The standalone systems made it difficult or the company to provide timely support to the other

departments such as finance, production and Sales

The systems were iron based there were no integration between the systems

Most of the systems were customized and built according to the user requirements which were

made fifteen years ago therefore software were not updated

The software was built on old technology like fox pro based systems, which had inherent

problems of data integrity and data security

There were Islands of information in place and it made reporting difficult for the MIS Dept

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Lack of a centralized information storage, resulting in poor business processes

There was poor coordination among departments, which was a huge issue, as in today’s

business environment processes are cross functional

Inventory

There were three different inventory departments each department has its own custom built

software


Since there were 3 different inventory departments, islands of information existed between

them



The systems used by the inventory department were customized and built according to the user

requirements which were made fifteen years ago therefore software were not updated





There was a lot of duplication of effort

The need for integrity can be assessed by the fact that, quoting of a Price to the customer

required BoM from Engineering Department, Price from the Purchase Department and Treasury

Information from the finance department

As cited in the above example, this department was highly dependent on other departments to

get data

This made information sharing among the 3 inventory departments very difficult

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It was in 2002-03 that the management realized the need for an integrated solution to cater to

the needs of the company, including the inventory department

Finance

System previously used was a Mini ERP solution(CP) and customized fox-pro based solution





This resulted in poor consolidation from subsidiary ledgers

The information sharing with inventory and production departments was very poor

Which also resulted in false invoices billed to the customer, and this impacted the company’s

relationship with its clients





get data

There was often a great deal of inventory loss reported at physical inventory count, as it did not

tally with the amount and quantity on the books

The systems in the finance department were customized and built according to the user






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Used to close financial periods in 45 to 60 days. After implementation of Oracle, today, they do

it in 2 to 6 days

Marketing & Sales

Customized Visual Basic/SQL Server software was used prior to implementation of the ERP




The systems used by the marketing and sales were customized and built according to the user









get data

Gathering data resulted in time wastages which ultimately caused poor price quotes

And the process of sharing information with suppliers and clients was often unsatisfactory



It was in 2002-03 that the management realized the need for an integrated solution to cater to

the needs of the company, including the inventory department

Human Resource & Payroll

Fox-pro based system not integrated with general ledger

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Most of the systems were customized and built according to the user requirements which were

made fifteen years ago therefore software were not updated




15.15. ORGANIZATIONAL OBJECTIVE AND ERP COMPATIBILITYORGANIZATIONAL OBJECTIVE AND ERP COMPATIBILITY

Hinopak’s objective is to provide the society with safe, economical, comfortable and environment

friendly means of transportation by manufacturing and supplying commercial vehicles and services and

also to get rid of the following issues:

Segregation of systems and information

Use of obsolete technology to handle current competition

Lack of a centralized information storage

Time delays in making important decisions

Inventory software built on different platforms

Inaccurate records due to irregular updates

Duplication of effort

No regular updating of inventory record

Basic accounting errors being made in the legacy system

Gathering data resulted in time wastages

Delays in sales report

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Poor coordination among departments

The selected ERP i.e. ORACLE is compatible with the organization’s level of technology and its objectives

16.16. ERP SELECTION PROCESS AT THE COMPANYERP SELECTION PROCESS AT THE COMPANY

First the company evaluated the need of the organization and the employees and found out that

there is a need for an ERP that will adapt to the constantly changing environment.

Then the company evaluated different ERP options available on the basis of technology,

company name, functional fit, after sales services, nearness of the implementer, and the cost

associated to it.

Then the company evaluated different consultant and vendor options on the basis of prior

experience, company name and cost.

Then the company scheduled site visits to see the system demos.

Then after considering all the other factors, company decided to implement ORACLE.

17.17. ERP INDUSTRY IN PAKISTANERP INDUSTRY IN PAKISTAN

IT industry is a growing industry in Pakistan which has all the support of the government since some

couple of years. Some of the measures that the government has taken in the recent past to develop this

industry are tax exemption till 2016 and setting up of IT Parks with low rent. The government has also

allowed 100% repatriation of profit to IT companies in addition to foreign ownership of equity invested

in IT. Since the last three years, on account of such steps, the IT industry of the country has been

expanding even if at a relatively low rate. Software export is one industry area that has the potential to

take the industry further a long way.

Enterprise Resource Planning (ERP) is a strategic tool which assists an organization to gain and- edge

over its competitors in effectively integrating its key business operations, synchronizing, planning and

optimizing the resources available in the contemporary competitive environment. ERP can be standard

ERP (a solution such as SAP that can be bought 'off the shelf' to be applied) or can be customized

(software made as per the specifications of the client). Many IT firms in Pakistan, like KalSoft (Pvt.) Ltd.

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in Karachi, are doing an excellent job in providing ERP solutions – bringing a good name to the country

as an ERP solution provider. At present there are approximately 60 foreign IT and telecommunications

companies working in Pakistan.

At present, Pakistan's Small and Medium Enterprises sector (SMEs) is functioning at a disadvantage. This

is mainly on account of the fact that most of the manufacturing and planning processes are either not

automated, and when they are they are not being utilized to their maximum. So as to solve this issue,

PSEB's 'Automation of Domestic Industry on Open Source Systems' project is in progress to help develop

complete ERP solutions to automate the processes and procedures for the SMEs in HR & Payroll,

Finance, Inventory, Production and Sales and in all those sectors of the economy which are found to be

promising for future growth of the industry.

Under this project, ERP solutions are being developed by means of open source software code. This

makes allowances for further improvement to be made to the applications as per the needs of the units.

The project is being undertaken in collaboration with software consulting companies like NetSol, ITIM

Associates and Acrologix who have expertise in developing/implementing ERP solutions for the industry.

Systems Limited, Siemens, Jaffer Brothers, A F Ferguson, Inbox and Abacus are some other leading

system integrators of ERP solutions. Some of the imperative factors which offer a strategic outline of

Pakistan’s ERP industry are as follows:

Competition - Competition does not only exist within local market but neighboring industrial

giants also pose a lot of challenge. They compel manufacturers to invest in technology such as

ERP solution to make more efficient their back-end processing like procurement, accounting,

and order management. In addition to workflow efficiency, the investment brings down the cost

of the final product.

Globalization – Global companies that have their presence in Pakistan are and will carry on

investing in ERP solutions in the country so as to modernize their back-hand operations and to

integrate them with the head office. This will compel the local suppliers/manufacturers to take

on IT automation like ERP so as to compete and deal with global companies.

Compliance Risk – Local companies in Pakistan have to meet the international standards and

regulations when exporting. For this they have to show flexibility and learn the ways of the

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international market. Besides compliance, they must use a proven ERP solution in order to gain

more and more client confidence in internal processes of the supplier.

Resource Management – Shortage of resources and raw material will call for some improvement

in the consumption of these. Companies must invest in solutions that will help them in better

planning and execution on their way to the production of the final product.

Public Sector Reforms - The contemporary wave of reforms in the public sector of Pakistan in the

light of international regulations and cooperation have paved the way for ERP solutions. A

number of important projects have already been completed leading to major strategically

significant ERP adoptions in public sector. This has resulted in confidence gaining on part of the

industry. Furthermore, SME sector appreciates the significance of IT automation and process

streamlining under the protection of some proven solutions.

Though not working at its full potential and showing clumsiness in adopting technology, the industry of

Pakistan has a lot of potential. However, there is strong need for standardization and process

streamlining benchmarked against appropriate global best practices.

FUTURE OF ERP IN PAKISTAN

A very large market segment consisting of small and medium sized businesses in Pakistan have started

realizing the potential of the ERP systems and how the “right” ERP can help them grow, optimize

efficiencies and increase customer service levels. Therefore, there is a huge potential and a very bright

future of ERP solutions in Pakistan. For the purpose, Systems Limited is investing heavily in training the

resources to cater to the ERP demand of the said market segment. ERP systems have great significance

as they have become the biggest ingredient in ensuring a constant and consistent survival of

organizations in today’s competitive market.

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18.18. MAJOR VENDORS IN PAKISTAN AND THEIR MARKET SHAREMAJOR VENDORS IN PAKISTAN AND THEIR MARKET SHARE

There are a few major ERP vendors in the industry of Pakistan that share between them the task of

automating all the business and industrial segments of the country. SAP, Peoplesoft, Oracle and JD

Edwards are the major ERP vendors.

While the ERP market has grown in revenue, consolidation continues to change the industry. In 1999,

the top four vendors (J.D. Edwards, Oracle, PeopleSoft, and SAP) in the ERP market accounted for 59% of

the industry’s revenue. AMR Research expects the top five vendors in 2005 (SAP, Oracle, Sage Group,

Microsoft, and SSA Global) to account for 72% of ERP vendors’ total revenue.

While many ERP vendors struggled in 2004, SAP AG increased overall revenues by 17% and license

revenues by 20% - without any acquisitions. SAP’s ERP market share increased to more than 40%. Oracle

nearly doubled the size of its application business through the acquisition of PeopleSoft, but AMR

Research expects SAP to finish 2005 with more than twice the revenue and market share of the

combined Oracle-PeopleSoft.

Oracle E-business Suite started as Oracle Applications catering to Business Application segment in 1987.

This was the time when JD Edwards, BAAN, SAP, PeopleSoft were already established ERP players in

their specific market segments and any new business application had to face a tough challenge from the

existing players. Oracle Started modestly with Financial applications and moved on to Inventory,

Procurement and much later in Manufacturing and HRMS applications.

AMR REPORT FINDINGS AND ANALYSIS

The report delivers revenue and growth rates for the top ERP players as well as growth forecasts

through 2009. ERP vendors ranked by 2004 ERP license revenue can be seen in the chart below. The top

ten ERP vendors by revenue include the following companies:

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19.19. CONTRACT AWARDCONTRACT AWARD

After a series of presentations and demonstrations by Siemens and Oracle, the top management of

Hinopak decided to implement Oracle, although a sister concerned company of Hino Pak had

successfully implemented SAP.

This decision was based on the presentation and demonstration of the software and the analysis of both

SAP and Oracle by the top management of Hino Pak and they felt that they could get more expertise of

Oracle than SAP as Oracle had more market share than SAP.

The implementer that Hino Pak is currently working with was selected on the basis that they had a good

experience with Oracle and they were very good at Business Process Re-engineering, which was

immensely required at Hino Pak.

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20.20. ERP IMPLEMENTATION APPROACHERP IMPLEMENTATION APPROACH

The industry in which Hinopak operates is plagued with inefficiencies when it comes to information

management. The need for an ERP was felt lately and the company’s departure from its legacy system

itself was a tough process to carry out.

The company had to take a radical approach to implementing ERP. Breaking with its tradition of sticking

to tried and tested methods, Hinopak took a comprehensive look at its departments and operations

within each department to assess the true extent of the need for an ERP.

Prior to implementing the ERP, the company was using a mini ERP called CP. Due to lack of local support

the system would often crash and had many bugs. Realizing these problems, the management decided

to implement ERP that would be free from such problems and at the same time would fulfill their need

for information integration.

PRE-IMPLEMENTATION APPROACH

Before going with the actual implementation of ERP, Hinopak carried out the following approach.

The first step before actual implementation involved carrying a detailed analysis to assess the scope of

the project. Since the ERP was being implemented organization wide, different departments were asked

to prepare a list of the issues that they were facing from their existing system. The departments were

also asked to come up with their wish list, which was a list of what they actually wanted that the new

system should address.

The next step was to analyze the processes that would be affected by the system. During this stage, key

personnel from the respected departments had in-depth meetings with the technical staff to help them

in the conceptual designing of the ERP system. The step is crucial since it documents the ‘current

system’ and future ERP system and in turn helps identify how that transition would be carried out.

The final stage before actual implementation was the testing phase. In this phase the system was tested

in selected departments to check the functional fit of ERP.

ERP IMPLEMENTATION PHASES

The ERP implementation at Hinopak can be divided into three distinct phases.

a. Project phase

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b. Shakedown phase

c. Onward and upward phase

In the first phase, which is called the Project Phase, the ERP software was configured and rolled out to

the organization. The project phase was the actual phase of transitioning towards an ERP system.

In the second phase, known as the Shakedown Phase, the company made the transition from ‘go live’ to

‘normal operations’. During this phase, the ERP system was made part of the normal operations. With

ERP a part of the day-to-day operations, the ERP implementation was completed with this phase.

The third phase, which is generally called the Onward and Upward Phase is still under implementation.

During this phase, the company will capture majority of business benefits from the ERP system and will

plan the next steps for technology implementation and business improvement. The third phase is yet to

be fully implemented. However, as the ERP software use widens and becomes mature enough to

capture the major business benefits, this phase would be completed.

21.21. ERP IMPLEMENTATION METHODOLOGYERP IMPLEMENTATION METHODOLOGY

For a company like Hinopak, the best implementation methodology was to go for a phased approach. In

a phased approach, instead of going for an all-out implementation across the whole organization, a step

by step approach involving rolling out in specific departments was carried out.

To play it safe, Hinopak adopted the sales module first. After the sales module, it was rolled out to other

departments and other supply chain modules such as purchasing and materials planning modules were

adopted. After the successful implementation of the various modules of supply chain, HR modules were

implemented. In the final stage, financial modules were covered.

The implementation was properly conducted through a module implementation guideline. The guideline

helped set the standards for the implementation process and to have the same implementation

procedure across all the modules. This was done to ensure consistency in the implementation approach

and to help resolve integration issues at later stages.

This phased approach was also accompanied by proper training of the ERP system. The intent was to

keep the employees on-board while taking such a crucial step and to have their support. During this

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phase, employees were constantly communicated about ERP to familiarize them with the system and

reduce their resistance once it was fully implemented.

22.22. MODULES IMPLEMENTEDMODULES IMPLEMENTED

The following modules were implemented at Hinopak.

FINANCIALS

General Ledger

Accounts Payable

Accounts Receivable

Fixed Assets

Cash Management

SUPPLY CHAIN & MANUFACTURING

Purchasing

Inventory

Bills of Material

Material Planning

Sales

Work in Process

HUMAN RESOURCE

HRMS

Payroll

A brief description of some of the key modules is given below.

General ledger

The general Ledger is used for recording all accounting postings. This module has the added advantage

of updating and displaying information in real-time which helps in providing the latest and up to date

information of the different accounts in the ledgers.

Accounts payable

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This module records all vendor generated purchasing activities. The module records what vendors will

be paid and the recordings are also automatically updated in the general ledger module as well.

Accounts receivable

The accounts receivable module records all customer generated sales activities that are to be received.

This module is well integrated with the general ledger module as automatic updating in the general

ledger takes place with entries in the account receivable module.

Purchasing

The purchasing module covers all aspects of purchasing from different vendors. The main purchasing

functions covered by this module are:

Purchase Order

Vendor Management

Purchase Requisition

Request for Quotations (RFQ)

Inventory

The inventory management module is a comprehensive module that covers inventory related functions

including:

Physical Inventory

Stock items

Stock transport Order

Goods ordered

Goods Receipt

Goods Issue

Reservation

HR

The major functions covered by this module are:

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Employment history

Payroll

Training

Apart from these functions, the HR module offers other functions which are, although less frequently

used, yet provide comprehensive applicability to the company.

23.23.ERP PROJECT MANAGEMENT AND CHANGE MANAGEMENTERP PROJECT MANAGEMENT AND CHANGE MANAGEMENT

Hinopak had realized the need for an ERP and the enormous changes that ERP will have on its

employees. The top management was involved with the ERP from the beginning and ensured that all

employees become part of the change. Top management had realized the role of employees’

involvement in the whole process. All levels of the employees who were to be involved with the ERP in

any capacity were part of the change process. To make the change management process successful,

Hinopak took the following steps, although not in any particular order.

Steering committee

A high level steering committee was formed comprising of key stakeholders. The steering

committee was responsible for overall strategic direction of the ERP system and provided the

initial for change management.

Change management committee

While the steering committee was involved with the overall strategic direction of the ERP, the

change management committee’s primary role was to handle the change management process

by taking into account employee’s concerns and apprehensions about the ERP system. It

comprised of department heads, and the technical staff.

Employee training

The change management process was accompanied with employee training. Employee

trainings were conducted to familiarize employees with the ERP system.

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24.24. POST IMPLEMENTATION OF ERP IN HINOPAKPOST IMPLEMENTATION OF ERP IN HINOPAK

There had been certain post implementation issues that emerged after the system went live. The

interviews conducted in this regard of the Department heads pointed out to loop holes that caused top

management and their subordinates to build not-so-good views of the whole implementation exercise.

Such signs of dissatisfaction might also be the result of anticipations, which were set quite high. Some of

the post implementation subjects that arise are touched in following bullets;

In the Finance department Oracle application had been catering to 80% of business processes

while the rest 20% was left un-workable within the Oracle Financials. This 20% was identified

during the actual go-live i.e. after the implementation completion, thus the vendor and its

consultants along with Hinopak implementation team came up with last-minute patches. These

workarounds were not really the ideal solutions but just cover-ups to make the system work.

This generated a lot of distrust and negative impression about the whole Oracle application and

implementation technique.

The warehouse, which had already been running two parallel systems i.e. PC and CP. The later

system catered to needs of Finance department while the former’ Warehouse requirements.

With Oracle in effect, Warehouse now had to deal with three systems. The new system is not

complete such that it does not cater to the whole list of requirements which are needed by

Warehouse to shed its legacy system. And with no all-round solution in place, now the Store is

stuck with three altogether different systems, for its own, finance and the company.

The Productions is in a fix as the module implemented in it only caters to 30% of its

requirements. Such partial implementation had been done to ensure the completion of

Inventory cycle. Thus again’ like Store, Productions also had to cope with legacy and Oracle, with

the intention to complete its module on later date. It is causing its employees and management

indignation as they are burdened with two systems instead of the previously used one

Communication between the HR and Productions could not be established, that even after the

implementation is causing Production floors to live without attendance data

MIS department had still been coping with the complexities of fully understanding Oracle

operations. Authenticity of data, its movement and uploading still considered to be a tedious

task which had not been mastered yet

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ERP users had been in work overloads and they did not have time to authenticate their

respective data ‘that had been the cause of delays’. Thus in ERP scenario, it’s now not the

system rather the burdened users who had been the cause of lag.

To cater to growing needs of ERP maintenance, running and updation, there lay need of staff

hiring in MIS department. However management had been wary of such hiring as they still

consider a large MIS department as burden’ citing the fact that Hinopak exists as manufacturing

company which would hold a burgeoning IT department’ who would always play secondary role

25.25. IMPACT OF ERP IMPLEMENTATION ON HINOPAKIMPACT OF ERP IMPLEMENTATION ON HINOPAK

Despite some problems that the company had to face after the ERP went live, its overall effect had been

positive, as it ‘to-some-extent’ delivered its most basic promise of Integration, Efficiency and

Productivity. Though there had been talk of further improvements and solving the incumbent problems,

but Hinopak started yielding fruit of decreased processing time consumption and enhanced inter-

department communication. Following are some of the most conspicuous facets through which ERP

seeped its impact through

Lack of support for documentation in legacy system was removed that also lead to proper

internal controls.

Equipping the system with contingency plans such that in case of any crash there should not be

data loss.

Plus Hinopak had in place a smaller version of ERP called CP which didn’t have any local support,

with current system Siemens Pakistan was responsible for any glitches which might struck at any

point in time

The former system was stand-alone, which was not capable of providing support to other

departments like sales, Finance, HR etc but the new system brought all division on-board, plus it

also provided with much sought-after integration

The new system incorporated within it Best-practices of the market, in stark contrary to older

one’ whose architecture was made 15 years ago and was not updated

Islands of information was converted to seamless integrated platform, that transformed how

reporting, communication and decisions were made

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Three different inventory departments had their own individual systems, which were iron-

based’ having no integration at all between them

Duplication of efforts was replaced with across the board, singular procedural techniques that

converted lost-hours into productive output

Procurement, Production, Finance, Engineering departmental disparity in the old system could

be gauged by a simple fact that’ quoting Price to customers required BoM from Engineering,

Price from Purchase, Treasury from Finance, Order form Production. This disparity was replaced

with an efficient on-line, single window operation, such that the dependency of various

departments remained but level and channels of communication became easy and seamless

Previously, the inventory in-hand did not use to match inventory-on-record, that clearly showed

the ineffectual linkage and exchange between different arms of warehouse, procurement and

logistics, this mismatch was replaced by the oracle singular procurement and inventory keep

module’ effectively replacing all barriers

The previously closing financial periods of 45-60 days had effectively been replaced by 2-6 days,

thus reducing the time for any critical decision.

26.26. EMPLOYEE SATISFACTION SURVEYEMPLOYEE SATISFACTION SURVEY

Interviews were conducted of all the critical department managers who came under direct impact of

ERP implementation. Level of priorities set prior to the implementation for each departments were

different for instance Finance had been a high-priority department compared to Production. Thus the

level of integration and subsequent expectation by the management and their employees were

varyingly different. It must also be noted here that Hinopak did not conduct survey among low level

managers’ thus the word spelled by Department heads were taken at face’ for all of their subordinates.

Most of the questions posed were used to gauge the overall improvements in intended/implemented

paradigm and with respect to the legacy system. Following are the broad categories in which

Department responses were measured on the scale of 0-6.

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Success

Integration

Efficiency

Training and Implementation

Satisfaction & Involvement

Comparison with Legacy

0 1 2 3 4 5 6 7

HR

Marketing/Sales

Production

Warehouse

MIS

Finance

Measure of Satisfaction 0-6 (0= not satisfied, 6=Highly satisfied)

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SATISFACTION RESULTS (INTENDED / ACCOMPLISHED)

Priority Level Satisfaction level 0

1

2

3

4

5

6

HR

Marketing/Sales

Production

Warehouse

MIS

Finance

Measure of Priority/satisfaction 0-6 (0=least, 6= maximum)

27.27. CONCLUSIONCONCLUSION

Looking at the satisfaction results (intended/accomplished), it becomes clear that ERP implementation

and the desired accomplishment levels had not been purely satisfactory. ERP had been the brainchild of

Hinopak Finance department and in the pre-implementation analysis’ some of the departments were

given high priority over the others, thus it was never intended to be implemented thoroughly across the

board. Realization to enact its modules in all the major departments came when the implementation

had finally started, thus half of the departments were brought into the bigger fold half-heartedly. Their

satisfaction is conspicuous in lower-middle ranks while some others hover in upper-middle. Average out

and we get the mean of 3.9/6 that is not commendable.

Post-Implementation interviews of Department heads (after the first hand experience of the running

system) points to major flaws and challenges that Oracle had not been able to fully address. For instance

GM Finance spelled out the problems with BPR and to-be processes which were not feasibly equipped

with oracle applications, he stated that “whatever their recommendations were they were not 100% fit

with oracle applications so there were no as such a fit analysis between as is and to be process with

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oracle applications. What happened at the end of the day that oracle applications were catering to 80%

of our business processes and rest 20% of the business process, they were not catered upon”. It is worth

mentioning that’ Finance department had been at the front proposing ERP implementation and thus got

the highest priority throughout the implementation process, but even these people were complaining at

the end.

The warehouse that had been at low-priority levels were the least integrated and highly redundant

department even after the system went live. Its problems were spelled by the store-in charge who

stated “The basic problem is that we are already running two systems, one is called PC and the second is

called CP. The reason for using two systems is that the CP system is also used by finance. To fulfill the

requirements of finance we have to run the CP systems and CP does not completely fulfill our own

requirements so for that purpose we have developed our own system called PC and we have to feed data

and maintain it, the two systems at the same time. Now the MIS people have come with another system

which is oracle system and they are kind of imposing that system on us”. He further stated that “the

system is there and if it’s not tested than you have to be running three systems and it is kind of unfair on

us to run three systems on parallel in which one of the system is not working properly as well. So, why

not make a system proper and then implement it at our place”

Operations has never been a part of ERP implementation scheme as it had been kept aside from the

beginning, later on it was included because the system in hi-priority areas could not function properly

without it. DGM operations had also not been happy of the outcome, he talks about a number of critical

operations areas which were left un-attended “we have the shop floor planning that we have problem

with, we have shop floor quality or rejection, that cycle is not according to the system, similarly when we

have to complete a job than in that scenario not only the material is consumed, the labor is also

consumed and at the end of the month we have to identify how much labor is consumed for a specific

job, until and unless we have the attendance data, that cannot be done”

Gauging from the views expressed by Department managers, it becomes clear that the project of

revitalizing the Hinopak operation had not met its intended aim and each division had few glitches still

lurking among them.

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28.28. APPENDIXAPPENDIX

BUSINESS PROCESSES

This business process illustrates the payment life cycle as it passes through the various stages as

submission, verification, various reviews and then finally the delivery of signed cheque or the bank letter

to the treasury controller.

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This diagram shows the process for the procurement of items through inquiry. The process consists of

preparation and dispatching of inquiry, price comparison, supplier selection, purchase order and

dispatch of the items.

The process flow for processing the receipts requires the employees/customers/contractors to deposit

cheques. The treasury operations records the receipts and issue the receipts.

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The process flow for receiving items consists of the following. The store receives items from the supplier

and verifies documents. The quality assurance department carries out physical inspection and prepares

a receiving statement for the supplier. The store stacks the items and forwards DC & sales tax invoices.

The process for handling of rejected items during inspection is carried out this way. The quality

assurance department provides the store with rejection report. The store analyzes the report and either

prepares a quality concession report for quality assurance department in case it finds the material to

meet the quality standards or prepares a rejection note and allows the store to return the material.

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The process flow for issuing production related stock is as follows. The production department provides

production plans upon which the material planner executes the material requirement planning (MRP).

The store then issues the items which are received by the production department.

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ERP Report Hinopak_Completed

Documents

erp implementation approach

erp implementation phases

erp implementation methodology

erp industry

erp compatibility

future of erp

hinopak s market share

hinopak s position