A perfect software and precise implementation has led to remarkable results for Madura Garments

Consider this. Eight factories, a warehouse, over 120 exclusive franchisee showrooms, 15 agents, 22 distributors and 3,500 retail outlets spread across the country — and that's only one side of the equation that N P Singh, Vice president, Information Technology, Madura Garments, had to solve. The other side — hundreds of SKUs that must be sold within four to six weeks. Otherwise, whatever was left had to be cleared at discounts of up to 50 per cent. Mind you, this is a business where planning-to-sales cycles could be as long as six to nine months.

Keeping the level of unsold stocks (returns) down to between five and 10 per cent is the challenge that every garment-maker must deal with. Returns up to this level are acceptable since it is impossible to get the forecasts completely right — but anything higher, and it begins to hurt.

This was the case with the Bangalore-based Madura Garments that sold brands such as Louis Philippe, Van Heusen and Allen Solly. The returns in Madura's case were as high as 30 per cent, high enough to hurt the bottomline.

The problem was apparent. "Users across functions identified operational problems and absence of timely MIS as two major issues," says Singh. The drawbacks of the legacy system included lack of updated information due to non-integrated systems, difficulty in modifying current systems for new information requirements related to product development and impending technology obsolescence (INGRES, COBOL, and FOXPRO were the platforms).

The presence of multiple technologies was making integration and modification complex and cumbersome. Moreover, the company was incurring high costs in maintaining the IT infrastructure. As a matter of fact, there were times when the warehousing system would show one figure that would be totally different from the consolidated figure at the corporate level!

It was critical that Madura had complete visibility into the supply chain. It also needed more accurate forecasting, better matching of demand and production, smoother interfaces with distributors and retailers. It needed to wire up everything — production, forecasting, and distribution — smartly.

In other words, Madura needed ERP, and also add other applications on top of it to reduce lead times and have better response mechanisms.

Having analyzed various implementation needs at the organisation, Singh knew that SAP, which already had over 200 installations of SAP R/3 in India alone, was the right partner for triggering re-engineering initiatives at Madura. So the company started with ERP from SAP. It decided to go for an industry and inventory-specific solution called Apparel and Footwear Solution (AFS) comprising SAP R/3 and AF3.

Now, a traditional ERP attempts to integrate all functions onto a single platform to serve the specific needs of all the departments. So it takes care of the 'enterprise' part (in its acronym) reasonably well. The trouble is with the 'planning' part. There, it doesn't quite live up to its promise.

SAP had two great aces up its sleeves: APO or Advance planning and Optimization module (a forecasting application); and BIW or Business Intelligence and Warehousing module (a data warehousing and decision support application) that took care of planning and top management decision-making concerns.

Since both the applications were from SAP, it meant that integration was going to be easier. It also added a web-based customer interface on top of the ERP system. This would make sure that it captured data from external sources (distributors, retailers, suppliers) in addition to what ERP gathered from within the organization.

How did it implement?
Madura formed a project team comprising a consultant from PwC (which is now IBM Business Consulting Services.) Besides, a joint team was formed with SAP India also. "It's because of the industry expertise SAP had," says Singh. A 30-member core team comprising 15 consultants and an equal number of specialists from Madura was formed to oversee the operations. Madura also hired 4-5 programmers and trained them in ABAP (the SAP language). They were to do the customization during implementation.

Since Madura wanted all the processes to be automated, the customization team came in handy. For example, entry of SKUs into the ERP system is manual. "But that would have been very cumbersome," says Singh. So the team developed a bar-code scanning module-essentially,software that would collect and load data automatically into the ERP system from a barcode scanner.

The team then integrated its existing Web-based ordering process with the ERP system. Today, Madura does not entertain any orders offline. Distributors and agents can place orders, check status of their orders and even check the accounts with the company, just by logging in. With this, the team had integrated a large chunk of the supply chain with ERP at its core.

Simultaneously, it went about integrating the top management MIS so that it could cull out data from the back-end and present it to the bosses faster and more accurately than ever before. This included information like profitability across brands and channels, sales offtakes and working capital status.

While implementing, Madura set certain milestones. When a module such as Materials Management was implemented it insisted that SAP AG fly an expert from its headquaters in Germany for auditing that milestone. Only after the audit did they move to the next stage. As a result, Madura was able to stabilize the system within 12 months.

"SAP implementation has changed the way we conduct our business by bringing in transparency and doing away with islands with tenuous connections to each other," says Singh. In the process, Madura has also reduced its response time to internal and external customers. "We are now able to sense, act and respond efficiently to ever-changing markets."

Now, senior executives at Madura can monitor variations between annual budget plan and monthly plans, which ensures coordinated monitoring of top-line and bottom-line growth resulting in improved profitability. The implementation has also brought an integrated order management, revenue recognition and account receivables functionality; and at the same time has eliminated non-value adding functions like reconciliation and consolidation.

"Profitability assessment for each showroom, brand and customer can be done in the system, " says Singh. The new system can also suggest replenishment based on these parameters and also generate weekly control reports on sales and inventory for each showroom. Moreover, sales returns can be linked to original sales orders.

The numbers at Madura tell the entire story. Order fulfillment is up from 70 to 90 per cent; order release-to-dispatch time is down from 22 to 18 days; inventory is down from 13 per cent of sales to 11.7 per cent; showroom receivables have reduced from 55 to 45 days.

Now things don't get better than this, do they?