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11 April 2005  
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Home - Management - Article


SMI caps production wastage

SMI Coated Products has reduced production wastage and boosted its topline by deploying an ERP solution, says Abhinav Singh

Companies that produce coated papers operate with thin margins. In the case of SMI Coated Products, as much as 4 percent of its production was being wasted. By implementing ebizframe, an ERP solution from Eastern Software Systems (ESS), SMI has been able to cap its wastage and slash it to a mere 0.3 percent.

SMI manufactures coated paper for the process industry. It also produces self-adhesive sheets and rolls for making self-adhesive labels that are used by pharmaceutical companies. An SMB with an annual turnover of below Rs 10 crore, the company has its head office at Mumbai and two manufacturing plants in Daman. All three locations are connected using leased lines.

Clogs in the production pipeline

The best way to gain an edge over rivals is to minimise wastage during production as it directly reflects in our topline results

Ajay Mehta
SMI Coated Products

SMI needs to use its raw material optimally and avoid wastage. Ajay Mehta, Director of the company remarks, “The Indian paper industry is highly competitive, and the best way to gain an edge over rivals is to minimise wastage during the production process as it directly reflects on or translates into our topline results.” Before it went for an ERP system, SMI used manual processes to calculate wastage generated during production. The manual processes were inaccurate and sketchy, making it virtually impossible to evaluate actual wastage. This had an adverse effect on the company’s profit margins.

Additionally, tracking a range of sizes and widths, and the quality of paper was a difficult task. Mehta explains, “There are different processes such as coating, slitting and sheet-cutting in the manufacture of coated paper. There was no database that told us how much raw material was being consumed during each process in a given timeframe. This led to the generation of inaccurate production-related information.”

Variations and glitches

It was a challenge for SMI to monitor orders during production as customer specifications were not properly documented, making it tough to manufacture accurately as per the client’s requirements. According to Mehta, “There were variations in finished material because manual specification reports sometimes failed to tally with what the customer had ordered. This led to wastage and the chance of material being rejected due to variations.”

A shot of ERP

It was then that the organisation decided to go in for an ERP system to solve its production-related issues. The exercise commenced in December 2002 and went live in mid-2004. Considerable customisation had to be done while the implementation was underway. The first challenge was to make team members understand the concept and adopt it smoothly. Since the workers were not computer literate and there were different types of processes—such as sheet-cutting, item codification and sales order execution—various specifications had to be incorporated into the system, as a result of which the implementation exercise got prolonged. Every item produced at the plant is coded, and during implementation all the item codes had to be entered into the ERP system. As of now, the sales, purchase, inventory and production modules have gone live.

Cutting wastage

Post-implementation, measuring wastage has become transparent. Comments Mehta, “There is now proper and accurate documentation of wastage during a given time-span of production.” The company has also been able to meet customer requirements with precision. Earlier, out of 100 orders, about 15-20 failed to meet customer specifications. After the implementation of ebizframe, this has dropped to one or two orders. SMI has thus been able to meet service level agreements with its customers because of the accurate generation of customer specification reports.

Stocktaking and inventory have been improved as a result of the ERP deployment. In the past, stocktaking wasn’t accurate and keeping track of raw material details was next to impossible as everything had to be done manually. Today, every detail is entered into the system when raw material is procured. The company has successfully followed the ‘first in, first out’ policy regarding raw material which is now used in the order in which it arrives. As the details are there in the system, raw material can easily be categorised as per the purchase date. This in turn has enabled the organisation to streamline production and prevent wastage, thus helping it remain competitive while squeezing out some extra profit points.

HR and excise next

A few more modules are to be rolled out—excise, costing, HR & payroll—which will be deployed within the next few months. There are some customisation processes that the company is carrying out on these modules, especially the excise one.

In a nutshell
The company SMI Coated Products manufactures coated paper for the process industry
Product ebizframe from Eastern Software Systems
Modules implemented Sales, purchase, inventory and production
Server One dual-Xeon IBM server with 1 GB memory
Database Oracle 8i
Operating system Windows 2000
Number of users 20 concurrent
Cost of the project About Rs 12 lakh, including software



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