It’s bad when you’re a traditional company that’s working on refurbishing your internal systems and processes. But Essar Steel is doing just that. It is leveraging technology to create seamless collaboration and draw macro-level benefits. Today, Essar has a long-term plan that will ensure that its IT initiatives are clubbed with every greenfield and brownfield project. That’s the only way, its chief executive officer, Dilip Oommen, says, that the company can stay ahead in a competitive marketplace.
What is IT’s role in giving a global company like Essar a local feel?
There isn’t an iota of doubt that we’re a global company. We are growing at a very fast pace and are acquiring steel companies around the world. And as we have expanded, IT has helped us greatly. Our wide area network and virtual private network—running across all our locations, even the global ones—have helped our staff access vital data resources, business applications and productivity tools in a secure manner, 24x7.
The benefits don’t stop there. The speed at which we conduct business has gone up tremendously. Interactions among employees and our responsiveness to business partners have also increased considerably thanks to IT. To fulfill the company’s dream, we started with a long-term program to upgrade our enterprise resource planning (ERP).
We have also implemented planning solutions across the steel business group. Phase one of this IT-enablement is complete and a new version of SAP has been implemented in Essar Steel and the same template is being rolled out in other companies across the globe.
The upgraded ERP has helped us achieve business processes integration across IT solutions and has enabled reliable operations reporting. We have also completed the implementation of i2 solutions (i2 is a global consulting, technology and managed services company, and Essar has implemented their advanced order, sales and operations planning systems). There are several benefits that are being realised as the solutions stabilise.
For instance, the quality of data and user expertise is improving. By implementing i2, we have achieved end-to-end planning from demand forecasting to customer delivery using a single platform. We have also optimised our resources for profit maximisation and customer satisfaction.
What about inventory? Where does IT fit there?
There are three aspects to this question. First, Essar Steel creates ‘made-to-order’ products. In that respect, IT has helped us greatly get an end-to-end visibility of the status of customer orders. It has also helps us control credit effectively and track every batch or unit of material.
Second, by implementing i2 solutions, we have got excellent tools to optimise capacity utilisation, thus allowing us to manufacture in a more profitable manner. It also gives us complete visibility and control through the manufacturing process. Finally, our information systems are now being leveraged to crunch the cycle time from steel melting to cash realisation.
And further downstream, at distribution?
Distribution and logistics are most critical for any manufacturer. Based on the intelligence we gathered through our earlier experiences, IT was given a mandate to provide complete visibility of finished goods from factory to a customer’s premises. In its first phase, this challenge has been accomplished successfully. These systems are now being improved with planning and optimisation solutions, and other solutions that will reduce vehicle turnaround time. A material tracking system is also being evaluated to further reduce inventory time.
As a traditional enterprise, you could be thought of as a slow IT investor. How would you respond?
As a company, we have always believed in leveraging the latest technologies, developing internal competencies and getting the best value out of our investments. Essar was one of the first companies in India to embrace SAP, leverage auction technologies using the Internet, develop a lively Intranet, launch several master data synchronisation/unification initiatives, introduce shared services, etc. Our investments in IT have always matched business requirements. And in several areas, business strategies have been IT-driven.
At a broader level, what are the top priorities you wanted technology to fulfill?
Since we are a growing enterprise and need quick action and turnaround time, the expectations from IT and our technology leaders are very high. One version of the truth was a priority (by way of unified, actionable, reliable reporting). So was deploying resources in value-added areas through automation and productivity improvements. Another important business priority was business process orientation, which can help reduce cycle times and cross-functional gaps.
Recently, Essar Steel made some global acquisitions. How do you merge these entities and make one profitable unit?
When it comes to amalgamating the disparate processes of two distinct entities, IT is probably the only saviour. It has certainly got an important role to play in the merging of processes, systems and even cultures.
People and systems across the globe can talk the same language on SAP and i2, use identical system template, share data across geographies for effective procurement, improve sales realisations, reduce inventory, better customer service, and share services to reduce the cost of operations. We also want to leverage best practices from each geography, share knowledge using the latest technology and develop domain competencies internally. Apart from this, shared and optimised IT assets have definitely helped us leverage time zone differences and keep working round-the-clock.
Given these contributions, should IT leaders be part of boardroom discussions?
IT is becoming an integral part of every business activity from accounting to production to statutory records. It’s all about how we want to conduct and control business and business processes efficiently. The success of IT initiatives and the delivery of business benefits are becoming a lot more critical to stay competitive. It is essential to have CIOs who understand and communicate the business effectively. They are taking the role of change managers and catalysts for business transformation.
What importance do you attach to ROI in IT?
All investments should have tangible and intangible benefits. That’s our business philosophy. I agree that some IT costs are part of running the business and therefore, can’t be directly related to return on investments (ROI). Having said that, effective steps are being taken at Essar to track tangible business benefits, effective ROI forecasting and make the CEO/CFO/CIO responsible for tracking and delivering planned tangible business benefits.
Going forward, how will technology help as the company expands?
In all new initiatives, IT initiatives are planned with greenfield/brownfield projects. Plus, IT has a significant role in the integration of acquired entities. We endeavour to ensure that systems talk to each other and every function should leverage technology to their benefit. It’s not just the function of IT to implement projects and roll out new initiatives, but it is for individual business users to leverage IT and benefit from it. That is the recipe to stay ahead in the marketplace.
