Project Report on Implementation of ERP in

ROYAL CONSTRUCTION LTD.

Contents
I. Introduction II. Pre-Implementation Stage (1) Need Analysis (2) Challenges and Opportunities (3) ERP Modules (a) Sales Module (b) Architecture Module (c) Execution Module (d) Plant and Machinery
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(e) Purchase and Store Module (f) Payroll Module (g) Finance Module (h) Legal Module (4) ERP Package III.Implementation Stage IV. Post-Implementation Stage (1) (2) Benefits ROI

V. Conclusion VI. Appendix a. Sales Module b. Architecture Module c. Execution Module d. Plant and Machinery e. Purchase and Store Module f. Payroll Module g. Finance Module

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I. Introduction
About the Company
Royal Construction Ltd. came in to existence in 1964 with the objective of providing construction services to strengthen Indias railway infrastructure. The company has rich domain expertise in servicing the Indian Railwaysearthwork, ballast, rail-track linking and welding, bridges, tunnels, electrification and signalling. The company has also extended its business to the construction of roads and highways, bridges and flyovers and sewerage and drainage networks among others besides venturing in to the attractive marine infrastructure space, power transmission and distribution segment and aviation infrastructure.

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II.

Pre Implementation Stage

Need Analysis
Introduction to the Problem The company had relied upon a manual system to manage its documents and was heavily dependent upon physical files containing valuable documents, records, project applications, payments, transactions, customer relations etc. This manual system worked fine until the company expanded and experienced a phenomenal growth in its business to find that it was surrounded by islands of paper files that needed to be managed, updated and preserved. Experiencing problems such as incomplete client information, untraceable accounts and the lack of an effective mechanism to address customer queries, the company decided to take its first step in deploying a connected IT infrastructure and implement an ERP solution called ERP matrix. Although the company had implemented an ERP system, the solution primarily looked after its accounting operations. Data entry and material management related to construction projects continued to be handled manually using physical files and Excel spreadsheets.

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Furthermore, with no defined procedure of information transfer, the company was spending valuable time in sending information from one project site to another resulting in additional hassles and low productivity. With the data only to be entered at the companys headquarters in Delhi, it was necessary to collect and collate information and records from the companies numerous sites and then put them together at the main branch. The procedure not only proved to be tedious and cumbersome but also inefficient as the manual consolidation of data resulted in fragmented pools of information. Then again, accessibility was a major problem and there was no tracking or monitoring mechanism in place to obtain the immediate status of a project resulting in unnecessary delays and errors on different fronts. Besides, facing hurdles such as the lack of transparency, additional retrieval of important data and data analysis had become a tiresome and a long drawn process. Challenges & Opportunity Following were some of the challenges & opportunities which were take care of by implementing the new ERP.

Rapid growth in the company Close monitoring of projects and tracking was an imperative for better execution Eroding margins due to increased competition and increasing prices of raw materials Need for a new business model to increase growth and improve profitability Need for diversification within the industry to fuel growth rates To improve project tracking for better control and execution Company have been in operations for over 40 years. Over the years it has grown exponentially and has expanded to 20 project sites with one regional office in Delhi. Bur one of the major challenges faced by the company was to save and preserve records as those were needed for future.

So the basic objective of ERP implementation in the Royal Construction Ltd. to derive competitive advantage by Establish a solid information systems platform for facilitating growth and closely monitor projects to take informed and timely business decisions

ERP Modules
The implementation was modularized type and the each module can linked at any time as per companys requirement. The system runs both at site as well as at head office independently. The head office is linked with the site office through web server/data transfer protocols and thus enables one to know the status of each site, which increased the effectiveness in monitoring and executing of site work. Following are the module that has been implemented on Royal Construction Ltd. Ltd. Each module is linked with each other by single or different ways. Flowchart of each module has given in APPENDIX I TO VII. 1. Sales Sales module is a comprehensive module which records each and every action of the sales representative for affecting a sale along with customer feedback. This really strengthens the front end, without compromising on the basics of the company's sales policy.
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Sales persons can check the feasibility of each request posted by the customer along with the project status and explore possibilities of merger of another unit or, transfer from one unit to another at a click of a button. This feature enables quick response time and in turn, provides for an excellent and effective Customer Relationship Management (CRM) feature tool. Salient Features:

Maintains history of customer enquiries with complete details and its subsequent follow-ups Generates status and demand letters automatically Report Builder tool for creation of customized reports Booking details of all unit owners are maintained, including parking availability, rate and issue of allotment letter in a project Define base rate for a project and also, define subsequent incremental floor wise rates Define Transfer fee and also, cancellation charges between dates Define project wise brokerage charges Setting up of instalment structure for a project Configure other various heads under which payments are receivable, e.g. parking, electric / water meter charges, legal charges, maintenance charges etc.

Reports:

Enquiries handled between different dates Unit Occupation Report Client Feedback / Follow-up Report Complete Transaction details Booked Units, Cancelled Units, Merged Units (with reasons, if any) MIS Reports and more

2. Architecture Architecture module is a comprehensive application developed to take care of the minute details of construction activity in a project, right from the design stage. Plans can be viewed vis--vis compliance with all government described norms and buyer preferences. Salient Features:

Sets Project Parameters (Fresh / Slum Rehab Project) Maps the latest status of the project e.g. Under Construction (i.e. Slab status etc.) or ready for possession, which enables the sales team to plan its activities in advance Define instalment structure in project This module can provide a view of the project site, building, wing and structure layout for sales department and buyer decisions Create various masters like Project Master, Building Master, Unit Master, and Floor Master Etc. Create Parking Area with allocation of Name / Nos.

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Merge request forms received from Sales module for instant feedback on status, "Approved / Not Approved"

Reports:

Project Report Area Certificate copy Project Completion Certificate Various types of Issue Certificate

3. Execution Engineering module is a powerful project management tool to monitor and control project data, evaluate projects and enable design-to-cost engineering to optimize construction costs. Quality Management - Plan, collect, settle, and evaluate quality related to costs. The solution includes features that provide data to determine standard or user defined quality scores. This module is also designed to integrate with other modules like Accounting, Architecture, and Sales etc. The contractors & labour billing is a major part of construction business which has been taken care by this module. It comprises 70% of cash outflow from the organization. Salient Features:

Project execution management and running bill generation The quantities can be generated directly from the user-defined drawings using graphical building generator The user can maintain the detailed library of resources, units, overhead charges and activities Daily reports can be had from the site engineer The actual progress is mapped to the plan of the project to find deviations Total inventory management of site Embedded provision for multi-level user security and permissions Customized reports generation Analyze the warehouse activities, such as the physical flow of raw materials versus workloads Daily labour entry and material consumption entry

Reports:

Sub Contractor detail list Activity Time Management Work Order Processing Daily Progress Reports Stores inventory report Site activity and other MIS reports

4. Plant & Machinery Plant and Machine Maintenance module provides an integrated solution for supporting the operational needs of an enterprise-wide system. The module includes an entire family of
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products covering all aspects of plant/machine maintenance. All maintenance tasks such as inspection, servicing and repair activities are saved in a historical database. It also provides technical and business reports and various presentation options, according to the criteria used: for example organizational unit, location, execution period for tasks, or system manufacturer. This information helps organization to reduce the duration and costs of plant down times as a result of damage and to recognize possible weak points within your technical system in good time. Salient Features:

Maintain the Auditors remarks Maintain construction equipment along with plant (for concrete production) Minimize cost of operation Ensure availability of equipment at every site when these are needed Ensure availability of spare parts for all the machinery Manage man power (operator) for all the machinery

Reports:

Monthly Maintenance Bills MIS Report Daily Progress Reports Breakdown Repair Log Spare Part Installation Log

5. Purchase & Stores Purchase & Stores modules cover the entire Purchase and Stores function aspects of an enterprise. It is tightly integrated with the Inventory, Payments and Legal modules. Purchase Managers can now accurately and easily access information about vendors, stock levels, purchase analysis, etc. in real time. Store Managers can easily deal with all the items or products required by the organization. Salient Features:

Get complete purchase history such as cost average, cost difference and average leadtime for each vendor, item and delivery schedules Supports FIFO, LIFO average and standard costing methods Easy templates for calculation of taxes and Vendor terms and conditions Maintaining Product wise preferred vendor list Preparation of Purchase Bill based on GRN Tracking transfer of stock from company to work site and vice-versa Updating of stock after receipt of resources Price comparisons of quotation and finalization of best quotation Generation of request for the quotation of the procurement Compilation of available resources from various project sites for procurement analysis. This helps procurement of the right material at the right time and at the right place Requisition directly linked to the Project Plan Check stock opening balance
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Stock transfer Generate material receipt Inventory Management

Reports:

Vendor Detail List Indent details report Enquiry generation Quotations Purchase Order Store Receipt Note Purchase Invoice Payment authentication, budget allocations etc. Stock Report (Updated Stock, Stock as on date, Periodic Stock)

6. Payroll Payroll module covers every activity dealt by the HR department. This module enables an organization to capitalize on the workforce - their most important asset. It helps in performing HR activities such as recruitment, salary, leave management, payroll, etc. Salient Features:

Maintenance of Employee Details with respect to department, designation, status, income tax category, recruitment agency, payment mode, PF, etc. Leave Management that involves leave opening balance calculations, over time and monthly leave calculations Application, processing and sanction of Loan to employee and their repayment Payroll generation and management based on every department Statement creation for pay slip, provident fund, professional tax, ESIC, income tax, housing loan, salary, challan, etc. MIS reports based on monthly leave details, leave balance and attendance Voucher creation and management

Reports:

MIS reports Attendance Report Leave Balance as well as details Vouchers Salary Structure

7. Finance Finance module is a business application capable of totally managing most accounting needs of a company. It enables management to optimize accounting with inventory control along with integration of payroll, sales, purchase and engineering modules thus delivering a comprehensive picture of company's financial robustness at any given point of time and at any given place through web connectivity.
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Finance module is a powerful browser architected enterprise module, providing a completely integrated approach to an organization's accounting needs, delivering control, speed and responsiveness with cost savings. Salient Features:

Maintains financial year wise transaction details Helps in generation of different types of vouchers such as Credit, Internal Transfer, Journal and Petty cash etc. Calculations of TDS, VAT and other taxes possible before releasing payments Maintenance of all payment details made to external parties under various accounting heads Bank reconciliation and Cheque return status maintained Builder software with a solid accounting foundation enhanced with constructionspecific functionality Job cost reporting in real-time, including work-in-progress schedules and detailed bonding reports Billing and cost tracking by lot, plan and elevations The ability to import payroll time cards Residential templates for housing developments Buyer options and change order tracking software to capture revenue for work outside a job's original scope

Reports:

Balance Sheet Trial Balance Profit and Loss Account Account Books like day cash, bank transactions etc. General Ledger and multiple ledgers Stock Report Payable / Receivable MIS Report Ratio Analysis, etc.

8. Legal Legal Module covers the entire legal efficacy involved in the real estate and construction business. This module helps to perform operations in accordance with the laws applicable in the construction activity. Salient Features:

Availability of all the legal documents at one place Easy access to general legal forms and transfer documents Provides Ready Reckoned for reference to all facilities made available Stamp Duty Calculation Availability of addresses of important government offices EMI Calculation for user-specified values
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Royal Construction Ltd.

ERP Package
The company evaluated a number of ERP solution vendors including Microsoft and Oracle but finally decided to go with SAP. For a construction company, the quality and timeliness of its data spells success or failure. The SAP solution offered us with industry proven best practices and the ability to expand the solution according to our changing needs. Another factors which helped Royal Construction Ltd., decide in favour of SAP was

The core features included a project system amongst other modules like finance and controlling, purchases & stores and sales which fitted neatly into the companys core business requirements. Its a powerful systems available for efficient costing and project execution SAP also had solutions that were localized for India which would help organization to meet statutory norms defined by the Indian Government. SAP also had a pay roll system customized for India that matched organizations requirements.

III.

Implementation Stage

Once the company zeroed in on SAP ERP, it chose Caritor as its implementation partner (consultant) and began the execution cycle. A 20-member team from Caritor studied the requirement of the company in order to come up with a suitable solution. Besides engaging the implementation partner the company also bought in its own team of five members representing five key departments in the company to give a detailed picture to the execution partner of their business requirements. Excellent communication and coordination between the management, core team and consultants ensured that the process was completed in just eight months. At a Glance Name Location Industry Products and services Revenue Employees Concurrent Users Period of implementation Royal Construction Ltd.s Ltd. Delhi, India Construction Infrastructure 162 crore 400 60 8 months

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However during this period the team was faced with certain major challenges:

Fragmented data: As an established construction company, Royal Construction Ltd. had huge piles of records and data. Then again with no systematic storage of information a major task for the team was to collate and gather as much data as possible and update it accordingly. Employee inhibitions: Having no experience in working with SAP, the employees were initially apprehensive about switching to the new system. They preferred the manual system of file handling despite it being tedious as they feared that the new one would be complicated to understand and difficult to use.

To proceed with the implementation it was necessary for the team to overcome these challenges. After an in-depth understanding of the business process, Royal Construction Ltd. proceeded to re-engineer the system. Orientation and re-orientation as per SAP standards and precise testing gave way to full steam implementation. In order to overcome employee apprehensions, we not only provided on the go training but also conducted a two-day training session taking up employee queries after the implementation was complete.
IV.

Post Implementation Stage

Benefits
The implementation of the SAP ERP solution has benefited Royal Construction Ltd. in more ways than one. First and foremost, the four core modules of implementation finance, Purchases & store, Execution and sales and distribution have been extremely beneficial to Royal Construction business. The solution has enabled the company to standardise and integrate all its processes across the country. With a centralised system in place, data is now accessible from all locations and can be entered on-site. Moreover, the interconnected system automatically updates all related data upon entry, providing reliable and up-to-date information. It has not only put an end to the tedious and long-winded process of entering, re-entering and checking data for each calculation but has also enabled the company to significantly cut down its bandwidth requirements. Improved productivity and insight for a broad community The solution has helped Royal Construction Ltd. improve its operational efficiency and productivity by significantly extending the reach of business processes, which enable it to engage and connect with more people in real time including customers, suppliers, and partners. The secure but easy access to a consolidated and consistent view of each business process encourages wide use and collaboration. Every employee has the necessary information and can act efficiently and respond quickly to market changes and competitive challenges. Reduced costs through increased flexibility With the application extending transactions, information, and collaboration functions to a broad business community. Royal Construction Ltd. can use SAP ERP to add customer relationship

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management, supply chain management, and product life-cycle management functionality as their needs evolve which reduces costs and facilitates change. Adaptability to support changing industry requirements With the SAP ERP powered by SAP NetWeaver, Royal Construction Ltd. has been able to seamlessly integrate its end-to-end processes using a scalable and adaptable application that meets its industry-specific needs. In addition, it can also take advantage of the latest open, Web-based technology With the company planning to grow its business overseas, its relying on the scalability and the control over business offered to it by the solution.

ROI
Return on investment is one way of considering profits in relation to capital invested. The purpose of the "return on investment" metric is to measure per-period rates of return on dollars invested in an economic entity. ROI and related metrics (ROA, ROC, RONA and ROIC) provide a snapshot of profitability adjusted for the size of the investment assets tied up in the enterprise. Marketing decisions have obvious potential connection to the numerator of ROI (profits), but these same decisions often influence assets usage and capital requirements (for example, receivables and inventories). Marketers should understand the position of their company and the returns expected. ROI is often compared to expected (or required) rates of return on dollars invested. Return on investment (%) = Net profit ($) / Investment ($) * 100 % For Old ERP system: For Royal Construction Ltd., Net profit is 13 crores as compared to 8 crores in the previous year. Old ERP implementation cost = 100 crores First year profit = 5 crores Second year profit = 3.2 crores First year Return on Investment = 5% Second year Return on Investment = 3.2% Return on Investment for the two years is 8.2% For New ERP system: New ERP implementation cost = 162 crore Net Profit = 13 crores Return on Investment for the current ERP = 8%

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V.Conclusion

Using the old ERP system, the combined ROI for the two years was 8.2%. But on implementation of the new ERP, the ROI for the single year has been 8%. Hence, it is advisable for the company to continue with the new ERP for the coming years. However, deviations can exist which can lower the ROI for the new ERP system too. So, choosing the best ERP package for this company can be only done if considerable amount of time is given to the new package and cannot be judged by sole performance in a single year.

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VI. APPENDIX Sales Module

Customer/Client Database (Project)

No

Particular Project can give profit or goodwill or both to the organization? Yes Project selection Value Proposition & Differentiation of Company

Finance Module H
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Value Proposition & Differentiation of Bidding Company fits with Client Requirement? A Tenderin Yes B No Architecture

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Execution Module

Cas h

Deliver to the Client Feedback

CRM
End

Execution Module

Architecture Module
B Sale Module

Parameter set by analyzing tendering document

Design Done

Design done according to the ISO standards & Govt norms Yes Transfer to Client

No

CRM Feedback Client likes the design? No

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Yes Design Conformed

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Execution

Execution Module
Architecture Module Finance Module D C Bill of Quantity (BOQ) prepared Estimated Labour Requirements Contractor Database Purchase Orders F Purchase & Store Module Architectur e Module
Feedb ack

Sale Module

Estimated Material Requirements

Estimated Machinery Requirements

E No P&M Module

Contracted labour fits with the work requirement? Yes Contractor selected C No Client satisfie d? Yes Work in Progress Billing

Material N

Purchase & Store Module

CRM

Finance Module

Work continue

Final Product
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P&M Module
E Execution Module

Yes

M/c is available? No Particular M/c gives longterm profitability? No Contractor Database M/c have taken for rent I Purchase & Store Module Prepare Operation Scheduled Yes Purchase orders

Prepare Maintenance Scheduled Prepare list of spare parts

Prepare list of fuel & other operating product Purchase & Store Module Purchase & Store Module

Purchase orders

Operating product Purchased M

No

M/c available for work Depreciati M/c is in working condition? NoRepair Spare P

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Purchase & Store Module Purchase & Store Module

Purchase & Store Module

J Particular vendor can provide all the material at reasonable price in credit of more than 30 day? Ye Vendor Selected P&M

No

Quotations submitted by vendor M/c Store Purchase Spare parts Store

Material Store

Operating Product Store

M N
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O P&M Module Billing P Finance

P&M Module

Executio n Module

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P&M

Payroll Module

Employee Selected

Feedba ck

Feedback taken from all the employees

Employee Database

Feedba ck Leaves taken Basic PF, TA, DA, Medical allowances

CRM Salary Feedba ck

Promotion/Demotion

R Finance Module

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Finance Module
D Execution Module Execution Module P&M Module

Execution Module G

Budget Allocation Purchase & Store Module

Sale Module

Q Depreciati

Cash against Bill Cash Cash dispatch to all contractor and vendor Salary Cash Out Recorde R Payroll Module Cash In Cash In Recorde

Profit Calculation

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