Fast Trak Case Study - May2012

AS-IS Business Process
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SAP FAST TRACK Created by: Project Team
Table of Contents:
Content Page No
1. Background:.....................................................................2
2. Product Range :................................................................2
3. Presence across sectors :....................................................2
4. The main objectives of ERP implementation:...........................3
5. Highlights of the Operations:................................................3
5.1. Company: PIL.................................................................3
5.2. Company: PEL................................................................5
6. Operation Areas of Group Company :......................................5
6.1. Materials Management......................................................5
6.2. Quality Assurance...........................................................7
6.3. Manufacturing :..............................................................8
6.3.1 Quality Assurance in Production:........................................15
6.4. Sales and Distribution :...................................................15
6.5. Human Resource...........................................................19
6.6. Finance and Controlling..................................................28
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1. Background:
Power India Limited started its operation in the year 1965. From it’s humble beginning in a small
town of Maharashtra called Ranjangaon, PIL has achieved several milestones and today it is one
of the largest manufactures of storage batteries in India. Currently the company is having seven
production facilities in India namely Ranjangaon, Pune, Nashik, Chennai, Hosur, Gurgaon and
Durgapur respectively.
Power Electronics Limited is another group company which started it’s operation in the year
1985.The company has a manufacturing plant in Bangalore. PEL is producing power supplies and
battery chargers.
2. Product Range :
Power India Limited, the flagship company of the Oscar group is the market leader in the storage
battery industry. It manufactures wide range of batteries from 2 Ah capacities to 10500 Ah to cover
the broadest spectrum of applications.
PEL manufactures different kinds of Industrial Power supplies and Battery Chargers.
3. Presence across sectors :

Power India Limited is catering to both Automotive and Industrial sectors. The company has a
dominating presence in the Automotive OEM segment and currently it is enjoying a market share
of around 33%. PIL is supplying batteries to all the passenger car and commercial vehicle
manufactures of India.
They are also supplying to some of the leading carmakers of Japan and USA and in the
international market PIL’s market share is around 3%. PIL is a dominant player in the Industrial
power supply segment also and their customers include Railway, Telecom and Energy companies.
For the Retail customers, PIL is operating through it's dealers.
Power Electronics Limited mainly sells their products to Power India Limited. Along with that they
also sell their products to other customers like Railways and Steel Industries.
Others:
======
PIL has a turnover of around 250 Million US$
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The company has recently embarked on an initiative to implement an ERP solution across all the
manufacturing locations of India and abroad. The company has carefully evaluated three ERP
products and finally they have selected SAP as the preferred product.
4. The main objectives of ERP implementation:

1. Standardize and streamline the business process
2. Establishing an Integrated information repository
3. Improvement in the area of Planning
4. Complete visibility of stock
5. Better Ware housing management
5. Highlights of the Operations:
5.1. Company: PIL

The company’s major operations are as follows:
Head Office:
===========
The head office of PIL is located in Mumbai is from where all operations like Import Purchasing,
Sales, Finance, Accounts, HR, and Salary are centrally controlled.
R&D:
===========
The PIL’s R&D centre is located at Kolkata. The main functions of R&D center are new product
and process development, tools, moulds and components development, providing technical
services to marketing and manufacturing like carrying out critical tests of raw materials etc.
Project:
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==========
The project division is located in Kolkata. The main functions are raising proposals for capital
expenditure, purchase, installation and commissioning of plant and machinery after capex
approval, making provision of imported/local spare parts for new machineries.
Manufacturing:
=============
The company has seven manufacturing facilities in India and they are spread across different parts
of the country. Pune, Chennai and Gurgaon plants are manufacturing only automotive batteries
and Hosur and Durgapur plants are manufacturing only Industrial batteries. Nashik and
Ranjangaon plants are catering to both the segments. Pune plant is mainly doing the assembly
operation and for that it sources in house produced materials from Nashik plant. For sub
contracted items, Pune plant works through sub contracting.
PIL does have storing and warehousing facility at the manufacturing locations also. Further there
are plant-to-plant stock transfers of raw material, WIP and Finished goods.
Warehousing
===========
The company has full flegded warehousing facility for its manaufacturing plants and the Regional
Distribution Centres. In each manufacturing plants, externally procured goods – raw materials and
engineering spares are received and stored in warehouse. For production requirement, the
associated manufacturing plant draw the materials from the warehouse. The manufactured
batteries are also stored in warehouse which are then transferred to Regional distribution centre
warehouses.
Company has a plan to cover its warehousing activity under SAP for one particular region. That
means this plan will cover warehouse for a manufacturing Plant and one RDC ware house.
Distribution
===========
The company has four regional offices located at Mumbai, Chennai, Delhi and Kolkata
respectively. The Regional offices decide the regional marketing strategies, communicate their
sales budget to central planning and also keep a track on competition. The Regional offices
operate both in Automotive and Industrial sector.
There are also four Regional Distribution Centers (RDCs), which are attached to the Regional
offices. The RDCs act as Logistics centers where the finished batteries (both Auto and Industrial)
are warehoused and distributed to respective Sales offices.
Sales
======
PIL has 50 branch offices all over India and Branch offices also have limited warehousing facility.
The company has a robust dealer network of 2400 dealers and the branch office does the job of
coordinating with the dealers of that region.
The 50 branch offices are attached to respective regional offices and the distribution is:-
12 branch offices to Delhi
12 branch offices to Kolkata
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13 branch offices to Mumbai

13 branch offices to Chennai
The main function of the branch offices is sales, after sales service, daily budgeting, daily
feedback of sales and competition to the Regional offices. When branch offices get the bulk order,
the goods are delivered from the respective RDC ware house.
5.2. Company: PEL

The only manufacturing plant of PEL is at Bangalore, which is producing UPS and battery
chargers. PEL also uses PIL’s regional offices and branch offices for their sales activity.
The four RDCs of PIL also serve as regional warehouses for PEL with the battery chargers kept in
a separate shed.
6. Operation Areas of Group Company :
6.1. Materials Management

Procurement:
============
PIL procures raw materials mostly from the domestic suppliers but they are also procuring some of
the raw materials from overseas suppliers. Lead and PP-CB are the main raw materials which are
imported on a regular basis. Lead is the most critical and expensive raw material of PIL and import
procurement of Lead is centrally managed. Factories send their requirements to the H.O, wherein
all the demands are consolidated and a consolidated PO is sent to the vendor. The material is
delivered to the nearest port i.e. Mumbai, Kolkata or Chennai. Then the entire consignment is
transported to the nearest factory and from there the material is distributed to other factories
through stock transfer. The company procures large number of components from the suppliers
who are present in and around their plants and in such cases the average lead-time is 15 days.
However for certain raw materials they have to depend on the suppliers who are located in other
parts of the country and in those cases average lead-time is 30 days. For the imported materials
the normal lead time is around 60 days but for certain Spare items it can go up to 120 days
Planning department sends Purchase requisitions to Purchase department. All purchase

requisitions are approved by the Purchase Manger. Purchase department maintains a vendor list
of all the existing items. In case any new item is required, Purchase department invites quotations
from different vendors.
Once all quotations are received a committee finalizes the source based on several factors. It
includes basic price, location of the vendor, delivery conditions, and Minimum order quantity and
credit period.
All purchase orders are approved by the Purchase Manager where as some high value import
purchase orders(eg Capital items) require additional approvals and it is also approved by the
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Managing Director . The company has appointed multiple clearing agents who handle the job of
clearing the consignment on behalf of PIL. For certain components PIL procures the raw materials
on behalf of the vendor and they issue the raw materials to the vendor. One such example would
be PP-CB. This is used as a raw material for producing battery containers ,Lids etc. PIL procures
PP-CBs from both domestic and international suppliers and later on this is issued to the Sub
Contractors.
The screen-printing of battery containers are being carried out by external agencies within the
factory premises of PIL. The printing vendor provides the service and also the printing ink as per
PIL’s specification. Printing vendor manages the stock of printing inks.
PIL is involved in trading business and they procure power supplies and battery chargers from
PEL. PEL is also procuring UPS Batteries from PIL.
The Purchase department of PIL is responsible for all kinds of Purchases and they have the
following responsibilities
1. Vendor Development
2. Inviting quotations from different vendors
3. Rate negotiations
4. Creation of long term agreement with the vendors for certain production items
5. Procurement of local and imported items
6. Procurement of stationery items
7. Procurement of maintenance spares for machines
8. Periodic evaluation of suppliers
9. Ensuring uninterrupted supply of material.
Inventory Management:
====================
Once the material reaches the factory it goes to the receiving and forwarding stores and Goods
receipt is done. Goods receipt is always done against a valid Purchase order. If the material needs
to be checked by the Quality Inspection then it is forwarded to the Incoming Quality Assurance
department otherwise this will directly go to the Main store (Ware house). In the main store,
materials are stored in different bins and pallets kept in different locations/bins – mainly for raw
materials, finished goods and hazardous goods . Main store issues material to the production
department. If any plant of PIL is facing a material shortage and if it is found that some other plant
is having some excess material then this excess raw material can be transferred to the other plant.
Apart from that some of the Semi-finished products(eg Cured Plates) of Nashik plant are used as
the incoming raw material of the Pune plant. Hence such semi finished goods are transferred to
the Pune plant. Inter unit stock transfer and Inter company stock transfer take place on a regular
basis. Such Transactions are captured in the legacy system.
Plant Stores issues lot of materials to the R&D centre located in Calcutta. Most of these items are
high value item that’s why PIL keeps a track of the stock, which is lying at R&D centre. R&D does
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some testing with those materials and at times this is of destructive nature. In such cases they
have to scrap those materials. After the necessary testing R&D sends back some materials to the
respective store and these will be again stored in the Main store after necessary Quality check.
The company has four regional depots and these depots have huge warehouses. In most of the
cases customer deliveries are made from the warehouses. However in many cases finished goods
are directly sent to the customers from the factory itself. Delivery for the OEM customers are
made directly from the plant where as Delivery for the dealers are done from the brach offices. To
cater to the demand of the Retailers in a faster way company maintains stock at branches also..
In some cases branch office also does direct sale to the end customer however, this practice is
limited. The branch office warehouses are simple in nature and not really qualify as a warehouse
where lot of activities are to be done.
The company regularly carries out Physical Inventory at all the stock keeping locations. In
warehouse and branch offices normally this is done once in a year.
In the factory once in a year Physical Inventory is done for all items where as for certain high value
items Physical Inventory is done once in every three months.
6.2. Quality Assurance

The company has a very strict Quality Assurance policy. Almost 80% of the local incoming
materials go through the Incoming Quality Inspection process. For BOP ( Brought out parts )
like lid , 100 % inspection is done . In the absence of a Usage decision for all incoming
materials which are subject to quality inspection , there is a Invoice Block . For very low
value items like screws and nuts, incoming quality inspection is skipped. Normally the Imported
production materials(eg. Lead) do not go through the Incoming Inspection. However , for lead a
Incoming Quality certificate having the specification for the Purity is mandatory . In the
absence of a Quality Certificate , the Lot is posted to Blocked Stock till the certificate is
made available . For Imported Polypropelene , a incoming certificate is mandatory and a
GR inspection is also done .
At different stages of the production Quality checking is carried out and when the finished good is
received, an elaborate testing is carried out. PIL is also providing Quality certificates to it's
customers.
Others:
======
PIL is looking for a complete visibility of stock at all locations. Currently in most of the branch
offices PIL is having a FOXPRO based legacy inventory management system, which keeps a track
of the sales and inventory . Such systems are all isolated systems and they send the sales data to
the Head office on a daily basis. SAP will replace all such systems in the future. However due to a
problem the legacy system cannot be replaced in 5 branch offices and they will continue to work
on the legacy system for the next one year. Sales data of these five branches need to be uploaded
into SAP on a daily basis through an inbound interface. During this ERP implementation process
PIL is going to re-codify their materials and such changes will be limited to SAP system only. No
re-codification will happen in the legacy applications.
Packaging materials like crates etc. owned by PIL are given to vendors for packing and supplying
Bought out parts like containers etc. while buying these materials, they are expensed off, however
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there is a requirement of tracking these materials with vendors. Apart from these items like Gas
cylinders etc which belong to vendors, but are in PIL’s possession, need to be tracked.
6.3. Manufacturing :
95 % of the manufacturing is made against forecasted requirements and it covers both Automotive
and Industrial batteries. 5% of the products are made against specific customer orders. The
planning process starts with the annual budget, which is based on the inputs received from the 4
regional offices, which in turn gather the data from dealers and the large OEMs. For regular
manufacturing, the central planning department at the HO collates demands from the Regional
offices on a 3 monthly basis and after analyzing the stocks at the RO’s, warehouses and transit,
generates a manufacturing plan which is a firm plan for the current month and rolling plan for the
following 2 months. All the collation process being manual, the central plan gets released to the
factories only by the middle of the month. Thus the first 2 weeks production planning inside
individual manufacturing location is done on the basis of the previous months’ rolling plan and
manual (telephone, fax etc.) inputs from the Central planning department. Once the firm plan is
received by the factories, rationalization is done and the balance quantities are taken up for
manufacturing in the last 2 weeks of the month.
Although the number of SKU’s is close to 200, the number of subassemblies is limited to about 30,
which cover up to 80 % of the SKU’s and another 30 types, which cater to the remaining 20% of
the SKU’s. Thus ‘subassembly’ manufacturing is not controlled by the Central planning and is
based on the ‘in house’ planning of individual locations. The central planning controls the
manufacturing of the FG (finished good), which goes to the RG1 stock. It is seen that certain
Automotive batteries have a very high demand in the Retail outlet. In order to ensure an
uninterrupted supply of those products, always an optimum stock is maintained at the branch
office level. Once this stock goes below the optimum level Warehouse or factory needs to
replenish this.
There are two types of finished goods – Batteries for automotive sectors and batteries for industrial
sectors. In automotive sector, batteries are manufactured for car, LCV and HCV. Each category
has two batteries made for a particular OEM and corresponding batteries for replacement market
to be sold through dealer network. Many of the components are common and product structure
differs in their quantities. The finished goods planning are done based on projections furnished to
head office in Mumbai by sales and marketing. The head office conveys these plans to respective
manufacturing plants for the quantities to be produced based on a quarterly plan. Components are
planned based on the planned quantities of the finished goods and not separately.
So when an MRP is executed for finished goods, it also plans for components where the available
stock of these components is also taken in to account. Some of the components / raw materials
are planned with re-order level and with maximum replenishment stock so as to de-link their
planning from the frequent requirement generation from MRP.
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The planning of batteries for OEM is planned in such a way that components can be planned and
manufactured and stocked based of the planned quantities of the main battery but assembly of
main battery is done only on receipt of sales order.
The corresponding batteries for replacement market along with their components are planned,
manufactured and stocked in the manufacturing plants. From there, they are sent to regional
distribution centers and branch offices through replenishment cycle, based on re-order point and
replenishment to a maximum stock level. (Make to stock scenario).
In case of industrial batteries, manufacture of batteries for UPS follow the logic that of automotive
batteries i.e. requirement projections are given by head office in Mumbai which constitutes the
input for production planning. The battery for industrial sector is taken up only after receipt of sales
order.
The actual manufacturing is of the ‘discrete’ type and the labor productivity is maintained by the
‘piece rate’ for the incentive payment. Any ‘scrap’ during manufacturing has to be accounted for
very accurately as the raw materials are very expensive.
There are two types of scrap defined. Finished Goods, which fail the quality testing norms and
Second category is that of raw materials which get damaged in handling though they qualified the
quality testing norms at procurement. The scrapping for the finished goods happen at the time of
confirmation of goods by the production.
The raw material, which is damaged and has to be scrapped and returned to the purchase
department.
The finished subassemblies are stocked and are used to fed the ‘assembly line ‘ for producing the
finished good. Apart from the ‘subassemblies’ there are about 50 odd items which go into making
the finished good and of these 40 odd components are ‘bought outs’ and the rest are made by
‘subcontractors’. The raw materials for the subcontracted goods are also supplied by PIL and the
stock at the subcontractors premises are maintained using manual systems. Periodic, physical
stocktaking is carried out across the factory and as well at the subcontractors’ location.
Routine preventive maintenance is carried out for all machineries and key service units like Boiler,
generator and water treatment plants. The furnace need heavy maintenance and the lining repairs
require annual shutdown for 2 weeks for each of the furnaces. The production process produces
hazardous effluents (both liquid as well as gaseous) and these are treated in effluent treatment
plants before discharge.
The manufacturing of the subassemblies requires melting of lead alloy, this is carried out in an
induction furnace, which is energy intensive and consumes electricity. Thus power consumption is
the main parameter to be monitored to control cost.
Approximately 70 % of the labor force is permanent while the remaining are on ‘daily wage’
contracts. This is true for all the manufacturing units
Product structure
Each battery for an OEM has a corresponding battery for open market. Both are identified as
different products. Product structures for both are same except for handle and carton which are
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not used in case of a product meant for OEMs. LCV and HCV batteries are similar to Car
batteries except for difference in quantities of cured plates and separators.
Following tables give the details of products, their components and requirements for monthly
production capacities.
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Table 1: Bill of material and component requirement for Car Battery
MFS40 - RM 55B24L - RM
Description Type UOM MFS40 (MTO) 55B24L (MTO) (MTS) (MTS)
Production = Production = Production = Production =
250/Month 250/Month 500/Month 500/Month
Per Total Per Total Per Total Per Total
battery reqd battery reqd battery reqd battery reqd
Lid - Car battery SC EA 1 250 1 250 1 500 1 500
Container - Car Battery SC EA 1 250 1 250 1 500 1 500
Terminal plug - Auto Battery SC EA 6 1500 6 1500 6 3000 6 3000
Handle - Car Battery SC EA 2 1000 2 1000
Sulphuric Acid RM L 0.300 75 0.500 125 0.300 150 0.500 250
Separator -Type I RM EA 20 5000 28 7000 20 10000 28 14000
Thermocol RM EA 1 250 1 250 1 500 1 500
Packing carton RM EA 1 500 1 500
Cured plate - Positive Auto SF EA 10 2500 14 3500 10 5000 14 7000
Cured plate - Negative Auto SF EA 12 3000 16 4000 12 6000 16 8000
COS Top Lead - Car SF KG 0.250 62.5 0.350 87.5 0.250 125 0.350 175
Table 2: Bill of material and component requirement for LCV Battery
XPRESS
FREEDOM MHD800 FRDMFS70 - XPRESS MHD800 -
Description Type UOM MFS70 (MTO) (MTO) RM (MTS) RM (MTS)
Lid - LCV Battery SC EA 1 250 1 250 1 500 1 500
Container - LCV Battery SC EA 1 250 1 250 1 500 1 500
Handle - LCV Battery SC EA 2 1000 2 1000
Thermocol RM EA 1 250 1 250 1 500 1 500
COS Top Lead - LCV SF KG 0.250 62.5 0.350 87.5 0.250 125 0.350 175
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Table 3: Bill of material and component requirement for HCV Battery
PBX1500 SHD1500 PBX1500 - RM SHD1500 - RM

Description Type UOM (MTO) (MTO) (MTS) (MTS)
Lid - HCV Battery SC EA 1 250 1 250 1 500 1 500
Container - HCV Battery SC EA 1 250 1 250 1 500 1 500
Handle - HCV Battery SC EA 2 1000 2 1000
Thermocol RM EA 1 250 1 250 1 500 1 500
COS Top Lead - HCV SF KG 0.250 62.5 0.350 87.5 0.250 125 0.350 175
Note: SC – Sub contracted, RM – Raw material and SF – Semi finished
Following figure graphically depicts the bill of material for a battery produced for replacement
market to be sold through dealers’ network.
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Battery (MTS Scenario)
LID Container Plug Handle Sulphuric Acid Carton Thermocol Separator
Sub Contracted
Positive Cured Plate Negative Cured Plate
Positive Wet Plate Negative Wet Plate
Grid for Positive wet plate Positive paste Grid for Negative wet plate Negative paste
Lead Carbon Sulphuric Lead Carbon Sulphuric

Oxide Black Acid Oxide Black Acid
Primary Lead Primary Lead
Alloy Lead Alloy Lead

Ingot Ingot
COS Top Lead
Secondary ` Secondary
Lead Lead
Antimony Primary Lead Antimony Antimony
Fig 1.1
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Work center:
Following table shows the work centers that are used to produce in house produced components.
Pune plant will have only final assembly and packing work centers and will source it’s
requirements of these components from Nashik plant. All other manufacturing plants will have all
the work centers. The operating parameters are shown in the fig 1.3.
Table 1: List of work centers
Semi finished product

/Processing Work centre
Positive cured plate Curing m/c
Negative cured plate Curing m/c
Positive wet plate Plate pasting m/c
Grid for positive wet plate Grid casting m/c
Positive paste Paste mixer
Negative wet plate Plate pasting m/c
Grid for negative wet plateGrid casting m/c
Negative paste Paste mixer
Alloy Lead ingot Furnace
Lead oxide Oxide mill
COS Top lead COS Machine
Table 2: Operating parameters for the work centers
Sr No Work center Operation Activities

Act 1 Act 2 Act 3
1 Furnace Melting and casting Power M/c Time

(KWh) (Min)
2 Oxide mill Grinding Power M/c Time
(KWh) (Min)
3 Paste Mixer Paste mixing Power M/c Time
(KWh) (Min)
4 Grid Casting Grid Casting Labor Power M/c Time
Machine (Min) (KWh) (Min)
5 Plate Pasting M/c Plate Pasting Power Labor M/c Time
(KWh) (Min) (Min)
6 Curing machine Plate Curing Power Labor M/c Time
(KWh) (Min) (Min)
7 COS Machine Cast on Strap Power M/c Time
(KWh) (Min)
8 Assembly Final Assembly Labor Power M/c Time
(Min) (KWh) (Min)
9 Packing Final packing Labor
(Min)
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6.3.1 Quality Assurance in Production:

Inorder to ensure quality at Inprocess stages , Inprocess quality Inspection is done once for
every Production Order for the following work centers and the Properties tested are as follows.
Work-Center Parameter Tested

Grid Casting a. Grid Thickness
b. Visual check
a. Residual Lead (sample

Curing Machine tested)
b. Moisture (sample tested)
Assembly Short Circuit Test (100%)
Note : If Band width permits , then Inspection Points can be used to record the
Inprocess results every day.
In all the Finished Products , the GR Inspection after Production is done for a random sample
of 5 . Only Packed weight is checked .
6.4. Sales and Distribution :

PIL’s distribution model is fundamentally based on the inherent need of the customer to ensure
smooth supply of components under all circumstances while providing a long-term cost advantage.
Manufacturing Plants (7) Stocking Facility available in all the plants

(Hosur, Gurgaon, Durgapur, Ranjangaon , Pune ,
Nashik, Chennai)
Regional Distribution centers (4) Responsible for delivery to the various locations
(Mumbai, Chennai, Delhi, Kolkata)
Stocking facility available (Act as selling units)

Sales Offices (50)
The four regional distribution centers of PIL are strategically located in the four regions of India so
as to cater customers across the country. Similarly, Sales Offices are spread across India
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according to the demand of both Automotive as well Industrial products. Also these sales offices
make the distribution of products seamless. Some of the important activities to be carried out by
these units are customer complaints, product liability, negotiating on the terms of sale with dealers
(pricing, payment terms etc) and debt collection. Negotiations with the OEMs take place at the
head office. A monthly regional level Sales Report is submitted to the Head Office.
Most of the delivery from plants to regional warehouses is done via road.
Sales office is responsible for the following functions.

 Enquiry, Quotation & sales order processing
 Check the previous business transactions (if any)
 Contractual transactions (if any)
 Check credit availability
 Material availability
 Delivery scheduling needs to be done for various plants, regional offices or sales office
 Tax determination is also done
The damaged returns are treated as inbound delivery and so are treated as sales return.
For this a credit note is raised to the customers account. OEMs normally send the defective items
to the nearest warehouse where as the dealers return the defective items to the branch office.
In case of bulk purchase (which usually happens in India & Japan), a number of
seasonal/promotional rebates are given to the buyers such as: Say 5% rebate on purchase of
1000 units in first quarter in Japan & 8% rebate on 500 units to US.
Delivery to dealers is normally done from the branch offices. In some cases branch office also
directly sells goods to the end customers.
PIL engages itself in a variety of distribution channels. The various channels of distribution
available are dealers, direct sale etc. In some cases branch offices also sell their products directly
to the end customers.
PIL being the pioneer in the storage battery sector with the strongest distribution system in place
caters to the third party sales too. A company called Fugitive Limited supplies battery storage
racks directly to different customers of PIL after receiving purchase orders from PIL.
Rate Contract Scenario- For Government agencies/ state transport/ civil defense etc. there is rate
contract is fixed with the validity from 5 years to 7 years. The material is delivered against this
mutually agreed contract & based on the material quantity. The payment terms varies depending
on the party.
RDC – BO – Plant relationship:

=========================
Some of the plants manufacture all batteries (Automotive and Industrial), some produce only
automotive and some produce only Industrial. These are sent to various RDCs and branch offices
through a replenishment cycle. RDCs get supplied from specific plants only. Similarly, each RDC
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has a number of branch offices under it. The relationship between these units is indicated in the
figure 1.4
Product Pricing and Variations

=========================
There are two major product divisions at PIL i.e. Automotive and Industrial under the Automotive
PAS, HCV, LCV and BC is produced. For Industrial the variations are UPS, UPS Battery, Stand By
& BC. At PIL, UPS and BC are manufactured. Separate pricing strategy is considered for
Automotive and industrial sales. Exports have different pricing maintained from the head office.
PEL has separate pricing strategies for direct and PIL. Pricing includes Basic price, Customer and
Material discounts, Sales tax, Excise etc.
Credit management
================
The customers are segregated according to the risk. Customers credit limit is checked before
generating the sales order. There is a separate procedure for credit checks for OEM and Export
customers.
Stock transfer
============
Stock transfer between PEL and PIL occurs through Regional Distribution Centers. In addition to
this there are stock transfers within PIL to balance demand and supply. Stock transfers are also to
R&D for testing and evaluation and for audit purposes. These stock transfers are captured in the
legacy system
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Delhi
Gurgaon
Durgapur
Kolkatta
Nashik
Ranjangaon
Plant producing Automotive Battery
Pune
Pune
Plant producing Industrial Battery
Plant producing both Industrial and

Automotive Battery
Hosur
Movement of Industrial Battery
Chennai Movement of Automotive Battery
Regional Office
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Fig 1.4
Quality Assurance in Sales and Distribution.

Optional Exercise
In the Pune Plant , when delivery is created for the Material Car Battery , the inspection at delivery
is mandatory to post the goods issue. In the delivery a physical inspection of the package is
done .
6.5. Human Resource
Recruitment
=============
PIL’s main hire consists of ITI diploma holder for the positions of workmen. Positions like
supervisor & Engineer etc are filled with BE/BTECH
All Managerial positions have MBA with good analytical abilities.
Sales team mainly includes Management trainees.
Applicants are invited from outside to fill the vacancies, these external candidates go through
chain of selection process and some time inter-unit transfers are done to fulfill the immediate
requirements.
Some time candidates are directly hired in cases of special references without undergoing chain of
selection process.
Vacancies are published in the newspapers. Placement consultants are also informed about the
vacancies from time to time.
Most of the recruitment for workers is done through Placement Consultants. Recruitment is also
through website where candidates can place their resume in company required format.
Initial Screening of candidates is done by the HR deptt & then they are called for preliminary round
of interview. Interview panel consists of people from technical area & HR.
Selected candidates are called for IInd round of Interview. This interview is with the Deptt head.
After clearing the IInd round head of HR scrutinize the candidate in behavioral aspects. (IIIrd
Round).
After IIIrd round candidate is informed about the selection & Offer is made. On joining Appointment
letter is issued with all terms & conditions.
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Personnel Administration
=======================
Personnel Administration procedures include maintaining a personnel file, Hiring, Transfers,

Deputation, Change in working Details, Promotion, Separation. For maintaining personal file a
manual system is followed and tracking is done through employee no.
The main category of employees is
Regular Employees
Contractors
Temporary
Trainees
Employees Administration and Recruitment databases are in Fox pro.
If there are requirement of certain skills at other location. Then people are deputed to that location
for short-term assignment. If the duration of assignment increases six months then people are
transferred/relocated to the respective locations.
Organization Structure
====================
The employees are identified by employee no, name & designation.
The organizational units are broadly classified as Locations, Division, Departments and Cost
center. Regional offices look after both Industrial and Automotive along with PEL product
distribution. Hence three regional managers manage each regional office. One of the Regional
manager looks after Telco and Maruti products only at the region and reports to GM- Telco and
Maruti. Similarly one regional manager looks after Industrial product and reports to GM-Railway
and GM- Mining. Rest of the products comes under third Regional manager, which looks after all
the PEL products and automotive PIL products other than Maruti and Telco. This regional manager
reports to respective GM of the Zones. Area sales manager of the branch office reports to all the
three regional managers of the respective zone.
Positions are clearly defined in the organization. The employees are allocated to different cost
centers. There are employees who are assigned to two or more departments or cost center. For
example, a person working for Production and testing can have different department and hence
different cost center
Employees working in the same department may have different cost centers. For example Person
working in R&D for two different product development can have same department and different
cost center
Organization Hierarchy includes four broad levels –
1. Top Management
2. Middle Management
3. Workers
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4. Utilities
These can be further divided as follows –
Top Management –
CEO - L9
Directors - L8
GM - L7
Middle Management-
Managers - L6
Sr. Engineers - L5
Supervisor/GET/Mgmt Trainee - L4
Workers
Specialist Workers - L3
Workers - L2
Trainees - L1
Utilities
Sweepers - S1& S2
All production facilities have Time office functions. However payroll is run centrally at corporate
office.
Time Management
=================
Employees working in Grade L2, L1, and S2&S1 have rotating shifts. L4&L5 employees can have
night shifts. All others have general shift Pattern.
All the employees working in factories are covered under the provisions of factory Act.
Besides National holidays all employees are entitled for 24 Earned Leaves & 7 Causal Leaves. All
women employees are entitled for 90 days maternity leave. Provision for comp off is allowed.
Absences taken by employees if exceeds their entitlements for respective leave. Will be
considered as unpaid leaves and will be deducted from Basic Salary at source.
Rules for late night shift & overtime are monitored as per the factory Act.
All branches are following shops and establishment acts as per the state, so different paid holidays
are observed.
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Different Holiday Calendars are maintained for different cities. Every location follows local holidays
and working days calendar.
The department head prepares the weekly/Monthly shift schedule and inform the time office
accordingly. It is likely that the schedule may get changed as per the production requirements and
the same will be informed to time office by the concern authority. The deviations are stored in the
attendance system for attendance calculations.
It is likely that the deviation may not reach time office before the end of the shift, then system
should generate schedule mismatch report for rectification.
Absenteeism report is generated for payroll process.
Payroll
========
Payroll is run bi- monthly for workers & monthly for middle & top management. Payroll date for
workers is 1st & 16th of every month & for middle/top mgmt its last working day.
The absenteeism is monitored on day-to-day basis and the leave applications are posted to clear
the absenteeism. On the month end the attendance is audited and transferred to payroll system
In addition to HRA employees in Delhi and Mumbai locations are getting Additional HRA as well
Following reimbursement / Claim schemes are available in SCIL.
Medical Reimbursement
Leave Travel Assistance Claim

The permanent employees not covered under ESI scheme are eligible. If the person is on
probation, as soon as he becomes permanent, he will be eligible for the scheme.
For Supervisors/Eng. 6 % of Basic Salary

For Executives 8.33 % of Basic Salary
For managers & above 10.33 % of Basic Salary
The claim forms are submitted to taxation along with the medical bills. The reimbursement up to
Rs. 15000/- is exempted. Balance is paid as medical allowance and made taxable. The amount is
not carried forward to next year for claim.
Leave Travel assistance is a benefit provided by the company to all permanent employees and
can be claimed in respect of self, spouse, dependent parents and children only. The accumulated
amount will be paid annually.
Category Eligibility
Workers 200/- per month
Executives 8%
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Managers 8%
Salary Advance--
The salary advance is sanctioned to the employee for serious illness of an employee or his/her
family member. The installment amount to be deducted from salary and period for deduction will
be fixed by personnel department.
Festival Advance--
The festival advance is paid to worker and staff category once in a year, amount varies location
wise. It is to be deducted in maximum 4-5 installments. The period of disbursement is different for
Poona, Roha and Mahad. The advance is availed on more than one occasion, either at the time of
Ganpati festival, Ambedkar Jayanti or Holi The worker/Staff can take advance on any one
occasion.
Full & Final Settlement –
The individual will be provided with a Clearance Certificate along with the Separation letter. He will
complete the said form and hand it over to the Personnel Department a day prior to his last day of
separation. This certificate will be filed in the individual’s personal file
The Personnel Department will compute the final dues in the register, get it audited, prepare the
voucher and forward it to Accounts Dept. for drawing a cheque.
Organization Chart
MD Oscar
CEO- PIL CEO-PEL
Oscar Group
CEO
Director R&D Director Automotive Director Industrial Director Finance VP HR
PIL
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CEO
Director R&D Director Finance VP HR Director Product
PEL
CEO
Director R&D Director Finance VP HR Director Product

_______________________________________________________________________________________________
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Director
Automotive
GM-
South
GM-
North Director
Industrial
GM-
East
GM-
Railway
GM-
West
GM-
Mining
GM-
Maruti
FM Pune
GM-
Telco
FM-
FM- Durgapur
Pune
FM-
FM- Ranjangao
n
Nashik
FM-
Gurgaon
FM-
Chennai
PIL
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Director Product
GM-East
GM-West
GM-North
GM-South
FM-Bangalore
PEL
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Document
GM-Telco GM-Maruti GM-South-PIL GM-South-PEL GM-Railway GM-Mining
RM-Automotive RM-South RM-Industrial
Chennai RO ASM 1 Branch office 1
Southern Region
Director-Finance
GM-Treasury
GM-Accounts
Factory Regional
-Accountants Accountants
Accounts and Treasury
_______________________________________________________________________________________________
Document
6.6. Finance and Controlling

Both PIL and PEL being a separate legal entities incorporated in India prepares its final accounts
complying with the requirements of the Companies Act 1956. The provisions of Income Tax Act
1961 are also taken into consideration in maintaining the books of accounts. The group reporting
is done at the level of PIL making adjustments for all inter company transactions. The books of
accounts in both PIL and PEL are maintained in INR. The fiscal year followed by both the
companies is April – March.
MIS Reporting
==============
Budgeting and control forms an important part of the MIS reporting for both the company codes.
The important MIS requirements are:
 MIS on various plans vs actual
 The company carries out profit center planning to measure the performance of each
unit/offices. In this context each regional offices and branch offices are considered as Profit
Center. The plans are compared with the actual when they are incurred and variances
analyzed and responsibility is fixed to ensure correction. The plan version is uploaded once
a year during the first quarter. This plan version generally remains unchanged during the
year. For major changes, the plan version maybe changed or a new plan version be
uploaded as per the management decision.
 Cost center planning is also done to control the expenditure as well as for product costing
purpose. Product costing is carried out by production order as well as by sales order. The
actual cost of production is compared with the plan cost and variances analyzed. All
expenses are accounted for cost center wise. In this context, each department of the
manufacturing unit, regional offices are considered as cost center. Each cost centre is
attached to a profit centre.
 All common costs incurred at the common cost centers are identified and allocated to the
user cost centers. The basis of apportionment is decided by the head office which
generally remains static during a financial year. Adjustment to basis of apportionment is
accordingly made to account for any abnormal situation/condition. The apportionment is
made each month before the month closing.
 Trail Balance is prepared on monthly basis as the company follows monthly closing policy.
 The following reports are prepared on a monthly basis to judge the performance of the
company:
o Debtors Aging Report

o Vendor Balance Report
o Stock Report
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o Cash Balance Report/Cash Flow Statement

o Branch wise Sales Report
o Customer Balance report Branch wise
o Branch wise Debtors or Vendors Balance Report
o Profit centre wise report of values of various accounts
o Cost centre wise report of cost elements of various accounts
 Balance sheet are prepared per branch wise.
Product Costing and overhead allocations

===================================
The uniform product costing approach is taken across all locations and standard cost estimates
are released beginning of every quarter. The Management of Oscar group divides the cost of its
products into 5 categories for detailed analysis. These help them in identifying the tax areas as
also focus on the thrust areas. The internal performance is evaluated by taking into account the
collective variance between planned and actual costs for each of these categories. These
categories are:
1. Material Costs, which includes the costs of direct raw materials, identified straight in the
product composition.
2. Process Cost, which clubs the costs of the activities, which go into adding value to the
products.
3. Production Overhead is allocated on the basis of Raw Material consumption. Raw material
used for specific Finished Product is segregated from the common raw material for
overheads allocation. Overhead allocation for common raw material does not depends on
the finished product and is decided by the parameters defined by management.
Management gives different overheads for different raw material based on the consumption
in the final product. This also takes care of the handling costs in the products.
4. Sales & Distribution Overheads, which identifies the costs incurred in selling the product
and distributing it to the vendor's place.
5. Other Costs covering the costs, which are not accrued in any of the above but have to be
included in the product cost.
Variances are calculated on the above categories. The under absorption & over absorption are
taken into account via production variances whereby they get booked into P&L.
Accounts Receivable
=================
Debtors management or accounts receivables are an important area for the organization due to
the large customer base. One of the critical requirements is to be able to have the online view of
the debtors across all the units.
Sales of PIL include both domestic as well as export sales. Majority of the sales are done from the
branch offices while export sales are negotiated and carried out from the Head Office. All sales are
credit sales except for sales to new customers in which case the same is secured by accepting
hundi/bills of exchange. Customers are basically grouped under two categories – domestic and
export. Besides this there are may be few one-time customers. Sales of PEL are only domestic.
_______________________________________________________________________________________________
Document
The finance department accepts the procedure of raising a bill of exchange for payment from
Customers and Letter of credit for payment from the foreign customer. Subsequently a Bill of
exchange is raised and sent to the Customer for acceptance. Once the customer Accepts the Bill
of exchange the accountants makes a note of that in a register but the books of accounts are not
updated. Then the bill of exchange is sent to the bank for discounting.
When the bank statements are received the customer invoice is cleared against the bill of
exchange encashed.
Similarly when a Bill of exchange is approved for payment to vendor, it is noted in a register. The
vendor invoice is cleared if the bill is mentioned in the bank statement as encashed
In case of LC, LC will be raised. Once the Bank Accepts the LC the accountants makes a note of
that in a register but the books of accounts are not updated. After goods are dispatched, the LC is
sent to the bank along with the necessary documents.
When the bank statements are received the customer invoice is cleared against the amount
received for the LC.
Similarly when a LC is approved for payment to vendor, it is noted in a register. The vendor invoice
is then cleared when the amount of LC is mentioned in the bank statement as paid
Credit management and debt management are also strictly followed. Credit limit for the customers
are set in each region after strictly examining the creditworthiness of the customers and ensuring
optimum liquidity position.
Credit notes are also raised on the customer for discounts under various schemes after analysis
and approval.
Collections from the domestic customers are made at the branch offices and remitted to the Head
Office on monthly basis along with statement of collections made and balance due customer wise.
Export sales are made against irrevocable letter of credit. Advances from customer are also
collected as per the terms and conditions of the negotiation, which is subsequently adjusted
against the customer invoice.
Periodically reminder notices are sent to the customers with overdue outstanding for the payment
of the amount due and interest are also charged on long overdue customers solely at the
discretion of the Head Office. Interests are accounted for on cash basis, i.e., on recovery.
Reminders are issued manually after analyzing the outstanding overdue and due dates. The first
reminder is send as the due date passes, subsequently at an interval of 7 days second and final
reminders are sent Unrecoverable receivables are identified periodically and provisions made.
Account receivables are written of only after proper analysis and approval of the competent
authority in the Head Office.
Debtors aging analysis report is prepared complying with the requirement of schedule VI to the
companies’ act 1956.
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Accounts Payable
===============
The main objective of the efficient accounts payable system is to process the bills of the suppliers
in time and at the same time securing maximum credit period in order to achieve an optimum
working capital cycle and standard current ratio.
Procurement of raw materials in PIL is mainly from domestic suppliers. However they also procure
certain high value specialized components from overseas suppliers. All imports are centrally
managed.
Vendors of the company are broadly categorized under four groups – Domestic Vendors, Import
Vendors, Service Vendors and Vendors for Capital Goods. One time vendors also exists for
procurement on urgent basis in order to ensure uninterrupted production process.
All the vendors are subject to withholding tax under the provision of income tax act 1961. Taxes
are withheld at the applicable rate at the time of payment or credit to the vendor account
whichever is earlier. Taxes mainly include tax under sections 194C, 194H, 194J, and 194I.
Withholding taxes are not deducted or deducted at lower rate where any vendor submits certificate
from the income tax department to that effect.
Payments to vendors include payment against invoices as well as advance payments. Final
payments are made after adjusting the advances paid.
Credit period for procurement from domestic suppliers is on an average 45 to 60 days from the
date of receipt of materials at the plant whereas imports are made against issue of irrevocable
letter of credit of 120 days. Credit period of vendors for office supplies varies from 15 to 20 days.
Payments to domestic vendors are made from the regional offices. Bills are processed for
payments twice in the month on fortnightly basis, i.e., 7 th and 22nd of the month. The regional
offices send a statement/forecast of funds required to make the payment to the domestic vendors
for a month to the Head Office by the 20 th day of the pervious month. Based on same the Head
Office transfers the amount to bank of the regional offices by 5 th and 20th day of the next month
respectively. After making the payment the regional offices prepares a statement of vendor wise
payments made to the Head Office for reconciliation by 15th and 30th of the same month. Blocking a
vendor from payment is solely decided by the Head Office.
The company also raises debit notes promptly on vendors for non-performance /deficiency
/rejections, etc.
Correspondences are sent to the vendors on quarterly basis to confirm the balances due to them.
TDS certificates for the deductions are printed and sent to the vendors on yearly basis.
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Inventories
=============
Inventories are valued at lower of cost or net realizable value. The cost of raw materials and
components are calculated on moving average price whereas cost of semi finished goods and
finished goods are calculated at standard price.
Slow moving and non-moving stocks are identified on periodical basis and provision is made for
the same at the applicable rates by the Head Office.
Inventory aging report is prepared at each plant, regional offices and branch offices.
Fixed Assets
===========
All procurement of fixed assets is made centrally at the Head Office. Requisition for fixed asset is
made by the respective department of the plant, regional office and branch offices to the Head
Office. On receiving the same the Head Office secures quotation from approved suppliers and
prepares a purchase order for the same. The fixed assets are delivered and/or installed directly at
the location from where the requisition was generated and bill for the same are submitted to the
Head Office for processing.
Budgeting is maintained for fixed assets so as to know the difference between the budgeted and
actual amounts.
The policy of the company is to provide depreciation on straight line method at the rates
prescribed by schedule XIV of the Companies Act 1956. It also calculates depreciation on WDV
method for calculation of managerial remuneration under section 349 and 350 of the Companies
Act 1956.Depreciation is charged on monthly basis.
All disposal or retirements of fixed assets are made on the proper approval and the head office
makes all negotiations for the same.
Fixed Asset register recording all acquisitions, disposal, transfers and depreciation is maintained at
the head office.
Banking
=========
The company maintains bank accounts at the Head Office, regional offices and the branch offices
and manufacturing locations. All the bank accounts are maintained in INR. All expenses incurred at
the plants are paid by the head office. Cash balance is maintained at the plants for incurring petty
expenses. The head office remits fund for petty cash expenses at the plants at the beginning of
the each month. The plants prepare the statement of expenses incurred at the plant and send the
same to the head office at the beginning of the next month together with the balance of petty cash
in hand at the plants.
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Bank reconciliation is done on monthly basis and credit balance above certain limit is transferred
to the Head Office periodically
_______________________________________________________________________________________________

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AS-IS Business Process

3. Presence across sectors :

4. The main objectives of ERP implementation:

5. Highlights of the Operations:

5.1. Company: PIL

13 branch offices to Mumbai

5.2. Company: PEL

6. Operation Areas of Group Company :

6.1. Materials Management

Planning department sends Purchase requisitions to Purchase department. All purchase

6.2. Quality Assurance

Table 1: Bill of material and component requirement for Car Battery

Table 3: Bill of material and component requirement for HCV Battery

PBX1500 SHD1500 PBX1500 - RM SHD1500 - RM

Note: SC – Sub contracted, RM – Raw material and SF – Semi finished

Battery (MTS Scenario)

LID Container Plug Handle Sulphuric Acid Carton Thermocol Separator

Positive Cured Plate Negative Cured Plate

Positive Wet Plate Negative Wet Plate

Lead Carbon Sulphuric Lead Carbon Sulphuric

Primary Lead Primary Lead

Alloy Lead Alloy Lead

COS Top Lead

Antimony Primary Lead Antimony Antimony

Table 1: List of work centers

Semi finished product

Table 2: Operating parameters for the work centers

Sr No Work center Operation Activities

1 Furnace Melting and casting Power M/c Time

6.3.1 Quality Assurance in Production:

Work-Center Parameter Tested

a. Residual Lead (sample

Assembly Short Circuit Test (100%)

6.4. Sales and Distribution :

Manufacturing Plants (7) Stocking Facility available in all the plants

Stocking facility available (Act as selling units)

Sales office is responsible for the following functions.

RDC – BO – Plant relationship:

Product Pricing and Variations

Plant producing both Industrial and

Quality Assurance in Sales and Distribution.

6.5. Human Resource

All Managerial positions have MBA with good analytical abilities.

Sales team mainly includes Management trainees.

Personnel Administration procedures include maintaining a personnel file, Hiring, Transfers,

The main category of employees is

Organization Hierarchy includes four broad levels –

These can be further divided as follows –

Absenteeism report is generated for payroll process.

Following reimbursement / Claim schemes are available in SCIL.

Leave Travel Assistance Claim

For Supervisors/Eng. 6 % of Basic Salary

CEO- PIL CEO-PEL

Director R&D Director Automotive Director Industrial Director Finance VP HR

Director R&D Director Finance VP HR Director Product

Director R&D Director Finance VP HR Director Product

GM-Telco GM-Maruti GM-South-PIL GM-South-PEL GM-Railway GM-Mining

RM-Automotive RM-South RM-Industrial

Chennai RO ASM 1 Branch office 1

Accounts and Treasury

6.6. Finance and Controlling

 MIS on various plans vs actual

o Debtors Aging Report