The adoption of efficient solutions to enhance the service delivery mechanism and minimise disruptions in gas flow has become a crucial part of the operations of a city gas distribution (CGD) entity. CGD operators across the globe have been adopting new technologies to ensure a safe, convenient and reliable natural gas supply to customers in the domestic as well as commercial sectors. Of late, there has been an increasing focus on integrating the different functional domains of a CGD utility. In this regard, an increasing number of CGD firms are taking up enterprise resource planning (ERP).
Features of an ERP system
An ERP system integrates information and processes from all functional divisions of an organisation, thereby providing easy access and a structured workflow. This level of integration can be achieved by creating a single database repository that can communicate with various software applications and provide different departments with business statistics and information. Overall, an ERP system integrates the external and internal flow of information across an organisation.
Need for ERP
The business complexity of CGD operators increases due to various internal and external factors. The major ones include the limited period of market exclusivity, regulated margins, the capital intensive nature of the business and the requirement of high uptimes for pipeline infrastructure to ensure uninterrupted gas supply. As the margins depend on overall operational efficiency, this translates into a CGD firm’s need for ERP. An ERP system can help a CGD utility commence operations early, minimise costs, achieve high utilisation rates, carry out predictive maintenance and optimise overall performance.
An integrated technology system helps a firm achieve high profitability and operational efficiency. These objectives require the provision of infrastructure to support system growth; the centralisation of CGD operations for easy data acquisition and evaluation; enhanced employee productivity due to greater user friendliness and automation of operations; the standardisation of vital data elements; easier information flow across the firm; the improved reporting of accurate data with increased accuracy and timeliness; and the easier regulatory compliance of various components of an operational system.
Implementation of ERP
The implementation of ERP solutions by CGD operators in India is bound to facilitate business process integration and streamline information for speeding up decision-making processes. These solutions are implementable at a predictable cost and time, and help achieve improved inventory management, reduce transportation expenditures, increase sales and reduce day sales outstanding. CGD operators who have put ERP solutions in place include GAIL Gas Limited, Gujarat State Petroleum Corporation Limited, Gujarat Gas Company Limited and Assam Gas Limited.
The implementation of ERP involves the following processes:
- Pre-evaluation screening: This process involves screening out those business processes in the firm that are not aligned with its business objectives.
- Package evaluation: This involves selecting the most suitable ERP package.
- Project planning: In this phase, implementation strategies are decided, including time schedules and deadlines.
- Gap analysis: Through this process, firms create a model illustrating their current as well as desired positions.
- Re-engineering: Human factors, such as the changing job responsibilities of employees, are taken into consideration in this phase.
- Customisation: The ERP package is tailored to suit the organisation’s business processes.
- Training the implementation team: The company trains its employees in system implementation and operations.
- Testing: During this phase, tests are conducted to check for problems, errors, etc.
- Operation: This is the final stage where the ERP system is made available to the entire organisation.
- End-user training: In this phase, training is provided to end-users.
- Post implementation: This is the maintenance phase where trained employees tackle post-implementation challenges.
The successful implementation of an ERP solution is contingent upon the adopted transition strategy, which refers to the process of shifting from a legacy system to an ERP system. Selecting the right transition strategy is critical. The successful operationalisation of an ERP system demands an understanding of the relationship of ERP transition strategies with processes, people and technologies. The different types of ERP implantation strategies include:
- Big Bang strategy: This calls for the installation of ERP systems for all business modules across the entire organisation in a single phase. The transition from the existing or legacy system takes place on a specific date. The advantages of this strategy are its low overall implementation costs, faster returns on investments, and avoidance of complex integration issues. However, it involves a lot of time and effort in terms of pre-implementation and planning, and has also been seen to have a high failure rate.
- Phased implementation strategy: This involves the implementation of one functional module at a time in a sequential order and is also known as the modular, functional and sequential approach. It requires interface programs for bridging the gap between the legacy system and the new ERP system until it is fully operational. The advantages of this strategy include lower risk exposures, a step-wise approach and low resource commitment. However, its overall costs are high due to the requirement of a lot of technical resources for creating interface programs.
- Parallel approach: This system allows the leg-acy and new ERP systems to co-exist for a specific period of time. This approach helps in good recovery options in case of any failure. However, it also consumes more resources than other approaches in the transition phase.
- Process line approach: The implementation strategy in this case is divided to manage parallel business process flows or product lines. The transition from the legacy system to the new ERP system takes place in terms of one product line at a given time. Once the transition of the first product line is complete, the process continues sequentially with the other product lines. This process has a high success rate and low resource commitment but its shortcomings include high overall costs and extensive implementation.
- Hybrid approach: This is a combination of all the above-listed approaches and it can be used in organisations with optimal interdepartmental communication and strong managerial leadership.
The optimal approach for ERP implementation in a CGD company would be to follow a phased investment process depending on the oper-ational stage of the company. The ERP requirements of a firm that has just entered the market differ from those of an experienced player. The following are the broad parameters for deploying an ERP system in a company:
- Beginner: This stage includes firms that have been in the market for around 0 to 3 years and are mainly involved in awarding CGD contracts as well as infrastructure development. In this phase, the company needs to invest only in a base ERP system that will help it move to the next level.
- Intermediate: This stage comprises firms that have been in operation for a period between 2 and 5 years and are involved in the commencement and expansion of operations. It requires CGD firms to implement softwares like SAP Utilities along with a base ERP system.
- Established: Such firms have mostly been in operation for more than a period of 5 years and are focusing on sustaining their business operations. After entering this stage, firms require a comprehensive system comprising ERP, SAP Utilities, business intelligence, and CRM solutions.
ERP project investments are massive and risky. Given the rate of failure, which is as high as 60 per cent, it is crucial for CGD players to take cognisance of the fact that ERP needs to be implemented in phases. The benefits of such systems in a CGD firm outweigh the efforts involved, and, keeping this in mind, more and more entities are taking up their implementation.