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The total cost of ownership of SAP ERP has fallen considerably
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Satish Pendse, CIO of Hindustan Construction Company Ltd discusses the importance of Enterprise Resource Planning (ERP) from the construction industry's perspective

The term Enterprise Resource Planning (ERP) has become synonymous with a software application that automates all the critical business functions of an organisation.

From the construction industry’s perspective, it is a single application, a single database that automates functions such as land acquisition, project planning & budgeting, execution, materials management, equipment handling, sales, lease management, utilities management, costing, accounts & finance, HR, Payroll and so on.

This is a single software running across all the locations and the business functions of the organisation.

The key advantage is that it provides a single set of figures giving end-to-end view of the business in an on-line, real-time manner, for all business locations spread across the globe. In the absence of integrated ERP, different functions work on different set of figures. The time is then spent in deciding which figure is correct.

Post ERP implementation, this problem ceases to exist since everyone works on a single set of figure. Saved time can be used for acting on the information provided through ERP reports, in order to reduce cycle-time and costs.

ERP automates the key business processes, eliminating duplication and improving efficiency. World-class ERP software are built around best-practices, thereby giving us an opportunity to upgrade our business processes.

Adoption of world-class ERP software such as SAP also helps organisations to reach next levels of corporate governance and creates adequate transparency. This is the reason private equity investors give preference to construction organisations that have implemented systems like world-class ERP.

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ERP allows an organisation to exercise required systemic controls, which becomes a necessity as organisation starts growing and spreading geographically. With ERP, one can get better control over funds and is also able to track the actual expenditure vis-à-vis a planned one and act on the deviations before it is too late.

Even a small improvement in productivity, utilisation of the construction equipment, reduction of inventory or reduction of wastage using the information provided by ERP, can lead to considerable savings in operating costs.

It is also experienced that the automation using ERP helps to track the records properly which results into getting better tax credits. By tracking the dates, it also helps in ensuring timely payment of statutory dues.

Real estate organisations use ERP to track customer collections during and after the construction. Real estate organisations whose business model consists of leasing the developed property get value through ERP. They can do much better management of lease rentals.

The system also does for them the rule based distribution of maintenance charges to all the occupants. Tracking of land-bank development, status of approvals of each hissa of land-bank gets facilitated through usage of SAP like ERP software.

In a nutshell, ERP has become a business infrastructure today. The way country needs solid infrastructure backbone in the form of roads, power, ports, airports and so on to sustain its growth, a construction organisation needs ERP backbone to sustain its growth in the future.

Beyond concerns

Construction companies do have some concerns regarding implementing world-class ERP solutions such as SAP. There is a perception that the system is complex. An implementation partner having domain knowledge can guide you about eliminating complications without scarifying the value.

Some of the construction companies also believe that their internal processes are not matured as yet and hence they may face difficulties while adopting ERP. The reality is that such companies should rather adopt world-class ERP, so that they can quickly migrate to world-class processes. Our staff, although may not be as educated, generally ends up surprising us positively in terms of the pace and comfort with which they adopt the software.

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