Faizan Mustafa is chief information officer (CIO) at Indus Motor Company, a joint venture between Toyota and the House of Habib in Pakistan as well as the biggest automotive manufacturer in the country. At SAPPHIRE NOW this year, Mustafa received an SAP Innovation Award on behalf of Indus in the category of “Process Innovator.”
The award is well deserved — Indus Motor Company is not only the first to implement SAP S/4HANA in Pakistan, it is also among the first to implement the next-generation suite in the automotive industry worldwide. But Indus Motors is not stopping there. If Mustafa has his way, the company will be well positioned for another SAP Innovation Award in 2020 – this time in the “Digital Trailblazer” category.
Reset: New Market Competition, New Customer Focus
Indus has been an SAP customer for years, and during this time its legacy ERP had been highly customized. “We had lost track of the upgrade path,” Mustafa recalls. “This meant that it was difficult to take quick advantage of new innovations coming out of SAP.”
Pressure to rectify this situation came when the automotive market in Pakistan opened up a few years back. “The government announced a new policy of tax and tariff breaks to bring new automakers into the market,” Mustafa explains. “With new competition on the way, we understood immediately the importance of becoming more innovative and customer-centric.”
In the past, market dynamics in Pakistan favored the manufacturer: Demand was high, supply was low. Customers took for granted wait times of two to three months for orders to be filled. But market competition would change this.
To prepare itself for this new environment, Indus conducted a “SWOT” analysis of the organization’s strengths, weaknesses, opportunities, and threats. This exercise revealed a lack of real-time visibility at a global level. Processes were strong, but not necessarily connected. Data silos developed. Reporting from these data silos took time, and merging all the reports into a single picture took even longer. The result was that managers made decisions based on old data.
“We needed to be more real time,” says Mustafa. “We needed a way to be in the moment with our customers.”
Supply Chain Responsiveness
Indus knew that a big part of the equation had to do with a more flexible and responsive supply chain. “When it comes to supply chain, you’re only as strong as your weakest link. To set ourselves apart from the competition, we needed to understand exactly what was going on in the supply chain and ensure that all the parts were clicking.”
The simplified data model that comes with SAP S/4HANA has played a big role in achieving this end. The underlying SAP HANA database eliminates many of the tables otherwise needed to facilitate lookups and reporting with traditional databases. Running in memory, SAP HANA also completes computational tasks in a fraction of the time.
One concrete advantage of this setup is much faster materials requirements planning (MRP).
“We’ve seen a 95 percent improvement in processing time for MRP,” Mustafa says. “It used to take a day, now it takes minutes. So if there’s a change in demand, I can now quickly run the MRP report and communicate with my suppliers about adjusting to the new plan.”
This helps Indus improve responsiveness, which corresponds directly to improving the customer experience.
Data Visibility for Better Product Quality
A move away from spreadsheets toward a single version of truth, accessible globally, is also helping Indus to improve product quality. In a spreadsheet-based process, data regarding defects — for, say, a shock absorber — would not show up for a week or so. By this time, of course, cars could be shipped already, leading to costly and complicated recalls.
Today, defects show up in the analysis almost in real time. “Now we have the power to stop defects from going deep into the supply chain,” says Mustafa. “We’ve reduced defects in our final products and the cost of dealing with them. We’re also delivering higher-quality products that keep customers satisfied.”
Business Process Re-Engineering
While Indus already had world-class processes in place as part of the Toyota brand, Mustafa and his team wanted to look under the hood and see what could be improved.
“We wanted to do more than automate existing processes,” he says. “If a process is inefficient in the first place, automating would only multiply the inefficiencies.”
Instead, Indus devoted a few months to defining the ideal state before the implementation. As a result, the company not only automated processes, but strengthened controls as well: “We added probably 1,000 new controls related to the segregation of duties and approvals, encompassing everything from revenue leakage and reputational risk to fraud detection and prevention.”
Indus Leads the Way in Pakistan and Beyond
Today, Indus is leading the way for the manufacturing sector overall in Pakistan. The implementation of SAP S/4HANA has caught the attention of companies even beyond the auto industry.
“What we’re showing is a way forward that puts the customer first,” says Mustafa. “Now companies in other sectors are seeing the advantages: how you can do more business, attract more customers, and differentiate yourself in a crowded marketplace by putting the focus on the customer experience.”
Moving forward, Indus will continue to strive for new levels of excellence. Predictive maintenance – using on-board sensors and analytics in vehicles to predict the need for repairs – is on the agenda.
Mustafa also talks about a more outcome-based future for customers and the automotive industry. “We already see it with Uber and Lyft and Zipcar,” he says. “Customers want outcomes. Instead of selling vehicles, we’re selling experiences. Where does a car manufacturer fit in this new value chain? Wherever it is, I’m sure it has a lot to do with flexibility and real-time insight.”
Meanwhile, through “Yokoten,” the Japanese word for best-practice sharing, Indus is communicating its experience with the Toyota global organization so that it can be applied to other plants around the world.
“I’m proud of what we’ve done at Indus,” says Mustafa. “In many ways, it is a template for a new way forward enterprise-wide. If we keep pushing forward, I think ‘Digital Trailblazer’ may be within reach for Indus at SAPPHIRE NOW in 2020.”
To learn more, visit the SAP S/4HANA area of sap.com or register for the virtual event, “Intelligent ERP: SAP S/4HANA 2019 Update.”