Karachi: City of Lights

December 30, 2011 by Perry Manross

 

With more than 20 million inhabitants, Karachi, Pakistan is one of the world’s largest cities, with a commensurate demand for energy. Karachi Electric Supply Company’s (KESC) mission is to generate, transmit, and distribute electricity for the progress and prosperity of this burgeoning metropolis. Information technology is helping the company return Karachi to its proud distinction as “the city of lights.”

Generation, transmission, and distribution: The health of an energy company depends on performance in these areas. In 2008, a team of industry-savvy managers began to turn a struggling company around and have since made significant inroads towards optimizing KESC’s processes and infrastructure to better serve customers, employees, and shareholders.

KESC CIO Sardar Naufil Mahmud recalls, “The organization’s biggest problem was the vast expanse of its customers and the lack of physical resources to account for the utilization of resources.” This issue had several symptoms: shrinking production capability, increasing line losses, energy theft, and non-payment, among others.

Over the past three years, however, KESC has pushed forward on an intense journey to transform itself into a more profitable, more efficient operation. These efforts have primarily manifested themselves in increased generation capacity, a revamped transmission and distribution network, and improvements in the efficiency of its customer service.

 

Aligning IT with business strategy

KESC has invested heavily in increasing generation efficiency through the commissioning of power and engine plants and boosting capacity by 33% through the addition of three gas turbines.

New grid stations have been set up to enhance the reliability of KESC’s transmission network. The company has also been able to reduce its transmission and distribution costs by 2.7% last year alone, due to heightened attention to process and increased accountability.

Key among the contributors to this transformation, Mahmud says, has been an IT strategy aligned with business strategy. Mahmud’s team worked closely with SAP Partner Abacus Consulting to implement SAP ERP Financials and SAP ERP Human Capital Management (SAP ERP HCM) solutions, along with specific functionalities of the SAP ERP application.

The team agreed that by December 2008, most of the software would be ready in a beta version: financials, HCM and materials management. March 31, 2009, was the deadline for the plant maintenance software to be up and running – the day a new KESC combined cycle power plant was scheduled to go live.

That timeline presented a challenge, and the teams worked hard – completing the implementation and testing 15 days before the deadline. “We got ourselves additional time to debug and streamline the entire process, which is an implementation dream come true,” Mahmud recalls. Since then, KESC’s other plants have also successfully implemented the SAP software.

IT switches on value at KESC

Each individual SAP solution must be able to contribute real financial value to the company, Mahmud explains. As an example, he points to SAP ERP Financials. “If the accounts close on time, the treasury is able to have a full view of the costs and recoveries,” he says. “It’s quicker for them to identify bottlenecks thus making the collections and recoveries process more efficient.” SAP ERP Financials has also enabled KESC to make a month’s financial reports available as quickly as the third day of the following month.

Improving inventory and asset management was also a major priority. In the past, KESC had only one central place to hold the company’s complete inventory. “This inventory was valued in billions of rupees, and there was no control due to weak documentation practices,” Mahmud says. When a unit was moved to another location, it was actually shown as “consumed” rather than “moved,” making it difficult to accurately account for that unit in the company books. “Mainly because of the materials management functionality in SAP ERP and its concept of sub-stores, we have gained greater control of our assets,” Mahmud observes.

Simultaneously, implementation of plant maintenance across some of KESC’s largest and latest facilities has meant improved maintenance processes across its plants. “We have more visibility over assets and associated bills of materials and data sharing across the key groups involved in maintenance and operations,” Mahmud says. “There has also been a significant improvement in our ability to plan maintenance operations and undertake preventive maintenance.”

As Inayat Koreshi, a partner with Abacus Consulting, explains, there are two critical elements in the success of such a deployment: an organization’s own vision and a solid relationship with its implementation partner. KESC was fortunate to have both.

“KESC knew what they wanted from the technology and were aggressive in their timelines and demands,” Koreshi says.  As partners, we appreciate that assertiveness from the customer. We discussed the goals and developed timelines and milestones that reflected the commitment of everyone involved.”

SAP in tune with integrated business centers

As KESC drafted its strategy in 2008, it became clear to management that the company needed to improve both its external customer service as well as its own internal corporate culture. Management introduced a new structure relying on what are known as integrated business centers (IBC).

Previously, there were 98 complaint centers where consumers could go and register their complaints. Separate offices would investigate the maintenance side. By introducing the concept of IBCs, KESC localized customer management, consolidating the structure into 26 IBCs and putting key performance indicators and objectives in place to increase accountability within the organization.

The first IBC was launched in Karachi’s Defence area and has performed brilliantly, Mahmud says. With this structure in combination with its SAP implementation, KESC has already realized the return on its SAP investment. “We’ve seen a 50% reduction in transmission and distribution losses in the first IBC. We are now replicating this efficiency across all our IBCs,” Mahmud notes. “If we assume that a 1% saving across KESC yields approximately a billion rupees, the savings already generated is considerable.”

Mahmud concludes, “We currently have 2.2 million customers, and we feel we are now capable of serving somewhere between 3 and 4 million. Our future road map is a lot brighter now that we have the proper SAP solution and tools implemented.”

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