To boost profitability across its booming business, Granules India sought deeper insight into the costs and margins of each product, manufacturing facility, region and more.
Granules India decided to implement SAP S/4HANA with IBM Services, and host and manage the application on IBM Power Systems™.
25% growthforecasted in 24 months
3 times greatercompute density from IBM Power Systems
Enhancesdecision-making with new insights into profitability
Business challenge story
Bold expansion plans
Serving the medical needs of its patients, Granules India has made its name supplying drugs such as paracetamol and ibuprofen to pharmaceutical companies. To win market share, Granules India has focused on manufacturing at high volume with remarkable cost-efficiency. The strategy has paid off, as Granules India now sells thousands of tons of these medicines each year to some of the world’s leading generic and branded pharmaceutical companies.
Granules India is now looking for new ways to bring high-quality medication to the masses. For example, Granules India recently purchased Auctus Pharma; an acquisition that moves the company into the active pharmaceutical ingredient (API) market. Additionally, Granules India teamed up with Ajinomoto OmniChem to venture into the licensed manufacture of patent-protected products for regulated markets, known as Contract Research and Manufacturing Services (CRAMS).
Ganesh Karuppannan, CFO, Granules India begins: “To achieve healthy growth in our new and established lines of business, we need to keep a close eye on profitability across our diverse operations, fine-tuning our strategy and adapting to market changes.
“We faced a challenge: our approach to finance was geared towards our core business of manufacturing generic medications, and would not cope well with the additional complexity introduced by new lines of business. For starters, we relied heavily on manual working, and our planned expansion saw workloads set to rise. Furthermore, our existing systems provided only limited visibility of the actual costs of manufacturing, which we require to make sound business decisions.
“We aim to reach annual revenues of USD 1 billion within the next few years. It was clear that to achieve our growth aspirations, we needed to move to a more efficient way of working.”
Finding the cure
For real-time, granular insight into profitability, Granules India decided to deploy the SAP S/4HANA Enterprise Management solution, a core application covering all mission-critical business processes of an enterprise. SAP S/4HANA Enterprise Management is natively built on the SAP HANA® database, and designed with the SAP Fiori® user experience. For support during the implementation, Granules India turned to IBM Services.
“We opted for SAP S/4HANA because SAP is a very well-established vendor and has a strong reputation in the pharmaceutical industry,” recalls Ganesh Karuppannan. “We selected IBM as an implementation partner because the IBM team offered excellent experience and expertise in SAP deployments. Also, IBM provided the global reach we needed to complete the deployment across our Indian and U.S. operations.”
IBM Services helped Granules India deploy SAP S/4HANA in India and the U.S. in just six months. The IBM consultants helped Granules India map core business processes in the new solution, and standardize data such as material codes. After the implementation, Granules India engaged an Application Management Services team from IBM to manage the SAP S/4HANA solution for the next five years.
Ganesh Karuppannan remarks, “When we engaged IBM, we were already investing heavily in additional manufacturing capacity to support our new lines of business, and we were keen to start seeing a return on that investment. We set a goal of completing the entire implementation in just six months – a tall order for a project of this size and complexity. The IBM team worked tirelessly to keep the project on track, putting in some very long days to cover the Indian and U.S. time zones. Thanks to the excellent support from IBM, we were able to complete the SAP S/4HANA implementation within the deadline.
“For us, the SAP S/4HANA deployment wasn’t just a technology switch; it also represented a massive cultural change. Our teams had previously been accustomed to rudimentary tools supplemented by manual ways of working, and suddenly we gave them a world-class SAP solution that automated and standardized many tasks. It’s like giving a sports car to someone who used to ride a bicycle. To ease the transition, IBM trained our staff to use SAP S/4HANA proficiently, and IBM’s efforts in helping us overcome the cultural element of the transformation were crucial to our success.”
SAP S/4HANA is managed by IBM Services and runs on IBM Power Systems servers located on-premise. Specifically, the solution runs on two IBM Power System S822L servers virtualized using IBM PowerVM® technology and running the SUSE Linux Enterprise Server for SAP Applications operating system. Data is stored on an IBM Storwize® V3700 device.
“We had to decide whether to run SAP S/4HANA on IBM Power Systems or on an x86 architecture,” explains Ganesh Karuppannan. “IBM Power Systems comes with a higher upfront cost, but the platform offers around three times greater compute density, so you need to run, maintain, power and cool fewer physical servers, and therefore your running costs are lower. In our eyes, the exceptional reliability, continuity and TCO of IBM Power Systems make the platform a worthwhile investment.”
A healthy prognosis
Granules India has a history of innovation, and working with IBM deployed the very first Virtual Desktop Infrastructure worldwide. With the introduction of SAP S/4HANA, Granules India has transformed its approach to finance and decision-making – embracing standardization, automation and digitization.
Ganesh Karuppannan adds: “In the past, we had only limited visibility of the actual costs of manufacturing, so assessing profitability was extremely difficult. Now, we have clear breakdowns of profitability available at different dimensions, such as product, line of business, manufacturing plant, region and many others. We can even see how many batches have been sent to quality management, and what impact this has on our delivery timelines. For many of our products, we manufacture high volumes on slim margins, so even small reductions in costs can translate into substantial savings.
“Rich insight generated by using SAP S/4HANA also empowers us to measure business performance more accurately and in much finer detail. And because reporting is so fast, we can react to changing conditions in a more agile manner – rather than only finding out later if something has gone wrong. We are currently working with IBM to bring our costing run down to just one hour, which enables us to make even timelier decisions.
“Because we are now better at identifying and understanding trends in our costs, we can make smarter long-term plans. For example, we can pinpoint an appropriate level at which we can fix our prices, which gives our customers peace of mind and helps to win their loyalty.
“We are currently on track to grow our business by 25 percent within just 24 months. By fine-tuning our materials management, we hope to keep inventory levels of raw materials flat even as we expand.”
SAP S/4HANA also enables Granules India to automatically consolidate financial reports from its multiple subsidiaries, eliminating significant volumes of manual work.
Success has encouraged Granules to pursue new opportunities for improvement, for example, using insights revealed by SAP S/4HANA to reduce logistics costs and cut maintenance expenditure. Furthermore, the company intends to take a deeper look at cost drivers for manufacturing – such as employee salaries, contract labor and laboratory consumables – to identify areas for further improvement.
Ganesh Karuppannan concludes: “We are a company with big ambitions, and IBM Services and SAP S/4HANA are helping us transform them into reality. We have achieved huge success in a short period of time, and we are excited to take our business to the next level.”
About Granules India
Granules India is a vertically integrated pharmaceutical company headquartered in Hyderabad, India. The company operates eight manufacturing sites, serving customers in over 75 countries, and employs more than 2,100 people.
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