Case Studies

Moving Out of the Dark Ages: KESC

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Image courtesy: https://c.tribune.com.pk/2012/08/419447-kesc-1344480283-373-640x480.jpg

The Karachi Electric Supply Company generates and supplies electric power to one of the most populous cities in the world, Karachi. KESC serves a subscriber base of 2.2 million customers across Karachi and towns of Dhabeji and Gharo along with adjacent province of Balochistan in Uthal, Vindhar and Bela, spanning a total area of 6,000 square kilometers.

The company went through several transitions in management before it was finally privatized in 2005 and already had an understanding with Siemens whereby they would Operate and Maintain the company. The realization that the company was unable to scale its services to cope with the rapid growth in market demand was becoming grossly apparent. It wasn’t until a fresh IT team was hired in 2008 and reestablished its connection with SAP partners, Abacus Consulting that the intermittent progress of automation actually took off in a more streamlined manner.

“The organization’s biggest problem was the vast expanse of its customers and not enough physical resources to account for the utilization of resources,” says Sardar Naufil Mahmud, Chief Information Officer (CIO) of KESC.

When Mahmud took over as CIO of KESC, he invested a lot of the IT Department’s time and focus into aligning the IT strategy with the organization’s business strategy. He reached out to SAP partner, Abacus Consulting, and worked closely with them to implement 5 modules of SAP at KESC. These were SAP ERP Financials, HCM, Material Management, Plant Maintenance and Sales & Distribution.

KESC and Abacus Consulting mutually decided on a deadline of December 2008, where they would get Finance, Controlling, Materials Management and HCM to a stage where it could be introduced into a beta environment, whereas the Plant Maintenance module needed to be up and running before their new CCPP (Combined Cycle Power Plant) was scheduled to go live on 31st of March, 2010. “We wanted to have the implementation done to initiate the Plant Maintenance from the get go.” The challenging implementation deadline was set for the 31st of March, and the teams worked hard to complete 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!” explains Mahmud.

Since then, KESC’s other plants have also had the implementation completed.

Energizing Efficiency through the Organizational Machinery
Each SAP module that was implemented has very specific ROI for KESC. “If you look at the Finance department, if the accounts close on time, the treasury is able to have a full view of the costs and recoveries. It’s quicker for them to identify bottlenecks to make the collections and recoveries process more efficient,” explains Mahmud.

Inventory and Asset Management was a big issue for the company. In the legacy Materials Management model, KESC had only one central store which used to hold the company’s complete inventory. “This inventory was valued in billions of rupees and there was no control due to the weak documentation practices. When a unit was moved to another location, it was actually shown as ‘consumed’ rather than as ‘moved’, making it difficult to account for it in the company books. Mainly because of the SAP’s Material Management module and the concept of Sub-Stores, we have gained greater control on assets.”

After the implementation of the SAP Financials, KESC now has been able to set a standard whereby the financial reports for a month are made available on the 3rd day of the following.

A workforce of 17,000 people is a lot when it comes to any organization and the optimized utilization of its Human Capital is something that will help any company in becoming self-sustaining. “Getting better insights into the skillsets of our own employees will help us to create a more productive work environment. The HCM solution will help us to ensure more productivity, increased efficiency and greater work satisfaction for our teams,” explains the CIO.

The development of a HCM database helped the HR Department at KESC to be in a more proactive situation to match the right qualifications for the right positions across the organization. “The HCM module empowered them to do more than just hire people and have them work in isolated silos. It helped them to better manage the most valuable resources at KESC – its people.”

The Business and IT Alignment
Much of what IT needed from its ERP implementation was defined by the Business Strategy. That’s the strategy that helped make it clear that KESC needed to not just be a better organization serving its customers outside, but also those users within the company. “We’re bringing in a totally new concept of Management. Previously there were 98 complaint centers where consumers could go and get their complaints registered, and separate offices that would look into the maintenance side. By introducing the concept of IBC’s (Integrated Business Centers), we’ve decentralized and localized the customer management. We’ve got KPIs and objectives in place which means that there is a lot more accountability each time someone calls in.”

The first IBC was launched in the Defence area in Karachi and the ROI can already be seen. “We’ve already seen reduction in Transmission and Distribution losses by upto 50% in the first IBC and this efficiency is something we are replicating across all our IBCs. If we assume that 1% saving yields approximately a billion rupees, the amount of savings that have already been generated are considerable.” In terms of where the technology has been able to help, is to consolidate these 98 centers into 26 IBCs. 26 IBCs that are more efficient, are more empowered, have greater tracking and accountability and can take quicker action. “We’ve got 7 of them now and a program to complete all of them by next year.”

Establishing the Partner Connection
There are two critical elements in the success of any deployment: the organization’s own vision and the relationship with the implementation partner. KESC was fortunate to have both.

Abacus Consulting says, “They knew what they wanted from the technology and were aggressive in their timelines and demands. 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.”

Abacus describes the example of how Mahmud’s team already had a blueprint in place for what they wanted from their Finance module implementation. “They had this idea of Cost Center Planning so they could identify and pool cost in cost centers and track it against budgets since the new management wanted definite budgets. What we deployed was well aligned with their needs.”

Sponsor-level commitment and professionalism help the implementation to move forward, explains Abacus. “In our experience and interaction with KESC, the team has both elements.”

The Road Ahead
Now that KESC has the basic implementation modules in place, they are in a position to build more on the benefits. “In order to be really efficient, we need to link all of these modules together. Other areas that we are heading towards include GIS integration, IT Governance, IT Audits and Information Security. We’re moving towards a system where even IT becomes accountable in terms of what our KPI’s are. We want to be able to generate reports on what we’ve done in the month and what improvements are there as compared to last month,” explains the CIO.

For KESC to be an efficient company and empower its departments to manage their market outreach effectively, internal customer management is imperative. The SAP implementation will play a critical step in achieving how the departments work, manage delivery timelines and budgets.

KESC also realizes its inherent challenge of making the right information accessible to the right people at the right time for which delivery of processed information will make its way onto mobile platforms and applications with the integration of Business Intelligence tools.

“Now that we have a clear idea of our own roadmap with SAP, we have a lot more control over an otherwise very rigid business ecosystem,” says Mahmud.

KESC is already on its way to building and implementing new billing software that will cover the revenue assurance side of the challenge. “This gives us the ability to be able to bill the consumers accurately, and be able to generate and monitor the revenues that we receive.” As part of its efforts to be more customer-centric, the existing call center has already been doubled in capacity with plans to increase to a 300-seat call center. The facility will be further scaled and linked to SAP CRM solutions enabling KESC to establish a more positive and interactive relationship with their customers.

“We currently have 2.2 million consumers and we feel we are capable of serving somewhere between 3 and 4 million consumers. Our future roadmap is a lot brighter, now that we have the proper SAP solution and tools implemented. The IT Team is now confident that it can support the KESC Business Strategy through its readily available, transparent information across the entire Enterprise.”

 

Quick Facts

Company

  • Name: Karachi Electric Supply Company (KESC)
  • Location: Karachi, Pakistan
  • Industry: Utilities
  • Products and Services: Management of the generation, transmission and distribution of Electricity.
  • Employees: 17,000
  • Website: www.kesc.com.pk
  • SAP Implementation Partner: Abacus Consulting

Challenges and Opportunities

  • Frequent changes in ownership and thus the top management resulting in latent progress
  • Lack of  Sponsor-level commitment
  • Capacity building and effective human capital management

 Objectives

  • Greater efficiency in service
  • Increased accountability in inventory and asset management
  • Stronger alignment between IT and Business strategies and roles
  • Greater transparency in operations specially Billing
  • Improved Customer Care services through better  and timely access to information

SAP Solutions and Services

  • SAP ERP Financials
  • Asset Management
  • Human Capital Management (HCM)
  • Material Management
  • Plant Maintenance
  • Sales & Distribution

Implementation Highlights

  • Compatibility with legacy systems
  • Coding of  Plant Asset based on International coding standards
  • Deployment and testing of Plant Maintenance modules 15 days ahead of schedule

 Why SAP

  • Completely integrated solution
  • Scalability
  • Availability of end to end, integrated Utilities solutions, including Billing and CRM, Business Communication Management
  • High Availability of support and expertise
  • Industry Best Practices available, which could be leveraged for enhanced efficiency and improving performance
  • Multiple successful implementations across various Regions of the globe

 

Benefits

  • Documented accountability of inventory and collections
  • Better customer services and customer relationship management through the establishment of 98 IBCs (Integrated Business Centers)
  • Losses contained as a result of the establishment of IBCs from 25% to 12% (where 1% gain equals approximately Rs.1billion)
  • One-window dashboard for collections and resource utilization
  • Single, integrated, best in class solution

 

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