erp report hinopak_completed
DESCRIPTION
ERP report HinopakTRANSCRIPT
To:
Mr. Ameer Rizvi
By:
Sheikh Bilal YousufRana KashanSafdar JangMurtaza AbbasTanveer MukhtarSalman ArjumandMuhammad Shafqat
CONTENTS1. About the Company......................................................................................................................4
2. Business of the Company..............................................................................................................4
Salient Features...............................................................................................................................5
3. Hinopak’s Products.......................................................................................................................6
Buses...............................................................................................................................................6
Trucks and Prime Movers.................................................................................................................6
Specialized Vehicles..........................................................................................................................7
4. Hinopak’s Mission Statement.......................................................................................................7
Vision...............................................................................................................................................7
Mission............................................................................................................................................7
5. STRATEGIC DIRECTION..................................................................................................................8
6. COMPANY'S CUSTOMER COMPETITIVE STRATEGY........................................................................9
7. Hinopak’s Position in the Industry..............................................................................................10
8. Hinopak’s Market Share..............................................................................................................10
9. Current Market Issues.................................................................................................................10
10. Company Structure and Organizational Structure....................................................................11
11. Competition............................................................................................................................11
12. Prior Implementation Scenario...............................................................................................11
13. Information System Implementation at Hinopak.....................................................................12
14. Issues Faced During and after Implementation........................................................................13
Top Management Issues.................................................................................................................13
Departmental Issues.......................................................................................................................13
IT Dept Issues.................................................................................................................................14
15. Need for ERP...........................................................................................................................15
16. ORGANIZATIONAL OBJECTIVE AND ERP COMPATIBILITY.........................................................19
17. ERP SELECTION PROCESS AT THE COMPANY............................................................................20
18. ERP Industry in Pakistan..........................................................................................................20
Future of ERP in Pakistan................................................................................................................22
19. Major Vendors in Pakistan and their Market Share.................................................................23
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AMR Report Findings and Analysis..................................................................................................23
20. CONTRACT AWARD.................................................................................................................24
21. ERP Implementation Approach...............................................................................................25
Pre-implementation Approach.......................................................................................................25
ERP implementation phases...........................................................................................................25
22. ERP Implementation Methodology.........................................................................................26
23. Modules implemented............................................................................................................27
Financials.......................................................................................................................................27
Supply Chain & Manufacturing.......................................................................................................27
Human Resource............................................................................................................................27
24. ERP Project Management and Change Management...............................................................29
25. Post Implementation of ERP in Hinopak..................................................................................30
26. Impact of ERP implementation on Hinopak.............................................................................31
27. Employee Satisfaction Survey.................................................................................................32
Satisfaction Results (Intended / Accomplished)..............................................................................34
28. Conclusion..............................................................................................................................34
29. APPENDIX...............................................................................................................................36
Business Processes.........................................................................................................................36
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1.1. ABOUT THE COMPANYABOUT THE COMPANY
Hino Motors Japan and Toyota Tsusho Corporation in collaboration with Al-Futtaim Group of UAE and
PACO Pakistan formed Hinopak Motors Limited in 1986.
In 1998, Hino Motors Ltd., and Toyota Tsusho Corporation obtained majority shareholding in the
company after disinvestments by the other two founding sponsors. This decision to invest in Hinopak at
a time when the country's economy was passing through a depression and the sale of commercial
vehicles was at an all time low reflects the confidence our Principals have in our company and their
commitment to the Pakistani market. Hinopak is the trusted market leader with over 65% share in the
Pakistani Truck and Bus industry. Hinopak a vital contributor in saving of foreign exchange is also
providing jobs and plays a pivotal role for the development of the local industry through its progressive
manufacturing.
By continuing to move forward and staying alert to the ever-changing market & social needs, Hinopak
will continue to be a successful and respected corporate citizen of Pakistan, reflecting their commitment
and belief in the Hinopak corporate philosophy to "contribute to the development of a more prosperous
and comfortable society by providing the world with a new set of values".
(source: www.hinopak.com)
2.2. BUSINESS OF THE COMPANYBUSINESS OF THE COMPANY
Assembly Operations Plant, Body Operations Plant, and Product Support constitute three main working
units of Hinopak Motors Limited.
Assembly Operations Plant (AOP) is used to assemble Bus and Truck Chassis. Head Office is also located
inside this plant. Quality Assurance Department, Material Operations Department, and Production are
the main areas of AOP.
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Body Operations Plant (BOP) is used to fabricate and assemble Bus and Truck Bodies. It is at a 1km
distance from Assembly Operations Plant and has its own Quality Assurance and Material Operations
Departments. BOP has its own Engineering and Design Department as well.
Product Support Department (PSD) provides 2S services to customers. It is responsible for providing
Spare Parts and Services. PSD has three branches in Karachi, Peshawar, Multan, and Lahore.
Organization has Managing Director who is supported by Deputy Managing Director, Directory
Marketing, Director Personnel and Administration, Director Production, and Director Material
Operations. General Manager Finance reports directly to Deputy Managing Director. GM Finance is also
heading MIS department.
It was in 2002-03 that the management realized the need for an integrated solution to cater to the
needs of the company. The first idea was to build an integrated system by its own IT staff. MIS started
working on this idea and it worked on HR module and along with that they started working on the
analysis of various modules as well. Four months down the road it found out that it was not physically
possible for MIS department alone to build a whole integrated system for the entire organization. It was
taking too much time and there were various software issues and bugs which couldn't be handled at
that point in time. So management started looking for pre-packaged software available in the market.
SAP and Oracle both were evaluated. Company went for Oracle, due to cost benefits and availability of
local consultants. Sidaat Hyder Murshid and Land Marked Resources (LMR) did the implementation from
2005-07.
Hinopak’s Products
BUSES
The largest Manufacturer of Buses in Pakistan, Hinopak is fully-equipped to design and manufacture a
wide range of Bus Chassis and all types of Bus Bodies. Hinopak’s Bus Line Up includes the Roadliner
Supreme Luxury Bus for long journeys, Citiliner Intercity Buses, Citiliner Urban Buses and the luxury
Senator Coach and Rapidliner Deluxe Coaches.
Hinopak delivers only the safest most reliable products and remains the Pioneer in supplying the largest
number of Urban Buses those are successfully facilitating the commuters of Punjab and Sindh. Hinopak
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is fully-equipped to design and manufacture a wide range of Bus Chassis and all types of Bus Bodies.
Hinopak’s Bus Line Up includes the Roadliner Supreme air-condition Super Luxury Bus, Citiliner Intercity
Buses, Citiliner Urban Buses, Senator Pride, air-condition luxury coach and Rapidliner Deluxe Coach.
(source: www.hinopak.com)
TRUCKS AND PRIME MOVERS
Hino 500 Series
The 500 series consist of vehicles that are in line with global Euro emission standards making Hinopak
the first Pakistani commercial vehicle manufacturer to introduce a complete range of environment
friendly vehicles. It has been especially developed and designed keeping in mind the rugged terrain in
order to meet the requirements of the diverse Pakistani automobile market.
DUTRO – Light Duty Truck
Hino 300 Series
Dutro is Hino’s globally renowned light duty truck with high-performance direct-injection engine that
delivers power with high-fuel economy and lower and cleaner emissions for minimum impact on the
environment. The Euro1 emission standards are adhered to through employment of electronically
controlled common rail fuel injection device.
(source: www.hinopak.com)
SPECIALIZED VEHICLES
Our versatile range of special purpose vehicles play an important role in meeting the transportation
needs of our customers. These vehicles are engaged in prompt and safe hauling of a variety of supplies
like food, equipment and machinery, virtually from any location to any destination. Hinopak has been
able to successfully develop and market various buses and super structures satisfying the needs of
different customers.
(source: www.hinopak.com)
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3.3. HINOPAK’S MISSION STATEMENTHINOPAK’S MISSION STATEMENT
VISION
“Total Customer Satisfaction, a set vision for the company. In pursuit new concepts have been
introduced such as a mobile workshops, 3S/2S dealership facilities, training and free service camps for
the vehicle owners and drivers”.
(source: www.hinopak.com)
MISSION
"The mission of Hinopak Motors Limited is to provide the society with safe, economical, comfortable
and environment friendly means of transportation by manufacturing and supplying commercial vehicles
and services".
(source: www.hinopak.com)
4.4. STRATEGIC DIRECTIONSTRATEGIC DIRECTION
Building on 22 years of success, the Hinopak continues to play a leading role in marketing commercial
vehicles with superior and advanced Japanese technology.
Market Leader in Pakistan, holding over 65% of the truck and bus market share.
First Pakistani automobile company and Hino affiliate to receive ISO-9001 certificate.
First Pakistani automobile company and Hino affiliate to receive ISO-14000 certificate.
First company to export buses from Pakistan.
Recipient of Quality Excellence Awards.
First automotive company to introduce "3S" concept in heavy-duty commercial vehicles market.
First company to supply busses under "Urban Transport Scheme" in Pakistan.
Recipient of Employers' Federation of Pakistan's Golden Jubilee Award for Human Resource and
Industrial Relations.
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Recipient of Corporate Excellence Award from Management Association of Pakistan.
Recipient of Employers' Federation of Pakistan's Golden Jubilee Award for "Excellence in
Productivity".
By continuing to move forward and staying alert to the ever-changing market & social needs, Hinopak
will continue to be a successful and respected corporate citizen of Pakistan, reflecting their commitment
and belief in the Hinopak corporate philosophy to "contribute to the development of a more prosperous
and comfortable society by providing the world with a new set of values".
5.5. COMPANY'S CUSTOMER COMPETITIVE STRATEGYCOMPANY'S CUSTOMER COMPETITIVE STRATEGY
Hinopak supplies not only high-quality and environment friendly trucks and buses but also provides the
best backup support including after sales service and training to all their valued customers throughout
Pakistan to achieve the goal of “TOTAL CUSTOMER SATISFACTION”.
To achieve its mission, Hinopak commits itself:
To individual institutional and international customers: to deliver high quality, safe, durable,
reliable, comfortable, environment–friendly and economical products and services to their total
satisfaction.
To employees: to foster corporate culture of mutual trust; respect for fundamental human
rights at work; opportunities for professional growth and personal welfare so that they are
proud of being a member of the “Hinopak Family”.
To the community and the nation: to contribute in economic and social development by
providing means of transportation and by progressive localization of the vehicles.
To the shareholders: to act in compliance with the norms expected of a subsidiary of the Toyota
Group of companies and make a meaningful financial return to the shareholders.
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6.6. HINOPAK’S POSITION IN THE INDUSTRYHINOPAK’S POSITION IN THE INDUSTRY
Hino Pak has been the market leader in heavy commercial vehicles since last 17 years. It deals in diesel
based busses, heavy commercial vehicles like trucks and special vehicles like fire truck or cement and oil
tankers.
Hino manufactures/assembles buses locally and enjoys 30% of the market share in the LCV range and
25% of the market share in the coach range. It, however dominates the heavy commercial vehicles by
holding on to 75% of the market, its overall share of the market is 66%.
Right now the company and the industry itself is facing a lot of pressure but it still retains its market
share and position as the leader in sales of heavy and light vehicles.
7.7. HINOPAK’S MARKET SHAREHINOPAK’S MARKET SHARE
Hino manufactures/assembles buses locally and enjoys 30% of the market share in the LCV range and
25% of the market share in the coach range. It, however dominates the heavy commercial vehicles by
holding on to 75% of the market, its overall share of the market is 66%.
8.8. CURRENT MARKET ISSUESCURRENT MARKET ISSUES
Security issues in the north and Baluchistan have started hindering heavy vehicle sales
significantly.
Prices of goods are increasing due to lack of sales and more storage
Lack of over all goods business in country has also hindered transport business and as such has
affected Hino’s sales
Leasing companies have very high rates which discourages investment
Maintenance has become costly due to lack of business
Imports have decreased due to devaluation.
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9.9. COMPANY STRUCTURE AND ORGANIZATIONAL STRUCTURECOMPANY STRUCTURE AND ORGANIZATIONAL STRUCTURE
It consists of One Assembly plant a Headquater, body operations plant and Product Support constitutes
of product parts and service. Its distributors consist of 1S (Sales only), 2S(Sales and service) and 3S
(Sales, Service and Spare Parts) dealers, brokers etc.
Organization has Managing Director who is supported by Deputy Managing Director, Directory
Marketing, Director Personnel and Administration, Director Production, and Director Material
Operations. General Manager Finance reports directly to Deputy Managing Director. GM Finance is also
heading MIS department.
10.10. COMPETITIONCOMPETITION
Second greatest market share belongs to Nissan which is approx 20%. It is not giving Hino much of a
hard time since its value for price is of no competition to Hino.
New entries threatening Hino are the refurbished cars which are being imported from foreign countries
and being sold at very low price and good condition.
Another few new entrants of noticeable activity are Daewoo in the light vehicle and Fa in the heavy
vehicle industry. Although both of these companies have not had a significant effect till now but their
specialization in their respective vehicle category allows them much maneuverability.
11.11. PRIOR IMPLEMENTATION SCENARIOPRIOR IMPLEMENTATION SCENARIO
Prior to the implementation of Oracle at Hinopak, the following systems were being used in the
organization:
Finance: Mini ERP solution(CP) and customized fox-pro based solution
Inventory: There are three different inventory departments each department has its own
custom built software
Sales & Marketing: Customized Visual Basic/SQL Server software
Human Resource & Payroll: Fox-pro based system not integrated with general ledger
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The existing systems had a lot of issues, following is a list of the major problems and limitations that
those systems brought:
1. The systems were iron based there were no integration between the systems
2. The company also using a mini ERP system called CP and there was no local support for this
system due to that for any system crash or bug the business continuity was at risk.
3. Most of the systems were customized and built according to the user requirements which were
made fifteen years ago therefore software were not updated.
4. The software was built on old technology like fox pro based systems. Fox pro based system has
some inherent problems
1. Data integrity
2. Data security
For these reasons, company planned to work for an integrated system. The first idea was to build an
integrated system by its own IT staff. MIS started working on this idea and it worked on HR module and
along with that they started working on the analysis of various modules as well. Four months down the
road it found out that it was not physically possible for MIS department alone to build a whole
integrated system for the entire organization. It was taking too much time and there were various
software issues and bugs which couldn't be handled at that point in time. So management started
looking for pre-packaged software available in the market.
12.12. INFORMATION SYSTEM IMPLEMENTATION AT HINOPAKINFORMATION SYSTEM IMPLEMENTATION AT HINOPAK
Pre-packaged software provided certain benefits. It would be based on best industry processes and it
would be already tried and tested in similar companies. The disadvantages were the rigidity and lack of
customization of prepackaged software. Hinopak studied and analyzed various ERP solutions and finally
decided to go for Oracle Applications.
ERP implementation started in April 2004. Target Completion time was 9 months. 30 months had passed
and so far only 70% implementation had been completed. All Project Stakeholders, namely Project
Owners (Finance Department), Project Coordinators (MIS), End-Users and Project Implementers
(Consultants), were losing patience. However, even though late, once the system went live, everyone
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seemed to be happy, as one would say ‘It was worth the wait’. A detail of what modules were
implemented is given in heading number 24.
13.13. ISSUES FACED DURING AND AFTER IMPLEMENTATIONISSUES FACED DURING AND AFTER IMPLEMENTATION
TOP MANAGEMENT ISSUES
a. DGM Production that he or his department weren’t actively involved or asked for their
opinion during the whole ERP implementation exercise.
b. Since it is an enterprise project, the ownership of the project should be at the highest
level not at the level of finance department. So, ideally the managing director or deputy
managing director should have been the project owner; it should have been across the
board to all the functional areas not only the finance department.
c. The rationale for the implementation of the ERP system was not inculcated in the major
stakeholders, most seemed adherent to start with.
d. The top management didn’t communicate well within the organization regarding the
implementation of Oracle.
e. The top management didn’t actively involve themselves in the implementation and left
it mostly to the Finance departments, who were the project owners
DEPARTMENTAL ISSUES
a. The project is owned by the finance department so when one talks about
implementation in the finance department, it went well but when one goes to other
departments, like inventory stores, production or even to the extent purchasing , major
difficulties were faced.
b. The difficulties to other department was such that it was not compelled by their own
senior management to attend and if they had any grudge against finance that grudge
could be taken out in the face of this project implementation.
c. Since it is an enterprise project, the ownership of the project should be at the highest
level not at the level of finance department.
d. Even after implementation of HR module, there was still no sign of attendance data
being monitored by the system.
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e. The implementation also did not cover areas like shop floor planning, shop floor quality
or rejection, where there were issues even after the Oracle’s implementation. According
to the DGM Production the production cycle initially was not according to the system.
f. Similarly, when production completes a job, then in that scenario not only the material
is consumed, the labor is also consumed and at the end of the month production has to
identify how much labor is consumed for a specific job, which would be impossible to do
until and unless the attendance data is made available.
g. The stores in-charge felt very disappointed with the Oracle system at the time it was
being implemented. He said, we are already running two systems, one is called PC and
the second is called CP. The reason for using two systems is that the CP system is also
used by finance. To fulfill the requirements of finance we have to run the CP systems
and CP does not completely fulfill our own requirements so for that purpose we have
developed our own system called PC and we have to feed data and maintain it, the two
systems at the same time. Now the MIS people have come with another system which is
oracle system and they are kind of imposing that system on us.
h. Since finance department owned the system, the store incharge felt it was useless for
him
i. Hinopak faced problems with the implementation methodologies. For example they
started BPR and as a as is and to be processes so the team of consultants which did as is
and to be process, were not feasibly equipped with oracle applications, as felt by the
GM Finance
j. At the end of the day Oracle application were catering to 80% of Hinopak’s business
processes and rest 20% of the business process were not being catered upon and there
were no work-around solutions available as well. These 20% of the business processes
were initially not identified in the process Gap Analysis conducted by the Consultants.
IT DEPT ISSUES
a. To coordinate between the end users and the consultants and to ensure that each knew
what the other expected from it.
b. Had principal responsibility of conducting user-acceptance training sessions.
c. Monitoring the overall progress of the project, and having to bear the heat incase
something went wrong.
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d. Once the system was up and running, IT was responsible for Data Migration and back
up.
e. Another important task was the development of customized reports on Oracle.
f. There were issues with data migration initially, as it required study of the oracle
interfaces with which data had to be uploaded, and it became a very tedious task.
g. Having to constantly be reminded that the project was running behind schedule and
having to do everything in a hurry.
14.14. NEED FOR ERPNEED FOR ERP
Some of the issues resulting from the Legacy systems, prompted Hinopak to consider looking for an
integrated solution to their business problems. Some of the major problems are stated below:
MIS/IT
Support of legacy system without proper documentation
Since there was no proper documentation, there was lack of proper internal control
There was no contingency planning in place, in order to tackle unexpected situations, such as
system crashes, which could lead to data losses
The company also using a mini ERP system called CP and there was no local support for this
system due to that for any system crash or bug the business continuity was at risk
The standalone systems made it difficult or the company to provide timely support to the other
departments such as finance, production and Sales
The systems were iron based there were no integration between the systems
Most of the systems were customized and built according to the user requirements which were
made fifteen years ago therefore software were not updated
The software was built on old technology like fox pro based systems, which had inherent
problems of data integrity and data security
There were Islands of information in place and it made reporting difficult for the MIS Dept
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Lack of a centralized information storage, resulting in poor business processes
There was poor coordination among departments, which was a huge issue, as in today’s
business environment processes are cross functional
Inventory
There were three different inventory departments each department has its own custom built
software
The systems were iron based there were no integration between the systems
Since there were 3 different inventory departments, islands of information existed between
them
The company also using a mini ERP system called CP and there was no local support for this
system due to that for any system crash or bug the business continuity was at risk
The systems used by the inventory department were customized and built according to the user
requirements which were made fifteen years ago therefore software were not updated
The software was built on old technology like fox pro based systems, which had inherent
problems of data integrity and data security
There was poor coordination among departments, which was a huge issue, as in today’s
business environment processes are cross functional
There was a lot of duplication of effort
The need for integrity can be assessed by the fact that, quoting of a Price to the customer
required BoM from Engineering Department, Price from the Purchase Department and Treasury
Information from the finance department
As cited in the above example, this department was highly dependent on other departments to
get data
This made information sharing among the 3 inventory departments very difficult
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It was in 2002-03 that the management realized the need for an integrated solution to cater to
the needs of the company, including the inventory department
Finance
System previously used was a Mini ERP solution(CP) and customized fox-pro based solution
The company also using a mini ERP system called CP and there was no local support for this
system due to that for any system crash or bug the business continuity was at risk
There was a lot of duplication of effort
The systems were iron based there were no integration between the systems
This resulted in poor consolidation from subsidiary ledgers
The information sharing with inventory and production departments was very poor
Which also resulted in false invoices billed to the customer, and this impacted the company’s
relationship with its clients
The need for integrity can be assessed by the fact that, quoting of a Price to the customer
required BoM from Engineering Department, Price from the Purchase Department and Treasury
Information from the finance department
As cited in the above example, this department was highly dependent on other departments to
get data
There was often a great deal of inventory loss reported at physical inventory count, as it did not
tally with the amount and quantity on the books
The systems in the finance department were customized and built according to the user
requirements which were made fifteen years ago therefore software were not updated
The software was built on old technology like fox pro based systems, which had inherent
problems of data integrity and data security
There was poor coordination among departments, which was a huge issue, as in today’s
business environment processes are cross functional
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Used to close financial periods in 45 to 60 days. After implementation of Oracle, today, they do
it in 2 to 6 days
Marketing & Sales
Customized Visual Basic/SQL Server software was used prior to implementation of the ERP
The company also using a mini ERP system called CP and there was no local support for this
system due to that for any system crash or bug the business continuity was at risk
The systems were iron based there were no integration between the systems
The systems used by the marketing and sales were customized and built according to the user
requirements which were made fifteen years ago therefore software were not updated
The software was built on old technology like fox pro based systems, which had inherent
problems of data integrity and data security
There was a lot of duplication of effort
The need for integrity can be assessed by the fact that, quoting of a Price to the customer
required BoM from Engineering Department, Price from the Purchase Department and Treasury
Information from the finance department
As cited in the above example, this department was highly dependent on other departments to
get data
Gathering data resulted in time wastages which ultimately caused poor price quotes
And the process of sharing information with suppliers and clients was often unsatisfactory
There was poor coordination among departments, which was a huge issue, as in today’s
business environment processes are cross functional
It was in 2002-03 that the management realized the need for an integrated solution to cater to
the needs of the company, including the inventory department
Human Resource & Payroll
Fox-pro based system not integrated with general ledger
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The company also using a mini ERP system called CP and there was no local support for this
system due to that for any system crash or bug the business continuity was at risk
There was a lot of duplication of effort
Most of the systems were customized and built according to the user requirements which were
made fifteen years ago therefore software were not updated
The systems were iron based there were no integration between the systems
There was poor coordination among departments, which was a huge issue, as in today’s
business environment processes are cross functional
15.15. ORGANIZATIONAL OBJECTIVE AND ERP COMPATIBILITYORGANIZATIONAL OBJECTIVE AND ERP COMPATIBILITY
Hinopak’s objective is to provide the society with safe, economical, comfortable and environment
friendly means of transportation by manufacturing and supplying commercial vehicles and services and
also to get rid of the following issues:
Segregation of systems and information
Use of obsolete technology to handle current competition
Lack of a centralized information storage
Time delays in making important decisions
Inventory software built on different platforms
Inaccurate records due to irregular updates
Duplication of effort
No regular updating of inventory record
Basic accounting errors being made in the legacy system
Gathering data resulted in time wastages
Delays in sales report
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Poor coordination among departments
The selected ERP i.e. ORACLE is compatible with the organization’s level of technology and its objectives
16.16. ERP SELECTION PROCESS AT THE COMPANYERP SELECTION PROCESS AT THE COMPANY
First the company evaluated the need of the organization and the employees and found out that
there is a need for an ERP that will adapt to the constantly changing environment.
Then the company evaluated different ERP options available on the basis of technology,
company name, functional fit, after sales services, nearness of the implementer, and the cost
associated to it.
Then the company evaluated different consultant and vendor options on the basis of prior
experience, company name and cost.
Then the company scheduled site visits to see the system demos.
Then after considering all the other factors, company decided to implement ORACLE.
17.17. ERP INDUSTRY IN PAKISTANERP INDUSTRY IN PAKISTAN
IT industry is a growing industry in Pakistan which has all the support of the government since some
couple of years. Some of the measures that the government has taken in the recent past to develop this
industry are tax exemption till 2016 and setting up of IT Parks with low rent. The government has also
allowed 100% repatriation of profit to IT companies in addition to foreign ownership of equity invested
in IT. Since the last three years, on account of such steps, the IT industry of the country has been
expanding even if at a relatively low rate. Software export is one industry area that has the potential to
take the industry further a long way.
Enterprise Resource Planning (ERP) is a strategic tool which assists an organization to gain and- edge
over its competitors in effectively integrating its key business operations, synchronizing, planning and
optimizing the resources available in the contemporary competitive environment. ERP can be standard
ERP (a solution such as SAP that can be bought 'off the shelf' to be applied) or can be customized
(software made as per the specifications of the client). Many IT firms in Pakistan, like KalSoft (Pvt.) Ltd.
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in Karachi, are doing an excellent job in providing ERP solutions – bringing a good name to the country
as an ERP solution provider. At present there are approximately 60 foreign IT and telecommunications
companies working in Pakistan.
At present, Pakistan's Small and Medium Enterprises sector (SMEs) is functioning at a disadvantage. This
is mainly on account of the fact that most of the manufacturing and planning processes are either not
automated, and when they are they are not being utilized to their maximum. So as to solve this issue,
PSEB's 'Automation of Domestic Industry on Open Source Systems' project is in progress to help develop
complete ERP solutions to automate the processes and procedures for the SMEs in HR & Payroll,
Finance, Inventory, Production and Sales and in all those sectors of the economy which are found to be
promising for future growth of the industry.
Under this project, ERP solutions are being developed by means of open source software code. This
makes allowances for further improvement to be made to the applications as per the needs of the units.
The project is being undertaken in collaboration with software consulting companies like NetSol, ITIM
Associates and Acrologix who have expertise in developing/implementing ERP solutions for the industry.
Systems Limited, Siemens, Jaffer Brothers, A F Ferguson, Inbox and Abacus are some other leading
system integrators of ERP solutions. Some of the imperative factors which offer a strategic outline of
Pakistan’s ERP industry are as follows:
Competition - Competition does not only exist within local market but neighboring industrial
giants also pose a lot of challenge. They compel manufacturers to invest in technology such as
ERP solution to make more efficient their back-end processing like procurement, accounting,
and order management. In addition to workflow efficiency, the investment brings down the cost
of the final product.
Globalization – Global companies that have their presence in Pakistan are and will carry on
investing in ERP solutions in the country so as to modernize their back-hand operations and to
integrate them with the head office. This will compel the local suppliers/manufacturers to take
on IT automation like ERP so as to compete and deal with global companies.
Compliance Risk – Local companies in Pakistan have to meet the international standards and
regulations when exporting. For this they have to show flexibility and learn the ways of the
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international market. Besides compliance, they must use a proven ERP solution in order to gain
more and more client confidence in internal processes of the supplier.
Resource Management – Shortage of resources and raw material will call for some improvement
in the consumption of these. Companies must invest in solutions that will help them in better
planning and execution on their way to the production of the final product.
Public Sector Reforms - The contemporary wave of reforms in the public sector of Pakistan in the
light of international regulations and cooperation have paved the way for ERP solutions. A
number of important projects have already been completed leading to major strategically
significant ERP adoptions in public sector. This has resulted in confidence gaining on part of the
industry. Furthermore, SME sector appreciates the significance of IT automation and process
streamlining under the protection of some proven solutions.
Though not working at its full potential and showing clumsiness in adopting technology, the industry of
Pakistan has a lot of potential. However, there is strong need for standardization and process
streamlining benchmarked against appropriate global best practices.
FUTURE OF ERP IN PAKISTAN
A very large market segment consisting of small and medium sized businesses in Pakistan have started
realizing the potential of the ERP systems and how the “right” ERP can help them grow, optimize
efficiencies and increase customer service levels. Therefore, there is a huge potential and a very bright
future of ERP solutions in Pakistan. For the purpose, Systems Limited is investing heavily in training the
resources to cater to the ERP demand of the said market segment. ERP systems have great significance
as they have become the biggest ingredient in ensuring a constant and consistent survival of
organizations in today’s competitive market.
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18.18. MAJOR VENDORS IN PAKISTAN AND THEIR MARKET SHAREMAJOR VENDORS IN PAKISTAN AND THEIR MARKET SHARE
There are a few major ERP vendors in the industry of Pakistan that share between them the task of
automating all the business and industrial segments of the country. SAP, Peoplesoft, Oracle and JD
Edwards are the major ERP vendors.
While the ERP market has grown in revenue, consolidation continues to change the industry. In 1999,
the top four vendors (J.D. Edwards, Oracle, PeopleSoft, and SAP) in the ERP market accounted for 59% of
the industry’s revenue. AMR Research expects the top five vendors in 2005 (SAP, Oracle, Sage Group,
Microsoft, and SSA Global) to account for 72% of ERP vendors’ total revenue.
While many ERP vendors struggled in 2004, SAP AG increased overall revenues by 17% and license
revenues by 20% - without any acquisitions. SAP’s ERP market share increased to more than 40%. Oracle
nearly doubled the size of its application business through the acquisition of PeopleSoft, but AMR
Research expects SAP to finish 2005 with more than twice the revenue and market share of the
combined Oracle-PeopleSoft.
Oracle E-business Suite started as Oracle Applications catering to Business Application segment in 1987.
This was the time when JD Edwards, BAAN, SAP, PeopleSoft were already established ERP players in
their specific market segments and any new business application had to face a tough challenge from the
existing players. Oracle Started modestly with Financial applications and moved on to Inventory,
Procurement and much later in Manufacturing and HRMS applications.
AMR REPORT FINDINGS AND ANALYSIS
The report delivers revenue and growth rates for the top ERP players as well as growth forecasts
through 2009. ERP vendors ranked by 2004 ERP license revenue can be seen in the chart below. The top
ten ERP vendors by revenue include the following companies:
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19.19. CONTRACT AWARDCONTRACT AWARD
After a series of presentations and demonstrations by Siemens and Oracle, the top management of
Hinopak decided to implement Oracle, although a sister concerned company of Hino Pak had
successfully implemented SAP.
This decision was based on the presentation and demonstration of the software and the analysis of both
SAP and Oracle by the top management of Hino Pak and they felt that they could get more expertise of
Oracle than SAP as Oracle had more market share than SAP.
The implementer that Hino Pak is currently working with was selected on the basis that they had a good
experience with Oracle and they were very good at Business Process Re-engineering, which was
immensely required at Hino Pak.
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20.20. ERP IMPLEMENTATION APPROACHERP IMPLEMENTATION APPROACH
The industry in which Hinopak operates is plagued with inefficiencies when it comes to information
management. The need for an ERP was felt lately and the company’s departure from its legacy system
itself was a tough process to carry out.
The company had to take a radical approach to implementing ERP. Breaking with its tradition of sticking
to tried and tested methods, Hinopak took a comprehensive look at its departments and operations
within each department to assess the true extent of the need for an ERP.
Prior to implementing the ERP, the company was using a mini ERP called CP. Due to lack of local support
the system would often crash and had many bugs. Realizing these problems, the management decided
to implement ERP that would be free from such problems and at the same time would fulfill their need
for information integration.
PRE-IMPLEMENTATION APPROACH
Before going with the actual implementation of ERP, Hinopak carried out the following approach.
The first step before actual implementation involved carrying a detailed analysis to assess the scope of
the project. Since the ERP was being implemented organization wide, different departments were asked
to prepare a list of the issues that they were facing from their existing system. The departments were
also asked to come up with their wish list, which was a list of what they actually wanted that the new
system should address.
The next step was to analyze the processes that would be affected by the system. During this stage, key
personnel from the respected departments had in-depth meetings with the technical staff to help them
in the conceptual designing of the ERP system. The step is crucial since it documents the ‘current
system’ and future ERP system and in turn helps identify how that transition would be carried out.
The final stage before actual implementation was the testing phase. In this phase the system was tested
in selected departments to check the functional fit of ERP.
ERP IMPLEMENTATION PHASES
The ERP implementation at Hinopak can be divided into three distinct phases.
a. Project phase
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b. Shakedown phase
c. Onward and upward phase
In the first phase, which is called the Project Phase, the ERP software was configured and rolled out to
the organization. The project phase was the actual phase of transitioning towards an ERP system.
In the second phase, known as the Shakedown Phase, the company made the transition from ‘go live’ to
‘normal operations’. During this phase, the ERP system was made part of the normal operations. With
ERP a part of the day-to-day operations, the ERP implementation was completed with this phase.
The third phase, which is generally called the Onward and Upward Phase is still under implementation.
During this phase, the company will capture majority of business benefits from the ERP system and will
plan the next steps for technology implementation and business improvement. The third phase is yet to
be fully implemented. However, as the ERP software use widens and becomes mature enough to
capture the major business benefits, this phase would be completed.
21.21. ERP IMPLEMENTATION METHODOLOGYERP IMPLEMENTATION METHODOLOGY
For a company like Hinopak, the best implementation methodology was to go for a phased approach. In
a phased approach, instead of going for an all-out implementation across the whole organization, a step
by step approach involving rolling out in specific departments was carried out.
To play it safe, Hinopak adopted the sales module first. After the sales module, it was rolled out to other
departments and other supply chain modules such as purchasing and materials planning modules were
adopted. After the successful implementation of the various modules of supply chain, HR modules were
implemented. In the final stage, financial modules were covered.
The implementation was properly conducted through a module implementation guideline. The guideline
helped set the standards for the implementation process and to have the same implementation
procedure across all the modules. This was done to ensure consistency in the implementation approach
and to help resolve integration issues at later stages.
This phased approach was also accompanied by proper training of the ERP system. The intent was to
keep the employees on-board while taking such a crucial step and to have their support. During this
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phase, employees were constantly communicated about ERP to familiarize them with the system and
reduce their resistance once it was fully implemented.
22.22. MODULES IMPLEMENTEDMODULES IMPLEMENTED
The following modules were implemented at Hinopak.
FINANCIALS
General Ledger
Accounts Payable
Accounts Receivable
Fixed Assets
Cash Management
SUPPLY CHAIN & MANUFACTURING
Purchasing
Inventory
Bills of Material
Material Planning
Sales
Work in Process
HUMAN RESOURCE
HRMS
Payroll
A brief description of some of the key modules is given below.
General ledger
The general Ledger is used for recording all accounting postings. This module has the added advantage
of updating and displaying information in real-time which helps in providing the latest and up to date
information of the different accounts in the ledgers.
Accounts payable
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This module records all vendor generated purchasing activities. The module records what vendors will
be paid and the recordings are also automatically updated in the general ledger module as well.
Accounts receivable
The accounts receivable module records all customer generated sales activities that are to be received.
This module is well integrated with the general ledger module as automatic updating in the general
ledger takes place with entries in the account receivable module.
Purchasing
The purchasing module covers all aspects of purchasing from different vendors. The main purchasing
functions covered by this module are:
Purchase Order
Vendor Management
Purchase Requisition
Request for Quotations (RFQ)
Inventory
The inventory management module is a comprehensive module that covers inventory related functions
including:
Physical Inventory
Stock items
Stock transport Order
Goods ordered
Goods Receipt
Goods Issue
Reservation
HR
The major functions covered by this module are:
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Employment history
Payroll
Training
Apart from these functions, the HR module offers other functions which are, although less frequently
used, yet provide comprehensive applicability to the company.
23.23.ERP PROJECT MANAGEMENT AND CHANGE MANAGEMENTERP PROJECT MANAGEMENT AND CHANGE MANAGEMENT
Hinopak had realized the need for an ERP and the enormous changes that ERP will have on its
employees. The top management was involved with the ERP from the beginning and ensured that all
employees become part of the change. Top management had realized the role of employees’
involvement in the whole process. All levels of the employees who were to be involved with the ERP in
any capacity were part of the change process. To make the change management process successful,
Hinopak took the following steps, although not in any particular order.
Steering committee
A high level steering committee was formed comprising of key stakeholders. The steering
committee was responsible for overall strategic direction of the ERP system and provided the
initial for change management.
Change management committee
While the steering committee was involved with the overall strategic direction of the ERP, the
change management committee’s primary role was to handle the change management process
by taking into account employee’s concerns and apprehensions about the ERP system. It
comprised of department heads, and the technical staff.
Employee training
The change management process was accompanied with employee training. Employee
trainings were conducted to familiarize employees with the ERP system.
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24.24. POST IMPLEMENTATION OF ERP IN HINOPAKPOST IMPLEMENTATION OF ERP IN HINOPAK
There had been certain post implementation issues that emerged after the system went live. The
interviews conducted in this regard of the Department heads pointed out to loop holes that caused top
management and their subordinates to build not-so-good views of the whole implementation exercise.
Such signs of dissatisfaction might also be the result of anticipations, which were set quite high. Some of
the post implementation subjects that arise are touched in following bullets;
In the Finance department Oracle application had been catering to 80% of business processes
while the rest 20% was left un-workable within the Oracle Financials. This 20% was identified
during the actual go-live i.e. after the implementation completion, thus the vendor and its
consultants along with Hinopak implementation team came up with last-minute patches. These
workarounds were not really the ideal solutions but just cover-ups to make the system work.
This generated a lot of distrust and negative impression about the whole Oracle application and
implementation technique.
The warehouse, which had already been running two parallel systems i.e. PC and CP. The later
system catered to needs of Finance department while the former’ Warehouse requirements.
With Oracle in effect, Warehouse now had to deal with three systems. The new system is not
complete such that it does not cater to the whole list of requirements which are needed by
Warehouse to shed its legacy system. And with no all-round solution in place, now the Store is
stuck with three altogether different systems, for its own, finance and the company.
The Productions is in a fix as the module implemented in it only caters to 30% of its
requirements. Such partial implementation had been done to ensure the completion of
Inventory cycle. Thus again’ like Store, Productions also had to cope with legacy and Oracle, with
the intention to complete its module on later date. It is causing its employees and management
indignation as they are burdened with two systems instead of the previously used one
Communication between the HR and Productions could not be established, that even after the
implementation is causing Production floors to live without attendance data
MIS department had still been coping with the complexities of fully understanding Oracle
operations. Authenticity of data, its movement and uploading still considered to be a tedious
task which had not been mastered yet
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ERP users had been in work overloads and they did not have time to authenticate their
respective data ‘that had been the cause of delays’. Thus in ERP scenario, it’s now not the
system rather the burdened users who had been the cause of lag.
To cater to growing needs of ERP maintenance, running and updation, there lay need of staff
hiring in MIS department. However management had been wary of such hiring as they still
consider a large MIS department as burden’ citing the fact that Hinopak exists as manufacturing
company which would hold a burgeoning IT department’ who would always play secondary role
25.25. IMPACT OF ERP IMPLEMENTATION ON HINOPAKIMPACT OF ERP IMPLEMENTATION ON HINOPAK
Despite some problems that the company had to face after the ERP went live, its overall effect had been
positive, as it ‘to-some-extent’ delivered its most basic promise of Integration, Efficiency and
Productivity. Though there had been talk of further improvements and solving the incumbent problems,
but Hinopak started yielding fruit of decreased processing time consumption and enhanced inter-
department communication. Following are some of the most conspicuous facets through which ERP
seeped its impact through
Lack of support for documentation in legacy system was removed that also lead to proper
internal controls.
Equipping the system with contingency plans such that in case of any crash there should not be
data loss.
Plus Hinopak had in place a smaller version of ERP called CP which didn’t have any local support,
with current system Siemens Pakistan was responsible for any glitches which might struck at any
point in time
The former system was stand-alone, which was not capable of providing support to other
departments like sales, Finance, HR etc but the new system brought all division on-board, plus it
also provided with much sought-after integration
The new system incorporated within it Best-practices of the market, in stark contrary to older
one’ whose architecture was made 15 years ago and was not updated
Islands of information was converted to seamless integrated platform, that transformed how
reporting, communication and decisions were made
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Three different inventory departments had their own individual systems, which were iron-
based’ having no integration at all between them
Duplication of efforts was replaced with across the board, singular procedural techniques that
converted lost-hours into productive output
Procurement, Production, Finance, Engineering departmental disparity in the old system could
be gauged by a simple fact that’ quoting Price to customers required BoM from Engineering,
Price from Purchase, Treasury from Finance, Order form Production. This disparity was replaced
with an efficient on-line, single window operation, such that the dependency of various
departments remained but level and channels of communication became easy and seamless
Previously, the inventory in-hand did not use to match inventory-on-record, that clearly showed
the ineffectual linkage and exchange between different arms of warehouse, procurement and
logistics, this mismatch was replaced by the oracle singular procurement and inventory keep
module’ effectively replacing all barriers
The previously closing financial periods of 45-60 days had effectively been replaced by 2-6 days,
thus reducing the time for any critical decision.
26.26. EMPLOYEE SATISFACTION SURVEYEMPLOYEE SATISFACTION SURVEY
Interviews were conducted of all the critical department managers who came under direct impact of
ERP implementation. Level of priorities set prior to the implementation for each departments were
different for instance Finance had been a high-priority department compared to Production. Thus the
level of integration and subsequent expectation by the management and their employees were
varyingly different. It must also be noted here that Hinopak did not conduct survey among low level
managers’ thus the word spelled by Department heads were taken at face’ for all of their subordinates.
Most of the questions posed were used to gauge the overall improvements in intended/implemented
paradigm and with respect to the legacy system. Following are the broad categories in which
Department responses were measured on the scale of 0-6.
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Success
Integration
Efficiency
Training and Implementation
Satisfaction & Involvement
Comparison with Legacy
0 1 2 3 4 5 6 7
HR
Marketing/Sales
Production
Warehouse
MIS
Finance
Measure of Satisfaction 0-6 (0= not satisfied, 6=Highly satisfied)
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SATISFACTION RESULTS (INTENDED / ACCOMPLISHED)
Priority Level Satisfaction level 0
1
2
3
4
5
6
HR
Marketing/Sales
Production
Warehouse
MIS
Finance
Measure of Priority/satisfaction 0-6 (0=least, 6= maximum)
27.27. CONCLUSIONCONCLUSION
Looking at the satisfaction results (intended/accomplished), it becomes clear that ERP implementation
and the desired accomplishment levels had not been purely satisfactory. ERP had been the brainchild of
Hinopak Finance department and in the pre-implementation analysis’ some of the departments were
given high priority over the others, thus it was never intended to be implemented thoroughly across the
board. Realization to enact its modules in all the major departments came when the implementation
had finally started, thus half of the departments were brought into the bigger fold half-heartedly. Their
satisfaction is conspicuous in lower-middle ranks while some others hover in upper-middle. Average out
and we get the mean of 3.9/6 that is not commendable.
Post-Implementation interviews of Department heads (after the first hand experience of the running
system) points to major flaws and challenges that Oracle had not been able to fully address. For instance
GM Finance spelled out the problems with BPR and to-be processes which were not feasibly equipped
with oracle applications, he stated that “whatever their recommendations were they were not 100% fit
with oracle applications so there were no as such a fit analysis between as is and to be process with
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oracle applications. What happened at the end of the day that oracle applications were catering to 80%
of our business processes and rest 20% of the business process, they were not catered upon”. It is worth
mentioning that’ Finance department had been at the front proposing ERP implementation and thus got
the highest priority throughout the implementation process, but even these people were complaining at
the end.
The warehouse that had been at low-priority levels were the least integrated and highly redundant
department even after the system went live. Its problems were spelled by the store-in charge who
stated “The basic problem is that we are already running two systems, one is called PC and the second is
called CP. The reason for using two systems is that the CP system is also used by finance. To fulfill the
requirements of finance we have to run the CP systems and CP does not completely fulfill our own
requirements so for that purpose we have developed our own system called PC and we have to feed data
and maintain it, the two systems at the same time. Now the MIS people have come with another system
which is oracle system and they are kind of imposing that system on us”. He further stated that “the
system is there and if it’s not tested than you have to be running three systems and it is kind of unfair on
us to run three systems on parallel in which one of the system is not working properly as well. So, why
not make a system proper and then implement it at our place”
Operations has never been a part of ERP implementation scheme as it had been kept aside from the
beginning, later on it was included because the system in hi-priority areas could not function properly
without it. DGM operations had also not been happy of the outcome, he talks about a number of critical
operations areas which were left un-attended “we have the shop floor planning that we have problem
with, we have shop floor quality or rejection, that cycle is not according to the system, similarly when we
have to complete a job than in that scenario not only the material is consumed, the labor is also
consumed and at the end of the month we have to identify how much labor is consumed for a specific
job, until and unless we have the attendance data, that cannot be done”
Gauging from the views expressed by Department managers, it becomes clear that the project of
revitalizing the Hinopak operation had not met its intended aim and each division had few glitches still
lurking among them.
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28.28. APPENDIXAPPENDIX
BUSINESS PROCESSES
This business process illustrates the payment life cycle as it passes through the various stages as
submission, verification, various reviews and then finally the delivery of signed cheque or the bank letter
to the treasury controller.
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This diagram shows the process for the procurement of items through inquiry. The process consists of
preparation and dispatching of inquiry, price comparison, supplier selection, purchase order and
dispatch of the items.
The process flow for processing the receipts requires the employees/customers/contractors to deposit
cheques. The treasury operations records the receipts and issue the receipts.
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The process flow for receiving items consists of the following. The store receives items from the supplier
and verifies documents. The quality assurance department carries out physical inspection and prepares
a receiving statement for the supplier. The store stacks the items and forwards DC & sales tax invoices.
The process for handling of rejected items during inspection is carried out this way. The quality
assurance department provides the store with rejection report. The store analyzes the report and either
prepares a quality concession report for quality assurance department in case it finds the material to
meet the quality standards or prepares a rejection note and allows the store to return the material.
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The process flow for issuing production related stock is as follows. The production department provides
production plans upon which the material planner executes the material requirement planning (MRP).
The store then issues the items which are received by the production department.
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