Situation
Hartalega Sdn Bhd is one of Malaysia’s biggest manufacturers of natural rubber latex and synthetic examination gloves. Starting with only one production line in 1988, it has expanded to 23 lines producing about three billion pieces of gloves per year.

Not resting on its laurels, Hartalega plans to boost its total annual capacity to eight billion pieces with the completion of two additional plants at its Batang Berjuntai complex in Selangor by 2010.

Hartalega exports 99 percent of its products to key markets such as the United States, Europe, Japan and the Asian region. The company has about 1,300 workers and is in the process of being listed on the Malaysian bourse. Founded by Kuan Kam Hon, Hartalega has steadily built a reputation for quality products and service excellence in the industry.

As it rolls out its expansion program, Hartalega knew it also had to improve its existing IT system which handles the financial, manufacturing and work-in-progress aspects of its operations.

Internally developed some 15 years ago, the system had been upgraded over the years from the DOS to Windows platform. However, it did not fully integrate key areas of Hartalega’s operations such as warehousing, inventory and raw materials management. The warehousing operations and management of raw materials were essentially conducted through mainly manual processes.

These gaps in Hartalega’s work processes prevented the company from having an integrated end-to-end IT system which encompassed its overall business operations. “In terms of our manufacturing equipment, we are highly advanced but our software was lagging behind,” says Dicky Low Kok Wai, Hartalega’s Management Information Systems Manager.

“There was also data corruption, and this caused us a lot of headaches. Traceability of our goods and shipments is critical for us and we have to make sure data is accurately recorded as required by ISO procedures,” he adds.

With Hartalega’s business expanding by between 40 percent and 50 percent annually over the past decade, it was imperative the supporting IT systems kept pace with its tremendous growth. This prompted it to conduct an exhaustive search for an ERP (enterprise resource planning) system with the latest technologies and comprehensive features.

The new ERP system had to automate manual business processes in key areas, provide real time information and, most importantly, had to be easily integrated with Hartalega’s mission-critical production floor system. “Whatever data that is captured on the production floor will have to be pumped into the new ERP system,” Low explains.

A number of the offerings were proprietary systems which could not integrate with the production floor system while several could be linked but required extensive integration and customization work, says Low.

Solution
Hartalega looked at solutions from about 20 vendors and finally selected Microsoft Dynamics AX (formerly Microsoft Axapta). Designed for midsize and larger companies, Microsoft Dynamics AX is a multicurrency ERP solution whose core strengths are in manufacturing and e-business. It also has strong functionalities for the wholesale and services industries.

Microsoft Dynamics AX was chosen because of its ease of implementation, extensive functionalities, flexibility and reliable support. According to Low, another major reason why Hartalega selected Microsoft Dynamics AX was because of the availability of its source code.

“The source code enables us to easily integrate the solution with our production floor system, allowing for information to be pumped into the Microsoft Dynamics AX system,” explains Low. This provides real time information on the key areas of Hartalega’s business operations.

Another advantage was its extensive range of functionalities. “Almost all the functionalities and modules that we require can be found in Microsoft Dynamics AX.”

“Microsoft Dynamics AX is also very flexible. If you want to put in an extra field or capture more information, its just a matter of clicking a few buttons,” he states.

The company engaged Microsoft Certified Partner iDIMENSION Systems Sdn Bhd to implement the project. The deployment was carried out in stages, starting with the Financial Management module which was deployed in March 2007. Purchasing and Inventory were up and running by August 2007. Hartalega is targeting to have other modules such as Sales; Supply Chain Management; Manufacturing; and Business Intelligence and Reporting deployed by end 2007.

The new ERP system is powered by servers running Windows Server 2003 and Microsoft SQL Server 2005 located at its Batang Berjuntai facility. The system is linked to its headquarters in Sri Damansara on the outskirts of Kuala Lumpur via VPN (Virtual Private Network) connections.

The customization work required for the project such as writing of codes was “very minimal,” confirms iDIMENSION’s Managing Consultant Kang Shang Yie. “Customization constituted less than 5 per cent of the project,” he adds.

The ease of customization coupled with the strong support provided by iDIMENSION ensured that the deployment proceeded according to schedule. Low also acknowledged that Microsoft Dynamics AX is backed by the solidity of Microsoft. “We are a long term business and we definitely want to work with a supportive partner like Microsoft who will be there for the long haul.”

Benefits

Faster financial closing
With the new integrated Microsoft Dynamics AX system, the company is able cut down the time taken to process data and prepare financial reports. For example, the financial month-end closing which typically takes about 15 days previously has been reduced to just one or two days.

With a central data capture, substantial time savings have been achieved with the virtual elimination of unnecessary duplication of data entry. A transaction recorded in one module is automatically posted in corresponding accounts in the general ledger. This automatic, real-time updating of information ensures timely and accurate reporting.
“This effectively cuts down their workload by half. Now I can often see the Accounts staff smiling!,” says Low.

Decision-making by the top management has been enhanced as key reports are now available real time. “Previously, when our managing director requests for a report, he will get it about a week later. Now, he can access the Microsoft Dynamics AX system from the headquarters and get the required report with the push of a button,” explains Low.

Automating processes
Microsoft Dynamics AX has given Hartalega real-time connectivity across its business operations, bringing with it improved efficiency and productivity gains. For instance, the new system has improved Hartalega’s ability to track and trace the usage of materials in the production process. 

“Traceability is critical to us. If there was a complaint the staff had to manually do a search to find out which batch of raw materials was used for production, and that took a lot of time. Microsoft Dynamics AX eliminates the need for this manual tracking,” Low explains. As an ISO-certified organization, the improved traceability helps boost Hartalega’s ISO standing.

As part of the Microsoft product family, exporting data between Microsoft Dynamics AX and other Microsoft applications is a seamless process. Staff couldn’t directly export data to Microsoft Office applications such as Excel under the old system. “They had to export it to a text file and then import it into Excel. That took up a lot of time and we had many complaints. With Microsoft Dynamics AX, exporting data is now a cinch,” he adds.

Warehousing productivity
Microsoft Dynamics AX’s warehouse management system has automated the process of storing and tracking goods in Hartalega’s three massive warehouses, slashing by at least 80 percent the time taken to locate any finished goods.

Previously, information on goods stored in the warehouses was manually recorded in a log book. Anyone searching for a product typically had to check the log books at the three warehouses – a process which could sometimes take a few days.

With the new system, all cartons are given serial numbers and labeled with barcodes. Whenever a carton is moved into a warehouse, it will be scanned into the system. So now, locating a particular carton is no longer a task of nightmarish proportions. “From system, we can determine the exact location of carton – down to which warehouse, rack, shelf and bin!,” says Low.

Microsoft Dynamics AX has given Hartalega the assurance of business continuity and that its business expansion goals will not be hampered. Low expresses confidence that Microsoft Dynamics AX can easily handle Hartalega’s business growth well into the next decade.

Overview
Country or Region: Malaysia
Industry: Manufacturing

Customer Profile
Hartalega Sdn Bhd is one of Malaysia’s biggest manufacturers of natural rubber latex and synthetic examination gloves. Starting with only one production line in 1988, it has expanded to 23 lines producing about three billion pieces of gloves per year.


For More Information
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For other case studies in this series, visit www.microsoft.com/malaysia/business/casestudies