Imagine keeping track of thousands of railcars moving six million tons of nitrogen, phosphate, potash, and other fertilizers annually to hundreds of customers all over North America. Where is each individual rail car? Is it on time delivering goods to customers? When will it be available to carry another shipment?
Agrium: reducing on of the largest expenses
Canadian-based Agrium – one of the world’s foremost suppliers of agricultural nutrients – implemented SAP Railcar Management in order to answer these questions and also manage its fleet of railcars that deliver fertilizer throughout North America. This fleet grows from 3,000 to 6,000 railcars every spring, to handle the demands of on-time fertilizer delivery to the farm community.
The ability to know where every railcar is at any given time and to respond quickly to transportation delays has enabled Agrium to increase its fleet utilization by at least 10 percent. Since rail transport represents one of their largest expenses, this optimization has resulted in significant cost savings. The implementation took place without disrupting ongoing rail operations, as Agrium gradually transitioned management of its rail operations over a six-week period in 2006, from their legacy bolt-on application to SAP Railcar Management. “We established a goal early on to avoid any disruption to ongoing operations, and we succeeded in full,” stated Gordon Ingham, Team Leader, IT Sales and Transportation, Agrium Inc.
In considering its adoption of SAP Railcar Management, Agrium wanted to take full advantage of the benefits of an integrated solution. For the last decade, Agrium had been running its business using highly integrated SAP solutions, from its SAP R/3 implementation in 1996 to its SAP Business Information Warehouse and mySAP Customer Relationship Management implementations in 2004. However, the legacy railcar management system was non-SAP technology with unique support requirements and a user interface unfamiliar to most of the company’s employees.
By implementing the integrated SAP Railcar Management and SAP Event Management – a part of mySAP Supply Chain Management enabling Agrium’s SAP users to track railcars – the company realized cost savings on support and user training costs. But the greatest benefit of all was that, for the first time, railcar management became an application visible to and usable by all SAP users – not just the small group that knew how to use the legacy system. All sales, marketing, and distribution members within the SAP user community at Agrium are now equipped to improve business operations that involve railcars. Also, many are taking advantage of their new powers. For example, customer service representatives can easily provide their customers with up-to-date information on the location of their cars.
Olin Corporation: additional enhancements to profit even more
Another company using SAP Railcar Management to decrease transportation costs is the Chlor-Alkali products division of US-based Olin Corporation, one of the world’s largest manufacturers of basic materials, ammunition, and other products. This division relies on a fleet of 3,000 railcars – supplemented by trucks and barges – to deliver chlorine and caustic soda to customers in the eastern United States. These railcars, which ship 3.6 million tons annually, follow as many as 26,000 routes while in transit. This makes railcar tracking a significant challenge.
Like Agrium, Olin uses SAP Railcar Management to keep track of where these railcars are, what products they are carrying, and when they can be expected to arrive at their destinations, either customer sites or Olin’s production facilities. In addition, Olin implemented the integrated freight costing functionality included in SAP Railcar Management – which improves their ability to track freight costs such as consignment freight costs, stock transfer costs, and fuel/accessorial expenses of specific shipments. Because SAP RCM is integrated with Olin’s mySAP ERP solution, SAP Railcar Management enables freight costing data that it provides to be easily linked with the division’s overall financial information. This enables users to produce real-time reports that are far more complete than ever before. “Every day our senior executives make dollar-saving decisions using the richer information we’re now able to provide,” says Doug Lecomte, project lead, Chlor-Alkali products division, Olin Corporation.
Again, the implementation of SAP Railcar Management featured a rapid and seamless transition from the legacy to the new railcar management system. An SAP customer since 1995, Olin chose to perform most of the implementation with its own personnel, supported by railcar experts from SAP Custom Development. Working together, this team implemented the SAP Railcar Management application’s base functionality as well as its freight cost and railcar extensions. They made additional enhancements using SAP’s enterprise resource planning application already in place and the ABAP programming language. For example, SAP Railcar Management was enhanced to automatically create quality management inspection lots when a railcar is loaded. In addition, the long list of standard reports provided by SAP Railcar Management was extended to include reports developed to Olin’s custom specifications. For example, a custom freight rate declaration report that can be run to report selected freight rates by material group.
The system now supports the entire order-to-cash cycle with functionality specially customized to the unique way Olin operates. The project was completed on schedule in two phases – with the first phase dealing with railcar master data and the integration of SAP Railcar Management with SAP’s product lifecycle management component. The second deals with the integration of SAP Railcar Management into SAP standard sales and distribution, logistics execution, and financial modules. The end result was that Olin’s 250 users had the immediate advantage of an integrated system. Instead of switching back and forth between two distinct and very different looking applications to process and track shipments, users could directly access railcar tracking data from SAP shipment documents. Lecomte elaborated, “Our users are at least 10 percent more efficient because they no longer have to switch back and forth between applications on their desktops.”
Mosaic: a combination of mySAP ERP and SAP Railcar Management fits it best
Agrium and Olin are not unique in realizing the benefits of SAP Railcar Management. In excess of 40 companies in North America and Europe are licensed – with several in the chemical, oil & gas, mill products, and mining/resource industries. Thus, SAP Railcar Management is gaining traction as an add-on for supply chain management that provides a good return on investment. One example is the decision to implement SAP Railcar Management at Mosaic – the world’s second largest crop nutrition company.
The decision was driven by the fact that the application could deliver substantially more value than the cost of executing the project. With transportation expenditures in excess of $575 million, Mosaic needed transportation functionality beyond that supplied by its standard SAP ERP implementation. After a careful cost-benefit and functional fit analysis of various solutions, they settled on a combination of mySAP ERP 2004 and SAP Railcar Management as solutions most likely to meet both their requirements and implementation timeline.
Mosaic’s implementation is soon expected to be live, and will streamline railcar management, improve employee productivity, and lead to more efficient raw material procurement. Additionally, it will facilitate compliance with government regulations – such as those in the Sarbanes-Oxley Act requiring careful management of internal processes, including transportation.