The Start of a New Era in Logistics

The salt that esco extracts above and below ground comes to the market in various forms: salt for food and pickling in addition to commercial, industrial, and road salt. On its way to consumers and downstream processing, the salt is stored in a high-bay warehouse with capacity for 3,780 pallets and six lanes at the company’s plant in Bernburg, Germany. Every day, three shifts store 1,100 goods receipts from production. Two shifts prepare about 1,000 rail and truck shipments every day.

Recognized needs and integrated logistics

esco wants to extend its strong market position in Europe. To coordinate logistics with its growth strategy, the company decided to modernize the warehouse comprehensively. There was certainly room for improvement. The company needed more transparency into storage locations and inventory, faster data exchange with fewer interfaces, better opportunities for the integration of batch management, fewer systems, and fewer breaks between systems. The list was long, and the need for action in the areas of warehouse, IT, and control technology was clear.

esco primarily uses SAP software to support its enterprise resource planning (ERP) processes. Its parent company, K+S-Gruppe, also uses the SAP Supply Chain Management (SAP SCM) and SAP ERP applications. Nevertheless, esco did not have an easy time in 2006 when it selected software to modernize its inventory management. Manfred Eberl, director of surface production and logistics at esco, gave his approval only after a thorough analysis of various alternatives.

“In terms of functionality and orientation, the SAP Extended Warehouse Management (SAP EWM) application fits precisely into the supply chain management strategy of K+S-Gruppe and esco that is supported by SAP software. As a component of SAP SCM, the application combines everything needed for process control under one roof and onto a uniform platform,” says Eberl.

Eberl wanted comprehensive process integration with the SAP family of products. He also wanted to thin out the existing warehouse logistics solution. esco had been using separate applications for warehouse technology and automation, material flow control, and inventory management along with SAP software. SAP EWM, however, bundled inventory management and material flow control onto one homogenous solution.

Direct control of the rack feeders and the mechanical conveying elements was a clear objective – without the use of additional interfaces. The perspective led to the material flow system (MFS) that is integrated in SAP EWM and that allows direct connection of conveyer systems to SAP EWM with programmable control (SPS). Direct control with this high-performance material flow functionality had its world premiere in Bernburg.

A view of inventory

It took exactly nine months to move from the detailed design phase to productive operations in November 2007. “On time and on budget” was the announcement from Andreas Walczyk, who led the project for K+S IT-Services GmbH, the IT services provider within K+S-Gruppe. Working with IGZ Logistics + IT from Falkenberg, Germany, an SAP special expertise partner for supply chain execution, Walczyk and his team successfully implemented SAP EWM. The advantages for esco were clear. All logistics processes have become much more effective.

Transparency into storage locations and goods movements has increased significantly. A thin system architecture has replaced a heterogeneous landscape. The reduced number of systems and interfaces lowered the expense of maintaining and servicing logistics IT systems. It was especially important that esco achieved its goals and now has the comprehensive processes it wanted – based on SAP SCM.

For example, production planning now occurs in SAP ERP based on sales orders and the degree of fullness in inventory. Finished goods from several lines are automatically transferred from production to the warehouse. On the way, the pallets are automatically identified and tagged with the shipping unit number (SUN) so that the pallets can be traced. In the warehouse, SAP EWM guarantees user-friendly and optimized inventory management with flexible strategies for putting goods into storage and issuing goods. It also considers handling unit management (HUM) at the level of the storage type.

Additional rollouts planned

The material flow system within SAP EWM controls what is stored where in the high-bay warehouse along with the related goods movements. The application communicates directly – without subsystems or middleware – with the rack feeders and the conveyers. All movement orders are communicated from the MFS to the SPS that executes them in real time. Tight conveyance also means that the goods are automatically labeled and packed on pallets. The MFS ensures automatic readiness of delivery pallets in shipping lanes that accept pallets in the correct order. SAP EWM also shows its strengths in goods issues, which are linked directly with transportation planning.

Personnel in Bernburg have had a positive experience with the process-oriented software from SAP and its options for rule-based control of logistical needs. That is the background for the additional rollouts to other locations and in other companies of the K+S-Gruppe. The company also plans to implement additional functionality. The focus here is on transport and yard management and on quality management with the quality inspection software from SAP.

“SAP EWM also gives us perspective into implementing additional functions like cross-docking and RFID integration in near-real time and economically and into meeting new legal requirements, such as those related to labeling,” concludes Eberl.