Onno Jongkind, managing director of German commodities company OPW Ingredients, visits suppliers in India and then Italy. He has come to inspect their castor oil plants and check the almond harvest. Both oils are used in the pharmaceutical and cosmetic industries as ingredients in vaccinations, skin creams, perfumes, and shampoo.
OPW Ingredients, founded in August 2012, trades in top-quality commodities such as plant oils, fats, and proteins. Their customers demand the best, so while on site at his suppliers, Onno Jongkind checks the quality of each oil. By using his iPad to log on to the ERP system, he has the specifications for almond oil and castor oil at his fingertips and can compare them with the results of the quality control chemist’s latest analysis. If the oil meets the quality criteria, staff at company headquarters in Germany can send the purchase order to the supplier right away.
OPW Ingredients: 6 reasons for SAP Business ByDesign
Yet this is just one of the reasons why OPW Ingredients opted for SAP Business ByDesign. All six are:
- Mobile data: quality analyses can be displayed and verified on an iPad.
- Processes: every process, from purchasing to delivery to the customer, is transparent and documented.
- ERP on demand: commodities and funds can be tracked in almost real time.
- Automation: the ERP system triggers the next processes.
- Quality control: staff have the information they need about commodity quality.
- Administration: new mobile processes reduce administrative effort.
1. Mobile data: checking quality analyses on the iPad
The ERP on-demand solution SAP Business ByDesign, implemented by SAP partner “itelligence”, has made OPW Ingredients’ business mobile and changed the way it uses IT. The ERP software has extensive functions – in particular for commercial logistics – has an easy-to-use interface, can be used as Software-as-a-Service in the cloud, and allows data to be accessed from mobile devices. No matter where in the world Jongkind is, he can use his iPad to display up-to-date information about sales, liquidity, the number of new contracts, and to see where his commodities are. All of this makes the company much more flexible. As he knows how his company is performing at any time, he and other members of his team can make decisions quickly. The sales managers, sales team, and logistics staff can use their iPads and iPhones to access the ERP system.
2. Processes: every process, from purchasing to delivery to the customer, is transparent and documented
“When it comes to commodity forward deals, if you want to stay competitive you have act quickly and reliably on the world market. That’s what it takes to get the right quantity and the right quality of commodities to the customer at the right time,” says Jongkind. Regulations require that the entire process, from purchasing through to the customer taking delivery of the oils, is thoroughly documented and there is a complete audit trail. Commodities supplied to the pharmaceutical, food, and animal feed industries, and especially to manufacturers of baby food, have to meet the highest quality standards. A large part of the business is international, for instance with partners in India, China, and in North and South America. In addition, the company handles a vast range of products: several hundred types of oils, fats, waxes, esters, proteins, and whey products.
When the commodities are shipped to the European ports of Rotterdam, Hamburg, or Antwerp, OPW Ingredients has to make sure that the consignment and the container ship that will transport it are at the port of departure at the same time. As the company trades globally, it has to arrange bank guarantees for its suppliers. After the consignment has arrived at the destination port, it is transferred onto barges and brought to the Krefeld Container Terminal in Germany, where it is loaded onto trucks and taken to OPW’s warehouse in Viersen, Germany, or in Nijmegen, in the Netherlands. The commodities are then shipped from the warehouses to the customers according to the contract terms. They are normally shipped on demand in batches on fixed delivery dates. For instance, a customer orders 600 tonnes of castor oil and almond oil to be delivered in weekly batches of 24 tonnes over a period of six months.
3. Tracking commodities and funds in almost real time
OPW Ingredients is a fast-growing startup employing 14 people, and its operational processes are as complex as those of a large enterprise. SAP Business ByDesign harmonizes processes so that they run smoothly and efficiently, and customers receive exactly what they ordered at the agreed time, which minimizes business risk.
This is especially important when transporting commodities across the ocean. “One cargo ship carries 1,200 tonnes of freight, which is generally worth $1.5 million to $1.7 million. So getting it wrong would be very expensive,” says Jongkind. On average, the company has 20 to 25 containers at sea at the same time.
ERP on demand: knowing what containers will arrive when
The integrated functions of the ERP on-demand solution map business processes and track the consignments and funds, from the moment the commodities are purchased, during their transportation by sea, and to their delivery to the customer, including the invoicing. This brings transparency to every step. Which containers will arrive in Rotterdam in the next three days and which commodities are they carrying? Which commodities are already on their way to the warehouse? A customer needs 20 tonnes more almond oil than agreed in the contract – can we deliver within a week? The ERP on-demand solution answers these questions, and many more, in almost real time.
4. Automation: The ERP system triggers the next processes
As the business processes are fully integrated and mostly automated, they are very fast and simple. Confirming the delivery of a batch in the ERP system triggers the next processes, such as confirming the delivery quantity, invoicing, and updating the inventory. Jongkind is particularly impressed by how the software handles orders for transportation by ship, and back-to-back coverage. “If a customer orders 600 tonnes of castor oil, this sale triggers the original supplier to enter into a hedge transaction until the complete order is shipped and the futures contract fulfilled,” says Jongkind.
Business processes are as important as quality
5. Quality control: Getting information about commodity quality
Jongkind can also give his customers on-the-spot information about the quality of the commodity. The information he needs, such as specifications and analysis results, is documented in the batch management and quality management modules of the cloud-based ERP software and can be called up any time. This is important: customers, especially those in the organic and natural cosmetics industry, pharmaceutical industry, and food industry, are not only interested in the quality of their trading partners’ products, but their business processes as well.
6. Administration: New mobile processes lead to less administrative effort
IT and mobile data reduce time-consuming manual administration work, enabling OPW Ingredients’ staff to work faster and more efficiently, which leaves them more time for their core tasks. Sales staff really benefit: every day, they issue 20 to 30 sales quotes and, as product managers, they manage the commercial processes involved in purchasing commodities and arranging their transportation by sea. Now that they have a complete audit trail, OPW Ingredients can meet the requirements of Basel II and Basel III, which come into force in the near future. This can help the company get better terms from the banks.
Lesson learned: allow enough time for project scoping
OPW Ingredients deliberately chose a cloud-based ERP solution. Jongkind is not concerned about any loss of control: he knows that his business data is better taken care of at SAP’s high-performance data center in St. Leon-Rot, Germany, than in-house. Yet with hindsight there are some things he would change: “We implemented the new software very fast but had to adapt it after we had gone live, as the processes we needed to map are complex. We could have avoided this extra work had we taken more time to scope the project with our consultants beforehand.”