For 25 years, German automobile manufacturer BMW used homegrown software for its sample-based physical inventory. The search for new software began when all BMW’s German locations and its spares provisioning shifted to SAP. The auditors demanded a solution that complies with approved estimation procedures. “The BMW Group defined difference estimation as a minimum requirement,” explains Stat Control managing director Jörg Ökonomou.
Four estimates instead of one guess
This is one of the four approved procedures (mean-value estimation, difference estimation, ratio estimation, and regression estimation) with which the relative sampling error and the deviation of the total values can be calculated. Sample-based physical inventories using these procedures are permitted by law in Germany, in accordance with section 241 of the German Commercial Code. This is because around 20% of stock items are sufficient to represent between 60 and 95% of the warehouse value.
However, auditors only recognize a sample-based physical inventory if these values lie between certain limits – but it doesn’t matter which of the four techniques is used to produce the results.
Nevertheless, the results can be very different. “For example, an inventory that was successful using difference estimation could fail if the rules of mean-value estimation are applied,” Ökonomou explains. As a result, the mean-value method does not meet the expectations of many companies and auditors. Difference estimation is much more efficient, but ratio and regression estimation also offer certain advantages.
In practice, the more accurately the procedure works for determining the relative sampling error and the deviation of the total values, the greater the chance that the inventory performed will meet the expectations of the auditors. BMW opted for the inventory software system STASAM from Stat Control, which compares the results of all four estimation methods at each inventory.
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Installation: full count and sampling at BMW
After BMW selected STASAM, Stat Control’s technology and service team stepped in to start work, because STASAM also had to communicate with a legacy host application.
“BMW manages the inventory levels for assembling new vehicles using SAP, while the legacy system is used to organize the central spare parts warehouse in the town of Dingolfing,” says Jan Erichsen, head of software development at Stat Control. In total, 240,000 material numbers are stored in the systems, from which a special layer is determined. This layer defines how many and which stock items need to be counted fully or using a sample.
While the SAP solution uses this layer to determine inventory levels in assembly, STASAM gets involved in the process in the legacy system at this point in time. The Stat Control solution analyzes the counts based on the procedures described above. During the project, STASAM not only had to be tailored to SAP and the legacy host solution, but also to the Citrix terminal server application. “This means that we only have to install STASAM once centrally, and it can be used by all the plants,” says Erichsen.
The result: central inventory management
Another challenge for the technology specialists at Stat Control was the connection to the Oracle database, which is deployed throughout the BMW Group. STASAM was originally only enabled for SQL databases, and adapting it to fit Oracle involved lots of extra work. Despite this extra hurdle, Stat Control managed to stick to the original schedule. On February 2, 2009, STASAM was rolled out to all the plants so that the impending inventories could be performed.
The goal was to have central inventory management. “Just one employee in Munich gathers the figures for the full counts and samples for all production sites in Germany and the central spare parts warehouse in Dingolfing,” says Erichsen. But that’s not all that is done at headquarters: The processes are managed and the procedure is controlled in Munich, too. That’s why the end-to-end integration of STASAM with BMW’s IT landscape was no easy task.
However, the company is now reaping the benefits of time and cost savings. To determine the layer for the full count and sample, all the user has to do is click the plant in which the inventory is to be performed. The entire process for mapping the layer takes just one hour. “It used to take BMW a whole day every week to gather the figures, because employees had to retrieve the data required from the different systems through various interfaces,” Ökonomou concludes.