New IT and New Processes Cut Costs

November 14, 2005 by admin

With a registered tonnage of 148,528, a length of 345 meters, a width of 41 meters, and height of 72 meters from the keel to the top of its funnels, the Queen Mary 2 is currently the largest passenger ship in the world. Hundreds of companies and vendors contributed to the ability of the Queen Mary to launch on January 8, 2004. The VULKAN Group, headquartered in Herne, Germany, was one of those companies. VULKAN, which was founded in 1889, supplied the couplings that allow the luxury steamer plow through the world’s oceans at 30 knots – just under 55 km per hour.

Around the world, the VULKAN Group produces couplings for ship and boat drives, generators, railroad drives, and a broad variety of industrial drives. Today, the VULKAN Group consists of four areas: VULKAN Couplings, Transmissions, VULKAN Lokring, and Seacom. “High competitive pressures from the globalization of markets and strict requirements for flexibility and the cost structure force VULKAN to optimize its internal processes and lower costs,” says Bernd Hackforth, owner and managing partner at VULKAN as he summarizes the starting situation for the project.

The Optimized Production Processes . . .

To meet these goals, VULKAN first looked for opportunities to improve processes and cut costs throughout its entire supply chain. To do so, it engaged the services of a consulting firm, value4business GmbH in Dortmund, to study its production processes. VULKAN used proven kaizen methods to direct the cost drivers it had found into a continuous, two-year-long improvement process driven by its employees.
“In the context of the continuous improvement process,” says Markus Falz of value4business, “we discovered that organizational improvements on their own would not be enough to achieve the desired optimizations. We also had to optimize the processes to create value with systems and technology.”

. . . No Longer Fit with Legacy IT Systems

At that point, VULKAN decided that a comprehensive analysis of its IT landscape was required to develop a new IT strategy. To this end, the company studied its IT organization, service management, operating models, application portfolio, and infrastructure in detail. The sobering result? The newly designed processes that resulted from continuous improvement no longer fit the processes that had been designed to work with the ERP software from BaaN – and thus proved a stumbling block for productivity.

The planning process, which lacked integration of plan values with detailed production planning and control, was one example. Before the implementation of SAP solutions, the scheduler at VULKAN had to retrieve the planned and scheduled production orders along with material needs from Microsoft Excel. The scheduler then had to compare those figures with the stock and stock replenishments in the BaaN software. Because the Excel data was not always completely up-to-date, the involved planning process was often executed without current data. And despite frequent adjustments of the quantities and dates to be scheduled, the required parts were often not at the correct location. The result? Both employees and machines at VULKAN were either overburdened or were underutilized.
In addition, the ERP solutions from BaaN, Ifax, and Expert-L no longer met VULKAN’s functional requirements and the desired status of configuration and version. And given today’s requirements, the related hardware was also obsolete. IT systems at VULKAN were not available around the clock, and they did not allow three-dimensional construction. Those alone were enough reasons for VULKAN to rebuild and optimize its IT landscape radically.

Process-Oriented Organization

IT Goals of the VULKAN Group

IT Goals of the VULKAN Group

In a make-or-buy analysis, VULKAN compared the costs of building a new computing center with various outsourcing offers. Ultimately, the company decided to implement the SAP solution with the support of value4business and then to outsource the entire IT infrastructure to arxes NCC AG, an IT service provider based in Cologne.
VULKAN decided to begin with a pilot project at the company’s headquarters in Herne. During the implementation, the company developed a template for the international rollout. With the help of SAP software for sales and distribution, production planning, customer service, warehouse management, materials management, financials, and controlling, VULKAN first mapped the processes required for accounting and logistics. The template also contains the worldwide organizational structure of VULKKAN and offers foreign subsidiaries a vast amount of required processes and master data. VULKAN also developed a gap analysis with examples and process descriptions so that each location could quickly identity the processes relevant to it and compare those processes to its current processes. VULKAN summarized the available processes into three categories. Category A included processes that may not be changed. Company headquarters in Herne makes decisions about changes to category B processes. Category C processes may have country-specific properties. Service processing serves as an example of category C. With service processing, VULKAN creates standards and yet grants its subsidiaries some flexibility. The company also has a worldwide, homogeneous management and control instrument.
The transfer of data from the BaaN ERP solution proved difficult. Above all, the transfer affected copying data in the areas of customer processing, production processing, and the planning of parts to be assembled anonymously. BaaN uses a different key control concept to define activities in the production order. The company also redesigned setup times, buffer times, and idle times. The template created and implemented in Herne contains processes required within the VULKAN group and comprehensive processes for collaboration between the firms’ locations and legally independent companies. VULKAN also developed a concept for cross-location use of mySAP Product Lifecycle Management.

Plan Data at First Glance

The new ERP solution and the accompanying organizational changes have enabled VULKAN to integrate a complete planning process with production control. The scheduler now has all the required data available instantly from one IT solution. This availability leads to more secure planning in production, assembly, and procurement. In the midterm, transparent planning and the plan-controlled scheduling from SAP will lower inventory costs – without forcing VULKAN to lose any flexibility, such as the short-term availability of spare parts for a disabled vessel. Integration of financial accounting with logistics also produced greater efficiency because the number of duplicate entries was reduced significantly.
“Our IT costs have been reduced by 30%,” says Bernd Hackforth of VULKAN. “Consistent application of the strategy developed by value4business has created organizational improvements and flexibility for business administration that we benefit from.” And the IT costs have become as transparent as the performance and reliability of IT, which are guaranteed by the appropriate service level agreements. The SAP solution went live on May 9, 2004 at VULKAN headquarters. VULKAN is currently converting its production facilities in the United Sates, Japan, India, and Brazil to the SAP solution. The rollout of the master template developed in Herne will continue until 2008. At that point, VULKAN will be operating on a uniform, worldwide, and integrated platform consisting of SAP software.

Thomas Schnöller

Thomas Schnöller

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