Academy of Better Business

Odlewnia Żeliwa Śrem SA: SAP system implementation

The most complete SAP in metallurgy in this part of Europe

The project in the iron foundry in Śrem was considered to be the widest functional SAP implementation in metallurgy plant in Central-Eastern Europe. The foundry in Śrem is also remarkable because of the way the start of ERP solutions was used to introduce new quality in company management, especially in logistics.

Why SAP and BCC?
 
The board of the foundry faced the choice of an ERP system in mid-1999. The basic argument for choosing SAP was a wide functional range of PP module (production planning and control). The possibility of supporting different models of production process, from process production (casting) to discrete manufacturing (automotive castings) to MTO (made-to-order) production (complicated single castings) and final details finishing was vital for the plant.
 
While choosing an implementation company the deciding factor was experience in SAP implementations  and the completeness of a presented offer. In December 1999 the company signed a contract with BCC for implementation service and additionally a delivery of a hardware platform and the sale of license for SAP system.

Implementation course

Implementation works started in January 2000 and were run according to the methodology of SAP implementation used by BCC. At the beginning a project chart and regulations were created and the necessary resources prepared (like rooms for teams and technical infrastructure). Next, from February to May, training in module functionalities was carried out, business processes were modeled and the ‘Concept of  SAP implementation’ was created.

After approving the concept the prototype was carried out. During that time the system was configured and tested in terms of functionalities and integration. November and December were devoted to the preparation to productive start, user training and ending the entering of master data into the system.

In January 2001 the following modules SAP started: FI – financial accounting, CO - controlling, FI-AA – fixed assets accounting, MM – materials management, SD – sales and distribution, PP – production planning (in 3 departments: central melting plant, the foundry of heavy casting and mechanical treatment). The phase of user support ended in March 2001 with Steering Committee taking over the implementation product.

In the next phase, finished in January 2002, the PP was started in the remaining departments (the foundry of medium castings, the foundry of light castings,  the pattern shop). In January 2002 Odlewnia also started using CO-PA (profitability analysis) module.

Advantages of SAP in particular areas

Finance

During implementation works of FI module the chart of accounts for the foundry was created. It took into consideration the accounts of the ledger, suppliers and customers records and fixed assets. Most data in finance is automatically recorded during operations performed in other modules (e.g. material movement causes changes in quantity data concerning materials, and posting relevant values on accounts). Also an interface transferring the data of payroll costs from external payroll system to the SAP system.

Controlling

The CO module helps in detailed cost planning on the level of single products down to a used detail. SAP enables to carry out cost calculation according to the orders for batches destined for particular customers thanks to integrating it with MM and SD modules it is possible to analyze production costs of a particular product for a particular customer. It is also possible to analyze costs from general level (e.g. a whole department) down to a detailed one (e.g. part of a product).

Within the implementation the structure of cost centers was defined (MPK); it supports recording costs according to places that cause them. This in turn allows to analyze indirect costs of every department and (in further details) of separate parts of departments (e.g. workstations)

Materials management
 
Thanks to SAP implementation in this area the employees use one database of basic materials. Also supply and accounting have one common data base of suppliers. The implemented MM module supports in a wide range the service of purchase processes, e.g. every item in an order has information about quantities and values already delivered, about the open quantity of an order and about quantities and values already invoiced.
SAP ensures information about up-to-date quantity and the value of stock, with consideration for current stock and planned receipts and dispatch. The system also allows to create automatically stock-taking records and automatically settle stock-taking discrepancies (correcting the quantities in a warehouse with simultaneous update of stock value on accounts).

Sales and distribution

Thanks to SAP the employees working in sales and distribution area use the same data base of customers and products. Through registering documents during the sales process (from an inquiry to an offer to order, sale order and delivery and invoice) the system gives access to the history of customer relations.

Thanks to the registration of inquiries it is possible to gather information about possible customers, the products they mainly look for or the channel through which the inquiry has come (e.g. advertisement, trade representatives). Registering the offers in turn gives access to information about the progress of customer talks or the reasons the offer has been rejected.

Thanks to the integration with PP (production planning) module after a customer’s order has been entered into the system, planned orders are created that later are changed into production orders. At the same time on the basis of the evaluation of production capacity and current liabilities the system defines the term of order  realization.
As a result of integration with FI module when the invoice is recorded, the values are automatically posted on accounts.

Production planning

Within the implementation of PP module the service of production planning and control for all production sections of the foundry was started. Thanks to that SAP supports the full production cycle of castings and casting models.
 
The foundry adopted a strategy of order-based production. A product is identified by an order and serial numbers. This enables to have full control over the process as well as to check data on product manufacture, e.g. the content of the iron the casting was made of.
It is important because of the requirements of certifying bodies (e.g. for shipbuilding industry that is a regular customer of the foundry).

During the service of production orders not only the availability and production capacity are controlled but also the models and foundry moulding machines. How the system is used can be proved by the fact that monthly about 25,000 production orders are serviced.
 

New quality in logistic chain management – business projects in the foundry

In 2003 the foundry in Śrem continued implementing changes in the management model on the basis of  the data from SAP and, with BCC support, reorganized the planning process in logistics. The aim of the works was to increase an efficiency in customer service through redirecting processes to customer order realization.  

The quality change in the planning process, prepared in the project, covers the whole logistic area in the company– from sale planning and confirmation of order realization terms to production planning and control to stock management and material flow management.  
Reorganization of the planning process in the foundry adds new quality to planning process management by connecting logistic processes even closer to real market demand. The redirection of the processes enable a reliable definition of the terms of realization of customer orders, based on the control patterns and foundry moulding machines as well as  information collected thanks to monitoring of the order status (the production cycle sometimes takes a few weeks).

The new planning model allows to define priorities in customer order realization and settling production departments mainly on the basis of the indicators of order service level.

The result of organizational changes implemented in the project was creating a Planning Office that coordinates planning functions for all production sections in the foundry and creating and implementing organizational procedures related to logistic service.

The Planning Office is supported in its work by SAP. All information necessary to perform its tasks and notifying customers about their order status is taken from SAP.
 
The changes in business processes related to the project and organizational changes were fully reflected in the SAP system used in the foundry.

For the customers of the plant changes in planning mean a guarantee of quick and reliable information on the realization of their orders and consequently – an improvement in the quality of goods and more efficient service.

5 years after implementation: IT Leader

In autumn 2005, five years after implementing SAP system, the foundry in Śrem won the most prestigious IT competition organized by the Computerworld weekly, titled ”Recognition of achievements made thanks to IT technologies.”

The title of an IT leader of 2005 is a next prize granted to the foundry in Śrem for SAP implementation.

In January 2004, in a competition organized among industrial analysts (ex. from IDC Group and DiS re-market search group) and IT experts by the Nowy Przemysł monthly, the project was considered to be one of the most innovative projects of this type in Polish industry in recent years.