The simplicity in complexity

The simplicity in complexity

BEUMER Group’s Supply Chain Management optimises the supply chain from the raw material supplier to the end customer. In order to remain competitive, plant manufacturers need to develop more complex solutions that are often tailor-made for the customer. This can lead to a lack of transparency in the production and logistics processes and with the participating partners, making it more difficult to come up with a precise calculation during the quotation phase. In order to efficiently prevent potential risks for the project and the company while maximising transparency during the quotation phase, BEUMER Group uses an integrated approach for supply chain management. By configuring the supply chain at an early stage, the customers can get the optimal solution for their individual project.

“We are building our systems according to the engineer to order principle,” explains Johannes Stemmer, Corporate Strategy at BEUMER Group. “The systems that we deliver to our customers are customised precisely to their needs, just like a made to measure suit.” And just as every tailor-made suit has different leg lengths and chest and waist sizes, our individual system solutions are also very specific to each customer. “In this era dominated by e-commerce we can see this especially among the mail order companies,” says Johannes Stemmer. If they want to stay competitive in the long run they will have to be able to handle individual delivery times and provide same day delivery. Another characteristic developing is the fact that the consignments are getting smaller: the customer orders sometimes several times a day, but smaller amounts. These trends mean that material flow technology is becoming more complex. Intralogistic systems such as the BEUMER Group high-speed sortation systems must be capable of handling more diverse tasks and adjust to modified circumstances. “As a system integrator we design, build and commission these systems. This ensures that our customers can deliver their products securely and reliably,” explains Johannes Stemmer. “They get the competitive edge and can prepare for future growth. This individualisation however has its price.”

Inaccuracies during the quotation process

BEUMER provides their systems with different modules and functions such as manual feeding posts, semiautomatic induction units, camera systems and tools that can correct errors to ensure a higher precision during the sortation process. There are also various drives that can differ in their capacity and energy efficiency. This means that there are a variety of product variants. “Because we don’t manufacture the camera systems or sensors ourselves we rely on selected suppliers,” explains Stemmer. But the more complex the system becomes and the more people involved, the higher the coordination and development expenses can be. Plant manufacturers are therefore exposed to influences that they do not always have control over and that are difficult to predict. This increases the risks when calculating the scope of services and developing the schedules. Another difficulty lies in long project durations: operators can have change requests, exchange rates and raw material prices fluctuate. These are all drivers that increase complexity and make it harder to come up with a precise calculation at the time when the quotation is submitted.

And despite all of this: “Our customers still want a clear statement. This is why only those suppliers who can reliably plan the demand for components and production, even under these more difficult conditions, can be successful in the long run,” Johannes Stemmer is convinced. In order to make the quotation process more transparent, BEUMER Group relies on its efficient supply chain management (SCM). This process-oriented management approach includes any flow of raw materials, components, semi-finished products and end products as well as information along the value and supply chain. The goal is to optimise the resources for all companies involved. If we want SCM to efficiently support the project-specific planning of the supply chain and the coordination of the participating actors, it needs to be coordinated with specific requirements from the supplier.

This is certainly not an easy task. For some, this management approach has a central and superior planning and control function that can help to coordinate and manage internal and external supply chains. For others, it is the basis of an integrated approach that is only applied occasionally by Procurement, Sales or Project Management. The reason for this is that the individual departments have a different perception of which tasks and targets are part of the SCM scope. During the final phase of the quotation it is however important to coordinate a clear concept together with the supplier and subsupplier. “In case of a very extensive system, an offer can comprise up to 800 pages. A consistent SCM is therefore all the more important,” emphasises Stemmer.

Complexity becomes manageable

When introducing SCM not only potential change requests and fluctuating prices must be considered, but also factors that facilitate the quotation process. “Customers are usually willing to invest more if they know they can rely on the expertise of the supplier and they feel understood by being offered a solution that is customised to their problem,” knows Stemmer. BEUMER Group counts their extensive Customer Support as one of their success factors. Approximately 1,000 employees worldwide now work for this business segment. They take care of the customer, starting with the first project discussion, through the time when the system is in operation. Customer Support can comprise of different services. With the Residential Service, BEUMER employees assume the responsibility to provide trouble-free operation on site, even for the long-term. An important role is also the high competency of the BEUMER sales employees and the technical performance parameters of the system.

BEUMER Group designs modular machines in order to make the complex manageable. This approach has proven to be useful when processes, components or customer requirements remain similar and are used frequently. Through uniform requirements and processes, the system integrator can simplify the coordination of supply chain planning and control during the quotation phase. BEUMER brings the customised modules together and adjusts them. The system supplier often pre-fabricates subassemblies or components not specific to any particular customer. Due to the scale effects, the individual modules are highly reusable which means that the needs for the internal manufacture are also a lot easier to manage. When an order comes in, BEUMER can save an enormous amount of time and can be more flexible when it comes to delivery, another success factor.

The same goals, different strategies

The reason for adopting a SCM approach for every company is to build on these success factors and strengthen them as competitive advantages. But each company is different. Some companies only manufacture products, others entire systems, some manufacture globally, others almost exclusively use subsuppliers. Different frame conditions mean that there are different SCM strategies and areas for the company to consider. The SCM areas refer to individual business units, the entire company, the cooperation network with the participating partners or the cooperation with the customers. This means that there is more than one desirable solution for how to design the supply chain. With each progressing segment, from a function-based concept to a customer-oriented approach, the requirements on the management system increase as well. On the one hand you have the opportunities and possibilities of a customer-oriented SCM approach, on the other you have the risk of overstretching the company resources and competences with an integrated implementation.

Companies that are using a more function-oriented SCM approach usually manufacture individual products, and less often complete systems. They mostly manufacture in-house, have a very high proportion of value added and their suppliers are usually located only a few kilometres away. The quotation process of the company is usually based on experience. The product business is predominantly standardised. This makes it possible to preconfigure performance parameters and customer requirements for the solutions. The customer-specific part of the products is very small. SCM in stage one is usually of lesser importance because the companies are producing for niche markets and competition here is usually less intense. SCM is used to improve success factors such as timeliness, price and quality.

Creating transparency

A central goal for BEUMER Group is to ensure internal transparency through company-based SCM. By doing so the group focuses not only on sales, purchasing or manufacturing, but on the company as a whole. “Over the last ten years, we have grown enormously due to globalisation. We were able to increase sales turnover from 100 million to 700 million Euro,” explains Johannes Stemmer. Also the number of employees grew from around 700 in 2004 to currently over 4,000 employees. The company has a global presence with a total of 35 operative group companies and five production locations. “SCM for us is a central component to ensure transparency in the company and allow trouble-free communication between everybody involved,” explains Stemmer.

Companies that are using a network-based SCM approach are going one step further and extend their view beyond their own company to include the suppliers. Integrating them into the internal company structure requires synchronous processes and systems. Both sides agree on common network goals that are superior to company and divisional goals. This also requires cooperation and transparency from the involved participants. This includes for example information supply, the use of resources and common research and development projects. Unlike BEUMER Group, other companies that are using this strategy usually do not have any or only very limited in-house production. The proportion of purchased components and internal engineering is high. SCM in the supply network is supposed to enhance the profitability of the supply chain in the network, strengthen cooperation with the suppliers and improve the use of the supply chain’s potential for innovation.

Focus on the customer

“Our customers increasingly approached us with the request to get “everything from one source”, says Stemmer. “This is why during the last years we developed from a product manufacturer to a system supplier.” By doing so, BEUMER Group also focused their SCM more towards customer requirements. This strategy focuses on how the supply chain remains flexible based on the individual needs of the user during the quotation process and is considered as a core competence for system integrators. This is because the complexity during the quotation process depends largely on the complexity of the system to be supplied. The number of customer requirements that need to be considered is generally very high. This means that adjusting the supply chain to the project-specific frame conditions is very extensive.

In order to further reduce complexity and respond to individual needs, BEUMER Group has bundled the expertise and competences available in the various fields of all branches and created relevant Centers of Competence. These centers are responsible for research and development, sales, project management, purchasing and above all the support of the group companies worldwide. “This way we can ensure consistent communication between all involved actors throughout the company during the quotation phase,” describes Stemmer. As a cross-sectional function, SCM creates the necessary interfaces between the different business units.

In order to make the costs for a project more transparent, the system integrator relies on cost analyses for individual components and products. BEUMER increases the transparency during the quotation process by detailing capacity and resource planning and takes the total landed cost from the customer’s perspective into consideration. “This makes it easier for us to detect potential savings and allows us to actively develop them,” says Stemmer. These savings can for example be detected through preferential agreements of different countries, local content requirements and evaluating different product scenarios, which have a significant impact on the quotation price.

No surprise costs

“With the customer-based supply chain management we have found our way,” Johannes Stemmer is persuaded. “We are focusing on our company core competences, are innovative and strategic and consistently develop our internationalisation further.” Maximum transparency of all participants is crucial to the project-specific supply chain configuration. This is particularly important to BEUMER Group because for the system supplier the cooperation with the customer is based on mutual trust. “Customers should see us as a trusting partner who helps them turn their project into a success with excellent problem-solving expertise,” emphasises Stemmer.

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About The Author

Ian Taylor

Ian Taylor is the Editor of Triangle’s Mail & Express Review Magazine and the portal. Ian has been a business journalist for almost 30 years, editing and writing for a wide range of magazines and newspapers with a particular focus on the transport and logistics industries.

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