Digitalisation of the supply chain with our Asian suppliers

China is an important emerging market that can offer STEINEL a comparative competitive advantage in the procurement of the parts, merchandise and services it needs to buy in. There are not only economic hurdles to overcome to be successful.

Challenge

It takes several trips to China to begin to understand the country, its people and their unyielding ambition for growth and progress from a Western perspective. Not only are the language and eating habits foreign to the Western world, but the mentality, culture, behaviour and economic and political thinking also often leave the outside observer in the dark.

Procurement processes and purchasing activities with Chinese suppliers can therefore be very extensive, and even very costly from a TCO perspective. It's about transparency, it's about bridging distances and cultural discrepancies – yes, it's especially about a unified, simple communication policy, the information of which must be accessible to Steinel and its suppliers and freight forwarders at all times, in a comprehensible and correct manner and to the same extent.

Decision

Step-by-step process flow (purchase order) OMS between STEINEL Asia Offices, M R office and suppliers

In 2013, Steinel launched a joint project in cooperation with the logistics service provider M+R Spedag Group to make the procurement processes between the European Steinel plants, its Chinese suppliers and logistics partners transparent and efficient. The overarching goal was to evaluate, intervene in and avoid potential procurement risks in a timely manner. The focus was always on the use of a common information platform and the standardisation of processes.

After the procurement process had been analysed and optimised, the M+R standard product "Order Management System (OMS)" was customised in several joint project steps to meet Steinel's requirements for a supply chain tool and digitised in various project milestones (originally mainly manual sub-processes).

This decision not only meant a change for the internal procurement system at the European Steinel locations, but also, and in particular, for the Asian suppliers, for whom it initially resulted in a considerable adjustment in their usual day-to-day business, order handling and communication.

It was therefore important that, before the official "go live", selected A-suppliers were invited to an exchange and that we were able to align the system together in such a way that, on the one hand, it meets our requirements and, on the other hand, offers a benefit for the suppliers. Only after that and after system test runs were all suppliers in East and South China invited to workshop seminars, where the new common basis for cooperation was presented and finally went live.


"OMS is a groundbreaking and future-oriented tool. Its capabilities go far beyond the management of purchase orders. It combines all the tools needed for an efficient, effective and transparent supply chain in a web-based platform."

 

Benno Hägler, Head of Sales Switzerland M+R Spedag Group AG


Result

The implementation of an IT-based supply chain management system in the procurement process between Asia and Europe has not only significantly increased efficiency and streamlined the ordering process, but has also created a communication and collaboration platform.

Stored electronic components SMD taping on several reels

On this platform, the entire procurement process is systematically digitised (from the creation of the order to the confirmation of the delivery at the destination by the freight forwarder in Europe) along defined guidelines. By defining these guidelines for Asian suppliers (e.g. when creating the invoice and delivery note) and the connected freight forwarders, the clarification of possible errors and sometimes tedious discussions has been almost completely eliminated. The following project milestones have been digitised:

✓ Quantity Contract and PO Management
✓ PO Acknowledgment
✓ E-booking
✓ PO and Consignment Tracking
✓ Document creation (e.g. Commercial Invoice and Packing List)
✓ Production Status Update
✓ Event Notifications and Reportings

Furthermore, we are able to permanently measure the performance of Asian suppliers. Evaluating historical key figures is one thing, but the decisive factor is that so-called PPIs (Predicted Performance Indicators) help to identify potential problems, including to recognise potential problems with meeting delivery deadlines and quality requirements in good time (i.e. already at the supplier in Asia) and to provide leverage for eliminating the weak points, with the aim of supplying the European Steinel locations and, in particular, our customers on time and in the required quality ("Solve the problem in Asia today that could become a problem in x weeks at the destination in Europe").

This has contributed to measurable success so far. In particular, the delivery rate has almost doubled to almost 96%, and the rejection rate has fallen from almost 20% in 2012 to <1% in the meantime.

Conclusion

The implementation and continuous development of the IT-based supply chain was and is a significant success. This is not only proven by the positive results that we achieve through the digitalisation and optimisation of operational processes. Rather, it is also a collaboration between our logistics service provider in Hong Kong/China/Taiwan/Germany/Romania/Moldova and Switzerland, the employees involved at the Steinel locations and the Asian suppliers, which ultimately also achieved motivation and closer, intercultural cooperation. It is a cooperation and a work of people who have contributed a lot of energy and know-how to the design and permanent optimisation of a sustainable cooperation.

"Working together today on the problems of tomorrow in international procurement and at the same time providing motivation for value-adding activities were the key objectives in the digitalisation of an efficient supply chain. This not only benefits our own production sites, but ultimately in particular our internal and external customers." 


Heiko Hartkamp, former Head of Purchasing at STEINEL Solutions AG