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A full 10 years has elapsed since German steel manufacturer Deutsche Edelstahlwerke first began its supply chain transformation. In this time, the company has implemented a suite of integrated solutions and achieved outstanding levels of efficiency and customer service. But the company didnt have to wait 10 years to realize the benefits of its transformation.
A vision emerges from necessity
Like many steel manufacturers, Deutsche Edelstahlwerke has very complex production processes. It produces 30,000 different varieties of steel products, each of which involves up to 10 production stages. Every month, it makes 11,900 shipments, including deliveries from stock and make-to-order consignments.
A decade ago, Deutsche Edelstahlwerke was struggling to provide reliable due dates for its customers. It didnt have good visibility into its capacity levels or inventory and wanted to be able to manage production orders more effectively. In particular, the company faced problems with moving bottlenecks that occurred when materials were transferred from one stage of production to the next. We needed a solution that could link production phases and determine maximum lead times between phases, says Joachim Heidrich, leader, production planning, Deutsche Edelstahlwerke. If a material cools down, it will scratch. We needed better visibility into the quantities of material that have to be transferred hot and the available timeframe before materials cool.
Deutsche Edelstahlwerke used a software solution for factory planning that it had developed in house, and it urgently needed to replace the outdated application. We wanted to move away from bespoke developments and deploy a standard software solution that would be regularly updated and developed by the software vendor, Heidrich says.
The company reviewed three vendors of supply chain solutions and selected i2. One of the most important criteria for us was to select a company that had experience in working with steel companies, Heidrich says. i2 had several customers in our industry and offered a complete suite of supply chain management solutions. It therefore didnt just meet our immediate need for a factory planning system, but also had the capability to meet our wider requirements.
One success leads to anotherand another
Deutsche Edelstahlwerke implemented i2 Factory Planner in 1999. As soon as the solution was up and running, the company discovered data quality issues and bottlenecks in its systems that it didnt realize existed. After three months, Deutsche Edelstahlwerke succeeded in reducing its product throughput times from five weeks to under four weeks. It also reduced work in progress by 20 percent.
Based on this success, the company started to consider other improvements to its wider supply chain environment. This first implementation was a success story, Heidrich says. It therefore gave us the confidence to take the next step toward our long-term vision. It was a basic requirement that we had to have success with one solution before we could go ahead with another.
Fortunately for Deutsche Edelstahlwerke, success followed success, and the company rolled out a full suite of supply chain management solutions in the following years. In 2002, it implemented i2 Master Planner, i2 Demand Fulfillment and i2 Material Allocator. Two years later, it deployed i2 solutions for forecasting (i2 Demand Planner) and vendor-managed inventory, and in 2007, it upgraded from i2 Demand Planner to i2 Demand Manager on the i2 Agile Business Process Platform (i2 ABPP).
i2 ABPP enables Deutsche Edelstahlwerke to improve its supply chain workflows and streamlines the maintenance of i2 solutions, resulting in faster turnaround of plans, and allowing Deutsche Edelstahlwerke to respond to market conditions more efficiently. By removing the manual workflows required to manage its i2 solutions, i2 ABPP frees up the production planner and IT staff to focus more on plan improvements and accuracy. Over the years we have developed a very sophisticated environment to manage our planning data, says Heidrich. With i2 ABPP we were able to replace our homegrown solution and not only significantly simplify workflows, but also gain the flexibility required to align our business processes to changing business requirements. We are taking full advantage of the service-oriented architecture technology, which will help us further improve our competiveness.
The deployment of i2 solutions was carried out in tandem with business process changes and internal reorganizations. Nearly each new step in the companys supply chain transformation made a positive impact on the business and paved the way for continued development. As a result of its incremental business improvements, Deutsche Edelstahlwerke succeeded in:
Improving accuracy in production planning
Following its yearly business plan more closely
Making more accurate promises to customers
Reducing warehouse inventory by around 20 percent
Reducing pre-material inventory by around 5 percent
Improving delivery performance by up to 10 percent
Integration creates competitive advantage
Following a business merger in 2006, Deutsche Edelstahlwerke acquired two new steel production facilities, doubling its number of sites. Soon afterward it began to roll out i2 solutions to these two new facilities, mirroring the systems at its two existing sites. We recognized that it would be advantageous to have one planning solution for the entire business, says Heidrich. We transfer material between sites, so we need to be able to control material movements and processes across the whole company.
The integrated use of i2 solutions across all of Deutsche Edelstahlwerkes four production sites has given the company much better visibility into its capacity and resources, as well as a better understanding of its due-date performance. The improvements in supply chain visibility have also enabled the company to introduce reserved capacity to allow strategic customers to place orders with a shorter lead time. As a result, the sales team can offer more flexible and competitive contracts to attract and retain high-volume customers.
After 10 years of innovation and development, Deutsche Edelstahlwerke doesnt plan to stop. It plans to expand its use of i2s solution for vendor-managed inventory, which is currently delivering services for four key Deutsche Edelstahlwerke customers. It has been a clear success, and is therefore something that we wish to expand upon, says Heidrich. Customers who subscribe to this service save time and gain a reliable supply, while we have the opportunity to build a strong long-term relationship with them.
Deutsche Edelstahlwerke is confident that its use of advanced supply chain management solutions and workflows puts it at the forefront of its industry. When I compare our systems to those of other companies, I see that we have much greater visibility into our production and can make reliable promises to our customers, says Heidrich. We are a very competitive organization now and can offer our customers better service, capacity reservation and rapid production times.
Every new step that we have taken with our supply chain management system has been justified by the success of the previous step. The business and customer improvements that we have achieved, motivate us to continue to implement solutions and pursue our goals.
Company name: Deutsche Edelstahlwerke GmbH
Headquarters: Witten, Germany
Products/Services: Deutsche Edelstahlwerkes extensive product offering ranges from small-diameter drawn wire to forgings of up to 1,100 mm in diameter and includes engineering steels, tool steels and stainless steels. In addition, the company produces Ferro-Titanit, a powder metallurgical titanium carbide material that can be further heat treated. The materials produced by Deutsche Edelstahlwerke are used in the automotive, aerospace, power generation, oil and gas, and tooling industries.
Annual sales: Nearly 4 billion
Production sites in Witten, Siegen, Krefeld, Hagen and Hattingen. Heat treatment at locations in Ldenscheid and Stuttgart
Provide reliable due dates for customers
Increase visibility into capacity levels and inventory
Manage production orders more effectively
i2 Factory Planner
i2 Master Planner
i2 Demand Fulfillment
i2 Material Allocator
i2 Demand Manager
i2 Agile Business Process Platform
Enabled more synchronized and consistent definition of due-date performance across the entire company
Allowed strategic customers to place orders with a shorter lead time, leading to attraction and retention of high-volume customers
Increased cooperation among teams due to improved visibility into the same information