SAP Business One: improving total cost of ownership efficiencies

Issued by 4most
Pretoria, 02 Oct 2015

Eickhoff South Africa implements SAP Business One, from 4most, for greater control over stock management and job costing, together with improved customer service.

The need for optimal internal processes, in order to remain competitive in a challenging marketplace, led Eickhoff South Africa to re-examine its existing technology infrastructure. Operating in a niche market, with an ever increasing emphasis on Total Cost of Ownership, Eickhoff's ability to continue to deliver in line with customer requirements while not compromising on quality, was becoming business critical.

About Eickhoff

Established in 1864 and headquartered in Germany, Eickhoff is a global company with offices as far afield as South Africa, Australia, America, Russia, Poland, China and Belorussia. With its origins in the supply of premium quality equipment (longwall shearer loaders, industrial and wind turbine gearboxes and locomotives), ten years ago saw Eickhoff take the decision to expand into the room and pillar mining market with the manufacture of its first continuous miner.

Quality above all else in a challenging environment

But it is an environment not without its challenges. A steady drop in coal and steel prices over the last few years, further compounded by depleting reserves, has placed enormous pressure on mining operators. "Companies are constantly reviewing costs to identify unnecessary expenditure," says Werner Marx, Financial Manager of the local operation. In addition, depleting coal seams have created a much more rugged environment in which the machines need to function.

"We operate in a very niche but capital intensive market, with extremely high equipment costs," continues Marx. While quality remains essential, the last few years has seen an increased focus on Total Cost of Ownership (TCO) with reliability and maximum life expectancy of machines key. There is also a need for operator friendly machines, due to South Africa's well-known skill shortages.

In keeping with this, a primary focus for Eickhoff is the constant evolution of its product range allowing for increased operational efficiencies within its customer base while ensuring the highest quality and most effective offering. "Our aim is to deliver a quality product at the lowest overall cost of ownership possible, while staying on the forefront of new developments and technological innovations in an extremely competitive marketplace," says Marx.

The business case - requirements and increased efficiencies

In order to function optimally within this marketplace, Eickhoff was clear on the need for maximum efficiencies within its own internal operations. "Our legacy system was not able to provide us with the information needed to make informed and relevant decisions," continues Marx. Not only was it unable to deliver the reports required, but effective day-to-day management of the local operation was challenging.

With SAP ERP highly regarded as one of the best - innovative, reliable and stable, together with the appeal of a German product, Eickhoff took the decision to implement SAP Business One. "What made the solution particularly suitable was the fact that it integrates with Job Costing," says Marx. A method of monitoring both items and the cost thereof, together with time spent, this would enable Eickhoff to collate and review cost per job or project.

Further, effective stock management, planning and optimisation was crucial for Eickhoff, particularly given the complexity and long lead times required to manufacture some of its specialised parts. "We also needed an infrastructure that was locally supported, user friendly, adaptable to unique customer requirements and able to supply adequate reports for the daily management of our business," adds Marx. These ranged from financial reporting and stock minimum levels through to cost centre and back order reports.

Implementation and new relationships

Post implementation, Eickhoff took the decision to seek out a new SAP vendor. After an extensive market review, it chose to engage with 4most - a leading supplier and implementer of SAP and ERP software and technology, as its preferred SAP partner moving forward. "Not only is 4most highly regarded within the marketplace, but our research also indicated that it is one of the only SAP partners with the requisite expertise and necessary competencies to assist with Job Costing."

"And we have never looked back," enthuses Marx. From top management right through to technical and resource support, Eickhoff has received nothing but the very highest levels of service and efficiency. "Nothing is ever a problem, with unexpectedly quick turnaround a standard occurrence from query resolution through to the implementation of new reports."

Accurate job costing, improved stock management and enhanced customer service

"Without a doubt, the greatest benefit is our ability to isolate cost to a job or project, says Marx. When a machine arrives in South Africa, it is assembled with additional products added. "We are now able to track the individual cost associated with each component," explains Marx. In addition, increased functionality allows Eickhoff to track costs across other areas of a product's lifecycle as well. "For example, there can be as many as 20 - 30 different components associated with a gearbox over the course of its lifespan. Increased functionality allows us to track each individual component." This is providing Eickhoff with invaluable insight, not only pertaining to associated costs but also with regards to which companies are perhaps not receiving the full life expectancy of the product. "In turn, we are now able to report this back into our head office in Germany," adds Marx.

Additional benefits include the ability to analyse issues resulting in overdue jobs, assessment of repairs and the costing thereof.

Eickhoff is also enjoying significant improvement with regards to stock planning and control. "We are able to review minimum levels of stock, which in turn assists us with knowing exactly when to place orders," says Marx, leading to guaranteed business continuity for its customers. "It is crucial that part planning and stock levels are accurate," continues Marx. "Should machines in the field stand due to our lack of being able to supply the needed part, not only is this detrimental to our customers from a financial perspective, but also incredibly damaging to our reputation."

Further, due to the specialised nature of its product, design and manufacture can take up to nine months before client delivery. "It is critical to find the balance between too little versus old stock, in light of constant product development," says Marx. As a result of its SAP infrastructure, Eickhoff management now conducts weekly stock reviews. This covers all stock, from items under maintenance right through to that which is still in the manufacturing process. "Efficient stock planning is crucial," stresses Marx. "Financially, it has the power to make or break a company."

Seamless flow of daily operations

The optimal and smooth running of daily operations is yet another benefit. "We review budgets on an annual basis, each November, with implementation taking place in January across all cost centres," says Marx. Ease of reporting is allowing for a hands-on view of current versus budget. "The information is reliable and accurate," says Marx, resulting in increased confidence and better decision-making capabilities on a daily basis. As a result, local reporting by management into its German holding company is both quick and easy.

"Our ERP system is of the utmost importance to us and a key strategic asset," continues Marx. It has enabled Eickhoff to streamline its business, eliminate waste and optimise processes - using it as a compass to indicate the direction in which the company is heading. "Together with 4most, SAP has been pivotal in enabling us to make the most of our data - extracting critical information, as needed, which we as a company can then use to ensure continuous delivery of the best possible service to our customers."