On track with ERP

Manufacturer of steel fittings uses modern ERP system to optimize business processes

A success story of the German Unification was written in Saxony-Anhalt: as many other former Eastern German companies, the Armaturenwerk Hötensleben (AWH) was privatized and had to be reorganized after the reunification. The buyout by the worldwide operating Neumo-Ehrenberg Group in 1992 was a godsend for AWH, since the new owner opted for a long-term engagement and invested in the company. However, there were painful cutbacks at the beginning of this process. The number of employees was reduced by a factor of seven. At the same time, investments were made in production and company IT, the entire company was reorganized. Already in the mid-90s these measures proved effective: thanks to new products AWH was able to strengthen its position on the old, as well as new markets and, as a consequence of the increasing demand, was able to increase the workforce by eighty percent. Nowadays the company employs approximately 200 people in Hötensleben.

The medium-sized company is specialized in the production of steel fittings for the pharmaceutical, food and brewery industry, as well as biology and water-supply companies. The portfolio comprises valves, pressure tanks and steam boiler components, but also all kinds of variations of pipes and tubes, strainers or pipe supports for plant engineering.

The complete program comprises about 40,000 various products in the standard production which are for the most part available from stock. In addition to this widely diversified program, the development of new products, such as at present for the pipe pigging and cleaning technology, is of high priority. AWH also provides customized services for plant engineering.

Large vertical range of manufacture

In the course of the reorganization the necessity to introduce a modern ERP system arose in 1993. Up to then a business software by IBM was being used on an AS/400 server which was focused on sales and warehousing, but which neither supported materials management nor production planning. "On second thoughts we chose an ERP system by ABAS, which covered most of our requirements," remembers Ingolf Wölk, Head of IT at AWH.

The software provider ABAS from Karlsruhe is specialized in standard business software for production and trade companies and as a medium-sized business knows the needs of its customers, which are also medium-sized businesses, very well. Another advantage is the ABAS partner model: competent sales partners operate around the world. The support for AWH is carried out by the abas system GmbH in Berlin, which proved to be the perfect ERP advisor due to the experience with projects in the machine and plant engineering, metal working and finishing sectors of industry, as well as trade. AWH not only manufactures fittings (60 percent of the turnover is generated in production),

but also trades with semi-finished products made from steel. The company opts for a large vertical range of manufacture - all stainless steel products are manufactured in Hötensleben, the rest is purchased. For this 33 modern CNC machines are used in production. The internal production at AWH is the basis for ongoing high quality, short delivery times and calculable costs.

"The large part of the finished parts - about 80 percent - is put into storage. There we have goods available for about nine million Euros. We provide a 24/7 service to our customers, as spare parts have to be available as fast as possible when a plant comes to a standstill," explains the Head of IT. This is a huge challenge for the company's logistic, because up to 35,000 packages in the 30 kilograms area alone are sent to customers every year. To tackle this challenge, a new warehouse and shipping center with 8000 storage locations was put into operation in Hötensleben in 2004, which is connected to the company IT of the main plant via a two megabyte leased line.

All business areas and processes covered

All modules of the abas Business Software are being used to meet these requirements: from purchasing with purchase order management to warehousing, scheduling, retailing and materials management to sales with sales order processing and accounting. The purchasing module provides a continuous transaction processing - from the request to purchase order suggestions, purchase orders to entering goods received, and also invoice verification. Dealing with purchase orders is a central component in purchasing. In the scheduling, purchase order suggestions are generated when stock levels fall below the minimum stock level, which then flow into requests and purchase orders. For each purchase order item the purchase order management is linked to the financial accounting and cost accounting via cost centers, cost objects and account assignments. For financial accounting, as well as for payroll accounting, separate solutions which are used in all companies of the Neumo-Ehrenberg Group, are installed at AWH.

The abas function materials management plays an important role, as it covers among other things the warehouse management, batch size creation, bundle and serial number management, materials allocation, as well as lot management. The production/PPC module enables the creation of work order suggestions from which work orders can be created, followed by shop floor papers which have to be confirmed. The function manual production entries is used for special orders. So far only the PDC function is missing, but is currently being prepared and is to be connected by mid 2006.

The ERP system, as well as the hardware that has been installed by the abas system GmbH, has proven to be reliable and low-maintenance: the abas Business Software runs using the operating system Linux on Maxdata servers with a Raid system, an absolutely reliable combination.

Increased efficiency, reduced costs

"Many processes were optimized thanks to the ERP system. If, for example, the sales nowadays prints a packing slip, then the printer in the warehouse which is about 3 kilometers away is activated and prints a picking list and a packing slip," explains Wölk. The warehouse management has also been reorganized: the products are divided into A, B and C products - according to their purchase order frequency - and are assigned locations which can be reached easily or not so easily. The ERP program provides the values for this. "This system has established itself, because complaints caused by wrong deliveries have decreased - thanks to the new organization which replaced total paper chaos," emphasizes Wölk. Another positive effect: the salespersons have more time for their actual tasks as they no longer have to go through the warehouse to check available quantities or to find stock items.

Another saving potential has been made accessible by means of the abas Business Software and the Document Management System Habel by changing to electronic documents: "With exception of the picking list and packing slips there are no more papers in circulation. This means that we are able to decrease our paper costs by EUR 5,000 and postage by EUR 2,000 per year." Not included are savings through simplified processes which we were able to gain by omitting paper documents, " explains Wölk proudly.


Quality control also plays an important part at AWH, and here the processes were also simplified and costs were reduced. Almost all customers require certificates of origin for the products, which are provided to the fittings manufacturer by the vendors. In the past these were copied and enclosed in the delivery on customer request. A long winded and labor intensive procedure. In the meantime, this process has been automated: incoming certificates of origin are scanned, assigned to the lot number and delivered in electronic form. "Even if the individual process only takes a few minutes, this can be totalled to approx. 41 working days that we can save with 8,000 documents per year," emphasizes Wölk. The number of processed packing slips is also impressive: "In 2004 50,000 of these documents were created and processed by means of the abas Business Software. The ERP system is here also of great assistance,"
he adds. The automated print of the shipping labels for deliveries with the service provider UPS, which starts after the delivery number has been entered, also saves a lot ot time.

In many areas it becomes apparent how AWH, despite the continuing increase in revenue, was able to keep the number of employees steady and became more and more profitable over the past years by optimizing administration processes and decreasing production lead times. At least in this case privatization, buyout and reorganization of an East German traditional company has turned out to be a success.