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Sandvik, a global Swedish mining and construction engineering company, has simplified its supply chain with a single purchase order portal. This has created information not previously available to make decisions about supplier relations, such as renegotiating contracts.
Dubbed SupplierConnect internally, the system, from Finland-based data integration supplier Liaison Technologies, has saved Sandvik “a lot of time and money” according to programme manager Lars Holmström. Individual buyers are now dealing with 20,000 purchase lines per month, and it was previously a fraction of that.
The engineering company, founded in 1862 and employing 50,000, has many thousands of suppliers with dozens of ERP (enterprise resource planning) systems and instances. SupplierConnect covers 750 suppliers in 22 countries, and encompasses 13 Sandvik ERP systems.
Mikko Soirola, vice-president of sales at Liaison, stressed that being ERP supplier-agnostic was crucial to Sandvik Mining and Construction at the beginning of the engagement in 2009.
In the existing system, when Liaison receives purchase orders from Sandvik’s ERP systems, it sends them to suppliers via electronic data interchange (EDI) or, using SupplierWeb. To suppliers, the portal looks the same; the Sandvik buyers work in their own ERP.
Holmström confirmed that a need to cut costs in the wake of the 2008 crash was the initial impetus for the project, but that this gave way to a need to support business growth, as its mining and construction markets picked up sharply.
For more on procurement, supplier relationship management
Underlying the need for a unified supplier procurement portal is Sandvik’s growth pattern – organic but also by frequent acquisition, said Holmström. The company has a variety of different processes and multiple ERP systems throughout its dozens of global locations.
“Our supply chain was fragmented around the world. Some areas were really good, others were not," said Holmström. "That put us in an awkward situation. It got to the point where we really needed a better way to conduct business with our suppliers.”
Previously, the company had used a lot of manual processes, including fax and email. “Our choices were either to go for unique implementations for each location or a standardised shared process .”
The selection of Liaison was as much to do with established advisory relationship as with technology, said Holmström, referring to a relationship with Sandvik, in Finland, since 2000.
Our choices were either to go for unique implementations for each location or a standardised shared process
Lars Holmström, programme manager, Sandvik
After the 2009 pilot programme – focused on the initial cost-saving phase – Sandvik Mining and Construction’s senior business leadership approved a plan to implement SupplierConnect globally within 18 months.
Sandvik and Liaison chose a roll out approach in which basic functionality would be implemented in multiple locations while, at the same time, developing and implementing additional functionality – such as advance shipping notices and electronic invoicing – in pilot locations.
"A key component of each roll out is what is called an 'acceptance test', performed in each location to prove that the integration solution is extremely stable," said Holmstrom. "I am very calm with every go-live. We can focus on our business, which is mining and construction, not data integration."
Holmström’s advice to others considering similar projects to streamline a global corporation’s transactions with its supplier base is to keep things simple and focus on the process, not the ERP. His team’s procedure was to identify “lowest common denominators” in the procurement business processes at 10 locations, and “go from there”.
Now that the system is established, the company has seen unintended benefits. “For example, we have one Australian supplier who delivers to three locations there, but also to Singapore and China. There are four different ERP systems on our side, but they see one interface. And they are pushing our other locations to adopt the portal," he said
Having one uniform supplier portal is makes new common and shared key performance indicators (KPIs) possible, which are starting to reveal the best or worst suppliers said Holmström. “We can also see how our sites and factories are performing”.
And so business decision makers in the sourcing function at Sandvik have “new decision material” to use in sacking suppliers, re-negotiating contracts, and the rest, he said.
And since the corporation as a whole is committed to a One-Sandvik ethos, the SupplierConnect portal is a good fit, he said.
This was first published in September 2012