Six e-business steps to integration

There are times when a business IT solution is so elegant and all-encompassing, that at first it leaves you blinded, but then pondering, 'why didn't I think of that?'. And when that solution involves web technologies, XML and Java, and deals simultaneously with problems ranging from integrating multiple ERP systems, to providing full-function e-business and electronic intra- and inter-business transactions as well as spares and product information self-service, it's time to sit up and take notice. That's the case at Sterling Fluid Systems, the $500m global manufacturer of highly engineered fluid and gas handling products – liquid and vacuum pumps, specialised valves, packages and mixers for the process, oil and gas, automotive and other industries. Brand names include Sterling SIHI, Sterling Halberg, Sterling SAT, Sterling PCU and Sterling Mokveld, and there are some 50 business units supported by 20 manufacturing sites and 200 service centres. It's that sheer scale and diversity, and the fact that Sterling has grown dramatically in recent years largely by acquisition, that was both its strength and its problem. It meant, for example, that the company had more than 10 ERP systems – SAP, Baan, QAD Mfg/Pro, PSI Penta, MK, ManMan and so on – and multiple instances across the various sites. The UK HQ, for example, uses KBM (the old CA offering, now with SSA) but SAP at its manufacturing site in Manchester. Missing opportunities That in turn meant that inter-division operations, getting business reports and the rest involved time-consuming paper processes. Similarly, it was difficult to get economies of scale across the companies from, for instance, rationalising product development, customer service or supplier management. Then again, there were issues around new business. Signing up new partners and channels when there was no single system 'face' for the outside world, was a problem – as was marketing cross-division packaged solutions to specific industries. The firms needed integration and workflow. In 2001 however, enterprise application integration (EAI) was too expensive – while the cost, effort and timescales of moving to a unified, company-wide ERP standard were even more prohibitive. Also, the latter wouldn't provide an IT foundation to assist with further acquisitions, almost inevitably with yet more systems. And there was another quite separate problem: customer service and distributor order entry processes for new products, spares and service were inefficient and 'unfriendly' – again because of the separate businesses and systems, but also because of its specialised and diverse products. The company needed to make everything easier – from configuring, pricing and quoting tailored packages with products from across the business units, to helping customers identify and order spares and associated consumables. So Sterling looked at e-business to tackle all these issues. The idea was to create a 'framework' for integration, communication, information sharing and publishing, workflow and automated transactions – using XML and web technologies as the inter-system glue. The power of the approach was three-fold: overlaying e-business would minimise change to the firm's structure, simply adding to existing processes; thus, the existing IT investment could be harnessed rather than replaced; and third it would be flexible and future-proof. Ian Massey, Sterling's group vice president of IT and business processes, says the company started its project on the customer and distributor interaction side, driven by the scope to cut costs and to improve service – particularly in after-market sales – while also proving the concept. The initial objective was to improve on a situation where customers would phone in with a serial number, be channelled through a manual process of component identification, quotes, terms etc, after which they would fax, email or post orders. It was time consuming, error prone and cost was estimated at $75 per transaction. "The target was to halve that and increase our margin by 2%," says Massey, "by putting tools in front of the customer in the form of web-based identification and ordering mechanisms – with self-service capability at the customer end, and inter-system automation internally." Sterling set up purchasing portals with rules-driven catalogues and ordering mechanisms linked to the ERP systems via XML. That could be broadened with system-to-system links between existing customer and distributor procurement engines and the ERP systems, while also providing the infrastructure for intra- and inter-business unit information flow and transactions. Says Massey: "Since the solution would ultimately be applied across the business units, providing for more services, we were thinking big." Sterling chose a solution from IBM and partner Digital Union, harnessing WebSphere for everything from web publishing to integration. The system is now hosted at Sterling's Amsterdam data centre, and it's an excellent model. At the front end is a Windows NT web server running IBM HTTP server. Below that are three Windows NT servers, each running WebSphere Commerce for the B2B functionality, authentication and the rest on WebSphere Application Server. Transformed operations Then under that is DB2, storing product, pricing and order data for the Commerce server. And below that, also connected to the database, is a Windows NT server running IBM WebSphere Business Integration software – and thus providing the hub and spoke XML connection for the ERP systems, as well as external automated B2B links. Data at this level moves between systems over a VPN (virtual private network). So far the system has gone live at Sterling's US vacuum pumps division, its Netherlands engineered valves unit and the US filling and testing systems division – thus connecting Baan, SAP and MK ERP systems. Says Massey: "Now customers or business units can go onto the portal and order online from customised catalogues, with product information displayed according to rules driven by their profile and sales history. "The system identifies who's enquiring, and lets them see a graphical representation of relevant products, which helps them to confirm identity. They can select that and be advised immediately of associated items, availability and their contract prices – and then transact it as an order, or break-out and contact their local organisation. It's got everything." The hub provides the messaging and transformation path for the ERP systems to and from the personalised web front ends, also populating the database with catalogue information, such that content and pricing changes are reflected instantly on the portal. Sterling also plans a link from customers' ERP systems directly into the system via WebSphere for full automation. And Massey adds: "All sites share products and localisation – so it's a centrally administered application sharing the cost of maintenance while giving individual experience to salespeople and customers." As for the benefits, he says: "Our estimates of sales cost reduction seem to have been conservative. We now calculate payback in two years, but it could easily be quicker." And that's on an investment of around £1 million all in. But there are other benefits. "The big thing is the power of spares visibility. We believe customer service is going to represent good growth, and we're talking about six-figure numbers. That's £2 million savings and additional revenues." And there's more: "We also expect it to provide long-term strategic advantages." Referring to the hub ERP integration, he says: "It transforms what has been a limiting factor internally, to a system that is enabling us to offer customers packaged solutions with inter-company products and services, and there are options to improve intra-division economies. We also have a simple and relatively low cost framework for integrating any businesses we may acquire in the future."