e-business works for fluid integration

When Sterling Fluid Systems needed to improve its after-market operations, order processing and customer service, as well as intra- and inter-business transactions, while ‘integrating’ multiple ERP systems, it turned to e-business. Brian Tinham reports Key benefits Improved customer and distributor interaction side Better than halved transaction costs and increased margin by more than 2%, through web-based self-service, meaning system payback within two years Visibility of spares and associated support items, resulting in good growth and additional revenues Provides long term strategic advantages in terms of hub ERP integration, which removes a former business limiting factor Achieved a simple and relatively low cost framework for integrating business acquisitions There are times when a business IT solution is so elegant, yet so 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 across disparate divisions, 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 plus a network of third-party distributors and agents around the world. It’s that sheer scale and diversity, and the fact that Sterling has grown dramatically in recent years, largely by acquisition, that has been both its strength and the source of its problems. It meant, for example, that the company had several ERP systems – SAP, Baan, QAD Mfg/Pro, PSI Penta, MK, ManMan and so on – more than 10 types 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. That in turn meant inter-division transactions and reconciliation, getting global business views and reporting and the rest involved time consuming and labour-intensive paper processes and workarounds. Similarly, it was difficult to get economies of scale across the companies from, for instance, rationalising product development, customer service or supply chain management. Then again, there were issues around new business opportunities. Signing up new partners and channels, for example, when there was no single system ‘face’ for the outside world, was a problem – as was marketing cross-division packaged solutions of systems and services to specific industries. To get collaboration and process integration working, Sterling needed integration and automated workflow. In 2001, however, conventional enterprise application integration (EAI) technologies were 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 that would allow the company to be responsive to further acquisitions, almost inevitably with yet more different systems. And there was another quite separate problem: customer service and distributor order entry processes for new products, spares and service were labour-intensive, inefficient and ‘unfriendly’ – again partly because of the separate businesses and systems, but also importantly because of the specialised nature and diversity of its products. The company needed fast, electronic systems not only for intra- and inter-company transactions, but information provision 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. Early in 2001, 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 long-winded manual process of component identification, quotes, terms etc, after which they would separately fax, email or post orders … and so on. It was time consuming, there was plenty of scope for errors, cost was estimated at $75 per transaction, and it was hardly excellence in customer service. “There was a lot of cost in the information flow,” says Massey. “The target was to halve that and increase our margin by 2%, effectively 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.” The approach taken was to set up purchasing portals with rules-driven catalogues and ordering mechanisms linked to the back end ERP systems via XML. That could subsequently 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 went for a solution from IBM, IBM Global Services and partner Digital Union, harnessing WebSphere for everything from web publishing to business system integration. Digital Union was lead developer, working with Sterling’s IT development team in Letterkenny, Northern Ireland, and focusing on the portal, catalogue and database parts of the system, while Sterling looked after business process integration, look and feel, local functionality and the data and rules. 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. Then under that is the database server running IBM 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). The system went live at Sterling’s US vacuum pumps division, its Netherlands-based engineered valves unit and the US filling and testing systems division – thus connecting Baan, SAP and MK ERP systems – before being rolled out further. 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, spares and consumables, availability and their contract prices – and then transact it as an order, or break-out and contact their local organisation. It’s got everything for business-to-business.” The hub provides the messaging and transformation path for the ERP systems involved to and from the personalised web front end, also populating the database with its catalogue information on an event-driven basis, such that content and pricing changes are automatically and instantly reflected on the portal. Sterling also plans a link from customers’ purchasing systems directly into the system via WebSphere Business Integration. 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. Personalisation is done through WebSphere functionality.” As for the benefits, Massey says: “Our estimates of sales cost reduction seem to have been conservative: the businesses are seeing this all the time. We now calculate payback in two years, but it could easily be quicker.” And that’s on an investment of around £1 million all up. But there are other benefits not factored in. “The big thing is the power of the spares visibility and the support items. We believe that customer service is going to represent good growth for us, and we’re talking about six figure numbers even on standards. 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.”