Iveco thinks global for its configurator portal initiative

With ongoing debate around portals, EDI and web-based product catalogues and configurators, it's useful to look in more detail at Iveco's new vehicle ordering system – now live in Spain, Germany and Italy, and due for roll-out across the rest of Europe, the UK and Scandinavia in the next 18 months (MCS, April 2005, page 7). Iveco, the industrial vehicles arm of Fiat, went for a system based on 'SAP for Automotive', with the R/3 ERP extensions that deliver portal-based product configuration, order management, business intelligence (BI) and materials management. It also integrated with Iveco's legacy engineering development and web-based supplier systems – and claims that, since going live14 months ago initially only in Italy, it's slashed the financial closing cycle to one week and cut purchase-order errors by 50%. That's on sales of more than 150,000 commercial vehicles and 400,000 diesel engines per year. Dario Castello, Iveco's IS and business process manager, says that the SAP project, which overall has been running since 2003, has been about much more than the portal. It included SAP's modules for inventory management, materials management, purchasing, invoicing, sales and distribution and VMI (vendor managed inventory), as well as SAP's Business Warehouse (BW, analytics) and workflow. In short, it's a new business foundation system. Direct access But beyond that, he says Iveco wanted a mechanism by which dealers would be able to access information on SAP BW, see live information on products, components, services, prices, orders, modifications and so on – ultimately including the whole vehicle lifecycle. To achieve that, "We wanted a 'lite' tool that was web-based, that could be integrated with our R/3 backbone," he says. And SAP proposed the dealer portal software as the framework to achieve it. Enrico Nicoletta, Iveco's SAP project manager, explains: "Before this we had bespoke order processing software, but that technology was mainframe-based and obsolete. Also, configuration of vehicles on that system was by closed logic – dealers had to remember mnemonic codes. Now the dealers can configure customer orders by speaking the customers' language. The configurator drives users to the right specification and pricing." What does that mean in terms of business benefits to Iveco? Nicoletta says: "It was a strategic decision to go for SAP to substitute our legacy systems and to change and optimise our old processes. So we are giving the business a good technical solution with our portals etc, which is giving us opportunities we couldn't otherwise have. For example, we've created a general flow from the product definition up into our order management all the way from the dealers: it's a continuous flow." Re-use engineering IP It's also true that the product configurator captures all the existing body of engineering IP and maximises re-use. "Commercial vehicles are very different to high volume automotive. There is effectively one unique vehicle for every customer. So it gives us speed, velocity," says Castello. "We have 500,000 configurations in our catalogue and engineering development work for specials as well. All the rules are in the sales configuration engine and it downloads [new developments] into SAP the next day," explains Nicoletta. And he adds: "All our engineering development is still on our legacy systems but there are a lot of interfaces into our new SAP system. That connection is very strategic for product development: [engineering] can see the trends and requirements from commercial orders." Castello: "It's giving us a competitive advantage: evolving the Iveco product concept and selling that to customers speaking their language. For example, it means that engineering can design the product of the future linked to what customers are asking for now. And they can do it fast, also developing specific customisations supported by the direct link from the SAP commercial process into the legacy product definition systems." So what about the supplier side? "We haven't extended this solution into our supply chain," answers Castello. "We already had a web-based business-to-business system in place based on Sterling software." That portal system supports EDI, web and fax technologies – all communication types Iveco's suppliers apparently want. "The bigger suppliers use integrated EDI which delivers into the in-sequence JIT material management systems. The smaller suppliers, and those with lower volumes might use fax or paper," he explains. But he adds: "Now, three years later, we're starting to rethink and we may be considering SAP technology to replace it." There are similar thoughts around production. "We make engines, axles, special vehicles like fire engines, the ladders and so on – as well as assemble industrial vehicles. For example, we make 1,100 engines a day at our plant in the south of Italy. So the internal supply chain – for example, engines to our vehicles – is very complex, and we have very complex BoMs," says Nicoletta. "So we've agreed that SAP's functionality is improving very fast, but we are not sure that we are ready to implement it for our internal production supply chain 100% yet. Our thinking is to do some pilot work – and our first legacy challenging project will be in Melbourne, Australia where we will use SAP in manufacturing logistics, product costing, materials management, warehouse management, BoMs and routings. Then maybe we will roll it out to other sites in Europe."