found in nearly every electrical and electronic device: components such as
capacitors and sensors. An automobile may contain nearly 10,000 such
components, and our mobile phones, fluorescent light ballasts, notebooks, and
wind turbines couldn’t run without them. They are critical to processing
electrical signals, protecting electronic circuits, and ensuring energy supply.
leading supplier of such components, boasts a portfolio with over 100,000
different types. The company, with some 25,500 employees working in a
close-knit network of over 20 development and production sites, generated
revenues of roughly €1.8 billion in fiscal 2013.
logistics plays a key role in the success of EPCOS. EPCOS supplies some 20,000
customers around the globe – including many leading global players in the
sectors of automotive manufacturing, consumer goods, IT and communications, and
mechanical engineering – which EPCOS supplies either directly or through
wholesalers and distributors that resell a wide selection of EPCOS products.
Growing customer demands and rising
customers have very complex logistical needs,” notes Gerhard Hofmann, Manager
for Information Technology and Logistics at EPCOS. “From packing and labeling
to documents and EDI messages, the logistics processes must be configured to
mesh seamlessly with those of the customer.” Strict contract language governs
some of the specific requirements. EPCOS also faces intense competition, so
there is tremendous pressure to cut the costs of its global logistics
operations while still satisfying high performance expectations.
on the speed and flexibility of logistics are also growing – in part because
the company ties its manufacturing very closely to customer orders and keeps
its inventory as low as possible in order to minimize fixed capital and
inventory costs. But EPCOS logistics must still be capable of satisfying
customer needs if, for example, there are last-minute changes.
might happen if a customer calls up and says “Please increase the order from
10,000 units to 100,000 units of capacitor A, otherwise we may have to stop our
production lines.” Coping with this scenario generally means reallocating
volumes from less urgent orders in order to fulfill the urgent customer request
as quickly as possible – naturally with the appropriate level of quality and in
keeping with the customer’s specifications. This often means bringing in the
goods from more distant sites, so EPCOS needs a logistics network that can make
up the difference through short lead times.
these growing demands and challenges, EPCOS launched an ambitious project to
reorganize its transport logistics and supply chain processes. The heart of the
project was the implementation of a Transport & Freight Management system from German software developer AEB
that is used today to manage both operational and administrative aspects of
reorganization of the transport logistics was broken down into numerous smaller
projects that EPCOS and AEB worked on together for years, mostly in succession
but sometimes in parallel. The key phases:
Reorganize shipping logistics
operations, extending integration into customer processes
Introduce track & trace system
Consolidate number of transport
partners, tightly integrate carriers
Introduce global, enterprise-wide
freight cost management with self-billing procedure
Merge shipping and freight
management with track & trace processes into a single new TMS
Logistics structure of EPCOS
global transport logistics of EPCOS is closely aligned with its global
production processes. The company currently maintains more than 20 production
sites around the world, with a regional emphasis on Asia and Europe. Each site
focuses on the production of specific segments of the EPCOS portfolio, though
there is some overlap to accommodate special requirements such as physical
proximity to the customer.
uses EDI to manage orders and confirmations with its key accounts. EPCOS
receives delivery schedules from its customers, and the ERP system at EPCOS
runs an available-to-promise check with a shipping date that generally matches
the date requested by the customer. Products are shipped around the world from
the production sites in a two-phase transport chain (air/road transport or
global flows of goods pass through four central transfer points in Hong Kong,
Singapore, Japan, and Brazil. Here the goods are consolidated. European-bound
shipments are then brought through the three import gates of Hamburg,
Frankfurt, and Munich, where the customs assessment processes are controlled.
Distribution to European customers is handled from these three points by
channeling the goods directly into the networks of domestic transporters.
Shipping logistics extending to the
for the EPCOS transport logistics is the numerous logistics centers that EPCOS
maintains around the world, generally where it has its production sites. “The
picking and packing processes there need to run smoothly to meet tight delivery
deadlines and satisfy specific customer demands,” explains Gerhard Hofmann.
“That’s why we decided over a decade ago to begin replacing the old in-house
system and optimizing our shipping processes with the AEB solution.”
the shipping data is drawn from the SAP® host system into AEB’s Shipping
solution via Idec. Then Shipping
generates the picking lists, and the goods are transported according to the
person-to-goods principle to the heart of the EPCOS shipping system: the packing
station. This is where the packing takes place – and where the groundwork is
laid for seamless interaction of the logistics processes of EPCOS and the
customer. AEB’s Shipping
guides the packing station worker from the product packaging level.
customer who orders 1,000 type A capacitors, for example, may plan on using
these articles for different products and thus different production processes.
“This means that the shipping item may consist of ten different product
packages, each with 100 units of the same capacitor,” explains AEB project
manager Sebastian Zilm. “And AEB’s Shipping
assigns each of these ten product packages a different label, each with its own
specific customer serial number. This way, EPCOS customers can channel the
capacitors directly into their production processes.”
defined up to 900 different labels in AEB’s Shipping to
accommodate this type of customer demand. A complex rule-base developed to
accommodate this automatically calculates which labels are printed how often in
which process and where they need to be affixed. New customer-specific labels
can be created within just a few hours and, once approved by the customer,
centrally distributed to all sites around the world.
packing station is also where the goods are packed into the shipping packaging.
This is where AEB’s Shipping
shines, automatically consolidating orders and creating sub-packages to save
shipping costs. Multiple orders by the same customer are linked at the delivery
note level whenever possible, so the packer has the option to pack them
together in a single box.
also takes care of many packing station tasks that would otherwise fall to the shipping
office, such as printing delivery notes and packing lists. This saves trips and
time,” says Sebastian Zilm. The ultimate goal of EPCOS is to achieve the
highest possible quality and minimize the error rate throughout the packaging
packaging is complete, loading lists are created. This means consolidating the
daily volume for a particular freight forwarder, container, or truck in a
loading list and assigning a cargo number. The loading list is sent via EDI to
the relevant transport partner. But it isn’t only forwarders who are notified
by EDI. Customers also receive EDI messages about their consignments –
including a qualified packing list with information on products, quantities,
and the number of packages. This means customers are in the loop from an early
stage, so they can plan with greater certainty: another aspect in which EPCOS
integrates its customers into its own logistics processes.
Next step: freight forwarder
consolidation and integration
optimizing its shipping processes, EPCOS began reorganizing the way it
collaborates with its transport partners. The initial objective was to greatly
reduce the number of transport service providers and streamline this link of
the supply chain. EPCOS has been working with some 100 transport partners –
primarily global players, but also some regional providers. Each site was given
discretion to choose the transport service provider for a particular
EPCOS decided to set up a “preferred forwarder
pool” of selected providers. This not only minimized the administrative
overhead associated with contract negotiations, quote management, and
monitoring, it also meant a greater volume with each preferred forwarder,
making it possible to negotiate better prices and reduce transport costs. Above
all, EPCOS pushed IT integration with its forwarders to further automate and
streamline the processes from placing orders to invoicing.
transport service providers that wish to be accepted into the pool must meet
not only our pricing guidelines but also the technical requirements for
integration into our supply chain processes,” explains Michael Rühl, Head of
the Global Shipping Committee at EPCOS. “What this means, for example, is that
data is not exchanged in the proprietary formats of the transport service
providers, as is normally the case. Instead, we’ve defined our own global
IFTMIN for electronic forwarding orders, for example, which all transport
partners must use.” Status updates must also be submitted in a defined format, even
though AEB’s Transport & Freight Management system has the flexibility to handle all
the former transport partners were willing or able to comply with these
technical requirements. Today, the preferred forwarder pool comprises 18
transport partners that handle the entire spectrum of logistical transport
services from surface, air, and ocean freight to parcel services and together
account for 80 to 90 percent of the transport volume of EPCOS.
close-knit IT integration of the transport partners through AEB’s Transport & Freight Management made it possible for EPCOS to tackle the
next big phase of the project: introducing a global track & trace system
based on AEB’s Supply Chain Collaboration platform. The aim here was to be able to track
all consignments around the world through a central platform from the time they
are picked up at the logistics center until they are delivered to the end
preferred forwarders and all EPCOS sites are integrated into the track &
trace solution Monitoring & Alerting. The system consolidates consignment data from AEB’s Shipping
with status updates (IFTSTA) from the forwarders and presents this detailed
status data for each delivery note. “AEB’s Monitoring & Alerting functions here as the event-tracking system,”
explains Sebastian Zilm. “The software logs both the expected and actual
occurrence of events such as loading, arrival at hubs, or final delivery for
trackable objects such as the delivery note, consignment, or package.”
heaviest users of the centralized track & trace system at EPCOS today are
Customer Service and Sales. In the past, these departments had to call the
appropriate shipping point whenever a customer wanted to know the current
status of an order. Often, the shipping point was in a different time zone and
no one could be reached. And even if someone at the shipping point was
available, the information still had to be requested from the forwarder – a
complicated, time-consuming process.
thanks to AEB’s Monitoring & Alerting, Customer Service and Sales have round-the-clock
access to all status information through an online platform. “Proactive
notifications are also issued when delays are registered at certain
milestones,” notes Gerhard Hofmann. “This gives us the opportunity to warn the
customer and seek workarounds to ensure successful delivery.”
accounts also have direct access to information from AEB’s Monitoring & Alerting through the EPCOS website. They can track all their
shipments across all transport legs or call up the dates and contents of all
shipments linked to their customer number, for example – including the current
status. Access to this data – directly through the online platform or
indirectly through Sales or Customer Service – has led to much higher customer
How well are transport partners
In addition to improved
customer service, EPCOS is also using the data from AEB’s Monitoring & Alerting system to monitor its transport partners. Are
consignments arriving on time? Are service level agreements being upheld? Monitoring & Alerting provides answers to these questions and more. The
solution also lets you define and monitor key performance indicators. Powerful
statistics make it possible to produce and distribute very detailed
“Such analyses are an important argument when
negotiating new terms with carriers, for example, since they document the
actual level of performance,” says Michael Rühl. “They help us strengthen our
negotiating position and achieve fair and appropriate conditions.
makes it easy to identify which partners are especially strong and reliable,
then give preference to such partners – thereby further optimizing the
logistics processes.” But the success of such track & trace systems depends
entirely on the quality of the information they are fed – above all, the status
updates from the transport partners. The poorer the quality of the data, the
less acceptance from users. Customers who encounter misinformation or no
information whatsoever when checking on a shipment end up picking up the phone
again when they need reliable information.
problem with the quality of data is that the regional variances among transport
partners can be extreme. Here it becomes obvious that many global transport
service providers are highly diversified enterprises with largely autonomous
national entities. This leads to errors when data is missing, or the wrong data
is sent – an in-house number from the forwarder instead of the EPCOS delivery
note number, for example.
though EPCOS has established a very good foundation through the preferred
forwarder pool and uniform data format, maintaining a high quality of data
requires ongoing efforts – such as joint workshops with transport partners”
concedes Gerhard Hofmann. It’s not always easy to convince transport partners
how important this is. Exclusion from the preferred forwarder pool is the only
means of exercising pressure.
phase in the reorganization of EPCOS transport logistics was Freight Cost Management – above all, how transport service provider services
were settled. One of the greatest challenges had been auditing incoming
forwarder invoices. The 23 shipping centers received stacks of paper invoices
from the transport partners, and each site checked its own invoices in a
two-step process that addressed two primary questions:
1. Content check: Is the
consignment from EPCOS and was the merchandise / delivery note actually sent
with the transport service provider?
check: Does the invoiced rate match the negotiated rate?
freight invoice audit was very time-consuming, leading some sites to outsource
the task. This in turn yielded significant external costs each year,” explains
Sebastian Zilm. This led EPCOS to introduce self-billing wherever possible and
feasible (see Figure 2). Self-billing means that EPCOS uses AEB’s Freight Cost Management to calculate the freight charges itself, then issues
the forwarder a credit for the amount. This makes it the responsibility of the
forwarder to check the accuracy of the credited amount.
the consignment data for the self-billing of all 23 EPCOS shipping centers
around the world – consignor and consignee data, dimensions, weight, package
type, etc. – pass through the AEB Communication Management System to the central
Freight Cost Management system. The software checks which forwarder was
used, what the service type was, and whether it was a multi-stage transport. AEB’s
Freight Cost Management then checks this information against the quotes and
rates stored in the system for the forwarder in question and calculates the
transport costs – including those for each leg of multi-stage transports. When
the calculation is complete, the software then issues the credit and reports it
to the SAP® FI/CO finance system.
benefit: “AEB’s Shipping
automatically consolidates multiple transports from one transport partner when
calculating freight charges. If two shipments to different customers are sent
out on the same aircraft, for example, the software combines all the transport
items with the same route and airway bill number when calculating freight
charges,” explains Alexander Neuhäuser, Supply Chain Management / Project
Manager for Freight Cost Management at EPCOS. This yields a greater volume or weight for
each transport, which in turn yields much better price scales or volume
Good shipping data is a good
establishing the preferred forwarder pool, reducing the number of transport
service providers, and integrating the TSPs seamlessly into its own IT systems,
EPCOS had already created the ideal preconditions for introducing the freight
self-billing procedure. The AEB Transport & Freight Management system also gives EPCOS an excellent source
of data for consignments – package weight and dimensions, for example – and
goes one step further with AEB’s Transport & Freight Management: The integrated Monitoring & Alerting system lets EPCOS synchronize issued credits with the
successful consignment deliveries. This means that payment is issued only after
the transport service provider has transmitted the delivery status to confirm
completion of the order.
Currently, EPCOS uses freight self-billing to
manage a total volume of some €10 million annually. But so far, the process is
used primarily with logistics partners in Europe – and even then, only in
countries where the laws make it possible and feasible. An internal
cost-effectiveness study has shown that the process still pays for itself,
however. In addition to the strict cost benefits, there are also many quality-related
aspects that speak for freight self-billing (see Table 2).
Freight, shipping, and transport analyses
shipment data gathered through freight cost management also give EPCOS a
powerful foundation for strategic and tactical transport planning – especially
since AEB’s Transport & Freight Management can organize this data for analytical
purposes virtually at the click of a mouse,” notes Alexander Neuhäuser,
highlighting another benefit the solution offers. “The software can aggregate
the data by nearly all relevant criteria.” This makes it possible to identify
the cost drivers in one’s supply chain, for example, and answer the following
How high are the transport costs for
supplying key accounts?
Which route accounts for the largest
share of costs?
How high are the freight costs by
shipping point or profit center?
of the trend over time are also important: How have the quantities for specific
routes evolved? And for specific forwarders? The consignment data also provides
the ideal basis for preparing requests for proposals. You can analyze the flow
of goods down to the package structure and identify which packages with which
weight and dimensions make up the flow of goods. This information helps
transport service providers submit precise bids, often at lower cost, since it
potentially eliminates uncertainty buffers.
Happy customers, excellent logistics
track & trace, freight management: EPCOS has implemented a comprehensive
transport management system with AEB’s Transport & Freight Management, facilitating seamless communication of the
various applications and providing end-to-end support of the transport
processes, from the placement of the order to invoicing,” notes Sebastian Zilm,
summarizing the project from AEB’s perspective. “The benefit to EPCOS stems
from the individual components of the solution, but the optimal effect is
achieved only when they all work together.”
thanks to the new IT platform, the transport partners and customers are also
integrated into the logistics processes. Specific instructions for shipping
labels and documents make it possible for customers to channel EPCOS shipments
into their own processes and update their own logistics to the latest status
information from the Monitoring & Alerting system.
optimization of transport logistics, the implementation of a new AEB Transport & Freight Management, and the increased integration of customers
and transport service providers have paid off,” agree Gerhard Hofmann and
Michael Rühl. “We succeeded in drastically cutting transport management costs
while improving performance. Flexibility, availability, and on-time deliveries
also improved – and our customers have taken notice.” Siemens, one of the
biggest customers, recently awarded EPCOS Brazil the Diamond Prize for
outstanding quality, service, and logistics. LG, the Korean manufacturer of
household appliances, also honored EPCOS as an outstanding supplier, with
special mention for extraordinary on-time performance. Two of many customers
that have benefited along with EPCOS from the reorganized, high-performance
transport logistics and integrated supply chain processes.
reorganizing transport logistics is an ongoing process, of course, so EPCOS is
already planning the next phase with AEB and its solution suite. EPCOS will work with its parent company to expand the Freight Cost Management system to a logistics cost management system that
will encompass incoming freight shipments and other logistics costs as well as
all invoice processing and auditing.
The challenge of freight cost
Freight Cost Management is a challenge many companies face. The price patchwork among transport
service providers turns simple freight cost calculation into a complex task in
many companies. Rates and cost models differ from carrier to carrier. Freight
tariffs might be based on volume, weight, or distance, for example. Charges can
be negotiated per transaction or as a flat rate for a given period.
of billing might be the package, individual consignment, container, or
truckload. Other key factors affecting freight costs and thus critical to price
models include the size of the consignment, number of transfer points, freight
volume, transport distance, package size, freight network structure, and
selection of the transport chain.
provider might calculate the price of a consignment according to weight and zones,
for example, while another might apply volume weight and distance. In practice,
they often combine a whole range of parameters for even more complex price
structures. What’s more, each transporter can add on or factor in fuel
surcharges, tolls, handling, extra packaging, load devices, or hazardous goods.
There is almost no limit to the complexity.
some 150 quotes in the AEB’s Freight Cost Management, most from transport service providers in the
preferred forwarder pool. These quotes cover nearly every transport scenario at
EPCOS – whether air freight from Asia to Europe or road transport between two
sites in Germany.
Integrated global trade and logistics
countries, EPCOS has used the AEB software suite
to integrate Customs and Export Management into its Shipping
processes. This includes using the ATLAS system in Germany or e-Zoll in Austria
to automatically generate export declarations. By integrating customs process
management, EPCOS accelerates its supply chain and avoids the risk of shipping
delays caused by incomplete or inaccurate customs declarations.
solution also ensures that EPCOS logistics are always in compliance with all
export restrictions and anti-terrorism regulations. The Transport & Freight Management system from AEB features a module from
AEB’s Trade Compliance Management that provides automatic background Compliance Screening and a data service with daily updates for export control
regulations under German, European, and US law.
Success through collaboration
of the magnitude of reorganizing global transport processes and implementing a Transport & Freight Management system at all worldwide sites can succeed
only if the collaboration of the participating parties is organized
professionally and the parties can rely on one another. To date, some 25 AEB
employees have been involved with the project. At EPCOS, the number of employees
impacted by the implementation of the software – including the current
end-users – has reached nearly 300.
partners – EPCOS and AEB – were able to draw upon their many years of project
management experience. AEB has its own project management guide and standards
that establish the principles for successful projects and define elements such
as project roles, tasks, objectives, coordination, and communication.
partners had already worked together with success on smaller projects for many
years, so the relationship was characterized by close cooperation and mutual
trust. EPCOS also built up a high level of in-house expertise with AEB’s software portfolio to the extent that two of its employees have
become true experts in the use of the AEB solution.
EPCOS-internal experts also organized the Transport & Freight Management system implementation at many smaller
sites, supported by AEB employees on remote standby. For the initial
installations and at the larger sites, AEB colleagues were personally present,
sometimes weeks at a time, to help set up processes and implement the solution.
accumulation of in-house expertise also proved useful to EPCOS for training and
support. The training sessions for the EPCOS workforce followed the “train the
trainer” principle. The experts trained key users and super users at each site,
who then trained the remaining users. The key users and super users work with
the experts today to provide first-level support, with AEB stepping in only for