Companies that enter into a contract very often refer to the term partnership. Only to sometimes experience in practice a few years later that the term scarcely applies. This cannot be said of the relationship between SKF Logistics Services and software supplier Consafe Logistics. As young companies in the early nineties, they entered into an agreement for the implementation of a warehouse management system (WMS) for SKF Logistics Services.
Today, this system is one of the success factors of the business performance of the logistics services provider at the global level. We talked with Otto Wieber, vice-president of warehousing at SKF Logistics Services, about the strategic significance of the co-operation within the organisation. Based on the operations in the European Distribution Centre in Tongeren, Joris Leys, warehouse operations manager at SKF Logistics Services, sketched how the software works in practice.
Published in "Supply Chain Solutions", June/ July 2010
Author: Tina Claes
Pictures provided by SKF Logistics Services
As a manufacturer, SKF is specialised in ball bearings, sealings and related products. Towards the end of the eighties, the company recognised that managing its own logistics would prove to be a competitive advantage within the market. in 1993, when it became easier to store goods centrally within Europe due to the Maastricht Treaty, SKF Logistics Services – the logistics division that had meanwhile been set up within the organisation – jumped at the opportunity. Numerous local warehouses were discontinued within the scope of the "New European Distribution Structure" project. Instead, the company set up a new network with a European Distribution centre in Tongeren that was to see to the distribution of spare parts to the after market. In addition, the company kept the warehouses that made up part of the production sites of Germany, Sweden, Italy and France for the purpose of supplying the OEMs (Original Equipment Manufacturers). A Daily Transport System, which calls on some forty forwarding agents, was set up in order to guarantee the service within the new network. In light of the desire to increase the level of standardisation within that new network, the company examined the possibility of switching step-by-step to a single warehouse management system. Seeing that none of the existing – often out-dated – systems sufficed, a standard WMS package was selected with the aim of moulding it to meet the personal needs of the organisation and to implement it worldwide.
BL: How did you handle the selection of the WMS?
Otto Wieber: "We were first of all mainly looking for a competent partner that could meet most of our requirements. We also wanted a system with one standard interface that we could easily link to both our order administration system as well as that of our clients (nowadays, approximately 15% of sales stems from operations with external clients). The selected party furthermore had to be willing to work very closely and to evolve with us. Based on these criteria, we opted for the Swedish Consafe Logistics, which was still called MA Systems at the time. Together, we transformed the package step by step into what it is today. And because we have come to see the software as our own, we renamed the package (which is actually Astro) WASS (Warehouse Administration Service System)."
BL: Which made-to-measure components did you have developed?
O. Wieber: "Of course, the standard functionality of the WMS by Consafe Logistics has increased substantially since the time that we joined forces with the supplier. But what is typical of our activities is, for example, that we work with box calculations and weight control procedures. And a considerable number of instruction codes are linked to each order. The operators have to take these into account (see the box)."
BL: Were you not worried that the support would no longer be guaranteed at some point due to the many made-to-measure applications?
O. Wieber: "We put a lot of energy into establishing an adequate support contract. But, yes, a co-operation of this kind did require a great deal of trust. It still does. Because we have to call upon Consafe logistics every time that we want to implement a process improvement in our WMS."
BL: Is it not difficult to lay down a partnership of this kind in a contract?
O. Wieber: "We pay licence fees for each site where the system is used and Consafe Logistics is paid based on hourly rates for any additional developments. And we naturally work with Service Level Agreements."
BL: Considering the many made-to-measure applications, was it not an option for SKF Logistics Services to develop a WMS on its own?
O. Wieber: "From the very start we made the strategic choice not to develop it ourselves. It is not our core business."
BL: Can Consafe use the functionality that it developed for your company for other companies as well?
O. Wieber: "Yes, that is a possibility. That was agreed from the outset. Consafe Logistics was to develop a WMS for us at a reasonable price and in exchange for that Consafe would also be free to offer the functionality that it developed for us on the market."
BL: In how many warehouses of SKF Logistics Services is WASS used today?
O. Wieber: "In eighteen warehouses worldwide. A few warehouses – such as those in Shanghai and Brazil – do not use the package because they are run by subcontractors."
BL: Do you find it a huge advantage that you now have a single standard WMS worldwide?
O. Wieber: "It is definitely a trump to speak the same language worldwide. For example, we completely renovated a warehouse in Singapore at the end of the nineties. When the time came to implement the WMS, we could send people from Europe to lend support. We continuously learn from one another and we can adopt each other’s best practices. And last but not least, WASS fits perfectly within the integration strategy that we at SKF emphasise."
BL: You are constantly seeking ways to improve your logistics activities. Have you also considered possibilities such as RFID in that respect?
O. Wieber: "Certainly. But the fact that something is a hype does not mean that you therefore have to run with it. As far as RFID is concerned, one should not forget that we work with steel a lot, which used to be a bromide for RFID. But the technology has meanwhile evolved and it is also considerably less expensive. And so we too, together with the Fraunhofer Institute for Material Flow and Logistics in Dortmund, have been examining the possibility of using RFID in our logistics chain. For example, we have scheduled a test with RFID in the autumn of 2010 between our production site in Schweinfurt and Tongeren. All of the outgoing pallets are to be equipped with an RFID tag in Schweinfurt, which will then be automatically scanned upon delivery in Tongeren. The next step will be at the end of November, when the outgoing packages for transport will be automatically equipped with an RFID tag so that they can be sorted out to the dispatch areas automatically."
BL: Are any other important optimisation projects currently underway?
O. Wieber: "We are presently focusing strongly on optimising our inbound logistics, in other words, factory logistics. We are of the opinion in that respect that the factories should focus on production, and not on logistics. Which is why we plan to optimise the logistics for the production warehouses as well, like we already have for distribution."