Moving to SAP’s Ariba Network for e-business has been a winner for mining industry supplier Sandvik Mining, slashing data entry and error rates and accelerating order processing. Freya Purnell reports.
With operations in more than 130 countries, Sandvik Mining is a leading global supplier of equipment and tools, service, and technical solutions for the mining industry, covering rock drilling, rock cutting, rock crushing, loading and hauling, and materials handling.
Why e-business?
According to Caroline Robinson, senior e-business manager, Sandvik Mining, who presented at SAP’s recent Cloud Connect conference, with 8000 orders, 30,000 line items and 2.56 million keystrokes performed each month, moving to an e-commerce solution in its day-to-day operations was an imperative.
“Sandvik Mining realised a number of years ago that without the implementation of solutions to automate our business, we would continue to face problems such as high data entry processing costs, data entry issues and invoice disputes. As a supplier, we don’t want disputes, we don’t want mismatches and we don’t want errors,” said Robinson. “We want to serve our customers in a proactive value-add way. We want to provide our customers with expert knowledge, and we want to deliver our customers products above and beyond their expectations, and we want excellent working relationships with our customers,” said Robinson.
Not only were these millions of keystrokes being performed within the Sandvik business by both the sales and accounts receivables teams, the same work was being duplicated within customer organisations.
At the time it began the e-business journey, Sandvik also was coming out of one of the largest mining booms Australia has ever seen. As a result, Sandvik had made a huge number of acquisitions.
“This meant getting a handle on what our operating model was going to look like in the longer term, in addition to managing the changes that a company can experience by combining the teams of different companies with different cultures,” said Robinson.
In addition, the business was quite decentralised, and the avenues through which customers could purchase were varied.
“Our customers were used to an operation where they could simply walk into one of our warehouses, place an order and collect their parts straight away. However, we knew that a decentralised, largely manual approach wasn’t sustainable with a continual demand to provide better service and products at a lower price,” said Robinson.
Sandvik was aware there were benefits to be gained by using e-commerce to provide customers with a streamlined process.
Embracing the Ariba network
Sandvik’s major customers were engaging with SAP’s cloud-based Ariba Network as part of their procure-to-pay process, so it was a logical next step for Sandvik to sign up too.
“In many ways, it was our dealings with the network, and investing in our systems and processes to meet a lot of the disciplines and practices set out by the network, that provided us with that early direction and understanding of what e-commerce meant in a commercial environment,” Robinson said.
With the company’s operations beginning to centralise and a new culture starting to gel, implementing the Ariba Network into the Sandvik Mining business also brought the most significant operating and productivity gains. In a little more than four years, revenue through the e-business channel has increased by nearly 500 per cent, with around 35 per cent of all orders coming through this sales channel.
But adopting an e-business solution does take more than simply plugging into the cloud-based network and tacking on some new processes.
“It involves bringing together multiple departments from frontline account management and sales to order intake and processing, workshops, information technology, logistics and supply chain, and finally finance. It has impacts across all parts of the business, and does require change management and coordination in order to successfully implement,” Robinson said.
The benefits of e-business
The main benefits to the business have been faster processing of orders, improved accuracy, transparent processes and tracking, reduced disputes, and being able to reassign resources to more value-added activities.
Where customers previously had manual touchpoints with Sandvik, introducing e-business provides a faster channel to process an order and quickly identify any issues such as problems with pricing or part numbers.
Sandvik operations manager Sue Ward said, “Many issues and disputes happen in relation to invoicing, and the delay of parts being delivered or the delay of any item that is included in an order, but at least when there is a clear transaction through the e-business channel, the customer knows exactly where their order is at, and at what point that they need to intervene or put more information into the actual order.”
The implementation of e-business also has prompted Sandvik to review its current customer service processes and how these can be improved.
“Our whole purpose is to look at the way in which you contact the customer and actually get it right the first time, rather than the customer having to follow us up,” Ward said.
By reducing error-prone and time-consuming manual processes, Sandvik has not only decreased the number of issues with orders, it has also been able to meet its price and part agreements with customers more readily.
“We know that our customers can manage order confirmations by exception, changed orders can be automatically updated with minimal keystrokes and invoices can be automatically paid or rejected. By retaining the integrity of the information, and giving it back to the customer in the same format, our customers get to use the information again and again, subsequently saving them to 2.5 million keystrokes per month to get it back into their system,” said Robinson.
According to Sandvik general manager of customer account application engineering and marketing, Harry Hardy, the implementation of e-business has focused the business on data integrity, and getting it right the first time.
“It’s an excellent discipline for the business to have. Most people would be very aware we’re operating in an environment … where there is very much a desire for companies to operate very efficiently and to manage cost,” Hardy said.
“It also enables us to have our high-quality, well-trained people redeployed away from data capture and into direct customer service-style activities, making sure that the business and the relationship between ourselves and our customers is working really well. That’s a fantastic opportunity for us.”
Challenges in e-business adoption
Sandvik has faced a number of challenges in its e-business implementation.
- Lack of investment. A tough market in the mining industry has meant that although “customers and suppliers may champion the benefits of e-commerce, it’s not always reflected directly into system development, enhancement and investment”, said Robinson – even in high revenue, high turnover businesses. This means that the bulk of orders are still received by traditional methods such as phone, fax and email.
- Cultural barriers. This is particularly the case in certain regions of Africa, where customers do not trust e-commerce networks, and in Asia, where price negotiation is an important part of the sales process. “This type of sales interaction does not lend particularly well to e-commerce solutions specifically for the fact that we’re obtaining productivity gains due to automatic matching of pricing,” Robinson said. “As opposed to Australian transactions whereby our customers tend to purchase on a needs-be basis, we do see in some Asian countries the bulk ordering of parts through the tendering process.”
- Managing these cultural differences requires awareness and a customer-by-customer approach to onboarding to the e-commerce solution. For example, “in Mongolia, some of our major customers have certain practices that they may perform in their commercial operations that may not align to the way that we operate the business, so that may impact what solutions we roll out and the way we roll them out,” Robinson said.
- Technology challenges. In some remote areas, the availability of internet access is variable.
- The reality of customer behaviour. Sandvik offers a web portal which enables customers to shop directly online, as the company thought this would be the preferred sales channel. However, customers primarily use the web shop to check price and availability, rather than placing orders online. “We are changing our strategy – the online web shop tool is always going to be mainly focused on pricing and availability now, but we are looking at some other technology that will support those customers that want to place orders online or that won’t be using the network,” Robinson said.
The future for e-business at Sandvik
In the future, Sandvik plans to further leverage its existing infrastructure to increase the use of e-business.
Hardy said the next project underway will allow customers to deal with the company “slightly more casually”, by capturing data in a new way.
“If we look at where e-business can go, at Sandvik we started off with quite a narrow view – it was probably e-order capture. We see that we can leverage that further into the business if we use the concept of getting that one keystroke and then really capturing the information from that keystroke from the cradle to the grave,” Hardy said.
The use of e-business also could be extended into areas such as accounts receivable with the aim of improving customer relationships on that side of the business.
Ultimately, Sandvik’s goal is to process 90 per cent of its order electronically by the end of 2015.
“In addition to the rollout of the network globally, we’re now in a position to utilise the technology by engaging in other solutions which we can build off to provide automatic processing solutions to businesses that may not have the funds to invest in or the technological prowess to develop e-commerce solutions,” Robinson said. “By aiming to remove as many keystrokes from our day-to-day as possible, Sandvik will continue to be the leader in mining services by investing in our staff and their capabilities to provide our customers with world-class service.”
This article was published in Inside SAP Winter 2014.
