COLOGNE BUSINESS SCHOOL (CBS)

Case Study: EvoBus GmbH

How a coach bus company benefits from

the SAP EWM application and its

implementation challenges

Term paper for Enterprise Resource Planning & SAP

Summer Semester 2014/2015

Lecturer: XXX

Anton Wischnewski

BA12 in International Business / International Trade

Student-No. XXX

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Table of contents

1. Introduction .................................................................................................. 2 2. Company’s Background .............................................................................. 3 3. Problem Analysis ......................................................................................... 4 4. Reasons for SAP Implementation and Its Exceptional Feature ............... 4 5. The SAP EWM Warehouse Process Integration ........................................ 6

5.1. Goods Receipt .......................................................................................... 7 5.2. Goods Issue ............................................................................................. 8

6. Benefits for Business Processes Through SAP EWM ............................. 9 6.1. SAP EWM Full Integration ........................................................................ 9 6.2. Wireless Network ...................................................................................... 9 6.3. Integration of Mobile Devices ................................................................... 9 6.4. Further Benefits ........................................................................................ 9

7. Critical Analysis ......................................................................................... 12 7.1. Competition in the ERP Market .............................................................. 12 7.2. EvoBus’ Risk as the First User of SAP EWM Application ...................... 14 7.3. Cooperation between SAP, the EvoBus’ IT-Department and Users ...... 14 7.4. Disadvantages of SAP ERP Systems .................................................... 15

8. Conclusion .................................................................................................. 18 9. Reference List ............................................................................................ 19

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1. Introduction

As there is an increase in complexity of business processes because of

Globalisation and a change in business structure new advanced technologies are

providing companies with more possibilities to deal with the emerging challenges.

The companies nowadays need to be able to coordinate and collaborate across

all business processes including planning, procurement, transportation,

warehousing, and fulfilment in real time in order to save time, resources and

costs.

An Enterprise Resource Planning (ERP) system offers a possible solution. ERP

systems facilitate the flow of information between all business functions inside

the organization resulting in time reduction of business processes and, thus, in

profit increase.

The SAP Group is a multinational corporation and is the German leader vendor

in enterprise system SAP ERP. It belongs to one of the largest software

companies in the world with a revenue of €16.81 billion.

EvoBus GmbH is one of 253,500 SAP’s customers. In order to run the spare

parts logistics operations as efficient as possible EvoBus GmbH management

has decided to implement the SAP Extended Warehouse Management (SAP

EWM) application.

On the example of the bus and coach constructor EvoBus GmbH I would like to

analyse if the Evobus' management has made the right decision by choosing

SAP EWM for its business processes figuring out what benefits the SAP ERP-

EWM has to offer and what problems and challenges might occur throughout the

implementation process. This term paper is going to answer the question: How

does EvoBus GmbH benefit from the SAP EWM implementation and which

problems and challenges is the SAP ERP hiding?

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2. Company’s Background

EvoBus GmbH has been created as a result of a merger between Setra and

Mercedes-Benz in 1995 operating in the automotive, vehicle construction

industry (SAP, 2010; EvoBus GmbH, 2014).

EvoBus GmbH is a 100% subsidiary of the Daimler Group corporation, which

also owns Mercedes-Benz. Mercedes-Benz is pioneer in the bus and coach

business having more than 100 years of experience in the bus and coach

industry with its headquarter in Stuttgart, Germany (SAP, 2010). The company’s

subsidiaries locations are distributed amongst Europe such as Germany, France,

Spain, Czech Republic, etc. (EvoBus GmbH, 2014). Throughout the SAP

analysis we are focusing on the warehouse location Neu-Ulm in Germany.

EvoBus offers products such as buses and coaches, and bus-specific services.

SAP EWM implementation partner is SAP Consulting. (SAP, 2010)

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3. Problem Analysis

Since the merger of Setra and Mercedes-Benz to EvoBus GmbH in 1995 the new

company started to face new challenges:

1. The warehouse management system was out-dated

2. By the year 2004 it becomes clear that the spare parts business started to

grow by 10% every year causing serious capacity problems

So there emerged the question how to deal with the warehousing challenges and

how to proceed with business operations in the future. Trying to solve the

problem in 2004, the EvoBus management, finally, came to the decision to invest

€47 million to build a new spare parts logistic centre in Neu-Ulm, Germany.

Through the project an area of 320,000 square feet with a capacity to store

about 100,000 original spare parts has been built.

4. Reasons for SAP Implementation and Its Exceptional Feature

In order to run the spare parts logistics operations in the new warehouse centre

as efficiently as possible, EvoBus was in need of a powerful warehouse

management system. At that time, the structure was based on the central spare

parts warehouse and five external warehouses. As the warehouses had already

a SAP software system established, the goal was to integrate a new central

warehouse system into the existing SAP system to ensure stability, high

availability, and ease of maintenance. The new SAP system should:

§ Optimise capacity

§ Close all external warehouses

§ Efficient and optimal processing of operations in the spare parts business

§ Extending order deadlines

§ Increasing delivery frequency

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The decision was made in favour of the SAP Extended Warehouse

Management (SAP EWM). The application was designed for highly complex

warehouses as the EvoBus' new warehouse centre. It should enable the

company to reduce investments in service spare parts while ensuring to have

the right parts in the right place at the right time.

Interestingly for the decision is that the SAP EWM application was never tried out

before, meaning EvoBus GmbH would be the first customer using the SAP EWM

application for the first time in practise.

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5. The SAP EWM Warehouse Process Integration

The decision to implement SAP Extended Warehouse Management (SAP EWM)

application was made based on evaluation of factors from which the company

would benefit in the future. In this part, I would like to explain the integration

process of SAP EWM.

The warehouse size and spare parts quantities of EvoBus’ demonstrate a very

complex operational process and tasks, which must be managed with a special

accuracy and a proper planning if the project SAP EWM implementation should

succeed and remain sustainable. In order to understand the processes effected

by the SAP EWM application it is necessary to have an understanding of

business processes and functions being run at the EvoBus’ warehouse centre

which are explained as followed:

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Figure 1

Source: SAP Help Portal, n.d., Storage Type. Retrieved n.d. from

http://help.sap.com/saphelp_ewm70/helpdata/en/97/d94541c47a6e24e10000000a155106/frames

et.htm

5.1. Goods Receipt

Incoming goods are transported to one of three different goods receipt areas:

• High Rack Storage Area

• Block Storage Area

• Fixed Bin Storage Area

According to their size or material number inspected the incoming goods are

distributed amongst the different areas. A conveyor belt moves the spare parts

automatically to the according storage area.

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The remaining goods are transported by shuttle from the transfer bins to the

correct put-away bins (SAP, 2010).

5.2. Goods Issue

The multi-step goods issue process takes place via process-oriented routing:

from picking, packing, and staging through loading. Workload is shared across

the various packing stations. There is a variety of loading scenarios:

1. Staging and loading individual handling units (HUs)

Handling Unit (HU) is a physical unit consisting of packaging materials and

the goods contained in it.

2. Loading all HUs on a single dispatch staging area in a single step

3. Direct loading onto the swap body

Those loading scenarios help ensure that the goods issue processes run

smoothly (SAP, 2010).

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6. Benefits for Business Processes Through SAP EWM

6.1. SAP EWM Full Integration

SAP EWM enables full integration with the already established SAP ERP used in

the warehouse centre operations (see: Figure 2).

SAP EWM application offers complete integration of warehouse management

and control with the inventory management and delivery processes. It enables a

smoothly use of other, not-SAP application for goods movements, which can be

organised, controlled, and monitored by the SAP warehousing solution.

6.2. Wireless Network

Wireless network that supports all manual logistics processes as for example

scanned Data that can be transmitted quickly via wireless network, warehouse

orders that are transmitted directly to the picking device.

6.3. Integration of Mobile Devices

The SAP EWM system enables company’s employees a web-based and user-

friendly integration of mobile devices. For example, the employees in the storage

area can use mobile or stationary terminals on the stacker cranes to manage all

processes, so that the warehouse process paperwork becomes unnecessary

(SAP, 2010).

6.4. Further Benefits

SAP EWM handles all of these comprehensive processes helping to ensure that:

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§ The end-to-end infrastructure controls the small-parts storage area

§ The location network connection, and the server services are fully

integrated

§ Greater flexibility and efficiency

§ Maximum security

Figure 2 illustrates how the SAP EWM application is integrated into the already

established SAP ERP System.

Figure 2

Source: SAP, n.d., Warehouse Integration Completion. Retrieved n.d. from

http://help.sap.com/SCENARIOS_BUS2012/helpdata/EN/fe/4d7267e8d84ed9924b24ef56234d3e

/content.htm

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As explained by Horst Pöschl, head of the parts center for EvoBus

IT management: “All of it gives a transparent processes and optimum data

quality” (SAP, 2003).

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7. Critical Analysis

7.1. Competition in the ERP Market

According to the infamous Forbes magazine (2013) and Panorama Consulting

Solution (2012) SAP posses a market share between 22-25%, which makes SAP

the market share leader in the ERP market. But there are many alternative ERP

systems in the market as for example Oracle, Microsoft Dynamics amongst the

market leaders. The question emerges if EvoBus made the right decision to

select SAP EWM as the best ERP solution.

The consulting company Panorama Consulting Solutions has compared the

three biggest ERP systems vendors as SAP, Oracle, Microsoft Dynamics and

discovered the shortcomings of the three ERP systems.

Contra: It must be considered that EvoBus GmbH is a subsidiary of the Daimler

Group (SAP, 2010, p.2). The whole Daimler corporation make use of SAP

system, thus, it was a reasonable step of EvoBus' management in the decision

making process to choose SAP EWM as a solution, which makes the integration

and interactive operations with SAP ERP much more easier in total.

As stated by SAP (2002), DaimlerChrysler is one of SAP's largest international

customers. "SAP is one of our strategic partners in this evolution, supporting our

wide range of business processes on a global scale.” explained Sue Unger, the

senior vice president of DaimlerChrysler AG (SAP, 2002).

EvoBus’ management focused on key factors when choosing SAP EWM making

decisions based on experience from the Daimler Group and made a reasonable

strategic evaluation.

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1. Implementation Duration

Panorama Consulting Solutions has conducted a survey about implementation

duration of the ERP systems amongst different companies. Its findings have

shown that 61% of project implementation are finished over-schedule (Panorama

Consulting Solutions, 2012, p.11). The reasons revealed have been

organisational issues, extension of initial project scope, data issues and resource

constraints, to name a few examples (Panorama Consulting Solutions, 2012,

p.12).

Contra: 61% of over-scheduled project implementation refers to all the ERP

systems providers. That does not differentiate between SAP, Microsoft Dynamics

and Oracle ERP systems. The argument tells us about the tendency of any ERP

systems implementation to be delayed.

2. Payback Period

Payback is defined as a period of time when the organisation recoups its initial

investment on the project. Panorama research reveals that the average payback

period is 2.4 years. Interestingly, the majority of SAP implementations took

longer than three years to provide 36% payback and amongst its competitors as

Oracle and Microsoft Dynamics the highest payback rate of 9% that took less

than a year (Panorama Consulting Solutions, 2012, pp.13-14).

Contra: The implementation phase in EvoBus’ case ran from July 2006 through

April 2007 and was followed by four months of intensive integration testing. SAP

EWM went live for the first time on September 17, 2007 (SAP, 2010).

Those statistics highlight the success of the implementation of EvoBus' SAP

project. It shows that it took EvoBus approximately 1.5 years less than the

companies’ average of 2.4 years to implement the SAP EWM application. It

would be interesting to know the payback percentage of its initial investments.

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7.2. EvoBus’ Risk as the First User of SAP EWM Application

EvoBus GmbH has been the first customer trying to implement SAP EWM

application. The fact of being the first user of SAP EWM application is indicating

a huge financial and operational risk as the software was never tried out before.

Contra: Daimler Group is a large financially stable corporation with a turnover of

€118 billion (Daimler, 2014), which can allow itself to make such big investments

and being slightly risky.

“SAP has been Daimler’s software partner since 1984 and became Daimler’s top

strategic software partner by entering a software development partnership in

2002.” (SAP, 2008). The Daimler Group has a long-term experience and

expertise with SAP Group and its applications. Besides, the continuation of SAP

integration helps to establish compatibility throughout the Daimler corporate

network (SAP, 2002).

7.3. Cooperation between SAP, the EvoBus’ IT-Department and Users

In such a large corporation as EvoBus the engagement of all participants is a key

feature of a successful SAP EWM implementation in order to run all business

processes smoothly. Proper communication and training is vital to manage the

change and familiarise the 3.699 employees (Daimler, 2014) working at EvoBus

with the new SAP EWM application.

Dr. C.V. Brown and Dr. I. Vessey both, professors of information systems, have

indicated through their extensive research key success factors for a successful

ERP implementations.

§ Top management is engaged in the project, not just involved

§ Project leaders are veterans, and team members are decision makers

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§ Third parties fill gaps in expertise and transfer their knowledge

§ Change management goes hand-in-hand with project management

§ A satisficing mindset prevails

To summarise, both professors came to the conclusion that a well-organised

management structure, an accurate management selection and co-operative

communication between all shareholders involved leads to a successful ERP

implementation (Brown and Vessey, 2003, pp.66-68).

Contra:

Coming back to SAP’s statement […] the entire project – from specification,

development, and customizing through integration tests – was processed in

cooperation with highly competent experts from SAP. The project team received

maximum attention from company management and was able to rely on first-

class support from Daimler and SAP (SAP, 2010).

[…] [T]here was outstanding cooperation between the SAP experts, the

IT department, and the users, characterized by an atmosphere of openness and

fairness (SAP, 2010).

All those involved in coordinating activities […] from middle management through

forepersons and individual employees – acted with the utmost commitment and

professionalism and contributed to a unique and all-embracing sense of team

spirit.

Based on the SAP’s statement it can be concluded that the SAP EWM project

was properly planned by the EvoBus’ management, which supported the project

with clear, detailed communication.

7.4. Disadvantages of SAP ERP Systems

Mr D. Weisinger, from the IT company Formtek, has indicated the problems with

ERP systems in his article ‘Enterprise Software: Top 10 ERP System Problems’

problems occurring. He has summarised the survey conducted by the ERP

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software vendor Intact Software and created a list of 10 most common problems

with ERP Systems (Weisinger, 2011). Based on the article’s critical evaluation I

analysed the arguments and proved them by scientific sources.

1. ERP Maintaining Costs

22% of ERP users complain about maintenance costs.

As Mr Wallace and Mr Kremzar would certainly agree to the statistic as they

themselves explain:

ERP implementation requires people to be educated and trained (Wallance and

Kremzar, 2001, p.36). Preferably, as also stated by Prof. Brown and Vessey

(2003, p.67), the training should happen throughout the implementation process

because, finally, the employees will operate the ERP system and should be

involved in the process as early as possible.

It takes time and effort in order to change employees from their daily work habits

to a completely new way of operations (Wallance and Kremzar, 2001, pp.24-36).

Another disadvantage of the SAP EWM application is the necessity of SAP

consultants' support, which contributes to the maintaining costs. […] the

entire project – from specification, development, and customizing through

integration tests – was processed in cooperation with highly competent experts

from SAP. The project team received maximum attention from company

management and was able to rely on first-class support from Daimler and SAP

(SAP, 2010).

2. ERP Upgrade Costs

30% of ERP users indicate the problem that an ERP system is too costly to

upgrade.

As written by Mrs Sumner in 2005 “Limited customization makes it simpler to

upgrade the ERP software as new versions and add-ons emerge over time.”

(Sumner, M., 2005, p.3). It becomes obvious that the less customised and

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standardised the ERP application the less problems occur when upgrading it. On

the other hand this explains the high costs occurrence when upgrading the SAP

system.

3. ERP Systems are Expensive to Change

20% of the ERP users replied have indicated that it is expensive to change the

ERP system, which is already established. That is why one of the major reasons

for a company to stick to one ERP system is the already established ERP

system. Also in case of EvoBus it becomes obvious as the Daimler group have

already a SAP ERP system established. In order maintain the compatibility and

save costs the management has decided to proceed with further SAP integration

(SAP, 2010).

4. Change of Business Processes for SAP Adjustment

12% of ERP users are indicating the problem that business processes have to

change in order to fit to the software. SAP EWM application was an extension of

already established SAP ERP system in the EvoBus’ warehouse center. That

means that all the processes were already adjusted to the SAP ERP process and

SAP EWM enabled to add more functions to SAP system. Finally, the EvoBus'

management made the right decision and avoided to change the business

processes.

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8. Conclusion

In course of the research it becomes clear that EvoBus GmbH truly benefits from

the implementation of SAP project. Amongst the competition SAP ERP systems

turned out to be the best in regards of implementation duration and payback

period.

The SAP EWM application enables full integration with the already established

SAP ERP used in the warehouse centre operations and control with the

inventory management and delivery processes. SAP EWM includes mobile

device integration, end-to-end infrastructure control, wireless network support for

all manual logistics processes, greater flexibility, efficiency and maximum

security. All those functions help EvoBus GmbH to improve the warehouse

centre processes.

The disadvantages of SAP implementation such as expensive upgrade and

maintenance costs are true, but on the contrary, Evobus GmbH, a subsidiary of

Daimler Group, is a financially stable company with a revenue of €118 billions, it

can allow itself such large investments of €47 millions and slight risks for

SAP implementation. Moreover, Daimler corporation as a whole has based its

enterprise system on SAP, it was a smart move to align the IT strategy to SAP

solution and allow further SAP integration.

Throughout the SAP EWM application implementation process in the Evobus'

new warehouse centre was a clear line of actions worked out by the Evobus'

management. EvoBus’ management has gathered an excellent team of experts,

professionals and consultants who have worked together to create a user-friendly

SAP system for Evobus’ employees avoiding the key problem factors in SAP

implementation process.

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9. Reference List

Brown C.V. and Vessey, I. (2003). Managing the next wave of enterprise

systems: Leveraging Lessons from ERP. MIS Quarterly Executive. 2(1), 65-77.

Daimler (2013). Company: Total Revenues. Retrieved 2014

from http://www.daimler.com/dccom/0-5-7145-1-1242702-0-0-0-0-0-0-0-0-0-0-0-

0-0-0-0.html

Daimler (2014). EvoBus GmbH: Facts and Figures. Retrieved 2014

from http://www.daimler.com/dccom/0-5-1369817-1-1341727-1-0-0-0-0-0-0-0-0-

0-0-0-0-0-0.html

EvoBus GmbH (2014). Facts and Figures. Retrieved 2014

from http://www.daimler.com/dccom/0-5-1369817-49-1341727-1-0-0-0-0-0-9506-

0-0-0-0-0-0-0-0.html

EvoBus GmbH (2014). Company. Retrieved 2014

from http://www.evobus.de/inter-evobus/0-674-399762-1-399881-1-0-0-0-0-1-0-

399762-0-0-0-0-0-0-0.html

Forbes (2013). 2013 ERP Market Share Update: SAP Solidifies Market

Leadership. Retrieved 5.12.2013

from http://www.forbes.com/sites/louiscolumbus/2013/05/12/2013-erp-market-

share-update-sap-solidifies-market-leadership/

Panorama Consulting Solutions (2012). Clash of the Titans - An independent

Comparison of SAP, Oracle and Microsoft Dynamics. Panorama Consulting

Solutions, p. 1-18. Retrieved 27.01.2013 from

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http://www.slideshare.net/msproject/sap-oracle-ms-dynamics-market-share-and-

kpis

SAP (2002). SAP Signs DaimlerChrysler AG to Global mySAP.com®

Agreement. Retrieved 05.09.2002 from http://global.sap.com/corporate-

en/news.epx?pressID=1408

SAP (2008). SAP Supports Daimler in Global IT Harmonization. Retrieved

19.05.2008 from http://global.sap.com/press.epx?pressid=9526

SAP (2010). EVOBUS Premium Bus and Coach Construction Gains First-

Class Spare Parts Logistics with SAP® EWM. Retrieved n.d.

from https://rapid.sap.com/se/expert#!/e2e/i_autom/lob-default-redirect,e2e-

i_autom-168

SAP (2011). SAP helps Service Parts Management Run Better. Retrieved

29.09.2011 from https://www.youtube.com/watch?v=qdvN4CeeOcQ

SAP (2012). SAP Named Worldwide Market Share Leader for Enterprise

Resource Planning. Retrieved 05/05/12 from http://global.sap.com/corporate-

en/news.epx?PressID=18813

SAP (2014). About SAP: Helping the world run better. Retrieved

2014 from http://global.sap.com/corporate-en/index.epx

Sumner, M. (2005). Enterprise Resource Planning. New Jersey: Prentice Hall

Wallance F. T. and Kremzar H. M. (2001). In ERP: Making it Happen. The

Implementers’ Guide to Success with Enterprise Resource Planning. New York:

John Wiley & Sons, Inc.

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Weisinger, D. (2011). Enterprise Software: Top 10 ERP System Problems.

Retrieved 21.12.2011 from http://formtek.com/blog/enterprise-software-top-10-

erp-system-problems/