Logistics Asia Pacific

Last year, OneSteel Distribution, in conjunction with Dematic, finalised the rollout of a new Australia-wide wireless data communications network, completing a key milestone in the implementation of its “OneSAP” ERP business solution.

Key benefits of the project for OneSteel Distribution include:

Reduction in error rate for receipting, putaway, picking and loading
Reduced costs associated with processing errors
Better data integrity and confidence in stock visibility
Less stockouts, higher order fill rate
Increased sales and service levels

OneSteel Steel & Tube’s National Operations Manager, Ken Davis, said: “We have effectively halved our error rate, increased our first-time order fill rate by 3% and achieved a productivity increase of around 15% on average across all of the sites.”

The various OneSteel Distribution businesses distribute a total of around 40,000 SKUs. Most of the businesses also offer different levels of value adding services, such as processing operations like plasma profiling, routing, grooving, machining, cutting, drilling, cleaning and packaging goods to suit customer needs.

A wide range of project management, technical and engineering support services are also available through most businesses, with the provision of these services adding further complexity to managing the order fulfilment process within OneSteel’s supply chain.

OneSteel’s IT Supply Chain Challenge

OneSteel was formed in 2000 by bringing together the operations of a group of businesses that had previously existed under the umbrella of BHP Steel – Long Products.

Because of the way the group of businesses that were to become OneSteel Distribution had evolved through acquisitions and mergers, they had brought with them a diverse and disparate mix of IT platforms. Such legacy operating systems meant a great opportunity in reducing cost and complexity and opening the door to implementing modern advanced ERP solutions.

To bring the various business units under a common IT platform required OneSteel Distribution to create a totally new IT systems hierarchy from ERP level down to interfacing hundreds of wireless mobile data computers, scanners and barcode printers at 26 key locations throughout Australia.

The project took over five years to implement (from analysis to rollout) and is believed to be one of the single largest rollouts of wireless data communications systems in Australia.

The Birth of OneSAP

“SAP was the best fit for us as a business and gaining the most from the implementation of the new ERP system required us to adopt real-time logistics practices in key distribution locations,” said Mr Davis.

With the high value nature of products handled by most OneSteel Distribution business units, order fulfilment errors represented a significant cost to the business. Also, because a significant proportion of OneSteel Distribution’s business is generated through ‘cash sales’, stock accuracy and availability is also a key driver.

“If we do not have the product a customer requires at the time, chances are they will order it from another supplier,” said Mr Davis.

“Implementation of our new system has given us the tools with which to drive errors down and increase sales through better inventory visibility,” he said.

Real-Time Logistics Solution Drivers

“The nature of our industry and business presents its own, unique supply chain challenges,” said Mr Davis.

“Firstly, we have a lot of products. Some are raw materials, others we manufacture, others we add value to and those we resell: basically large quantities of steel products in just about every shape and size imaginable.
“While the product range is diverse, there are a lot of similarities between many of our products.

It is very difficult to visually discern the difference between alike products, such as one length of steel tube or another. Because of this, accurate product identification was a fundamental driver in the design of our new order processing methodologies.

“Another fundamental driver prior to switching over to SAP and the wireless data communications system was to make sure we were starting from a clean slate in terms of data integrity. Each location was required to complete a stocktake and relabel every single product storage location with a new barcode to facilitate paperless order picking with the new RF system.”

Real-Time Enabling OneSAP

“When it came time to choosing which technology solution to real-time enable various modules in SAP, we had some imperatives. The technology had to be a seamless fit with SAP and the supplier needed to be experienced in industrial applications,” explained Mr Davis.

Providing seamless wireless network coverage across very large areas in high interference environments like steel warehouses requires specialised knowledge and experience.

“We chose Dematic to be the wireless network systems supplier and integrator. Dematic’s solution for OneSteel Distribution was based on the use of a CISCO IT backbone, with Teklogix network controller and access points, a combination of Teklogix and Symbol mobile computers, and scanners and label printers.

Teklogix wireless computers provide proven performance and durability in industrial applications, and had an existing interface to SAP,” added Mr Davis.

“We saw Dematic as the most experienced integrator of wireless systems in industrial environments in Australia. Their culture fitted ours, their approach to supplying the technology that was the best fit for our application, and the reassurance of 24/7 Australia-wide service and support were key factors in our choice of Dematic for the project,” he said.

Real-Time Logistics Applications

OneSteel Distribution identified a number of key processes associated with order fulfilment that would benefit from real-time logistics solutions. These include:

Reducing picking and loading errors
Improving visibility from real-time transactions
Increasing efficiencies through reduction of paper
Customising labeling and documentation for customers

“Real-time enabling order fulfilment activities also provides greater warehouse management and control enabling us to better manage workload balancing and traceability of actions,” said Mr Davis.

“Obviously with a distribution network the size of ours, we did not contemplate real-time enabling every single facility. That would be impossible to cost-justify.
“However, we identified 26 key locations that between them were responsible for 80% of order transactions.

“Our initial forecast was that over the 26 locations we would have around 200 real-time mobile data entry terminals. By the time we completed the project, we real-time enabled 26 sites and have brought more than 240 mobile terminals on line, together with 200 RF-driven printers.”

Implementing OneSAP One Step at a Time

The key to the successful implementation of our new systems was our staged rollout, said Mr Davis

“Unfortunately, this was not going be simply a case of getting it right in one or two locations and rolling the same solution out to the others. Rarely is one of our sites similar to another, not only in their physical characteristics, but also the way they service their customers and markets. As a result, we often needed to tailor the implementation program to suit.

“Many of our sites also cover significant areas, up to 6 hectares, with bigger warehouses at around 2 hectares (20000 sqm).”

Products for an order may be located hundreds of metres away from each other. This created a particular challenge in terms of assembling and consolidating the individual components of an order.

“Because of this we needed to come up with a way of turning some of our order pickers into totally mobile units with their own remote barcode label printing capabilities so they didn’t have to waste time returning to the office for labels and documentation,” said Mr Davis.

“The solution was to real-time enable a number of small and lightweight personal printers, which the pickers carried in a shoulder harness.”
An integral part of the implementation process was training at each site with all employees who were affected by the switch receiving up to 50 hours of workplace training.

Around 400 storespeople, 250 processing people and some 100 despatch people were trained in the use of SAP and around 250 people use mobile computing and scanners in their daily work.

Improved Customer Service and Market Offer

Steel products distribution is a very competitive market. OneSteel Distribution’s customer service and market offer has improved significantly since implementation of the new IT systems.

“Implementation of our new IT systems has had a significant effect on the

efficiency of order processing operations. The systems give us the capability to manage the data relating to the orders, as well as the orders themselves, in a more efficient and cost-effective manner. We have reduced errors, increased order fill rates, and improved customer service across a number of areas,” said Mr Davis.

Mr Davis summarises the key benefits of the project to the business and OneSteel Distribution’s customers:

Greater first-time order fulfilment accuracy: we realise the importance of getting customer order correct. If we make a mistake and deliver the wrong goods to a project where they are needed at the time, it can cause delays for customers.
Higher order fill rate: because we now have a better handle on what we have and where we have it, we are achieving a high order fill rate and fewer backorders due to stockouts.
Faster order turnaround: urgent orders can now be received electronically and be picked and packed ready for collection at despatch in most if our facilities in under 30 minutes.
Better order documentation: invoicing is now generated just prior to despatch when all of the items in an order have been picked. If we are unable to supply a particular item, the system automatically generates a backorder for the customer, but because the invoice is generated post-picking, it is an accurate manifest of what has been picked.
Electronic data transfer: account customers can now order electronically from us and receive electronic order confirmations and invoice data.

For more information, please contact Nathan Taylor
nathan.taylor@dematic.com
Ph. 61 (0) 409 600 046