Quick Facts. Executive Summary. Background. Company. Industry. Liaison Solution

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1 CASE STUDY Metso Automation Executive Summary Case company Metso Automation provides process automation and flow control solutions to maximize the profitability of their customers businesses by improving their production performance as well as their cost, material and energy efficiency. In 2013, Metso s automation business had more than 4,200 employees and a turnover of over 850 million euros. Challenge Multiple changes were required to improve the company s supplier network management in connection with a global ERP project. These included cost and operational efficiency improvements, facilitating information sharing with suppliers and gaining better visibility into the company s off-site assets. Solution Liaison implemented a complete supplier integration solution utilizing either EDI connections or Liaison s web-based supplier portal, SupplierWeb, depending on the type of the supplier and the supply volumes. All suppliers are fully integrated on Metso s end and the supply process is highly automated. The solution includes automated order delivery processing with exception management, which is complemented with Vendor Managed Inventory (VMI) and Tooling Asset Management (TAM) modules included in the SupplierWeb. Results The solution has allowed Metso Automation to reduce the amount of resources required for its purchasing operations and improve operational quality and efficiency. In addition, visibility into Metso s off-site assets has improved significantly, enabling better asset management and accountability. Supplier integrations are simpler for Metso than before with one interface into the company s ERP system that utilizes the ERP s standard XML messaging. Finally, the communication between Metso and its suppliers has improved with the introduction of Liaison s solution. Background As part of Metso Corporation, Metso Automation helps its customers in the global process industries to meet their challenges related to profitability, environmental concerns and safety. Their extensive range of flow control and process automation solutions and services is supported by a worldwide network of automation experts. The automation business biggest customer industries are oil & gas and pulp & paper. The unit also has a strong growth focus in mining & construction and power generation. In 2013 Metso s automation business operations employed more than 4,200 people, and the unit s turnover amounted to over 850 million euros. Quick Facts Company Metso Automation Helsinki, Finland Industry Machinery & Equipment Liaison Solution SupplierWeb Managing a diverse network of global suppliers is a complicated task that requires focusing your efforts on the right things. Liaison s solution provides us the functionalities and tools that help us in maintaining our focus on the most important tasks while using automated processes for handling the less important ones. This has enabled us to significantly increase the efficiency of our purchasing operations. Manager Metso Automation IT Services

2 Challenge In conjunction with a global ERP project, Metso Automation wanted to improve several aspects of its supplier network management. In addition to reducing costs and achieving higher operational efficiency through supplier integration, Metso also wanted to provide its suppliers global support and an easy way to access the CAD drawings of different Metso-specific components manufactured by the suppliers. Another goal was to gain better visibility into the condition and current value of special tooling equipment used by the suppliers, but owned by Metso. These requirements were not achievable with the existing systems and operational models, so the company needed to both improve the way its purchasing function was operating and find suitable tools and systems that would support this. To enable implementation of the new operational model from the technical standpoint, and to reach the goals that were set, Metso looked for viable solution alternatives from several vendors. In order to achieve major cost-reductions and increases in the operational efficiency, a decision was made to outsource all supplier integrations alongside the introduction of the new ERP system. Metso had some existing EDI connections that were already outsourced, but integrating the rest of the suppliers through EDI was not realistic because Metso did not have high enough order volumes with most of its suppliers, which meant that the connections would have been relatively expensive to create. Metso had an existing supplier portal in use, but it was operated on an in-house platform that the company wanted to decommission. A new, outsourced supplier portal was deemed as the best integration alternative for most suppliers. However, in order to guarantee the same level of service for the existing EDI integrated suppliers, those connections needed to be preserved. As a result, it was agreed that a combined supplier integration solution with both EDI and supplier portal connections would be best suited for Metso s situation. In selecting a vendor to provide the desired solution various alternatives were evaluated. A supplier portal module for the new ERP was available, but it had the wrong focus and did not fulfill Metso s needs. Another integration service provider in turn communicated a promising offering but failed to deliver a credible enough proposal. After assessing the alternatives, Liaison s solution was considered to be the best choice. Solution The solution for Metso Automation consists of tools for enabling and supporting the company s internal framework for purchasing operations and the related processes. In order to focus the purchasing function s efforts on the most relevant areas, Metso decided to divide the purchased goods into three categories that were labeled A, B and C. Category A goods are characterized by high importance and value, typically being special products with low buying volumes. Caterory B goods are often specially assembled products with high importance, relatively high value and high volumes. Goods in category C in turn are standard products with low value and high or very high order quantities. The goal is to ease and automate wherever possible the buying of goods in B and C categories, while enabling buyers to focus most of their efforts on the goods in category A. An overview of the categories and their differences is presented in Figure 1. The differences between the categories meant that they would benefit from different approaches in terms of the technical solutions for handling buying in each of them. This was achieved by building the solution around Liaison s SupplierWeb, which is adapted to fit Metso s needs and complemented with EDI integrations via the Liaison Cloud Integration Platform. The EDI connections are used for integrating the suppliers of category C goods, whereas the suppliers of goods in categories A and B are integrated through SupplierWeb. This combination provides the functionalities that are needed for efficiently category value volume product type buyer focus integration method A high low special high supplierweb B high high specially assembled low supplierweb (+VMI) C low high standard low EDI (/supplierweb) Figure 1. Categorization of goods purchased by Metso Automation.

3 managing Metso s global supplier network. The functionalities include 1) automated order delivery process and exception management 2) Vendor Managed Inventory (VMI) and 3) Tooling Asset Management. Through the solution Metso also provides its suppliers an easy access to the CAD drawings of Metso-specific components that are manufactured by the suppliers. The suppliers can access the drawings through a link in SupplierWeb that directs them to Metso s extranet where the drawings are located. Vendor Managed Inventory (VMI). The VMI functionality is included in SupplierWeb for Metso s suppliers who supply goods that belong to category B. Availability of these goods is a major factor in keeping Metso s production running on time and without problems, so special emphasis is placed on this. The suppliers of category B goods with VMI agreements take responsibility for maintaining Metso s stock between defined minimum and maximum levels. VMI eliminates the need for purchase orders and provides the suppliers with demand visibility. Suppliers are thus able to optimize material replenishment and plan their own operations accordingly. To enable VMI, Metso s production plan and inventory reports are provided to the suppliers from the ERP system. Figure 2. Metso Automation s SupplierWeb login screen and a purchase order Automated order delivery processing and exception management. From Metso s point of view full integration has been achieved in the order delivery process with all its suppliers. Orders, change orders, deliveries, delivery confirmations and reconfirmations are integrated with Metso s Lawson M3 ERP system, and the entire process is highly automated. Orders without exceptions are managed without manual work, so Metso s buyers will only need to react to process exceptions that are generated based on defined business rules. These exceptions include situations where an order is not confirmed in time, the order confirmation has an anomaly compared to the order, a delivery is delayed, or where a delivery is divided into multiple shipments. If an exception occurs, an notification is sent to both the buyer and the supplier enabling quick reaction. Since an automated process is easy for the process controllers to manage, it encourages them to keep the required master data updated to avoid exceptions in the process, which increases the overall process efficiency. Figure 3. Screenshots from the VMI solution Tooling Asset Management. Metso owns a significant amount of special tooling equipment that is used by its suppliers to manufacture Metso-specific components. Previously Metso didn t have the means to get updated information on the condition and value of the equipment, so managing these assets effectively was simply not realistic. The Tooling Asset Management module solves the problem by embedding this information in SupplierWeb, making it easily accessible for both Metso and the suppliers. Suppliers manage the equipment location and condition through the module, enabling Metso to have up-to-date information on its tooling equipment globally. This asset information is used for maintaining the audit trail, and is especially useful if Metso chooses to change suppliers.

4 Finance The solution has resulted in increased efficiency in the use of resources, which means that fewer resources are required for purchasing operations. Together with Metso s internal developments, the solution has thus enabled lowering the operational costs of purchasing. With suppliers taking charge of inventory management for category B goods, less capital is tied to the inventory of these items. The tooling asset management functionality in turn has provided significantly better visibility into the current state and value of Metso s off-site assets, making their accountability much more accurate. Figure 4. Screenshots from the Tooling Asset Management module Solution from business and technical perspectives. Even though suppliers can be connected to Metso s ERP system either through an EDI connection or through SupplierWeb, all messaging from Metso to its suppliers and back goes through one interface into Liaison s cloud as described in figures 3 and 4. An exception to this is the RFID data that is used for relaying information on the consumption of certain components by Metso. Currently the RFID solution is used only in Metso s Finnish operations but the plan is to expand the use to the other business units as well. The RFID solution for Metso is provided by a company called Vilant, and Liaison s cloud is used to pass the information through to Metso s suppliers. Results The results from implementing Liaison s solution for managing Metso s global supplier network can be assessed in the ways it has affected business processes, finance, IT and the suppliers. Business process By implementing Liaison s solution Metso has been able to improve cost-efficiency and quality of its order supply process, and to streamline its inventory and asset management. The solution provides complete supplier integration with Metso s ERP system, and minimal manual intervention is required for order management on Metso s side. The buyers are able to focus on exceptions and supplier management, there are less exceptions impacting Metso s production and less work is required for inventory management. VMI adoption has also lowered the amount of working capital in category B items. In addition, the tooling asset management functionality has significantly improved Metso s ability to manage its off-site assets. IT. The ramifications for Metso s IT function from implementing the solution are twofold. On the one hand, responsibilities of IT have increased since automation has meant that the processes previously belonging to the business operations now belong to the IT. In spite of this, the impact on IT was less than anticipated. On the other hand, the solution has also made things simpler for the IT as Metso no longer has to operate its own integration platform, and there is only one interface for all supplier integrations into Metso s ERP system capable of utilizing the ERP s standard XML messages. There is also no need for any supplier-specific management. The key to success from the Metso IT department s point of view in implementing the solution has been thorough testing before taking it live. Suppliers. Overall, communication between Metso and its suppliers has increased with the implementation of the solution, and each supplier has a way to do business with Metso that is appropriate for their situation. Suppliers with EDI capability and large volumes are able to use their existing EDI legacy systems to automate their order management. At the same time suppliers without EDI capability benefit from an easy, free-ofcharge, web-based order delivery process through SupplierWeb, even though using the portal does require manual work on the supplier s side. Further benefits are gained from SupplierWeb by the suppliers with VMI agreements, who have easy access to Metso s real-time inventory levels and consumption forecasts through the VMI functionality. In addition, the tooling asset management functionality improves communication by providing mutual, up-to-date understanding on Metso s tooling assets that are in the possession of their suppliers.

5 Figure 5. Description of the solution from a business perspective. Figure 6. Description of the solution from a technical perspective.

6 Conclusion The key takeaway from this case is that managing a global supplier network where multiple different types of suppliers are involved is not simply a technical challenge, nor is it a pure business challenge. Success depends on finding the right model of operating, which then needs to be supported by well-defined processes and the right technical solutions. Metso Automation did extensive work internally to develop their purchasing operations and found the right partner to execute the required supplier integrations and solution functionalities. Together with Liaison, Metso Automation achieved major improvements in its supplier network management and reached the goals that it set. Atlanta US HQ 3157 Royal Drive Building 200, Suite 200 Alpharetta, GA Tel Fax United Kingdom +44 (0) Finland +358 (0) The Netherlands +31 (0) Sweden Liaison Technologies All rights reserved. Liaison is a trademark of Liaison Technologies.

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