SAP All-in-One - Universal Instruments Corporation
Module
AT A GLANCE
Summary Universal Instruments Corporation, a leading capital equipment manufacturer, streamlined global processes and dramatically improved its aftermarket business with help from SAP® software.
Key Challenges
Enabling business flexibility to meet challenges of globalization
Driving down process costs
Completely replacing legacy environment
Project Objectives
Consolidate systems
Make global processes consistent across all geographical locations
Ensure scalability
Solution and Services SAP for Industrial Machinery & Components set of solutions
Why SAP Solution
Integrated offering; no point solutions required
Functional completeness
Industry expertise and reputation
Implementation Highlights
1,200 users
On time and within budget
Fixed-price contract
Key Benefits
Reduced parts-delivery cycle times from weeks to less than 24 hours
Streamlined material planning processes, reducing total work hours by 95%
Reduced monthly reporting time by more than 50%
Ensured leadership position for aftermarket business
Existing Environment MAPICS and Lawson
Database IBM Informix
Hardware IBM
Operating System IBM AIX
A Leading Capital Equipment Manufacturer Uses SAP® Software to Overhaul Its Business Processes – and Uncovers Surprising New Benefits
Universal Instruments is one of the world’s leading electronics productivity specialists, providing innovative circuit, semiconductor, and back-end assembly technologies as well as equipment, integrated system solutions, and process expertise to manufacturers in every sector of the global electronics industry. Universal Instruments is a global company with approximately 1,200 employees; manufacturing facilities in Shekou, China and Binghamton, N.Y.; and offices in 21 countries. But it wasn’t always that way.
“In the 1990s, things changed for us fairly rapidly,” says Jim Jacobson, director of information technology and system software at Universal. “In a matter of two quarters, our business was in China. We became a global company.”
But there was a problem. The company didn’t have the processes to sustain its new business model. Expansion and acquisition resulted in an amalgamation of systems and processes that failed to scale in a way that could accommodate the company’s emphasis on business agility in a global market.
In the mid-1990s, Universal decided that something needed to change. “That’s when we took a look at SAP,” says Jacobson. “Basically, we decided to scrap our legacy environment all together and go with a single-instance, global rollout of SAP software using standard, out-of-the-box best practices to manage our business.”
Consolidation and Scalability In 1997, Universal Instruments completed its implementation, installing SAP® software for enterprise resource planning (ERP), financials and controlling, inventory management, human resources, and other core aspects of the business. “This gave us three things,” says Jacobson. “It gave us a single platform for the entire organization, consistent processes for managing our core business, and the ability to consolidate financially. Today, every nickel that flows through the company goes through our SAP software. This has helped us cut our monthly reporting time by more than half. And we can do amazing things with the numbers – analyzing information across regions, customers, and product mixes. This just wasn’t possible before – at least not with any degree of efficiency.”
The SAP implementation also gave the company the agility and responsiveness it required to succeed in the fast-paced, rapidly changing global market. “The scale happened,” as Jacobson puts it. “Whenever it’s been necessary, we’ve been able to scale the business using standard SAP functionality.”
Take, for example, the company’s new plan to establish facilities in Brazil. “Things have heated up there and we need a presence,” says Jacobson. “It’ll take about 30 days to be up and running, but it’s no big deal for us now because our business processes are no longer an impediment.”
Unexpected Benefits for the Aftermarket Jacobson talks a lot about what he calls “SAP vanilla” – the basic functionality of the software that is available immediately, without configuration, right out of the box. “What I really appreciate about ‘SAP vanilla,’” Jacobson says, “is the companystructure piece. You set up relationships among entities within the organization – all very explicit but flexible at the same time – and that’s the core benefit. In fact, it’s an ongoing benefit because it’s given us the flexibility to adapt quickly as our organizational structure has changed.”
Universal’s ability to model and flexibly manage its organizational structure within the software delivered some unexpected business benefits as well. Jacobson explains, “We originally implemented [the software] to get a handle on our core business – financials, ERP, that sort of thing. The structure SAP [software] gave us really helped kick our aftermarket parts and service business into high gear. And that’s extremely important because that business is high margin. It really became the poster child for the success of the SAP implementation throughout the organization.”
Universal Instrument’s aftermarket business operates on a direct-service model. This means the company itself maintains direct control over operations, whereas competitors may outsource the job to distributors. “It keeps us close to the customer,” says Jacobson. “And it gives us a lot of credibility during the sales phase because we can make promises about service levels that our competitors can’t really make due to the fact that they don’t have direct control over their aftermarket operations.”
Before implementing SAP software, Universal’s aftermarket business was profitable, but inventory carrying costs continually ate into margins. “We had depots all over the world with parts just piling up,” Jacobson explains. “But now, with our SAP software, we have so much more visibility. If a customer needs a part, we can get it to almost any place on the planet within 24 hours. And we can do this with lower overhead because now we have the power to forecast demand.”
In fact, Universal has been able to reduce cycle times by 30% to 40% and significantly increase inventory turns. “This has really given us a market leadership position in the aftermarket business,” Jacobson says. “And, you know what? It also helps us sell our machines in the first place. Customers need to know that you’re going to be there when they need you, and, in very unambiguous terms, we can demonstrate impeccable service capabilities and a clear record of customer satisfaction.”
The Snowball Effect The success of Universal’s aftermarket business generated substantial buy-in for moving forward with other SAP software projects at Universal. “Initially, we weren’t using the software for materials and product life-cycle management, although the software gave us the capabilities,” says Jacobson. “But successes in other areas just generated a snowball effect. Now, we’re using it to manage product configurations and the associated planning.”
In the past, materials planning for the complex machines built and delivered by Universal demanded significant time and resources. “A single machine has somewhere around 250 plannable items,” Jacobson explains. “So what we would do is sit in a meeting, go through each item for about 30 machines, and figure out the requirements for each plannable item – all using an Excel spreadsheet. Today, we just use a variant configurator in the SAP software. It takes no time at all.”
What does this mean to Universal’s core business? Jacobson offers an example. “Recently, we had a slight dip in what we were expected to build toward the second half of the year. Previously, it would have required a major undertaking to adjust our plans. But now, it’s just trivial – just press a few buttons. Instead of the mechanics of how you change a plan, our focus is on what the market is doing and how this impacts our business strategy. What used to take about 80 work hours a month now takes minutes.”
With increased speed and agility, Universal now finds it easier to compete in a crowded marketplace that demands increased responsiveness. “A few years ago, we had about 14 weeks’ lead time for each order,” Jacobson explains. “That meant we were able to operate under a build-to-order model. Today, that cycle has been cut to about two weeks, which means we have to build ahead of the market.”
Universal now operates under an assemble-to-order business model, building subsystems ahead of time and then piecing these subsystems together to meet customer requirements after an order is placed. “This means that we’re required to take on considerably more risk,” Jacobson says. “But with our SAP implementation in place, we have the visibility and process efficiency to succeed.”
Moving Forward Is there anything else in store for Universal and SAP? “Actually, we just turned on mySAP™ Product Lifecycle Management,” Jacobson responds. “Already this is making design change a lot more efficient.”
In addition, the company is planning to implement customer relationship management functionality to drive even greater efficiencies in its aftermarket business. Internet sales and employee self-service – both enabled by the SAP NetWeaver™ Portal component of the SAP NetWeaver platform – are also on the table.
“There’s still work to be done,” Jacobson says. “But SAP has proven its value. It looks like we’ll be working together for a long time.”
SAP All-in-One - Universal Instruments Corporation
