Learn how SAP solutions and best-practice offerings enable manufacturers of complex equipment to differentiate themselves from the competition and low-cost global providers through superior-value products and services and move their offerings to market more quickly and more profitably.

1. saP White Paper
Best Practices in
comPlex equiPment
manufacturing,
sales, and service
version 01

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3. contents
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Best Practices and Key Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Best Practices and Enterprise Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Best Practices and Support for Service and Aftermarket Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Best Practices and Price and Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Best Practices and Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Best Practices and Measuring Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Best Practices Versus Industry-Standard Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Best Practices and Eliminating Barriers to Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Best Practices and SAP Customer Success Stories for Manufacturers of Complex Equipment . . . . . 14
Schumacher Elevator Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Goss International Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Veeco Instruments Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Sauer-Danfoss Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Learn More . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3

4. executive summary
Best practices in technology are helping manufacturers of com- For you, manufacturing is more difficult because complex prod-
plex products and equipment to move their offerings to market uct and equipment designs require cross-functional design teams
more quickly and more profitably by enabling them to become coming from different disciplines and vendors in different loca-
more cost effective and efficient. Following best practices is the tions and countries who must all collaborate on design and engi-
best way to navigate the sea of challenges facing manufacturers of neering issues. In relation to the design and engineering aspects
complex equipment. alone, it often takes an extraordinary effort from complex equip-
ment manufacturers to design for manufacturability using a sin-
Rapidly advancing technology, together with strides in manage- gle, synchronized, time- and cost-effective design collaboration
ment and logistics, bring the threat of commoditization to the process. Further compounding this complexity is the heavy reli-
doorstep of every manufacturer. At the same time, product life ance on component systems and subsystems used in complex
cycles become shorter and shorter. Responsibly managing these products, all of which require integration not only in manufac-
challenges is incumbent upon all manufacturers. But for the turing processes, but also throughout the supply chain.
complex equipment manufacturer, managing these challenges is,
well, more complex, because complexity goes beyond the design Beyond the challenges of designing and making complex prod-
and function of the product or equipment itself and extends ucts and equipment are the difficulties inherent in selling them.
throughout the product life cycle – from design and planning, The quotation and order management processes must be highly
through manufacturing, service, and aftermarket sales all the flexible, because customers and dealers of complex equipment
way to obsolescence. As a result, best practices are especially ap- often require customized solutions. They also demand a high de-
plicable to complex equipment manufacturers. gree of configurability to allow them to customize the product
themselves. These customers want “glass-pipe” visibility into
your business so they can see, at any time, where their quotation
or order is in the process. In addition, even before purchasing a
complex product, customers are demanding value from you in
the form of sales and engineering expertise. Finally, complex
products require complex contracts, particularly contracts with
government agencies and long-term contracts, and the compli-
cated billing that follows them. Working under all of these sales
pressures, the complex equipment manufacturer not only must
make the product and make it right, on time, and within budget,
but also must make a margin while doing it.
4

5. Margin pressures, in turn, have led to escalating service complex- This white paper addresses these questions and opportunities
ity, driving complex equipment manufacturers to enhance reve- from the point of view of the manufacturer of complex products
nue streams by differentiating themselves through service offer- and equipment. Additionally, it demonstrates the value of best
ings. This competitive differentiation goes beyond effective, practices through the success stories of SAP customers. It pro-
lower-cost warranty and service management to the manufac- vides a brief overview of the SAP® solutions used by these manu-
turer’s ability to manage and coordinate parts, personnel, assets, facturers of complex products and equipment to differentiate
resources, and vendors with the goal of reducing inventories themselves from the competition through superior-value prod-
while maintaining and growing customer retention and satisfac- ucts and services against low-cost global providers.
tion. Moreover, service revenues have opened the door to a pa-
rade of value-added services for manufacturers of complex prod-
ucts and equipment, ranging from proactive predictive and
preventive maintenance to vendor-managed inventory and add-
on sales.
What best practices should you, as a manufacturer of complex
products and equipment, use to address the challenges facing
your industry today? What factors determine success? What chal-
lenges must you overcome in supporting service and aftermarket
sales? What best practices will help you control price and profits?
How can you streamline and improve the accuracy and com-
pleteness of your compliance process?
5

6. Best Practices and
Key challenges
Whether you are a small, midsize, or large manufacturer of com- The key overall challenge, however, is the continuous struggle to
plex products or equipment, you share many of the same key streamline the integration of processes and systems related to
challenges and customer expectations for price, innovation, and complex product and equipment manufacturing, which encom-
value-added services. In addition, many complex product and passes the entire product life cycle, from new-product develop-
equipment manufacturers share the same customer base, includ- ment and introduction through to obsolescence. The task
ing the customer standards this base has grown to expect. becomes more complex for manufacturers using hybrid manu-
facturing methods – switching from engineer-to-order to make-
One characteristic of this diverse customer base is that it is con- to-order with product configurations and then to assemble-
stantly demanding changes to product design. For manufactur- to-order and back again. Then, after installation, comes field
ers of highly configured products, it can be challenging to man- service and spare parts that must get there on time – and at a
age multiple variations of products headed for the production profit. Streamlining the product life cycle, including hybrid
floor. At the same time, these manufacturers may have new- manufacturing processes and order fulfillment processes, and
product introductions they also want to bring to the floor, and then tightly integrating them with the sales and service side of
that can double the challenge. the business is essential to provide your customers with the accu-
rate, consistent, and timely information they need, whenever
Customer demand drives the service side of business for complex they need it.
equipment manufacturers, with sporadic demand for spare parts
and service requirements. This forces inventories to hold many
different parts and contributes to higher inventory management
costs. Further, these parts are often difficult to source in world
markets, challenging global manufacturers and midsize manu-
facturers that are going global to offer global customer service at
a level customers will accept.

7. Best Practices and
enterPrise aPPlications
Streamlining the product life cycle requires an integrated enter- With enterprise visibility, complex product and equipment man-
prise solution backed by a cohesive sales- and operations- ufacturers can avoid excess inventory. For example, if a subassem-
planning methodology that links and aligns production, sales, bly component is missing, you can see into any warehouse in the
and materials processes. Manufacturing companies that achieve supply chain to determine, live and in real time, whether you
this level of planning are seeing efficiencies rise throughout their need to retrieve inventory from a depot or order from your sup-
production and supply chain processes. plier. You won’t have to wait until your overseas office opens in
the morning and sends you an e-mail to know what to do. More-
Also enabled by an enterprise solution is another critical aspect over, enterprise visibility allows you to manage inventory segre-
of success for complex manufacturing: enterprise visibility. As gation between original equipment and spare parts, enabling you
companies become more global, the ability to see quickly across to make precise decisions that do not sacrifice product quality or
the global enterprise becomes more and more essential to make customer service.
rapid decisions, to fulfill customer demand, to keep pace with
product changes, and to monitor inventory levels and lead times
that drive purchasing. Instead of relying on phone calls and
e-mails to find out information from production or purchasing,
manufacturers and customers can access a single source of con-
sistent information, putting everyone on the same page and con-
verting phone calls and e-mails to information confirmations
instead of information requests.
7

8. Best Practices and
suPPort for service and
aftermarKet sales
Unique factors contribute to the sales and service of complex These companies have no need to rob from production to satisfy
products and equipment manufacturing. These include the spo- their service requirements. They can plan demand for service
radic demand for services and spare parts and the challenge of and aftermarket sales because they have visibility into the in-
getting those parts to the customer on time and servicing remote stalled base and the system support needed to enable predictive
customers. An enterprise solution should provide an integrated maintenance in the field. These companies are realizing the val-
forecasting tool that enables visibility into the facility delivering ue of integrating their service business with their production and
the parts, as well as into the rest of the enterprise. This ability to sales business using an enterprise solution.
visualize the demand pattern of the entire enterprise equips the
manufacturer to support sporadic parts demand efficiently and With their spare parts business growing rapidly as a percentage of
cost-effectively. Integrated applications also enable you to posi- revenue, many complex product and equipment manufacturers
tion inventories, either globally or locally, to better service your have found their cost centers growing into larger and larger prof-
customers. it centers. Typically, these cost centers have “island” systems that
are not integrated to the enterprise, inhibiting communication
This is important because many manufacturers rely on rudimen- with customers and customer service organizations, service
tary safety-stock calculations that may not achieve the desired groups, engineers, vendors, and suppliers.
balance between high customer-service levels and low inventory
levels. The outcome is that many manufacturers may have the Redundancy of data entry occurs across numerous systems, and,
right inventory, but they may have too much of it. The best prac- inevitably, the service technician and your customer are affected.
tice is to have integrated order, reorder, and safety-stock method- However, as more manufacturers enjoy rising margins from their
ologies that consider historical consumption. An additional best service business – in some cases higher than the company’s origi-
practice would be to include integrated forecasting tools to nal equipment business – more manufacturers are focusing on
maintain proper inventory levels. Manufacturing companies integrated product and order fulfillment life cycles – and the in-
with these capabilities are enjoying reduced inventory levels tegrated solutions that support them.
without a decrease in customer fill rates.

9. Best Practices and
Price and margin
Lowering costs, increasing productivity, and improving sourcing Another key best practice in the area of price and margin is to co-
and quality can help, but there are always going to be low-cost ordinate and measure the global supply chain continuously to
providers. Complex product and equipment manufacturers maintain profitability. This includes better offshore sourcing of
must compete on another level, and that is by offering innovative products and assemblies without sacrificing customer-service
value-added services. For example, although it contributes to levels.
complexity, some manufacturers are expanding their product
and equipment lines to the point of becoming total solution pro- Concurrently, customers are asking manufacturers to provide
viders, offering full-package, one-stop-shop solutions to their superior aftermarket-sales support by managing a customer’s
customers, instead of only individual components or parts of the spare parts or inventorying spare parts on the customer’s site to
solution. shorten repair times. This becomes achievable with integrated
systems. Manufacturers can also provide customers with diag-
The move toward becoming total solution providers is occurring nostic tools that link into the customer’s equipment to track
across the complex product and equipment manufacturing in- preventive maintenance requirements. In this case, you may rec-
dustry. Manufacturers are expanding their offerings and taking ognize an equipment problem before the customer does. To
on more responsibility to meet ever-increasing customer de- drive customer satisfaction and loyalty still further, you can em-
mand. Moreover, the manufacturing business model is changing. ploy enterprise applications that integrate customer informa-
You no longer just make complex products or equipment; you tion, giving you the complete information you need, no matter
are providing your customers with a growing array of competen- when the customer calls.
cies and vendors. In this way, complex product and equipment
manufacturers have become brokers, coordinating highly com-
plex design and manufacturing processes across the global and
local supply chain.
The pressures of price and margin are forcing complex product
and equipment manufacturers to take on more engineering ac-
tivities. Adding this responsibility results in the need for tighter
collaboration with customers and tiered suppliers to, for in-
stance, work through design issues, minimize lead times, and re-
solve quality concerns.
9

10. Best Practices and
comPliance
Pick your acronym: SOX, DoD, OSHA, or WEEE.1 Whatever the Using enterprise resource planning (ERP) software as a backbone
regulatory agency, there are serious consequences for noncom- gets all compliance information and supporting details in one
pliance with its regulations – both revenue risks for selling in place. Auditors can access the data they need in the same place
certain markets without authorization, and punitive risks for and can drill down to any level of detail to satisfy their require-
selling the wrong product into a market. All responsible manu- ments. Additionally, they appreciate the ease of using a single
facturers, small to large, pay attention to them. electronic audit trail rather than a paper trail. Manufacturers can
also significantly reduce the time it takes to prepare for audits, as
One way of paying attention is to integrate fail-safe electronic se- well as the cost and risk of error experienced in manual, paper-
curity at both the transaction and process levels to see who based processes.
changed what and under what authorization. This provides an
audit trail useful to you and regulatory agencies in performing Another focus should be on improving quality-control informa-
audits. tion through the tight integration of quality-control and order-
fulfillment processes, including inbound and in-process product
Island solutions often manage product attributes, workforce and and shipping requirements. Correspondence with customers and
training records, and data about quality; environment, health, suppliers can also benefit from integrated quality-control
and safety issues; and dangerous goods or hazardous materials. information.
However, these solutions often run outside the overall enterprise
system. Best practice, therefore, is tighter integration of these
supporting solutions with the enterprise system.
1. SOX, Sarbanes-Oxley Act; DoD, U.S. Department of Defense; OSHA, U.S. Occupational
Safety and Health Administration; WEEE, Waste Electrical and Electronic Equipment
Directive.
10

11. Best Practices and
measuring success
To define and measure success in the manufacturing and sales Another measurement of success, and one of the purest, is your
and service of complex products and equipment, manufacturers working capital and cash-to-cash cycles. These measurements
use benchmarks like forecasts and lead times. The better you can tell manufacturers if their lean manufacturing and other strate-
reduce lead times and improve forecasts, the better you can com- gies are making a difference – or not. Many manufacturing com-
pete and succeed. This depends, of course, on the level of sales panies are enjoying top-end revenue growth in service and
and operations planning you put into the effort, coupled with spares. In addition to revenues, these new areas are increasing vis-
the success of your teamwork and execution. ibility into customer needs and providing opportunities to im-
prove customer service.
For example, one measurement of the success of your execution
is how often you meet customer ship and deliver dates. Even Finally, success results from improved collaboration on product
when companies report fulfillment rates of 99% plus, the date design for both manufacturability and service. Integrated engi-
delivered is sometimes not the date the customer requested. In neering, production planning, and inventory processes enable
addition, the date requested may not actually be the date the cus- better collaboration and visibility for corrective action and the
tomer would like delivery, but rather the date the customer is ac- weaning and fine-tuning of processes. Best practice is total life-
customed to ask for, based on your lead times. cycle buy-in across a cross-functional team of engineering and
design, production planning, inventory management, and sales
Sometimes making sure the customer gets what the customer and service.
wants when they want it means reevaluating how the company
generates its customer fill rates. An integrated solution enables
you to meet customer request dates without increasing invento-
ries or personnel or decreasing productivity.
11

12. Best Practices versus industry-standard
Practices
Trends show many companies are moving away from traditional practices and adopting forward-looking industry-leading
practices to support profitable growth in key areas, as shown in the following table.
Key AreA Industry-stAndArd PrActIce Industry-LeAdIng PrActIce
Material cost control Independent procurement conducted by each Aggregated sourcing of commodity items using
department or division using standard requests online RFQs; collaborative design for specialty
for quotations (RFQs) products
Aftermarket sales and Aftermarket service performed on as-needed Proactive relationship building to identify
service basis opportunities for value-added products and services
Inventory reduction Demand planning based on past experience Out-of-the-box integration of supply chain manage-
and seasonal trends ment and customer relationship management
for more accurate forecasting and demand-driven
supply network capabilities for responding to
real-time demand fluctuations
enterprise Visibility and Division-by-division analysis based on overall Enterprise-wide analysis based on real-time data
control performance metrics and key performance indicators
Lean Manufacturing Extensive long-term planning based on manual Greater manufacturing flexibility and the ability
processes in an attempt to predict and align to respond to demand and production changes
all variables without the need to carry excess safety stock
1

13. Best Practices and
eliminating Barriers
to groWth
The best path to eliminating growth barriers is to integrate the By providing an integrated software foundation based on open
enterprise globally. Industrial manufacturing is, after all, a global standards and industry best practices, the SAP for Industrial Ma-
business. The globally integrated enterprise enables access to new chinery Components (SAP for IMC) solution portfolio and
markets, which is often the key to success. Whether your organi- the SAP® Best Practices for IMC offering enable enterprise-wide
zation is simply setting up shop in a new locale or acquiring new visibility and market-leading abilities to roll out sophisticated
companies in far-off regions to gain market access, a disaggregat- functionality to new regions quickly and easily. You’ll be able to
ed IT landscape with legacy systems working at cross-purposes coordinate global activities with greater ease and execute on cor-
impedes your ability to execute. porate growth strategies more effectively.
A holistic view of the global enterprise is critical for success in a
global marketplace. For this reason, many complex product and
equipment manufacturers are taking steps to standardize on a
single software foundation that overcomes the challenges of silo
departments. This facilitates the free flow of information and al-
lows decisions based on real-time information and a single ver-
sion of the truth. This makes it easier to integrate newly acquired
companies, as well as deliver a single face to the customer in a
cost-effective manner.
13

14. Best Practices and saP
customer success stories
for manufacturers of
comPlex equiPment
The SAP customer base of IMC companies includes the follow- goss international corporation
ing leaders in the complex products and equipment industry. Industry giant Goss International Corporation, headquartered in
Each faces the challenges reviewed previously, and each has Bolingbrook, Illinois, is one of the world’s leading manufacturers
selected solutions from SAP for IMC to overcome them. of web offset printing machinery, software, equipment, and fin-
ishing solutions. Following the acquisition of Heidelberg Web
schumacher elevator company Systems, a division of the Heidelberg Group – the huge Germany-
If complex product and equipment manufacturers must com- based manufacturer of printing machinery – Goss set out to
petitively differentiate themselves against low-cost global provid- achieve the vision of “one system for one company” by standard-
ers through superior-value products and services, then Schum- izing its processes and unifying its worldwide network with a sin-
acher Elevator Company of Denver, Iowa, has done just that in gle instance of the SAP ERP application.
successfully selling its custom-designed passenger and freight el-
evators and components worldwide. Following the implementation, which took just six months and
included the successful transition to an SAP data center, an anal-
One reason for the company’s success, says Jeff Schumacher, vice ysis of Goss worldwide operations revealed an almost 100% fit
president and chief financial officer, is its willingness to look at its with the road map available in the SAP Best Practices for Industri-
business processes in light of current best practices and technolo- al Machinery Components offering.
gy infrastructures. This willingness led to increased manufactur-
ing productivity and improved customer service, without With the implementation of SAP ERP, Goss achieved annual sav-
lengthy implementation or cumbersome customizations, after ings of US$4 million in contracted data-center maintenance fees
going live with the SAP ERP application, which supports best and through lower support costs due to reduced IT complexity.
practices both on the plant floor and in working with customers It improved processes through global standardization, creating
and suppliers. one common approach to IT. Furthermore, Goss enhanced its
analyses and planning capabilities with integrated financial infor-
In doing this, Schumacher Elevator hit the up-button to business mation. The company improved its service and sales with accu-
benefits. The company reduced IT support costs and improved rate, up-to-date customer information. Furthermore, using
customer service through better information availability, even as shared services, Goss reduced its inventory.
it reduced product lead times 5%, increased sale closings by 15%,
reduced raw material costs 30% due to improved inventory accu- To see the full Goss International success story, link to:
racy, and reduced time to close books by 5 days. www.sapmanufacturing.com/mfg/resources_successes
/GossCustomerSuccessStory.pdf.
To see the Schumacher Elevator business transformation study,
link to: www.sapmanufacturing.com/mfg
/resources_businesstransformation
/SchumacherElevatorCompanyBusinessTransformation.pdf.
14

15. veeco instruments inc. sauer-danfoss inc.
Headquartered in Woodbury, New York, and with global opera- The name Sauer-Danfoss Inc. stands out in the business of mo-
tions spanning the United States and abroad, Veeco Instruments bile motion and control production. The same name powers
Inc. is a leading instrument manufacturer that grew by acquisi- some of world’s toughest mobile machinery and equipment.
tion. According to Linda Chan, Veeco’s IT director of worldwide This includes superstrong forklifts and aerial lifts, tractors, and
infrastructure: “Veeco has grown by acquisition. As a result, we other mobile machinery used in many industries – from agricul-
had all kinds of disparate ERP systems – everything that you ture, construction, and material handling to road building and
could possibly fathom.” forestry.
To compete effectively and to grow, stay agile, and stay profitable, As strong as the company’s products were, its homegrown and
Veeco needed to achieve operational excellence, and it could do confederated ERP systems needed a lift. A merger in 1999 result-
that only by creating “One Veeco” – unifying its processes with ed in 13 diverse ERP systems, making it impossible to get timely
best practices under the SAP All-in-One for Industrial Machinery answers on the status of the supply chain. These multiple legacy
Components solution. The rollout of the solution to nine systems were leading to disjointed sources of information and
Veeco U.S. facilities is complete, and implementation is in process material flow. Additionally, some plants had nonintegrated
at Veeco’s European locations. shop-floor systems and financial systems.
Consequently, Veeco is already reaping business benefits in the The implementation of the SAP ERP application, together with
form of improved on-time delivery performance, shortened de- the SAP NetWeaver® Exchange Infrastructure component, solved
livery lead times, reduced time to market for new products, and these problems for Sauer-Danfoss and resulted in a string of busi-
the elimination of manual processes through automation. Veeco ness benefits. These include expected cost reductions of 5% to
has also improved information flow from sales offices to manu- 10% in inventory, customer service, and finance and the ability to
facturing, while the flexibility of reporting structures enables the make better business decisions. Lower IT costs with more func-
hierarchical aggregation of business units. tionality, improved throughput of information flow to the shop
floor, and increased customer satisfaction – with the right prod-
To see the full Veeco Instruments success story, link to: uct delivered at the right price and at the right time – round out
www.sapmanufacturing.com/mfg/resources_successes the benefits for Sauer-Danfoss.
/VeecoInstrumentsCSS.pdf.
To see the full Sauer-Danfoss success story, please link to:
www.sapmanufacturing.com/mfg/resources_successes
/SauerDanfossCSS.pdf.
15

16. www.sap.com/contactsap
learn more
To learn more about best practices for manufacturers of com-
plex products and equipment, please visit the SAP Web site at
www.sapmanufacturing.com.
. Source content derived from “Getting the Complex Product to Market: Best Practices
in Manufacturing, Sales, and Service,” Industry Week Webcast, April 1, 007, hosted by
John Brandt, chief executive officer of Manufacturing Performance Institute. Additio-
nal content derived from numerous internal SAP sources.
50 084 736 (07/06) Printed in USA.
1