Clean transformation brings transparency
The aim was to show how much the Home and Cleaning Solutions company earns with a product (technical term: globally calculated contribution margin). For the more than 30 Freudenberg branches worldwide, the previously different controlling areas with their respective national currencies were therefore converted into a uniform controlling area.
Within three years, the solution developed by cbs has now been implemented on all continents and integrated into the group's central SAP system. The local currencies continue to run in parallel to meet the respective local requirements.
In addition, the respective costs for each product are now available in the company currency, the euro, at the click of a mouse. This creates the desired transparency.
Home and Cleaning Solutions is a subsidiary of the Freudenberg Group, a German family-owned company with international operations and more than 160 years of tradition. The company's headquarters are located in Weinheim an der Bergstrasse.
The group of companies includes Vileda with its well-known household products for the consumer sector. Vileda's product portfolio includes everything that makes household cleaning easier, from mops and brooms to cleaning cloths and laundry care products.
In addition, the umbrella also includes other brands such as O'Cedar, Wettex, Marigold and Gimi, which are successful in the various national markets. Around 87 percent of total sales of around EUR 938 million (fiscal year 2017) are generated by the product portfolio for the consumer market.
The company is present in more than 30 countries with its sales organizations. These include sites in Europe, the USA, Canada and Mexico as well as numerous branches in Australia, Asia (for example in Thailand and Hong Kong) and a joint venture in India. Freudenberg Home and Cleaning Solutions is characterized by a global supply chain and international production and sales processes.
Decentralized cost accounting in the local currency
Home and Cleaning Solutions and its 30 subsidiaries work with a central SAP system that all sites access. The corresponding modules are available for production, supply chain, sales and accounting processes.
The branch's controlling areas were previously decentralized and used only the respective local currency. Costs were converted into the Group currency, the euro, manually. The processes were cumbersome, lacked the necessary transparency and also held potential for sources of error.
"The international orientation of our group with its various brands then ultimately tipped the scales in favor of establishing a uniform controlling area along the lines of a global corporation"
recalls Monika von Duering, Corporate Director Business Processes and Systems.
From the delivery of the raw materials through processing in the production chain, the products often pass through several locations in different countries. The costs were recorded in the local currency in each case.
Due to the diversity of locations, there was no quick and consistent view of the cost composition at the various production sites. There was no overview of the financial expenditure for materials, personnel, suppliers and other items in the production cycle.
Until now, these values could only be converted manually into euros, whereby inter-company surcharges and other factors had to be taken into account in addition to currency effects.
To reduce complexity and improve transparency, the company wanted to generate visibility directly from the SAP system. Freudenberg uses an ERP/ECC 6.0 supplemented by a Business Warehouse 7.4.
This SAP landscape also includes SAP Integrated Business Planning (IBP) and Cloud for Customers (C4C) with Hybris. This meant that it was possible to build on a classic SAP architecture without any further risk of a release upgrade. Therefore, the decision was made to harmonize the controlling areas and merge them into a uniform system. The Weinheim-based company chose SAP consultancy cbs as its project partner.
Several factors were convincing.
"cbs has already successfully implemented similar projects and has excellent references in the industry."
says Monika von Duering. The tried-and-tested M-cbs methodology and the minimally invasive procedure ensured that day-to-day operations were hardly disrupted and all units were able to continue operating without restrictions immediately before and immediately after the transformation.
"The concept proposed by cbs was transparent and consistent - and therefore understandable and comprehensible to us at all stages"
says the IT specialist.
Conversion with Enterprise Transformer
cbs- Enterprise-Transformer was used for the technical implementation. The software enables existing data to be transferred to a new process and system environment.
Initially, the subsidiaries in Europe were converted to the uniform controlling area. The USA, Canada, Asia and Australia followed at six-month intervals. The final step was the conversion in India.
Here, not only the currency conversion was on the agenda. Rather, the local year, which deviates from the usual group fiscal year, also had to be transferred to the overall concept. This is because a uniform controlling area works with only one uniform fiscal year for all company locations.
The solution was initially implemented on a separate test system, allowing it to be tested multiple times without disrupting operations. The implementation of each wave then went live over just one weekend.
As of the respective Monday, it was already possible to work with the new solution. The training of the participants took place at the company headquarters in Weinheim, while key users in the international subsidiaries took care of the training of their colleagues.
The centralization of the controlling areas also acted as an impetus to harmonize further processes at the branded goods manufacturer. This affected production planning, manufacturing and product cost accounting.
"cbs has retained the existing modules in SAP for this purpose, but has added another convenient layer with additional options for action on top of it for us. Now we have a quick overview of numerous national areas if required. This standardization supports us in many respects.
explains IT specialist von Duering.
Transparency at the touch of a button
In the meantime, Freudenberg can transparently track all products on their way through the SAP system ERP/ECC 6.0 and the supply chain - through the entire production cycle all the way to the customer. "We now have the luxury of centralized cost accounting in the sense of a Global Corporation," says von Duering happily.
At the touch of a button, a uniform calculation of the desired values is available at any location. Freudenberg has a view of end-to-end profitability.
Those responsible can see at any time how much is earned worldwide with a product. In this context, one also speaks of a calculated contribution margin. In this way, the Group benefits from the automation of product cost accounting.
This speeds up the associated processes and eliminates sources of error. No matter where in the world the data sources are - they can now be retrieved centrally at the click of a mouse and are available promptly.
"The good cooperation with the cbs consultants played a major role in enabling us to successfully implement the complex system. In the process, we even stayed under the budgeted amount. The planned time frame was adhered to. A success story from start to finish"
was the positive conclusion drawn by Monika von Duering.
The most important aspects
Freudenberg Home and Cleaning Solutions is implementing a central controlling area for all global sites.
Different company codes with their respective national currencies were migrated to a uniform platform for 30 branches worldwide.
The SAP system landscape consists of ERP/ECC 6.0 and SAP BW 7.4. This ERP architecture is supplemented by SAP IBP, C4C and Hybris.
Within three years, the new cost accounting system was implemented on all continents and integrated into the group's central SAP system.
Today, the respective costs (calculated contribution margin) for each product are available promptly and automatically in the company currency, the euro.
