Company: Akzo Nobel
Elemica Solution: Procure to Pay and VMI
Akzo Nobel is a leading global paints and coatings company and major producer of specialty chemicals. They bring color into our lives making it more livable and inspiring.
They help protect the buildings you go in every day. They are in your mobile devices, the cars and roads that move you around and are an essential part of the products that keep you healthy. Headquartered in Amsterdam, the Netherlands, their portfolio includes well-known brands such as Dulux, Sikkens, International, Interpon and Eka.
Akzo Nobel needed to replace an internally developed and aging Vendor Managed Inventory, (VMI) system. This brought its own set of challenges. The system was built specifically for them and over time the people that built it were no longer associated with the existing solution.
According to Thomas Ratliff, Global B2B and Systems Integration Head, “While other options were possible, we knew we needed a replacement portal solution since many suppliers would not as readily embrace consignment stock without visibility into Akzo Nobel stock levels.” The suppliers openly expressed concerns that they would need to keep higher stock levels on site, tying up their stock essentially keeping it from other customers if they did not have insight into actuals stock levels.
Additionally, the transparency of information in the portal helps to streamline the reconciliation process substantially reducing the need for lengthy conversations to agree what was consumed during the period and ultimately produce an accurate invoice.
Akzo Nobel had been leveraging the relationship with Elemica and the Business Network for the Process Industry for nine years. The relationship started based on the need to automate the ordering process on the supply side to gain efficiencies in the Procure to Pay business process. A win-win perspective was the goal.
In 2014, Akzo expanded the relationship by replacing their home grown VMI solution with Elemica. “The transition has been quite successful for us. In doing a market review and comparing the results with capabilities of our existing partners, the cross hairs landed on Elemica.” stated Thomas.
It was the right choice. The VMI solution is comprehensive yet flexible enough that all easily adapt to using it. “That was the nice thing about the transition. Elemica offered a service that is in line with our needs. It is feature rich compared to what we had and our users lost nothing.”
Akzo Nobel now has several business units leveraging Elemica. The primary user is the Decorative Coatings business. They leverage the portal in Latin America, Asia, and Europe. The Performance Coatings business units including Vehicle Refinishes and Wood Coatings are recognizing benefits in Europe and North America.
“Elemica is now an extension of the Akzo Nobel supply chain.” Usage has expanded the original conceptual deployment. The expansion now includes Latin America and Asia, providing a springboard for growth and further reducing their internal working capital.
Akzo Nobel is utilizing suppliers in a unique fashion to deliver raw materials to their plants. Using a VMI process, suppliers are deciding and delivering material based on Akzo Nobel inventory consumption levels, production forecast and agreed safety stock, not orders. They place full responsibility to the supplier to deliver the materials needed to manufacture without disruption.
Suppliers also benefit. With Akzo Nobel providing visibility into inventory consumption and forecast, suppliers can optimize their production scheduling and transportation cost by delivering FULL loads of raw materials just in time. The process enables the suppliers to deliver to their end customers while maintaining minimum levels of inventory.
The VMI process gives full transparency to the stock at the Akzo Nobel plants. They now optimize the entire delivery and manufacturing process and keep their own customers happy. During peak and slow periods of demand, the visibility into consumption rates mitigates volatility ensuring that everyone is operating as efficiently as possible.
Payment side benefits have also been realized for both parties. Now suppliers see the daily consumption pattern and delivers an accurate invoice. Financial relationships have improved by speeding up the payment processing and less errors are occurring.
Trust is the Key to Success
With VMI roll-out, trust is key. This year Akzo Nobel has added over two hundred planning items to the VMI program. Onboarding a VMI supplier requires trust the program to work.
Visibility into Akzo Nobel consumption rates and agreeing on safety stock levels are only tools in the process. Rules of operations need to be defined to help ensure the right understanding is in place leading to the right expectations. “The supplier must rely on information we provide and we have to trust that the supplier delivers.” It takes a bit of time for the people involved to really embrace that.
Elemica is the leading Business Network for the process industries. Elemica transforms supply chains by replacing manual and complex approaches with efficient and reliable ones. Launched in 2000, customers process nearly $400B in commerce value annually on the network. Elemica drives bottom line results by promoting reduced cost of operations, faster process execution, automation of key business processes, removal of transactional barriers, and seamless information flow between trading partners. For more information, visit www.elemica.com