Outsourcing: A global success story; new software, internet access, help German 3PL deliver top-flight distribution services around the world. (European Logistics: Case Study).

Timely delivery of spare parts around the world can be a daunting task, given the number of countries involved and the diversity of language. But for Fiege ecm, a third-party logistics provider based in Greven, Germany, that task is make easier by technology.

Fiege handles all non-U.S. distribution of spare parts for three U. S.-based companies--Ingersoll-Rand International Bobcat, Clark Material Handling, and the Spicer Division of Dana Corp. In total, the 3PL distributes to more than 600 dealers in 75 countries outside of the United States.

A wide range of procurement, storage, and distribution activities are provided for these clients. Fiege also provides such non-traditional services as debt and credit accounting as well as cash management. By outsourcing all of these services, the U.S.-based companies' goal is to provide the worldwide network of dealers with spare parts quickly and cost effectively.

The Fiege Logistics Center in Mulheim, Germany, is responsible for managing this complete logistics chain. The center features a direct link to the European highway network as well as to Europe's largest inland port in Duisburg, where most of the approximately 82,000 spare parts arrive from the United States. A further advantage of the site is its proximity to Rhine-Ruhr International Airport in Dusseldorf, which offers easy access for one-day outgoing parts distribution.

Keys to success: IT and Internet

The center's previous data processing system had been developed specifically for its customers in COBOL and Assembler, and ran on an IBM 4381 system. This system had certain problems, including lack of multilingual capabilities. Software maintenance and service was another major issue. Plus, it was not particularly responsive to changing market demands.

In light of the demand for quicker and more responsive turnaround, Fiege suggested linking a software system with an Internet solution. This would guarantee that the worldwide network of dealers could have online access to the Mulheim warehouse and parts inventories. Of course, the system also had to be able to process orders immediately and handle everything up to shipping through the paperless IT system. Fiege needed to link up the Internet technology with continuous access to the warehouse computers and the material management system.

After considering various existing software products, Fiege and its customers agreed on the SAP R/3 system, since this standard system already provided many of the needed functions, such as handling multiple clients, languages, and currencies. An c-commerce system would provide the basis for liege's own business-to-business solution via the Internet.

The system would not only add functions to the software, but also would make it possible to conduct online business for all parts replacement requests. SAP R/3 and the Internet transaction server would automate as many aspects of sales and paperwork as possible.

IT processes and ordering by Internet

The system is streamlined and efficient. Dealers can either place orders with the service department of the Logistics Center in Mulheim through the Internet or conventionally by phone or fax. The Mulheim call center can enter orders in five languages.

Every dealer is given password-protected access to the system, including access to all relevant spare parts stock. After logging into the system, the dealer can check if an item is in stock by entering the part number. Should a part not be in stock, the Logistics Center orders it from the manufacturer to be sent either to Mulheim or directly to the dealer, based on the customer's needs.

When order data is entered, the system automatically checks availability online. As soon as all the order data has been entered, the order is confirmed and the items are reserved.

When a dealer's order has been entered, it immediately appears in the SAP screen. Every delivery service provider, forwarder, and airline that dealer has used in the past can be seen and selected by a simple mouse click. Fiege transfers data from the transport company into the system so that it can monitor shipment to anywhere in the world.

As soon as a part number and quantity are entered, the SAP system immediately checks on availability. The dealer then receives information about availability, number of pieces per packaging unit, recommended price, net price, and weight per unit of the part.

All parts, great and small

Orders can be flagged with up to five different categories and priorities, which trigger different delivery speeds. The Fiege stockroom clerk processes orders using a PC in the warehouse according to the delivery priorities shown and the amount of time allocated for shipment. All told, there are approximately 82,000 spare parts managed in the warehouse, and some 220,000 in the SAP system (including old parts), 40,000 of which are small parts like screws, valves, and gaskets.

After the ordered items have been commissioned and packed, an automatic conveyor brings the packages to the final checkpoint, where they are weighed and banded. At this time, the SAP system registers the package as ready for delivery. An address sticker is produced automatically and affixed to the box. The package information is transferred to the shipping department, where the necessary shipping documents are printed.

All the required customs documents and trade statistics can be drawn up and sent to the on-site Customs office at the Mulheim center. As soon as the shipment is passed on to a carrier, the clerk reports thc shipment to the IT system. When the order has been shipped, an invoice is prepared and sent Out the next working day.

The customer and the sales department can monitor the status of an order at any time using the Web site by entering the order number, the part number, or the order date. In addition, the dealer can enter a range of dates and get information on all of its orders and invoices for that period.

Fiege stocks only original parts -- the same ones that are used in assembling the original equipment in the U.S. The Mulheim Logistics Center orders the parts and components directly from the suppliers. In the event that a particular series of equipment is replaced by another or dropped from the line, Fiege's customers guarantee their dealers that all necessary parts will be in supply for 10 years.

Availability of spare parts is a critical factor in Fiege's success. On average, 95 percent of the new parts are in stock. This high value results from an ingenious stock-keeping system: Each time a part leaves the warehouse, the IT system re-calculates which items have a fast or slow turnover rate.

The result: First-class global service around the clock

For Fiege's clients, ordering by the Internet brings multiple benefits. It not only eliminates language barriers and the errors they can lead to, but also makes it possible to place orders at any time, independent of continents or time zones. In addition, all of the dealers now have their own Fiege log-ins, which allow them to check on availability of parts and delivery times, and prioritize orders, such as marking certain items for express delivery.

The advantages of this system for IRI Bobcat, Spicer ,and Clark Material Handling result from the combination of Internet technology and conventional logistics IT systems. The solution Fiege developed has improved service, accelerated the delivery process, and resulted in a much higher comfort level for dealers. All and all, it's been an outstanding success story for the three U.S.-based companies and their dealers around the globe.