Improving cross-branch collaboration with S&OP at Eramet

May 28, 2019

Eramet

Among supply chain practitioners, it is generally accepted that intensifying the cooperation between production sites and their sales and distribution organizations is key to improving service and reducing costs. Yet, in the metal manufacturing sector, realizing this vision has not always been that easy. At Eramet Alloys, Sales & Operations Planning software has been deployed as the linchpin to dramatically improve collaboration across their extended production and sales network. “Over time, confidence in the system has grown steadily and today, all of us find it unthinkable to run the business without an integrated S&OP process.”

S&OP implemented to improve service and reduce costs

Eramet Alloys was formed in the late 20th century with the merger of several companies, including specialty steel maker Aubert & Duval and tooling manufacturer Erasteel. The group is now a world leader in alloying metals and high-quality metallurgy as well as recycling. Pooled resources and the exploitation of operational synergies are key elements in group strategy to keep pace with, and anticipate, the high demands made by their multiple markets, which include power production, aerospace, automotive (electric vehicles), and construction.

About Eramet

Eramet Group is a major industrial player, operating in more than twenty countries across five continents, with its main markets in Europe, Asia and North America. The Group employs around 12,705 people. Global turnover in 2018 was 3,825 million euros.

Keeping pace with the market

Historically, the metals sector has had a hard time providing good service. Considering the complexity of the production process, it is hardly surprising that steel companies give priority to gaining control over their internal operations. Yet, in recent years, the markets have increasingly expressed concerns about reliability of service.

Improving cross-branch collaboration with S&OP

“Our people now see clearly why it’s essential to reserve capacity for sales that haven’t taken place yet, and how a constrained forecast can help reduce the risk of not being able to deliver on time. S&OP implementation meant our service level increased significantly.”

Stéphane Roux, Chief Information Officer at Eramet

“Our customers typically operate in very competitive environments,” explains Eramet Alloys Chief Information Officer Stéphane Roux. “Look at the competitive battles going on in the aeronautics industry, where no jetliner deal will ever be closed without the manufacturer providing proof they can deliver on time.

Naturally, this puts pressure on suppliers upstream such as Eramet who, in turn, must guarantee delivery times. Stocks have to be ready to go, and the manufacturing processes have to keep up with the pace of the airplane makers. The dynamics are somewhat different in other industries, such as power generation and automotive, but we’re always being urged to up our service levels even more.”

Quite a challenge

For these reasons, efforts have been made at Eramet Alloys since 2009 to transform the vintage Silo Organization into a more dynamic cluster of collaborative entities.

Improving cross-branch collaboration with S&OP at Eramet

But morphing into a supply-chain driven organization has been quite a challenge. “There are several reasons for this,” elaborates Eramet Supply Chain and Business Reporting Engineer, Grégoire Castagna. “It’s a complex production environment. Most of the products are unique, manufacture lead times are long, and changes to the production footprint need a lot of time, making it difficult to react quickly to changing market conditions. As a result, internal competition for resources can be hard at times, especially in periods of growing demand. Demand has been evolving too over the past few years. Conditions are tough in high-speed steel, and markets such as powder metallurgy and metals recovery offer opportunities for future growth and are claiming our attention and resources. Bear in mind also that, by nature, our sector is rather conservative. Under the circumstances, I think we did very well.”

Unleashing the synergy potential

A crucial element in the successful transformation of Eramet’s supply chain has been the implementation of OMP as a comprehensive S&OP system.

“The system greatly helped to unleash the synergy potential between Aubert & Duval and Erasteel.”

“Five years ago, S&OP was not yet an established practice everywhere at Eramet Alloys,” explains Roux. “The implementation of OMP in 2012 meant we could see clearly why it’s essential to reserve capacity for sales that haven’t taken place yet, and how a constrained forecast can help reduce the risk of not being able to deliver on time. After that, our service level increased significantly. Likewise, the system greatly helped to unleash the synergy potential between Aubert & Duval and Erasteel two years later. Both S&OP Plans have been integrated, allowing us to tune and optimize the planning of production sites for the benefit of both branches.”

“Managers increasingly appreciate and trust the data coming out of S&OP. This greatly helps to improve communication between the various teams across sales, distribution and production entities.”

Grégoire Castagna, Supply Chain and Business Reporting Engineer at Eramet

Breaking down organizational barriers

The system also helped to increase the level of trust in the organization. “People have learned to deal with uncertainties successfully,” says Castagna. “While forecasting was previously deemed unreliable and therefore resisted, our teams now increasingly understand the assumptions they’re based on. Forecasts are validated and their degree of uncertainty is qualified and clearly communicated across the organization. Managers therefore increasingly appreciate and trust the data coming out of the system. This greatly helps to improve communication between the various teams at Aubert & Duval and Erasteel. The system has made a substantial contribution to breaking down barriers between our different sales, distribution and production entities.”

Towards S&OP-supported financial planning

Eramet’s manufacturing, distribution and sales departments have learned to rely on the S&OP system to consolidate their planning. From very early on, OMP has been used to prepare financial budgets by valorizing forecasting but, according to Stéphane Roux, this is not the end of the story.

“In my view, we should go one step further and use OMP to support financial planning too. I think this will be one of the main challenges for S&OP in the coming years.”

Empowered, not frustrated

Supply Chain and Business Reporting Engineer, Grégoire Castagna is a business user of OMP and he greatly appreciates having full access to the OMP database.

“I may be IT-savvy, but in my business, I also need to fully understand the data I am working with. So, it’s a big advantage getting hold of the data model behind the system, and not being frustrated by some black box I wouldn’t understand. Of course, the data model is quite complex, and it took us a while to really grasp it. But OMP fully supported us in that. This is especially important in reporting. For example, we’re currently developing and fine-tuning reporting that will allow us to cross-check data from different sources, including accounting, supply history, S&OP, and economic trending analyses.”

Assessing risk and supporting investment decisions

In addition to providing guidance on capacity planning and sourcing, the S&OP system has proved to be an excellent tool to deal with market dynamics and to support decisions on product routing and investments.

Stéphane Roux: “Our markets are in a constant flux, and the expectation is that this will continue as the economy gathers pace. That’s why we use OMP to continuously evaluate our sales strategy and assess the risks involved in signing new long-term contracts. On the other hand, we mustn’t be over-cautious, especially with the opportunities presented by emerging markets. But even there the system can help us, for example by giving us the tools to simulate the effects of investment or changes in production and supply routes.”

Project details

OMP was implemented at the Aubert & Duval and Erasteel branches of Eramet. Features implemented include:

Sales & Operations Planning, including finite capacity plans, complex production flows, multi-operation routings, alternative routings, and What-If simulation.
Collaborative forecasting, including market-share and bill-of-material forecasting, statistical model for breakdown, integration of steel service centres, financial validation, and annual budgetting.
Network Design, including embedded support for long-term strategic studies and flexible adaptation of the underlying cross-site flow model.
SAP integration, including integration of sales history and open order book, mapping of SAP product to S&OP families, and upload of constrained sales plan to SAP sales quota.

About OMP

OMP helps companies facing complex planning challenges to excel, grow and thrive by offering the best digitized supply chain planning solution on the market.

Its Unison Planning^TM concept has a unique approach. It handles all supply chain planning challenges in a unified way, synchronizing all planning stages, horizons, functions and roles. From source to deliver. From strategic to operational planning. From leadership teams to schedulers.

Hundreds of customers run OMP’s cloud-based solution to generate more value by making informed decisions. Valued as a thought leader by experts as Gartner, OMP invests one out of every three dollars earned into innovation.