28 Jun Global ERP Consolidation and Roll-out of Microsoft Dynamics NAV in AVK Group

AVK Group is the international enterprise specializing in production and sales of hydrants, locks and valves used in oil and gas supply, water supply, sewage treatment or fire protection appliances. Group has 77 locations on almost all continents. So many different subsidiaries results in different demands and ways to lead business processes.

Headquarters’ ambition and real need has always been data and processes unification. The base of their solution has become Microsoft Dynamics NAV and they have chosen IT.integro as a global partner in system implementation.

Microsoft Dynamics NAV global project for AVK Group – industrial group that currently comprises 90 companies. The core business of AVK is the production of valves, hydrants and accessories for the water and gas distribution network, sewage treatment and fire protection.

Vision: standardization of business processes, reporting and master data

For several years AVK on their own made efforts to unify the system and procedures for data transfer and reporting. Eventually, a decision was made to seek support and assistance of an IT partner eager to develop a unified structure for reporting and data exchange.

IT.integro competed with several reputed global partners from Western Europe and it was our experience in the development of complex unified systems for multi-branch global organizations (previously prepared for VideoJet EMEA) which helped us to win this project.

The first project assumptions anticipated implementation of the so-called Scipper* (internal project name) only in the European branches of AVK Group. As the project brought success it prompted the management to expand it to almost all remaining companies. At the moment, the project spans more than 30 of them, located in 16 countries worldwide. Ultimately, Scipper is to be used by employees in at least 40 companies. We are very proud that all this time we have successfully fulfilled the original vision of AVK management and incorporated more and more companies into the global ERP system, trying to streamline business processes at the same time.

The challenge: how to reconcile the global organization?

Since the creation of the company in 1941 AVK has gone a long way – from a small, family-owned craft workshop to a global trading and production corporation. Currently it owns more than 70 entities, including over 20 manufacturing plants.

AVK Group has been trying to unify ERP systems for a long time. Most of the new AVK companies used Microsoft Dynamics NAV. There were local installations, with no need to introduce global process standards. Local systems generated reports necessary to manage the entire organization. This level of unification, however, was sufficient only to some point. Subsidiaries worked on different system versions and managed processes in a different manner. Advanced solutions were implemented in some of them while others lacked proper trainings and did not use NAV at all.

After intense development on various markets AVK management found that what the company needed most was a complete consolidation which implicated working out global procedures and conditions under which local companies could work in the same manner:

• simplifying reporting procedures, making it automatic (especially for group reporting) – to avoid report delays
• developing a unified structure for inventory and BOM management– that is Manufacturing Specification managed from one location by the technical department (based in Denmark).

Unification was also aimed at cost reduction.

At the core of consolidation was simplification of reporting by introducing the same chart of accounts in all subsidiaries. The chart of accounts was divided in such a way as to highlight structures which will be global – obligatory for all companies. The remaining parts (e.g. VAT or income tax) could be dependent on local conditions.

The project was first commenced in companies operating in the UK but it was suspended due to development difficulties in other countries. It was the time when IT.integro supporting, as yet, onlyPolish AVK subsidiaries in the area of NAV. We assisted in defining project objectives for the entire organization and developing procedures which are currently the basis for system functioning in AVK.

Solution: Global Template for Microsoft DynamicsNAV

The Group (both the headquarters and most of the local companies) was well familiar with Microsoft Dynamics NAV. Therefore, it seemed natural to plan consolidation based on that ERP system. The global solution was founded upon its version 5.0 and it adopted the name Scipper*.

Many of the components inc
orporated into Scipper are external solutions, integrated with the basic ERP version. Purchase planning as well as production planning is executed in Stratum tool; an external BI tool is used to conduct advanced business analysis. In a similar manner IT.integro took advantage of many other solutions. So wherever it was possible, we used external, dedicated software tightly integrated with Microsoft Dynamics NAV.

The first piece of work performed jointly by AVK and IT.integro project team was to define a list of processes and divide them into local and global ones. Then, the same was done with data – it was established which data will be centrally managed and which will be administered by individual countries. After comprehensive preparations a Global Template (ERP system core) was developed (a unified set of processes, data and functionalities).

The Global Template developed as the system was implemented in more and more companies. Very often, during Scipper implementation in subsequent countries it turned out that the procedures used in a given location were more effective than what was originally considered global standard. The same applied to functionalities required locally by a subsidiary in which system roll-out was being carried out. AVK headquarters several times acknowledged the fact that the solution so far used only locally is so advantageous that it could be made available to all other companies in the group. As a consequence, with every half-year Scipper was more and more enhanced and extended.

Until now, consolidated Microsoft Dynamics NAV (based on Global Template) system has been implemented in 31 AVK subsidiaries worldwide

What brought such effective result was the very nature of work of global partner – IT.integro. The whole project from the very beginning to the very end is carried out by the same project team – says Andrzej Dudzik, IT.integro Project Manager – Every system start-up equipped our consultants with better insight and understanding of our customers’ needs and expectations. Thus, on the one hand, we are more and more efficient in system implementations. On the other hand, what we offer is of increasingly higher quality. If several independent teams were to carry out the project (which is very common for the biggest ERP partners) this knowledge and experience would be dispersed among too many people. What we offer is consolidated knowledge – Andrzej Dudzik concludes.

What currently falls within the scope of Global Template is, above all, processes of internal data exchange connected with selling their own products, a uniform chart of accounts as well asMaster Data Repository (MDR).

Master Data Repository is one of those indispensable components the entire AVK group wouldn’t do without. This central database stores the following data:

• data of all inventory manufactured by AVK, components and materials are available through web interface (unified item card numbering for each company);
• BOM (Bill of Materials – material specification) for manufactured items– in this solution they are created, modified and made available to other companies;
• data regarding all company products (technical, marketing, manufacturing details);
• central information about pricelists and inventory.

Advanced search tools are used in the solution facilitating the process of searching the desired piece of information. For BOM related data pertaining to a specific product – the manufacturing company is able to create their own copy of BOM directly in central database and adjust it to their individual needs. However, its basic structure (project) is the same for all companies. Using such a central data repository streamlines implementation of modifications in each company.

An example of a solution initially developed for only one country (France), later extended to the whole group is a module dedicated to conditional discounts management. It turned out however, that several companies in the group granted discounts to their customers for reaching a certain purchase value in a given period (month, quarter, year). Discounts are offered even if the customer’s overall number of small purchases reaches a required price limit. In such a case a credit memo is issued. The module allows to set different discount amounts for individual customers/groups of customers. Posting group setup as well as automatic additional costs were properly adjusted and they are invoiced as customer discounts.

In AVK Group the scope of business activities of individual companies is divided into sales and manufacturing. Commercial companies sell products supplied by factories scattered around the world. A lot of internal sales and purchase documents are exchanged between these entities. What was of pivotal importance to AVK was to accelerate and simplify this exchange to the utmost. Thus, Scipper incorporated EDI (a solution for electronic data interchange). With EDI, purchase order sent to the manufacturer from the commercial company is automatically converted into sales order. Having produced an ordered item, an invoice is generated and automatically posted (provided there are no discrepancies in relation to original agreements or within the permitted scope of differences). It is also automatically posted. That significantly streamlines the whole process.

The central database collects also warehouse data in individual companies, which serves as a basis for preparing a report on slow-rotation stock (slow moving stock) – i.e. item(s) which could be sold to another location, reporting increased demand for it. As a result, company cash is not “frozen” in unused accumulated inventory. This type of reporting and checking of item availability is, in large measure, possible due to the uniform numbering of inventory. Before introducing standardized numbering each company marked inventory according to their own directives. That was the reason for hindering global and complete overview and comparison of stock levels from the group perspective.

Business benefits: simplification, cost savings, transparency and much more…

Adopting the approach to use Global Template in all group companies reduces implementation costs in each of them. A large amount of work at the project onset was devoted to a thorough process analysis. Once process unification and data collection are done, system start-up in each location is executed more and more smoothly and seamlessly.

Each of local organizations can make use of numerous effective solutions worked out during previous implementations. At this stage Scipper is so well developed that very rarely companies report requirements which hadn’t been already prepared – says Andrzej Dudzik – What’s more, the number of available (and free) functionalities is so vast that companies are not able to consume them all. It happens that implementations of some interesting, though less significant modifications, are postponed to a more distant future. Being halfway through project realization we came across a situation when companies pay much less than they would pay for NAV implementation in a standard manner. What they get in return is a vast number of solutions they couldn’t afford on their own. That’s a real synergy effect, feasible with the use of Global Templateand by working exclusively with one project team.

AVK Group is also running a very deliberate project-related information policy. Companies already using Scipper, willing to share their opinions and benefits of using it have AVK internal portal at their disposal. Currently, the list of prospective advantages is over 80, including time-saving benefits as well as the ones which bring real financial gains.

As the number of countries, which are to implement Scipper, is significantly expanding, it is the confirmation of noticeable benefits acknowledged by AVK. Initially, Scipper implementation was planned only in manufacturing plants in Europe. Great project success brought about its expansion to other continents.

Certainly, one of the most significant and already noticeable benefits is savings related towarehouse reporting and purchase optimization within the group. Scipper boost purchase from other commercial companies rather than generates new production orders.

The headquarters’ supervision over all activities carried out by the company has definitely increased. Instead of periodic reports, now all information is visible in the global database on a regular basis. Settlement of mutual receivables is also enhancing due to high transparency of contracts executed between the companies.

The use of BI tool – Stratum, a part of Scipper, brings gains as well. Historical data regarding purchased items and sales orders planned for execution is globally stored in Stratum. Based on subsequent data processing a production requisition plan is developed and forwarded to the manufacturer. Finally, it is loaded into the system forming a base for a ready-made production plan.

From the project onset, there have always been high hopes behind its realization and future outcomes. Many years ago a list of prospective benefits was complied. Looking at how the project developed, we can firmly state that these objectives have been achieved. AVK Group is successfully undergoing consolidation and numerous benefits have been gained: unified chart of accounts, inventory reduction, and reporting, to name just a few.

Keld Moestrup, Group IT Manager in AVK since 2011: AVK sees IT.integro not only as a supplier, but also as a partner, who is actively involved in the activities of our internal IT department. IT.integro has been handling all our Navision roll-out projects and a huge part of our daily user support. As their business model is to delegate a permanent team of consultants to our installation support, we can be sure that their consultants know our business and our system setup very well. I would also mention their flexibility. Now, we are able to change plans dynamically and we can count on their assistance when we need it.

Carsten Skovbjerg, former AVK’s Project Manager: Developing Master Data Repository was a very demanding and complex process due to a large number of AVK products and various methods of manufacturing of particular items. We are very glad that this solution is working, especially in process subscription by individual group companies. We are very satisfied with the cooperation with IT.integro. We were looking for a partner who will assist us in developing the system and support us in problem solving.

Read more about other AVK people opinions at our website: AVK opinions and Financial Consolidation.

You will also find two blog posts of former AVK IT Manager (Henrik Buss) at this blog: International Dynamics NAV partner | My experience with choosing partner for global roll-out and Global Microsoft Dynamics NAV project for AVK Group | IT.integro performance.

More about AVK Group

AVK is an international enterprise specializing in production and sales of hydrants, locks and valves used in oil and gas supply, water supply, sewage treatment or fire protection appliances. AVK products are characterized by their high quality achieved by using the most cutting-edge design solutions (e.g. their own design office and laboratory). Manufacturing technologies play a vital role too (different manufacturing methods, usage of epoxy paints, enamel and other anticorrosives). Additionally, some part of mechanical processing is robotized and about 70 types of rubber are used in production in their own rubber factory.

It took less than 35 years for a small Danish workshop to grow into a global Group owner of production plants in Denmark, Germany, Poland, Netherlands, Great Britain, France, USA, Saudi Arabia, China, Australia and a chain of 77 commercial companies. AVK employs more than 2300 people making an annual net sales of DKK 3.3 billion. Their products are available on all continents.

* Scipper – global ERP solution developed for AVK based on Microsoft Dynamics NAV 5.0. The name is an acronym (S: Supply chain, C: Customer service, I: Integration, P: Planning, P: Production, E: E-business, R: Reporting)