>> Driving eco-friendly e-mobility by using smarter finances to fine-tune sustainable manufacturing
E-mobility heralds a new environmentally conscious era for the automotive industry. To ensure that manufacturing is fully profitable and eco-friendly, Volkswagen Sachsen worked with IBM® Services™ to deploy SAP S/4HANA®, helping it standardize and streamline its financial processes, unlocking insight into manufacturing costs and efficiency.
Business challenge - To support Volkswagen Sachsen’s transition to eco-friendly e-mobility, it sought deeper insight into manufacturing profitability, helping to optimize efficiency and so minimize environmental impact.
Transformation - Volkswagen Sachsen engaged IBM® Services™ to implement standardized financial processes based on SAP S/4HANA®, laying the groundwork for a global template for the Volkswagen Passenger Cars brand.
> 80% of workflows will form part of a global template for the Volkswagen Passenger Cars brand
> 20% improvement in financial processes enables better decision-making with deeper insights
> 50% fewer staff are involved in order-input processes, freeing time for business development
Business challenge story - Preparing for an electric future
A global leader in the automotive industry, Volkswagen Group is one of the world’s largest and most successful automobile manufacturers, and is at the forefront of the electric car revolution. The group is made up of 12 individual brands, including Volkswagen Passenger Cars, Audi, SEAT, ŠKODA, Bentley, Lamborghini and Porsche. The group sells its vehicles all around the world, in 153 countries.
Driven by consumer demand for greater environmental consciousness, the appetite for sustainable mobility is growing rapidly. Volkswagen Group wants to deliver e-mobility for everyone, while minimizing the eco-impact. As part of its ‘TOGETHER—Strategy 2025’ program, Volkswagen Group plans to launch 30 purely battery-powered electric models by 2025, paving the way for the breakthrough of affordable, emission-free electric vehicles worldwide.
Volkswagen Sachsen GmbH, a group subsidiary based in Saxony, Germany, is currently converting its Zwickau manufacturing site to support the production of the Volkswagen ID., the group’s first model based on the modular electric drive matrix.
The company already uses only green energy at this plant to minimize the environmental impact of car production, helping to preserve the planet and limit climate change effects. In addition, suppliers will be encouraged to follow suit in an effort to spread this vision further throughout the automotive industry and facilitate a more sustainable future.
To be able to efficiently build cars for millions and not just for millionaires, while preserving a healthy profit margin, the group plans to invest approximately EUR1.2 billion to transform the factory in Zwickau. Equipment will include smart Internet of Things devices and robots and driverless transport systems, with a high degree of automation across the production line.
The Zwickau plant will be the group’s first manufacturing facility dedicated exclusively to e-mobility with a clear focus on sustainability and the environment. This unprecedented move will not only help bringing electric cars to all parts of society, it will also protect and create jobs in the local area and open up new perspective for factory workers.
Drive towards profitability
To ensure a smooth transition to e-mobility and achieve growth in the new line of business, the group must keep a close eye on profitability.
Volkswagen Sachsen was selected to run a pilot financial and production integration project, which if successful could be replicated across the group.
Kai Siedlatzek, Managing Director Finance and Controlling at Volkswagen Sachsen, continues the story: “We were the perfect candidate for the pilot project, because Volkswagen Sachsen were representative of the group as a whole.
“We had separate finance and enterprise resource planning systems at our three production sites in Zwickau, Chemnitz and Dresden, which added complexity to operations.
“We also relied heavily on manual workflows for reporting, using spreadsheets to track and analyze manufacturing costs.
“We were selected to lead the pilot project for the creation of a standard finance system, integrating the existing applications to increase transparency and productivity, and to improve our analytics capabilities.”
Planning moves up a gear
To bring “Electric for All” mobility to everyone, Volkswagen Group chose to deploy SAP S/4HANA as the foundation for the new global finance system. For support with the implementation of the pilot at Volkswagen Sachsen, the company turned to IBM Services.
Ronald Göllnitz, Project Manager at Volkswagen Sachsen, says: “We have been using SAP Business Suite across the group for decades, so know from experience that SAP applications can accommodate the scale and complexity of our operations. This gave us the confidence that the next-generation ERP software SAP S/4HANA was the right choice for us to remain a leading force in the industry and make the company ready for the challenges of today – and tomorrow.
“The solution would give us a transparent and unified view of our business that would help to make our processes more agile and enable us to take more effective decisions.”
IBM Services worked closely with Volkswagen Sachsen at every stage of the 18-month project, from initial planning and design to implementation and go-live, identifying and deploying the best technology options to suit the client’s business needs throughout. Supporting the company’s shift towards sustainable production and electric mobility, the IBM Services team scoped out the functionality required by Volkswagen Sachsen using workshops modeled on the innovative design thinking approach. As part of the transformation project, the team adopted agile project management methods such as Kanban.
Volkswagen Sachsen and IBM also worked closely with SAP to develop a custom integration code, enabling the company to connect its core SAP S/4HANA solution with SAP S/4HANA Sourcing and Procurement. Volkswagen Sachsen took advantage of the SAP Customer Center of Expertise’s value prototyping labs to build the interface based on SAP Best Practice templates.
Smooth start, swift journey
The strategic shift to electric mobility and the transformation of complex business applications need careful planning and communication. IBM Services helped Volkswagen Sachsen to lead a successful change management process before, during and after the technical implementation, engaging employees to garner support.
The IBM team ran a series of workshops and helped establish an innovative e-learning program to train technical, functional and support staff to use the new SAP S/4HANA solution effectively from day one.
Learning new skills and developing new professional capabilities also helps the company to retain qualified staff and create new career opportunities for the brightest talents.
Kai Siedlatzek recalls: “To shape the mobility of the future, we needed the best team. So we decided to work with IBM because we knew that their consultants are the global leaders in SAP transformation programs.
“We were delighted with our work with IBM Services – they offered excellent support throughout the project, and worked hard to gain an in-depth understanding of our business goals, which helped them customize SAP S/4HANA to suit our requirements. Most of the IBM Services consultants were local, and the core team was based nearby, and they were on-site with us every day, so there was great camaraderie and team spirit. We also received invaluable advice and coaching from specialists and subject-matter experts based in Romania and India, taking advantage of international expertise.”
Ronald Göllnitz confirms: “It was as though we were one big team. There weren’t any distinctions between who was from IBM and who was from Volkswagen – we all pulled together as one team to achieve a common goal, and the IBM Services consultants went above and beyond their duty to support us.
“The deep expertise of IBM Services in SAP S/4HANA implementations was evident from the start—the industry experience and technical know-how that the team shared was key to the success.
“Their hard work, consistency and commitment made it possible to complete the project within a very ambitious timeframe. The move away from spreadsheets to SAP S/4HANA represented a whole new way of working and a significant cultural change. The IBM team did a tremendous job communicating how and why we were making this change, helping us to guide our employees throughout the transition.”
Results story - Fueling business transformation
With SAP S/4HANA delivered by IBM Services, Volkswagen Sachsen has transformed a range of core business processes: the company has standardized, digitized and automated its financial planning and controlling operations for the 2,000 employees who rely on the SAP applications.
Kai Siedlatzek comments: “In the past, compiling complex reports and tracking manufacturing costs was very time-consuming. Today, we have instant, clear breakdowns of profitability, and we can drill down within various dimensions, such as vehicle model, line of business, production plant and more. SAP S/4HANA has also improved data quality, as all employees now work on a single, unified platform with a simplified data structure.”
Volkswagen Sachsen worked with IBM Services to reduce accounting complexity, and today the company uses 30 percent fewer cost centers. In addition, Volkswagen Sachsen also optimized organizational processes, allowing the company to streamline approval processes and move from 13 hierarchy levels to 8, a reduction of 40 percent that allows for faster information flows and more effective decision-making on all levels.
Mapping new routes
By introducing a single standard for financial control, Volkswagen Sachsen has significantly improved information visibility. With SAP S/4HANA, all employees have access to the latest information at the click of a button, in real time, providing a clearer view of profitability across production lines. The clarity and accuracy provided means that the company can better identify and understand costs, trends and variations, enabling better-informed strategic decision-making.
Kai Siedlatzek remarks: “To make production based on our new modular electric drive matrix even more efficient and the transition to e-mobility possible for everyone, we must have razor-sharp financial reporting processes in place. With help from IBM and the SAP S/4HANA solution, we can support costing, budgeting, production planning, execution, accounting and more to make the manufacture of affordable electric vehicles a reality. This rollout has laid a solid foundation for the Volkswagen Passenger Cars brand’s transition to e-mobility.”
The company also revisited the scope of various activities and roles across departments. For example, 50 percent fewer staff are now involved in order-input processes. A smaller number of trained specialists handle all the procurement tasks, improving business efficiency, releasing financial staff’s time for business development and analysis tasks.
As part of the change management process, IBM Services also developed an education program together with Volkswagen Sachsen to support the transformation of the production facilities. To date approximately 700 maintenance staff have benefitted from innovative, state-of-the-art e-learning resources devised by IBM Services.
Kai Siedlatzek adds: “More flexible and increasingly mobile working patterns are essential to remain competitive in the industry, and to attract the best and most dedicated employees. While some of our staff were skeptical at first, everyone was quickly won over by the freedom that online learning and conferencing offers compared to traditional classroom training sessions and on-site meetings. We are looking to make remote, mobile working even easier by taking advantage of new SAP Fiori apps in the future.”
Creating the roadmap
The successful implementation of SAP S/4HANA at Volkswagen Sachsen, supported by IBM Services, lays a solid foundation for a single implementation blueprint that can be used throughout the Volkswagen Passenger Cars brand. This standardization and harmonization will potentially enable the brand to take advantage of corporate synergies and reduce the number of SAP instances by at least 50 percent, significantly reducing software and infrastructure licensing costs, and cutting maintenance expenses.
Ronald Göllnitz says: “We worked very hard with the IBM Services team to ensure that we had a truly global template for the solution, which would only need minor local customization.
“We estimate that 80 percent of the features for the global template will be based on our implementation, with only 20 percent of workflows requiring localization – making our pilot project a great success with huge potential for the entire group, paving the way for leaner, smarter planning processes.”
Working with IBM Services also inspired the team at Volkswagen Sachsen to commit to more agile and less hierarchical project management practices.
Ronald Göllnitz emphasizes: “Thanks to IBM Services, we gained first-hand experience of ‘sprints’, the short development cycles that are key to agile project management. We learned that sprints could help us achieve real results much faster when combined with Kanban methodology. For the management team, this learning is not so much about methods, but about giving more responsibility to the implementation teams, empowering them to work as equals across hierarchies. By replacing strict control with trust that fosters a team spirit, employees can flourish and develop more creative solutions.”
Kai Siedlatzek remarks: “Now, we want to apply what we learned from the SAP S/4HANA project with IBM Services to other transformation projects as well.”
Achieving a sustainable journey
Volkswagen Sachsen estimated that, with help from IBM Services, it can boost operational excellence and achieve a 20 percent improvement in financial accounting, procurement and maintenance processes, helping to make the vision of electric mobility for all a reality. By reducing general and administrative expenses, the company aims to realize significant savings and gain a competitive edge in terms of profitability, liquidity and financial stability within the industry.
Kai Siedlatzek concludes: “Demand for sustainable mobility has never been higher, and only looks set to rise. With SAP S/4HANA underpinning our financial processes, we have started our digital transformation, which will enable us to make electric vehicles mainstream.
“Working with IBM Services has helped us get closer to our vision of becoming a role model for a modern, transparent and digital enterprise.
“By learning from IBM Services, we managed to strengthen our innovation potential and get our business applications ready to bring electric vehicles into production, so we can advance society with our sustainable mobility solutions.”