RPM Improves Direct Materials Purchasing Using Enterprise Software
A world leader in specialty finishes with more than 30 separate business units, including well-known brands such as BONDO, Zinsser and Dryvit, RPM needed a technology solution that would allow it to continue improving its purchasing practices. As part of RPM's corporate strategy, each business unit functions independently. These business units often use similar material and/or suppliers within product development. For the last seven years, RPM had been aggregating material purchasing where the effort to aggregate was most transparent and where there was substantial return. With Optiva Strategic Sourcing, RPM is able to pursue broader rationalization from aggregating a much greater portfolio of materials and packaging.
"Our core issue was: How do we know if two materials are the same?" says Paul Hoogenboom, CIO and VP of operations at RPM. "We realized we needed a system that had a native understanding of material properties for the chemical industry, and this led us to Optiva.
"We were already using Optiva as a formulation and product lifecycle management system in some of our units, and we realized Optiva was the best solution that could help us address this problem as well."
To capitalize on the opportunity to purchase materials more effectively, RPM needed a product lifestyle management tool that could work across all business units, without replacing or re-implementing the more than 17 ERP systems currently in place. This system needed to consolidate raw material, packaging and component items from all ERP systems into a consistent format, and cross-reference chemically and functionally equivalent materials. Using parametric search, visual analysis tools and automated business processes, RPM could identify, by commodity group, similar materials and/or suppliers. Once the materials are identified, a financial analysis per material is performed to see if aggregation might yield savings. When commercially proven, the next step is to perform a technical evaluation to see if the material substitution or consolidation will meet the product specification.
Selecting Optiva for RPM's Integrated Sourcing SolutionBased on its requirements to integrate and accelerate its sourcing across business units, RPM examined building its own customized database and developing a more robust ERP system leveraging their installed ERP vendors such as SAP, J.D. Edwards, Adage or Baan. After careful consideration, RPM selected Formation Systems' Optiva solution and Strategic Sourcing to interface the ERP systems, existing Optiva applications, and other formulation management packages within distinct business units.
"Optiva permits us to intelligently deal with over $900 million purchased annually, and the far more voluminous detail of experimental materials under consideration," says Hoogenboom. "Bottom line: Optiva is a vital tool to help continuously improve our gross margins and net income."
Within four months, RPM went live with Optiva Strategic Sourcing in its first commodity group, and was live in all groups within the next 18 months. The solution was able to aggregate the data, map to corporate items, and support the rationalization process. As a result, the deployments helped further define seven best practices that are used corporate-wide, and helped streamline the new material introduction and alternate plant certification processes.
Optiva Meets Corporate GoalsWith Optiva in place, RPM has a single view of materials used across the extended organization. This provides the company with new levels of efficiency that affect the bottom line, and also creates time savings within each business unit as the analysis and acquisition of materials is streamlined.
"We are constantly rationalizing material and packaging costs using the unique capabilities of Optiva, which provides visibility of raw material and packaging across our manufacturing systems," says Hoogenboom. "Roughly 40-45% of our revenue dollars are spent on raw materials, components and packaging. Optiva is a critical tool for continuous improvement of our bottom line."
About Formation SystemsFormation Systems is a software and services company that focuses on significantly improving the product development process for manufacturers in the food and beverage, personal care, and specialty chemical industries. The company helps manufacturers accelerate new product introduction and achieve globally compliant products with lower development costs and a shorter time to world markets. Customers realize these benefits by using Formation Systems' software, Optiva, which enables manufacturers to consolidate the product development process and integrate disparate systems into one centralized, easy-to-use solution. Customers include Coca-Cola, Barber Foods, Rich Products, Hormel, Groupe Danone, RPM and GE Plastics. Formation Systems is located in Southborough, MA, with offices around the world.
For more information, visit http://www.formationsystems.com .