ZF Friedrichshafen AG - on the way to a transparent preference determination system for all ZF-locations with a successful pilot project

Customer Case | Central Classification | Origin Calculation 30 July 2015

Centralized and, standardised group solutions for origin of goods & FTA preferences including customs tariff classification

Interview with

Harald Boes, Manager Customs Management & Policies / Air Cargo Security, ZF Friedrichshafen AG


Robert Hettler, Senior Manager Corporate Finance, IT, M&A/ FC Outbound Logistics (FISO), ZF Friedrichshafen AG


ZF Friedrichshafen AG - the company

ZF is one of the world's leading technology groups in automotive drive line and chassis technology, as well as active and passive safety technology. The company, having taken over TRW Automotive on 15 May 2015, is represented in approximately 230 locations in 40 countries. In 2014, the still independent companies generated a turnover of over 30 billion Euro with 134,000 employees. These impressive figures make ZF one of the three biggest tier 1 automotive suppliers in the world.

Source: www.zf.com


The starting point of ZF - merger of a company established and grown in a decentralised way

Until 2011 ZF was a company which had grown in a decentralised way, consisting of independent divisions and legal entities. From a technical point of view, all divisions in Germany used their own SAP-systems, evolved in different ways since their introduction. Their FTA preference determination processes evolved in a similarly decentralized fashion.

In August 2011 these formerly independent operations were formally merged into ZF Friedrichshafen AG. One item on the agenda of the merger was a transition to consensus with regards to the preference determination process for the entire ZF Friedrichshafen AG. This transition required naming a person with overall responsibility for the preference determination system at ZF, in front of the German Central Customs Office.

Harald Boes, Manager Customs Management & Policies / Air Cargo Security, took overall responsibility for FTA preferences. He stresses: "The administration, controllability and control of the preference determination system, with the nine differently designed SAP-systems to date, could only be carried out with difficulty and great effort. You quickly reach the limits when you imagine you have to customise the same thing nine times, which would only be necessary once in a standardised system. This circumstance has led to many internal discussions with the aim to establish a standardised preference determination system for all ZF locations."

In addition to the professional requirements and the need for a standardised preference determination system, company-wide regulation of the IT-processes was also a concern at ZF. In the course of the evaluation of the "Application Landscape" ZF's IT-department came across the various processes for preference determination in the SAP-systems nearly at the same time.

Robert Hettler, Senior Manager Corporate Finance, IT, M&A/ FC Outbound Logistics, explains: "We discovered that the processes for preference determination were documented in all sectors in the SAP-systems, initially this was a positive surprise for us. Unfortunately, however, all systems were organised differently. And since the need for standardisation from the business side, in particular Mr. Boes, was growing at that time, this gave the whole process further momentum."

In January 2014, ZF's Material Management Council (MMC) initiated and commissioned the project "Ready for Preferences". The goal: to establish a standardised and ZF-comprehensive system for the preferential determination process - either via the existing SAP-landscape or a third-party system.


The requirements - what must a ZF-comprehensive system for the preference determination process provide?

The correct determination management of the originating status of goods in accordance with rules of origin listed in a given agreement, are material for the use of the advantages in the preference agreement. Therefore, the new software solution had to be able to ensure all aspects of the preference determination management in order to guarantee legal certainty in any event.

Furthermore this solution must be able to support ZF in the centralisation and control of the cross-company and cross-system preferential processing: via central access to the relevant data and processes to create the necessary transparency.

The solution should be acknowledged by the national and international customs authorities for origin determination management and should be usable from the point of view of all other ZF-production locations for preference management to use the advantages of the free trade agreements. It must also provide a continuous high degree of automation.


Searching for an appropriate partner- why ZF opted for MIC

It is to be expected that the importance of preference determination is known in customs departments, but what about other professionals, for example in the IT-sector who are also involved in the project "Ready for Preferences"?

For exactly this reason, it was essential to create a common level of knowledge of all people from the various departments involved in this project. In order to be able to make a qualified decision with regards to the best possible solution for a standardised and ZF-comprehensive system for the preference determination process, the people involved participated in a technical seminar on the topic origin of goods and preferences in February 2014.

At the same time, ZF began to look for software providers for origin of goods and preference solutions. Thanks to the recommendations of other companies in the automotive industry - they quickly came across MIC Customs Solutions, the leading provider for global customs solutions.

As early as March 2014, three eligible providers, MIC included, were invited to an initial presentation. The information ZF gained during these presentations formed the basis of the ZF-internal project in April 2014. These presentations also served as the foundation for the creation of the specifications. In May 2014, the detailed provider presentations took place. During the month of June MIC and one other provider remained in the race.

Harald Boes says: "After the contractual negotiations it was clear that the overall package from MIC has convinced us. MIC Customs Solutions offered the most functionally mature system for IT, making ZF's work easier via the many functionalities - it simply covers all aspects of foreign trade."

The result was presented to the ZF-Steering Committee and as of early August 2014 it was confirmed: MIC was going to be the new solution provider for ZF-Friedrichshafen AG's preference determination process.


ZF's experiences with MIC - project progression and go-live

Kick-off for the pilot project took place a week after the decision with a very ambitious schedule: This schedule forecasted that, on the one hand, the pilot, the business unit "Electronic Systems" in Auerbach, should be live within 6 months. On the other hand, all facets of the preference calculation that were going to be used for the entire ZF-group later, had to be implemented in the pilot as well, in order to make the rollout in other locations faster and easier.

Despite this challenge, all those involved supported the strict schedule. A lot of time and effort was invested in order to reach the goal.

The pilot project at ZF "Electronic Systems" in Auerbach was divided into three phases:

  • Phase 1 - Request for supplier declarations by end of 2014
    At the end of November 2014, the requesting and administration of supplier declarations was started by means of the MIC Module OCS SCS (Supply Chain Solicitation). In the framework of this project phase, a number of workshops concerning ZF's comprehensive requirements took place. In phase 1, the division into a larger working group and a small task force proved very successful. The large working group developed and adopted the prevailing templates, and the smaller task force then carried out the rollout for the pilot.
  • Phase 2 - Calculation of the origin of goods by the end of March 2015
    Next the implementation of necessary processes for the calculation of the origin of goods was carried out in the second phase. Setting up the rules for origin of goods, testing the rules and processes and training for employees were only some of the many required tasks. Here the data gained from the first phase were used and communication took place via automated interfaces between MIC and SAP.
  • Phase 3 - Go-live on 25 March 2015
    After a successful go-live of the definitive pilot solution in Auerbach on 25 March 2015, Harald Boes said: "Since 6pm last night, we have been operative in our pilot in Auerbach with the preference calculations under MIC OCS. I would like to thank the entire team for the extraordinary effort during the last few days and weeks. The entire project team, ZF-IT, MIC and the pilot in Auerbach worked as one. This is exceptional! ZF and MIC have created a new European standard with regards to origin of goods and preference solution. The right people from both sides were at the right place at the right time. Our service provider MIC has strengthened ZF's preference determination process in a sustainable way by means of an exceptionally good project team and an exceptionally good project. We will be positioned correctly with MIC in future too."

Additionally the Module MIC CCS for customs tariff classification of ZF-articles including integration via SAP was introduced, also containing a return interface for the classified articles to SAP from MIC CCS.

Thus the pilot project was implemented and concluded within the planned project period, within the planned budget and with the highest quality...not always the case for IT-projects like this. 


ZF's benefits via the use of the MIC solution

Robert Hettler and Harald Boes see the following benefits for ZF as a result of the use of the MIC solution:

  • "ZF now has a comprehensive global system. Everything runs or will run via the server in Germany and will be accessed via the same interfaces, whether from the US, China or Brasil."
  • "We now have the opportunity to use synergies, such as further development, support or the provision of 'Shared Services'."
  • "Nine different processes for nine ERP-systems are now standardised and centralised in one process - this also means there is only one system to maintain and service."
  • "We now have a legally certain and controllable system that can be accessed centrally and we also have more transparency with complete traceability of the origin calculations."
  • "The employees now have high-quality jobs. They can concern themselves more with checking the processes. The monotonous processing of supplier declarations is, also due to the corresponding supplier web-portal solution, a thing of the past."


ZF's plans for the future - the next steps

The rollout to all of ZF's German locations in following the pilot project is now fully implemented. The schedule was very ambitious, as was the rollout in Germany. In order to accomplish this goal, the software has been rolled out in 2 locations at a time since June 2015.

Also in June 2015, the kick-off of the US pilot project took place. Like in Germany, here too MIC's solution for the origin calculation and administration of supplier declarations, including customs tariff classification, is implemented in a pilot project, in South Carolina. Go-live is planned for November 2015.

Rollout in Korea and Austria will take place in 2016. Furthermore, work is to be carried out on full automation of customs tariff classification.

We wish continued success to all those involved!


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