Together with MIC, Hilti Group successfully introduces a uniform and transparent solution for origin of goods & preferences incl. customs tariff classification

Customer Case | Central Classification | Origin Calculation | 15 January 2020

Hilti – the Company

Hilti stands for quality, innovation and direct customer relations with around 250,000 contacts per day. More than 30,000 employees worldwide help to make work on construction sites easier, faster and safer - and to inspire customers every day anew. With products, systems, software and services that offer superior added value. Ideas for improvements often arise directly on site in discussions with customers. If there is no Hilti solution for a challenge, it will be developed. To this end, the company, which is headquartered in Schaan, Liechtenstein, invests around 6 percent of its turnover in research and development every year.

The strategic goal: sustainable value creation through market leadership and differentiation. The company, founded in 1941 by the brothers Eugen and Martin Hilti, also has far-sighted financial plans. All shares of the Group are held by the Martin Hilti Family Trust, which ensures the long-term continuation of the company.

Hilti is building a better future – with sustainable and innovative solutions. The company assumes equal responsibility towards society and the environment in order to work for a better future – also outside its core business. In addition to the charitable Hilti Foundation, the values we live by every day in our dealings with team members, partners and customers also contribute to this: Integrity, courage, teamwork and commitment.

Source: www.hilti.group

 

The initial situation at Hilti – migration from SAP ECC6.0 to SAP S/4HANA

Hilti has long had a strong focus on global and uniform process management. All Hilti foreign trade processes (e.g. Country of Origin Management, Customs Operation, AEO, Dual-Use, etc.) were mapped centrally in SAP ECC 6.0 with overall responsibility or group-wide, using extensive in-house developments and a high degree of automation.

Over many years, HILTI’s Foreign Trade System has been developed to efficiently execute foreign trade processes that meet compliance requirements and to take advantage of the corresponding tax and cost-saving potential.

In 2016, however, it was decided to replace SAP ECC 6.0 with S/4 HANA. This was a far-reaching decision that affected the entire Hilti Group and had a very ambitious project plan:

  • Project start in 2017
  • Implementation target in 2018/2019
  • All at the same time in the whole Hilti Group with a BIG BANG as go-live at the end of the project

Hilti was thus one of the first companies to take up the challenge of switching from SAP ECC to SAP S/4HANA. The impact on the Hilti Global Customs Team was enormous as not all Hilti requirements in the area of foreign trade could be covered and the solution had to be future-oriented. For this reason, the “Foreign Trade 2.0” project was launched in January 2017 with the aim of establishing a uniform and Hilti-wide external system for the management of the origin of goods and the customs tariff classification of its products, which is connected via interfaces to the new SAP S/4HANA ERP system and thus ensures integrated processes.

Requirements & evaluation – why Hilti chose MIC

Hilti’s analysis of the requirements and implications for the future system of origin management and customs tariff classification led to the following basic selection criteria:

  • Selection of a service provider solution that enables:
    • to close potential functional gaps in the foreign trade management of S/4HANA.
    • to be tested and used during Hilti’s ERP changeover phase to reduce complexity and mitigate risk among the stakeholders involved (Hilti plants).
    • Further improve customs productivity and efficiency through efficient use of FTAs or process optimisation.
  • The solution must fully comply with Hilti’s specific foreign trade processes.
  • The solution must avoid potentially negative financial consequences and ensure that:
    • free trade agreements can continue to be used without interruption in order to realise the savings potential of CHF 6 million annually.
    • Hilti products will continue to be available for the 28 countries where a certificate of origin is required for import.
    • it supports Hilti’s visionary IT goal of “Solid Core and Flexible Boundary”.

The evaluation and selection of the appropriate service provider solution based on these criteria was carried out worldwide from Hilti’s headquarters and affected various Hilti organisations (e.g. plants, regional distribution centres, etc.).

Soon after the start of the “Foreign Trade 2.0” project, Hilti’s Global Customs and Trade Compliance department began looking for well-known software providers for origin and preference solutions and customs tariff classification. And very quickly they came across MIC, the leading provider of global customs and trade compliance solutions. In addition to other suppliers, Hilti invited MIC for presentations, discussions and a corresponding offer. In order to ensure that the products and services offered by MIC were also confirmed by third parties, reference visits to existing MIC customers were also scheduled.

 

The project – progress & go-live

The kick-off for this project took place in September 2017, when HILTI relied on MIC’s cloud-based Software-as-a-Service (SaaS) solution and initially implemented the following MIC modules:

  • Original Calculation System – OCS|CALC:
    MIC’s solution for preferential origin calculation (MIC OCS|CALC) helps to comply with a number of complex preferential rules of origin for numerous free trade agreements through complete audit trails and to optimise processes by increasing the degree of automation.
  • Central Customs Tariff Classification System –CCS|CTC:
    MIC’s Central Customs Tariff Classification System (MIC CCS|CTC) enables improved automation and traceability of the customs tariff classification of products through rule-based and intelligent algorithms taking into account regularly updated national customs tariffs.

In concrete terms, almost a dozen free trade agreements have been implemented for the calculation of origin, such as EUCA (EU with CA), (PAN) CH/LI & EU (EFTA with TR, EU) or EUMED (EU with MA, JO, IL, LB). In addition to the implementation of these numerous FTAs, several new developments to extend the functionality of OCS were also implemented as part of this project.

This includes, among other things, the preference transfer, which enables Hilti to pass on the acquired preference from one plant to the next plant in internal series of transactions, fully automated and including all documents, which represents a significant process facilitation.

Apart from that, a Swiss peculiarity had to be taken into account, namely with regard to supplier declarations. In this case, purchase order based declarations are required for each order, the usual long-term supplier declarations are not available here.

The origin calculation is also connected to Hilti’s SAP S/4HANA via bidirectional interfaces and is 100% automated. The origin information calculated by MIC OCS flows fully automatically into Hilti’s invoice generation. Not a single user is involved in the process, only in the case of error messages must manual intervention be taken. This saves time and frees users from tiresome repetitive tasks.

One should not forget the centralised customs classification for Hilti’s entire product range according to national requirements with MIC’s customs classification system CCS. Here, too, integration with SAP took place via bidirectional interfaces.

The integration with SAP S/4HANA via interfaces was probably one of the main challenges for MIC in this project. There were standardized SAP interfaces, but not for S4/HANA, which was completely new territory. The interfaces therefore first had to be developed and implemented, but in the end new standardized SAP S/4HANA interfaces were available. Hilti now benefits from the seamless integration between its new ERP system and the software solutions from MIC. This enables highly automated and compliant customs and trade processes. The interface communication takes place in real time with XML files via SOAP standard web services.

In a project with a big unknown like the newly introduced SAP S/4HANA, new requirements arose during the project, which increased the project scope and also the complexity. This in turn required extensive testing by Hilti and MIC. It included a system load test in mid-2018 with 2000 users simultaneously accessing the new foreign trade system, which lasted over an entire weekend and was very positive.

After this test a preliminary conclusion was drawn and the interfaces were “frozen” at this stage of development, nothing could be changed from now on. It was a precautionary measure to not put anything at risk until the go-live and to be able to access a functioning system at that time.

The big bang was on 26 November 2018. Clocked in hours and in line with the migration from SAP ECC6.0 to SAP S/4HANA, the go-live of MIC’s solution for origin and preferences as well as for centralised customs tariff classification within the entire Hilti Group took place. From the beginning, no delay was “allowed” and there had been no delays until completion.

 

Summary and comments on the project

The entire project was characterised by professional and solution-oriented cooperation, always focusing on the big picture and not getting lost in details.

All milestones were reached on time – even though additional requirements were defined during the project.

The project was implemented and completed within the planned project duration, the planned budget and in perfect quality.

The use of MIC’s SaaS solution now enables Hilti to focus more on the core processes in its ERP system SAP S/4HANA (Solid Core). This is due to the additional flexibility gained through MIC and the reduced need for adaptation in view of regular legislative changes in the area of customs and trade compliance (flexible boundary).

 

Hilti and the next steps

The contract signed with MIC also includes the sub-module MIC OCS|SCS (Supply Chain Solicitation), which enables intelligent and efficient supplier management for many free trade agreements worldwide via the MIC supplier web portal. The go-live of this sub-module will take place in 2020.

Above all, however, the company wants to permanently dedicate itself to system development and automation in order to further increase process efficiency.

We wish all those involved continued success with the same enthusiasm and commitment!


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