Tuesday, 21 November 2006

The Hertel Group is a leading European provider of building and infrastructure support services, ranging from civil engineering and building maintenance to nuclear decommissioning. Two years ago, Hertel was very much paper and fax focused, which lead to silos of information and lack of communication and centralised information. Since implementing IFS Applications Hertel has seen its business become more efficient

With the elimination of paper-based transactions, purchasing and invoicing processes have become more streamlined. Better access to accurate information also means that accounting has improved and productivity has increased - all significant benefits for the construction business.

Benefits

Faster, more accurate invoicing
Automatic invoice processing
Less costly administration
More efficient purchasing
Greater regional autonomy while retaining central control

Payroll Routines Were Unwieldy
Hertel's workforce is fairly transient, and within regions personnel can be moved between sites as projects progress. Better HR facilities were needed for maintaining employee records. Other requirements included a more efficient means for accruing costs against customer accounts. An initial business process review had shown that as the company was growing, so were its problems in purchasing administration and purchase ledger. Payroll was taking too long and tying up excessive administrative resources.

Hertel's IT Manager, David Redpath, explains, "Being a service-orientated business, a large proportion of our costs stem from direct labour. Our time sheets are based on Excel spreadsheets, which previously were printed and faxed to the head office, where the data were keyed into another computer database. This unnecessary effort has been eliminated. Data files are emailed to the head office and imported directly into IFS Applications. All that is required is a simple check for any anomalies. Significant savings have been made as a result of this improvement."

The HR and payroll components were among the first to be implemented together with purchasing and finance and the IT support centre. The monthly payroll, which involves around 300 people, went live in December 2004. Weekly payroll followed in June 2005 with over 2,000 employees now being paid correctly by bank transfer. While monthly payments tend to be fairly uniform, the weekly payroll presented a number of challenges to the project team because of the complexity of Hertel's hourly rates payment structure.

Delegating Purchase Orders
The initial implementation phase also included the introduction of IFS/PurchasingTM. In a similar way to the payroll component, this has resulted in a huge improvement in business efficiency by eliminating the use of paper-based documentation. Purchase orders can now be raised locally using information drawn from the company's central database.

Each of Hertel's site operations acts as an autonomous unit with an onsite manager, project numbers, and performance bonuses. "The main thrust of our strategy was to increase the autonomy of the regional centres while retaining central control on what items or services they are allowed to purchase. This is governed by a corporate database listing recognised products and approved suppliers" says David Redpath.

Should a service engineer require any materials while on site, all he needs to do now is call his local office. An order can be raised instantly through IFS and sent over to the supplier before the engineer arrives to collect the part. Previously the company had a head office purchasing function serving multiple site locations as well as the regional centres, each submitting hand-written purchase requisitions for orders to be raised centrally.
Matching Invoices
As well as streamlining the ordering process, the new system instills better discipline for accruing customer account costs. Information is more readily available and since supplier invoices can be matched easily to the purchase orders they can be paid promptly without further query or delay.

"The paperwork we save on that is unbelievable. Instead of sending out copies, which would very often go astray, the invoice can now be authorised automatically if it matches the purchase order. Any exceptions can be presented on the site computer screen and authorised at the press of a button."

Weaknesses in the previous system would often cause supply difficulties. Delays caused by an invoice mislaid and overdue for payment resulted in stops being imposed, which would also impact other parts of Hertel's national network. The new system provides better visibility, allowing suppliers to be advised of payment status.

Invoicing Faster and More Accurate
Savings have also been realised by making the operational sites responsible for their own invoicing. All the information is readily available within IFS. Site managers can now get 90 percent of guaranteed costs straight away; a target which David Redpath believes can be improved. "We work to a 10-day rule as often we have to make allowance for obtaining information we require from the customer. We are now down to six or seven working days to get costs into the system, and we want to get that down to five days."

In all these areas, payroll, purchasing and customer invoicing, Hertel Services is now achieving better productivity performance with a smaller head office team, even though the business has grown.

Future and Other Developments
The initial IFS Applications implementation has expanded to centralise all of Hertel's information and intelligence:
IFS CRM was quickly and successfully implemented in March 2005 to provide a company-wide tender tracking solution and give visibility of sales pipeline. Each sales area now updates its own records and prospects which provides the sales director and business development managers with accurate, up-to-date information. The success of this solution means that Hertel is now looking at rolling this out to its Middle East office.
IFS Risk Assessment went live in July 2006 providing field technicians with digitised pen upload into IFS. The subsequent processing through IFS results in output to the end customer in a fraction of the time and provides Hertel with a competitive advantage and significant efficiency gains. The solution is now being considered for other site activities such as Health and Safety reporting.
IFS Service Management will go live in late October 2006 to provide facilities management control and tracking for periodical jobs utilising the full integration into the existing IFS solution for finance, HR, payroll and purchasing.

Overall benefits to the Company
The IFS solution still gives the 50+ UK sites their independence as well as providing full head office support for all the centralised core functions such as payroll, finance and IT. The result is effective information flow while still retaining the distributed environment essential for that type of business. The change is being made from pockets of isolated data to company wide knowledge management. Additionally, Hertel UK has grown its business by over 25% without increasing the level of support staff since implementing IFS.

"A recent online survey for staff demonstrated that the majority (88%) think the IFS system is good or better than the old systems. The staff have more information, it is easy to learn and it is easy to find and analyse information without having to re-type it all back into a separate system it is more accurate" concluded David Redpath. The roll out of additional IFS solutions to complement their business is proof of the success that the partnership between vendor and customer has driven.

About Hertel Services
The UK business is growing at around 10% per annum and with annual sales of £145 million it accounts for nearly half of the group's total business. Hertel (UK) Limited operates through a network of over 60 customer site offices and 11 regional centres. Activities range from project surveys and reports, to total solutions for rectification and ongoing monitoring. The extensive customer base includes nuclear decommissioning, petrochemical processing plants, public sector utilities and municipal authorities.