Product Diversity With Foresight How KSB Handles Product Variation and Engages in Innovation Management
KSB received the “2008 Best Innovator” award in the “Complexity Management” category. What exactly was it that so impressed the judges from A.T. Kearney and WirtschaftsWoche business magazine? PROCESS went to find out.
The mood at the Frankenthal headquarters of KSB, one of the world’s biggest pump manufacturers, is distinctly upbeat. Not only does this long-standing company benefit from a broad base of projects and target industries, but it also has a clearly well-functioning innovation and complexity management system — not to mention an enviably strong equity position.
“Mastering complexity has always been one of KSB’s great strengths,” is how KSB Management Board member, Dr. Dieter-Heinz Hellmann, kicks off the roundtable discussions with PROCESS. The company may not be a big volume manufacturer but it has always seen itself as a supplier of technically sophisticated pumps. “Even for a standard pump, such as the Eta, of which we produce around 65,000 units per year, the batch size is 1.4. No two pumps are identical.” Nevertheless, in order to make a profit, processes and procedures had to be mastered; hence the need for proficient complexity and variant management.
But doesn’t the term complexity carry negative connotations, implying that there is a potential for problems? Dr. Andreas Kühl, responsible for development processes and variant management at KSB, has a completely different interpretation: “For us, product diversity is a useful and unique selling point. What it means is that the customer can choose from among a great number of variants.” But don’t other manufacturers also supply variants and modular and flexible systems? Certainly, concedes Kühl, nevertheless clearly convinced that KSB masters the diversity significantly better than others. “Especially as we received the Best Innovator award in respect of continuity and the widespread application of our variant management system throughout the entire value-added chain.” Central to this is the digital visualization of all information held on the technical systems. “Universality of data is our strength; it provides us with transparency of cost and revenue for every product,” says Kühl.
Central configurator platform for all-round benefits
An important tool in supporting the huge range of product variations supplied while reducing complexity internally is the central configurator platform which already delivers around 50 percent of KSB’s sales: “The configurator allows customers to build the pump they require from predefined modules and components either themselves or together with sales colleagues. The data is then fed directly into the manufacturing process — which saves on labor, cost and time and prevents mistakes,” explains Dr. Sönke Brodersen, Head of Research at KSB. Colleagues in Customer Support access the configurator online, as well as the company’s plants and distributors. Colleagues in Field Sales and subsidiaries who are not linked to the SAP system work offline using the same application for their own needs. Registered users and customers can also use the KSB Webshop online, which is linked to the sales configurator. Around 3,000 pumps and fittings as well as approx. 500,000 parts are processed here. The orders come onto the SAP system and after approval are transferred directly onto the production activity control system by Customer Support.
“The big advantage here is that our sales colleagues have more time for discussions with customers,” adds Kühl. “Previously, non-standard features had to be discussed and defined and it was a time-consuming business. Today, the customer is presented with a whole host of variations already pre-configured.” It also reduces the delivery time for pumps. And because sales information is now available in a structured form, the company gleans important knowledge about the market, which amounts to a considerable competitive advantage for KSB. This isn’t merely an academic exercise, as the company’s sales have increased at double-digit rates in recent years without the need to increase the workforce at a similar rate, while the profit margin has almost tripled — and currently stands at eight percent.
Constant search for new opportunities
Complexity management is important for day-to-day business, but how does KSB identify new markets? Dr. Hellmann: “We regard it as standard practice to sound out the opportunities presented today which will bring us market success later on. We do this by keeping a proactive eye on our business sector and studying the trends, all of which generates new product ideas. Structuring, developing and evaluating these new ideas falls to a dedicated project group.”
KSB’s Head of Research, Sönke Brodersen, describes the process: “We hold regular workshops to identify trends. We also evaluate information passed on to us by our own staff as well as analyzing our customers’ requirements. This prompts discussion of questions such as: What does this development mean for the markets and applications of KSB as a company? And which products do we need? We enter sector trends in a “trend book”, which is accessible to all at KSB on our intranet. This in turn sharpens staff awareness.” And they go even further than that by exchanging their trend book with other companies, who are not part of the competition. Another question which is always central to these discussions is: Which customer processes are going to change? Brodersen: “A specific example would be the development of the Microchem pump. This started six years beforehand when we identified the increasing significance of micro-process engineering from our observations of the sector. We then analyzed the pump qualities required by this type of technology. You can see from the length of time taken by this approach that you need to be aware of the future early on to be able to move forward.”
To ensure that the products generated from these ideas are those required by the market, KSB restructured its research and development work. The aim was to consolidate feasible ideas and achieve a high level of efficiency through clearly structured and monitored processes. In 2007, the company invested € 31 million in research and development, corresponding to 1.8 percent of turnover.
Ongoing need for process pump development
So what is the way forward for process pumps? Dr. Hellmann: “Chemical processes are dependent on the transport of fluids — in the form of liquid or gas. To move fluids, we need to introduce energy — it would be hard to imagine a processing unit without a pump or control fittings. We always look early on at the processes and processing technologies our customers will be using for production and adjust our products and system solutions accordingly. We also take the time to familiarize ourselves thoroughly with customers’ new business models.” Brodersen also sees an ongoing need for development as a result of the fragmentation of markets, which always presents the experts at KSB with new and ever-changing demands on pumps. “Every new customer process imposes modifications on the process pumps to be used — it might be in terms of medium-resistant composite material, optimized hydraulics or appropriate sealing,” explains Brodersen.
And what’s the position with the famous “2nd pump” for critical sectors of the chemical industry? According to Hellmann, a reliable solution has been around for some time now that doesn’t use stand-by pumps but an early fault detection system. For example, works engineers at large chemical companies have to check upwards of a specific performance class whether reserve capacity can be avoided through early fault detection. Dr. Hellmann: “You can see from the example of large power station pumps and expensive compressors that it works: they wouldn’t dream of investing in a second unit.” On the other hand, all companies in the chemical industry now attach great value to the automation of their processes. Let no-one be in any doubt that sensors reliably pick up faults and that control equipment secures reliable operation, says Hellmann. It’s only with respect to pumps that many an operator still openly refuses to believe in modern I&C technology. We need to do more work here to convince people. Ultimately, if the chemical industry in Germany were to dispense with stand-by pumps, this would correspond alone to a massive saving in investment costs of nine percent per annum — the equivalent of € 500 million. In view of the economic crisis, these kinds of savings provide ample food for thought within the chemical industry.