ZF CIO Peter Kraus in AutomotiveIT interview

ZF CIO Peter Kraus in AutomotiveIT interview

Peter Kraus is in charge of corporate IT at ZF Friedrichshafen. In an interview with AutomotiveIT earlier this year, the graduate in mathematics explained the role IT plays at the German automotive supplier.

How does IT support the business strategy at ZF?

Technology leadership, customer benefits and global business processes are major ZF strategic elements.Accordingly, we have established ZF-wide standards for product development ”“ naturally in close coordination with auto industry standards. Accompanying this, a uniform product data management system has been established ZF-wide.Every developer at each of our development facilities worldwide today works “real-time” with current product information. Just recently, a benchmark established with this highly integrated solution attested to our top position in this segment in the industry. Similarly, we are working with our departments on standardizing other business processes and developing a common IT solution for collaboration and process handling in each case.

Give us a few examples of that?

The first examples relate to globally oriented procurement of operating materials, global accounting and financial processes as well as repetitive human-research processes. Despite the ZF strategy of decentralized business responsibility, this kind of approach makes a good deal of sense, and we are working with the business side on these solutions. At the same time, one major challenge is the consolidation of our SAP/ERP systems, to improve our cost position ”“ and not just in IT ”“ on the one hand, but above all to support global cooperation and to roll out new standards more quickly in our business areas.

Let’s go into the issue of support for the business in detail: Development times are getting shorter and shorter, and new powertrain technologies will accelerate the process even more. Doesn’t that result in new demands on IT?

Of course it results in demands on IT.A basic prerequisite for this is the provision of consistent, product-related data in an integrated IT system with automated transmission of necessary data to other IT systems, for example, the SAP/ERP systems in the company. We have created an outstanding basis for this with the previously mentioned integrated PDM system. Other issues are virtual prototyping in 3D or the digital factory, for example. In turn, these activities strongly affect our networks.Furthermore, the exchange of geometric and structure data with our customers and suppliers is crucial. We are turning to virtual test stands in the field of test stand technology. We are already achieving very good results with a prototype.

Let’s take networked functions in simultaneous engineering and integrated product language for a moment. What challenges await here?

This topic becomes interesting if engineering is to be done on the “follow the sun principle.” As already mentioned, we are very well positioned here. But it’s not just global simultaneous engineering that is important to us. We also have to be on site in various markets. We have taken this into consideration with our IT structures. The cooperation between our development centers, which are spread across the globe, and our production facilities, is assured with this.We must make additional investment in high-capacity networks in the future. In doing so, we naturally attach an extremely high importance to data protection. Another challenge is the multiplicity of languages expressing the data in our IT systems, especially where more than just German and English are needed. The overall harmonization of various master data must be advanced. In this area, we are already relatively well positioned with the ZF Group’s master material and parts list system.

Your new development center in Shanghai was inaugurated a short while ago. What is the amount of the (IT) investment and what tools is ZF using for collaborative engineering?

Our Axalant PDM system, already mentioned a number of times, is the absolute basis for collaborative work in the entire product development process. All data, documents and CAD models relevant to development are administered through it. Bill of materials information will be transmitted automatically from the PDM system to the SAP/ERP systems at the facilities. Data related to demand and targets are also provided to employees outside the development department. Generally known tools or tools developed in-house for special tasks are used in the field of technical calculation. We are relying on NetMeeting and Webex conferences for communication.

ZF has its own replacement parts business - ZF Services - with four brands.Doesn’t IT have a leading role in the improvement of service quality in this area, by providing the most advanced process platforms?

A comprehensive IT-based range of B2B services supports and differentiates our four brands from our competitors, which, to some extent, occupy only lucrative niches below our price level. We take into account the individualized wishes of our clients and, at the same time, map the order processing and distribution processes in a very automated way at our 76 ZF service facilities in 36 countries. We offer our customers the ability to link their merchandise management systems directly with our systems, to integrate the entire process chain within the supply chain, from the price or availability query, through the order, all the way to the invoice.

Can you give us some examples?

Through internal process networking, we fulfill orders from local distribution centers or from a centralized warehouse, depending on quantities and urgency. At the same time, our customers have one contact person in sales and order processing, independently of the flow of products.The distribution of stocks in our internal supply chain is controlled across facilities to assure a delivery service that is as large as possible. Thus, our IT forms the basis of our ability to meet constantly changing business requirements.

To put it bluntly: Replacement parts have errors ”“ what are the IT tools that you are working with to reduce the frequency of errors in production?

Quality must be produced ”“ not checked. Our customers require secure production processes that guarantee an error-free output. Low ppm numbers are a significant evaluation criterion for the degree of maturity of an auto supplier. For example, transmissions go through a 100-percent check oriented to the product after its assembly. We developed the customized test software used for this.At the same time, the software development process is subject to regular Spice audits. There are protections against the danger of switching parts in the assembly process. The manufacturers provide an individual data matrix code (DMC) for components. Detailed information on components is found here. During mounting into the assembly, the information is input and compared with the specifications from the parts list, and stored in a long-term archive. Furthermore, there has been work with RFID technology in transmission manufacturing recently. The castings supplier outfits the blank for the transmission case with an RFID tag, which stores information on assembly. In the next assembly steps, the information on each step is input and corroborated. Reprocessed parts receive an RFID update with information on the current process step. In this way, parts that are not OK can be immediately pulled.

You have re-worked your IT procurement processes. This includes uniform charging for IT services at German locations. What has been your experience?

The issue of IT controlling is in no way new to us. Instead, it has been established for many years in a very sophisticated form, with a clear global dimension. As in every other business, good transparency in costs is a prerequisite for professional management. And believe me: In our company, IT is required to absorb the cost pressures from our customers with targeted productivity increases every year.

How do you do that?

All our information technology services are planned and calculated by means of a uniform price list ”“ at ZF, IT is run as a global service organization. We’ve integrated planning, accounting and reporting systems for this, to give ourselves as well as our internal customers control and full transparency on the development of our services. In 2009, we changed the structure of some pricing positions. We consolidated various services to further increase transparency for our customers.

In recent years, engineers have been a “scarce commodity.” Do you have to offer the younger generation more ”“ social computing, for example ”“ to remain attractive?

In recent years, a new movement to Web 2.0 technologies has developed.So-called social computing increasingly plays an important role in a modern, flexible corporate structure, to organize in-house knowledge management and to serve as a communication channel. At ZF, we are very open to new technologies ”“ in our IT innovation management unit, they are regularly investigated as to their applicability to our company. “Innovations that pay off” -- we have placed our IT innovation process under this guiding principle. We try to support our employees on the IT side as much as possible, to alleviate their daily work routine.But it’s important to be aware of risks and choose the tools that make sense in the work environment. We have already had very good experience with wikis.But our IT blog is still getting a rather muted reaction.

Mr. Kraus, in September, 2009, ZF received 250 million euros from Germany’s fund for companies in distress. Was that an indication that your company was having financial difficulties?

That’s partly right, partly wrong. It’s true that we requested and were granted a loan of 250 million euros as a risk provision. On the other hand, it’s not true that we were in distress or in dire economic straits. The opposite is the case. We continue to be solidly financed.

Why then the loan from the KfW Bank?

Even in the crisis, we remained true to our policy and are betting on security. Based on the principle of the prudent businessperson, we are securing our liquidity early.

What is the money for?

In the future, we’ll spend a lot of money on research and development, expand our global position as a technology leader and develop new markets. That was naturally more difficult than usual in 2009. Because we made heavy losses, we accepted loans.

Will the IT area benefit from the cash infusion?

ZF accepted the funds as a risk provision. IT has no special role in this.

How big is ZF’s total IT budget, compared to revenue?

The IT budget amounts to 1.3 percent of revenue and thus lies right in the competitive range, based on my estimates. At the same time, it’s important that this IT budget in fact contains all IT costs worldwide ”“ including all IT projects, and all application areas, ranging from engineering to test stand applications. I personally consider this frequently cited figure to be dubious. In my view, the relations of the IT budget to value creation is more realistic ”“ there we are at 3.2 percent.

Can you still negotiate increases in the IT budget?

Against the background of the current financial situation, information technology is delivering a significant contribution to cost reduction.We are s

triving for savings of at least 15 percent in 2010 IT costs compared to the business plan. Strategic projects as well as projects with a high return on investment naturally receive special consideration.

Interview by Hilmar Dunker