Reference Report
High customs conformity and legal certainty in foreign trade
MAGNA automates preference processing with SAP-based add-on AVENIO - worldwide roll-out
If there is a preferential agreement between the country of origin and the country of destination, companies can make a delivery duty-free or at a reduced rate of duty.
The processes for this are demanding and must be monitored regularly: from requesting and issuing Long-term supplier declarations (LLE) about the Preference calculation until the issue of certificates.
MAGNA International Inc.
MAGNA International Inc., headquartered in Aurora, Canada, is one of the world's largest automotive suppliers with more than 168,000 employees at 348 production sites in 28 countries. Its core business is the development and production of parts, systems and modules for the automotive industry. MAGNA's global supply chain is a key competitive factor.
Many processes and IT systems in supply chain management have been standardized in recent years. MAGNA operates according to the basic principle "Think global, act local" - so too in IT: Individual sites are managed independently by the local IT departments. The central IT departments draw up overarching guidelines and prepare IT solutions that are then made available to all sites.
Preferential processing in customs/foreign trade - mistakes can be expensive
Preferential calculation is at the heart of processing. It is a procedure that determines and documents the preferential origin of a product. It also offers the possibility of recognizing possible price advantages in foreign trade. However, incorrect preference calculations can have consequences under civil or tax law or have a negative impact on existing authorizations.
For the globally positioned industrial group MAGNA, preference processing is an important but also comprehensive topic in the area of customs and foreign trade.
Manual calculation outside of SAP ERP - time-consuming, error-prone and non-transparent
The MAGNA Powertrain plant in Lannach, Austria, manufactures complex powertrain and transmission systems. Deliveries are made to 28 countries, 8 of which have preferential agreements.
The necessary requirements and processes for preference processing could not be adequately mapped by SAP ERP. For example, SAP ERP does not take a customs-compliant view of the invoice values over an appropriate period of time according to the "worst-case method" when calculating. Instead, the system uses moving average prices, which is explicitly not permitted by the customs authorities.
As a result of this gap, for a long time all preference handling processes in the plant were primarily carried out manually: from requesting and managing to issuing documents (such as the LLE). Excel lists were used for data preparation and calculation. The effort involved was enormous. As the number of agreements increased, it became more difficult for employees to keep the lists up to date in order to ensure transparent, reliable preference calculations.
Patrick Monschein, SAP SD Analyst, MAGNA Global IT:
"We ran the risk of violating customs regulations."
The challenge
In June 2019, MAGNA decided to standardize preference processing at the Lannach plant and automate it with IT support. As this was not possible with SAP ERP, the company looked for an add-on that would meet the following requirements:
Resolve manual preference determination outside SAP ERP
Easy handling for the employees
Maximum possible consideration of the MAGNA processes
Fast, reliable implementation
Integration with SAP ERP
Worldwide rollout
Goal: high legal certainty in international trade in goods
SAP add-on AVENIO closes process gaps in SAP ERP
MAGNA's primary goal was to achieve a high level of legal certainty in preference processing. Manual activities were to be reduced and the transparency of the preference calculation increased - also for the purpose of calculating price advantages.
The decision was made in favor of the SAP-based AVENIO preference processing system from IT service provider WSW Software.
Go-live with speed - AVENIO implemented in three steps
The project started in August 2019 with a kick-off meeting for key users, global IT managers and WSW managers. Existing processes were evaluated, a common understanding of the approach was created and target processes were defined. In the concept phase, the target processes were prepared and implemented in AVENIO (formerly adapted.
The implementation comprised the three MAGNA core processes, which were successively implemented:
- Supplier-side request for LLE - introduced in 09/2019
- Preferential costing - introduced in 10/2019
- Customer-side issuing of LLE - introduced in 11/2019
The final go-live in November 2019 went smoothly and according to plan. The gradual introduction had the advantage that the employees were trained during the project and were able to work with individual solution modules at a very early stage. For example, the LLEs were already requested automatically during the implementation phase of the preference calculation.
Worldwide roll-out of AVENIO - seven plants implemented on schedule
After the successful go-live of the MAGNA plant in Lannach, the worldwide roll-out in other MAGNA plants was a done deal. AVENIO preference processing is now in use in seven plants in Austria, Germany and Slovakia. The project teams on the MAGNA and WSW side are well coordinated. The implementation for two further plants in Spain and Morocco is about to start.
Patrick Monschein, SAP SD Analyst at MAGNA:
"As an international listed group, we need the highest level of certainty that every plant is acting in compliance with customs and that there is no threat of additional claims. WSW has convinced us all along the line. We now have a solution that saves us a massive amount of time and is extremely easy to use. The WSW solution has been so well received that a customs community has even been formed in which knowledge and best practices are exchanged between the plants. Last but not least, our customers and suppliers appreciate that we now have a uniform approach to all LLE requirements - we simply appear more professional than before."
Robert Rakaric, International Sales Representative at WSW Software:
"The project was fun. The biggest challenge was the large number of data records; Adobe Interactive Forms reached its limits. We solved this by optimizing the interface and making some form adjustments. The standardization also had the advantage that all master data, such as commodity codes, preference zones or rules, are now kept up to date."
You want to know more about our services, products or have questions that our website could not answer? Then we look forward to talking to you!