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"The man who could devise something that would reduce friction fundamentally would achieve something of real value to the world." ­ Henry Timken, founder, The Timken Company

Few companies can flatly claim to have significantly improved the quality of life for all humankind. The Timken Company does so, however, as the tapered roller bearing founder Henry Timken patented in 1898 proved a fundamental product of the industrial revolution. A century later, the company, headquartered in Canton, Ohio, ships more than a million tons of steel annually and offers a selection of more than 200 types and 30,000 sizes of tapered roller bearings used by every major manufacturing industry worldwide.

But Timken has not remained the world's largest manufacturer of tapered roller bearings and mechanical seamless steel tubing just because it got there first a century ago. Timken Steel not only has kept ahead of the steel-manufacturing technology curve but also stayed up to date with the technology of business operations. The finance, sales and marketing departments, for example, now use enterprise business intelligence software tools from Cognos to accurately track and set product costs ­ which translates into fairer pricing for customers globally.

Product costing can be tricky because so much Timken steel is made to order to suit custom-designed needs ranging from space shuttle parts to oil well drills to specialty surgical blades used for heart implants. This makes it difficult to set pricing based on an average-based costing system. Three years ago, Timken committed to utilizing an activity-based methodology in place of a standard (average) cost methodology to manage this dilemma. With this transition, a new job costing system (JCS) was implemented.

Under the old system, product cost rates were updated once a year based on averages gathered from production history by legacy batch systems. Analysts responsible for different products or production activities reviewed the results and adjusted the averages to remove significant variations. This subjective analytical approach resulted in conflicting conclusions among analysts and required more analysis to resolve the differences.

With JCS, however, Timken can cost products based on the number and level of sophistication of the activities involved in making those products. For example, if making one steel product involves only one activity, it would cost less than one involving a dozen activities to produce. Activities are collected from the raw-material stage through finished production. This lends itself both to fairer pricing and target marketing.

Timken uses Cognos Impromptu client to generate reports for the JCS. Users run sophisticated reports on a weekly basis to monitor status and trends, and to detect data flaws. Timken Steel provides monthly financial systems with this information. This process previously took several weeks but can now be accomplished in a matter of days. Getting this information on a timely and accurate basis has been a key benefit felt by the company's finance department. Simulation of daily financial results is a concept Timken Steel sees as a future benefit.

Using Cognos PowerPlay OLAP tool, the company's sales and marketing department integrate the data from the JCS into a data cube to compare and track profitability versus product cost. Using the multidimensional features in PowerPlay, they can track sales and costs by district, type of product, size group of product, where products originated or any imaginable cross cut. Using the drill-down features to integrate PowerPlay and Impromptu, they can analyze cost detail to an activity level for any customer order. "By publishing these cubes for use across the enterprise (and not just by power users), all Timken analysts now work from the same data source ­ dramatically eliminating confusion and contradiction," said Mark Mazzaferri, principal market research analyst and co-developer.

Timken currently deals with two such cubes. The first represents profitability and involves more than 1 million rows of data. The second tracks monthly activity costs and has in excess of 100,000 rows. The Cognos tools are applied to a system running Oracle RDB with Windows 95 on the clients and ODBC as the connect. Timken Steel hardware is Compaq and most of its workstations are Gateway.

The Cognos tools atop the JCS system have allowed Timken to reduced its IS staff and enabled the staff to build applications in a way that users can perform far more analysis on their own. Rare queries from sales or marketing personnel now may be, "How do I do something?" rather than, "Get it for me." For customers, it means these custom-made steel products are neither overpriced nor underpriced because Timken now has a better way to analyze cost complexity.

Headed into its second century, Timken aims to remain a leader by using the Web to expand internal access to the data on which critical pricing decisions are made. It is now in the process of transitioning their users to the Web-enabled versions of both Impromptu and PowerPlay, preparing to take best advantage of the inevitability of Web access becoming the common ground for business operations. The ease of use and quick implementation of the solution has greatly accelerated this effort.

"We are delighted to have an analysis solution that gives us a better understanding of our cost structure and allows us to make better and faster financial and marketing decisions because we now can get the information we need when we need it, accurately and hassle-free," said Daniel Bagnola, manager of market intelligence.

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