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Software Improves Pricing Efficiency for Steel Maker
Cognos Business Intelligence Software

The Timken Co., the world's largest manufacturer of tapered roller bearings and mechanical seamless-steel tubing, was in search of a way to accurately track and set product costs to achieve fairer pricing for customers globally. The finance, sales and marketing departments adopted Cognos' enterprise business intelligence software to accomplish this goal.

 Timken, whose headquarters are in Canton, Ohio, ships more than 1 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. Because so many Timken steel products are custom-made to suit orders ranging from space shuttle parts to oil well drills to specialty surgical blades used for heart implants, it can be difficult to set pricing using an average-based costing system. Three years ago, Timken committed to utilizing an activity-based methodology in place of a standard cost methodology to manage this dilemma and implemented a new job-costing system (JCS).

 Under the old system, product cost rates were updated once a year based on averages drawn 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 producing one type of steel product requires only one activity, it should cost less than producing another product involving a dozen activities. Activities are collected from the raw-material stage through finished production. This lends itself both to fairer pricing and target marketing.

 The steel manufacturer uses Cognos' Web-based reporting solution to generate reports for the JCS. Users run sophisticated weekly reports to monitor status and trends and to detect data flaws. Timken Steel provides monthly financial statements with this information. This process used to take 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.

 Using the analysis component of the Cognos solution, the company's sales and marketing departments integrate the data from the JCS into a data cube to compare and track profitability versus product cost. With Cognos' multidimensional-analysis features, Timken can track sales and costs by district, type of product, size group of product, product origin or any imaginable cross-cut. Using the drill-down features to integrate the analysis and reports, the department 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," says Mark Mazzaferri, a Timken marketing specialist.

 The company 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 well in excess of 100,000 rows.

 The Cognos tools atop the JCS system have allowed Timken to reduce its information-services staff, which is now able to build applications that allow users to perform far more analysis on their own. For customers, this means custom-made steel products are neither overpriced nor underpriced because Timken has a better way to analyze cost complexity.

 Timken aims to remain a leader by using the Web to expand internal access to the data on which critical pricing decisions are made. The company continues to introduce more employees to the software, of which the analysis and Web reports features are integral parts. The Cognos system allows decision makers and knowledge workers to perform multidimensional data analysis. Users can explore and analyze data from any angle and in any combination to quickly identify problem areas or other factors that are difficult to find using other analysis methods. Web reporting capabilities allow report writers to create and centrally distribute their reports over the Web without needing to understand the workings of the underlying database. Users can tailor a report's content, format and layout with a guided series of HTML pages. Additionally, a report auditing feature tracks report usage.

 The ease of use and quick implementation of the solution has greatly accelerated the effort to implement the software companywide. "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," says Daniel Bagnola, product manager of tubes. "We now can get the information we need when we need it, accurately and hassle-free."