To design, build, and deploy the world’s most-efficient solar energy systems, managers at Amonix must maintain a streamlined global supply chain.
by Fred Sandsmark, May 2013
Efficiency is the name of the game in the solar energy business. The more electricity a photovoltaic solar power system squeezes from the sun, the greater value (by area) that system delivers—more “energy per acre,” in industryspeak. No solar energy systems are more efficient than concentrator photovoltaic (CPV) solar energy systems designed and manufactured by Seal Beach, California–based Amonix. In October 2012, testing by the National Renewable Energy Laboratory (NREL) demonstrated that Amonix CPV modules can convert 33.5 percent of direct sunlight into electricity under real-world conditions, peaking at 34.2 percent—the most-efficient systems ever tested. (Amonix also held the previous record, by the way.)
To achieve this efficiency, Amonix CPV systems use a wider variety of materials and employ different manufacturing processes than conventional solar panels. Amonix’ systems are also different from conventional systems in how they’re used—they’re made specifically for large, utility-grade deployments, as opposed to rooftop installations on homes or businesses. For these reasons and more, Amonix as a company requires business processes that are global, collaborative, and tightly integrated.
During a period of rapid growth a few years ago, leaders at Amonix could see that their existing business applications couldn’t handle their complex manufacturing and construction needs. “We were running a tier 2 ERP [enterprise resource planning] environment,” recalls Amonix CEO Patrick McCullough. “It could not scale with us internationally, and it could not handle the complexity in our supply chain.” To meet those challenges, Amonix IT staff deployed Oracle E-Business Suite 12.1 in the last half of 2011—and did so in a manner that, like Amonix solar energy systems, was unprecedented in its efficiency.
Amonix CPV systems require a robust ERP to manufacture and construct because they differ significantly from conventional solar panels. First, while conventional solar panels use a large, thin layer of silicon-based semiconductor material to convert photons to electrons, Amonix CPV systems use a fingernail-size target made of gallium arsenide and germanium semiconductor material. Second, Fresnel lenses—like those in lighthouses, only inverted—magnify the sun’s rays by a factor of 900, focusing about a square foot of sunlight onto that tiny semiconductor target. The result of these two design differences is a solar energy system that can deliver conversion efficiency greater than 33 percent—dubbed “one-third of a sun” in the industry—compared with 15 to 20 percent for silicon-based photovoltaic panels or 11 percent for thin-film solar panels.
These differences also compel Amonix management to employ a unique sourcing, manufacturing, and construction model. Unlike conventional, silicon-based competitors, Amonix CPV systems use a variety of raw materials—including acrylic plastics in lenses and steel and aluminum in support structures— in addition to semiconductor materials. So the company’s cost structure is not dependent on a single commodity. “We’ve got a diversified play, which is a real business advantage,” McCullough says.
But that diversification requires a larger number of commodity suppliers. Amonix’ manufacturing and construction practices add further complexity—procurement staff typically design and select their own raw materials and use specialized overseas manufacturing partners to create many subassemblies, such as lenses and semiconductor targets. Amonix-owned raw materials are consigned to a partner for processing, and in some cases are then passed to another partner for further work before being returned to Amonix’ books as a manufactured subassembly.
While some combining of these partner-made subassemblies occurs in Amonix-owned manufacturing facilities, final construction is typically completed very close to where the systems will be deployed, with the cooperation of local engineering, procurement, and construction (EPC) partners. This construction model is driven mostly by logistics: one Amonix CPV array can be 65 feet tall and more than 68 feet wide, and a single utility-grade installation can entail hundreds of arrays. Final assembly is a massive undertaking, but because the most-complex work is done in the factory (rather than in the field), Amonix’ installation cost per watt is lower than that of its competitors.
Leveraging local EPC partners for final construction brings business benefits, too: the economic development organizations that often sponsor utility-grade solar projects often also desire to promote local job creation and community investment and factor that desire into their selection of a solar power vendor.
With all this in mind, McCullough says Amonix must manage three factors to deliver customer value: the efficiency of its solar energy systems, the cost to make and deploy those systems, and the systems’ reliability and quality over time. The first and third factors are engineering challenges, and improving them is central to the company’s roots as an innovative engineering firm. But the second factor, controlling cost, is purely a business function, and McCullough knew that working with multiple commodity suppliers, manufacturing partners, and local construction companies made inefficiency more likely. “We’ve got to have competitive costs, even at our higher panel efficiency level,” McCullough says. Without competitive costs, Amonix could be priced out of the market in spite of its technology’s superior efficiency.
Amonix’ old ERP system was inadequate to help company leaders manage costs in their complex supply chain. “The earlier ERP system was not robust enough to effectively manage the business complications around inventory management,” recalls Rajesh Ramakrishnan, global business process manager at Amonix. “At times there was a significant gap between physical inventory and book inventory, which warranted a lot of time being spent on reconciliation.”
Imprecise inventory data—particularly for consigned inventory—reduced Amonix’ leverage in managing its manufacturing partners’ costs. “We had very little negotiating power in terms of asking questions like, ‘Why is your cost so high when we are providing you with raw material?’” Ramakrishnan recalls.
“Obviously, you’re creating a more complex supply chain when you manufacture our way,” McCullough says. “You have intracompany agreements that are happening halfway around the world. This was one of the big reasons that we needed the support of Oracle E-Business Suite.”
With the company’s specific needs in mind, Amonix leaders tested Oracle E-Business Suite’s capabilities in joint-venture accounting, multiple currencies, virtual consignment, internal and external sales, varied accounting calendars, and other functions. They were also impressed by Oracle’s integration with SolidWorks, Amonix’ CAD platform, via Oracle’s Agile Product Lifecycle Management applications. “There was no challenge that Oracle hadn’t seen, dealt with, and succeeded at,” McCullough recalls. “That gave us a lot of confidence that we were on the right track in choosing Oracle.” (See the “Agile Response” sidebar.)
In the last half of 2011, Amonix management licensed Oracle E-Business Suite and Agile Product Lifecycle Management applications, hired Ramakrishnan to manage the deployment, and engaged Oracle Diamond Partner Wipro to help with implementation of Oracle E-Business Suite. Wipro’s team came to Amonix’ California headquarters for three weeks to establish requirements, and then returned to India for development, testing, implementation, and delivery. Ramakrishnan, who represented Amonix in India during the project, estimates that 85 percent of the work related to Oracle deployment was done offshore. The implementation process itself took just 10 weeks. “We were told by Wipro that it was the fastest implementation they’d ever done, or even heard of,” McCullough says. “We were pretty proud of that.”
To enable that fast implementation, McCullough and Ramakrishnan directed the Oracle software to be implemented without configuration and modifications. “We wanted the employees to understand how well the ERP system worked out of the box, and that it could actually provide best practices for us,” Ramakrishnan says, rather than trying to adapt the software to old, inefficient practices. This proved to be a savvy stratagem: McCullough estimates that more than half of the configuration requests initially suggested by Amonix staff were dropped when employees learned to use Oracle E-Business Suite.
There was no challenge that Oracle hadn’t seen, dealt with, and succeeded at.
Two other factors contributed to the speed and success of the project, Ramakrishnan says. First, data-cleansing and data-migration procedures were developed and tested simultaneously with overall application development, rather than waiting until just prior to rollout (as is common). Second, change management was led from the top tiers of the company. “We had a lot of support from Pat [McCullough] and from senior management,” Ramakrishnan recalls. “They emphasized that Oracle was a way of life, and that everybody needed to use it. ”
Amonix management saw improved efficiency soon after Oracle E-Business Suite came online. The deviation between physical inventory and inventory on the books dropped to about 5 percent. Now, purchasing staff can make much more accurate buys, ensuring materials are not over- or under-ordered. That same data also helps manufacturing partners manage their operations and labor needs—and maintain their own margins—while meeting Amonix’ production and cost goals. “At any point in time we now know how much material is still with our vendors,” says Abhijit Rao, corporate controller at Amonix.“Maintaining an optimum level of production is really important, and Oracle helps us a lot in that.”
Faster, more-accurate communication with manufacturing partners—enabled by Oracle E-Business Suite and Agile Product Lifecycle Management applications—is also vital as Amonix engineers work to increase the efficiency of their solar energy systems. As they improve their designs in SolidWorks, they generate new bills of materials (BOMs) that must be promptly shared with other divisions of Amonix and with manufacturing partners—a process that was a challenge with the old ERP system.
“Before Agile and Oracle, everything was done manually, with spreadsheets,” Ramakrishnan says. “The engineering team would be working with a current version of the BOM, which the operations and manufacturing teams would not be aware of.” Now, with Oracle E-Business Suite and Agile solutions, BOMs are centralized and communication of changes to them is automated.
Back-office functions, such as financial reporting, are also more efficient under Amonix’ Oracle system. Closing the books, which formerly took a week, now takes just two business days. And publishing monthly financial reports for management—a two-week process under the previous system—now takes less than five business days. “We used to have multiple systems across geographies from which we had to consolidate all the numbers,” Ramakrishnan explains. “Now we do it all within Oracle.” In addition to making reporting faster and more accurate, the Oracle-powered process improvements have enabled Amonix to reduce staffing in the finance department.
Rao says that having Amonix’ financial data in Oracle has improved decision-making speed and accuracy. He says with a few mouse clicks, he can drill down into the data, analyze transactions by project, study related transactions over time, discover who initiated a specific transaction, and much more. “These things are really helpful in higher-level financial analysis,” he says. “Oracle is a tool that helps me and the management team with our decisions.”
Decision-making abilities will be further enhanced by the end of 2013, when Oracle Hyperion Financial Management and Oracle Business Intelligence Enterprise Edition are implemented at Amonix. Ramakrishnan anticipates that these additional Oracle applications will further improve control over budgeting and financial reporting and help management make even better operational decisions. The additional applications will shine a light deeper into the company’s complex business processes, and help Amonix’ leaders generate even more efficient operations—just as Amonix’ solar energy systems generate electricity more efficiently from the sun.
Fred Sandsmark is a regular contributor to Profit.
Boosting Innovation Power
Since its founding in 1989, Amonix has been led by engineers. “Our DNA is innovation,” says CEO Patrick McCullough (himself a mechanical engineer), and SolidWorks was the computer-aided design (CAD) tool used by the company’s engineering teams. When Amonix management chose Oracle E-Business Suite as the right tool to support the company’s complex business operations, they also sought a product that would connect Oracle E-Business Suite with SolidWorks.
They chose Oracle’s Agile Product Lifecycle Management applications after Agile experts demonstrated their integration with both SolidWorks and Oracle E-Business Suite, and Amonix’ head of engineering offered his endorsement based on his experience at a previous employer. Oracle global system integration partner Genpact assisted Amonix with the deployment of Agile Product Lifecycle Management applications.
The deployment was rocky at first—some of the engineering data didn’t flow into Agile as expected—so the team at Amonix called Oracle for help. McCullough was impressed with the response. “The Oracle sales organization got the right experts in our shop, and we quickly resolved the problem,” he recalls. “It was great to see the helping hand of the sales team get involved, to make sure our implementation happened on time.”