In the U.S., trucks serve as the back­bone of sup­ply chain trans­porta­tion, with the Bureau of Trans­porta­tion Sta­tis­tics esti­mat­ing that trucks account for 79.6% of all intrastate ship­ments and the Amer­i­can Truck­ing Asso­ci­a­tion report­ing that trucks moved 72.6% of the entire country’s freight in 2022. How­ev­er, trucks are also sig­nif­i­cant sources of green­house gas emis­sions. As enter­pris­es invest in car­bon account­ing while work­ing toward net-zero emis­sions, the need for more vehi­cles pow­ered by alter­na­tive fuel sources has dra­mat­i­cal­ly increased. 

Based in Phoenix, Niko­la Cor­po­ra­tion is work­ing to estab­lish the foun­da­tion for a hydro­gen refu­el­ing net­work and spur the growth of the North Amer­i­can hydro­gen indus­try. Niko­la began man­u­fac­tur­ing and ship­ping vehi­cles in March 2022, pri­or to which the com­pa­ny was busy con­nect­ing the dots with an engineering/​design cen­tric focus. The chal­lenge since then has been to grace­ful­ly nav­i­gate a shift-of-grav­i­ty from design to pro­duc­tion and deliv­ery. The orga­ni­za­tion began pro­duc­ing heavy-duty com­mer­cial bat­tery-elec­tric vehi­cles, includ­ing its line of Class 8 hydro­gen fuel cell elec­tric semi-trucks, refer­ring to trucks with a gross vehi­cle weight over 33,000 pounds. 

Addi­tion­al­ly, Niko­la lead­ers are work­ing with ener­gy dis­trib­u­tors to devel­op a sus­tain­able, depend­able net­work for hydro­gen-pow­ered vehi­cles. Recent­ly, Niko­la announced the open­ing of addi­tion­al HYLA mod­u­lar hydro­gen refu­el­ing sta­tions in Ontario, Long Beach, San­ta Fe Springs, Cal­i­for­nia, as well as Toron­to. These mile­stones advance Nikola’s goal of pio­neer­ing solu­tions for a zero-emis­sions world.

“This is not some­thing for which an econ­o­my of scale has been devel­oped,” Dan Cirig­nani, Prin­ci­pal Solu­tion Archi­tect at Niko­la Cor­po­ra­tion, recent­ly told ASUG, not­ing that tra­di­tion­al diesel-pow­ered vehi­cle man­u­fac­tur­ers — which dom­i­nate the roads and the truck­ing indus­try — had spent decades estab­lish­ing well-tuned mod­els to man­u­fac­ture and dis­trib­ute their products. 

In pur­suit of busi­ness growth, Niko­la sought to adopt an ​“alche­my” of inno­va­tion and best-in-class busi­ness prac­tices, accord­ing to Cirig­nani. In 2022, the orga­ni­za­tion began its RISE with SAP jour­ney by imple­ment­ing SAP S/4HANA Cloud, pri­vate edi­tion. With this solu­tion in place, the orga­ni­za­tion embarked on its mis­sion to man­u­fac­ture and dis­trib­ute Class 8 trucks at scale. 

Scal­ing Niko­la isn’t impor­tant just to Niko­la: one mar­ket-dri­ver behind Nikola’s indus­try are Zero-Emis­sion Vehi­cle man­dates, (i.e.: ​“ZEV Man­dates”). ZEV man­dates are reg­u­la­to­ry poli­cies and local or nation­al laws that set ambi­tious tar­gets for the con­ver­sion to zero-emis­sion vehi­cles. On a nation­al lev­el these man­dates are in effect, for exam­ple, in Cana­da, Ger­many, the Unit­ed King­dom and on a local lev­el with­in the US they are in effect for Cal­i­for­nia, Col­orado, Con­necti­cut, Maine and else­where. Gen­er­al­ly, ZEV man­dates require grad­u­at­ed con­ver­sions to zero-emis­sion acqui­si­tion by buy­ers and exclu­sive avail­abil­i­ty by sell­ers by var­i­ous gov­ern­ment-set tar­get dates. For exam­ple, Cal­i­for­nia man­dates a con­ver­sion to zero-emis­sion vehi­cles by 2035. 

These con­ver­sions aren’t black and white or over-night. In par­tic­u­lar, for fleet buy­ers of Class 8 semis, such as those Niko­la man­u­fac­tures, acqui­si­tion and con­ver­sion starts now. Fleet buy­ers must learn how these vehi­cles work, what their main­te­nance require­ments are, how their infra­struc­ture dif­fers from the exist­ing fos­sil-fuel infra­struc­ture and par­tic­i­pate in expand­ing the infra­struc­ture dur­ing the lead­ing peri­od from now until 2035. 

Niko­la has an advan­tage here because where it comes to long-haul truck­ing, hydro­gen packs some pow­er­ful advan­tages. Com­pared to bat­tery-elec­tric alter­na­tives, hydro­gen-elec­tric semis have ranges around or above 500 miles. This is an attrac­tive propo­si­tion for fleet-buy­ers oper­at­ing under ZEV mandates. 

With many such man­dates tar­get­ing net-zero emis­sions by 2035, Niko­la is focused on devel­op­ing a sup­ply chain capa­ble of pro­vid­ing its inno­v­a­tive trucks to cus­tomers seek­ing to reduce car­bon emis­sions from their vehi­cle fleets. ​“Estab­lish­ing an effi­cient econ­o­my of scale,” Cirig­nani said, ​“will allow cus­tomers to suc­cess­ful­ly lever­age Nikola’s trucks to meet those forth­com­ing goals and man­dates.” Ahead of his pre­sen­ta­tion at the ASUG Best Prac­tices con­fer­ence (Oct. 14 – 16 in Hous­ton), Cirig­nani dis­cussed the com­plex­i­ties of devel­op­ing new economies of scale and how SAP is one of the tools help­ing Niko­la on its mission. 

Build­ing an Econ­o­my of Scale

As Niko­la set its sights on mass-pro­duc­ing its inno­v­a­tive suite of trucks, process­es and sup­ply chain ini­tia­tives were put into place to facil­i­tate such a goal. ​“We are com­ing into this mar­ket with some­thing that is bet­ter for the future,” Cirig­nani said. ​“But we must build an econ­o­my of scale to be successful.” 

Build­ing such an econ­o­my of scale goes beyond devel­op­ing sup­ply chains to ensure steady and reli­able access to the mate­ri­als and com­po­nents nec­es­sary to build trucks. Niko­la also need­ed to build an ecosys­tem for its cus­tomers to con­sis­tent­ly refu­el the trucks. ​“In order for peo­ple to use that vehi­cle you’re sell­ing, they need a net­work,” Cirig­nani said, empha­siz­ing the impor­tance of depend­able, acces­si­ble refu­el­ing sta­tions. ​“That rep­re­sents a fun­da­men­tal strate­gic pri­or­i­ty here at Nikola.” 

As a start-up, Niko­la pos­sess­es process­es and options in its ​“toolk­it” to facil­i­tate build­ing a depend­able hydro­gen refill­ing net­work that might be an expen­sive lux­u­ry for estab­lished play­ers with sunk invest­ments dis­trib­uted across numer­ous mass-mar­kets, where some of those mar­kets may not be well suit­ed to a scal­a­bil­i­ty or infra­struc­ture chal­lenge. ​“What’s nice about a Class 8 semi-truck that you don’t have going on with an ordi­nary vehi­cle is they fol­low pre­dictable routes and sched­ules,” Cirig­nani said. ​“When you’re try­ing to scale your infra­struc­ture that makes the chal­lenge con­sid­er­ably easier.” 

Niko­la has already opened four of its HYLA mod­u­lar refu­el­ing sta­tions along with three part­ner sta­tions in Cal­i­for­nia, with 14 oper­a­tional refu­el­ing solu­tions expect­ed by the end of the year. As it man­ages refu­el­ing those sta­tions, Niko­la can lever­age the infor­ma­tion gath­ered from sta­tions to imple­ment sus­tain­able refu­el­ing plans. Cirig­nani indi­cat­ed that fleet sales alone pro­vide a basis for ear­ly fore­cast of aggre­gate hydro­gen demand when ser­vic­ing low vol­ume, high geo­graph­ic den­si­ty fleets. It will be nec­es­sary to imple­ment dis­penser-mon­i­tor­ing and OTA-report­ing capa­bil­i­ties to pro­vide dis­tri­b­u­tion plan­ning sys­tems with the means to fore­cast hydro­gen demand at spe­cif­ic loca­tions and dates. 

Con­vert­ing from Engi­neer­ing-Cen­tric to Man­u­fac­tur­ing-Cen­tric Operations

Estab­lish­ing an econ­o­my of scale to sup­port Nikola’s Class 8 truck pro­duc­tion required trans­form­ing the organization’s engi­neer­ing-focused oper­a­tions to a man­u­fac­tur­ing-focused mod­el that will even­tu­al­ly enable pro­duc­ing the cur­rent tar­get capac­i­ty of up to 2,400 trucks per year on three shifts. 

“This is a chal­lenge pure­ly because of the matu­ri­ty of the com­pa­ny,” Cirig­nani said, empha­siz­ing that Nikola’s mis­sion tran­si­tioned from devel­op­ing the prod­uct to pro­duc­ing it for wider-spread con­sump­tion over time. This process includes tran­si­tion­ing from lever­ag­ing an engi­neer­ing bill of mate­ri­als, which spec­i­fies exact­ly what goes into a truck, to using a man­u­fac­tur­ing bill of mate­ri­als, which artic­u­lates the process­es and order of oper­a­tions required to assem­ble a vehicle. 

The need to sup­ply cus­tomers with options that devi­ate from a stan­dard mod­el in order to secure greater mar­ket share addi­tion­al­ly com­pli­cates this process. Niko­la allows for some cus­tomiza­tion of cer­tain aspects of its trucks, such as alter­na­tive fifth wheel con­fig­u­ra­tions and seat options.

Offer­ing more options is a key means of build­ing an econ­o­my of scale for pro­duc­tion and adopt­ing a man­u­fac­tur­ing process where­in the man­u­fac­tur­ing bill of mate­ri­als dri­ves pro­duc­tion. To accom­plish this the com­pa­ny needs a solu­tion that offers crit­i­cal sup­ply chain man­age­ment func­tions, includ­ing man­ag­ing pro­duc­tion orders, inven­to­ry man­age­ment, dis­tri­b­u­tion, and sourcing. 

“We oper­ate in a com­plex sup­ply chain,” Cirig­nani said.

There are over 30,000 indi­vid­ual parts in one of the truck’s bill of mate­ri­als. While there are some­times three to four dif­fer­ent types of prod­ucts — such as fas­ten­ers — that can accom­plish a spe­cif­ic job, the orga­ni­za­tion must dic­tate which type of fas­ten­er must be used and, there­fore, ordered.

Adopt­ing SAP S/4HANA

Niko­la eased its oper­a­tional mod­el tran­si­tion from an engi­neer­ing-cen­tric to a man­u­fac­tur­ing-cen­tric while facil­i­tat­ing option­al­i­ty and build­ing an econ­o­my of scale by imple­ment­ing SAP S/4HANA. When the com­pa­ny decid­ed to move from its pre­vi­ous ERP solu­tion to SAP S/4HANA Cloud, pri­vate edi­tion, it lever­aged RISE with SAP to imple­ment its new ERP plat­form in four months — mak­ing it one of the fastest SAP S/4HANA imple­men­ta­tions on record.

“Across the auto­mo­tive indus­try, SAP is quite stan­dard,” Cirig­nani said. 

Niko­la want­ed to adopt a solu­tion that its employ­ees were famil­iar with and that could help the orga­ni­za­tion tack­le chal­lenges spe­cif­ic to its prod­ucts. For exam­ple, man­u­fac­tur­ing Nikola’s Class 8 trucks demand many sub-assemblies. 

“We need a solu­tion that facil­i­tates sub-assem­bly sup­ply chain oper­a­tions for 3,000 to 4,000 vehi­cles,” Cirig­nani said. 

Cirig­nani not­ed that SAP S/4HANA also enabled the orga­ni­za­tion to house any vital cus­tomiza­tion ​“out­side of the core,” allow­ing Niko­la to dri­ve a ​“clean-core” method­ol­o­gy across its tech­nol­o­gy land­scape as it tran­si­tioned to the new ERP system. 

Core func­tions of SAP S/4HANA helped with tran­si­tion­ing between engi­neer­ing-cen­tric mod­els intend­ed to gen­er­ate designs to oper­a­tional­ly-cen­tric mod­els that are intend­ed to scale. ​“In order to go from start-up man­u­fac­tur­er to scal­ing to mass man­u­fac­tur­ing, we have to iden­ti­fy the con­nec­tions between cer­tain silos,” Cirig­nani said. ​“SAP ERP is one tool that helps a great deal, because it’s all about start­ing with the end goal in mind.” 

By uti­liz­ing SAP, Niko­la could lever­age exist­ing solu­tion sets to accom­plish its goals. Man­u­fac­tur­ing bill-of-mate­ri­als, fore­cast­ing and dis­tri­b­u­tion oper­a­tions in SAP S/4HANA were a few of the func­tion­al­i­ty aspects that Niko­la appreciated. 

SAP solu­tions also ​“impose dis­ci­pline” on users, he added, high­light­ing that real-time con­nec­tiv­i­ty to an organization’s gen­er­al ledger negates the need to man­u­al­ly trans­fer crit­i­cal infor­ma­tion from one source to the gen­er­al ledger. 

“In real time, our trans­ac­tions are com­posed imme­di­ate­ly on the gen­er­al ledger,” Cirig­nani said. 

Look­ing Ahead 

With many of its crit­i­cal oper­a­tions facil­i­tat­ed in SAP S/4HANA, Niko­la can dri­ve sus­tain­abil­i­ty by improv­ing its oper­a­tional effi­cien­cy as it pro­vides its cus­tomers with increas­ing­ly cus­tomized options for its truck and a net­work of refu­el­ing sta­tions they can rely on. 

“Our com­pet­i­tive advan­tage is that we’re in this space of effi­cient elec­tric vehi­cles,” Cirig­nani said. ​“We don’t need to make any­thing any hard­er for us by try­ing to rein­vent solu­tions for batch man­age­ment, inter­change­abil­i­ty, fore­cast­ing, sec­ondary dis­tri­b­u­tion, and back­wards plan­ning. We can use the exist­ing solu­tion set that oth­ers have used before and already fig­ured these process­es out.” 

Niko­la is con­tin­u­ing to expand its scale and is pre­pared for the growth of the hydro­gen refu­el­ing ecosys­tem to trans­form com­mer­cial trans­porta­tion operations.