Day for day, not only 2.5 to 3 million customers buy from the KarstadtQuelle AG department stores and mail order service, the 90,000 employees also need a wide variety of products for their work stations. These range from printer cartridges to PCs, and packing boxes to mannequins. Previously, the purchase of non-trading groups was not bundled across the group, and a complete overview of who had bought what, were, and in what quantities in the individual companies was not available at the touch of a button, because the group lacked transparency and standardization. Article descriptions, numbering systems, and material groups could only be harmonized in the individual companies with great difficulty, and the result was that similar partner/product ranges were negotiated with suppliers in different areas of KarstadtQuelle, and articles of the same type were offered at different purchase prices.
Central negotiation, local procurement
KarstadtQuelle’s aims were to make purchasing more transparent, utilize its market position, simplify its procurement processes, and significantly reduce purchasing costs. “One prerequisite for optimization in purchasing is transparency on articles, partner/product ranges, quantity and value flows, contracts, and conditions,” says Gregor Blauermel, head of logistics/services and responsible for the purchase of non-trading goods and services at KarstadtQuelle AG. To achieve this, the trading group decided to introduce the lead buyer principle as a virtual organization. This was to be supported by a central purchasing platform based on mySAP Supplier Relationship Management (mySAP SRM).
In the lead buyer approach, purchasing projects are harmonized across the group, and each is assigned to a lead buyer. The lead buyer works on the principle of “one for all,” taking on the purchasing role for all the companies in KarstadtQuelle AG for the purchasing areas assigned to him or her. Every lead buyer is therefore responsible for negotiating contracts with suppliers for the whole group, and for centrally listing the articles in a material group. The central purchasing platform supports them in these tasks, but at the same time ensures that the individual purchasing transactions are still carried out locally and the departments are able to purchase the items they need themselves on the basis of the negotiated conditions.
“It was important for use to exploit the advantages of both local and central purchasing. We therefore decided to introduce the new virtual organization and make it available to the individual companies in the group,” explains Gregor Blauermel. “This ensures that centrally negotiated contracts actually match the local requirement situation.”
Lead buyers introduced
KarstadtQuelle commissioned the consulting firm axentiv AG to draw up an application solution to support the lead buyer principle and to implement this together with Itellium GmbH, the trading group’s IT service provider, on the basis of SAP software. The concept for supporting the lead buyer principle was drawn up at the start of 2004 as part of an initial study. It was accepted and implemented by a joint team of consultants from axentiv and Itellium from April through October 2004. KarstadtQuelle also decided to introduce eClass, an internationally proven classification standard for material groups and material characteristics. This task was completed by a team in parallel with the implementation of mySAP SRM.
The latest SAP technology and architecture is used for the application platform. In addition to mySAP SRM and SAP NetWeaver Business Intelligence, SAP NetWeaver Portal is also used. One particular challenge is the integration of a number of SAP and non-SAP procurement systems.
Catalogs and contracts
One important element of the concept is an overarching platform that consists of the mySAP SRM components Central Catalog and Content Management, Contract Management, Self Service Procurement, and Central Purchasing Reporting. In the Contract Management part of the purchasing platform, all purchasing-relevant information and data about suppliers, results of negotiations, contracts, conditions, partner/product ranges, and articles and the most important accounting value flows for Controlling are prepared and made available to the operational procurement units and systems.
In Self Service Procurement, central catalogs are created for the group that contain both partner/product ranges for the whole group and for its individual parts and connect up to supplier catalogs. Browser technology is all that is needed to view the catalogs and initiate ordering transactions.
The Business Intelligence component of central reporting enables KarstadtQuelle to analyze all key figures and identify variances immediately. This information can then be used to reduce and standardize partner/product ranges, for example.
After a project lasting just six months, the IT system for non-trading goods and services was introduced at KarstadtQuelle AG at the end of 2004. The trading group was able to reduce its procurement costs significantly. While material requirements remained the same, the group was able to standardize its partner/product ranges and contracts, and the number of suppliers was also reduced. KarstadtQuelle was also able to reduce its process costs thanks to an integrated process chain from notification of demand through approval and ordering to payment. All those involved in the process access the same data, and the multiple entry of master data and the creation of high-maintenance paper catalogs are now a thing of the past.
As a next step, the lead buyer principle is to be extended to other organizations and material groups. “The innovative Lead Buyer Platform project sounds very complex, but its implementation was less costly than one might think,” says Oliver Siepers, axentiv AG project manager. “The project is extremely interesting, not just from a technological point of view but primarily also because of its business objectives, because purchasing is an area that offers many enterprises significant potential for reducing costs over the long term, increasing margins, and significantly increasing profit. KarstadtQuelle is taking a leading role here in the area of non-trading goods.”