Shedding Light on Vendor Relationships


According to a German business proverb, profit comes from purchasing. The proverb fits ERCO Leuchten GmbH in Lüdenscheid, Germany. Several thousand lighting products leave the company’s plant every day. The products meet the safety regulations of their target markets, which require adherence to strict, certified standards during production and inspection. The company must strive for the highest quality even when it produces elements that are later used in the manufacture of end products.

Retaining and Evaluating Vendors – Important Competitive Factors

“Optimization of logistic processes by maintaining a close relationship with important vendors and efficient vendor evaluation are strategically significant competitive factors for ERCO Leuchten,” explains Jörg Späinghaus, director of purchasing at the Light Factory, as ERCO refers to itself. ERCO Leuchten uses SAP R/3 as its central enterprise software and also uses a vendor portal, ITML> SCM <Procure> from the SAP partner ITML to integrate feeder plants directly with the central SAP solution and set up Web-based information exchange. This approach makes the transfer of orders much simpler. At ERCO, the vendor portal runs internally under the name WebSCM-Portal.
Data exchange between SAP R/3 and ITML > SCM occurs online and is automated because the Web screens run directly on SAP NetWeaver Application Server (SAP NetWeaver AS) as programs and Web-enabled business server pages. The data is imported into SAP R/3 using BAPIs (a programming interface) and remote function calls (RFC).

Early Recognition of Bottlenecks

The browser-enabled ITML > SCM <Procure> links vendors to procurement processes. The processes can include order plans, delivery plans, or changes to orders. Authorized vendors simply use a normal Web browser (Microsoft Internet Explorer or Mozilla Firefox) on the vendor portal to view information on current stocks. Vendors can use this approach to spot possible bottlenecks, automatically create orders, and ensure on-time delivery of required parts.
For example, vendor integration can process order confirmations and delivery notes directly. That frees purchasing clerks from those day-to-day operations so they can focus on strategic tasks, such as selecting and evaluating vendors. Effective vendor evaluation is a crucial element of supply chain management. Because it is directly integrated with the purchasing functions of the SAP ERP solution, WebSCM-Portal offers customers and vendors multifaceted options. Complete integration means that no additional hardware is necessary, and companies do not need to expend the effort involved in programming and monitoring interfaces.

Benchmarking in Self-Service

Employees no longer need to assemble the required data and information (dates, quantities, and distributions) manually from various sources. Instead, vendors can use the add-on solution from ITML directly. The add-on also processes order changes and frees the purchasing department from unnecessary administrative tasks.
ERCO Leuchten also uses the Web-based portal to improve vendor evaluation. The purchasing department had long used time-consuming conversations with vendors to inform them of their evaluations. But with the WebSCM-Portal, authorized vendors can view their evaluations online. The evaluations are always current and detailed. Vendors are evaluated by price, adherence to schedules, speed, quality, and communications. Percentages are translated into exact statistics, and the individual points offer information on the dedication and quality of each vendor.
“Only authorized ERCO employees can view the comparison of vendors in a ranked list,” says Späinghaus. But each vendor can use the WebSCM-Portal to compare benchmarks with all the other vendors evaluated by ERCO. “The ranking list is anonymous, so that vendors see only their own data,” he adds.

More Quality and More Competitive Advantages

ERCO Leuchten has clearly improved the quality of its purchasing with the integrated WebSCM-Portal. Variations in service by vendors – in terms of scheduling or of the quality of parts – are recognized quickly and correctly without delay. And Web-based communication between ERCO Leuchten and its vendors guarantees rapid and transparent purchasing processes. As Späinghaus says, “The add-on solution from ITML ensures that we work with the best of all possible partners. That enables us to deliver products on time, with high quality, and at market-based prices – and ultimately improve our competitiveness.”

Dr. Andreas Schaffry
Dr. Andreas Schaffry