Lower Transaction Costs and Shorter Runtimes for Processes

May 17, 2004 by admin

Organizational model

Organizational model

ThyssenKrupp Bilstein, headquartered in Ennepetal, Germany, is a typical midsize business. About 2,200 employees in four plants produce over 40,000 bumpers every day for well-known companies, such as DaimlerChrysler, General Motors, Jaguar, Porsche, and Maserati. Although the company belongs to the ThyssenKrupp Group, it’s responsible for its own purchasing because it’s an independent profit center. That’s why the purchasing processing was typical of most midsize companies until recently. It involved filling out request forms, getting approval, and redirecting the form to the purchasing department. It also required typing requests for quotations, writing orders, and signing the forms. “In the end, the process costs were significantly higher than the goods being ordered,” says Rainer Kochanski, purchasing director at Bilstein, as he describes the time-intensive and expensive flow of orders for consumer (C) goods and maintenance, repair, and operations (MRO) goods.

Workflow-supported approval procedure …

Focus on MRO procurement

Focus on MRO procurement

To get some help here and to optimize the procurement process, the automobile supplier decided about three years ago to reorganize its procurement system with the assistance of the e.Procurement platform from ThyssenKrupp. Today, employees at Bilstein use a browser-based system directly at their workstations to order the goods they need for their work. The platform displays an electronic catalog that contains the various available products, and employees select the required item. The shopping cart created in the process makes available various account assignments, such as cost center, internal order, product substitution procedure (PSP) element, or asset account assignment. The account assignments are checked directly online with the materials management component of the SAP R/3 system in Bilstein.
The system uses its built-in workflow to determine how the approval procedure is to occur. The basics of the procedure include threshold values and organizational structures. The software sends the employee who has the authority to issue an approval an e-mail that contains a link. When the employee activates the link, the order is either approved or denied. If approval is granted, the order is sent to the corresponding vendor. The employee who receives the goods also enters a goods receipt in the application. The related posting in the appropriate back-end system occurs automatically. The credit memo procedure optimizes the process. It triggers payment to the vendor without external intervention after the entry of the goods receipt.

… without media breaks

Elements

Elements

Employees use an open catalog interface (OCI 3.0) from SAP and an integrated search engine to access the electronic catalog of multiple vendors. The SAP Enterprise Buyer Professional (SAP EBP) component of mySAP Supplier Relationship Management (mySAP SRM) is linked to the SAP R/3 back-end system on the client side and enables users to execute their orders in a decentralized manner. If the order is forwarded, SAP EBP automatically transfers it to the materials management component on the client-side SAP R/3 system. From there, it moves over the SAP Business Connector, provided by the platform, over e-mail, or XML to the vendor. The vendor then immediately routes the order information to its order management system.

Components

Components

“Because many vendors process order management in SAP R/3, customers can link to a customer’s Web-based order processing system without any problems or breaks in media,” says Peter Schlemmer, the product manager for mySAP Supplier Relationship Management at SAP’s headquarters. The effort needed for implementation can be calculated easily. “Especially in Europe, SAP EBP is quite common,” emphasizes Norbert Schulte-Bausenhagen, operational unit manager of the e-procurement competence centers at Triaton GmbH. Triaton developed and implemented the e.Procurement platform. With over 500 systems in operation, Triaton counts among the largest service providers for SAP R/3 in Europe, which gives it comprehensive experience with integration and implementation. It belongs to Hewlett-Packard since April 2004.

The main focus on midsize companies

So far, Triaton has integrated 177 electronic catalogs with about 1.3 million articles into the e.Procurement platform at ThyssenKrupp, which has given it considerable experience. Now more than 20 companies, most of which belong to ThyssenKrupp AG, use the modular platform. But that is supposed to change soon. “Above all, we want to increase the number of external customers significantly this year,” promises Schulte-Bausenhagen. He’s got his eye on upscale, midsize companies in all industries that need electronic purchasing and have about 100–300 purchasing agents.

Content management

Content management

ThyssenKrupp Bilstein has shown that it’s worth it for a midsize company to use such a solution. Only 15 months after implementation of the new procurement solution, Bilstein lowered the number of vendors in the area of C goods by 20% and also had 74 of its desired vendors integrate their electronic catalogs into the new system. This success led to a corresponding decrease in the effort required to maintain vendors and the resulting bundling of quantities lowered material costs. “Transaction costs were lowered by 25% and the average runtime for processes was shortened from eight to three days, which led to significant reductions in inventory,” concludes purchasing director Rainer Kochanski.
At the same time, the number of less-expensive standard items rose. Off-contract orders no longer occur. An additional advantage has also developed. Because about 600–700 orders are processed over the e.Procurement platform today (the number is expected to increase to more than 2,000 in fiscal 2004), personnel resources in the purchasing department have been freed up to work on strategic tasks. Because they are not involved in operational tasks, the employees in purchasing can concentrate more strongly on their core business: the setup and maintenance of strategic relationships with important vendors.

Yvonne Giebels

Yvonne Giebels

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