Dynamic service e-procurement for EGGER
With the decentralized ordering of services via the DIG e-procurement platform, the world's leading manufacturer of wood-based materials is taking the next hurdle on the way to the best possible automation in procurement. "We are aiming for a level of automation of up to 75% - and we want to achieve this by 2022. In DIG, we have found the right partner for this," says Gerd Hesse, Head of Purchasing Technology for Germany.
Two locations bundle the driving forces in the EGGER Group with 19 plants internationally: Brilon in Germany and St. Johann/Tyrol in Austria. "We work as a team across several countries to create the conditions to exploit our potential in strategic purchasing. In doing so, we combine as many points of view as possible to create solutions that can be used throughout the Group - including e-procurement for services," explains Dominik Lenz, Technology Purchasing in Brilon.
First mover in service purchasing
After the successful introduction of DIG E-Procurement around eight years ago, the desire to map service procurement in a decentralized process soon arose in view of increasing outsourcing. "At first, I thought, we're not the only ones who work with service providers. There must be a ready-made solution. I was even more surprised to find the opposite. And the deeper we dived into the complexity of our requirements, the clearer it became for us to play a kind of first-mover role here," Hesse recalls. And this role was a demanding one: "We wanted the system to be as easy to use as possible, and it had to be self-explanatory in order to motivate new user groups and make it easier to connect additional sites. At the same time, it had to include all processes for future use. We threatened to despair at this task in some places, but the development tandem with our project team and DIG ultimately led to the goal!"
Order with several parties
"The way it works for us is that the requester enters a BANF into the system. This can be, for example, any maintenance work such as electrical work or painting. For this, an estimate of the effort is given, i.e., how many hours the service provider will need in order to obtain a cost framework," Lenz describes. "But of course, an estimate is also possible with a following offer from the supplier." According to the rules of the SAP used, an order itself can only be triggered by a manager with budget responsibility - but this manager is often not the specific person who needs the service: "That's why there's a field in the form where the contact person from EGGER is specified as the technical coordinator on site." This person is the contact person for the supplier, goes through the work with him, confirms the proof of performance, etc. "Using his own access to the system, the supplier then enters his effort, i.e. the hours worked. Any surcharges for work on public holidays or similar are automatically considered. Likewise, the manual performance record is uploaded here."
Deviations determine the approval process
"It is in the nature of the service that hourly estimates and real efforts are not always congruent," Hesse explains the reason for specific approval processes depending on the extent of the additional effort. If there is an overrun of 25% or more, the technical coordinator is involved in the approval process. The latter checks the overrun for plausibility, and the manager simply receives a notification. "Alternatively, the manager can take the matter up with him. It's different with an overrun of more than 60%, in which case the coordinator is skipped and the case is handled directly by the manager right away." These limits can be set flexibly - and not just for each supplier. Lenz gives a practical example of this function: "This is particularly important for projects such as the construction of new plants. There, it makes sense to reduce the percentage values in order to be able to react to cost overruns of individual trades at an early stage in terms of the costing security of the overall project."
Go-Live and Roll-out
After around 1.5 years of implementation and a 6-month test phase, the go-live took place at the Brilon site: "From the second or third connected supplier, the different ways of working became apparent - adaptations became necessary, which were flexibly implemented by the DIG team," report Hesse and Lenz of a steadily growing process, of whose benefits he is convinced. "After around 460 orders in the past 18 months, we are more than satisfied. The expected time advantage has materialized, confirming the enormous potential for our group!" Accordingly, the system is currently being rolled out to the Wismar and Gifhorn sites. "The ease of use of the system has convinced our initially skeptical colleagues from the other plants. In the coming months, other sites are to follow, including those from other countries."
While seven suppliers are currently connected in Brilon, the two new sites will each start with one: "We deliberately chose those suppliers that involve the most work in day-to-day business. But of course, we want to connect many more as quickly as possible so that the benefits are maximized in day-to-day operations!"
Great goal P2P
By 2022, 75 to 80% of all processes in purchasing could be automated, Hesse estimates: "Our operation entails that about 20% of all procurements are related to emergencies, that's just the challenge of uninterrupted 24/7 production. We won't be able to automate these cases, but we want to move the rest away from purchasing as much as possible in order to focus more on the strategic." The fact that orders are only controlled by Purchasing above certain value limits and the rest is automatically sent directly to the supplier is just the next step of many: "Purchase-to-pay is our very big goal, but of course various departments are involved in this. In any case, we are glad to have DIG as a partner who also covers this area and with whom we can go down this joint path!"