While others are only just discovering big data, he has been juggling countless pieces of data in purchasing for over 25 years: After learning how to analyze data and generate meaningful information from it in central purchasing at B/S/H, Werner Güntner founded his own company: SoftconCIS. With a great deal of enthusiasm for the subject, he is on a mission to support people in purchasing with transparent information.
Procurement today: You founded SoftconCIS 25 years ago. What has changed since then from your perspective, and what was different 25 years ago?
Werner Güntner: It is interesting to note that not much has changed in terms of the use of modern tools in purchasing. In this respect, purchasing remains a field of research.
When I was still working in central purchasing at B/S/H, people were just as desperate to find reasonable key figures and meaningful information as they are today. Although we have a lot of data, there is still little reasonable, meaningful, and usable information.
The change lies in the fact that the ability to collect data and turn it into information is much better today. Computers are faster and software has evolved. In addition, there is a growing awareness in purchasing and within companies that a lot can be gleaned from intelligent data analysis. The possibilities are better, but it’s the same people as before. I see this as a major problem today: If you don’t get people on board, it will come to nothing, just like many other trends under the current buzzword of digitalization. The big task is to help people deal with the many streams of information.
Procurement today: Since you mention a lot of information, your WebCIS 4.0 software already offers 400 key figures as standard. Isn’t it easy to lose track of things?
Güntner: 400 key figures may sound like a lot at first glance, but it’s quite possible in combinatorics. You have to take into account the classification of these key figures, depending on the type of purchase. Take indirect purchasing and direct purchasing, for example—these are two completely different classifications. There is supply purchasing and series purchasing, both of which require completely different information. If you compare the supply of production materials to an automotive supplier with the supply purchasing of a railway company or municipal utilities, you are comparing completely different subject areas and objectives. A purchasing manager needs different key figures than a member of the executive board, and a lead buyer needs different ones than a dispatcher. That’s why the mere number of 400 is really only a statement about the possible combinations. Broken down by information recipient, there are rarely more than ten suitable key figures per purchasing role. These describe the area of work and the objectives that should be used as a guide.
It is important to communicate what role-based information is. This is also one of our tasks. We help people find the key figures that are important to them. There are so many meaningless key figures that I always ask the question: What does this number tell you, what is its purpose? The answer is usually: I read it, or: It’s what everyone is talking about.
The correct answer would be: I need information and key figures because they cover my area of work and thus reveal potential or deficits. If this is the case, a key figure will be accepted and the information behind it will be used. There is still a lot to be clarified here in terms of understanding.
Procurement today: So, in your opinion, the most important key figure probably doesn’t even exist?
Güntner: If you ask someone in purchasing for the most important key figure, you’ll always get one word that describes everything: Savings. But what exactly does that mean? Everyone interprets it differently. There are savings that are reflected one-to-one in a profit and loss statement. That is the actual goal, but it is not always achieved.
And then there are savings that represent a purchasing achievement: for example, when a supplier demands a price increase because its costs have risen and the purchasing department is able to fend off this demand. In some cases, the purchasing department can reduce an increase, but in the end there is still an increase. In this case, the purchasing department has achieved something, but this is not reflected in the profit and loss statement.
There is a great deal of confusion in the terminology, calculation, and expression of what is done in purchasing. Management often has a different understanding of the term “savings optimization” than purchasing. Many things are mixed together that will never be reflected in the company’s results. It is often unclear what purchasing actually stands for. That is why it is important for purchasing to first define the terminology and then the objectives.
Procurement today: However, this is not an internal purchasing problem, but rather concerns the internal positioning of purchasing within the company in relation to management.
Güntner: Yes, that’s right. It is the purchasing manager’s job to communicate to senior management what influences professional purchasing, where its leverage lies, and where they can start. This varies from company to company.
Purchasing is often seen in a completely wrong light because it does not communicate professionally. People in purchasing know their business, but there is room for improvement in purchasing marketing, i.e., presenting their own value contribution to the company in a comprehensible way.
Procurement today: Does your software provide purchasing managers with arguments for better communication with upper management?
Güntner: Yes, we support purchasing in this regard because the database is already in place. Everything that purchasing does can be seen from the documents generated. But data has to be turned into usable information, and that is a laborious task: What information is needed for communication upwards, downwards, to suppliers, and to internal customers? What information documents the progress of improvements or external market influences? WebCIS 4.0 provides the answers as standard, because the data is available in a structured form. The crucial thing is that it must be understood by purchasing. This means that purchasing staff must be trained in interpreting this information and deriving the appropriate measures, which is often forgotten. To put it bluntly, data is the raw material of purchasing. It is readily available, but you also have to be able to use it. That is where the major challenges of the future lie, not in the word “digitalization.”
Procurement today: One problem is that the data is not structured. How do you deal with that? Does the software do it automatically?
Güntner: The data needs to be organized. WebCIS 4.0 supports the creation of order and structures. However, this automation requires clear, clean rules. We also help with our purchasing experience to avoid meaningless machine suggestions.
We often see major shortcomings in master data maintenance, order values, and order quantities. But when it comes to invoicing, the quality is there.
>Of course, we also point out where invoices and orders don’t match up, where the prices you have on file don’t match the invoices. Many people are then very surprised that their processes allow such errors to occur. And that’s one of our goals: our software should help buyers think for themselves about what they’re doing and what they’re responsible for.
Procurement today: Why is it that companies don’t have this basic data under control?
Güntner: First, it depends on the volume of data and the various places where data can be stored and maintained. It’s a division of labor where everyone certainly means well, but the strands don’t come together. There’s a lack of clarity.
Often, it’s simply the sheer volume that overwhelms the purchasing department, leaving them with no chance of getting to the bottom of everything. There is also often a lack of awareness of the disruptions that can occur. When we visit customers and I tell them this, everyone says, “No, that doesn’t happen at our company.”
And then we do a 3-day test that makes purchasing completely transparent. And the result is shocking for many at first, because we show them where they can improve. Not by pointing fingers, but by saying, “Look, this is what you’re doing. Is that what you want? Does it fit the market trend? Is that what you’re aiming for? Are you communicating that to upper management?”
And we want to help kick-start the discussion: How can I help a purchaser do the right thing, the thing that adds value? Because a lot of non-value-adding work is still being done in purchasing because there is no overview.
However, purchasing must also be willing to accept this assistance. Many purchasers, especially experienced ones, think that they have so much experience that they don’t need any support. I would argue that many purchasers are not professional enough when it comes to the topic of “How do I use information in my business?” If digitalization continues to accelerate in the future, they will need even more help.
Procurement today: Does the hype surrounding “digitalization in purchasing” actually help you get your message across to purchasers?
Güntner: Actually, what we have been doing for over 25 years is nothing more than digitization. I am surprised that people, including existing customers, are suddenly coming to us to start a digitization project. What else have we been doing in recent years? The process is already underway. The challenge is much more about individuals understanding where machines can work for them. That will come, but it requires a solution space with clear IT rules, otherwise it won’t work.
We are still failing on trivial issues!
For example, over 80 percent of our customers face the problem in their purchasing planning that sales cannot provide the figures that purchasing needs.
Güntner: Both are necessary: an awareness of data hygiene. When it comes to structures and data maintenance, I need a certain level of data hygiene so that I get information instead of a pile of data. Secondly, I need to learn and understand how to use what is available. If I don’t understand the development of material costs, the influence of currency, or the impact of market indices on prices in context, all the data and information in the world is useless to me. This has to be learned and practiced, and there is a huge deficit in this area.
Procurement today: Data maintenance is not exactly exciting work.
Güntner: Nevertheless, data hygiene is an important and not trivial issue. Take part numbers, for example: Material specifications change with technical developments. Do I always need a new part number? Or do I just change the price and keep the part number the same? These are questions we face time and time again. We discuss these issues repeatedly because they always have an impact on pricing. Changing a material number means extra work, which no one wants. This has to be weighed up each time.
Procurement today: Do you think that companies need to have a group of people within the purchasing department who deal specifically with these kinds of issues?
Güntner: Yes, definitely. I can tell you from my own experience: I joined Bosch-Siemens in central purchasing in 1990. Even back then, a department called purchasing controlling was set up there. At that time, I was fortunate enough to learn what purchasing controlling involves. The task was quite simple: “Mr. Güntner, make sure we have the information we need in purchasing to enable us to report and control. So that we can maintain an overview and go out into the world with everything we do.”
Procurement today: Where is this purchasing controlling located? Does it belong in finance or in purchasing?
Güntner: Even though purchasing controlling must be independent, it belongs in purchasing. Our colleagues in finance don’t understand what purchasing does exactly. They can only understand it if they are right in the middle of the action.
That’s why we have a clear message: Purchasing controlling is important in terms of taxation, providing information, training purchasing colleagues in how to use this information, raising awareness of automated reporting, and deriving what needs to be read from these reports in terms of potential and improvements. To do this, it is necessary to know and understand purchasing and to have experienced it from the inside.
Procurement today: What skills should a purchasing controller have?
Güntner: It may surprise you, but purchasing controlling is a highly communicative job. That’s why, as a purchasing controller, I don’t need an introverted data person, but rather a communicator who understands the big picture and motivates people.
You need people who enjoy working with information, data, and structures, but who are also good communicators.
Güntner: That’s difficult. You can train them. I teach purchasing controlling at the Technical University of Applied Sciences in Nuremberg, focusing on purchasing planning, purchasing performance measurement, and performance measurement. There, I always try to convey to people that communication is the most important tool alongside useful information.
Procurement today: What is the difference between the training at the university in Nuremberg and your own SoftconCIS Academy?
Güntner: The university program is part of a master’s degree, so it has a fixed curriculum designed to teach purchasing controlling from a certain academic perspective.
At our academy, we aim to go beyond pure purchasing controlling and teach students about the latest developments in purchasing. What are the current trends? Where is the field headed? We don’t want the academy to be an advertising platform for our software modules. That’s not always easy, because many topics can only be covered using our own software. But it’s not an advertising platform.
We have now divided the academy into a kind of knowledge transfer platform on the subject of purchasing and the so-called User Days. In the future, we may expand to include the topic
Procurement today: For companies of what size does your software make sense?
Güntner: For a purchasing volume of 40 to 50 million and a certain level of complexity in what is being purchased: direct and indirect purchasing, supply of production materials. If you have a lot of part numbers or unnumbered materials, then using our software makes sense. You can achieve the right impact from 150 million upwards. There’s no need to discuss ROI at that point. We can show companies right away in a 3-day trial what potential the software has and how they can benefit from the information.
The key thing is to use the information, then you’ll see a return on investment in less than six months. Any investment you make here pays for itself in no time because there are so many opportunities to pick up on issues that immediately bring money back in. However, it doesn’t help at all if the information is in the report and you don’t do anything with it. Then the potential is useless.p>
Procurement today: What does this require? A purchaser or rather an IT specialist who acquires purchasing knowledge?
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Güntner: Both are suitable. I don’t need to tell an experienced purchaser how negotiations work or how strategic considerations and arguments are made. I can perhaps help them by saying: Take a look at your product group and the structures of your suppliers. Do you have the competition you expect here? What arguments can you use to make a long-term contribution to your company’s value? Do you need new parts or better approvals from your development department? Do you need to talk more with development to get newer parts approved, or can the old parts be optimized? We have some interesting insights here as well: For a part that has been purchased unchanged for five or ten years, there is no room for optimization in terms of price.
Procurement today: But that goes far beyond normal purchasing control.
Güntner: Yes, it’s sometimes really amazing what connections you come across when you take a closer look at cost developments. I stumbled across this purely by chance during a presentation just a year ago. And every purchaser was able to explain it to me immediately: these are our old parts, which we unfortunately still have to buy. There’s little innovation there. You’d have to talk to the development department. Price developments are only possible with dynamic parts development.”
Our WebCIS 4.0 helps with templates, suggestions, and key figures to maintain an overview, but customers have to select, decide, and draw their own conclusions.
Procurement today: And that gives purchasing a creative role?
Güntner: Yes, of course. It is the value driver. In many manufacturing companies, more than 50 percent of sales are purchased. There are often 10,000 to 15,000 creditors that need to be managed. Who is important, who is less important? Who is risky, who is less risky? All these issues have to be learned: these are the tasks of purchasing. It’s a fine art, which is why purchasing is so eminently important. And we understand purchasers. Even completely new customers who don’t know us at all say after just two hours: Wow, that’s great, we can talk from purchaser to purchaser. And then we show them how we solve and present this from an IT perspective.
People feel they are in good hands, and they value that. That’s why IT is only a means to an end for us. To sum it up: it’s all about people. The people in purchasing have to be taken along with us.
Interview with Werner Güntner, Managing Director of SoftconCIS GmbH, and Sabine Schulz-Rohde, published in Beschaffung aktuell, March 2019
