(published in Beschaffung aktuell – 2015/05 issue)

Purchasers need the right tools to work strategically and reduce costs in the long term. If purchasing reduces expenditure by just one percent, this can increase annual profits by up to 20 percent. This requires transparent data and a professional purchasing control system.

“We wanted transparency with regard to changes in the cost situation, and we wanted to identify potential savings – this requires a suitable database from a single system that also offers appropriate analysis and evaluation options and maps correlations,” explains Thomas Kuchler, Global Category Manager Rubber at Knorr-Bremse Systeme für Nutzfahrzeuge GmbH. The world’s leading manufacturer of braking systems for rail and commercial vehicles, with sales of €5.2 billion and headquarters in Munich, is now represented at over 100 locations in 29 countries and restructured its purchasing department last year: “Since the beginning of 2014, purchasing is no longer managed regionally, but globally,” says Kuchler. The category managers are now responsible for individual product groups within the Knorr-Bremse Group and thus for the entire purchasing volume. This new structure creates considerable savings potential – which can be identified – through volume bundling, raw material consolidation, and a focus on strategic suppliers. It also offers the opportunity to hedge risks. However, if the data for reporting and analysis comes from different sources, it is difficult to compare and companies such as Knorr-Bremse cannot exploit its full potential.

Previously, Knorr-Bremse used an Access solution for reporting and an SAP Business Warehouse for purchasing. As in many other companies, analyses were Excel-based and therefore relatively time-consuming due to the extensive manual work involved, as there were no stored formulas or conclusive evaluation options. And with every analysis, the purchasers had to start from scratch. This also affected comparability. In order to manage the new global purchasing organization in a targeted manner and exploit potential, Knorr-Bremse decided to implement a new purchasing controlling system. “Originally, we wanted to develop an internal solution based on the Business Warehouse, but then we realized that the effort involved was far too great,” recalls Kuchler. Knorr-Bremse therefore took a close look at various purchasing controlling systems.

Global evaluations at the touch of a button

The central requirement for the new system was that it should consolidate data sensibly, create maximum transparency, and identify potential savings on this basis. Since Knorr-Bremse’s purchasing department is globally positioned, access had to be possible from anywhere in the world. Automatic savings calculations and extensive evaluation options were also of particular interest: For example, the solution had to be able to display price changes compared to the last price of the previous year and price changes compared to the average price, as well as break down material surcharges. “Our prices are made up of various components: for example, the price of parts plus the price of raw materials – if the raw material prices on the market change and a part becomes more expensive or cheaper as a result, the system should reflect this. The same applies to currency effects. We want to be able to clearly understand the impact of such price changes,” explains Kuchler. The new solution also had to map predecessor/successor relationships and be usable with different currencies. A download option for post-processing reports in Excel was also desired. “For us, only a standard solution was an option. Although many manufacturers offer customized software, this requires enormous implementation effort and considerable maintenance,” says the purchasing expert. “We wanted a system that could be put into operation quickly.”

After a tender and test phase, only the purchasing control system from SoftconCIS fully met the requirements. The easy-to-use web interface of WebCIS was immediately convincing: “The usability is really good. The entire interface is much easier to use than the previous solution. The summary of data across all locations is a real added value for us – we can now perform global evaluations at the touch of a button,” says Kuchler with satisfaction. “It was also important to us that SoftconCIS provided us with credible proof during the three-day test that implementation was possible at short notice, as the schedule of only nine months left little room for troubleshooting and development work.”

Purchasing control system as a central control tool for purchasing

WebCIS is now the central control tool for Knorr-Bremse’s purchasing department. It provides complete transparency, consolidates data, identifies potential savings and material cost drivers, and forms the basis for strategic work. Purchasers can easily access the system from anywhere in the world via their web browser and work with “their” currency. All important developments can be displayed and analyzed, enabling appropriate measures to be taken immediately if necessary. “SoftconCIS creates the transparency that is necessary to control this purchasing organization: purchasing volumes, price developments, and responsibilities are mapped worldwide and can thus be controlled,” explains purchasing expert Kuchler. The solution also enables quick access to purchasing-related data and the creation of standardized analyses. This means that evaluations can be developed centrally and made available to purchasers and controllers in a decentralized manner—for example, on volume changes, different price levels at component level, and changes and effects of material surcharges.

“The system constantly provides us with starting points for discussions with suppliers.”

With the “Purchasing Analysis” module, Knorr-Bremse can benchmark suppliers, identify cost drivers, prepare negotiations, evaluate purchasing groups, review the use of framework agreements, and measure and improve the cost development of suppliers, material groups, and parts. “It used to happen that suppliers in different regions charged different prices for the same parts – the SoftconCIS system immediately reveals which parts have more than one price,” says Kuchler. “In addition, with a click of the mouse, we can use the module to see how the prices of a supplier or a component have developed over the last few years, for example, or even compare the prices of a component from different suppliers. or compare the prices of a component from different suppliers. The system constantly provides us with starting points for discussions with suppliers.”

Overall, the purchasing control solution offers more than 250 ready-made analysis models and key figures that can be customized. Kuchler explains: “We have developed a standard dashboard for our controllers that allows them to track material surcharges and their impact. We also use a dashboard developed in-house as a supplier overview, which shows the purchase volume of previous years, the plants supplied, ABC analyses of part numbers, price developments, and the price development and volume of A-parts.”

Conclusion

“The purchasing control solution will pay for itself by the end of this year – not least thanks to the potential that has been created through global cooperation with plants in Brazil, the US, Europe, China, India, and Japan, which can now be identified and leveraged with the help of WebCIS,” says Kuchler. Around 80 users across the group are making intensive use of the system. “An experienced colleague came up to me and said he had never worked with such a good system,” recalls Kuchler, summing up: “Overall, the solution is very powerful, easy to use, self-explanatory, and we have had nothing but positive experiences with it.” That is why plans are currently underway to further expand the system: The “purchasing planning” module is currently still in the test phase and is scheduled to be implemented by the end of the year.