How I Spent Oktoberfest Going to School on German Procurement Practices

German procurement

A few weeks back, I had the good fortune to spend two days in Munich during a time that just happened to coincide with Oktoberfest. Of course, there was absolutely no relationship between the visit and the festivities at the time. And getting into a small “tent” — part of the activities with the Volksfest if you have the right friends — together with some colleagues from a startup in town was a complete coincidence as well. Or, that is what I tell my wife at least. (That, and all I had to drink was watered-down Radler.)

Core motivations for the trip aside, I probably packed more conversations into the 36 hours on the ground in Munich than I do on most trips. And after talking with at least half a dozen individuals in detail about the current state of procurement in the region — as well as testing the waters for greater Spend Matters activities in Germany — I came away with a new appreciation for what makes the market different and what the rest of the world can learn from the Mittelstand businesses in Germany from a procurement perspective. For those unfamiliar with the term, it’s like an upsized version of the SME space in the U.S., or the chuushoukigyo firms in Japan, where more than 95% of all German businesses fall into the Mittelstand bracket and around 57% of all Germans work for a Mittelstand organization.

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What also surprised me was the significant similarities — even parallels — between German automotive OEMs and supplier relationship management versus U.S. and Japanese OEMs. If Volkswagen  — the business unit, not necessarily its dedicated Porsche or Audi procurement team members — is like General Motors in how it has historically treated suppliers, BMW is certainly the Honda of the region, in terms of partnering and tapping supplier innovation. Daimler AG, parent of Mercedes-Benz, might best be described as similar to a Ford or Toyota in its approach to supplier management and engagement.

Of course, these are gross oversimplifications. German OEMs are different in overall procurement practices, and this trickles down to suppliers. The focus on rote process and process management and oversight would make any Six Sigma-trained manager proud. (Although, playing to stereotype, German procurement practices appear more concerned with the process itself rather than continuous improvement.)

Still, I came away from the discussions with a number of general lessons learned from the region as well as ideas gained from how the Mittelstand approaches procurement overall and procurement technology adoption specifically.  

Stay tuned to Spend Matters PRO in the coming days as I explore this topic further in a deeper analysis.

Please follow Jason Busch on Twitter @jasondbusch

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