BASF and Thyssenkrupp – Two Giants Talk About Global Procurement Transformation

At the recent SAP Ariba Live event, there were several very good customer case study sessions. Two that shared some similarities were from BASF and Thyssenkrupp, Here are a few headlines from those sessions.

BASF is a huge (€57 billion in sales annually) chemical sector firm, whose products are used in pretty much every industry. There are dozens of production sites all over the world, with the HQ in Germany. The firm has identified seven core digital technologies where it needs to focus (such as 3D printing, big data analytics, AI, IoT etc.). Many of those play into the procurement and supply chain area; so initiatives and ideas such as automated buying, big data for demand planning, product sensors to trigger orders, are on the agenda.

So as BASF told us in Prague, the firm is going through a procurement transformation programme that has three key goals - to create a “simplified life” for the procurement community and suppliers; to use strategic sourcing enabled via IT-Tool support, and to implement standardised processes that ensure compliance and efficiency. Six major areas were identified where improvement in the supporting IT would help to drive performance – see the picture for more detail.

BASF wants to create the “network of choice” for their industry, which means they needed “a connectivity provider with industry know how”. This inter-connectedness with suppliers through a hub structure will reduce interfaces, reduce complexity, and increase benefits. The platform includes a vendor interaction portal and a global catalogue system. In the long-term, perhaps there will even be a more “open standard” to enable collaboration between different network solution providers.

The firm is using SAP Ariba for the “Strategic Procurement Suite” (incorporating sourcing, supplier and contract management). The aim is to have globally aligned processes and workflows via an  integrated system for strategic procurement – “we want to present one face to the supplier”.  Overall, the aim is to “simplify the buyer’s life and increase time for value-creating activities”.

Jens Klasener of Thyssenkrupps explained that their materials cost is some €23.5 billion per year. The firm is a major diversified industrial group with traditional strengths in materials and a growing share of capital goods and services businesses. The group is made up of around 800 companies, and there were “100 different SAP ERP systems running” (and more non-SAP!). So their programme, like that at BASF, looks to create more harmonised approaches across the business.

The aim in procurement is to address the full third party spend strategically, with less local effort, by using local staff as “network resources” in clusters. Spend leverage can be driven through automation and digitisation. This will all require a closely connected procurement network – in both the sense of the people and the technical network.

The firm chose SAP Ariba in 2015, and is using the platform for supplier management, sourcing and contracts – that is the “backbone” of the programme. Catalogues and use of the supplier network are also on the implementation curve. It is pretty amazing in our opinion that in 24 months, 250 “legal entities” have been brought into this programme, but there is further to go - for instance more work is needed to harmonise supplier master data.

Another key goal is to bring procurement into the product lifecycle process earlier, at the idea-generation and requirements engineering stages, not just once the engineers are ready to go to  the supply market. There is also a goal to bring direct materials sourcing under the same processes and disciplines.

What was impressive in both cases was the huge scale of these programmes. Can you imagine the “project plan” when you have 800 companies in your group to worry about?  We don’t know how open BASF or Thyssenkrupps would be to discussing their experiences with other non-competing practitioners, but there must be a lot more to be learnt that couldn’t be covered in these short sessions.

Clearly, the global scale and reach of SAP Ariba must have been one reason why that solution was chosen by these two global giants. But the fact that these two well-regarded firms were prepared to come and speak at the event says a lot about their relationship with the software firm, and there is no doubt that SAP Ariba is investing heavily (time, resources and energy) to making sure these key clients feel good about their experience.

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