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February 18, 2018

Success Story Stadtwerke Konstanz: Putting Procurement on a Diet

© Stadtwerke Konstanz

Even companies put on weight. However, this is not about unnecessary pounds, but about unnecessarily complex processes. Procurement in particular is regarded as the “problem zone” with a high potential for shedding some extra weight. This is now increasingly being recognized by municipal energy suppliers such as Stadtwerke Konstanz: with the help of the eSolution provider Newtron, they are now successively switching to a tailor-made web-based procurement system, positioning the company by Lake Constance as one of the pioneers. There is a great deal of catching up to do in the industry. A recent study by the CKEW concluded: – barely half of all municipal utilities use eProcurement.

Lower procurement costs, but how? This question continues to be a constant driver for buyers. In addition to pricing, it makes sense to always keep a critical eye on the workflow, because substantial savings reserves also lie dormant here. Making use of them for oneself isn’t that hard. The lever lies in the triad “digitization, automation and integration”, as the following practical example shows:

In mid 2016, Stadtwerke Konstanz was looking for a modern, future-proof eProcurement solution for the entire corporate group in order to collect, evaluate, approve and process order requests faster and more efficiently than before. The contract was awarded to Newtron GmbH, initially to embed the ordering system into an innovative catalog management system.

Considering individual requirements

“It was important to us that the new catalog solution be tailored to our very special needs, help us to standardize processes, in addition to being able to integrate our own databases and connect to the existing ERP environment,” reports Federico Fabbri, Head of Purchasing at Stadtwerke Konstanz GmbH. Stadtwerke Konstanz’s purchasing department is responsible for group-wide supply and services. The spectrum ranges from standard parts, supply lines and electrical systems, buses and ships through to office equipment, software, service clothing and engineering services.

Maverick Buying equals additional cost and effort

“It is typical for municipal utilities that a large number of very small orders have to be placed at high frequency, which in turn favours Maverick Buying,” reports Florian Zimmermann, Existing Customer Manager at Newtron. This “wild purchasing” outside of standardized procurement channels was also widespread in Constance and reporting was incomplete. This meant an unreasonably high additional expense for accounting and purchasing, which had to deal with a large number of unregulated orders. Moreover, energy suppliers usually have a wide range of procurement regulations that must be precisely adhered to, for example with regard to hazardous substances. Another factor to consider: “Approval processes are usually very time-consuming,” says Florian Zimmermann. All these aspects had to be taken into account in order to develop a strategy that would help optimize the procurement workflow and manage resources more efficiently.

Deployment within three days

In a first step, Newtron therefore determined the actual status of the group-wide ordering system in a two-day workshop. The IT experts then worked out a requirements profile for a tailor-made eProcurement system and a corresponding to-do list for its implementation together with those responsible at the municipal utilities. The plan was to start Newtron eProcurement in early 2017. But then suddenly everything had to happen very quickly, a crash diet so to speak. After all, it became apparent that the previous IT service provider would no longer be operational sooner than expected. In order to keep the ordering system running, a Newtron team set up a new system and was able to deploy it within just three days. Newtron was thereby able to prevent bottlenecks, restrictions or breakdowns.

Long-term relief for purchasing and accounting

The result was a multi-vendor catalog solution with convenient search functions, intuitive, simple handling and complete integration into the Stadtwerke Konstanz ERP system. Previously used catalogs and supplier lists, including the respective framework agreements, are embedded in Newtron’s trade portal and can be supplemented or changed at any time. Any demand for materials, products or services can be centrally managed and tracked. All orders are automatically posted with the correct account assignment without requiring outside intervention. As a result, the purchasing and accounting departments of the corporate group are significantly unburdened in the long term. Users are able to order the exact parts they require from the listed supplier who is most suitable and offers the best price. Release and approval scenarios are stored in the system. Additionally, all steps are documented and archived to ensure adherence to compliance guidelines. “Newtron has fully understood our requirements and needs and subsequently implemented them,” summarizes Head of Purchasing Fabbri.

Study: Municipal utilities lag behind in digital transformation

With NEWTRON’s eProcurement solution, Stadtwerke Konstanz now boasts an innovative and cost-effective catalog management system that offers the desired transparency in procurement and also noticeably streamlines the entire purchasing process. Resources are not wasted and time which can be used productively for other activities is saved. By the end of the year, Newtron will also be providing eSourcing solutions for auctions and calls for tenders as well as implementing modern Supplier Relationship Management (SRM). Stadtwerke Konstanz therefore counts as one of the pioneers in the sector: According to a study by the Center for Municipal Energy Industry (CKEW) at the University of Cologne’s INeKO Institute, less than half of all municipal utilities in Germany (49%) have integrated eProcurement into their own processes. By way of comparison: According to a survey by the German Association for Materials Management, Purchasing and Logistics (BME), three out of four buying companies in Germany (75%) now use electronic catalogs.

Anissa

Anissa Hartmann

Marketing Manager

Anissa Hartmann worked as a Marketing Manager at Newtron until September 2019.

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