Digital Procurement: How Deutsche Bank buys pencils

Imagine the following: A Deutsche Bank employee runs out of pencils, notepads, or batteries for his computer mouse. How will he ensure supplies in 2019? Does he send an e-mail, as has been customary in large companies for many years, with his requirements to the responsible employee in indirect purchasing, who then checks the stock and orders new goods if necessary? If we were in 2009 – or 2015 – the process would almost certainly be like this. But now, in 2019, is the right time to question, optimize and rethink purchasing processes and other mechanisms.

Digitalization now offers the right tools and opens up new possibilities that can be implemented across departments, reduce routine tasks and thus streamline processes.

At Nunatak, we are convinced that suitable B2B marketplace solutions can be integrated into P2P systems such as SAP Ariba, Coupa and Tradeshift, which can be used to automate parts of indirect purchasing comparatively quickly and easily. Above all, employees can order standardized material groups directly in the system – without the detour via their purchasing colleague, who can in the meantime deal with more complex topics and products with individual prices. This also includes agency services or coaching, which must be calculated manually according to requirements. Our perception: Contrary to the perhaps emerging fear that such a step could threaten jobs, most buyers long for relief through such innovations and an upgrading of their work.

But first to the initial situation: Today, hardly any internal digital strategy can do without terms such as blockchain, big data or cloud systems. And this is no longer just about app-based co-working solutions, mobile office and pixel tracking for performance optimization. Instead, real thought leaders today are questioning every area of their company to increase efficiency through digital solutions. This also applies to an area that has been deprioritized for a long time: indirect purchasing, where goods and services are concerned that are used internally and are not included in products or services for sale.

Why untouched? There is one obvious reason for this: the value contribution of indirect purchasing, in contrast to direct purchasing, is not visible in production and service delivery. That’s why it usually has a shadowy existence on the agendas of large companies – wrongly so. After all, well and efficiently managed indirect purchasing is essential, especially for big players, and an important component of internal customer satisfaction.

Due to the almost chronic neglect in internal change processes, procurement departments have usually grown without a long-term plan and are structurally inefficient. Contracts with manufacturers that have lasted for decades continue to run without being questioned. Employees in the department spend a large part of their working time on standardized processes that could have been automated long ago – such as the pencil-purchasing-process mentioned above.

That’s about to change: The principle behind these new B2B marketplace solutions is the same as those we know as private customers – e.g. from ebay or Amazon. Individual products are divided into groups, priced and provided with evaluation criteria. This gives employees a quick, well-assorted overview and enables them to order directly online. The system then checks whether the product selection meets the intended criteria and forwards the order to the manufacturer.

The giants of the industries are catching up

To date, the B2B marketplace solutions sector has been dominated by established medium-sized companies such as Mercateo, Meplato or the start-up Crowdfox, which are connected to the company’s own SAP system via interfaces. But the giants of the industries are catching up. In the meantime, Amazon has also recognized the signs of the times and is entering the global market with Amazon Business. With Amazon’s enormous resources, technical possibilities and international reputation in mind, it won’t be long before the balance of power in the battle for the B2B marketplace crown shifts in favor of the billion-euro corporation.

So how does a Deutsche Bank employee get new pencils in the future? With the help of Amazon Business, every company, regardless of its size, can now register for a free customer account – and thus fall back on the best offers and prices from the B2C market leader. Of course, the order volume still plays a role when it comes to the really low prices. But the threshold is also lower for smaller companies.

We now advise and support numerous companies in change processes in procurement. The goal is always to be live with an MVP (Minimal Viable Product) after just three months in order to obtain immediate customer feedback. After the kick-off, a meeting with the customer’s indirect purchasing for status quo analysis, the appropriate marketplace is connected to the company’s own commercial software. Usually, this is an SAP instance. The selection of the respective products then takes place in the marketplace, the actual release and purchase process however in the enterprise software. The latter thus fulfills a control function that protects against misuse. As a result, employees can choose from millions of products from thousands of suppliers at the touch of a button – depending on what is activated.

The costs in the marketplace are sometimes higher than with individually negotiated prices. However, the savings in process costs are usually so significant that the difference in individual product costs hardly carries any weight.