The mechanical engineering company Memminger-Iro shows the advantages of digitising indirect procurement. The company saves a lot of time and resources through the digitised procurement of C-parts.
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Everyone agrees on the impact of digitization on companies. And yet the economy only occupies 18th place in a European comparison according to the KfW SME Digitization Report 2021 regarding integrating digital technologies in previously analog operational processes. In recent years, only half of the companies have planned to digitise customer and supplier relationships. However, the mechanical engineering company Memminger-Iro shows that switching to the digital age pays off here, especially in indirect procurement. The digitised procurement of C-parts saves the company from Dornstetten in Baden-Württemberg a lot of time and resources. These can be used profitably elsewhere.
Around 230 more than 400 employees worldwide work in the company headquarters of Memminger-Iro. The medium-sized mechanical engineering company is an expert in process engineering for thread feeding, control technology, and lubrication systems for knitting machines. As a renowned address, it supplies high-tech components to textile manufacturers in over 100 countries. Until 2010, the company ordered from stock.
In practice, this meant that before each order, a new search for the currently cheapest offers was set up – an enormous effort for the purchasing department. Then the first steps were taken in the direction of digitization of procurement. These lay in bundling the purchasing volume for office supplies from a single supplier with its digital procurement platform. Due to the advantages and positive experiences, the procurement of packaging materials such as cardboard boxes and adhesive tapes was quickly digitised. And with a second supplier that also has its procurement platform.
The Common Thread Through Everyday Business
“We quickly gained many positive experiences with the digitization of indirect procurement.” “But the different purchasing systems still complicated the process. We were therefore looking for a central platform through which the purchase of C-parts and indirect procurement can be processed.”
In the following competitive comparison, the procurement platform simple system emerged as the winner since the most significant overlap between the requirements and the ranges on offer was.
The introduction of the platform was fully implemented in less than half a year. “At the beginning, some employees still had reservations because they were now supposed to take on tasks in purchasing.” “In day-to-day practice, however, it quickly became apparent what advantages are associated with it, and reservations could be quickly dispelled.”
Since the beginning of the cooperation with the simple system, the proportion of centrally procured products has continuously increased to 65 percent. Local business partners from the region currently cover the remaining share. “In the beginning, we only used one supplier for each product area.” “Due to the increased volumes and security of supply, a second supplier has usually been added.” The indirect procurement of Memminger-Iro ranges from office supplies and specialist literature to packaging material and development materials (small electronic parts and samples) to hand tools, Small electronics, and hygiene material.
Quantifiable Successes And Motor For Further Digitization
The remarkable thing about working with the new e-procurement platform is. The required products are ordered independently by the employees of the departments as needed. A total of 80 personal and impersonal, jointly used accounts have been set up on the platform for around 230 employees at the company headquarters in the Black Forest.
Up to a specific budget limit, orders are approved by a supervisor in the purchasing department. For higher amounts, the management must approve. Instead of the lengthy Internet research that had been the norm up to now, employees could quickly and independently select the required products from electronic catalogues from various suppliers. This way, the pure processing time in purchasing per order was more than half from five to two minutes—a relevant variable with around 100 orders per month.
Optimization Of The Entire Ordering And Delivery Process
For Memminger-Iro’s purchasing department, this relief primarily means that the resources saved can be invested in procuring A and B products. Because of the sales volume, significantly more significant contributions to improving the margin and thus to the company’s sustainable success can be achieved here.
Another advance is the reduction of inventories, which ties up less capital. “We used to have a room of over 25 square metres just for toner cartridges and other materials,”. “Optimising the entire ordering and delivery process, we can order as needed without worrying about supply bottlenecks.”
Last but not least, introducing a simple system also marks the start of the further digitization of company processes. “The connection of e-procurement to the ERP solution proAlpha was one of the first interface projects in this area for us.” “Based on the experience gained, we looked at where operations benefited from digitised processes. The digitised and automated procurement was the initial spark for the entire company.” In addition, digitization could create positive effects on sustainability and resource conservation. While in the past, vast stacks of different printed catalogues were distributed in the company at the turn of the year, only digital product directories are used today.
Digitization Connects Business Partners
Existing business relationships could be transferred to the platform: “In 2012, our first online supplier was not yet represented on a simple system. After discussions with our suppliers and a simple system, we managed to get our business partner to make their range available on the platform.
This makes purchasing easier for us, and our supplier can easily find potential new customers. A classic win-win situation,”.
Over the years, other suppliers followed who were quickly won over by the simple onboarding and the opportunity to tap into additional customer potential. Ultimately, a look at the return on investment (ROI) shows the management of Memminger-Iro that they have done everything right. By entering e-procurement on the simple system platform, the purchasing department can once again devote itself entirely to its strategic core tasks. “Even the development costs of the ERP interface are negligible because of the comprehensive advantages.”