Find profit in procurement

Effective procurement is critical to staying up-to-date with supplier capacity, managing sudden changes in demand, optimising cash flow, and controlling costs without sacrificing quality. Yet How do you demonstrate your savings on the bottom line?

This interview between Sam Perrin and 2k Managing Director and procurement expert, Christian Kiock examines how Jedox is helping organisations find profit in procurement. 

procurementstrategies

Sam Perrin, Naked Data: Let’s start with how you came across Jedox in the first place.

Christian Kiock, MD, 2k My business partner used to work at Daimler, where he worked with a technology similar to Jedox, they share similar roots. He did some research and came across Jedox, and we used it for internal purposes initially, for planning and reporting and procurement optimisation. Over time we used it more and more and saw a lot more potential applications for it.

We used Jedox for the sort of analyses you would normally do in Excel, and it made things so much faster. Our clients didn’t know it was being used, they just saw the project running ahead of schedule. Obviously we really liked it. Excel chaos is prevalent in most organisations, and also in most consulting projects. Using Jedox made our projects much more efficient and really benefited our clients. We were very happy with it.

Sam Perrin, Naked Data:  You’re procurement specialists at 2k. Before we talk about your projects, can you describe procurement?

Christian Kiock, 2k: Procurement is a very important function of a business. There is direct procurement for companies that have a manufacturing department, where procurement is crucial to business operations. In service organisations, procurement might not contribute directly to the product that the company sells, but in theory, procurement should be in charge of every good or service that enters the business.

It’s a highly important department within the organisation. Historically it’s not had the standing and visibility it really deserves. It tends to be seen as a department that deals with transactional purchase orders, requests. On the strategic side of things, the benefits that procurement can offer are often not valued highly enough.

Naked Data: What are some of the reasons for this?

Christian Kiock, 2k: It’s important to show management the contribution that good procurement makes. This means showing them how much you save, how much those measures and cost savings initiatives that were devised have achieved, and the results that makes to the bottom line. You need transparency for that, you need efficient processes to monitor and manage those results. Unfortunately, when that happens in Excel, you can’t provide that transparency.

There’s also a historical issue. If you’re the person who carries out procurement orders but you can’t see your contribution to the bottom line, then it can be difficult to assume that role. It makes it different to implement a strategy when you are not aware of what you contribute to the business.

There’s a saying in Germany, “der Gewinn liegt im Einkauf” (profit lies in procurement). It’s very true. If you buy something 5% cheaper then, depending on your sales margins, you can work out how much you would have to increase your sales to achieve the same effect on the bottom line. So procurement is incredibly important.

Naked Data: Specific to BI, what are the main challenges you’ve seen around procurement in some of the organisations you’ve worked with?

If you want to make sure your contribution is seen, you need data transparency across the organisation. You’re using data from different parts of the organisation. You need to know the sales planning, as this affects production planning, which affects materials bought.
Good sales planning is not always readily available, as lots of source systems tend to be in data silos or just inaccessible and lot of procurement gets done in Excel.

This makes it difficult for organisations to effectively procure goods, which is a huge priority. So much time is wasted in analysis and reporting, and you don’t get around to effective procurement.

Also in indirect procurement there is often little transparency regarding spend patterns and optimisation opportunities. This is a vast opportunity that business intelligence can help exploit.

Naked Data: How does Jedox streamline procurement?

Christian Kiock, 2k: Jedox solves these issues very well, as its automated data integration mean you easily combine data from different sources and modules. You combine information from production and operations with supplier information, making planning very efficient. It’s not just about analysis and reporting, it’s also about looking forward and planning, which is one of Jedox’s strengths.

By combining those advantages, you have real time insight on what’s going on in your organisation and where savings can be made. Then you plan and monitor savings initiatives. You then report back, with automated, high-quality information, to your superiors, which leads to buy-in from your top management. As you present the information easily and efficiently in a way that is easy to understand and work with, which is another impressive side of Jedox.

Simply put, Jedox gives procurement the tools to do their job more efficiently and effectively.

Naked Data: Let’s talk about some of your favourite projects over the years.

Christian Kiock, 2k: There are three projects that have been quite challenging and very interesting.

Reaching international sales quotas 
The first project is supplier planning for a global leasing company, managing their planning processes globally across over 30 entities and materials to be bought from each supplier. The problem was two-fold.

One was that they wanted to plan cost-savings initiatives, then track and report on them efficiently across different companies. Previously it was done in Excel, which was a right old chaos. With Jedox, that improved almost immediately.

The other problem was that there were Supply Chain Analysisglobally and nationally preferred suppliers. Whenever you reached a certain quota from one supplier, you got bonuses, rebates and such, and sometimes the different agreements cannibalise each other.

For instance, if nationally you have a contract with company A, and internationally you have one with company B, then the entity in e.g. Spain may have more of an incentive to buy from A, with whom they have a quota to meet. Yet by doing that, they might miss an international quota from B, which, worst case scenario, means that everyone in the globe misses out on a quota, and foregoes their bonus with B. So obviously it’s very important to measure and manage those quotas, to make sure the overall benefit is achieved for everyone. That needs to be planned, and that had previously been done in Excel, which made it very difficult to compile and manage. We used Jedox to create a very cool supplier planning tool.

Supplier planning demand forecasting

Another project was supplier planning, cost-optimisation and demand forecasting. They used SAP, but the production planning module didn’t speak with the supplier module, so there was a lack of data – and extensive Excel-based processes.

Product demand changes all the time. Many organisations do production plans once a year, but they change constantly as the year goes on. Now this organisation can review their data in Jedox, they adjust their plan regularly and they always know current demands. They know what they need from different buying centres across the globe, for some 20,000 entities, which in Excel was a miserable task. KPIs appear up automatically, thresholds are made transparent, aiding analysis.

Ultimately, Jedox’s planning capability, which makes it so powerful, is why you need it for a project like this. You know actual demands, how you currently stand, and if it changes you’ll know immediately. You know if there are suppliers at better prices than the ones you’re currently getting. And you know if these suppliers have capacity left, so it’s not just whether or not they can theoretically supply you. Then you use Jedox Web to allow suppliers to directly enter their capacity and fulfil your demands, so you know if you can switch suppliers or not, rounding off the whole package. When you fully utilise all the strengths of Jedox, from the planning to the web, you can really optimise your procurement costs. It’s a very comprehensive solution.

Sales-1

Purchase planning
The third project is also quite large. We’re working with an online retailing giant, developing a large purchase planning tool for more than 100 buyers. They plan their purchase for the next year and season across different suppliers and price categories, it has some quite complex models in the background. The project leverages Jedox reporting and dashboard capability too.

Have there been any applications of Jedox which have been quite outside the box?
We developed a law suit reporting application, which is certainly not a classical use of BI. We were working with another industry giant, which had a tool they used to track all their active and passive law suits. They have very large contracts, so there is often a lot at stake.

Originally, they pulled information out with Excel, testing for changes in cells. If there were changes, there had been activity in that suit – easy to miss. They consolidated suits that needed further analysis.

We streamlined the entire business process Sales-3with Jedox. The solution is web-based, and all lawyers and law practices input information concerning suits. There’s also a value estimate concerning how much is at risk financially. Now they have a good overview of where cases are and aren’t progressing, because Jedox has optimised reporting. They used to use a few detours to make data useable, but we sorted that out using Jedox in no time.

Naked Data: Where you’ve worked with large global enterprise, what has been the biggest advantage of Jedox over an older mega-vendor BI tool?

Christian Kiock, 2k: There are two main advantages, apart from the value of course – you don’t get stung by outrageous maintenance price jumps every year. First, Jedox takes relationships with clients seriously. You can get direct contact with board-level members. We’ve had meetings with large industry companies and Jedox directors were there, in a meeting for a few hours. You can’t get that level of trust from the likes of SAP or Oracle. A more agile organisation can be more flexible when it comes to accommodating clients.

Second is the ease-of-use – the intuitiveness. The Education Ministry for the Federal State of Berlin is in charge of over 800 schools and approximately 270,000 pupils. It’s a huge organisation, and we implemented Jedox there for student data analytics, amongst other things. The cool thing was that they trained two people to administer and to help adjust the solution to new business requirements. Because Jedox is so easy to learn, they got the hang of it quite quickly, and they independently discovered a lot of internal applications for Jedox.

They’d put a few cubes and dimensions together, and you had another business process that was streamlined. There was no need to set up a project, no need for consultants. They were empowered and managed to solve internal process problems completely independently with Jedox.

And that’s also something you don’t get from a big provider. That agility, that ease-of-use. If you’ve got SAP and you want a new solution or application, you’ve got to set up a project, get budget approval, and get external consultants in. Most people don’t because it takes forever. So you do it in Excel, because you know your way around it, but it’s nowhere near as efficient and has a huge risk for errors. Jedox takes away all that stress.

Naked Data: Let’s look at the future. What’s your ideal position with Jedox in two years’ time?

Christian Kiock, 2k: To be working closely with Jedox in the procurement field. We’ve just done a few Jedox webinars on procurement. Our position is as Jedox experts who really know BI when it comes to procurement. I plan to strengthen that link.
The development trajectory Jedox has shown in the last few years will continue. The solution just goes from strength to strength. What I love about Jedox is that it’s so flexible, there’s so many things you can do with it. If you really know your stuff, and of course I’m lucky enough to work with a lot of people who do, then you can develop very cool solutions. The sky is the limit.

Jedox solution: Procurement
Featured industries: Education, Retail, Wholesale, Manufacturing, Property/Leasing

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s