Fine tuning in purchasing – VW Immobilien is optimising the planning of their supplier orders with value contracts in SAP^®

When purchasing is buzzing

The strategic purchasing division has a lot on its plate. On the one hand, it is responsible for ensuring the timely and high-quality provision of services. At the same, the department is also tasked with achieving noticeable savings for the company. The VW Group’s strict compliance requirements must also be enforced to ensure that no listed supplier is discriminated against or receives preferential treatment. Maintaining the right balance is a fundamental objective in purchasing management. At VWI, this task is carried out by the central purchasing division of the Volkswagen Group. All expertise in this area is bundled in a central location. This makes it possible to fix the terms of both regular services and high-volume orders over a long time period in framework contracts. This grants the company planning security.

Sand in the gears

Transparent controlling of purchasing volumes is essential to fully realise the potential of central purchasing. How can orders be optimally distributed across the suppliers if there is no information on which trade companies already have framework contracts, on the amount of the agreed service volume and on how much of the maintenance budget has already been allocated? VWI are now able to answer these questions thanks to a useful enhancement in their SAP^® system. While corresponding working time numbers used to be maintained outside the SAP^® system and manually entered in a supplementary order field before the actual figures were determined in periodic evaluations and finally sent to the purchasing division in an Excel file, there is now integrated monitoring in SAP^® ERP.

Free-riding on the SAP^® standard

VWI commissioned the Berlin digitisation experts at PROMOS consult with the implementation and adjustment of the standard value contracts function. A value contract is a contractual agreement with a supplier through which materials and/or services can be acquired for a certain time period and with a specific target value. With this function, you can create a contract item for each service provider and trade and store the agreed target value. On the basis of these framework contracts, individual purchasing processes are created that concretely reference the respective contract. This is referred to as a release. So when a maintenance order or a purchase order is entered at VWI and there is already a contract for the supplier in the system, the employee is directed to assign the order to a contract. Otherwise they will receive an error message or be required to enter a reason for why no assignment is possible.

Value contracts fresh off the assembly line

The only downside to the standard value contract functionality is that only the released value is updated and checked against the contract. When calling up a contract, the system does automatically update the released values in the contract. The released value is then the sum of all order values. However, the actual costs can significantly deviate from the order value in either direction. For this reason, PROMOS programmed the VWI solution in such a way that the actual costs are updated as a released value in invoice posting. The degree of depletion is also transparently displayed in a search aid. If an employee wants to create an order, the list of companies in the supplier search aid will include additional information on the contract, target value, duration and degree of depletion. This allows the employee to already recognise whether the distribution is even or not during the search (Figure 1).

Larsen Bernhard, IT project manager, VW Immobilien

Green wave for reporting

Larsen Bernhard, IT project manager at VWI, expressed his satisfaction with the solution and the selected implementation partner: “The expenses for maintenance, renovation and modernisation ran up to €19.6 million in the last financial year^[1]. With such a high budget, we have the responsibility to ensure that our orders are distributed equally across our suppliers and that no companies receive special treatment. Thanks to the support from PROMOS consultants, we were able to sufficiently implement the revision specifications within the prescribed time frame.” Two evaluations round off the now entirely system-supported monitoring, eliminating the possibility of exceeding the contract limit. In addition to the overview of all contracts in the search aid showing the term, limit and released value, an exhaustive release documentation was also developed. Since the standard report only provides evaluations on individual contract items, it was enhanced to allow evaluations of the release volume across multiple contracts (Figure 2). The reports naturally also include a jump into the purchasing documents.

Like a well-oiled machine

VWI is the dialogue, real estate and solution partner for the corporate group, lending support to Volkswagen AG and its subsidiaries on a wide range of real estate topics. The optimisation of their order distribution and supplier search is but one small component among the many needed to implement their diverse real estate projects efficiently, transparently and above all cost-effectively for the customers. Nevertheless, the project shows us how useful it can be to seamlessly connect all processes in SAP^®. Manual post-processing in Excel is eliminated, guidelines are IT-enforced from the top down and savings potential is utilised through existing framework contracts, all with more security for planning and distribution – to name only a few benefits the company is enjoying now that each part within the SAP^® motor is perfectly calibrated.

1. 2018 Annual Report