Innogy brochure – 2018

P R O C U R I N G VA L U E F O R

INNOGY

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INNOGY:CREATING SUSTAINABLE VALUE THROUGH PROCUREMENT Dr. Ulrich Piepel, CPO at European renewable energy giant innogy, explains why procurement is such an important part of the company’s strategy WRIT TEN BY

OLIVIA MINNOCK PRODUCED BY

RICHARD DURR ANT

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rocurement is all about the right players, says Ulrich Piepel, choosing a football analogy

during World Cup 2018 from his office overlooking Borussia Dortmund’s Signal Iduna Park, where he regularly attends matches.

Since drafting in Piepel in 2003, innogy has transformed procurement into an important strategic function which adds significant value and innovation to the organisation – and together with the right players and partners, the procurement function has been instrumental in transforming innogy into one of the largest providers of renewable energy in Europe.

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A RENEWABLE FOCUS RWE is a major European energy company dating back over 100 years; in 2016 amid policy and market changes, RWE decided to split the generation part of its business from the rest of the company, making innogy (innovative energy) a separate entity. “innogy has everything besides conventional power plants,” explains Piepel, adding RWE itself still owns gas, lignite, coal and nuclear, as well as mining. “All of the rest of the company – roughly 2/3 of the people, volume and revenue – is now innogy.”

This actually makes the subsidiary bigger than RWE, and it owns retail operations across Europe, including the UK, Germany, the Netherlands, Czech Republic, Poland, Hungary, Slovakia and Austria. “Our renewables business is solar, onshore and offshore wind, as well as some biomass energy production. There’s also some new business because the energy market is changing

Click to watch: talks Renewable

: ‘Innogy CPO Ulrich Piepel e Energy’

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rapidly and we’re seeing developments like electric cars and smart homes,” Piepel adds.

PROCUREMENT TO THE FORE “Let me ask you a question. If you had €50,000 to invest, would you give that to someone who isn’t capable, and lacks a degree or expertise in spending or investing money?” Of course not – but Piepel argues that’s exactly what many companies are still doing when it comes to procurement.

“Decades ago, procurement wasn’t seen as an important function. Perhaps in retail it was known that making the right price point was vital for i a m . i n n o g y. c o m

Dr. Bernd Schönwälder Mercateo Executive Boardmember

»

Digitisation is definitely a cool universal technology to connect people for business.

This opens up enormous opportunities for purchasing.

That’s what we believe in at Mercateo.

«

Find out more → i a m . i n n o g y. c o m

success, but other industries didn’t pay attention, meaning a large chunk of costs weren’t managed professionally. In the 80s when I left university, procurement was the fifth wheel on the wagon.

It was just transactional work.”

Heading up a large organisation means being able to transform this process through procurement engineering. “If you don’t have the right organisation, you cannot become a successful value creator bringing lots of money to the company. You must create a larger, centralised procurement organisation including the right people. You have to engineer the right organisation and all procurement processes.”

‘Procurement engineering’ for Piepel involves bringing together processes, measurements and set-ups to go through one department.

“This helps you make sure your organisation is following the best in 08

class processes, with the same set of KPIs,” he says. Perhaps unsurprisingly, the most important KPI at Innogy is return on investment. “In the past, when procurement was transactional, people only looked at the cost involved. You have to keep that in mind, but the most important thing is to establish RoI as a key factor to ensure we’re saving a multiple of what we’re spending. This is long-term added value.”

Procurement is so vital in value creation that it’s hard to imagine how innogy functioned without this strategic department. Piepel is

“ You have to make the organisation aware of your bottom line savings.

This helps senior management and the board understand how important procurement can be” — Ulrich Piepel CPO, Innogy

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Eberspächer transformed their supply chain payments with Tradeshift The Eberspächer Group, headquartered in Esslingen, is one of the world’s leading system developers and suppliers of exhaust technology, vehicle heaters and bus air conditioning systems. The company is active in 60 locations across 25 countries, and it processes over half a million paper invoices annually from international suppliers of all sizes. To conduct its accounting processes more efficiently, the global automotive supplier realized it needed an electronic invoicing system, and for them Tradeshift was the clear choice.

Discover how Tradeshift can transform supply chain payments for your company at Tradeshift.com

Inefficient invoice processes Until the introduction of Tradeshift, Eberspächer processed invoices semi-automatically based on a scanning technology. A key challenge was to map the e-invoicing process to all relevant global markets and, knowing the importance of adoption, motivate suppliers to participate.

Other needs were to reduce the workload for the Eberspächer team with less manual processes, allowing them to refocus resources on other areas of the company, and to standardize the interfaces that link partners within the supply network. Eberspächer required a solution that could enable automatic global processing for all incoming invoices, with an extremely high availability across the globe.

The solution needed to be compatible with the IT systems of all Eberspächer suppliers— supplier onboarding and ease of use were paramount. The company analyzed solution criteria that went beyond functionality and cost, including expandability, industry knowledge, and supplier integration.

“We chose Tradeshift’s open B2B platform as they met our requirements in full—it’s free for our suppliers and is already prepared for, and tailored to, the legal regulations of most countries,” Dr. Oliver Frille, Vice President of Procurement & Supply Chain management for Climate Controls Division within the Eberspächer Group.

“In addition, Tradeshift allows us to be flexible.

With their extensible platform, we can easily extend our business applications to best suit our requirements and business.” The implementation of the Tradeshift platform launched in March 2016 at two sites with an initial 700 invited suppliers. In June 2016, the solution was rolled out at two additional locations and to another 70 strategic suppliers.

The successful onboarding of suppliers was an important linchpin in the implementation of Tradeshift. With Eberspächer’s input and approval, Tradeshift employed email campaigns to help engage suppliers and guide them through registration.

The automated onboarding required only a few clicks to connect suppliers to Eberspächer by establishing a Tradeshift account.

Automated invoice receipt, lower costs and higher data quality With Tradeshift, suppliers can now provide electronic invoices to Eberspächer in different ways and collaborate and communicate more easily. Of the 700 selected partners of the pilot project, one third have now switched to Tradeshift, and about 40 percent of them regularly send invoices through the platform. In addition to the automatic onboarding campaigns, Tradeshift’s integration as a service helped Eberspächer quickly integrate its top suppliers. One of the key benefits according to Eberspächer are Tradeshift’s automated validation rules. A supplier, forexample, that mistypes an electronic catalog order number, will be notified and can correct it easily and resubmit. The delays and unnecessary inquiries that come with paper invoices are a thing of the past. Tradeshift CloudScan, an application that allows PDF and paper invoices to be transferred into Tradeshift, digitizes documents automatically and performs various validation tests.

Eberspächer can now ensure that only high-quality data reaches the company’s internal IT systems.

SHAPING THE FUTURE. TOGETHER. BCG provides end-to-end procurement solutions. Our focus is on delivering sustainable value and efficient operating models. With digitization becoming real, we partner with companies to develop a customized and comprehensive digital portfolio comprising ready-tomarket offerings, such as AI-based negotiation coaches, tail-spend management software, supplier collaboration and contract platforms, and robotics to push the value envelope in procurement even further.

For more information about BCG’s procurement offerings, please contact: Robert Tevelson (Global Leader, Procurement) tevelson.robert@bcg.com Daniel Weise (Procurement Leader, Europe) weise.daniel@bcg.com

bcg.com

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adamant that procurement savings must

solutions, services and products to bring

be recognised as vital to profitability. “If

them into the business.”

a salesperson made 30% more sales, they would be seen as the hero of the company,

PROCURING ACROSS EUROPE

but if procurement makes savings with the

With Innogy operating across a multitude

same effect, which will also be sustainable

of locations, it’s important to ensure

over the next year, nobody really notices.

procurement organisations are independ-

You have to make the organisation aware of

ent parts of a well-run whole. “We structure

your bottom line savings and innovations

procurement not according to countries

from suppliers as well. This helps senior

but according to categories across a global

management and the board understand

market,” Piepel explains. “We allocate

how important procurement can be. And in

experts to each category who may work in

the age of digitisation, it is our job to scan the

different countries, but the negotiation and

world market for disruptive and digitised

strategy can be done centrally. You can i a m . i n n o g y. c o m

Click to watch: ‘Innogy CPO on the role of Procurement. Ulrich Piepel’ 15

then apply the same best-in-class process

as you can. We need these experts who

whether in the UK, Germany, the Nether-

focus on a few product groups, rather than

lands or elsewhere.”

covering many categories in a decentral-

The energy giant deals with a variety

ised organisation with little knowledge.”

of product groups, and Piepel has worked to centralise these in order to make the

WORLD-CLASS PLAYERS

most of resources, thus increasing the

Experts are indeed vital in procurement if

knowledge within each category dramati-

it is to cease being an add-on or ‘fifth wheel’.

cally. “In the past, we had maybe 15 buyers

“We just had the World Cup, for example:

for cables for example, but why not

at the highest level, you need great players.

concentrate this to a single buyer with the

If you want to have great players, you need

right knowledge of markets, suppliers and

to pay, educate and motivate them. Attract

cost points? To create a great organisation,

them, even, as a large organisation with

you must centralise procurement as much

a lot of spend and leverage. Nowadays, i a m . i n n o g y. c o m

procurement is one of the most complex jobs you can have – you need to understand the business, processes and the latest innovations in an increasingly digital world. You need to understand the products and costs involved, compliance, purchase-to-pay processes, even health and safety and data security,” says Piepel.

Amid rapid digitisation and transformation, roles can change quickly so it’s not always about employing those with the best ‘technical’ skill or the most specific qualification. “It’s important to have the right people with the intellectual capabilities to adapt to new situations. You need 16

smart people – it’s about brains and, very importantly, passion. We then try to give the highly skilled people freedom and trust. A buyer has to have room to negotiate, find new and innovative suppliers worldwide and interact with technical departments. You also have to reward staff, recognise who is doing a great job and encourage them to be braver, even get into arguments with technical people because they may have a better and more digital solution.”

AUTOMATION – GETTING DOWN TO BUSINESS Procurement involves a number of processes in any company, and as innogy was quick to recognise, automating as much as possible means more time is freed up for staff to make the most of their talents.

“ To create a great organisation,you must centralise procurement as much as you can.We need these experts” — Ulrich Piepel CPO, Innogy

“Take tendering for example,” says Piepel.

“Previously, people would mail out tonnes of paper to the suppliers, and time was wasted when files came back to do research, comparison and benchmarking. Now, we do most of our tendering electronically with software like myFUTURA, which has helped us reduce cycle time and become way more efficient.” MyFUTURA allows for automatic comparison of various quotes and price allocation, and is a fully compliant with innogy’s back end systems, as well as being faster and easier for buyers to use, according to Piepel.

More surprisingly, negotiation can also be automated through electronic auctioning tools.

“Electronic auctioning brings us way more savings because we take away the personal element between supplier and buyer, which isn’t always needed when talking about facts and figures.”

While this was a challenge to introduce to some staff who felt negotiation was their biggest strength, Piepel persevered. “Now, people love it.

We’ve done thousands of e-auctions, and have in some areas up to 80-90% of our spend going through e-auction tools. It’s been a big boost, but also one of the toughest things to introduce, as there was resistance from buyers, technical departments… and suppliers who know it’s tough.

Call-offs notoriously involve a lot of paperwork which can be a huge drain on time and resources.

“We needed tools, like catalogues, which cover i a m . i n n o g y. c o m

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75-80% of our orders. We implemented

a successful and powerful organisation,

catalogues around 12 years ago and then

you can’t do it alone,” Piepel continues.

found we shouldn’t do the hosting and

“We have ideas, but need strong and inno-

management ourselves, but give this to

vative partners to follow these through

someone who is even more capable than

with. You can develop things better as

us. We therefore invited Mercateo to join

part of a partnership rather than looking

our procurement transformation journey

for a specific tool. We have also been

– we were one of their first customers so

working with many consultants which

were really able to help them grow their

specialise in procurement for the last few

platform, and now Mercateo is a major

years, for example Boston Consulting

company in electronic catalogue handling.”

Group, which has helped us shape our ideas, strategy and cost savings. It is

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RELATIONSHIPS BUILT TO LAST

fundamental that we benchmark with

Mercateo is one of several partners that

each other, as they know what is going

Innogy sees as vital to success and

on in the market.”

growth. “When you want to create such

Call-offs have also been supported

by software giant SAP. “We now have, with

mining, which utilises big data to help us

SAP, a supplier and procurement platform

see where our processing is not accord-

to cover all countries. SAP enables us to

ing to standard. This tool made us even

create call-off orders automatically, which

better in streamlining processes and

we call ‘no touch procurement’. All

becoming leaner, faster and more agile.”

contracts with all details are entered and

Tradeshift’s platform has also filled gaps

stored within the system, so people in the

in innogy’s purchase-to-pay process,

business can now call off without even

freeing up time and skills. “We do a lot of

involving procurement. This takes most

self-billing where possible, but found out

of the transactional work out of your

that we still receive a lot of invoices which

organisation and pushes this capacity into

aren’t up to standard for us to process.

the more strategical, value-creating

Tradeshift is an effective, fast-growing tool,

procurement work. We also have a lot of

which helps us to automate complex

processes in our organisation which is

paper invoices. The software automati-

tough to subtract the data out of, so we

cally reads all invoices and reduces

have implemented Celonis process

transactional work significantly.”

“ When you want to create such a successful organisation,you can’t do it alone.We have ideas, but need partners to follow these through with” — Ulrich Piepel CPO, Innogy

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PA R T N E R S H I P S

A decade-long partnership

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innogy has enjoyed a 10-year partnership with Mercateo, with the procurement platform being instrumental in time and cost savings. This long-standing collaboration has enabled Mercateo not only to develop suloutions that are specifically adapted to the needs of the energy giant, but also over time to develop into one of Europe’s leading platform providers. “We’re proud of contributing to the hugely successful innogy story,” says Dr. Bernd Schönwälder, a member of Mercateo’s executive board. “innogy was an early and rapid mover in introducing process digitisation.”

The partnership has allowed this digitisation to be accepted by users despite the initial resistance recalled by Piepel. “It was a fascinating step into a new arena,” says Schönwälder, “but today many procurement managers see Mercateo’s solution as a kind of

‘dial tone’ in e-procurement – they connect, pick up the receiver as it were, and have access to millions of items. It’s crucial to see how users find the platform useful.

This was a really strategic step for us with innogy.

“It was a co-creative process,” he recalls. “innogy has always had a clear vision and the partnership has contributed a lot to our innovation. Innogy should be proud of how they helped improve our solution and brought this value to a broader market.”

Initially, Mercateo onboarded innogy’s existing suppliers with its B2B network, and users began to accept the platform as a way to get their suppliers all on the same solution. “We had a mashup from the marketplace, an ocean of products, and the very specific products that every single user needed each day. This was groundbreaking in terms of acceptance,”

Click to watch: ‘Innogy and its Partners featuring Chief Procurement Officer Ulrich Piepel’

Schönwälder explains.

Will the partnership span a further 10 years? Its success so far certainly inspires confidence in both parties. “It’s always hard to tell the future,” allows Schönwälder, “but looking back at our stable partnership which has always evolved, I have no doubt we can build on this partnership where we each know what the other side can use, what their world looks like, and how to adapt.”

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innogy and Mercateo clearly share a vision of the future where digitisation can only add to the journey. “I deeply believe we will find digitisation to be a tool to bring people closer together and improve communication: enrich it, make it more efficient, more transparent.

Procurement has a lot to win, from process cost saving to free time to do more valuable things,” Schönwälder concludes.

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Automation has been crucial in removing

an ongoing commitment to maintaining

transactional work over the years, says

partnerships, automation and digitisation.

Piepel, especially if the procurement

“We have two main strategic directions:

department is to lead by example. “You

digitisation of procurement and digitisa-

cannot add a couple of hundred people to

tion of the business,” Piepel outlines. “In

procurement and add this to costs. You

procurement, we are investing in evolving

have to transform to ensure all costs are

tools such as data transparency with

under control – automation transforms

artificial intelligence and will also imple-

transactional work into space for strategic

ment a highly strategic digitised source to

work,” comments Piepel.

contract software solution. With these tools we will support our buyers through

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THE FUTURE

decision making, and to make the process

Innogy’s transformation looks set to

faster and more transparent. In a global

continue, with the company showing

market, it’s tough for buyers to see what’s

innogy smarthome

BIO

Dr. Ulrich Piepel qualified as a mechanical engineer at the University of Dortmund, Germany. He then started his career at the Fraunhofer-Institute for Logistics and Material flow. At the age of 30, he made his dissertation at the Fraunhofer-Institute in the field of robotics. After this, he joined the headquarters of Krupp in Essen, Germany for 3 1/2 years. He then took over responsibilities for logistics and production planning as well as for distribution in a Krupp subsidiary named Widia. After Widia merged with a US-based company named Valenite, Dr. Ulrich Piepel was responsible for the global procurement & supply chain of WidiaValenite.

In 2000, Dr. Ulrich Piepel left Widia to become COO of Maxdata, a major manufacturer of servers, PCs and laptops as well as the market leader for computers monitors in Europe. In 2003, Dr. Ulrich Piepel became CPO of RWE, the main German utility group for energy, gas and water. He is responsible for an annual purchasing volume of â‚Ź 10bm.

Since October 2008, Dr. Ulrich Piepel has been promoted to managing director of RWE Shared Service Center, the RWE Service GmbH. Since Feb. 2014 Ulrich Piepel has been promoted to directly manage all procurement activities within the RWE group, now reporting directly to the RWE board and having solid lines of all buyers if RWE worldwide.

In September 2016, Dr. Piepel became CPO of the new innogy SE, which has been the created as the renewable energy company from former RWE. He reports to the CEO.

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“ We must continue to push digitisation, even if there is some resistance — we must make people understand it’s not threatening their job,just changing and maybe even supporting it.”

— Ulrich Piepel CPO, Innogy

happening in Israel or China for example, so they must be supported by digital tools with AI elements.”

It is also very important to ensure buyers understand the digitisation of the business itself – and indeed, the renewable energy industry.

“Our buyers need to understand the needs, developments and innovations of the market,” says Piepel.

“They have to challenge the business sometimes, or support it with these kinds of tools and digitised, disruptive solutions.”

We can expect to see constant improvement across innogy, led by a strategic procurement department. “We want to learn from other organisations and develop an even greater network of buyers. We must continue to push digitisation, even if there is some resistance – we must make people understand it’s not threatening their job, just changing and maybe even supporting it.

Mainly, we are looking at all the latest trends and getting the best people on board.”

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innogy SE Opernplatz 1, 45128 Essen, Germany T +49 231 438-07 iam.innogy.com