E-Procurement Software Drives Savings At Mercedes

DaimlerChrysler AG's Mercedes-Benz auto-production operation in Spain says it has seen a return of more than 80% on its investment in E-procurement software from enterprise vendor SAP.

The automaker has reduced procurement costs for nonproduction-related supplies by nearly 30% (on $60 million in annual expenditures) by using mySAP.com Enterprise Buyer Professional, says Daniel Saenz, Mercedes-Benz Espana's manager of organization and process management.

The division achieved the results by moving half of the 10 workers required to check invoices and process orders to other jobs, consolidating contracts with vendors, negotiating lower prices, and cutting the paperwork required for orders--which has helped reduce order lead times from 14 days to one day.

Mercedes has cut the number of suppliers from 1,500 to about 200 since it went live with the software in March at its Vitoria, Spain, production plant and its Barcelona offices. For example, the automaker had 109 suppliers for electronic switches used in machines, tools, and plant maintenance. Now it uses one supplier for switches, and all orders are handled over the Internet, Saenz says.

The company has also used the software to connect with auto exchange Covisint. It's using Enterprise Buyer Professional as its first step to using Covisint for production parts and materials, Aberdeen Group analyst Fran Howarth says. Integration with Covisint took only two days, using SAP XML connectors to its SAP R/3 enterprise applications and Commerce One cXBL connectors used on Covisint, Mercedes says. It's testing the use of Enterprise Buyer Professional connected to Covisint with a key supplier and expects to begin using Covisint for production materials early next year.

The company already has found a key benefit, Saenz says. For nonproduction supplies, it's quickly moving toward exposing its inventory of vital materials to suppliers so those vendors can maintain their own stock. The vendor-managed inventory system should be ready for full-time deployment early next year, reducing the number of required procurement personnel needed even further, he says. "Once a contract is negotiated," Saenz says, "it will be closed; no more searching for suppliers. And no mistakes in the process."