From Request to Purchasing – Experience Report from the SME Sector

The interface from the department to procurement forms the basis for the entire procurement process. Effective collaboration quickly decides on project success, cost savings, and process compliance.

In this post, we report from over 50 conversations about the most common challenges in German SMEs and experience reports on solution concepts that could be developed with the help of Lhotse.

Current Status: From Request to Purchasing

Numerous systems for digital procurement are currently being offered on the market. However, the selection in individual company cases - especially for German SMEs - is extremely difficult. This is mainly because various parameters (company size, objectives, budget, procurement cases, legacy issues, etc.) severely limit the selection.

While large corporations usually rely on the big names in the eProcurement scene such SAP Ariba, these offer no alternative for the traditional SME due to the enormous costs and resulting complexity. Here, it simply doesn't pay off to take on the effort of a multi-year implementation process, including 7-figure costs.

For SMEs, other objectives apply. The focus is on pragmatism and resource conservation. As pragmatic procurement processes as possible should be established, which can be set up and accompanied by the company's own employees without taking up additional resources (especially IT).

From this requirement profile, three dominant process alternatives have emerged for German SMEs for decades:

  • A simple Excel template (possibly with some VBA code) that is emailed to procurement.
  • A PDF document that leads almost in paper form from the requirements to approval through the procurement process.
  • Direct interaction of the departments with the ERP system (direct SAP BANF in the SAP R/3 or S/4HANA  environment).

Challenges: Everyone Struggles with These

As can probably be directly guessed: From these pragmatic solution approaches, strong impairments arise across a wide range of companies. These challenges often extend to invoice receipt through the entire procurement process and make work difficult for the parties involved.

The top 3 most frequently mentioned challenges of German SMEs:

  1. Lack of Transparency: The department lacks the ability to quickly and easily track the status of their own request without elaborate inquiries by phone. Employees from departments see this point as one of the biggest disruptive factors for planning security in everyday business.
  2. Procurement as Educators: Buyers are frustrated by the frequency with which requirements have to be corrected or sent back to the department. Lack of quality in request creation was highlighted by over 80% of the companies surveyed as one of the core problems.
  3. Maverick Buying: Complex procurement processes (often with direct integration with the ERP system) set strong incentives to bypass the orderly procurement process. Procurement can only intervene where early involvement takes place and costs can still be saved. Over 70% of companies therefore see elaborate requirement processes as the most cost-intensive consequence.

Solutions: How German SMEs Counteract

Pragmatism and lack of resources often lead to static solution approaches. The challenges are obvious - but how can German SMEs detach themselves from them?

Lhotse aims to offer an intuitive tool that enables companies to map guidelines in a guided and digital process. A process that covers the needs of the departments and procurement. Easily connected to existing ERP or e-procurement systems, the platform should be able to be flexibly integrated into various system and process landscapes. For this, the company relies on the following solution approaches:

  • Start a request directly from MS Teams: Employees can start their request where they feel comfortable. MS Teams (or similar systems) is where planning, thinking, and exchanging ideas take place. With Lhotse, purchase requisitions can now be started from such tools.
  • Intuitive and guided request definition: The Lhotse forms are intended to guide demand carriers through an intuitive question-and-answer game to a rule-compliant needs definition and can be set up without development effort. In this way, forms can be created for a wide variety of application cases and personalized (compliance) rules can be enforced through customizable questions and logic.
  • Dynamic workflows for efficient and compliant procurement: Based on the entries in the forms, the request goes through a predefined workflow. These can be automatically initiated approval processes or tasks for the procurement department, such as supplier onboarding, obtaining offers, or ESG checks, which can be managed and executed in Lhotse.
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