In manufacturing, procurement may well be the department with the greatest leverage when it comes to cutting costs. After all, material costs often account for more than 50% of total costs. The flip side of this: procurement is the first to feel the effects of geopolitical uncertainty, which drives up energy, raw material, and labor costs. Room to maneuver is shrinking, and conventional cost-saving initiatives can only be implemented to a limited extent – times like these call for innovative measures, and often a new strategy altogether. On top of that, the level of innovation in a procurement organization depends directly on two factors: the organization’s maturity and the targeted use of digital tools. Hengst Filtration, a family-owned manufacturer of innovative filtration solutions, recognized this interplay and acted early: with the goal of positioning itself for long-term competitiveness and setting the course for a future-proof procurement organization, the company decided last year to introduce the spend analytics platform ivoflow.
Pressure on Procurement as a Performance Driver Is Rising With more than 3,800 employees at 34 locations worldwide, Hengst develops innovative solutions in filtration and fluid management. Its products are used in fields such as plant and machinery engineering, industrial filtration, hydraulics, life science, and health care. Compared to other companies of similar size and industry, Hengst can point to a highly mature procurement organization: even without a spend analytics solution in place, the team has successfully implemented savings strategies in the past. However, the economic climate has significantly increased the pressure on procurement, prompting Hengst to position itself better for the future.
Transparency Across Global Procurement Spend Consolidating all ERP systems within the ivoflow platform creates, for the first time, structured transparency across a global procurement volume of 420 million euros, 1,600 suppliers, and 27,000 part numbers. “We can now spot price outliers caused by incorrect order units in the source system, or excessive volumes resulting from incorrect goods-receipt postings, in just a few clicks,” says Thomas Rauen, Risk Manager Procurement at Hengst.
Putting Market Developments to Work for Procurement By enriching its ERP data with external market data within the tool, Hengst’s procurement team can see the impact of the market on its own commodity groups immediately – including both risks and opportunities. For example, the tool identifies when exchange rate movements make a retrospective saving possible. This is always the case when a supplier is making so-called windfall profits because the exchange rate has moved in its favor since the contract was signed. That opens up new opportunities for the buyer in supplier negotiations. The benchmarking, multiple sourcing, and Market Monitor functions add further value.
The risks and opportunities identified by ivoflow can be picked up by the buyer and transferred to the “Initiative Manager.” There, processing notes can be added and the measure tracked through to full implementation.
Challenges: Data Quality & Acceptance Of course, a digitalization project like this one stands or falls with the quality of the data – or never gets off the ground at all, for fear that the data basis is too poor. “Despite our solid data foundation, the project with ivoflow allowed us to uncover a few weak spots. In some cases, individual part numbers weren’t assigned to the right commodity group,” Rauen explains. “The project with ivoflow created the motivation, and also the awareness of just how urgent it was, to finally clean up the data properly.”
Acceptance is another hurdle in projects like this one. Nicolas Neubauer, co-founder and managing director of ivoflow: “Users of our platform often approach us with skepticism at first. That’s because our tool initially makes things visible – depending on the data situation – that were previously hidden. But of course, these are just food for thought, which the buyer, as the expert, needs to qualify. It’s not about finger pointing, but about surfacing additional potential.”
Results & Outlook By deploying the spend analytics solution, Hengst has created a single source of truth – a central hub of data that also delivers valuable insights for other departments. “ivoflow gives us full traceability of goods flows from all suppliers to our plants worldwide, and between plants within the Hengst Group. Depending on what’s needed, reports with the desired procurement information on specific commodity groups, suppliers, or items can be selected and exported as an Excel file – for individual plants, regions, or specific time periods. This lets us identify synergies quickly and easily,” says Rauen.
Since going live last September, 26 buyers from various locations worldwide have been trained to use the software confidently in their day-to-day work. Rauen: “ivoflow’s customer support responds promptly to questions, acts pragmatically, and provides user-friendly assistance – that’s exactly how it should be.”
The tool supports procurement managers in their day-to-day work – always with the goal of making procurement as efficient as possible in order to remain competitive internationally.
About Hengst Filtration
As a family-owned company with more than 3,800 employees at 34 locations, Hengst stands for innovative solutions in filtration and fluid management worldwide.
Hengst supplies technologically leading filtration systems for plant and machinery engineering, industrial filtration, hydraulics, life science, and health care. The tailored solutions it develops are used in medical clean rooms, air conditioning systems, cleaning equipment, industrial plants, power tools, and robots. Hengst is also a series supplier to the international vehicle and engine industry, and a development partner for future-oriented drive and mobility concepts.
