Transportation & Logistics

Deutsche Bahn

Deutsche Bahn AG optimizes its purchase-to-pay processes across organizational silos

November 28, 2019

The Challenge

As a systematically relevant, public organization, it is crucial for DB’s purchasing department to ensure that all internal requirements are met economically, on time, and in compliance with regulations

The Goal

DB's goal is to ensure the greatest possible corporate performance through lean business processes. In Procurement, the Policy Department establishes guidelines to guarantee efficient and lean processes - from sourcing and operational purchasing to accounting. Continuous analysis and monitoring of the processes by Processand enables data-driven, sustainable process optimization.

Results

  1. Documentation and monitoring of the purchase-to-pay processes
  2. Determination and evaluation of meaningful performance indicators
  3. Support for corporate procurement through data-based focus analyses
  4. Establishment of Center of Excellence in purchasing

Deutsche Bahn

Deutsche Bahn not only transports passengers from Munich to Berlin within four hours, they also are one of Germany's largest contractors. This is because of the purchases made by each of DB AG's 600 or so subsidiaries - everything from pencils to ICE trains, shipping services and construction projects.

As a public-sector group, it is crucial for DB AG to meet all internal requirements in a cost-effective, timely, and compliant manner. This is only feasible with lean business processes and the continuous analysis and monitoring of those processes. This is where the Strategy and Projects Procurement department comes into play.

The procurement strategy and projects department focuses on optimizing purchasing

The Strategy and Projects Procurement department acts as the central authority in DB's procurement. It establishes guidelines to guarantee and continuously improve efficient and lean processes - from sourcing and operational purchasing to accounting. In addition, the department assumes a leading function in negotiations of particular strategic relevance.

In order to cover requirements in the subsidiaries as cost-efficiently as possible, these requirements are consolidated, and framework agreements are negotiated. However, no matter how well the department works - if the established processes are not maintained or, for example, if strategic purchasing is not involved or agreements are made against existing framework agreements, it will lead to delays, inefficiencies, and additional costs in invoice processing.

The Center of Excellence uses Process Mining to ensure process transparency and measure key performance indicators

DB has been using Process Mining since 2017 to create process transparency and monitor the ongoing performance. This enables optimization measures to be implemented and supported with a fact and figures based decision-making basis. To maintain an overview of all measures in the purchase-to-pay process, a Center of Excellence in Purchasing was established, where all threads come together under the leadership of Patrick Grohmann.

Processand supports Deutsche Bahn in its Process Mining initiative. Thomas Kerschbaumer, Head of Delivery at Processand, says: "The department under Mr. Erik Steinort is characterized by an extremely detailed, success-oriented, and as pragmatic way of working. A commitment to optimization and an open mind to changing established structures for the benefit of the Group prevail. This is the perfect mix for an optimization-driven organizational team." To achieve the overall goal of lean business processes, the following use cases, among others, were jointly implemented:

1. Payment Terms:

Monitoring of payment term deviations between invoices received under general agreements. Payment terms can be found in the master record of the supplier, in the general agreement, in the purchase order, and on the invoice. If these payment terms do not match, this can have a negative financial impact. Monitoring shows where there are payment term deviations and which purchase orders/suppliers are affected by the problem.

Solution:

DB, with the support of the Board of Directors, has defined several preferred payment terms that must be applied to every supplier since their introduction.

2. Maverick Buying:

Automated recognition of invoices without order reference and implementation of countermeasures. Invoices without order reference are generally undesirable at DB and are supposed to be replaced by proper procurement. The following reasons, among others, are crucial for achieving this goal:

  • The strengths of purchasing cannot be utilized if orders are placed without going through the purchasing department
  • Purchasing often achieves more desirable prices through negotiation techniques and the bundling of requirements
  • The risk of duplicate payment for invoices is significantly higher compared to proper procurement
  • The processing of invoices without purchase order reference causes considerable additional effort

Solution:

With Celonis Process Mining, it can be determined in which area the maverick buying quota is high. This allows for proactive and continuous enablement as well as the implementation of countermeasures.

3. Goods Receipt Posting:

Avoiding payment blocks and cash discount losses through performance benchmarking. As the largest German logistics group, Deutsche Bahn is represented worldwide. Therefore, there are a large number of departments that have to receive and record goods receipts. The goods receipt must be recorded in the SAP system shortly after the acceptance of the goods. A delay in the process can lead to far-reaching negative consequences in the accounting department.

Invoices without booked goods receipt cannot be released for payment by the Shared Service Center (SSC). Payment blocks and avoidable inquiries on the part of the SSC lead to high manual efforts as well as possible loss of cash discounts.

Solution:

A performance benchmark of the lead time from goods receipt to posting of the goods receipt makes it possible to regularly alert the affected departments and to highlight the consequences of a delayed posting.

4. Purchase Requisition:

Avoidance of payment blocks and cash discount losses through performance benchmarking. Based on general order information (e.g. material group, supplier, purchase order value), a purchase requisition is assigned to the responsible purchasing group. If information in the purchase requisition is not unique or not correct, the systematic assignment of the purchase requisition is not carried out correctly. As a result, the purchase requisition is assigned to the wrong purchasing group and must be forwarded by this group to the correct recipient. This leads to delays in the purchasing process.

Solution:

Within Celonis, the BANF process was reconstructed. Inefficient loops and ping-pong effects became apparent and allowed the affected stakeholders to be approached.

Result:

An end-to-end process without organizational silos

Dr. Patrick Grohmann, who leads the Process Mining initiative from a technical perspective, notes: "The beauty of Process Mining is that the end-to-end process knows no functional or structural boundaries. As a result, we bring strategic and operational purchasing, accounting, and subsidiary procurement functions to the same table and can find data and fact-based solutions. We also now recognize what effects do the activities of certain departments have on other departments."

Deutsche Bahn has successfully integrated Celonis Process Mining into its strategic purchasing. The Center of Excellence around the team of Dr. Patrick Grohmann and Mr. Rainer Prüfig serves as a group-wide contact point for users. This ensures that best practices and data-driven findings are applied throughout the organization.

About Processand

The Munich-based consulting firm with branches in USA (Austin), Czech Republic (Prague), and Taiwan (Taipei), specializes in Process Mining, Business Intelligence and Advanced Analytics. Today, Processand is one of the leading Process Mining consultancies worldwide and supports companies in their long-term Process Mining initiatives. In each case, the focus is on operationalizing data-driven insights and creating a factual basis for strategic decisions.

Interested?

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Our address:

info@processand.com

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