E-business as usual in the energy industry

Dominique Bergantino, Siemens, Germany

Three years later and after a long silence, the e-procurement buzz is again becoming a discussion point in energy industry circles. For energy industry suppliers, the question now is how do they support their customers’ e-procurement projects, i.e. provide them with product content?

In December 2003, at an industry forum in Hannover, Germany sponsored by VDEW (Verband der Energiewirtschaft), procurement managers from energy companies across Germany gathered to discuss their current e-procurement projects and learnings. They gave a clear message that e-procurement is central to their e-business strategy.

The Hannover forum highlighted that many large-scale energy industry organizations had already finished the first stage of e-procurement implementation, using them to purchase indirect products.

Concert: the network approach
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A case in point is Germany’s E.ON Energie. It has used the SAP enterprise buyer system since 2002 and now has over 600 000 C Class articles available. However, the full process cost saving will only be realised once buyers can ‘self serve’ complex products within their own e-procurement systems. An early report by Goldman Sachs concluded that while the energy industry stood to gain a potential cost saving in the region of $10-20 billion a year through the adoption of e-procurement systems, the real benefit of e-procurement would only follow from the ability to enable the specification and accomplishment of complex engineered products and services, which are at the heart of the business.

How can suppliers support their customers’ demands for product information? Perhaps the question for those on the sell-side, should be, “What is the best process to manage and disseminate product information meeting both internal e-business sales needs and external e-procurement demands?”

The following case study shows Siemens Power and Transmission and Distribution (PTD) group’s approach to finding a solution, and how that approached required a complete re-engineering of the entire product information process. The challenge Siemens PTD set itself was to create a product information system which met the needs of the sales, marketing and product teams as well as those of Siemens’ customers. These customers would therefore have the information they needed to make their purchasing decision and order the product immediately.

The solution developed is called Concert, a product information network which manages and delivers product information to any sales or customer channel by using standard interfaces. For example, Siemens PTD’s division power automation uses Concert to provide product information to their direct sales shop, allowing customers to easily order and buy products such as Siprotec units online. This same network is also being used to deliver E.ON Energie with detailed information on complex products, such as protection devices direct to their SAP system, in a test project at their subsidiary in Bayreuth. Allowing plant maintenance teams the ability to source, configure and order complex products.

For Siemens, the story begins back in 2000, with the set up of an e-business task force. The group was quick to realise that while there are an infinite number of solutions available, each managing part of the product information process for either sellers or buyers, this patchwork approach was not ideal when there are also an infinite number of information hungry channels and customers.

One face to the customer

The key objective was to use Concert to provide “one face to the customer” with the ability to customise and configure that face to meet the individual needs of each customer. Customers should be able to reach the information they needed, regardless of the channel they used ” Internet website, marketplace, or SAP procurement system. The team began by reviewing the main method for suppliers to provide buyers with product content. This was usually achieved through the maintenance, transfer, import, integration and synchronization of e-catalogue information into e-procurement system.

Situation analysis diagram
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They concluded that while this was possible for simple products which can fit into a standard data structure, it did not cover the capital equipment and project materials also supplied by Siemens. In addition this route had a number of other disadvantages:

  • Does not support product configuration
  • The file import and synchronization process increases IT support costs
  • Imported data becomes out of date quickly, requiring frequent re-import
  • Each supplier must be integrated through a separate process and project.

The challenges in this process have been the main reason for supplier reluctance in supporting customers’ e-procurement systems. The burden created by the production of multiple files, with complex data structures that need updating and reprocessing every time there is a small change to a product is overwhelming ” a process which must be repeated for every channel and every customer.

E-commerce enabler

Another alternative would be to agree an industry standard for complex products with multiple variants. However, this would be a costly and time-consuming project. For buyers, with e-procurement systems already implemented it is a solution Concert believed they would not wait for. Concert’s answer was to build standard SAP, HTML, XTML and Venture Publishing interfaces.

For Siemens, Concert also provides a complete process for maintaining product information, managing the process at every stage. This is achieved by:

  • Storing information centrally, enabling the various teams within the organization responsible for creating and maintaining information to work together
  • It is a web based application which means that information can be worked on by global teams, ensuring it is up to date, and available 24/7
  • The built in configurator has a dual purpose
  • Allows product teams manage and customise engineering products with numerous variants and accessories
  • Buyers can then use the same tool to products within their own e-procurement system or other direct sales channels
  • Concert’s standard network interfaces also mean that product information from existing pricing and e-catalogues can be added easily.

The network approach means that information can be used to power content to different e-business initiatives.

From seller to buyer

E.ON Energie, as part of its ongoing organization-wide process review project, has been looking to e-business, and notably e-procurement initiatives to achieve process costs reductions. It was while E.ON Energie was discussing this issue that it and Siemens PTD realised that they both had much in common. So began an innovative and potentially ground breaking project.

E.ON Energie realised that the next stage of e-procurement enablement would be to empower plant maintenance teams to source, specify and order complex products such as protection devices within E.ON Energie’s SAP Enterprise Buyer System. The company just needed the product information in a format that allowed it to be configured within the SAP system. Eventually Siemens supported E.ON Energie by providing this information via the Concert system. For E.ON Energie, if successful, it will yield substantial process cost savings as the new system releases engineers from time intensive web site searches, catalogue references and subsequent follow up calls to sales reps before the final order is made. For Siemens, not only are they effectively supporting an important customer, but they will also optimize the order process.

The pilot is currently being run at E.ON Energie’s subsidiary in Bayreuth. Connection between the product information held in Concert and E.ON Energie’s SAP system has already been made, and the first orders were due to take place in February 2004. Michael GroàƒÅ¸, E.ON Energie project leader e-procurement, says: “Concert will allow the E.ON Energie’s team to self serve Siemens products, speeding up the whole sourcing process and reducing administration time.”

Helmut Deissenberger, CIO of Siemens PTD said: “Concert gives Siemens PTD the flexibility to integrate product information into our customers’ procurement portals, our own websites, our project management tools, and our employee intranet.” It continues to roll out Concert globally, with product information for over 800 products and four million variants already available and being used for global and local websites, extranets, intranets and print catalogues.

In terms of IT cost, the one system approach has eliminated the need for separate catalogue, configurator and content management software, and more importantly for the costly implementation and maintenance of custom interfaces between these tools. Concert is a subsidiary of Siemens, and is working with other energy industry buyers and sellers.

Robert Greeley of Concert concludes: “The management and delivery of complex product information is one of the main e-business challenges facing the energy industry. The industry’s buyers and their e-procurement systems will demand an answer, and those who meet the challenge will find their products in the right place and the right time; on the factory floor, when the demand is identified and the order is placed.”

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