Introduction of an E-Procurement system at AKAD-KS Group

01. September 2002

Digital printing is of prime significance for the AKAD-KS Group. Since printed documents are frequently used to represent C goods within the company, they are a core part of services in training and further education. A school’s teaching material is relevant to customers’ perception and even represents a “hygiene factor” for participants, or put another way, a lack of documents leads to dissatisfaction. It was therefore important for the AKAD-KS Group to find a strategic partner to create services in digital printing. A central requirement of this was that the partner would support an E-Procurement solution to provide reliable handling of order and delivery processes.

1. The company

The AKAD-KS Group is the largest provider of private training and further education in Switzerland and stands out due to a wide network of schools in the German-speaking part of the country.

This case study describes the introduction of an e-procurement system at the AKAD-KS Group. The AKAD-KS Group appears in the role of the purchaser.

In 2001 the group comprised 1,393 educational employees and 198 administrative employees. 12,123 students attended the courses on offer. The current company structure is the result of a merger between the AKAD Group and the KS Group on 26 November 2001. The new group therefore became one of the largest privately funded educational institutions in Switzerland with a dense geographical network. The case study specifically examines the performance areas of AKAD Business/HfB and AKAD College.

Industry, product and target group
The range of training and further education products offered by the AKAD-KS Group comprises elementary school, grammar school Matura (’A’ levels), vocational courses with or without recognised final examinations, courses for general education, business and languages. In 2001 a total of 153 courses were offered.

The final examinations on offer in addition to the school-leaving exam are commercial and technical Swiss vocational school-leaving certificates, special admission examinations for entry to universities, polytechnics and higher education institutions, Swiss vocational qualifications, MBA or master’s-equivalent degrees. These training and further education courses are geared to both children and adults, depending on the learning material.

The industry is characterised by a broad spectrum of private suppliers and public institutions. Basic conditions for the education market are agreed in political decision-making bodies. This includes, for example, the funding and/or subsidisation of training and further education. The AKAD-KS Group is the largest private supplier in the market and takes up a leading position in some educational segments.

Corporate vision
The declared goal of the AKAD-KS Group is to contribute to shaping the educational landscape in Switzerland. This goal has been chosen from the conviction that Switzerland as a location already has a good educational system which however has to be maintained and improved on an ongoing basis. The AKAD-KS Group wants to work towards this goal side by side with other providers – both public and private.

2. e-business strategy

The goal of the e-business strategy of the AKAD-KS Group is to have all company-related processes meaningfully supported by e-business solutions.

Importance of e-business in corporate strategy
In the case of e-business strategy, the emphasis is on “meaningful“. Starting from a status where e-business played no role or only a minor one, all departments are now largely supported.

e-business fields of application in the company
If the individual fields of application for e-business solutions are structured, these can be assigned to the central production of services, internal processes and procurement processes. The rest of the case study concentrates on the support of procurement processes. In this field the AKAD Business/HfB and AKAD College started to search for and utilise e-business solutions in 2001. To simplify terminology, these two relevant corporate arms of the AKAD-KS Group are referred to in the following text as AKAD.

The starting point for the project was the discussion about whether to aim to purchase a new industrial copier as a replacement for the old one (conversion from analogue to digital) or to outsource copying (approx. 3.5 million A4 copies a year). Copies and their commissioning are in this case individual products, such as training documents or marketing brochures or teaching material. These are produced complete with file and all types of mailing copies in black and white or colour and perhaps with personalised mailings. At the same time, consideration was given to how the copies were to be distributed in the individual locations.

The combination of the pending conversion from analogue to digital printing and the mainly digital originals that existed for copying as well as the advanced development of e-procurement solutions were the reasons behind choosing the outsourcing option.

3. Targets in e-procurement

The targets which were aimed for when making the transition from an in-house solution to an outsourcing solution were as follows:

  • Cost reduction/increased efficiency in the printing area
  • Quality enhancement (copy quality, error-free delivery)
  • Punctuality (with acceptable delivery dates for the printouts/copies)
  • Increased cost centre transparency

The company still aimed to coordinate the actual production (copies/printing) and distribution as well as the provision of a decentralised procurement system at the workplace.

An e-procurement solution is a necessary precondition in this regard. The procurement orders in digital printing are characterised by small margins and stringent time and quality requirements. The proviso for outsourcing is a coordination instrument with low transaction costs and this coordination instrument is the e-procurement solution. It must therefore suppport the stated requirements for outsourcing.

In the Benefit and Changes sections we discuss how these dimensions were achieved and the problems that arose through the e-procurement solution.

4. Partners

Mikro + Repro AG offered AKAD an individual e-procurement solution based on existing solutions. Chili Solutions GmbH was incorporated into the project as technical operator.

Mikro + Repro AG
The current Mikro + Repro AG was a central service department of BBC/ABB Schweiz for duplication, printing and microfilm until mid 1988. In 1988 it was transformed into a joint-stock company under the name ABB Mikro + Repro AG. As part of a management buy-out the company became independent from ABB in 1992 and has since also offered its services outside its former holding company.

Nicolas von Mühlenen – the Managing Director of Mikro + Repro AG at the time of the project – handled the major outsourcing project for digital printing with AKAD. AKAD had already made initial contacts with Mikro + Repro AG prior to the start of the project via the then subsidiary AKAD Verlag/Compendio. The services of Mikro + Repro AG, which had already been known within the group as a reliable supplier for a long time, were enlisted for the e-procurement project in the AKAD Business/HfB and AKAD College areas.

An evaluation of the various providers was not carried out during project preparations. Mikro + Repro AG had already entered into long-term relations with AKAD on a basis of trust. This was a relevant aspect for such a key area as digital printing/warehouse management when making an outsourcing decision. Mikro + Repro AG had also made it clear that they wanted to solve the problem with a process-oriented approach (defined by AKAD internally as an important basic condition for the project).

Chili Solutions GmbH
Chili Solutions GmbH was founded in Zurich in October, 1997. It is one of the leading providers of web solutions in Switzerland. With around ten employees and the assistance of external partners, it develops complex e-business solutions for small and large companies. Chili Solutions offers a broad spectrum of services ranging from consultancy, design and programming to marketing and maintenance of internet solutions. Chili Solutions GmbH was involved in the project via Mr von Mühlenen, the Managing Director of Mikro + Repro AG. The conceptual framework for the technical solution was drawn up jointly and then implemented by Chili Solutions.

5. Procurement solution

Basic functions in e-procurement and in the e-procurement solution
The e-procurement solution realised at AKAD supports the basic e-procurement functions of Operation and Reporting. Sourcing & Settlement as the first step in the overall e-procurement system is, on the other hand, not taken into account. The reason for this is the close, long-term and desired cooperation which was caused by the outsourcing of the central AKAD department. As a result of this, basic agreements were drawn up with a view to long-term cooperation. The ordering process is supported from the Operation department in the main; the payment process, on the other hand, is only prepared. The internet (email/WWW) is used for transmission services.

Catalogue management and content management have no significance in this case, although this function is generally provided in the currently existing e-procurement solution. The reason for this is the high degree of flexibility for digital printing which is demanded in the training and further education field. In the section of AKAD schools which are affected by the e-procurement solution, 80% of the orders are day-to-day business activities, for example orders from the training programs. In this case the contents are not standardised and are generally not completely standardised until just before order placement - the parameters are only clarified just before the actual order is placed, thus making it feasible. Only 20% of the order volume (5% of orders) can be planned long term, i.e. semester business and marketing brochures with a planning period of one month. Even in this case, updates are regularly made to the media.

Fig. 5.1: Role distribution for basic functions
Fig. 5.1: Role distribution for basic functions

A standard catalogue in the sense of predetermined documents is not planned, as it could not be maintained - version management of the documents alone would be too complex. The maintenance of variations in paper formats and types, attachments, bindings etc. by Mikro + Repro AG constitutes the only relevant component for catalogue and content management. In this case a framework is predefined for AKAD employees, from which they can set the respective parameters to achieve the desired end product for their documents.

In the reporting area, statistical assessments are possible in terms of both time and cost centre. Thus, both the ad hoc information requirement and the information requirement for budgetary planning can be covered. The following chapter deals with order process support.

Processes, roles and functions [order process]
The participating schools of AKAD and Mikro + Repro AG have agreed three days as the time period for the order process. The order must be placed three days prior to utilisation of the copies (exception semester business; see chapter on basic functions). Any orders that arrive later must either be arranged with Mikro + Repro AG (which seldom occurs) or copied internally on existing copiers on the floors.

Only the administrative personnel (secretary’s offices) are allowed to order - as far as order values are concerned, there are no specifications. Unusually large orders will be checked for correctness through the proper channels. The decision not to allow educational staff to place orders is due to the fact that they are mostly assigned to different cost centres and have no way of managing the costs themselves. Also, it is feared that if advisors make direct orders there will be an increase in special orders (less than three days’delivery time) and an associated increase in “express surcharges” as well as an undue burden on the key contact persons at AKAD and Mikro + Repro AG.

The persons making the orders only need a web browser. Using forms, they enter the required parameters of the order (number of pages of the original, order size, paper format, paper colour, covering sheets, etc.) and attach the digital document to be printed (specified by name by document name and department allocation, ususally a PDF document). It may also be the case that originals of the documents are only available as paper copies. In these cases, different contact points in the company are visited by couriers several times a day in order to bring in any originals for reproduction. At the same time, completed documents/copies are filed there again for their intended use. An exception in the case of delivery are orders to which a dispatch order with direct delivery to third parties has been attached. These are immediately prepared with the appropriate letters, labels and delivery notes and sent off immediately. When the AKAD employee actually hands over the order, the whole order is calculated with all the parameters (paper, binding, attachment, etc.) after it has been recorded and prior to the file upload. The order is only sent off together with the file after it has been checked by the AKAD employee.

Once the order arrives at Mikro + Repro AG, it is checked a second time immediately before production. If any queries arise, the person who placed the order is contacted by phone (in the case of up to 30% of orders, adjustments have to be made later due to manual configuration work or incorrect orders). After production, a further comparison is made between the order and production (automatic counting by the printing machines). If the order is correct within tolerable deviation limits in paper and material consumption, it is assigned to the cost centre/project stated in the order and finally sent off as described in the previous sections. The billing process is not supported by the system (apart from the structured preparation of all orders according to cost centres for a collective invoice).

A speciality of the e-procurement solution for this application context is the handling of an order after it has been determined that the order and production deviate beyond the tolerance limits. After a check has been carried out by Mikro + Repro AG, a flag is placed in the order marking the changes that have to be made in production (mutation).

Fig. 5.2: Workflow for order-process and billing-process support

The mutated order is forwarded to the customer again for checking who then has to agree to the amended order (provide a visa). Only then can the order be reassigned to the project and the process subsequently continue as normal. This process is carried out using purely internet-based methods and seldom requires telephone enquiries. If the customer does not provide its visa, it is reminded about this several times by mail by the Mikro + Repro AG system.

6. Implementation

Redesign of processes
The project started in December 2000 with a few initial meetings, in which the specialist concept was worked out and the shopping basket was defined. Definitions for variants and cost centres were already specified by AKAD. All requirements and definitions were carried out during this phase on a text basis. Thus, each person involved could at this point contribute his/her ideas informally.

Mr Wolter was made available by AKAD and was responsible for the technical/database-oriented department there, including access management. In addition he coordinated employees who helped to prepare and put into definite terms the requirements of e-procurement from the customer’s point of view. Mr von Mühlenen, the representative from Mikro + Repro AG, incorporated the system view of the solution which was already in the pipeline and specified the requirements for the order form and the pricing structure. The actual realisation was carried out by Chili Solutions GmbH.

Six weeks after the project was launched the first orders could be received via the e-procurement system. Shorting after the e-procurement solution was introduced in February 2001 a brief description was distributed to employees, which was designed to familiarise them with the new procurement method. The system then started in the first week of February “on the fly”. After just one day of halted production - due to the acceptance of the production machine of AKAD by Mikro + Repro AG and its installation and dismantling - the system went online. The back office functions such as mutation, the issuing of a visa and the statistical assessment were supplemented in the course of the following nine months.

Software solution/programming
At the time when the application was launched at AKAD, the software had a pilot project character. The root software, the web form and the file upload were already developed in 1998 for Copyprint Bahnhof AG, whose managing director at that time was also Mr von Mühlenen. Further development of the project was also strategically driven forward largely due to his efforts. At the beginning of 2000, the calculation module was also added.

With the three modules available to date the application was then presented to and accepted by AKAD under the overall control of Mikro + Repro AG. At the end of 2000, the cost-centre clearance was introduced as a next step, the last basic requirement of AKAD for order acceptance within the scope of outsourcing. Other areas in the order tool (mutation and visa), administrative and extranet functionalities rounded off the AKAD-specific programming in 2001.

The application then underwent several development cycles at Copyprint Bahnhof AG and is now available on the market as a standardised product with an extended range of functions (catalogue modules, client capability, online billing, etc.). The whole application was programmed by Chili Solutions GmbH. Active server pages were inserted in the system and entered as the programming language VB-Script.

Technical platform and architecture [system architecture]

Fig. 6.1: Architecture
Fig. 6.1: Architecture

The e-procurement solution is developed based on Microsoft products (cf. Fig. 6.1). The core components of the system, the web server and the database server are located at Chili Solutions GmbH and are protected by a hardware firewall from Sonic.

All communication between the servers and Chili Solutions GmbH and the clients at AKAD and at Mikro + Repro AG runs via the web or by email on the basis of the internet. The order processes are managed via the web using forms. Only the reminders where the visa has not been confirmed are exchanged by email.

During this process, authorised users at AKAD access the server via their internet-compatible computers. On site they only require a browser and an email client. In the case of Mikro + Repro AG, the same technical conditions have been created.

7. Operation

For maintenance of the e-procurement solution - as in all tasks outside the actual order process - the roles are clearly distributed. Chili Solutions GmbH is responsible for the whole technical operation, including looking after and rectifying errors in the server hardware and software.

There are two task areas in the field of database maintenance: the updating of user data and the input of variants in digital printing. The user data is uploaded by AKAD itself in the form of an access database on the server and the variants are maintained directly on the server by Mikro + Repro AG.

Cost reduction/increased efficiency in the printing field can be named as primary benefits. Suitable dimensions at the size of (new) investments and the unit costs. A further aspect when considering benefits is the improved quality (copy quality, error-free status of delivery). The complaints volume can also be measured in this case. Also in the case of punctuality (combined with acceptable delivery times for printouts/copies) as a third aspect the complaints volume is the relevant measurement. As a final aspect cost centre transparency was stated. Here the variety and efficiency of the statistical assessments is the measure.

The externalisation of distribution of copier products and the provision of a decentralised purchasing system at the workplace were aimed for as sub-targets - both have been achieved with this solution.

Direct costs for introduction and operation were not named, but as an indicator the time spent by the individual partners was ascertained and provided.

The costs for the actual launch are difficult to assess for Mikro + Repro AG and Chili Solutions GmbH. The reason for this is that the software still had a pilot character then. Now the cost of introducing a similar product with these two partners would be less (according to them, 90% of the time was invested in initial development and tests).

Tab. 7.1: Cost structure
Tab. 7.1: Cost structure

When operation is in progress the incurred process costs at AKAD - as described in Tab. 7.1 - are put at about the same as one saved employee and the running costs of machinery that no longer apply.

In terms of cost reductions and increased efficiency in the printing field, two aspects are worth mentioning. Firstly the conversion from analogue to digital copies without any new investment - no capital had to be tied up in machines and equipment. Secondly, the running costs from outsourcing digital printing are equal to the savings in running costs for technology and saving one employee position (the employee was deployed elsewhere). Owing to the conversion from analogue to digital and the associated different initial situation/basis of comparison, a direct before/after cost comparison in relation to the order is not possible.

8. Success factors

The success factors of the e-procurement solution can be divided into launch success factors and success factors for operation.

During the introduction phase, experienced staff from all the departments taking part in the solution were involved early on. This included both the later users of the system as well as the IT and logistics department. Attempts were also made to specify a concluded requirement catalogue for the project at an early stage, so that the project schedule was not put at risk by constant rectifications.

For the operation and acceptance of the e-procurement solution, the first and most important success factor that should be mentioned is the enabling of outsourcing in digital printing. The low transaction costs resulting from the e-procurement have been instrumental to the success of outsourcing. From the user’s point of view, the smooth transtion from the old solution to the new and the intuitive, user-friendly operability via web forms were also crucial.

Specialities of the solution
For AKAD the crucial aspects of the solution are the logical overall concept and the high level of transparency with regard to the products/variants to be managed and the structured cost return/cost centre allocation already mentioned under “Reporting”.

The difficulties which arose and the advantages of the new solution are discussed below.

User management of the system can be named as the first aspect in this summary. Here extra time is required on the part of AKAD in contrast to previously in order to keep access authorisations up to date. Secondly, an alternative, paper-based order form had to be incorporated for organisational reasons in order to maintain order capability in the event of a technical malfunction with the e-procurement solution.

On the advantages side there was an improvement in copying quality and in the error-free status of deliveries. Complaints fell sharply following conversion to the new solution and are scarcely measurable now. Delivery times (3 days) were adhered to as well. These two points have a considerable significance in that the copies are part of the core product of training and further education. Finally it can be determined that all requirements were also met with regard to increasing cost-centre transparency. Statistical assessments are possible according to cost centre and time.

Lessons learned
If we look at the “lessons learned” from the point of view of the two directly involved parties, ADAD and Mikro + Repro AG, three points become clear:

  1. The success of an application often depends on careful consideration being given to organisational rules. In this case detailed and in part “tough” agreements were reached which, however, make the expectations of the individual parties involved in the e-procurement solution clear and avoid dissatisfaction.
  2. A strongly formalised approach in the order process does not always support the employees who mainly work informally. Predetermined fields with predefined content were often used in a non- user-friendly way for information or comments. In order to organise the correction process there in the most efficient and structured way, the concept of mutation/concentration was introduced.
  3. In the beginning there was no concept for a possible outage of the online order system (whether on the server side, in the client network or in the connections between them). When the first difficulties arose, all the orders were fed into creative individual versions of Mikro + Repro AG. An emergency order form was quickly introduced here, which could then be filled in and faxed to Mikro + Repro AG or forwarded somewhere else.

Especially in the case of outsourcing, a company should make sure when dealing with an analogous or similar task profile that competent, reliable suppliers are called in who are prepared for long-term cooperation. Usually it is not the price itself that is the only crucial factor here but rather – as in the case of AKAD – the result and process quality that the supplier can offer.

Owner/s of the solution

AKAD-KS Gruppe
Andreas Wolter
Industry: Education/Science/Law
Company size: Medium-sized enterpriseAKAD-KS Gruppe

Solution partner/s

Nicolas von Mühlenen, Managing Director
Mikro + Repro AG
Chili Solutions GmbH
Chili Solutions GmbH

Case study author/s

Martin Dziuk
Universität Münster

01. September 2002
Dziuk; Martin (2002): AKAD-KS Group case study in: Schubert; Petra; Wölfle; Ralf; Dettling; Walter (Eds.; Procurement in E-Business; pp. 205-218; Munich; Vienna: Hanser Verlag; 2002

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