DMG MORI, the market leader in the machine tool industry, aimed to optimize one of its procurement processes. After using Saphirion’s Non-Linear Performance Pricing software for some time and seeing the additional potential of Saphirion’s approach, DMG MORI decided to implement an innovative, data-driven zero-RFQ purchasing process.

The goal was to replace the existing RFQ-based process, reduce needed roundtrip times from weeks to minutes, and enhance supplier relationships.

DMG MORI automated its purchasing process for wooden packaging materials using gained insights and target price formulas from Saphirion’s NLPP (Non-Linear Performance Pricing) software.

This innovative approach replaced the manual RFQ process with an automated system based on a jointly developed NLPP target price formula. This formula encodes the relation of wooden packaging performance parameters (such as length, width, and height of packaging materials) with their prices.

Using clearly measurable performance parameters allows DMG MORI and its supplier to automatically agree on a precise, transparent, and objective price within seconds.

The implementation involved several key steps:

1. NLPP Analysis: An initial analysis of the packaging materials portfolio was conducted to identify key performance drivers.
2. Supplier Collaboration: The performance drivers and several variants of target price formulas were discussed and aligned with the supplier.
3. Formula Agreement: DMG MORI and the supplier agreed and implemented a final NLPP target price formula.
4. System Integration: The formula was integrated into DMG MORI's SAP Ariba system, allowing real-time price calculations in the second a new wooden packaging is ordered.
5. Process Automation: The Ariba integration further allowed DMG MORI to automate the entire procure-to-pay process for wooden packaging, from price calculation to order placement and invoice verification within SAP Ariba.

The implementation of the NLPP-based automated zero-RFQ process yielded significant results:

1. Eliminating Manual RFQ: The time-consuming and often error-prone manual RFQ process was eliminated, and the supplier received this well.
2. Reduced Lead Times: Procure times decreased significantly, from up to six weeks to near real-time.
3. Increased Efficiency: The automated process increased efficiency, freeing up valuable resources and capacity for both parties.
4. Enhanced Transparency: A clear, traceable, and fair system for price calculation was established, strengthening supplier relationships.
5. Data-Driven Pricing: Pricing became more accurate and objective, based on data and performance parameters, and removed all emotional or tactical aspects.

• Automated Price Calculation: NLPP's transparent approach to make the gained target price formulas accessible- and useable outside of the tool unlocked the automated zero-RFQ purchasing process.
• End-to-End Digitalization: NLPP closed a fundamental gap in the end-to-end digitalization of purchase-to-pay processes: automated price agreement.
• Improved Supplier Collaboration: The joint development of the NLPP target price formula fostered stronger collaboration and alignment with suppliers. Both parties better understood the mutual requirements and needs, leading to a deeper integration. The supplier gained experience with a highly innovative zero-RFQ-based procurement process that can also be used for other business relationships.
• Real-Time Operations: Integrating NLPP’s target price formulas with SAP Ariba enabled real-time price calculations, ordering, and streamlined workflows for both parties.

DMG MORI's successful implementation of a zero-RFQ process using NLPP target price formulas demonstrates the power of digital transformation in optimizing procurement processes. This project significantly improved efficiency, transparency, and supplier relations. The initiative set a new standard and paves the way for the future end-to-end digitalization of further purchasing processes. We hope this case study inspires and motivates other companies seeking to leverage technology within procurement.