Early Involvement, AI & Platform Thinking and the Future of Höveler Holzmann

Fabian Heinrich (00:00)
Welcome to another episode of Procurement Unplugged. with Daniel Belka Managing Director and Managing Partner of Höveler-Holzmann, a Valantic Company. Daniel, I'm very pleased that you're here today.

Daniel Belka (00:14)
Fabian, I'm delighted to be with you. Thank you very much for the invitation.

Fabian Heinrich (00:18)
Perhaps you would like to start by introducing who and what Höveler-Holzmann

Daniel Belka (00:25)
Yes, of course I would love to. We are a management consultancy that specializes in the areas of purchasing, supply chain management and sustainability in all operational processes. Sustainability is a topic that has gained extreme momentum over the last five, six or seven years. We also picked up on this back then. The original Höveler-Holzmann was founded by Bernhard Höveler and Florian Holzmann.

Over 15 years ago as a purchasing boutique and we then continued to work our way through operations, so to speak. This means that today we do a lot in addition to purchasing, which is of course still our core business, a lot in logistics, for example, a lot in planning processes, the famous sales and operational planning, inventory management and so on. So we look at all the operational processes in companies. And optimize them together with our customers.

Fabian Heinrich (01:26)
Yes, very exciting. I think you have, let's say, many groundbreaking topics for many German companies that you work on every day. I mean, you've been Managing Partner and Managing Director there for a few years now. It probably wasn't always your dream to work in procurement, or maybe it was. But of course, I think it would be interesting to find out what your career or

How did you end up in Procurement, so to speak?

Daniel Belka (01:57)
Yes, so I got into purchasing, interesting question, Fabian, like the virgin to the child. So that was pure coincidence. I was actually working on the other side of the Sales department after my studies and then I read an advertisement, at that time still in the newspaper, i.e. very classic print, and a Lidl company was looking for buyers in training, Lidl in Neckars Ulm. And I applied and was

I applied and was actually accepted and that's where I found my absolute heart and my passion, the topic of purchasing, strategic purchasing and then worked for many years in corporations, at Lidl, at the Rewe Group in Cologne in purchasing tasks, also saw many logistics topics there, in addition to purchasing, because everything in retail is of course intertwined. So, as you can see, I'm not a born consultant.

Fabian Heinrich (02:56)
Hehehehehe

Daniel Belka (02:56)
But, more than 12 years ago, I changed sides in quotation marks, practically left the group, left the line and joined the then small Höveler-Holzmann, which was still very start-up, so very fresh and, as I said, that was more than 12 years ago and I have never regretted it.

Since then, I've only been working up and down on nice purchasing topics and supply chain issues. My former employers are now practically my customers on the other side, so to speak, among other things, of course. yes, perhaps I should add that Höveler Holzmann has grown steadily and two years ago we joined Valantic. So that means we are part of Valantic, a larger consultancy with over 4000 employees worldwide. Maybe I'll take the opportunity now, Fabian, if that's okay, to tell you a little secret or a big secret.

Fabian Heinrich (04:03)
Yes, I would love to. So certainly also very exciting for our listeners.

Daniel Belka (04:08)
Yes, exactly, so it's a secret in that everyone will see it in the end, in a good ten weeks sometime towards fall we'll be rebranding. The Höveler-Holzmann brand will leave the market and Valantic will shine above our heads as a new brand. This means we will become Valantic Supply Chain Procurement Consulting and will then be known as

The good news is that the people involved will remain the same, so whether it's Bernhard Höveler, Florian Holzmann, the founders of Höveler Holzmann or myself, we will all stay on board, we are all on board and will continue to dedicate ourselves to exciting procurement topics with our customers.

Fabian Heinrich (04:59)
Yes, very hot news, Daniel. So, Höveler-Holzmann is becoming Valantic. It's clear that you were a subsidiary of Girdt, longer clear. But, of course, Höveler-Holzmann was also a long-established brand in the purchasing industry. So, yes, exciting news. What do you expect from the brand change or from the new ...

Daniel Belka (05:25)
Basically, as Valantic, we can offer the famous end-to-end advice. This means that we as the Höveler-Holzmann unit, soon to be Valantic, Supply-Trend and Procurement Consulting, see ourselves as classic management consultants. This means that we can develop structures and processes further.

We can deliver added value, including purchasing optimization, for example in the area of conditions. But over the years, we have of course noticed more and more that digitalization is gaining ground, even in SMEs, and that is the right thing to do. And conceptual consulting is not the end of the story; once we have developed a good concept, good processes and good structures, our customers naturally also want solutions, systemic solutions.

And they want these good processes to be mapped digitally. You yourself are an expert with Merkanes on how to digitally map good processes in purchasing. And we can do that with Valentic. In other words, we can provide end-to-end consulting in all possible areas if we want to. For example, we are very active in the area of SAP. We have a lot of colleagues who are SAP experts and who also deal with procurement issues.

We can continue to develop value creation in the system. For example, we also have numerous other tools in the partnership. At Höveler-Holzmann, we are technology-agnostic anyway, as we say. We don't have our own tool, we advise our customers according to the application. If we take a look now, because we are now talking together, Mercanis is of course a great tool for SMEs.

And then say that we advise SMEs, Mercanis could of course also be a perfect solution for SMEs. And so we go through the requirements of our customers and then select the digital solution with them and accompany them to the end, until the tool works, until the tool is implemented and the further development processes also work digitally.

Fabian Heinrich (07:42)
Yes, my, now you've mentioned a lot about digitalization. It's a big topic. I think many people or customers are also concerned about it. But you've been in procurement for a long time now. How has purchasing changed over the last 20 years? I mean, it wasn't so digital back then, of course, but is digitalization the only thing that has changed? Have the demands on buyers also changed? That might be exciting if you could take us on a journey like that.

Daniel Belka (08:12)
Yes, purchasing has changed rapidly in recent years. I have to say that Covid, i.e. everything since the end of 2019, has actually been a blessing for the purchasing function, because we have of course seen that purchasing is not just some ordering function and some procurer for the company's needs, but that purchasing is actually an important management function and an important function, really. To really fuel value creation in the company. That is quite clear. So I would really say...

Fabian Heinrich (08:44)
So quasi since Covid, you would say, you can go from order office to value driver, so to speak.

Daniel Belka (08:52)
Yes, of course you have to differentiate by sector. I originally come from the retail sector, as I said. In retail, purchasing has always been a strategic function. But when I look at manufacturing companies now, for example, there are certainly specialist departments that were in charge before Covid and that meant research and development, technical areas, for example purchasing.

Fabian Heinrich (08:58)
Like.

Daniel Belka (09:16)
pure vicarious agent. Now we have realized, when the needs suddenly could not be met, when there was a shortage, that what we have been saying for a long time, that we...

Fabian Heinrich (09:18)
Yes, yes, yes.

Daniel Belka (09:29)
Basically, I'm saying that verrant management has a huge added value for a company, risk management has a huge added value. Clean purchasing processes and needs assessments have added value for companies. In the event of a crisis, the companies that were well positioned in all these areas, i.e. strategic purchasing processes were very well developed, the procurement management was very well developed and so on, got through the crisis much better because the purchasing department was simply efficient.

Than companies that had underdeveloped purchasing functions. They really had problems getting hold of products, materials, supplies, and so on. And we could clearly see from our customers that the mature companies in purchasing simply had an advantage. And this is an issue that has simply become so clear in 2020, 2021, 2022. And that's where the topic of procurement feels very strong again.

We can clearly see that investments are also being made in procurement and that many companies are also saying that they would like to develop procurement further. And we have some really exciting and great projects at the moment, where procurement is also perceived as a strategic partner for business. In other words, Procurement is not just a management assistant, but Procurement is becoming a strategic partner for the business.

Actually brought to the table in planning processes, in planning discussions. And let's say we have an IT department, let's take the constructed example.

Fabian Heinrich (11:02)
So in the determination of requirements.

Daniel Belka (11:05)
Exactly, we have an art department and they are planning an expenditure volume of 5 million euros for next year, for 2026, for example. Let's just take it, this case is completely focused. And in the past, things would have been done and done and then at some point the purchasing department would be brought in to negotiate. This is the famous late involvement. The buyer just says, what should I do now? Everything has been chosen. All I have to do now is type up the contract. Today

Fabian Heinrich (11:15)
Yes. Hmm.

Daniel Belka (11:33)
We can see very clearly that purchasing is brought in at an early stage in the planning discussions in the previous year when determining requirements, that you look at, okay, what do we actually want to procure, what are the needs of the department and that purchasing manages these requirements at an early stage on a kind of project basis and sees, okay, what kind of procurement market do I have, yes, what procurement strategies can I apply from this.

And ideally, of course, also map this digitally in so-called procurement initiatives, for example. And then you can see that there are currently 40 or 50 procurement initiatives underway, for example, some on a project basis if you want to buy a large IT item, for example, while others are of course series.

Materials, i.e. series, purchases that you buy again and again, framework agreements, is of course a different character of purchasing. But the topic of innovation roadmaps, for example, is also crucial here, where procurement is ideally integrated into innovation roadmaps at a very early stage in technological companies and is involved in supplier development, with very specific responsibilities.

Fabian Heinrich (12:46)
Yes.

Daniel Belka (12:53)
And therefore simply delivers added value to the company. And this early involvement, not late involvement, but early involvement of purchasing, of course only works if the company has very good processes and the interfaces between the individual users and purchasing are well developed, well described and everyone basically knows what they have to do. And purchasing is not perceived as a troublemaker who wants something again.

Fabian Heinrich (13:21)
And the topic of early involvement, you already see it that way when you come to the customer or you are more of a change manager who somehow helps to drive it forward. And what do you think has changed in the companies that this early involvement is now becoming more and more common?

Daniel Belka (13:41)
As I said, there are companies that are well positioned. Early involvement may not be a challenge there. But it is of course a process when we are in the company and when we have the task of carrying out a maturity analysis of purchasing, for example, and looking at how mature the purchasing structure is, i.e. the organizational structure and the process organization, the purchasing processes, how mature the whole thing is and where there are strengths and where there are weaknesses.

Fabian Heinrich (13:59)
Mh.

Daniel Belka (14:11)
Then let's take a look at the topic of early involvement. Why is this interesting for companies? Number one, as we saw during the crisis, is resilience. Am I supplied by suppliers who are efficient? Do I have two or three suppliers for critical parts who are qualified and can deliver the right quality?

Or do I have this nasty word single sourcing, which means that I have a single supplier who provides me with certain materials and services and I am dependent on them, so to speak, and have not taken care of it. In other words, I can only build up this resilience if I really keep up with the technology at an early stage. The second, of course, is cost awareness.

Is my cost structure lean?

Fabian Heinrich (15:06)
So I am have to be involved in the topic of technology at an early stage so that I have a chance to set it up efficiently and in a way that makes sense in terms of processes. so to speak, if I remain stuck in my analog processes, then at the end of the day I can't be such an early involvement value driver.

Daniel Belka (15:27)
Exactly, right. And the second thing is this cost awareness. We see that successful companies don't just focus on sales, on the top line, but are also cost-conscious and say, okay, we don't want to be the most economical in the industry, that's not the point here, but it's about saying, if I'm efficient in my cost structure, I get good value for money, so to speak, a good value contribution from my suppliers.

Fabian Heinrich (15:55)
Thank you very much

Daniel Belka (15:56)
And there is also an early involvement, for example in planning processes, where you then move on to strategic purchasing initiatives after planning and then to the operational call-off of requirements. In other words, this entire value chain up to the end of the contract, when the contract expires again and I need a new contract, that you accompany the purchasing department, the purchasing department accompanies the specialist departments, that is the decisive factor.

And of course there is also a good C-item management, we know the catalogs and the other technological tools, so to speak, to process and manage the entire C-parts area well. And here we say that it is crucial that the purchasing department manages the purchasing volume together with the business, together with the users, and that the purchasing volume does not leave the company in an uncontrolled manner or that the euros leave the company in an uncontrolled manner, but rather that the purchasing volume does not leave the company in an uncontrolled manner.

Fabian Heinrich (16:55)
Hmm.

Daniel Belka (16:56)
But different topics, different approaches, as just described, the purchasing volume is managed. And ⁓ to briefly build a bridge to technology, Fabian, as I've just mentioned, we clearly see the processes at the center. We are really realizing that it's not just us, studies also say that, so there are also

Fabian Heinrich (17:14)
Yes.

Daniel Belka (17:22)
Zelone studies as an example or The Economist studies often show that the structures and processes in companies are not set up optimally. Why is that the case? Because they have grown historically, because of inorganic growth, acquisitions and then loops, loops and inefficiencies arise in the processes. Unfortunately, this cannot be completely prevented.

Fabian Heinrich (17:44)
Yes.

Daniel Belka (17:51)
When it comes to digitalization, mapping all of these processes digitally and underpinning them with technology so that you can operate efficiently, we strongly recommend smoothing out and optimizing these processes and really taking a look at how you can position yourself more efficiently. It has many advantages for a company. Scalability, for example, cost reduction, but also a fundamental advantage.

Enabler, i.e. a help, for example, to introduce software quickly, yes, to shorten implementation times through efficient processes.

Fabian Heinrich (18:28)
Yes, I don't think anyone can avoid digitalization anymore. of course, that's absolutely right. What I've taken away from your advice is that digitalization is the foundation and that it's no longer possible without it. But if you think a bit further, you might even be able to say that it won't be possible without AI in the future.

And then my AI is also a huge bass host. What practical use cases do you see, let's say from practice, that really represent a value driver for the customer with AI?

Daniel Belka (19:14)
So it's a buzzword. Clearly AI. On the other hand, it's coming so quickly and so intensively that we can only recommend that companies get to grips with it. There are an incredible number of application examples in procurement.

In fact, in large companies, perhaps DAX-listed corporations, you can already see one or two use cases, one or two application examples actually in use. But not yet at the vast majority of companies. You can see selective daily use of JetGPT. I, for example, really use various AI tools on a daily basis to support me in the in the individual tasks, for example, ⁓ prescribing emails, a classic example, and also checking contracts, for example.

If you get a contract now, then our AI, we have our own AI, a Valantic AI that we use, so on a secure server and all data secure, we can actually use it to check contracts as an example. And the AI can pull out critical paragraphs in ten seconds where I previously had to read for an hour or an hour and a half.

Fabian Heinrich (20:11)
Well.

Daniel Belka (20:35)
and can point out where the contract has changed from the previous contract, for example, or where there are issues that I should keep an eye on. Our project database, we do a lot of purchasing projects, supply chain projects, we have connected the AI and can therefore simply extract relevant knowledge from our project database very quickly and efficiently.

Fabian Heinrich (21:02)
Hmm.

Daniel Belka (21:02)
Specific application examples where I say they're great. And that's how we see it.

Fabian Heinrich (21:06)
All right, my that contract example that you have in-house is also a topic that helps purchasers on a daily basis. Are there perhaps other practical use cases where you say, okay, maybe companies should look at this now, because the solution providers are already relatively advanced in this area, or are there perhaps other topics where you say, well, negotiation will continue to be a very personal issue, AI will not solve the problem for us.

Daniel Belka (21:13)
Unobjectionable. Yes. Yes.

Fabian Heinrich (21:36)
Spieletze.

Daniel Belka (21:37)
I think in strategic purchasing, the focus is particularly on data analysis issues that can be solved much faster and better with AI. For example, demand forecasts and demand planning. Yes, I think you can really have trends analyzed by AI using the order history alone. The existing evaluations and selection can also be broadly analyzed internationally across the entire existing portfolio with certain key figures.

Fabian Heinrich (21:42)
Mh.

Daniel Belka (22:05)
You can of course run analyses where the AI can also find similar suppliers, for example, that could be pre-qualified. We have seen price-discount analyses in strategic purchasing. We see these topics, Fabian, but, as I said, only selectively. It is used selectively in certain functions today. But we see it in the future ...

A clear underpinning of strategic purchasing processes across the board by AI. That is the future and, to be honest, we see this future in the next two to three years. So that will come very, very quickly, where this development is progressing rapidly. We are firmly convinced of this. In operational purchasing, for example, we are already seeing a few tools that are also very useful in C-parts management through the purchasing process

Fabian Heinrich (22:35)
Mh.

Daniel Belka (22:59)
Where you basically no longer rummage through catalogs as a consumer. So imagine I'm in a warehouse now and I want to buy a safety shoe, for example. I need a new safety shoe. In the past, you might have rummaged through a catalog and looked to see what shoes were available. Nowadays, Akaso, there is already a supplier or several suppliers. Just put a tip in the front end.

Safety shoe size 44. all right, we ordered it. is the model that is worn most in the company. then shoe comes. That's already an AI front end.

Fabian Heinrich (23:34)
Yes, if you think about it, our own user behavior is also changing. If you're looking at ski products in winter, for example, or more specialized things, nowadays I can just ask Chatchipiti, hey, what can you recommend? I then get a detailed comparison, which not even a specialist salesperson can give me, and am then shown where I could buy it cheapest on the internet or near me. So I mean,

Daniel Belka (23:39)
Yes, exactly.

Fabian Heinrich (24:04)
That, let's say, for years or decades, people have been saying that procurement needs this Amazon shopping experience. And I think this Amazon shopping experience or, in Germany, a Zalando shopping experience, I think that's outdated now, because users nowadays no longer want to click through catalogs, even if it doesn't look like it, but I can do everything.

I can now get everything on demand and the demand analyzes everything for me and gives me an assessment and even better insights than virtually any procurement advisor or specialist salesperson. So I think it's actually quite exciting to see how the mindset is changing right now, that you're completely moving away from this ⁓

Daniel Belka (24:38)
You know,

Fabian Heinrich (24:59)
Amazon Shopping Experience approach, with which Coupa also became big 20 years ago, who said, hey, we're bringing this to you, this catalog experience in Amazon style, that you're now kind of evolving and saying that, let's say, procurement, shopping has to be done in chat GPT style, yes, if you say so casually.

Daniel Belka (25:25)
That's how it is. And so the tools that we already see are of course also in use. Again, a comparison with reality. The vast majority of companies don't have anything like that yet. A digital input channel like Chat GPT, I would say, for recurring requirements. But here too, I think that prices will simply fall quickly because the technology will continue to develop. This means that it will become cheaper for companies to use systems. And above all, of course, I also see integration somewhere in other systems.

Fabian Heinrich (25:37)
Hmm.

Daniel Belka (25:55)
In other words, I don't want to have a tool where I can order chat GPT-like, another tool where I can then do chat GPT-like data analysis and so on, but I want to have all this in an integrated tool where I basically have the whole topic of supplier management, operational purchasing processes in one tool, so to speak, or in a front-end data.

Fabian Heinrich (26:20)
I think the main point is what we are now tools like this, niche tools like this, from the market. And that's why, since you've had such hot news here, we'd like to share some internal news with you. We at Mercanis Procurement Suite are working on exactly the kind of thing you just described. It's going in the direction of

Daniel Belka (26:32)
Yes.

Fabian Heinrich (26:42)
At the end of the year, perhaps as a Christmas present for customers, there will be a launch. from the topic. The topic is super important. You have to present the whole thing as a new chat GPT-like shopping experience, marrying procurement, demand carriers and demand.

And on the other hand, an important point is that you don't want a thousand tours where you're still afraid of how to integrate it and so on, but you want to have it natively anchored in the Procurement Suite, where you don't have to free up any IT resources and then spend a long time getting it to fly somehow.

Daniel Belka (27:28)
That's exactly how it is. And just like closing the circle, the prerequisites for this are of course data, good master data that can be used. With AI, as with all other tools, it's shit in, shit out. So at the end of the day, I need good data and good processes. Then I can be very successful with these new technologies.

Fabian Heinrich (27:44)
Yes.

Daniel Belka (27:55)
And to draw up a roadmap accordingly, in which areas I would like to develop further as a company. That's the basic prerequisite.

Fabian Heinrich (28:06)
Yes, I do very exciting. I mean, you've already mentioned a few things about how purchasing will develop over the next few years. If we perhaps disagree in two years' time, what do you think we'll be looking at then? What is it where you say, okay, that's what you'd like to see from the purchasing departments and that would perhaps be another vision for the future, as a final word from you.

Daniel Belka (28:35)
Yes, we've already discussed many purchasing processes that will be digitalized in two or three years. Much more digitized than today. Orders will be fully automated. We have a much stronger network with our suppliers. So we tend to think in terms of platforms. Negotiations are also very fact-based, regulated on the basis of indices. This means that the human factor is being used less and less in negotiations, especially

In the case of commodities or articles that are also very commodity-based, for example, you can simply do the math. we are already seeing with advanced customers that they are basically generating prices automatically with their suppliers using cost structure models. In other words, there is networking, there are platforms. And most of the processes are backed by AI to help people.

We will see significant efficiency gains in all areas in two or three years, I am firmly convinced of that, and ideally we will be able to counteract this shortage of skilled workers in Germany. That we say, where today a managing director always asks me with every project, don't you still have a good strategic buyer, a good logistics manager and so on and so forth, that we can use these processes to

Fabian Heinrich (30:02)
Yes.

Daniel Belka (30:04)
We can also close the gaps in our workforce there. I don't see it as a threat at all to the employees who are currently there, but rather as a benefit that we can get a boost for our economy there and also generate growth in Germany again. That's something I very much hope for in two years' time.

Fabian Heinrich (30:21)
I think that's a great final word. I think that procurement as a companion and accelerator for growth in Germany is also something that we stand up for here every day. And yes, Dani, it was a super exciting conversation with you, I think, here with the red-hot news from even more exciting. I think great approaches and I think our visions for the future are, I think, very much our own. So thank you very much for your time and I'm glad you were here.

Daniel Belka (30:58)
Thank you Fabian for the invitation. It was great. Thank you very much.