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Konica Minolta bids on Ariba Network

The U.S. wing of the printer manufacturer plans to scrap manual procurement and buy supplies over the e-commerce network after integrating it with SAP ERP.

Konica Minolta Business Solutions is seeking a more cooperative culture with suppliers early in 2015 when it moves...

procurement to the Ariba Network and creates a one-stop shop for millions of dollars in transactions.

Company leaders said the cloud-based procurement network, billed by Ariba as the world's largest, means businesses will no longer be focusing just on squeezing suppliers on price.

Konica Minolta CFO John Thielke and Larry Reuter, director of procurement, said the Ariba Network will allow a more collaborative process among buyers and sellers and give Konica Minolta strategic opportunities for winning new customers.

"It is like social media networking," Thielke said. "We will have both sides communicating with each other through the network. There are huge opportunities for the company in this process."

As a global company with suppliers all around the world, Konica Minolta is looking for a single source to manage suppliers and track spending and contracts. The Ariba Network will also dramatically reduce paperwork, cut costs and improve customer service.

Reuter said the business network could end the traditional way of treating suppliers as entities only to be pressured over price. During the next five to 10 years, automation will create big electronic supply chains that will blur the lines between businesses and prompt companies to look for value other than the price, he said.

"If that supplier is viewed as helping you service your customer because you are exchanging data [and] you are keeping each other informed, ultimately that is good for the supplier and good for us," he said.

Automating procurement, supplier connections

Headquartered in Ramsey, N.J., Konica Minolta Business Solutions is the U.S. arm of Tokyo-based parent Konica Minolta Inc. The company signed a five-year agreement this summer to use the applications on the SAP-owned Ariba Network for procurement and began the project in October. It is currently deep into the implementation and plans to launch the system on April 1.

Eventually, it will buy about $200 million in products and services annually through the Ariba Network, according to Reuter. The network will provide services that include finding and evaluating potential suppliers, connecting procurement with the financial department, managing invoices, analyzing data on spending and managing the performance of suppliers.

Ariba claims 1.6 million trading partners and more than $500 billion in annual transactions on its network. More than half of Konica Minolta's 7,000 suppliers are already on it.

Reuter said he is working with three or four Ariba consultants on building the company's system on the network. A lot of the work involves integrating Konica Minolta's existing SAP ERP system with Ariba.

The company currently runs a manual procurement system and processes over 70,000 purchase orders a year. About a dozen employees are assigned to handling them.

Thielke said he spends a lot of time approving paper purchase requests. The network will provide an automated approval procedure for requisitions and purchase orders, allowing for much faster processing. "To me, the process is not as efficient as it should be," Thielke said. "I think there is a lot of opportunity there for cost savings."

The Ariba Network could also expand the number of possible suppliers exponentially, bringing in thousands of suppliers previously unknown to the company. In many instances, paperwork promotes the use of a single supplier because it is easier to do business with just one.

The network will also include an automated system for checking a supplier's bill against the terms and conditions of a contract, giving Thielke better assurances that the company is taking advantage of negotiated items.

The company also uses a manual process for contract management, meaning it sometimes suffers from a lack of oversight of some agreements.

Corporations coming together

The move to the Ariba Network comes amid dramatic change. The core business of the parent company is manufacturing and selling multifunctional printers and other devices, which Konica Minolta Business Solutions then resells in the U.S. Because the printer industry is not growing, the company is moving into selling software and software services, as well as managing IT for other businesses.

It will handle direct procurement on the Ariba Network -- anything that it resells, such as software, components, subcontracted services and hardware -- and indirect procurement of anything it consumes, such as office supplies and janitorial services.

By offering a virtual one-stop shop for customers, the company could leverage the network to acquire new customers and to more smoothly buy and ship products it doesn't keep in stock.

Konica Minolta chose Ariba partly because of its long history with SAP, whose ERP software it implemented over five years starting in 1998.

About three years ago, it began considering new technologies for connecting its procurement process with the financial department.

The company was leaning toward SAP's supplier relationship management software because of its integration with the ERP system. It already had the license for it.

Then SAP bought Ariba in 2012 for $45 per share in cash, or a 20% premium at the time of the announcement. Like SAP, Konica Minolta decided Ariba was a good fit.

Next Steps

Read tips on e-procurement ROI

Learn more about the SAP purchase of Ariba

Understand the e-sourcing market

Dig Deeper on ERP procurement and purchasing

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