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08/03/2017

A question of price

The consultant from Düsseldorf wants to revolutionise German companies’ purchasing operations – with an app. The days of haggling are in the past, according to Germany’s former “penny pincher of the nation”.

Many years ago, Gerd Kerkhoff was given an honorary title of sorts: “penny pincher of the nation”. The purchasing consultant helped his clients to save millions of euros in goods procurement. “The Bermuda Triangle of Business Procurement”, the book Mr Kerkhoff had published in 2004, became an industry classic.

Nowadays, the business graduate laughs about this time – because digitalisation has fundamentally changed his profession too. “It no longer pays to make a song and dance about the last bit of margin,” explains Mr Kerkhoff in his central Düsseldorf office, which is situated diagonally opposite the city’s renowned Ständehaus. Today, he believes that suppliers and customers must explore ways of doing things together. The consequences are enormous, as the buyer having knowledge for the purpose of dominance doesn’t count for anything anymore; the value they provide is now transparent.

In the last two years, the Kerkhoff Group has invested heavily in software, which is what Mr Kerkhoff believes led to a lower annual turnover of €25 million with 100 employees in eight countries. He says the €33 million turnover generated in 2010 with 215 employees is down to the elimination of the Group’s global sourcing practices. Indeed, the chief streamliner had to streamline activities in his own company, closing branches in China, India and Malaysia because customers preferred to use local resources.
Now, the Managing Director wants to exploit this intensive groundwork in the digital age. A business app his company developed is set to become a standard feature of the SAP world and yield proceeds of between €100 and €200 a month per user. All for One Steeb, the Ratingen-based number one company on the German-speaking SAP market, has a 25% share in the product. A beta version was launched at the start of July, and the final product is expected to be released onto the market in September. SAP itself ranked the new creation in second place among business apps in a competition.

Devoting all his energies to big data

“We know what the right price is,” says Mr Kerkhoff, discussing the new world of buyers and his app, which records everything including companies and services in 744 regions and 24 sectors; the total time and money spent on individual products and components; and all the inner workings of goods in general. In the twilight of his career, Mr Kerkhoff, 59, is devoting all his energies to big data and has acquired the start-up Purchase Analytics, for example. All of this serves the purpose of “Procurement 4.0” – the procurement of goods and services in the digital age. His database is set to become a brilliant business and, though Mr Kerkhoff would love to collaborate with global consulting groups such as McKinsey as well, “they would rather go it alone”.

To understand what’s happening there, you have to leave the top-floor executive office behind and head down to the floors below, passing by walls adorned with certificates including “Best of Consulting” and “Hidden Champion of the Consulting Market”. In the “workshop”, for example, the company’s technicians are currently scrutinising windows as part of a pilot project. How expensive are the individual parts? What did the manufacturers pay for the materials? And then, the mother of all questions: What, then, is the right price for the DAX-listed real estate group Vonovia to pay? As with the windows, transparency is key for all parts that make up Vonovia residential buildings – from the doors, to the lifts and the balconies.

The company, based in Bochum, has been working together with Kerkhoff since 2015 and is now one of the Group’s best customers, with 20 Kerkhoff employees exclusively devoting all their energies to Vonovia operations. According to Klaus Freiberg, COO of Vonovia, the collaborative relationship is an extremely positive one. Mr Freiberg says he has seldom seen such concrete thinking in processes as he has at Kerkhoff. Mr Freiberg explains that “methods which are standard in the automotive industry, for example, are used in the housing sector.” He then adds that better process and cost control generates savings in the double-digit percentage range for the hundreds of millions of euros that the DAX-listed company invests in modernising its housing. Vonovia’s CEO, Rolf Buch, knows Mr Kerkhoff very well and has worked with him before, back when the industry manager headed up the Arvato service division in the Bertelsmann Group. It’s all about who you know in this business.

A little further along in the Kerkhoff headquarters is the “learning factory”. This is where the consulting group’s experts re-enact entire production sequences together with their clients. Participants move small machines and boxes; they gesticulate and walk around. Does every single one of the individual steps really work well together? How else could a department be organised? It was thanks to simulation operations such as this one that the productivity of Kerkhoff’s client Jägermeister rose by 14%. The liqueur manufacturer from Wolfenbüttel does not want to officially disclose exact figures as the evaluation is still ongoing, according to a spokesperson.

Thinking about retirement

Organisations are fundamentally changing and, as the owner proclaims, “anything that can be digitalised will be”. He continuously drags on an e-cigarette, as though wanting to advertise for smokeless cigarette company IQOS. In the purchasing sector, only 6% of companies are currently dealing with online issues to a large degree. Mr Kerkhoff asserts that “purchasing invests too little in digitalisation”. In contrast, first-class companies have digitally geared all the parts of the value creation chain towards a comprehensive economic plan – all the while “focusing on profitability”.
Mr Kerkhoff will learn about this new world – either in Silicon Valley or in Israel – in a week-long trip with best-selling author Christoph Keese from Axel Springer. In March, the future-shaper wants to share his findings in a new book – and possibly undergo a radical change himself. “When you reach 60, you can start thinking about retiring,” reveals Mr Kerkhoff, talking about businesspeople who have lost contact with their families because of their work. “I have met many successful people, but few of them are actually happy.”

Mr Kerkhoff, who holds a degree in Business Administration and is the son of a sales trainer, began his career in the management team of a coffee roasting company based in Dorsten. He founded his own company in 1999. His wife Stefanie, who is co-founder of the Kerkhoff Group and has worked in the company for many years, has been living on Lake Tegernsee with their three daughters for some time. Gerd Kerkhoff now works from home there one day a week. The industry veteran, who once helped football clubs like FC Bayern Munich develop their merchandising business, noticeably lights up at the mention of his “fireside chats”. This is in reference to his regular gentlemen’s club-style talks with prominent figures – either at his home in Rottach-Egern or in the Kerkhoff Lounge in Düsseldorf. From Gerhard Schröder to Richard David Precht, many well-known contemporaries have been guests of the businessman, who first became politically minded in the 1970s because of his interest in Willy Brandt. “Someone like me can only be liberal,” concludes Mr Kerkhoff.