Procurement strategies in the energy sector: Interview with Uwe Krepelin from GASAG

Fabian Heinrich (00:01)

Welcome, dear listeners, to another episode of Procurement Unplugged, podcast . Mercanis' Today we have a very special guest, Uwe Krepelin, Head of Procurement at GASAG, who basically supplies Berlin's for purchasershouses and flats with heat, which I think is particularly important in these cold winter days. Uwe, welcome, I'm very pleased to have you with us today

Uwe (00:31)

Hello Fabian, I am delighted to  enrich your podcast be able toand look forward to the exchange.

Fabian Heinrich (00:37)

Yes, I mean, it's always very exciting how you get into purchasing. You've been in Purchasing for a few years now, including a few years at GASAG. What brought you into Purchasing?

Uwe (00:51)

That's an interesting question. I think my colleagues, like me, got into purchasing by chance, because 20 or 30 years ago it wasn't an apprenticeship or a degree programme. I studied business administration normally and, as luck would have it, my first job was in purchasing at a small concrete and gravel works. I'd say it was pretty  back then, but even today pretty unspectacularunspectacularit's , just a few products, a few product groups, steel, cement, the typical thing you buy.

But I often learnt that from Pika. You could also say that I laid the foundations. You also lay the foundation with a shell and with concrete and cement. Exactly. And somehow I realised that it's quite inspiring, that it's extremely challenging. , I Of coursehad no idea at the time what would happen in 30 years. But I somehow realised that the exchange with people, with different people.

Fabian Heinrich (01:26)

Hahahaha

Uwe (01:47)

And again and again these roles that everyone naturally takes on, sales and purchasing. And then, of course, the requirement to have the right material in the right place at the right time, so that it's somehow very exciting. And I never wanted a job that was somehow boring or where I knew early on what I was doing or would be doing in the evening and the right-hand pile was on the left. And that's what I found in purchasing back then and I realised that this is exactly my thing and it's not for nothing that I'm here now.

A staggering 32 years in purchasing is a very long time, but I have honestly never regretted it.

Fabian Heinrich (02:21)

Yes, what you mentioned is very exciting. I mean, people always talk a lot about savings, supplier management and so on, but the aspect that you have a lot of stakeholder management somewhere, that you somehow the orchestrator somewhere in your own company and are beyond, that is also very often forgotten.

Uwe (02:43)

Yes, that's true. Many people don't even realise the extent of it. When I started my career, purchasing was actually still such an unloved department, a bit stepmotherly. Most of the time, people who no one else wanted to do the job were pushed into it because it wasn't really important yet. But that started back then. Lopez, who unpacked his sleight of hand at the end of the 90s, should tell everyone something. And back then, purchasing was already starting to gain a higher standing.

And as you say, different stakeholders who all want to be served in some way,  be served. have toAnd in the end, you have to play the whole keyboard because you are actually talking to all target groups. In the end, it with the board or the starts management and goes through the project managers, the department heads and then down to the employees in the individual departments or even in the projects. And that makes the whole thing pretty exciting.

Fabian Heinrich (03:40)

You just  Lopez mentionedfrom the automotive sector in the 90s. In your case, it was the ship from the foundations laid in the construction sector to the largest energy supplier in Berlin, one of the perhaps largest in Germany, apart from the really  ones.big Purchasing is very different from industry to industry. You always think that purchasing is purchasing, but you  this in particular,mentioned

The warning flow has to be right, so to speak. that's Of course, I think fundamentally different now with an energy supplier like GASAG. How was the change and what is really so different in the energy sector than perhaps now with Mr Lopez in the automotive sector?

Uwe (04:29)

Yes, with pleasure.

I think you could make a two-day workshop out of  I'll try to do it in a composed way. But that's  an it.actuallyextremely exciting question, because there's no any industry or patent remedy for segment that you can google or where you can get a template or where you can buy a book from Gabler Verlag or Gepler Verlag and then the find solution.

Yes, exactly, after I was in the concrete and gravel works at Hochtiefer-G, that's where I actually learnt the ropes when it  to the  business. comesWe projectbuilt large refineries and flats - a very broad spectrum. Then I spent a few more years at Deutsche Bahn. The challenges are once again very special. I think anyone who works for the railway knows what I'm talking about. Complexity  megais, influenceability is mega. And that was the reason why I decided to join

Fabian Heinrich (05:12)

Hahaha!

Uwe (05:19)

I made the relatively quick switch to GASAG. And that was another new realisation for me. I had been afraid that the energy sector was so entrenched that it lacked agility and dynamism. But that  turned out actuallyto be a misjudgement on my part. In fact, in the 22 years that I've been at GASAG, there has never really been one year like the next, with all kinds of different challenges.

But the energy sector, nobody knows better than we do today, as citizens of this country, when it comes to the energy transition. And these are very, very special things. We either build a lot of things for ourselves or for infrastructure, just the to supply heat and energy.  we build citizens of this city with Of course,also on customer request. We build biogas plants. Today, we build large neighbourhood projects.

in Berlin that didn't even exist 10 or 15 years ago. And you can see that there has been a tremendous renaissance, new skills are required, a new way of thinking. And that's  makes this job whatso extremely exciting and challenging.

Fabian Heinrich (06:38)

When, if you think in terms of the classic categories of purchasing, then you probably have with the whole  businessa lot of building construction and civil engineering , especially if you are now building refineries, biogas plants and the like. These are probably an extremely large number of construction services, complex services that need to be purchased.project

Uwe (06:57)

Yes, perhaps you could give me an insight, Fabian. Our purchasing volume per year is around 250, 280 million euros and half of that is pure construction services that are procured. But in addition to construction and construction services, there are also building construction services.  there are actually Of course,also a lot of civil engineering services for our pipe network. We have almost 14,000 kilometres of pipe network laid in Berlin.

And there are also many connected loads involved. And now, of course, combined heat and power plants, photovoltaics, let's say, are also investing in new energies, photovoltaic systems, photovoltaic projects, wind turbines that are being built in Brandenburg, not in Berlin of course, but in Brandenburg. And you can see that the spectrum is broad and the diversity is very, very large.

Fabian Heinrich (07:42)

Mh.

Uwe (07:47)

The other purchasing volume is, of course, IT, IT software, IT projects that we do ourselves. That is also a consulting service. That's also marketing, of course. At the end of the day, we are also a sales company. We also sell our contracts, our heating contracts. So from that point of view, it's an incredibly broad spectrum that we  to havecover in purchasing.

Sometimes the overlap between the buyers and the product groups isn't that big when you look at it from above. But when you look at the details, you can somehow see that everyone the same or has similar WW-Chin that needs to be cured and where you can perhaps help them and smooth the way a little to make shopping a little more pleasant and smooth.

Fabian Heinrich (08:38)

Yes, it's exciting to see the differences here, perhaps compared to automotive or manufacturing companies. I think to myself that no business or the  business day-to-dayhas probably not  much in the last 10, 15, 20 years changedas an energy supplier, whereas the last 5 years have probably been almost daily in the media as an energy supplier or the energy sector as such.

Well, Covid may have less impact now, of  because of the Ukraine war course,and of course the whole gas supply as such plus renewable energies. How is that subsidised or not subsidised? How has that changed? Have there been cuts,  purchasing, of coursechanges or how have the last been five years for you as Head of Procurement? Was it boring before that, the 20 years before that, and then came the adventure or what?

How can you see it that way?

Uwe (09:40)

A good question, so I could have, the adventure wished for itI would have done without , but it  was. actuallyagoThere was a huge upheaval five years . Corona was clearly  in our country, noticeableas was the war in Ukraine. Suddenly there were measures and issues that we hadn't had on our radar before. We have always had risk management, good risk management. But what happened back then

The new company could . And back then, we has far exceeded what we  imagined havein our wildest dreamsreally had to manage the companies and communicate very, very closely with our suppliers, which, as we all know, was not so easy in coronavirus times. A face-to-face meeting, which I would have , was more or less out of the question. That's when we started to organise the first teams...preferred team score.

And in fact there was a huge bulge in products, pipes, certain makes, because everyone who had was shortages naturally clamouring. And then the question was, who is the strongest on the market? Is it the one with the highest sales volumes? Is it the one with the worst purchase prices or the best, depending on which perspective you look at it from? So there were very, very, very many construction sites that had to be managed and us actually presented with new challenges.

Challenge that had never been faced before.

Fabian Heinrich (11:09)

I mean, now GASAG has come , at least from the through all these crises very welloutside. What would you say were the biggest lessons learnt on the one hand, but also the biggest success factors in purchasing for GASAG on the other?

Uwe (11:26)

So I think the biggest success factor, although not just for the last five years, I've been preaching this for over 20 years, is actually this partnership-based cooperation. You can buy this way and you can buy that way. Everyone has their role, purchasing has its role, sales has its role and yet both are a  extent. dependentThe client and the employee or contractor. This has  extremely successful for us on each other to certainproved, that the companies that with us.have had long-term  agreements framework
which are partly based on indices, so I would say they are very balanced.

Fabian Heinrich (12:01)

So like this keyword, price escalation clauses and indices, all anchored in such a way that in this quasi-context in the crisis you approach each other and say, hey, we can also find ways outside the contractual construct.

Uwe (12:17)

Yes, absolutely.  other words, Insolutions outside of the contract with a sense  proportionof, so as not to let the other party go under the knife.  to us After all, it's no if a supplier goes bankrupt. Our problem situation usewould end up much, much getting worse. The market is tight. Or actually, if you have indices, these  jumpsprice, some of which were exorbitant, even if you  in hindsight knowthat they were only brief peaks. But it was not foreseeable at the time.

Fabian Heinrich (12:40)

Nope.

Uwe (12:45)

But we have said that we are not parting company now just because the price is going up exorbitantly, but we are trying to with all joint cushion the blow measures. for us And the supplier has also borne some of the burden. And that proved its  in the coronavirus era worthduring the Ukraine war and is, I believe, still the key to success in  crisesovercoming.

Fabian Heinrich (13:09)

Yes, and I mean, is there now a patent remedy for the future outside the topic of acting in partnership or how can we be prepared next crisis or, as they say, Black Swan event in energy purchasing?for the

Uwe (13:29)

The is quite a balancing act. But I do believe that these long-term contracts, although it has to be said that the definition has shifted a bit. Ten or 15 years ago, we long-term put contracts out to tender for 5, 6 or 7 years. ,Today, of course many suppliers find it difficult to say, I can give you a price for 6 or 7 years. But that's exactly what we try to cushion with mechanisms and we say.

Fabian Heinrich (13:51)

Thank you very much.

Uwe (13:56)

Then tell us quite frankly where your pain points are which topics you can see or influence today and which are so volatile that you 't even  them into account today and cantakewe then find common clauses in the  about these topics, contractswhich always means that this is not a self-runner but the contract must then be managed in the truest sense of the word, so of course when the time comes, the contract must also go in.

You have to read formulae and interpret the framework conditions, depending on what you're talking about. So it's not a  successsure-fire, but always means it capacity and expertise in the purchasing department.

Fabian Heinrich (14:32)

Because capacities are a good keyword, because all the things you mention require a lot of time from a strategic buyer, a category bias. Where does he get the time? Or are you the only purchasing manager with an infinite budget? Or how do you make sure that the strategic buyers have time for these topics?

Uwe (14:48)

Okay. That's a really good question. I think all managers are concerned about this, regardless of whether they are in charge of purchasing or another department. Perhaps we should take another look back. In 2002, there were still 36 people working in Purchasing. At the beginning of the year, there were 17 people. But we also realised that at some point we were actually  our reachingnatural limits. And exactly what you say is an issue that has been bothering us for a long time. We've tried to really ...

We want to be involved in topics that create added value, i.e. where it really makes sense for us as Purchasing to be involved because the perhaps complexity is too high or the risks in the contract or the volume is so high. But that's where the question always arises: how do I get the capacities  in the right placebundled? And for that I  need reallyIT and systems that  us.support Let me also say the

Fabian Heinrich (15:45)

Mmh.

Uwe (15:54)

To reduce and minimise possible. They will never be completely eliminated, but they should really be in the single-digit percentage range. And the the honestly unloved administrative or  tasks as clericalmuch as majority of resources should  used precisely for thisbe, i.e. from a  perspective, capacityto  the important, either strategic issues deal withor the specialist areas.

Fabian Heinrich (16:21)

So I mean that digitalisation is a great approach. I think you've already come a long way. You're always looking at each other. I think it's fair to say that you a great  there.have solution next or now in the SRM onboarding area, where it a lot of, let's say, administrative automates activities, andactivities, non-strategic.

I mean, is there perhaps a patent remedy from you forenergy companies, that you say, hey, this can be digitised, this is how I look at the  other purchasing managers at medium-sized solutions, this is how we do it, because I think it creates incredible added value when you look at it, okay, that's where you win.

Now my category buyer saves 2-3 hours again, my category buyer saves bottom-9-savings again or the LKSG does not have to  care of it somehowtake, but gets the analysis out at the push of a button.

Uwe (17:36)

Absolutely. I mean, many people know what talking I'm . have tried for years to manage this transfer using SAP on-board resources. But at some point we realised, for whatever reason, that SAP is totally blunt and doesn't offer any smooth aboutsolutions or any solutions that really reduce . or minimise And so, from my point of view, we capacityactually made a smart decision to work with IntegrityNext and with you with Mercanis.

And my aim has always been that it has to be intuitive software, a a solution that is low-threshold, i.e. where I don't  weeks or months of training solution that is easy to useneedand what I'm not allowed  do, i.e.  tooverburden by providing several systems where you have to switch back and forth again and again, but rather the buyer .

It has to be intuitive and the  should actually buyerwant to  the system. openThe sourcing tool, how you typically Outlook or Teams open , which has already become routine and we have exactly the same requirement for the software that  us. early onsupportsAnd if you achieve that, then you no longer need to agitate or to the , talk it's a buyerno-brainer. When he realises that this is actually an advantage and that many activities or work

Fabian Heinrich (19:04)

Is there perhaps, are there any other issues that you should consider, especially if you  in the energy sectorare active, that you might say, say, software players who are now, say, more focused on the material flow, who are now perhaps more in the manufacturing industry 90 per cent of the time, they might not be a good fit now because you are more likely to buy services, or does it not really matter because purchasing is similar? How do you see it?

Uwe (19:34)

Procurement in the energy sector already has a number of specialities due to the fact that we  in such a sector. operateSome of my colleagues are also sector clients who even have fulfil  But apart from that, the issue is that we have a very narrow market in the energy sector. In other words, the providers that  in our segment to stricter procurement guidelines and conditions.are activeare normally no longer active. We have known them all for many, many years.

Fabian Heinrich (19:46)

Mmh.

Uwe (20:04)

It's a little different than perhaps in the automotive or other sectors. And from that point of view, the word partnership takes on a completely different meaning. You've known each other for 10, 20, 30 years and always have to work with the same pool of suppliers. But I could also turn that around in a positive way. I have a base and once I manage to get it to work with my sourcing tool or with my Zimpf for LKSG, with LQGT Next, with all the

Fabian Heinrich (20:14)

Yes.

Uwe (20:33)

Once they have warmed up to the system, they understand the reasoning behind it and are motivated to operate the systems because they  they know thatwill find employmentif they are profitable and  line with the market.long-term  with us, or can assume that they will, offer prices in

Fabian Heinrich (20:51)

This plays into the supplier's hands, because then it's more or less a system that can be used for years. And then the topic of supplier development, which is so important in your industry, supplier evaluation, development, which goes hand in hand somewhere, can also be mapped in such a system, so to speak. So this supplier lifecycle management, which not many systems map in this way, is also extremely important for you that it can be mapped somewhere in the same tool. If we could perhaps, yes, sorry.

Uwe (21:24)

Let me perhaps add one more. I've just remembered one more . The topic of sustainability. Of course, we ourselves are the ones driving the energy transition forward.  we want to thing, FabianOf course,also be a role model. The topic of sustainability can of course also be excellently mapped using such tools and systems. And in the end, if we have an evaluation matrix and it  should reallybe par for the course in terms of price equality or economic efficiency. The price alone never counts on its own anyway; there are several components.

Then I have the chance to partially apply the sustainability factor. Which of my suppliers is greener and who gets to promoteto do something in their own environment, in their company, photovoltaics,  motivation on the supplier side green electricity, etc., which ultimately contributes to the whole cycle.

Fabian Heinrich (22:15)

If we perhaps take a look into the future together now, I mean, on the one hand, clearly exciting digitalisation software, but as we also every see in the news, day artificial intelligence, generative AI with ChatGPT and so on, there is also a lot going on.

How do you see this movement? Have you perhaps already  any tools from GASAG in general?introduced So do you have all kinds of co-pilots, including the one from Microsoft or now ChatGPT for Business? Are you already using anything and what would your recommendations be?

Uwe (22:53)

Good question, exactly. I think it's still very much in its infancy here. It's a big topic. We have some major initiatives. But of  data protection is course,always a buzzword, which makes the topic very, very difficult and can quickly cause our company to fall behind. We are currently in the process of setting up an internal AI tool where we will actually only work in-house.

But this from my point of view, would again have the disadvantage for my people that they would  switch to another tool or application. have toI think what I said earlier is a fully integrated solution. So if there's an AI agent in the software, whether it's Mercanis or IntegrityNext, where I simply say I'm in my application, which I'm in every day because I'm doing tenders, because I'm sending questionnaires to the negotiations for EKSG, that I immediately have access to its agent, data.which I can use to  access the easily

I can ask my questions in a very structured way, get answers very quickly, suggestions for wording, whatever there may be. And I think we're using that today.

Fabian Heinrich (23:58)

Yes, this is a relaxed approach that the agent must already be fully integrated or the co-pilot must be fully integrated in the respective software where you are, that it the user naturally picks up for the situation or the challenge where the user is... is located.

And I mean, the other question for you now would be, is it only about the interaction with the , so to speak, conversational artist intelligenceor really then, what you're already talking about, about this process automation, that this agent automates entire processes. For example, all sourcing under XYZ source the agent itself, so to speak. That would really take us into the area of intelligent process automation, which I don't think we're really at yet. But that would be the next level.

Uwe (24:46)

I am firmly convinced that this will happen. It's always such an easy saying that data is the new gold. But there is hardly anyone who has more data than us in Purchasing, almost in every company. have demand data, have purchasing data, we have invoice data and this data is worth its weight in gold. And I believe that nowhere is it better than here. In fact, processes, entire processes  largely are to automate it via AI, or to drive it forward to a certain point, where then at some point, , via bots, fortunately a human being takes over or sets the last e-point or sets the human decision or modifies the award strategy again under different aspects or enriches it again with certain topics, but no longer puts in the work from the very beginning, but perhaps only the last 10 or 15 per cent. which gives him , of course, the  he has been longing for freedom to tackle strategic issues, to look at new suppliers on the market or to go to the plant. that For me, a vision of the future that I believe even in the medium term, i.e. three to would be is achievable five years.‍

Fabian Heinrich (26:00)

So the data is a very exciting point, I mean, a lot of it revolves around the fact that you somehow say ChatGPT, which we all know, or now Deep Fast train into the vertical AI age.

Uwe (26:34)

Yes, absolutely. I completely agree with you. Because I think we have so much data, structured data, not just wildly thrown together that nobody can do anything with. And I think don't it should be rocket science Because I don't think the process is more  anywhere for a system like this. consistent than in the procurement process. And in the awarding process, it goes all the way through to contract management. So it could certainly also run analyses later on for  for supplements reasons.

Disadvantage volumes, disadvantage frequency etc., where today a person has to sit down and run the analysis and where Excel tables pull this out. I believe that this can be done relatively quickly in the future, by  F5 once laboriously pressingand then I at least have the analytics and can still do it with the human master knowledge. I think that will remain the case for a long time to come, because of course the systems are also hallucinating a bit. But this last point is something we should still be focussing on.

Fabian Heinrich (27:02)

Yes. Hahaha.

So I think it's great that you have such a clear vision of where things will go in the next three to five years. So my last question, which will probably also be discussed in a week's time at the European Energy Supply Chain Forum, where I will see you in person again and where I'm really looking forward to, is where is the future going in the energy supply chain or in procurement? So let's move away from tools or AI. Do you have any final words that we could then perhaps at the forum in Berlin.

Uwe (28:03)

The connection is actually between what will be new for us and really large-scale projects. In , large-scale projectswe are talking about volumes of 50 million, 80 million, 100, 150 million euros or more, which will require a completely different way of purchasing cooperation. There will also be demand for new suppliers that are not in our portfolio today. That would be something new for us. But even there I and hope we  support have In any casesystem, we can work with your sourcing tool there.

I also want to use it for communication. But I believe that we  all work together to canthis process, which we call support , to make it much more transparent and thus large-scale project management, even moreof course also more error-prone and minimise risk.

Especially when there's so much money involved, I don't want to take any risks and  want reallythe project to run like  from A to Zclockwork. Many people communicate with each other, again at different levels, just as we the .actually started conversation And that culminates in a major project. There are many players involved, all of whom need to be on the same level of knowledge.  this is For me,the challenge of the next innovation-energy sector, the next two or three years, which we want to and  face.must I'm really looking forward to that.

Fabian Heinrich (29:16)

Many.

Yes, exciting insights Uwe, especially on the subject of purchasing in the energy sector. So it's something completely different to what one or two people may know about purchasing. You are perhaps even more in the stakeholder management role, which perhaps makes the whole thing different, but no less, perhaps even more exciting. And yes, I think it's great that you have such a clear vision of the future for energy issues, but also for where the journey is going in terms of technology.

So it was a very exciting round of talks with you. Thank you very much and I'm looking forward to the Energy Supply Chain Forum in a week's time.

Uwe (30:09)

Many thanks for the exchange Fabian. Here's to continued good cooperation and a successful year 2025.

Fabian Heinrich (30:16)

You too!