Leveraging the Supply Chain Act as an Opportunity for Procurement Instead of Viewing It as a Cost Factor

Schwäbische Werkzeugmaschinen GmbH

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🏗 Industry: Machine Building

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🗺 Headquarters: Waldmössingen (Germany)

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🧍 Employees: ~ 1,200

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Schwäbische Werkzeugmaschinen GmbH, or SW for short, is a classic mid-sized company and world market leader in the field of multi-spindle machining centers. The company specializes in machining centers, automation and system solutions in the automotive industry, in the agricultural and construction machinery sector, as well as in hydraulics and pneumatics.

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"After our analysis, Tacto was the only provider that fits the requirements of mid-sized companies and is simultaneously a long-term partner for our digitization strategy in procurement. The tool offers a comprehensive solution that covers the requirements of the LkSG and enables us to gradually make procurement more strategic." - Matthias Schlotter, Head of Procurement

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The LkSG as a Challenge:

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SW is both already indirectly affected through customer requirements and from 2024 directly affected by regulation through the Supply Chain Act (LkSG). As a leading supplier to the automotive industry, SW has customers employing more than 3,000 people who have been required to comply with LkSG obligations since January 2023. These customers are already passing on compliance with due diligence obligations to SW through ESG questionnaires, contractual assurances, and advantages in tenders. For Mr. Schlotter, the signs were clear that LkSG and ESG topics would need to be implemented by everyone in the future. That's why he wanted to address them early, to position himself in a future-proof manner both toward customers and internally with the executive board.

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From 2024, SW also falls directly under the regulatory requirements of the LkSG with more than 1,000 employees in Germany. As a classic mid-sized company, the additional administrative burden poses a major challenge, as qualified personnel are hard to find, more and more regulations (such as REACH, RoHS) must be complied with, and the procurement market has been tight in recent years anyway.

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"Already at the beginning of this year, I realized that the LkSG is an important and urgent topic that requires action. Every supplier, no matter how small, who is part of a multi-tier supply chain in any form, will come into contact with it sooner or later, whether regulatory obligated or not. For us, it was therefore important to address the requirements early with minimal additional effort and simultaneously seize the opportunity to set up our supplier management digitally and strategically."

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The LkSG as an Opportunity for Procurement

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Mr. Schlotter wanted to fulfill the LkSG requirements quickly & easily, while being 100% compliant to avoid risking penalties of up to 2% of revenue under any circumstances. At the same time, as few employee and especially heavily utilized IT resources as possible should be required. As a rapidly growing company, SW wanted to make supplier management more strategic anyway – automating administrative queries & compliance and managing suppliers in a more data-driven way. The LkSG was thus also an opportunity: The topic is relevant for the entire company, especially the executive board, and must be implemented. From a procurement perspective, Mr. Schlotter was able to use Tacto to leverage the challenge to easily fulfill the regulatory requirements while simultaneously further systematizing supplier management.

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"Without a tool, we would have had to hire additional personnel for the LkSG topic. At the same time, I didn't want to introduce yet another point solution just for the LkSG, since we have automation potential across numerous supplier processes and want to position ourselves more strategically overall."

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It was also important for Mr. Schlotter that SW presents itself professionally to suppliers with one face ("One Face to the Supplier") to increase supplier acceptance. That is, he didn't want one tool for the LkSG, one for the Minimum Wage Act, and one for supplier evaluation – no supplier in the mid-market would go along with that, IT would face enormous effort, and employees would need to be trained on everything.

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3 Needs That SW Wanted to Address

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Fast & efficient fulfillment of LkSG requirements while being 100% compliant

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Avoiding an LkSG point solution, instead leveraging the full automation potential across numerous supplier processes & thus also presenting one face to suppliers to increase acceptance on the supplier side

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No need to allocate new capacity to fulfill LkSG requirements

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‍Tacto as THE LkSG Solution for Mid-Sized Companies

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Tacto was therefore a perfect fit for Mr. Schlotter's requirements: The supplier base could be loaded into the tool with an IT effort of less than 2 days, and then procurement could manage the tool themselves. The LkSG can be fully covered – from organizational requirements through risk management to documentation – and SW has hardly any additional effort, since most process steps are automated and the useful information (e.g., risk analyses) is reused internally (e.g., for management reports).

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"We looked at several ESG and LkSG solutions on the market. The problem was always that the systems are designed for corporate requirements – huge IT, complex structures, and an entire department that does nothing but risk analyses all day. At the same time, as a mid-sized company, supplier relationships are significantly more partnership-oriented, meaning acceptance is very important. After our analysis, Tacto was the only provider that fits the requirements of mid-sized companies and is simultaneously a long-term partner for our digitization strategy in procurement."

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The supplier database and cross-provider acceptance of certifications and documents also significantly reduce the effort for suppliers. The tool is modular, so you can start with the LkSG but simultaneously map all other relevant supplier processes over time – without data or process gaps. At the same time, Tacto's mid-market focus offers major advantages for SW: Simple processes for employees, minimal IT effort, and above all high supplier acceptance.

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"The tool offers a comprehensive solution that covers the LkSG requirements and enables us to gradually make procurement more strategic. Our suppliers accept the tool well, as Tacto prioritizes minimizing effort for suppliers. It's the first tool where my employees asked me for access, and even our IT is impressed by the project speed – there's no better praise than that."

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A dedicated customer advisor and LkSG experts are available to SW at all times. As a partner, Tacto also offers best practices, experts, and procurement knowledge in the Tacto Community – from mid-sized companies for mid-sized companies. Another positive effect of introducing Tacto is the increased status and professionalism of procurement. Mr. Schlotter uses the clear management reports both with the executive board and during supplier visits. SW has thus, together with Tacto, leveraged the LkSG topic as an opportunity to position procurement for the future.

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3 Successes with Tacto:

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Comprehensive solution that covers LkSG requirements and gradually enables more strategic procurement

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Very minimal IT effort (less than 2 days) to load the entire supplier base into the tool

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High acceptance of the tool among procurement employees and suppliers through intuitive usability

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Learn how SW can easily & intuitively fulfill the requirements of the LkSG with the help of Tacto while strategically managing supplier relationships.