Germany’s notorious hidden champions have huge problems. And a software startup from Munich is now rushing to help them.
What’s going on: Almost all manufacturing companies, especially those referred to when the conspiratorial “backbone of the German economy” is mentioned, have serious problems with their supply chains. There are several reasons for this: for example, the Ukraine war and economic sanctions against Russia. The corona pandemic is another reason. If factories in China close for several weeks, a port is closed during a lockdown, or many workers in the production of raw materials are absent due to illness, then parts are missing in Germany that local industry wants to use to make goods. According to the ifo institute, in 2021 alone supply chain difficulties caused more than 38 billion euros of damage to the German economy.
But supply chains are also a pain point in manufacturing for other reasons. First: It’s about a lot of money. Companies spend about 50 to 70 percent of their turnover on purchased parts, that is, items that the companies do not manufacture themselves. Second: Politicians are looking more closely at what happens along the supply chain and making buyers more responsible, for example in terms of environmental protection and sustainability. Up to 50 percent of releases often occur at this point. And from 2023, the EU Supply Chain Law will also oblige companies to exercise human rights due diligence throughout their supply chains.
A medium-sized German company, more than a thousand suppliers worldwide
In short: the more companies that produce small individual parts buy regionally or globally, the more suppliers they have in the most distant places in the world, the more difficult it becomes to get all these long supply chains under control with the necessary care. Medium-sized companies in Germany that manufacture modern systems or complex machines, for example, have hundreds, often even thousands, of suppliers for all those specific small and large individual parts that they do not manufacture themselves.
And now Johannes Groll, André Petry and Nico Bentenrieder, the founders of Tacto, come into play. They say: We’ll take care of that. “We are working on building sustainable supply chains,” explains co-founder Petry to Gründerszene. “This is how we help midsize companies to manage their suppliers strategically, digitally and more sustainably.” The key is the software. You could also say artificial intelligence. Create transparency for all purchasing activities of a midsize business. Show potential savings and draw attention to impending bottlenecks and risks, and automate sourcing and supplier management tasks.
In concrete terms, this is how it works: In the first step, the system records all the data that a company has internally about its articles, materials, spare parts and suppliers. She analyzes them and prepares them. The AI then makes suggestions on where improvements can be made. If, for example, you see an increase in the price of a certain part, the responsible buyer receives a notification. You can then use the software to contact and onboard alternate vendors for that part. The AI also keeps an eye on what parts might be in short supply and reports it in time before the company hits a supply bottleneck.
Excel, phone and email
All of this is newer to midsize purchases than you think. The “Purchasing Barometer for SMEs” published in 2021 by the Federal Association for Materials Management, Purchasing and Logistics shows that a good quarter of small and medium-sized businesses manage their purchasing data with nothing more than Excel. Stored locally on the buyer’s company computer. Providers are contacted individually by email. As a result, order and invoice approvals, as you may have guessed, are also done by hand.
Many midsize companies have long been aware that this is not ideal and that there is urgent potential for improvement, says Tacto co-founder Petry: “Digitalization has come as a top priority in midsize companies and fear of software projects have Most of them are also aware that the computer is not the enemy of a safe workplace, but a necessary aid.”We are more of a support tool than streamlining something,” says Petry.This helps many companies in view of the shortage of qualified workers.
Bentenrieder, Groll and Petry met through the Technical University of Munich and built their startup in close collaboration with their clients. From the beginning, the team kept in touch with companies like Schwäbische Werkzeugmaschinen, had their buyers test prototypes, listened to what they needed to switch from all Excel to an all-in-one system, complete digitization of the buying process. It was not only at this point that Petry learned to appreciate midsize companies as clients: “Here you work with family entrepreneurs who understand very well how startups work. If you convince them, a decision is made overnight.”
The competition never sleeps
Now, the issue of digitizing supply chains is not new. Other start-ups are already working on solutions: Stuttgart-based manufacturing platform Laserhub promises to rapidly accelerate materials ordering. Companies search for a specific part on the platform, and offers from potential suppliers with price and delivery time appear in real time. In a 2020 Series A round, the company Acton Capital, Point Nine and Project A, among others, participated. The Würzburg startup Scoutbee, which sees itself as an AI-backed sourcing search, sees itself as a leader, raising a whopping €54 million from investors like Atomico and Lakestar in early 2020.
Munich Touch has now announced that it has received €5.3 million from investors in a seed funding round. The round was led by Cherry Ventures together with UVC Partners and Visionaries Club and supported by business angels Hanno Renner, founder of Personio, Johannes Reck, founder of Getyourguide, Forto co-founder Michael Wax and Helsing boss, Torsten Reil.