Modern ERP system for waste management – Case Lakeuden Etappi, joint procurement of five waste management centers

BACKGROUND INFORMATION

Procurer

Five waste management centers: Lakeuden Etappi Oy and mutual contract between Lounais-Suomen Jätehuolto Oy, Rosk’n Roll Oy, Pirkanmaan Jätehuolto Oy and Vestia Oy.

Object of the procurement

MaterialPort system: digitalization of the waste management centers processes and customer interface including systems development, implementation, maintenance and productization. The new system is used to receive and register incoming waste, and to efficiently administrate and control waste to and from storage places. 

Procurement value 

Procurement value is 300 000 €, that consists of participant discussions and preparation. 

Procurement background and objective

The different procurement entities had different type of weighing systems and solutions in use for the waste management. From these systems, the gathered information was used as a basis for the invoices. However, this information was no sufficient to manage the waste. The objective of the new system was to produce real time information that would help in the process management and for example lessen manual reporting, increase predictability and help in the work between different entities. The objective was also to create a system that can be used generally in the industry. Furthermore, the objective was to give customers the possibility to announce their cargo in advance, the possibility to fill out transformation documents digitally, to offer automated weighing systems, to make independent weighing via mobile possible and to create a possibility to view cargo later on.

Experts involved in the procurement     

There was continuous communication and collaboration between the waste management centers. The waste management centers found that they had many shared problems, the so-called bottlenecks were similar and challenges of the online systems were generally known. The procurement group was formed from companies that were different sizes and had different working methods. Hence, the group had a proficient knowledge and technical skills.

Outside the procurement group, a company with ICT knowledge was chosen to administrate the project and to work as a link between the procurer and the supplier. 

Business Finland’s funding for Innovative Public Procurement benefited the procurement. 

Basis for the selection of the innovation partner 

The companies that were part of the procurement process decided that innovation partnership process was the best procurement process for this case because there was no existing system in the markets that matched the objectives. In addition, the final properties of the system could not be defined in advance and the properties would be defined during the process. A precise definition of the properties in advance could have potentially limit some necessary properties and working in a partnership ensured that the system would benefit from different skills even before it was officially in use. 

PROCUREMENT PROCESS 

Procurement preparation: defining needs

The first definition of the procurement took about a year during which the procurement entities met regularly. As a result, needs and objectives of the procurement were decided. 

The object was an efficient stock control system with lower environment burden, improved services for the customers and to ease the execution of waste management’s legal obligations. For example, a transformation document for certain wastes can be filled digitally with the new system. 

For the supplier, which was part of the innovation partnership, was given an opportunity to gain a new commercial product with a possibility to expand. In this way, the overall level of knowledge and skills in the industry is advancing.

Competitive tendering of the innovation partnership: negotiated procedure

The contract notice was published on 14th of July 2018. There were ten responses to the notice and all of them fulfilled the eligibility criteria’s. Negotiations with the suppliers were held during which the procurement entities got to know different working methods of the suppliers and the call for tenders became more precise. In the end, four suppliers left tenders. The criteria was 40% quality and 60% life cycle costs.  

Innovation partnership procedure: development period   

The procurement decision was made on third of December 2018 and the procurement process began in the beginning of 2019. 

The supplier was chosen to be Elenium Oy. The procurement group and the supplier held an opening meet where the partners went through different actions and decided how to proceed.  After this, the supplier split the agreed actions to development periods and began working with them. Whenever the development period changed the supplier presented to the procurement group what was achieved and held a briefing about the next development period. 

During the development, the name MaterialPort was chosen for the operation management system. Read more about it from here: https://materialport.com/ 

Innovation Partnership: delivery period

A test version of the operations management system was in pilot period in the summer of 2020. In the beginning, the old systems were in use side by side with the new one. The complete transformation to the new system began in the beginning of 2021.  

As a procurement process, the innovation partnership was successful and suited well to developing the operations management system. It was useful to have several waste management companies to be part of the project and because of this; many surprising things and different ways of working were noticed. In addition, the supplier brought its own views to the process and the group found solutions by learning from each other. Due to this, the system has developed to be suitable for multiple users. 

From the suppliers point of view the developing and dialogue worked well. The procurement group has shown a united front to the supplier and the group had already united view of the objectives in the tendering period. 

Each member of the procurement group received a basic solutions package, as requested in the contract notice, and it is possible to integrate further properties into the basic solutions. The procurement organizations began using the new system in 2020, all in their own timelines.

Conditions of Contract

The intellectual property rights and the supplier’s security deposit stays with the procurer until the system is ready and working. 

The point of and as well as incentive to the supplier is to develop a commercial product as a part of the innovation partnership process. The supplier may use the development process as a reference. Furthermore, the procurement group has committed to be part of further development processes. 

From the suppliers point of view the innovation partnership process enabled a transformation to a new industry and a possibility to build a new product. This increased the allure to take part in the call for tenders. However, the innovation partnership process requires more background work from the suppliers. For example, mapping of markets and believing in the market potential of the new product. 

Possible challenges in the process

There were no so-called bottlenecks. The preconditions were defined already in the procurement period documents. The preconditions had different definitions and legal obligations that offered some limitations to further development. Challenge in the tendering period was that the tenders were quite close to each other. The situation would have been easier if one supplier would have clearly stood out. 

However, there were differences in the pricing of the contracts that told the procurement group which supplier had assimilated the model of co-operation. In MaterialPort the living cycle cost is defined by procurement + 10 years maintenance with a monthly payment. Furthermore, the quality points affected the overall price. In this project, this pricing system worked but in other projects, a price range would be worth considering. 

Benefits/Results/Effects

1. Achieving objectives 

• The procurement process has advanced well and the process suited well to this type of procurement. In the development work, naturally came up things that could not have been predicted. The group has invested time to solve these challenges in order to achieve its objectives. The system is in test use and the development work is continuing. At the moment it looks like objectives will be achieved and the system might even exceed expectations.

2. Effects of the procurement

Effects on Society:

• The procurer will get more and better information that is needed for the waste management in a more efficient way with lower burden to the environment. The customer will get solutions that are better suited, the developed system can be expanded, and therefore make the entire industry work more efficiently. 

Effects on business and markets:

• The new system offers need based, efficient solutions to the industries actors. The program supplier was able to develop a commercial product to the markets and development work continues in co-operation with the procurement group. The supplier is cultivating the product with the expansion of properties and building a product family around it. In addition to national markets, the system has possible demand in the international markets as well. The innovation partnership process offers the supplier an opportunity to co-develop with the procurer its business and product assortment to better respond to the existing needs. 

Sharing knowledge

There is many uncertainties within the innovation partnership process. It is important to choose good partners and good communication and active participation is essential to succeed. The participants of the procurement process need to be ready to share information and to be open to new solutions. It is better to approve little slips in the schedule in order to solve surprising challenges rather than to move forward with an incomplete solution. 

In the procurement of MaterialPort system, the contract notice was done meticulously which helped in the making of the tenders and was helpful in the development period. A successful innovation partnership process requires commitment from both sides to advance the procurement and to solve the problems on the way.

Contact information

Ilkka Letonsaari, 040 774 8522, ilkka.letonsaari(at)etappi.com  

Joonas Jokinen, Elenium Oy, 0400 270 480, joonas.jokinen(at)elenium.fi