SAP Procurement Process


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  • Instructions:Purpose: Introduce the key issues facing procurement LOB as a result of macro effects in the marketSummary:Difficult economyToday, we are seeing unprecedented levels of volatility and uncertainty in economies worldwide. Most financial indexes are down 40-50% from their peaks. In January 2008, the Dow Jones Industrial Average was at 12,735 (from an all time high of 14,279 in October 2007). On New Years Eve of the same year, we had reached the lows of 8,842, a drop of almost 40%!. Growing importance of supplier risk from the extended global supply baseThe world has rapidly changed to a single global integrated market. This integration is ushered in the importance of supply base for most companies becoming more global. This trend has produced an intense global competitive environment with companies simultaneously facing low-cost and high-end niche competitors. For example IBM has relocated its supply chain headquarters from the US to China so that all the company's global procurement operations will now be run from Shenzen. IBM hopes the relocation will allow it to capitalize on further purchasing opportunities in China and reducing supply riskRegulatory complianceThe importance of meeting regulatory compliance continues to be a driving issue for most companies locally, regionally and globally. Regulations like SOX, BASEL II, ROHS (Restriction of Hazardous Substances). Ensuring that new regulatory requirements are not a burden but also an opportunity to differentiate and provide organizational and business process improvement both internally and when working with suppliers as well as customersDeclining Budget and well as availability of resourcesBudgets continue to decline – do less with more and there is greater need to more efficient across the internal and external business processes. More and more important to distribute the transactional elements of procurement to employee base to drive their own procurement activities – procurement of office supplies, mobile phones, travel etc. This results in procurement professionals able to focus on more strategic activities focused on cost management, strategic sourcing etc. But there is scarce availability of resources that can do these more strategic areas.Increasing Focus on Sustainability and Green ProcurementThe importance of sustantOnce regarded as less important, the growing importance of sustainability is rapidly rewriting the rules for business, suppliers and in particularly Procurement. Procurement is being asked to be included as part of their source to pay process, in particular in supplier engagement and performance, contract enforcement and in delivering on cost savings KPIs.
  • Instructions:Purpose: Make the trends and implications relevant to the CPO – Procurement LOB and direct towards your prospect/ customer. Typical CPO – Procurement LOB Questions:How do we most effectively manage and reduce costs?How do we increase spend under management?How do we respond to increasingly rapid demand changes?How do we manage suppliers performance and risk? How do we measure compliance – regulatory and savings?How do we meet the growing need to include sustainability as part of our processes?How do we grow our talent from operational to strategic?
  • Better loo
  • 3 process then it is detailed in 6 stepsAutomates the contract creation cycle from draft to reviews and approvalsIncludes contract authoring with clause and template librariesCreates a contract repository with access-controlled search and reportingIncludes standard integration with SAP ERP functionality for materials management (MM) for procurement contract complianceDeep bi-directional integration within the source to contract processDrives rapid time to value via on-demand deployment and integration into ERP
  • SAP Procurement Process

    1. 1. © 2013 SAP AG. All rights reserved. 1CustomerMoving to an Efficient and IntegratedProcurement Process…its all in the cloud !
    2. 2. © 2013 SAP AG. All rights reserved. 2CustomerTopics• Introduction – SAP Ariba• Strategic Issues facing procurement• How ECO companies are using technology to …..– Improve Spend Visibility / Reduce Costs– Identify new suppliers and manage the registration / prequalification process– Improve Supplier Collaboration using Business network– Manage Contracts to improve compliance– Introduce Self Service Procurement for Indirect Materials using CatalogsCustomer Case Studies
    3. 3. © 2013 SAP AG. All rights reserved. 3CustomerIntroduction – SAP acquired Ariba in 201233Global Locations 25 locations in 21 countrieson 5 continents includingUAE 2,400+ employeesTechnology Coverage $340B+ passed last FY 4M+ desktops using Ariba applications 500+ categories sourced through Ariba Top companies plugging leakagesMultiple Languages Speak over 35 languages Global support centers in USEurope and IndiaLargest Suppliers Database 1M + registered suppliers coveringover 120 countries One of every three projects involvesglobal supply base 400 billion USD PO on ASN 210 billion USD Invoices on ASNDubai© 2012 Ariba, Inc. All rights reserved.
    4. 4. © 2013 SAP AG. All rights reserved. 4RetailElectronicsTechnologyLifeSciencesSoftwareConsumerGoodsFinancialServicesManufacturingEnergyTelecom/ InfrastructureGlobal Companies leverage SAP - Ariba to achieve Sustainable savings
    5. 5. © 2013 SAP AG. All rights reserved. 5SAP – Ariba- Customers in Projects, Real Estate & EPC
    6. 6. Strategic Issues facing procurement
    7. 7. © 2013 SAP AG. All rights reserved. 7Strategic issues facing procurement / ConstructionIndustry Difficult economy ( = fewerOpportunities ) and the growingvolatility of prices Greater Competition : Prices are drivendown as companies bid lower in anattempt to secure the work Cash flow is becoming moreproblematic as companies hold on tocash for as long as possible beforemaking payment Growing importance of supplier riskfrom the extended global supply base Declining budget as well as availabilityof skilled resources Greater global and regional regulatorypressures
    8. 8. © 2013 SAP AG. All rights reserved. 8Typical CPO Challenges How do we most effectively manage and reduce costs? How to we identify and source from the right suppliers ? How to we ensure that suppliers deliver on time and as perthe project deadlines ? How do we increase spend under management? How do we respond to increasingly rapid demand changes? How do we manage suppliers performance and risk? How do we improve our procurement processes? How do we measure compliance – regulatory and savings?“Costs Savings, Efficiencies, and Impact”
    9. 9. © 2013 SAP AG. All rights reserved. 9CustomerIneffective & Inflexible Source to Pay ProcessResult in Inability to Deliver Cost SavingsNone to Limited SpendVisibility Inability to extract and aggregate spend data Difficulty to measure and manage spend data Lack of insight into savings opportunities, trendsPoor Ability to DeliverNegotiated Cost Savings Lack of formalized sourcing practices Limited sourcing tools or analysis capabilities Long, poorly managed cycle timesIneffective StrategicSupplier Management Distributed supplierinformation across multiple systems Limited supplier performance andmanagement process Lack of ability to identify or manage riskHigh Transaction Costs,Inability to Deliver Savings Many disparate systems that generate spend Non-standardized processes, compliance to rulesand policies Poor user adoptionIneffective ContractManagement Lack of centralized managementleads to savings leakage Difficult to ensure contractcompliance No single process for contractmanagementCPOLegalLegalSourcingProfessionalsSourcingProfessionalsKey CategoryStakeholdersProcurementManagement
    10. 10. © 2013 SAP AG. All rights reserved. 10CustomerEffective and Flexible Source to Pay ProcessResults in Maximum Cost SavingsCPOABCABCSourcingProfessionalsSourcingProfessionalsProcurementManagementLegalLegalKey CategoryStakeholdersCPODeliver Insightful SpendPerformance Management Enables spend data extraction & aggregation from back-ends Provides Spend data normalization and classification Quickly identifies savings opportunitiesEnsures SustainableSourcing Processes Delivers maximized negotiable savings Manages the strategic and operating sourcing processes Provides analysis, project management, RFx, auctionEffective StrategicSupplier Management Enables the centralization of supplierinformation Provides supplier end to end lifecyclemanagement Minimizes supplier riskEfficient, StreamlinedOperational Procurement Reduces operational costs and maximize realizable savings Automates the entire procure to pay process Delivers compliance, supplier collaboration, and adoptionOptimize Contract LifecycleManagement Delivers efficiency, visibility & controlof contracts Automates the contract creation andmanagement cycles Enables full contract compliance
    11. 11. © 2013 SAP AG. All rights reserved. 11Customer11• A UK based leading commercial organization was tenderingits requirements for property contractors for various ad-hocprojects to be conducted in a two-year time frame.• The total estimated value was 60 million GBP spread overtwo years and over some 120 projects varying in size• Client goals were to achieve cost savings and consolidatesupply base by selecting a panel of preferred contractors.• Long term goals included improvement and standardizationof service.• 45 pre-qualified suppliers were invited to bid.Strategy• Aggregate bidding• Event was structured in nine lots; the first 8 split by regionand by project size. Lot 9 was an aggregate lotResult• 407 bids submitted• 20% savings ( GBP 12 M )Case Study : UK Property Contractors
    12. 12. © 2013 SAP AG. All rights reserved. 12• Transparency into thenegotiation process• Focus on laying outcomparative criteriaclearly before bidding /negotiations / responsesare received• Category managementto define sourcingprocess• Over 48 auctioningformatsSAP Ariba offers streamlining of Source to Pay ProcessElectronicInvoicingVisibility ProcurementSourcing• Monitor Performance &Compliance• Transparency into‘buyer’ performance• Visibility by Commodity• Strategic decisionmaking information byPurchasing Behavior• Identify opportunitiesand prioritize spend• Can work on top ofexisting ERP or Aribasystem• Enable Catalog and noncatalog based buying• Ensure purchasing ofPunchout, Dynamic,rate card and contractcatalogs• Ensure contractcompliance• Reduce Maverickbuying• Leakages plugged onvolume discounts• Drive policy complianceand consumptioncontrol• Reduce invoicing errors• Reduce cycle time forinvoice processing• Compliance againstcontracts for non-POspend• Ensure Transparentapproval and paymentprocessSupplier NetworkSupplier DiscoveryContracts• Clause Library• Electronic Workflow for approvals• ElectronicRepository• Seamless transferand communicationwith outside parties• Achieve globalcontract visibility• All Types ofcontracts
    13. 13. How does technology help to …Improve Spend Visibility
    14. 14. © 2013 SAP AG. All rights reserved. 14CustomerSpend VisibilityThree Key ComponentsIdentifyOpportunityDevelopStrategySource &NegotiateImplementContract& ExecuteMonitor &ManageInvoice& Pay Spend Visibility1 ProcessVisibility2 PerformanceVisibility3WHAT is our spend?by whomwhich suppliersWhich categoriesWhich projects ?HOW do we spend?which processesare they efficient WHO is performing?what are the goalsare they being met?
    15. 15. © 2013 SAP AG. All rights reserved. 15Customer
    16. 16. © 2013 SAP AG. All rights reserved. 16CustomerExecutive DashboardSupplierPerformanceSourcingActivityPurchasingActivityProductivityMeasuresContractingActivity
    17. 17. © 2013 SAP AG. All rights reserved. 17Customer Spend volume withsuppliers at risk Analyze categoryand item exposureto risk Quantify spendvolume and buyinglocations at riskVisibility into supplier performance
    18. 18. © 2013 SAP AG. All rights reserved. 18CustomerUsing the technology to generate Executive InsightAutomated , quality data to drive performance ( on mobile devices )
    19. 19. How does technology help to …Cost reduction
    20. 20. © 2013 SAP AG. All rights reserved. 20CustomerRecorded Event of an Online Negotiation
    21. 21. © 2013 SAP AG. All rights reserved. 21CustomerSearch, Report,And Analyze-Graphical Role Based Dashboards-All Fields are Searchable & Reportable-Ad-Hoc & Scheduling FeaturesRFx Events(Sealed Bid, Reverse Auction, RFP/RFQ, Negotiation)- Gathering Bids from Simple to Complex-Bid console, audit, messaging-Scoring, Grading, Total Cost Modeling- Bid Protection and Market Feedback rulesSupplier QualificationAnd Identification(Supplier Search)- Identify Acceptable Suppliers- Determine Supplier Capabilities- Supplier Profile Analysis- Ariba Network DiscoveryProjectCreation-Identify Key Stakeholders-Setup Project Milestones-Create TimelinesDecision Analysis(Optimization and Award)-Constraint-based Optimization-Evaluate Price and Performance-Explore Potential Award Scenarios-Generate Award & Create ContractSourcing Overview
    22. 22. © 2013 SAP AG. All rights reserved. 22Customers use SAP - Ariba in managing the keyconstruction related categories0 1000 2000 3000 4000 5000 6000In Mn USDSite ServicesDemolitionWaste DisposalDesign ServicesEquipmentsDG SetsM echanical Sub contractsElectrical Sub ContractsEquipment InstallationSteelPipingScaffoldingHVAC ContractsCategory Experience- Construction RelatedAsiaGlobal
    23. 23. © 2013 SAP AG. All rights reserved. 23CustomerDelivering significant benefits across categoriesSavings are shown in bracketsIllustrative Categories
    24. 24. © 2013 Ariba an SAP CompanyA Sourcing DashboardMeasure and analyse thecompany spend=Reduce costs, improve quality,mitigate risks and drivecontinuous improvementsEnabled by common, consistent set ofprocesses that focus resources, engagecompany stakeholders, and determinethe total cost of ownership of supplyrelationships, products, and entire supplychains.
    25. 25. © 2013 SAP AG. All rights reserved. 25CustomerSavings Potential across various Indirect Categories using
    26. 26. How does SAP – Ariba BusinessNetwork help to …Find new and capable suppliers /Supplier Collaboration
    27. 27. © 2013 SAP AG. All rights reserved. 27Customer“Other”Buyers SuppliersThe SAP - Ariba Business Network is the leading Business NetworkNearly 1 Million partners use the Ariba Network for ~$400 billion spendPartner andEcosystem SolutionsAn SAP CompanyAriba Network~1 million trading partnersacross all industries40+ millionPurchase Orders60+ million Invoices~$400 billion in spend142 countries72 currencies40 Invoice compliantcountriesEDIEmailHTMLcXMLAS2PaperSmartPDFCSVxCBL
    28. 28. © 2013 SAP AG. All rights reserved. 28CustomerCreate a summary ofyour needPublish on AribaDiscoveryRelevant suppliers willbe notifiedReview & Select newsuppliersInvite them to yourSOURCING projectFind new Suppliers and Post & Search to the ENTIREnetwork – Welcome to SAP Ariba Discovery !12k lightbulbsfor week 56AribaSourcingCheck it out!http://discovery.ariba.comSAP AribaDiscoveryHOT
    29. 29. © 2013 SAP AG. All rights reserved. 29Customer© 2010 Ariba, Inc. All rights reserved.How Smart Invoicing Works The best invoice solution is the one that is TOUCHLESS! Ariba Smart Invoicing drives auto post rates of 98% compared toless than 60% with other solutionsFaster billing andreceivablesprocessing atlower costSupplierSupplierSupplierSupplierSupplierInvoiceCustomerP2PAPNetworkAdapter98%...Touchless Lower AP Cost Faster Cycles Lower RiskAccountCodingContract &ReceiptMatchPrice & TaxComplianceGST/VATCompliancePO & PO-Line MatchBuyer Match(non PO)UOM & SKUChangeCurrencyMatchSub Total& TotalAmountPO-LineChangeLine & TotalConsumptionThresholdsShipping &TaxThresholdsInvoiceNumberBill To /Ship ToPONumberRequestor(Non PO)InvoiceDateVAT / GSTIDsPOPay
    30. 30. How does technology help to …Supplier Information and PerformanceManagement
    31. 31. © 2013 SAP AG. All rights reserved. 31CustomerUnified Best-in-Class Solution for ALL Aspects ofSupplier and Customer ManagementPartnerPartner PartnerPartnerBuyerBuyerBuyerBuyerSupplierCustomerSupplierCustomerInformation Management• Profile/Certificate Mgmt• On-Boarding• Vendor Master Mgmt• Supplier DiscoveryPerformance Management• Scorecards• Data collection• Analytical Reporting• Process and Program MgmtRisk Management• Risk Assessment• Information Enrichment• Analytical Reporting• Diversity• CSR / SustainabilityAccording to the Analysts:• “Remarkable demonstration of market understanding and marketing execution in2009 for this suite [Supply Base Management]”• - Gartner Research, Sourcing MQ, Feb. 2010Supplier InfoOrg hierarchyUCC filingsLiensLawsuitsFinancialsDiversityCSR / GreenRiskRegulatory InfoOFAC / SDNDenied Party ListsEPA / OSHALawsuitsBusiness events
    32. 32. © 2013 SAP AG. All rights reserved. 32CustomerSupplier LifecycleSupplierRegistrationSupplierQualificationSupplierEvaluationSupplier Portfolio& RiskSupplier OrderCollaboration (UIIntegration)SupplierDevelopmentSupplierPhase-out Continuous innovationRegistration/Qualification(e.g. additional questiontypes) Supplier Evaluation (eventtriggered and scheduled)
    33. 33. © 2013 SAP AG. All rights reserved. 33CustomerSupplier RegistrationKey Features
    34. 34. © 2013 SAP AG. All rights reserved. 34CustomerSupplier Portfolio ManagementKey Features
    35. 35. How does technology help to …Contract Management
    36. 36. © 2013 SAP AG. All rights reserved. 36CustomerSAP Contract Lifecycle ManagementSupports the Entire Contract Lifecycle
    37. 37. © 2013 SAP AG. All rights reserved. 37CustomerContract Performance Dashboard – Agreements OverviewContract Visibility Intuitive contract dashboardwith powerful searchfunctionality. Delivered with preconfiguredreports like ‘Top 10 Agreementsby Agreement Value’ and ‘Top10 Product Categories’ Search Result with header andline item information
    38. 38. © 2013 SAP AG. All rights reserved. 38CustomerContract Performance Dashboard – Expiring AgreementsContract Visibility Visibility into expiringagreements to supportworkload capacity planning Search Result with detailedheader and line iteminformation
    39. 39. How does technology help to …Enable Self Service Procurementusing Catalogs
    40. 40. © 2013 SAP AG. All rights reserved.Enhanced ErgonomicsConfigurable Smart FormsIn Catalogue Free TextServices FormsContracts in CatalogueWhat more do you get with the Cloud Catalogue?
    41. 41. Case Studies
    42. 42. © 2013 SAP AG. All rights reserved. 42Customer42• Germany Based parking garage turn key constructionproject• The budget was a round 11 million Euros.• 10 pre-qualified German based suppliers were invited tobid. Supplier qualification was based on them beinggeneral contractors with garage constructionexperience.• Key project objectives:•Reduce negotiation time•Reduce Costs• Technical Advisory via an independent planning office ofconsulting engineers• The buyer awarded the tender 72h following closure ofthe Competitive Online EventStrategy• Face-to-Face clarification meetings were held withevery participating supplier prior to the CompetitiveOnline Event• Rank only transformation feedbackResult• 204 bids placed into the market• 10% savings against the lowest offline quoteMulti-Storey Car Park
    43. 43. © 2013 SAP AG. All rights reserved. 43CustomerIndentified Savings of over 10% Infrastructure Contract15 participating suppliers placed 231 bids in the event
    44. 44. Thank you