Procurement Transformation with S/4 HANA Sourcing and Procurement
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Kai Finck, SAP / October 26, 2016
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Procurement Transformation with S/4 HANA Sourcing and Procurement
- 1. Procurement Transformation with S/4 HANA Sourcing and Procurement Kai Finck, SAP / October 26, 2016
- 2. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 3Public Megatrends and innovations impacting the procurement function of the future Industry 4.0 Internet of Things Digital business TodayTomorrow Business value of procurement Tasks that are operative, tactical, and strategic Key KPI: Savings Business value – “Value Creation Officer” Supplier innovations Supplier risk and performance Sequential processing of purchase requisitions and POs 3D printing Warehouse ordering automation Networks and marketplaces B2C B2B connected commerce Paper-based POs and goods receipt and invoices Scanning Lights-out shared services with end-to- end automation Spot-buy integration in catalogs
- 3. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 4Public Value map Guided User Buying Collaborative Sourcing and Contract Mgmt. Operational Purchasing Supplier Management Inventory and Basic Warehouse Mgmt. External Workforce Mgmt. Invoice and Payables Mgmt. Supplier Collaboration with Ariba Network Procurement Analytics
- 4. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 5Public The following solutions are widely deployed and support the procurement function of our customers: SAP Supplier Relationship Management SAP ERP application, the materials management component SAP Sourcing SAP Contract Lifecycle Management SAP Supplier Lifecycle Management SAP Ariba solutions Business intelligence offerings Current solution footprint
- 5. SUPPLIERS Fulfill SettleMarket Buyer management BUYERS Procure SettleSource Supplier management Integration to SAP and third-party solutions, security, open platform SAP Ariba solutions in the context of digital transformation Suppliers & networks Customer experience Workforce engagement loT & big data Security SAP HANA Platform Digital Core SPENDCATEGORIES Direct Indirect and MRO Contingent labor Travel Ariba Network
- 6. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 7Public SAP S/4HANA: Our next-generation business suite SAP S/4HANA Cloud SAP S/4HANA SAP S/4HANA software applications and extensions instant insight-driven applications for all lines of business and industries SAP HANA platform in-memory platform for all data SAP Fiori UX role-based user experience for all devices SAP Ariba solutions Concur solutions SAP Fieldglass solutions SAP Hybris solutions SAP SuccessFactors solutions Native integration for hybrid scenarios People Devices Big Data Internet of Things Business networks Social networks
- 8. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 9Public Ariba Network As the Backbone for Digital Supplier Collaboration
- 9. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 10Public Supplier collaboration with Ariba Network Recommendation For both direct and indirect goods and services, customers should connect to Ariba Network for extending operational procurement executed in: • SAP ERP (materials management) • SAP SRM • SAP S/4HANA • Third-party solutions Beyond pure purchase order and invoice collaboration, customers can use Ariba Collaborative Supply Chain on top for exchanging further message types such as demand forecasts, schedule agreements, and component inventory and consumption. Your Company Your company Your systems Your trading partners million companies 2.3+ trillion in annual commerce €1 million documents annually (PO + invoices) 130+
- 10. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 11Public SAP Ariba solutions offer suppliers choice on ways to collaborate digitally Portal: File upload or PO-Flip System to system Interactive e-mail order and invoices Full transaction set Ariba Network portal customer PO, OC, INV via e-mail only Full transaction set, EDI, cXML Ariba Network portal customer Light enablement Supplier self- enablement Enablement services Maturity Value
- 11. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 12Public E-invoicing compliance for more than 65 countries Supplier enablement delivered by more than 550 experts around the globe Automation of payments, cash collection, and dispute management Supply chain finance as the next evolution of supplier collaboration Strengthen the relationship with your suppliers
- 12. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 13Public Collaborative Sourcing and Contract Management
- 13. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 14Public Collaborative sourcing and contract management Ariba Sourcing Key capabilities State-of the-art dashboards Powerful universal search Sourcing program and category management RFx and auction management Decision support and optimization Savings pipeline and tracking Integrated customer support, sourcing support desk, event- day management, and BPC expertise services
- 14. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 15Public Collaborative sourcing and contract management Ariba Contract Management Key capabilities Contract creation Repository, reports, and alerts Compliance and usage Performance and audit management on contracts Integration with back-end systems for automated P2P usage of agreements E-signatures through DocuSign and Adobe Document Cloud eSign services L1 customer support, BPC expertise, and setup included in subscription Integration to sourcing and
- 15. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 16Public Collaborative sourcing and contract management Integration and recommendation SAP Ariba solutions SAP S/4HANA Enable sourcing requisition Award Initiate request for quotation Reward quote Create purchase order Recommendation Customers should adopt Ariba Collaborative Sourcing (including contracts) and replace current sourcing solutions that are part of SAP SRM or SAP Sourcing applications. Customers in manufacturing and consumer industries should evaluate direct materials sourcing in SAP Ariba solutions. Operational contract management will be available in SAP S/4HANA.
- 16. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 17Public Operational Purchasing for Indirect Materials
- 17. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 18Public Operational purchasing Indirect materials Recommendation for on premise In cases where basic indirect procurement capabilities are sufficient, customers should move to SAP S/4HANA Enterprise Management. Customers should use the Ariba Procurement Content solution for catalog provisioning and Ariba Network for transaction collaboration with suppliers. Recommendation for cloud In cases where indirect spend is a significant cost driver, customers should consider the Ariba Procure-to-Order and Ariba Procure-to-Pay solutions, replacing indirect procurement currently implemented with SAP SRM or SAP ERP (materials management).
- 18. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 19Public Operational purchasing Catalog shopping in SAP S/4HANA Enterprise ManagementElegant and intuitive user interface Support for ordering materials and services or creating free text requirements with a consumer-grade user experience Highly integrated requesting process with the SAP S/4HANA software process support and existing master data One user experience for the whole process, including requesting, reviewing, receiving, and returning
- 19. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 21Public Guided user buying Address functional buyers Elegant and intuitive user interface Search front and center Intuitive setup and navigation of categories Personalized experience for the user Actions easily visible Curated “landing pages” Service-specific guidance “Relevant” suppliers and items Built-in process guidance
- 20. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 22Public Guided user buying Address functional buyers SAP Ariba solutions SAP S/4HANA Support guided buying Create purchase order Recommendation The indirect procurement process is supported by SAP Ariba solutions, SAP S/4HANA Enterprise Management, or a combination of the two. Customers need to evaluate the amount of their potential savings for indirect spend to determine their direction.Manage purchase order Send purchase order Create goods request Receive invoice Supplier: receive electronic purchase order Supplier: send electronic ship notice Supplier: send electronic notice
- 21. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 23Public Service procurement SAP Fieldglass solutions compared with SAP S/4HANA or SAP Ariba solutions Recommendation Customers should consider implementing SAP Fieldglass solutions for service procurement scenarios if it is important “who” provides the service (temporary labor or professional services, for example). For scenarios where the “what” is more important, follow your strategy on indirect procurement: either transforming from SAP ERP (materials management) to SAP S/4HANA or implementing SAP Ariba solutions. Request in 2 clicks Benchmarking Bidding Approval On-and off-boarding Travel and expense capture Auto invoicing Reporting and analytics
- 22. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 24Public Operational Purchasing for Direct Materials
- 23. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 25Public Operational purchasing Direct materials Material requirements planning New MRP run in SAP S/4HANA Enterprise Management, including system and impact analysis of the entire material flow in real time and identification of disruptions in the material flow Proactive proposal of role-based, KPI- driven solutions for users to consider
- 24. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 26Public Ariba Collaborative Supply Chain Collaborative network for real-time visibility Buyer Purchase order/subcontract order Schedule agreement release Component inventory data Goods receipt notice Supplier or contract manufacturer Component receipt notice PO confirmation Component consumption notice Advance ship notice Self-billing/ERS invoice Component ship notice Consignment inventory status Payment Invoice Forecast commit Forecast/demand Manufacturing visibility** ** B2B only, UI/upload planned in upcoming releases Manufacturing and retail collaborative processes Forecast visibility and collaboration Direct materials purchase order collaboration Scheduling agreement release Subcontracting order collaboration Consigned inventory collaboration
- 25. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 27Public Operational purchasing Direct materials Recommendation Customers should transform direct procure- to-pay processes currently implemented with SAP ERP (materials management) or with SAP SRM to SAP S/4HANA Enterprise Management. Customers should plan to extend the process flow to suppliers with the Ariba Collaborative Supply Chain. SAP Ariba solutions SAP S/4HANA Create purchase order Send purchase order to supplier Create goods receipt Receive invoice from supplier Supplier: receive electronic purchase order Supplier: send electronic ship notice Supplier: send electronic notice Analyze inventory levels for spare parts Create purchase requisition
- 26. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 28Public Invoice and Payables Management
- 27. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 29Public Invoice and payables management Automating reconciliation with the Ariba Network Business benefits Faster close due to largely automated reconciliations Lower error rate from manual reconciliations Lower manual process cost Improved liquidity planning and working capital management
- 28. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 30Public Invoice and payables management Optimized invoice automation Recommendation Customers should plan to adopt SAP S/4HANA Finance to support accounts payable processes. Customers should evaluate SAP Ariba financial solutions such as AribaPay to optimize payment terms and turn the treasury department into a profit center. SAP S/4HANA Finance I n v o i c e p r o c e s s i n g t o p a y Automated reconciliation and posting Invoice verification Collaboration and monitoring Invoice completion Invoice approval SAP Invoice Management by OpenText+ Paper E-mail cXML EDI CSV SAP Supplier portal
- 29. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 31Public Ariba Strategic Payables Innovating and partnering to enable buy right, pay right Support all invoices and funding scenarios, complementing SAP Ariba solutions Payments Ariba Discount Professional Indirect spend Small and midsize suppliers Supplier accepts to be paid by buyer at prorated discount prior to due date Ariba Supply Chain Finance Direct spend Large to midsize suppliers Supplier sells approved invoices to funder at a discount rate based on buyer’s credit worthiness Electronic payments to suppliers with the ability to track and trace payment status and provide rich remittance info All spend All suppliers
- 30. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 32Public 32 Business Value and Next Steps
- 31. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 33Public Typical business outcomes for source to pay Where is your greatest opportunity for improvement? Cost reduction Rationalize supply base through spend visibility and centralized sourcing Negotiate better pricing based on advanced negotiation tools and insights into consumption history Gain savings on ad hoc purchases through demand management and spot quoting 4%–15% average unit-price reduction Process efficiency Drive sourcing productivity through deep spend analytics and immediate supplier discovery Reduce supply chain operation costs (such as content management, supply chain planning and execution, and order processing) Reduce cycle times and increase AP productivity through invoice process automation 40%–60% operating cost reduction Fiscal control and compliance Control maverick spending, risk, and fraud through use of contracted suppliers and preferred specs with standard, repeatable buying processes Ensure supplier compliance to preferred terms with reconciliation of invoice, PO, receipt, and contract $20 million contract leakage per $1 billion of spend Cash management Avoid unintended cash-flow drainage with a formalized payment-terms strategy Realize early payment discounts or SCF margin sharing via shorter invoice-processing cycle times and greater perfect of spend on discount or financing Capture rebates on high-volume, low-value spend through card programs $1 million to $2 million savings per $1 billion of target spend Source: SAP value engineering services
- 32. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 34Public Next steps Migration planningPlan transformationValue discovery SAP offers to develop a collaborative value assessment centered around optimization potential for cost reduction, process efficiency, fiscal control, and cash management. Execute a benchmarking assessment and work with SAP to create a joint point-of-view document. Adopt the business case and conduct a readiness check. Jointly create a migration and transformation plan with SAP, including timeline, service levels, and priorities.
- 33. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 35Public Thank you !
Editor's Notes
- In 2010 SAP started a journey to build an agile platform and solution for the digital economy with a combination of organic growth and acquisitions. SAP now offers the best solution portfolio and expertise required to enable our customer’s digital strategy across all industries and lines of business. The core of the end to end solution is S/4 HANA which is the reinvention of the business suite We have state of the art line of business cloud solutions that extend from the core in sales, human capital management and procurement – which is where SAP Ariba contributes to SAP’s digital framework SAP Ariba represents a two sided business model that includes buyers and suppliers and a network that brings them together with 2M+ companies The core of SAP Ariba is its source to procure to settle process so buyers can execute supplier management. SAP Ariba is the only provider that provides this end to end process. This process is delivered across all categories of spend by bringing in market leading solutions for contingent labor with SAP Fieldglass and travel and expense with Concur Within the source category we are enhancing traditional products like Spend Visibility and Contract Management with innovations like Direct Materials and Supplier Risk Management Additionally, in procure we are generating a fantastic new experience with Guided Buying so that we can lead every employee in the company to the right spend We are also innovating within settle with solutions such as Supply Chain Collaboration The suppliers are connected to the buyers via the network which is an e-commerce platform that allows them to market, fulfill and settle. All of this sits on a technology platform that integrates to SAP and Non SAP solutions, is secure and is open and extensible to SAP’s ecosystem
- SAP S/4HANA is fully built on the most advanced in-memory platform – SAP HANA – and is designed with the most modern user experience (UX) – SAP Fiori. It allows IT to easily connect to Social and Business Networks (e.g. Ariba and Concur) and the Internet of Things. S/4HANA comes with innovative and feature rich applications that make it simple to get any insight on any data from anywhere in real time with planning, execution, prediction, and simulation now all done on the fly at the highest level of granularity to drive faster business impact It is also designed with the Fiori User Experience that enable business users to get the job done with a personalized, responsive, and simple user experience available on any device In short, SAP S/4HANA is the a reimagined suite for reimagining business.
- Vertical Axes, Spend So lets start here on this axes looking out the total amount of purchases that a company makes. Horizontal axis, time And along here, a time axis. First red curve, curving up So this is the curve the CIPS guy drew, which tells the story that the rate of getting more spend under management seems to be levelling off, way before we get into the “broad sunlit uplands” of 100% coverage. Vertical Dotted line for “now” Lets draw a line here where the curve is starting to flatten out. 2016 So what’s going on? And where will that curve be going next. And as said in “Men in Black” : to understand the future we have to go back in time” Vertical red line for age of parts In the days of R/3 it was a world of Part Numbers, and that was the only way to create a PO, and that was the only spend purchasing was involved in. ERP era So systems built up around part numbers, purchase orders, GRNs and three way matches. Mandate Era As procurement became more “professionalised”, roughly in 1995 teams formed to get more “spend under management”. Since this was indirect spend they focused on Mandates (in fact that was an early name for Ariba), the word “Maverick” was much in vogue, as were approval rules, approved vendor lists, catalogues, contracts etc. Companies struggled to put this kind of information on their part number systems, so bought systems like Ariba and SRM. Rules With all of this non part number stuff to be bought, Procurement focused on setting up procedures, rules if you like, to tell people what to buy and who to buy it from. Approvals Also, companies tended to be quote large and hierarchical, and approval chains are how almost everything got done, so it was natural that these types of rules would be used in procurement. Catalogues The focus in the mandate era was to try and get things on catalogue, so that procurement could review content and publish it. Maverick The word that everyone talks about was “clamping down on Maverick spend”. Here in the procurement world we have been using the term maverick buying since the days of Top Gun (1986). It is generally used pejoratively: people who are maverick buyers are to be stopped at all costs and re-routed on to preferred contracts with preferred suppliers. Procurement departments look to clamp down on maverick buying and this forms part of their DNA. However, I've always been uneasy about this. I always imagined a maverick as someone who doesn't let needless rules stop them from doing their job. In American culture, the maverick is idolised, not vilified. The "Ask for forgiveness, not permission" gene runs deep. Think of James Bond, Han Solo and of course the eponymous hero of Top Gun who bested Viper, Cougar Jester and the Iceman. So having procurement folks banging on about eliminating "maverick buying" is counter-productive; everyone likes a maverick The stick Although procurement tried to be responsive to stakeholders, they tended to build systems and policies that ended up being a big Stick. Horizontal line The trouble with that approach is that the curve is levelling out and experience shows that this approach will not get you to 100% spend coverage. High Water Mark In some ways, we are reaching the high water mark for this approach If we look up hear at the large “Functional Buyers”, they have remained largely untouched by the Procurement Department’s systems, and although they have adopted some of the policies, they are not really using the systems that procurement has been offering. Events Events people tend to need products or services at extremely short notice, , and buying everything last minute. Oops, we need to hire a photographer for the day in Madrid, get on Google and find someone and pay for it on the Pcard. Facilities Here there are complex requirements, linked to projects systems, and highly mobile teams who like to use Email and IM. Print Very hard to specify what is needed, with artwork, lots of forms to fill out. Again along way from a catalogue approach. Logistics Often buying services, with collaboration via Email. Policy is 3 bids and a buy, done through Email. Marketing What can I say about these guys? A lot of their spend is put through on Expenses, and nevr hits the conventional Procurement systems. There are a variety of confounding factors which is making the problem worse not better. Millennials We hear a lot about these guys, who have grown up in the digital age and with internet shopping. They expect instant access to suppliers, and have never been on an IT training class in their lives. You are hiring more and more of them. Speed of Business All business is moving faster, and this means there isn’t always time to run a formal RFX process, or return to the office to raise a purchase requisition. Our customers expect us to be responsive, and this has a large impact on how we engage with our supply chain. Outsourcing Companies are no longer vertically integrated, they have outsourced catering, security maybe IT, finance and HR. Maybe even using contract manufacturers. So managing suppliers has become very strategic, and many of these suppliers will be small, requiring a different way of collaborating than formal RFPs. Social Many companies want to work with their customers on social media, that’s good, but social media has a downside as well…. Risk …managing risk is now the number one priority for CPOs according to the latest Ardent Partners white paper. And because of social media, one poorly chosen supplier can have huge, and instant impact. Eliminating so-called Maverick buying is no more about saving money, its about saving the job of the CPO. Red downslope, Under Mandate So following this curve on this trajectory you see that not only is the high water mark not breached, but it starts trending in the wrong direction. That’s why we have introduced a new concept called Guided Buying. Procurement needs to engage with those buyers in a different way: with advice and guidance, information and predictive analytics, yet at the same time managing business risk behind the scenes without getting in the way. Rising red line,, Under Guidance Companies on this track are not seeing a levelling off of engagement, but are using this alternative engagement model which matches these types of stakeholders. For example much more collaborative relations with suppliers via a network, allowing access (with appropriate controls) to marketplaces such as eBay, making the system as easy to use as consumer apps, allowing departments to set their own policies. Such an approach needs to approach which balances the needs of the stakeholders to get their jobs done, and the needs of the procurement team to manage risk. Advice Stakeholders want advice, to tell them what to buy, and how to buy it. Not manuals, or approved supplier lists, or complex intranets. Information They want information to make a decision, not a decision imposed on them. Information such as recommendations from colleagues, on-time delivery performance or information about a suppliers green credentials or anti-slavery certification. BYOD IT is a good example of a group that is already responding, by letting employees bring their own phone or tablet, and support those. The support model has changed to drop-in centres, rather than faceless ticketing systems. Procurement should be looking to adopt similar working practices. So. Moving from the stick to the carrot. Supplier Mgmt But in the background, Procurement need to be able to manage suppliers: engaging with them technically, monitoring performance, harvesting innovations. All in one place. Risk & Compliance The Maverick conversation is now about minimising risk, and making sure that processes are legally compliant in all countries. Did you know about the change in archiving law in Turkey recently? What about Brexit, what will that mean. Compliance is a never ending treadmill and Procurement departments need help from Networked services here. Predictive Finally, like many departments the avalanche of data from both within your company and externally gives the ability to become the Predictive CPO. Anticipating what users will need before they know themselves. This is another way that the carrot works, by making it easy for users to find what they need, based on trends. Which track are you on? Are you still trying to clamp down on mavericks in the mandate age? Or would you like to be on this path, keeping stakeholders and suppliers happy, while managing business risk. Which would you prefer: Stick or Carrot.