Digital Innovation in Sourcing and Procurement

How enterprises interact with their suppliers can have an immediate impact on their bottom line and competitive position in the market. Real-time insights into supplier spend, evaluations and scores, and contracts are a must rather than a nice-to-have. The ability to spot gaps in suppliers’ performance and act immediately can prevent the loss of business opportunities as well as drive customer loyalty.

A significant burden falls on the procurement leaders who have to deal with an ever-increasing number of suppliers and contracts. Imagine that a national grocery chain has unveiled a seasonal promotional item sourced from a new supplier, but the promotion has been met with an overwhelming customer demand, and that supplier is now struggling to deliver the required quantities. The grocery chain’s procurement manager needs to know, in real time, why the supplier’s evaluation scoring is now low in order to act appropriately and meet customers’ expectations. Or consider a purchasing officer responsible for procuring a specific commodity who needs to review and monitor her extensive list of contracts. She needs to be able to quickly and easily know when contracts are expiring and how to make adjustments as necessary.

SAP S/4HANA Sourcing and Procurement can lessen the burden on procurement leaders by providing simplified requisitioning processes, real-time visibility and analytics, and advanced global search capabilities to identify and resolve supplier issues. And with native integration with the Ariba Network, the new solution enables procurement teams and suppliers to collaborate easily and automatically.

New Enhanced and Simplified Processes

Delivered as part of the November 2015 on-premise release of SAP S/4HANA, SAP S/4HANA Sourcing and Procurement covers all operational procurement processes, including Purchase Requisitioning and Order Processing, Invoice Processing, Order Confirmation, and Operational Contract Management, supported by real-time embedded analytics. On top of these business processes, SAP has also built extensions into the Ariba Network for supplier order and invoice collaboration and into the Ariba Catalog for the Self-Service Requisitioning process.

The solution not only improves the performance, visibility, and usability of procurement processes but also delivers new, simplified ones that meet the needs and expectations of a new generation of millennial users who are used to Amazon-like, consumer-grade shopping experiences. For example, the Self-Service Requisitioning process offers employees a simple, three-step process for placing purchase requisitions, including a real cross-catalog search.

First, in SAP S/4HANA Sourcing and Procurement, a user can type his or her desired product into a Google-like search box and obtain the results from both internal and external catalogs that have been loaded into the solution. Next, the user can easily add the product to his or her cart and have the option to make any quantity or account changes (see Figure 1). Finally, the user can submit the requisition for approval. Once the cart is created and ready for approval, the employee can easily track the status of the requisition and, after having received the ordered product, confirm the receipt. In this example, the user has performed a real-time, cross-content search without even recognizing that the system is searching through various sources. In the past, the user first had to know exactly which catalog the product was available in; then start this external catalog, search the product, and order; and then return to the traditional system. And if the user’s assumption about product availability was wrong, he or she had to browse the connected catalogs one by one.

Throughout this Self-Service Requisitioning process — as with all of the processes performed within SAP S/4HANA Sourcing and Procurement — users benefit from the consumer-grade SAP Fiori user experience.

Instant Insights and Advanced Analytics

In addition to simplifying business processes, SAP S/4HANA Sourcing and Procurement enables users to gain deep, real-time insights through advanced analytics capabilities. Embedded analytics capabilities like spend analytics, contract analytics, and supplier evaluation can now run data from SAP S/4HANA in real time without the need to extract the data into a separate data warehouse. For example, key performance indicators immediately turn red when user-defined thresholds are affected. This allows procurement managers to make instant decisions about which suppliers to choose based on up-to-the-minute information. They can act instantly to resolve business issues by seamlessly navigating from analytical applications to transactional applications and back.

To illustrate this capability, let’s refer back to the grocery chain procurement manager and the purchasing officer mentioned earlier. In SAP S/4HANA Sourcing and Procurement, the procurement manager can analyze in real time why the supplier’s evaluation scoring is low — perhaps it is because of a large variation between goods ordered and received, or a large variation in expected and actual delivery date. Armed with this information, the procurement manager can analyze the purchasing spend of alternative suppliers to bring in a secondary vendor to compensate for the shortfall in goods and even potentially replace the first supplier who could not meet the demand.

Additionally, the purchasing officer can immediately view the consumption of her commodity contracts to determine which contracts to renegotiate. If a contract has a low consumption rate but close expiration date, she immediately wants to see why this contract was not really used. She can check evaluation scores for this contract’s supplier and also for alternative suppliers for that specific commodity. If the contract’s low consumption rate is due to low supplier evaluation scores, the purchasing officer may want to phase out the contract rather than renegotiate with that particular supplier.

User-Friendly Global Search

SAP S/4HANA Sourcing and Procurement also offers advanced search capabilities. Users can instantly search in one global, single search field and drill down to various object pages and easily navigate to other object pages or transactional applications. For example, a procurement manager can navigate from supplier object pages to materials pages to uncover other suppliers that are delivering the same material, and he or she can easily switch suppliers if needed. Such a cross-document search capability from one single search field was not available in the classical SAP ERP; previously, there was only an isolated display of documents with no search capability that could cut across all documents and master data.

Native Integration with the Ariba Network

Beyond the new capabilities discussed, procurement managers can also benefit from SAP S/4HANA Sourcing and Procurement’s native integration with the Ariba Network. Previously, with SAP ERP running on a classical database, a separate add-on was used to integrate into the Ariba Network, which made it more complex for IT to run hybrid on-premise and cloud solutions. Now, with SAP S/4HANA Sourcing and Procurement, the integration with the Ariba Network is prebuilt natively into the solution. Order creation, order change, order confirmation, advanced shipping notification, and invoicing can now be sent directly to the Ariba Network from within SAP S/4HANA Sourcing and Procurement.

With the solution, a procurement manager and supplier can automatically — and paperlessly — collaborate on the purchase order and invoicing processes. For example, within SAP S/4HANA Sourcing and Procurement, a procurement manager can send a purchase order to a supplier directly via the Ariba Network through an electronic data exchange. When logging into the Ariba Network, the supplier can immediately view the purchase order; there is no delay by sending via email, fax, or mail. The supplier can automatically confirm receipt of the order, provide advanced shipping notification, and then post and submit an invoice.

Learn More

In today’s global and digital economy, procurement leaders need to stay on top of their suppliers’ performance and their contracts’ status and be able to act nimbly — all in real time. SAP S/4HANA Sourcing and Procurement provides the capabilities needed to ensure smooth procurement and sourcing processes, ultimately resulting in better market position, lower total cost of ownership, happier customers, and a healthier bottom line. Visit sap.com/s4hana for more details.