Org. A has clear plans of embarking on SAP NetWeaver initiatives, the plans being in place for the next five years. The first and foremost activity post their ESA roadmap exercise being the removal of the “best-of-breed” applications from the landscape to reduce license costs. In this blog, I will discuss the removal of a best-of-breed application from the system landscape of Org. A with a “build” approach with the SAP NetWeaver platform and see how it impacts the supply chain of the organization to open up new avenues to the “build” approach that actually does away with the need for best-of breed applications and helps use the ESA architecture to create a robust business solution that integrates tightly with the existing application landscape, without disrupting the existing processes. Moving such a best of breed application actually opens up a window of opportunities for Org. A to create more applications that integrate with this one – from sourcing to procurement to an extended collaborative marketplace on the supplier facing portal. In this blog, we will see the business need for a sourcing engine needs to be built, which is the immediate requirement of the Purchasing department of Org. A – a business solution that leads to an extended collaborative enterprise solution. Org. A has the option of making this as xApps for the industry vertical.
The Business Solution:
In a drive to achieve greater competitive advantage and profitability, Org. A had moved its operations from a traditional, event-based sourcing to a new system of enterprise-deployed solutions specifically designed to improve sourcing and supplier management processes within. Traditional sourcing was a manual process, relying on paper, phone, and fax. Technology had only recently played a role, primarily through isolated online single-step reverse auction events that focused purely on price. The traditional sourcing only applied to a few commodities and often required specialist buyers or out-sourced auction service providers who have expertise in those commodities. This process left the commodity expertise outside Org. A and did not allow Org.A to standardize the sourcing process. The best of breed solution was the first step by Org.A in, leveraging enterprise-wide technology deployed within the company to automate the sourcing and supplier management process. It allowed buyers and suppliers to capture purchasing trade-offs and optimize sourcing activities with flexible bidding options and decision support tools. Though much of the functionality brought in by the best of breed application was more esoteric and not being used by Org. A, it is still being viewed as an application that “does the job right.”, implying that such an application is much needed within Org. A – be it bought or be it built.
This application that needs to be built has to allow Org. A to streamline the processes and draw on sourcing knowledge and expertise from inside the company. The most important point out here is – unlike the BOB application that was in place before (or still is), the build has to enhance ROI by combining/enhancing the online sourcing solution with contract management and the SAP R/3 system. It has to enable Org. A to implement enterprise-wide sourcing for 100 percent of their commodity and quote-based procurement and allow professional buyers internally to manage the complete sourcing process, from defining spending requirements to finding a supplier and negotiating an agreement. Unless Full integration between this Sourcing engine and the e-procurement BOB application to directly transfer the results from the Sourcing engine to the e-procurement BOB application that rides on MDM for catalog management and validate with the master agreements that ensure compliance in the underlying R/3 application. The workflow could be built using ABAP workflow or Flow-Brix or a custom java workflow application.
The perceived and calculated ROI by this build exercise is to realize an average saving of 13 percent on purchasing costs through fair market pricing, and create efficiencies that reduce the cycle time and buyer effort required to conduct and manage sourcing by greater than 30 percent and 50 percent respectively by defining and aggregating the buying needs across Org. A, managing supplier relationships and supplier interactions, lowering spend, aligning with the ESA roadmap and analyzing the sourcing process and implementing controls across Org.A. Starting as a BOB application targeted on the sourcing front, extended by an e-procurement Solution and being an extendable solution towards a digital marketplace, the application is meant to be scalable towards an external facing portal with Invoices being viewed using ADS, primarily to extend shortcomings of existing solutions – termed as best of breed.
Defining and aggregating Enterprise spend:
The application could be defined to enable buyers to define their requirements using a guided procedure driven RFI, RFP and RFQ and negotiation-based events. The Solution architecture needs to combine the industry-wide best practices built in as GP to ease usage as seen in some of the best of breed applications.
Design to allow Purchasing department to manage Supplier relationships and interactions:
Org. A needs to search for and capture the information they need about its suppliers and products. Org. A business partners and suppliers would need to collaborate and communicate their capabilities through a multi-stage RFx process and the Sourcing forum. The aim is to replicate the business solution being addressed by the BOB application to the maximum possible extent.
Ability to manage sourcing contracts:
With a custom sourcing engine that can be integrated with a custom e-procurement application that does away with the use of commerce networks, the application would need to accumulate all purchase requisitions for the same supplier as catalog requisitions (or catalog based commodity purchasing) to be sourced in the open market to scout for the best possible deal. The same should be extendable to solutions demanding Dutch, reverse and other key auction types being needed within Org. A. The integration of these two custom applications needs to enable businesses to automatically transfer data into systems to drive compliance so that Org. A buyers can use pre-negotiated prices and selected suppliers to reduce and streamline spend within the Org. A. Such an application would allow Org. A users to establish purchase requisitions or master purchase agreements using MDM and SAP R/3.
Compliance monitoring and Analytics:
The biggest benefit would come from providing a scalable architecture to ensure compliance monitoring nad reporting facilities extendable to the dashboard concept.
Doing away with best of breed application can potentially open up a host of new promises of increased business functionality at a lower cost. Call it the new paradigm of application development if you will, but a sourcing application that enables multi-stage RFx process, RFQ, negotiations, RFI and bid scoring can be architected to integrate with a custom solution that caters to e-procurement, extendable to a solution with Analytics in the future with the ability of Invoice settlement using ADS and workflow. When you weigh the benefits of such a range of applications built on the same underlying platform with practically zero-cost of operations would significantly lower the dependence of Org. A on many vendors while providing a linearity of architecture. Maybe, such solutions may seem esoteric to some and scalable to others. On the same token, isn’t this what Solution Architecture is all about – warranting intelligent discussions within the client community to shape the most suitable solution. And the development and re-use of many sub-processes that make the value chain, as enterprise services, may just be what Org. A has been missing out all the while to cut costs.