Best Practice: Business Process Monitoring for Procure to Pay
You can find an introduction to Business Process Monitoring in SAP Solution Manager in the SAP Business Process Monitoring within SAP Solution Manager of this blog. There, all further blogs dealing with various aspects of Business Process Monitoring are linked. The blog will be updated regularly.
Business Process Monitoring for Procure to Pay
Business Process Monitoring (BPMon), as part of Solution Monitoring in SAP Solution Manager means the proactive and process oriented monitoring of the most important or critical business processes including the observation of all technical and business application specific functions that are required for a steady and stable flow of the business processes.
One of the most critical business processes in the SAP ERP environment is often a procurement process (especially Procure to Pay) which looks more or less like the process below.
The procurement process starts either with a direct or an indirect creation of Purchase Requisitions which can be differentiated by the so-called Creation Indicator. „Directly“ means that someone from the requesting department enters a purchase requisition manually. The employee creating the requisition determines what and how much to order, and the delivery date. The employee creating the requisition determines what and how much to order, and the delivery date. In many case purchase requisitions are created automatically by MRP (Material Requirements Planning) run or „Indirectly“ by other SAP components like SD, PP, PM or PS or by Third Party or External Processing. In our example we have a MRP run on SAP ERP side. Of course you could also have some corresponding planning runs in the Supply Network Planning or Production Planning in SAP APO. All these planning runs are normally executed in background mode and hence could be monitored by the job monitoring functionality from Business Process Monitoring. For more information you could have a look into the Best Practice document “Best Practice – Background Job monitoring “. One additional possibility is that Purchase Requisitions are created out of Shopping Carts in SAP SRM.
Once the Purchase Requisition is created then for each Purchase Requisition item a corresponding Purchase Order item for external procurement should be created Usually a Purchase Requisition item is flagged as closed once the requested order quantity has been included in one or more respective purchase order(s). Or if the goods/materials or services are no longer needed then the purchase is cancelled and the corresponding Purchase Requisition item can be flagged as closed manually.
For each Purchase Requisition item (the whole order quantity) a corresponding Purchase Order should be created quite some time before the planned Delivery Date is reached. Otherwise such a Purchase Requisition item is considered to be open and overdue.
Similarly for every Purchase Order item it is expected to get the full order quantity delivered until the Delivery Date is reached, i.e. a corresponding Goods Receipt posting for every item should have taken place. Otherwise such a Purchase Order items is considered to be open and overdue.
Once goods/materials are delivered, several activities regarding inbound processing have to be performed. For this purpose customers often create Inbound Deliveries e.g. with reference to Purchase Orders or Shipping Notifications. The Inbound Delivery supports all activities such as putaway, packing, transportation and goods receipt. During the inbound delivery process, planning information is recorded, the status of different activities is monitored, and data accumulated during inbound shipment processing is documented. An Inbound Delivery is considered to be open and overdue if no corresponding Goods Receipt has been posted before the planned Delivery Date is reached.
The Invoice Verification completes the material procurement process, which started with the Purchase Requisition and resulted in a Goods Receipt. Incoming invoices are verified in terms of their content, prices and arithmetic. The system updates the data saved in the invoice documents in Materials Management and Financial Accounting. An invoice can be blocked, i.e. Financial Accounting cannot pay the invoice.
In a last step one would pay the invoice and hence clear the corresponding Accounts Payable item.
Within such a Procure to Pay process there are of course many things that could be monitored and Business Process Monitoring provides many technical and business application specific monitors for this purpose which come out-of-the-box and can be adjusted to the customer needs, e.g. by entering data for purchasing organizations, plants and document types. Probably the three most important key figures are the following:
- # Overdue Purchase Requisition Items
Business Risk: Overdue Purchase Requisition items mean that the planned delivery date lies already in the past and not all items have been converted into a corresponding purchase order. Hence the needed goods or materials might not arrive in time subsequent processes (Sales, Production, Maintenance/Repair) might be delayed.
- # Overdue Purchase Order items
Business Risk: Overdue Purchase Order items mean that the goods receipt for the ordered quantity was not or not completely posted by the receiving plant. If the stock quantity has not physically arrived in the receiving plant the materials are missing for the subsequent processes (Sales, Production, Maintenance/Repair). If the stock quantity has been physically arrived but the goods receipt was not posted in the system, Materials Requirement Planning could create wrong planning results.
- # Overdue Inbound Deliveries
Business Risk: This key figure represents the number of overdue inbound deliveries where the goods receipt was not posted yet. If the incoming goods or materials are not processed in a timely manner this goods or materials might be missing for the sales outbound or manufacturing process and might delay these processes respectively.
Besides these application key figures you could also monitor other things like interface processing. See also previous blogs about New Business Process Monitoring functionalities in SAP Solution Manager – ALE / IDoc Monitoring and New Business Process Monitoring functionalities in SAP Solution Manager – qRFC Monitoring. All monitoring data can be extracted to BI in order to perform some trend analysis. This was also described in a New Business Process Monitoring functionalities in SAP Solution Manager – BPMon Trend Analysis Reporting.
We take the key figure # Overdue Purchase Order items as an example for showing what information the Business Process Monitoring provides and what drill-down capabilities are provided.
First step in setting up monitoring for this key figure will be to model the Procure to Pay process in the system. How to model business processes in SAP Solution Manager is out of the scope here. Having modeled the business process, you can assign key figures to every business process step. In this example, we select the business process Procure to Pay, choose process step Convert Purchase Requisitions to Purchase Orders, select the Monitoring Type Application Monitor, then select the Monitoring Object Purchase Orders and finally select Key Figure # of Purchase Order Item overdue from the list of available key figures.
On the next level, “customizing” (i.e. select-options in order to identify the “right” documents) for the key figure has to be maintained, as well as threshold values which will later on define the rating of the alerts.
As an entry point, the system provides a general overview of the status of all alerts assigned to your business process steps.
Navigating into the details of this process step, you will find a list with all recent alerts thrown for our key figure. In this case, 5 Purchase Order Items are overdue for release and are older than 5 days. These overdue Purchase Order Items can be viewed directly in the monitored system using the Detail Info button.
If you like to see the details of a specific Purchase Order Item, just click on it and you will be directly led to standard transaction ME23N (if your backend user has the appropriate authorization) where you can process the issue further.
The next issue of this blog will be available in the next weeks.