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Rapid business value realization

 

      In the earlier Extending the value of investments in SAP Spend Performance Management (Part 2 – Leveraging Existing Investments) of this series of posting, I had discussed the basic tenets behind the design of Spend Performance Management application. I covered the two tenets – User Experience and Leveraging Existing Investments. In this post you will see how the application can deliver business value very quickly, enabling our customers to get an ROI in a very short time. The intuitive user interface reduces the training and other costs related to adoption of the product. In addition to this, the existing IT investments that have been made in ERP and BW bring down the implementation costs and help in value realization. Customers already have a good start once the implementation is on the way. We will now see how customers can realize additional value in a very short time by using the powerful pre-packaged content geared towards analyzing procurement data to drive specific procurement efficiencies.

 

     SAP Spend Performance Management comes with a set of pre-defined content that aims to provide quick insights into various aspects of the business. We highly recommend that customers extract a small set of data (a month or a quarter) initially to “test drive” the system. After the initial data is extracted from ERP systems and uploaded in the application, customers can use this content to “preview” the possibilities for analyzing their data in different context. Over 130 reports are provided as part of the application to give a good starting point for customers to understand what is particularly interesting for the individual business. These reports also act as templates and customers can copy the reports and make modifications instead of thinking about these reports. SAP collects feedback from customers and continually updates this library of reports so that new content is available with new updates and all customers can benefit from this. The content can be accessed from the “Browse” menu option as shown below.

 

SPM Browse

 

      Let’s now look at some of the reports that are part of the delivered content, the specific purpose behind this and how business can benefit from the targeted insights they can get from these reports. These reports are organized under different folders and can be found by navigation to SAP/Reports folder.

 

1.      Spend Analysis

The reports under this folder provide general analysis of total spend by available dimensions including Category, Supplier, Management Organization, G/L Account, Cost Center , Buyer etc. The analysis includes many important metric like Spend, % of Total Spend and PO Spend. These set of reports are a good starting point for customers to understand how the procurement spend is distributed across these dimensions.

 

2.      Off Contract Spend

In these reports users will be able to identify potential maverick spend behavior. This would provide visibility on invoices that don’t have matching contracts. This will immediately show opportunities to negotiate better prices and bring down procurement costs. It which entities i.e. suppliers/buyers/geographies/cost centers etc are procuring items without proper negotiated contracts.

 

3.      Non PO Spend

Like Off Contract Spend reports, these will also reveal potential maverick spend. These reports target spend that do not have a corresponding PO. This again provides the business with some rationale to identify opportunities for future savings.

 

4.      Spend Trend Analysis

These reports provide some visibility on how the procurement has been trending over various periods. Users will see the options of looking at Year-over-Year or Month-over-Month or Quarter-over-Quarter trends.

 

5.      Supplier Risk Analysis

Supplier risk evaluation is critical as it can impact the business adversely. The reports that are pre-delivered with the application helps our customers identify the potential risks earlier so that appropriate procurement decisions can be made based on facts presented by the data.

 

      This is a small sample of all the reports that provide valuable insights. Apart from this, the application comes with a cross section of analysis on targeted areas like:

 

a. Contracts – Contract Aging, Expiring Contracts, Contract Status, Contract Leakage, Contract Utilization,

b. Pricing Variances – Invoice Price Variance, Purchase Price Variance

c. Price Deviations – Item Price Deviation, Invoice Price Deviation

d. Price Optimizations – Supplier Price Optimization, PO Price Optimizations

e. Budget and Forecast Analysis

f. Payment Terms and Transaction Type Analysis.

 

      Details of all these reports is available is the documentation that comes as part of the product. I would be happy to discuss any specific part of this analysis if anyone has questions. The point here is that users will find a good place to start in one of these 130+ pre-packaged reports and that is a big part of the instant value realization that we are talking about here.

 

Spend Advisor

      SAP Spend Performance Management comes with content that provides easy access for executives to keep track of the most important KPI’s for the business. As part of the standard delivery, the user is presented with reports that can quickly identify the general state of procurement across various parts of the organizations based on key critical success factors. For each KPI like Non PO Spend or Off Contract Spend, users can quickly identify the top 5 contributors. Users can set goals for each of the KPI’s and drive the business to work towards the goal. This way, executives can measure the business and get a quick understanding of where the inefficiencies exist in the organization.

 

SPM Spend Advisor

 

Conclusion

      In this three part series I have tried to highlight the basic tenets of SAP Spend Performance Management in an effort to provide insights on what the application can deliver to business and IT, as well as communicate the benefits of the application. Many colleagues are contributing valuable information that can benefit existing implementations. Stay tuned to this channel for interesting information that can help you get the most out of SAP Spend Performance Management implementation and adoption.

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5 Comments

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  1. Muthu Ranganathan
    Ramesh,

    This is a great blog series. You have captured in detail the key facets of the spend performance management. We are seeing sizeable momentum from this solutions, to solve multiple issues such as spend analysis, supplier risk analysis, spend priorities, supplier data enrichment, quick value leveraging existing investment, better negotiation capabilities with supporting analytics vs. intuition. This solution also enables rapid ROI, as it would directly result in quantifiable savings, that some of our customers have already experienced.

    The blog series would get our customers, partners and internal sap to understand and recommend these solutions – especially for industries that has huge procurement budgets

    Thanks
    Muthu Ranganathan

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  2. Nikhil Goray
    Hi Ramesh

    Firstly, let me applaud you for the wonderful articles you have posted thus far. A brief background on myself – I am a Senior Manager with accenture and have lead several large scale SRM Procurement transformations. A quick question related to forecast visibility: Can you share leading practices to incorporate forecasts into SPM to see the future picture of spend for components (direct materials) and for indirect materials?

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    1. Sunder Ramesh Post author
      Hi Nikhil – thanks for your comments.

      What we have seen is that many customers have forecasts maintained in spreadsheets and other data sources (SAP ERP and non-SAP systems). The application enables the process of uploading this data in SAP Spend Performance Management. By doing this, users now can compare the current spend and look ahead to see what the forecast looks like and make right decisions for establishing the right contracts with the suppliers. When procurement users have to refer to multiple information sources to make the appropriate decisions, the process is often tedious and the results may not be reliable. By enabling the process of uploading this data, users can now effectively do side-by-side comparisons as well as include such measures like forecast amount or any custom forecast measure as part of the adhoc-analysis.

      Hope this helps.

      Regards,
      Ramesh

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      1. Nikhil Goray
        Hi Ramesh – I fully agree with your comments about having the side-by-side visibility to make appropriate decisions based upon the forecasted spend by product category (for indirect)/ materials (direct). For direct materials, are you aware of any standard integration that may be available to load the forecast data from either APO or ECC to SPM?
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        1. Sunder Ramesh Post author
          Hi Nikhil – good question.

          Currently, we do not have specific extractor starter kit that target APO. We have extractor starter-kit for ECC for Budgets. If customers maintain the forecast information in ECC, they can add or modify these starter kits.

          For more information on the extractor starter kits I recommend looking at Extractor FAQ by Rajesh Prabhu.

          Thanks,
          Ramesh

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