Using the SAP Ariba Network and Experiencing Bottom Line Business Results
Whether it’s the pressure of global supply chain risk management, getting innovative products into market faster than the competition, closely managing costs, or all of these – these factors continually put your Procurement, A/P, and Finance departments in challenging situations. With more critical products, services, and maintenance being outsourced to a global supply base, competitiveness has become highly dependent upon efficiency and effectiveness of the material and service supply chain.
Over the past two decades, companies have spent billions of dollars to improve their internal process and information flows. Unfortunately, these islands of efficiency are disconnected from the outside world and fall down where it matters most – when buying, selling, or exchanging cash with other businesses.
Inefficiencies of procurement in the industrial machinery and components industry
More than 80% of POs, Invoices, and other transactions still take place offline involving lots of paper, lots of people, and lots of inefficiency. Maverick spending, delayed payments, and overpayments are increasing costs and impacting profitability. Where automation has occurred between trading partners in the industry, it is often for singular processes using point-to-point connection methods. By some estimates, all this inefficiency costs businesses $650 billion per year in missed sales opportunities, higher operating and supply chain costs, and slower cash flow cycles.
It’s time to re-think supplier management
Today’s businesses are transforming. Business leaders are refocusing to deliver on their core strengths and leveraging their ecosystem to make it happen. This next wave of productivity will come from networks connecting people, machines, and digitizing processes between businesses.
Read the blog “Bringing the Networked Economy to Direct Material Procurement” from David Parrish about the challenges and trends of procurements in the industrial machinery and components industry.
For those willing to rethink their business and reinvent themselves, the 21st century architecture is already here.
The SAP Ariba Business Network
With the Ariba Business Network, you get a comprehensive platform to automate and improve your complete buying, selling, and working capital management processes with all of your trading partners throughout all of your spend categories.
Ariba is the leader in cloud-based procurement, invoice solutions, and business networks. The problem it solves is quite basic. It eliminates all the hassles, paper, phone calls, and other manual or disjointed activities companies perform each day to find new suppliers or business opportunities, place or manage orders, collect money, and collaborate with trading partners.
It solves this problem in two ways:
- It provides the industry’s only complete and integrated cloud source-to-settle platform.
The Ariba Network includes a host of services to help simplify and streamline the commerce process for both buyers and suppliers. Discovering and qualifying new partners and business opportunities; automating key purchase, invoice, and payment transactions; and accessing community-based insights and services that are only available in a networked model are a few of the processes inherent to the Ariba network. Additionally, dynamic discounting, receivables financing, community-based ratings, and market data can make things easier and more streamlined for your sales, finance, and purchasing professionals.
- The second part of the Ariba portfolio is even more compelling.
Ariba offers the world’s largest and most global business commerce network. Over 50,000 suppliers in the IM&C industry participate on the Ariba Network. This is important because the success of a network program is driven by the ability to effectively and efficiently get as much of your transaction and/or spend volume running on the network, and having this many suppliers already enabled on the network allows you to get to scale very quickly. These numbers reveal that other companies in your industry are already achieving significant network volume today via Ariba.
Industrial Machinery & Components companies around the world are capitalizing on the advantages and opportunities provided by the Networked Economy and are bringing their Procurement and Payables operations into the digital era with SAP and Ariba as key enablers.
The benefits for industrial machinery and components companies
The saving opportunity for IM&C companies is quite large – tens or even hundreds of millions of cost reductions have been achieved by those companies leveraging a Business Network approach. This impact is accomplished through powerful results such as:
- Helping organizations discover and negotiate with the best suppliers across a high % of their spending to drastically reduce Unit Price Cost (and thus total cost), in some categories of spend as high as 15% – 20% cost savings.
- The network helps companies take their negotiated savings and turn those into realized savings by making sure employees are buying the right items from the right suppliers at the right prices, and then savings leakage is eliminated. Typically, savings leakage without these compliance processes in place can range from 1% of spend to as high as 8% in more complex service categories.
- End-to-End “clean and error free” electronic processing with suppliers helps organizations lower internal processing costs significantly – with some companies reducing procurement and accounts payable costs by as much as 70%. The network also helps mitigate supplier risk, increase top line revenue, and decrease days sales outstanding (DSO) while maintaining high customer service and satisfaction levels.
- One of the more compelling opportunities driven by the Ariba Network is the ability to increase working capital returns. Through end-to-end controls, efficiency, and speed, payables can now be looked at as a profit center. With the Business Network, organizations can look at payables more strategically – balance and optimize payment terms, deploy upwards of 20% of payables cash to returns as high as 36% APR (or averaging 18-22%) and extend terms to increase working capital and extend DPO.
Besides the discussed cost improvements, there are additional benefits like discovering new sources of supply which can greatly reduce sourcing cycle times and help reduce supply chain risk.
With these solutions you also gain visibility into your spending and supplier relationships to identify opportunities for sourcing, demand management, or improved supplier performance. And with all the solutions available in the cloud, you’ll have minimal system maintenance issues, lower IT costs, and higher infrastructure availability.
Our customers have significantly increased efficiency and realized bottom-line savings with Ariba:
- Caterpillar now receives 90% of its invoices electronically
- SSAB reduced collection time from 3-4 weeks down to 15 -30 minutes; and achieved tax compliance globally
- Illinois Tool Works reduced sourcing cost by eliminating single source supplier dependencies
The suppliers really do like being a part of this network! On a 1:1 basis they have improved communications with their customers, gained better visibility into order status and payment timing, lowered customer service costs, and increased customer satisfaction.
In the context of the larger network, these suppliers have also increased opportunities to market themselves to the community of buyers which helps increase sales and growth. This is a win-win situation for IM&C buyers and IM&C suppliers alike. SAP Ariba already has a strong position in the IM&C industry with 99% of the Forbes 2000 companies running SAP.
SAP provides a holistic procurement solution
One of the great things about our offering is that you have a choice of deployment methods – On Premise, in the Cloud, or both. The combination or hybrid approach is currently most common in the IM&C industry.
Flexibility in the consumption model means that you have the choice in selecting the option that works best for your organization.
SAP offers source-to-pay solutions in an on premise deployment with applications such as SAP Sourcing and SAP SRM. If you are ready for cloud solutions, Ariba offers a full portfolio of source-to-pay solutions in an on-demand environment.
The Network extends the value of your SAP footprint by providing a scalable method to connect and collaborate across the value chain. Solutions are fully integrated while pre-configured integration options are available for non-SAP and Ariba solutions.
For customers with investments in SAP ERP and/or SAP SRM, we’ve already developed a Rapid Deployment Solution package to help get you started quickly on the Ariba Network. The package includes data and process integration of your back end system documents into the Ariba Network, as well as unlimited supplier enablement, and the ability to use the Ariba Procurement Content Catalog offering to drive quick adoption for self-service procurement. We can do all of this in as little as 4 weeks in many cases.
Companies are rapidly moving to more variable operating models that enable them to quickly increase or decrease infrastructure, talent, and expertise to accommodate changes in market dynamics, business needs, and special projects. Fieldglass’ cloud-based vendor management system (VMS) meets the growing demand. Combined with the collaborative, network-based procurement capabilities of SAP Ariba and the human resources expertise of SAP SuccessFactors, the acquisition uniquely positions SAP to deliver a platform for businesses to manage their entire workforce – both temporary and permanent staff — from initial recruiting and on boarding to ongoing development, performance management, retention and retirement.
For the Ariba Rapid Deployment Solution package on the SAP Service Marketplace, please visit: https://service.sap.com/public/rds-ariba