Procurement transformation with SAP’s Cloud ERP and Cloud Procurement

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The intent of this blog is to offer guidance and insights into how customers can partner with SAP to drive procurement transformation.

I will specifically focus on two SaaS solutions (Cloud Procurement and Cloud Services Procurement) helping to drive the procurement transformation and when it makes sense to combine these solutions with the SaaS Cloud ERP.

1) Procurement challenges:

When talking to CPO’s we generally hear that a high spend under management quote is already achieved. Their focus is on the two following areas,

• Value to the business
  
  
  
  • Engaging with business stakeholders on strategic topics like business transformation. Shifting from selling products to delivering solutions.
  
  
  
  


• Becoming a strategic advisor to the business
  
  
  
  • Monitoring market innovations and connecting with new, innovative suppliers to achieve differentiating services to the companies end customersThis can only be achieved by procurement solutions assuring
  
  
  
  

The value capturing of procurement changed rapidly during the last years and the pressure to stay agile and innovative will not slow down. Therefor procurement needs to be properly staffed with resources, processes and the underlying technology assuring the required high performance and high value impact can be achieved.

This can only be achieved by procurement solutions assuring

• Easy accessible business networks enabling collaboration along the whole supply chain
  
  
  
  • fully automated end-to-end processes, resulting in the ‘perfect order’ with a high ‘no touch’ rate by procurement
  
  
  • touchless e-invoicing with full visibility for buyers and suppliers avoiding phone call's and email follow up activities.
  
  
  
  

 

• Asset uptime
  
  
  
  • By sensor driven re - ordering of spare parts as a part of predictive maintenance process asset downtime can be significantly reduced
  
  
  
  

 

• Actively managed supplier life cycles

 

• High spend under management and low maverick buying by
  
  
  
  • ‘Guided buying’ experience for non- strategic buyers reducing work load on the strategic buyer side
  
  
  • Appealing and easy to use tools for non- strategic categories to avoid non compliant buying activities
  
  
  
  

2) Digital Procurement transformation with real Cloud fully SaaS based

The Cloud ERP solution covers operational procurement processes like requisitioning and order processing, invoice processing, order confirmation and operational contract management with embedded real-time analytics out of the box.

All the above-mentioned procurement challenges require a bit more than that. It is an agile, innovative and easy to consume procurement solution that will be enabled by combining Cloud ERP with Cloud Procurement and Cloud Services Procurement. These solutions extend the operational processes to a full source-to-settle functionality assuring easy access to partners and while the Cloud Procurement solution will optimize the

• Source2Contract process (Sourcing, RFP’s and contract management)


• Commerce automation solution- supplier collaboration (document exchange between buyers and sellers PO; Order confirmation, Shipment notice, Invoice,..)


• Payables process (Payment suggestions in & outbound)-


• Buying process of indirect materials by a ‘guided buying’ approach


• Buying and Invoicing- planned for the upcoming/next release of Cloud ERP

 



Exhibit 1: Cloud ERP and Cloud Procurement

 

The Cloud Procurement Services solution will optimize the

• Contingent labor procurement


• External workforce programs

By combining Cloud ERP, Cloud Procurement and Cloud Services Procurement the corresponding offering is a unique and the most complete solution portfolio to manage the entire source-to-settle process with:

• Breath
  
  
  
  • Each step of the process from sourcing, procurement to payments can be managed
  
  
  
  


• Depth
  
  
  
  • Diverse spending and expense types direct and indirect material, services, contingent labor, maintenance, repair and overhaul (MRO)
  
  
  
  


• Reach
  
  
  
  • Collaboration with your trusted suppliers and a broad network of business partnersThe easiest way to find the best fit from a solution portfolio is to segment the recommendations along the following focus topics
  
  
  
  

 

3) Solution combination recommendation

The easiest way to find the best fit from a solution portfolio is to segment the recommendations along the following focus topics

• Operational purchasing- indirect procurement

• Operational purchasing- services procurement

• Operational purchasing- Direct procurement

• Supplier management

• Supplier collaboration and invoice and payables management

 

3.1) Recommendation for operational purchasing

3.1.1) Indirect procurement

Companies with less than 1 b USD in revenue and low indirect spend, where essential indirect procurement capabilities are usually sufficient, the indirect procurement capabilities of Cloud ERP in combination with

• The PO and Invoice exchange solution for effective supplier collaboration


• Catalog solution

If indirect spend is a significant cost driver, customers should leverage the Cloud Procurement Buying solution either managing all indirect procurement within the Cloud Procurement solution – available with one of the next Cloud ERP releases or running all indirect procurement in the Cloud Procurement solution. The source-to-settle process will be completed by applying the Cloud Procurement Sourcing tool.

3.1.2) Services procurement

If the success is highly dependent on ‘WHO’ gets the job done, it is critically important to identify the right candidates from the ecosystem of contractors. This includes resume reviews, candidate onboarding, certifications etc. than this is a task for Cloud Services Procurement.

 

3.1.3) Direct procurement

Direct material procurement is handled by the Cloud ERP solution.

Customers with a need for supply chain integration and collaboration with forecast commit, schedules, inventory, consignment, contract manufacturing should plan to investigate the capabilities of the Cloud Procurement Supply Chain Collaboration and Clod procurement Direct Material Sourcing to reduce cost of goods sold as well as better leverage supplier innovations as well as PO and Invoice exchange solution for effective supplier collaboration.

 

3.2) Recommendation for Supplier management

The Supplier management process needs to be performed where the operational procurement takes place, in case this is done in the Cloud ERP the master data, supplier evaluation (supplier performance eg delivery performance, quality etc.) is managed within Cloud ERP.

 

3.3) Recommendation for supplier collaboration and invoice and payables management

Depending on the amount of PO’s and Invoices either the Cloud Procurement suite offer a commerce automation solution (PO and invoice exchange for effective supplier collaboration)- if the amount of PO and invoice documents are of a high volume, if the document number (of PO and Invoice documents) is lower Invoice management by scan and capture will help to drive AP document throughput within the AP team.

 

4) Benefits of combining Cloud ERP with Cloud Procurement and Cloud Services procurement

Depending on the solution scope the following benefits are

• Digitized, and automated procurement and finance processes


• Increased productivity of buyers, sourcing experts, and accounts payable clerks


• Increased operational efficiency and transparency


• Improved and self-enforce compliance, get better prices, enable accurate and on time delivery, earlier payments at better discounts with simplified, standardized and automated business processes


• Realized projects fast with predictable outcomes at low cost as you integrate Cloud ERP with operational sourcing, procurement and finance processes with Cloud Procurement solutions using a proven implementation methodology and its best practices