Achieve digital transformation in procurement processes with integration of SAP S/4 HANA and SAP Ariba Solutions
SAP Supplier Relationship Management (SRM) has quite well served the purpose to streamline and standardize the sourcing and procurement functions within an organization along with automation of the processes to bring in efficiencies. SAP S/4 HANA as the digital core, along with integrated SAP Ariba solutions, now offer next level of capabilities which takes forward the digital transformation journey of an organization in the procurement space.
While each organization has to decide its own path and pace to digital transformation, the key to digital transformation in procurement processes lies in exploiting new innovations in the area of user experience, supplier collaboration and possibility to drive competition though open marketplaces.
SAP S/4 HANA when integrated to SAP Ariba Solutions provides for this very capabilities.
SAP Ariba solutions offerings are focused on two key areas;
- Ariba Network
- SAP Ariba applications – SAP Ariba Strategic Sourcing Solutions, SAP Procurement Solutions
Each of these solutions can be very easily integrated with the S/4 HANA digital core via SAP Ariba Cloud Integration Gateway (CIG), which is a simple, cloud based, self-service integration solution.
Let us look at each of these solutions little more closely;
a) Ariba Network Solutions
Ariba Network is the cloud based network where buyers and suppliers can collaborate for different business processes either via the Ariba Network portal or by exchanging commerce extensible markup language (cXML) messages. Buying organizations use Ariba Network to find suppliers and to run automated business transactions from ordering to payment processing. Suppliers use Ariba Network to find new business opportunities and to work more efficiently and effectively with their customers on all the shared aspect of business commerce: proposals, contracts, Orders, advance shipment notices, Invoices, and payments.
SAP S/4 HANA buying organizations shall consider integrating their systems with Ariba Network when they want to manage their procurement processes within the S/4HANA system while also benefitting from the collaboration capabilities and efficiency gains that Ariba Network can offer.
Following are some of the integration scenarios of S/4 HANA with Ariba Network
- Commerce Automation: This is the most typical scenario involving automation of Purchase Order to Payment processing. In this scenario user creates PO in the S/4 HANA system, which is then sent to the supplier on the Ariba Network for processing. If the supplier is already registered on Ariba Network, the supplier can logon to the Ariba Supplier Network and process the PO, otherwise the supplier receives an email invitation for registration to Ariba Network along with links to process Purchase Order confirmation and subsequently submit Invoice for payment processing. Registered suppliers by logging into the Ariba Network can also send advance shipment notifications, receive update on Goods receipt postings, Invoice posting, Payment Proposals and Payment Remittances advice.
2. Ariba Collaborative Supply Chain (CSC) : Ariba Network provides greater supply chain visibility for direct materials for discrete and process manufacturing, consumer products and life sciences and for merchandise spend in the retail industry. To improve poor supply chain visibility, communication and collaboration among supply chain partners, CSC provides a comprehensive direct material and supply chain collaboration tool with industry specific aspects and a single access point and collaboration platform for all the partners across different supply chains. These scenarios include processes for subcontracting, consignment, forecasting and supplier managed inventory as well as returns.
b) SAP Ariba applications – SAP Ariba Strategic Sourcing Solutions
SAP Ariba Strategic Sourcing Solutions includes collaborative sourcing, collaborative contract management and spend analysis. Ariba strategic sourcing and contract management is the same as what is referred to as strategic procurement in SRM solution.
Ariba strategic sourcing and contract management solution is recommended for implementation where the buyer organization wants to manage their operational procurement process within their S/4 HANA system, separate from their strategic procurement process in Ariba sourcing.
- Ariba Sourcing : A sourcing event like RFQ initiated from S/4 HANA is sent to Ariba Network via CIG and from there to Ariba Sourcing as a sourcing request. The sourcing request is routed to the appropriate sourcing manager, who gets notified to review the request, edit and send for approval if required and then create a sourcing project. The sourcing project allows the sourcing manager to manage every aspect of the sourcing event from creation, collaboration with suppliers, monitoring the execution scoring and grading of supplier responses, and awarding suppliers. When the sourcing manager creates awards for the event, Ariba sourcing sends a cXML document to S/4 HANA system which creates either a PO or contract there as required.
- Ariba Contract Management : If a buyer publishes a contract, SAP Ariba Contracts sends contract information such as the contract header data and line item data to S/4 HANA, where an outline agreement is then created.
c) SAP Ariba applications – SAP Ariba Procurement Solutions
SAP Ariba Procurement Solution covers the operational procurement processes, which includes, Managing catalogs, Creating and Sending POs, Recording the receipt of goods and services, Receiving invoices (sent from suppliers electronically through Ariba Network, or as paper invoices), Reconciling invoices against contracts, POs, and/or receipts, Real-time budget check with fund reservation in SAP, Taxes and charges in requisitions and purchase orders.
These were the typical functionalities which were also supported by SAP SRM solution to a greater extent.
The process diagram below shows a typical integration flow between S/4 HANA and SAP Ariba Buying and Invoicing.
The SAP S/4 HANA instance integrated to Ariba Solutions can enable much more capabilities then what are discussed above. Depending on the needs of the organization, the available capabilities can be extended to achieve greater digitalization of the procurement processes. The business flows discussed above are the most basic and generic processes which apply to most of the organizations.
Depending on the organization’s current solution landscape and the strategy for digital transformation, different deployment options are possible.
- In a single instance installation, a single S/4 HANA instance can be integrated to Ariba solutions.
- Where there are multiple backend S/4 HANA and SAP ERP instances involved, a single S/4 HANA instance can be deployed as central hub connected to the multiple backend systems and in turn be integrated to Ariba solutions. This approach is more suitable for the organizations currenlty running SAP SRM connected to multiple backend systems, who can then transform to S/4 HANA as central hub instead.
- For some business reasons if an organization wants to retain the SAP SRM instance in the landscape, it is possible to integrate the Ariba solutions with the multiple backend systems in parallel to the SAP SRM instance connected to the multiple backend systems as well.
An Integrated SAP S/4 HANA and SAP Ariba solution landscape can realize following key Business values;
- Quick and easy solution to automate and enable electronic exchange of commerce transactions with suppliers without the requirement to setup traditional complex point to point interfaces
- Improved visibility and collaboration with suppliers
- Enable market place buying experience
- Touchless e-invoicing, automating the invoice and reconciliation process and preventing submission of invoice with errors
- Superior consumer grade user experience and easy access to business transactions across all devices
Good one Virendar!
Informative one Virender Kaushal!!!.Thanks for sharing...
Crisp and clear, Thanks for sharing.
Great article. Very well articulated. One question though, where does Ariba Guided Buying fit in this landscape? Do they use Ariba CW module for matching Suppliers/Purchase Items ? TIA