SAP S/4HANA for product sourcing for Automotive and IM&C

Introduction

Source and contract stakeholders, which range from the head of supply chain, CPOs and CIOs, to category managers and directors of sourcing, have a number of concerns that keep them up at night.

• Pricing complexities and frequent changes in design increase time to market.
• Complex user interfaces deter adoption and limit savings.
• Contracts are dispersed across Fragmented solutions limiting visibility
• Limited data-driven intelligence makes it difficult to automate routine tasks so users can instead focus on strategic actions.
• Integration complexity across the source and contract process causes disruptions and hinders process efficiency.
• Savings opportunities are reduced because spend is obscured in multiple systems and it is not linked to market intel or category insights.

These concerns are exacerbated by market trends as identified by analyst firms that have recently polled these key stakeholders.

• CPOs rated reducing costs, introducing new products/services, or expanding into new markets within the top five priorities for their organizations for the next 12 months.
• The most progressive approach has identified making CLM part of an enterprise-wide strategy which considers the interdependencies between contracts, business processes, and operational/financial results.
• Automating tactical processes to address complexity and make time for strategic alignment is an imperative for procurement to enable a focus shift to strategic activities.
• Increasing spend influence with strategic sourcing stakeholders is among the top measurements of a procurement organization’s performance, leading to reduced purchasing costs, improved quality, and better strategic outcomes, such as product innovation.
• And finally, solutions must evolve to address the growing needs for managing services, which make up a growing proportion of world GDP and a company’s spend.

To help our customers, in the Industry Automotive and IM&C, to handle such complexities in the source to contract process SAP is offering a new solution.

Solution in Detail

It is a new source and contract solution with distinctive capabilities required to fulfil direct material sourcing requirements, especially for our automotive and IM&C customers.

To highlight a few capabilities,

• An integrated source and contract engine form the core of this solution.
• The solution provides end-to-end source and contract capabilities for direct materials for our automotive and IM&C industry customers along with industry-specific cloud extensions to fulfil processes such as:

Planning and scheduling of sourcing projects ahead of time before the product launch – during forward sourcing

Mass renegotiation of contracts due to changes in underlying commodity indices, changes in exchange rates, or contract expiry

Trading partner collaboration on quotations, negotiations, or collaborations on contract terms with an option for buyers to use SAP Business Network or customer’s own supplier portal

The core source and contract solution has few unique features necessary to achieve best-in-class source and contract processes, such as:

• Interface to Product Lifecycle management systems to support sourcing of design parts during product development
• Interfaces to import Bill of materials and collaborate with suppliers on during sourcing
• Integration to commodity indices for real-time price calculation
• Supplier risk insights for early identification and mitigation of supplier risk
• Simplified process for complex pricing and conditional pricing
• Enterprise-wide one contract lifecycle management (CLM) infrastructure, facilitating centralized contract repository, authoring, and compliance for all types of contracts
• AL/ML-driven smart contract authoring
• Category strategy and insights that open new opportunities for savings that can be used to define and track source and contract goals

The solution bring for buying organization and also to suppliers value by providing:

• One single entry point for all collaboration needs right from sourcing, contracting, order receiving, invoicing, through payments
• A unified supplier app for tracking, reporting, and analytics
• Enhanced UI for bidding under complex pricing conditions

The journey to source and contract reimagined

Though the solution will comprehensively manage entire sourcing and contracts processes, some specific capabilities will evolve over time.

To highlight a few developments:

• In the first phase (Release 2021), automotive and IM&C customers will have a simplified end-to-end source and contracts solution with simplified contract management by providing an easier-to-use contract authoring solution to drive greater adoption and reduce risk
• With seamlessly integrated system in place users will be able to automatically create legal and operational contracts from sourcing
• Further the release also supports multi-round negotiations of supplier bids to achieve the set sourcing goals

(FUTURE Direction: This is the current state of planning and may be changed by SAP at any time without notice)

Next, in the evolve and expand phase, customers gain extended value from the platform with value added capabilities that allow customers to:

• Plan the sourcing activities ahead of product launch, and also schedule and track the sourcing projects as per the plan
• Customers can also initiate mass re-negotiation of contracts – where the re-negotiations are triggered either due to changes in underlying indices prices, exchange rate changes or due to any changes in the contract terms
• Customers will also see simplified supplier collaboration on contract term negotiations, along with enhancements to contract templates and clause management tasks. Autonomous use cases will be introduced to provide insights and automate routine tasks.

The last phase is one intelligent source and contract platform where the users can see

• Use case specific guided and intuitive recommendations to manage complex sourcing projects
• Integration of market and category intelligence in the source and contract process
• Complete automation of certain sourcing and contract processes for selected high volume use cases
• Then with one CLM solution defined by CLM capabilities to address all contract types, for all lines of business, provides best-in-suite contracting capability. New use cases will be introduced such as handling high-volume contract scenarios

Conclusion and Benefits

This end-to-end source and contract solution provides customers one platform for seamless collaboration with internal and external partners, reduces the time to market for new products with reduced source and contract cycle time, provides efficient tools to better manage complex pricing requirements for the automotive and IM&C industry and can find better price reduction opportunities, all in an integrated end-to-end solution.

End-to-end source and contract solution

• End-to-end coverage for forward sourcing and contract creation

Automated follow-on document creation

• Seamless integration of the sourcing into legal and operational contract creation, ensures purchasing compliance

Supplier negotiation for better price

• Multi round sourcing events with saving goal tracking to support outcome based negotiations