Self-service procurement: how far can you go in decentralizing your purchasing?
SAP S/4HANA allows you to implement an end-to-end self-service procurement process for your business users via easy-to-use Fiori applications. The question now arises whether you can fully decentralise the procurement process without having procurement experts involved. In this blog, I describe the difficulties we faced during the roll-out of a purchasing project and the insights we gained in the months after.
Procure to Pay (P2P) process steps
There are many steps and actions between identifying a need and paying a supplier for the goods delivered or services provided. Self-service procurement allows you to maximize business involvement in the process without overburdening Accounting and Procurement. It provides you with handy tools to carry out the many steps in an efficient way, from creating a Purchase Requisition (PR), until the handling of invoices. This with full transparency in all the different steps.
Two other processes that are strongly intertwined with purchasing, are the source-to-contract process and master data management. Before making a financial commitment with a supplier, all contracts need to be in place – from a signed quotation to specific contracts as a Service Level Agreement or a Non-Disclosure Agreement.
And of course, when you start working with a new supplier or a new product, the master data must be set up.
Full decentralization of procurement
In a large company with several entities, we ensured that each of the more than 1,000 employees could make purchasing requests. In line with the set-up of self-service procurement in S/4HANA, they were also in charge of doing the goods receipt for services and goods that were not processed through a warehouse. In case there was a quantity or price mismatch on the invoice, action was needed from the requestors of the purchases.
We identified three types of self-service purchasing that apply to all employees:
- purchases via internal (hosted) catalogues with fixed price agreements for different suppliers, or via external (punchout) catalogues for orders on websites of specific suppliers;
- purchases via free text PRs to order goods that are not available in any catalogue;
- purchases of services, which are considered as milestone purchases with fixed delivery dates; the creation and processing are similar to the process of free text PRs for goods and, therefore, simple for the end-users.
We trained all employees, set up defaults to further simplify ordering, and built a set of clear instructions. Although everyone in the business was fully convinced this was the right way to go, we had to revise the whole model after only a couple of months. Hundreds of invoices were blocked due to missing goods receipts, reclasses were needed because of wrong account assignments, and deliveries were delayed as a result of missing contracts or master data in the system. Nevertheless, everyone was convinced of the added value of self-service procurement. The involvement of the business in the creation of purchase orders was vital. That is why we started looking for a better way to use the tools of S/4HANA.
We decided to split procurement into two categories:
- creation and handling of catalogue ordering
- creation and handling of free text PR’s
There was no need to change the catalogue order process. This procurement process runs smoothly and correctly thanks to the fixed-price arrangements, contracts and master data that are in place already, and the receipt of goods by the central warehouse team. Creating correct PRs is easy as all data comes directly from the catalogue item. The requests are automatically converted into POs and sent to the suppliers without any involvement of Procurement.
However, we had to revise the creation of free text PRs, mainly for services. Many employees were occasionally involved in the procurement process, and it was not their core task. Even though the tools were easy to use, several steps in the process required extra attention. For example, the Goods Receipt was not done timely, purchase orders were not updated with new information, and the financial data kept were not appropriate.
In each team, we appointed a business expert user for these type of purchases. This person is responsible for creating free text PRs for everyone in the team. This setup allows us to get the best out of the self-service procurement in S/4HANA. The business expert user creates a PR on behalf of the requester. This person is immediately involved, as the approval workflow starts with him/her. Via the ‘Confirm Receipt of Goods’ application, both the business expert user as the requester can complete the receipt of goods for the services or goods ordered. The reporting tools allow both to monitor the entire process.
All departments, from procurement to accounting, controlling and legal, now have one user per team who is the single point of contact. You only need to explain changes in the process or the system to a select group of people. They use the system regularly and therefore know the importance of each step. This has led to improvements in each step of the flow. Purchases are made on time, costs are allocated to the correct objects in the right period, and invoices are paid timely.
Self-service procurement in S/4HANA provides you with all the tools to easily handle the purchase-to-pay process. The applications are user-friendly, self-explanatory and provide transparency at every step of the process. However, it is essential to think about how to use these tools to your maximum advantage.
Every employee can easily order his or her own purchasing needs. By creating multiple catalogues (hosted, punchout, Ariba), you can start the whole process from any end-user in your company.
For the purchase of items outside the catalogues, the on-behalf functionality of self-service procurement provides an excellent and workable solution that minimizes the risks of errors in the different steps of the purchasing process.
I have a question for you.
We are in the process of estimating the licenses required for a new S/4 implementation, decommissioning of our current ECC.
During our internal conversations we found a point of controversy in terms of interpretation of what Self-service procurement means.
My understanding is that Self-service procurement means I can self-service from the SAP tools to buy something that is not for the core objective of my company - in our case, since we are Retail, no products for resale, but also not necessarily products or services just for my self consumption like a pencil, a course or a laptop. In my understanding, via Self-service I can buy an advert service, for example, or any other product/service for which I do not need help from our professional procurement department, considering that they have more important things to do and negotiate. Some other colleague thinks that self-service procurement in SAP is only for purchasing of things for personal use.
My argument is that 1) it would be a waste of a license considering that we buy almost nothing for personal use nowadays 2) the whole aim of self-service procurement, in my view, is to provide relief to the procurement department, and to make "eventual" or even repetitive but simple purchasing quicker and easier 3) it's a way of differentiating the people responsible for the big purchases - professional procurement guys that would be granted with an S/4 Advanced user license from these non-professional purchasers of small non-core business products or services, which can be granted with the S/4 self-service user license.
Could you give me some indication about who is right in this discussion?
My whole point is that self-service does not mean self-consumption, at least not in terms of wording...
Thanks for taking the time to share your experience. It´s been a year now since this blog was publish, any chance of getting an update after the long-tem experience?