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Author's profile photo Praveen Kunigal Athmaramasetty

Collect and manage cost breakdown information during direct material sourcing in SAP Product Sourcing and SAP S/4HANA for product sourcing

Today, I would like to introduce an amazing feature that customers have been requesting for quite a long time: Collecting and managing cost breakdown information for the direct material during the sourcing process

This feature is available to customers in cloud (2208 CL), private cloud, and on-premise versions (2022 OP).

To identify cost-reduction opportunities, and to negotiate a win-win deal, a sourcing manager needs to understand the drivers of each item being sourced from the suppliers. This is generally performed by collecting cost breakdown information from the suppliers as part of their submitted quotation.

The sourcing manager analyzes the cost drivers for every item quoted by the supplier to determine opportunities for further cost reduction and begins negotiation with the supplier. This process eventually leads to the selection of one or more suppliers with long term contracts and negotiated long-term savings in line with the products’ projected growth plan.

Capabilities:

  • Create cost breakdown templates

              Picture 1: Screenshot of one of the template created in the system (Click to enlarge)

  • Set items in the sourcing project as relevant for collecting cost breakdown information

       Picture 2: Setting ‘item’ in the sourcing project as ‘Cost Breakdown’ relevant (Click to enlarge)

  • Publish sourcing projects to invited suppliers
  • Collect cost breakdown information from suppliers using the shared cost breakdown spreadsheet template
  • Compare cost breakdown cost elements at item level in the Compare Supplier Quotations application

                 Picture 3: Screenshot of the quotation comparison application (Click to enlarge)

  • Determine cost drivers and negotiate with suppliers to award business to one or more suppliers

Benefits:

  • Customers can use their existing cost breakdown excel documents to create standard cost breakdown templates
  • Simplified and easy to use quotation comparison application to compare ‘Cost elements’ shared by suppliers via cost breakdown templates
  • Improved trust between sourcing manager and suppliers

Take a look at this short video to better understand the new feature: https://sapvideoa35699dc5.hana.ondemand.com/?entry_id=1_wac1s9ng

 

I believe this blog and video have helped you understand this new feature. Pls share your feedback or thoughts in a comment.

Pls follow my profile for future blogs related to SAP Product Sourcing.

 

Praveen Kunigal Athmaramasetty

Product Manager, SAP Procurement LoB- Source to Contract

 

 

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      9 Comments
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      Author's profile photo Soidur Rahman
      Soidur Rahman

      It will be very helpful, thank you for this blog.

      Author's profile photo Milind Patil
      Milind Patil

      do you need Ariba for this functionality?

      Author's profile photo Praveen Kunigal Athmaramasetty
      Praveen Kunigal Athmaramasetty
      Blog Post Author

      Not Required. This functionality is part of S/4 Product Sourcing.

      Author's profile photo Milind Patil
      Milind Patil

      so all the communication with supplier will be through email. is that correct?

      Author's profile photo Praveen Kunigal Athmaramasetty
      Praveen Kunigal Athmaramasetty
      Blog Post Author

      S/4 Product Sourcing has its own supplier facing application SAP S/4HANA for supplier quotation management (BTP Based application). Supplier would see and respond to the sourcing events via this application.

      Author's profile photo Duc Tuan Le
      Duc Tuan Le

      Hello Praveen,

       

      Thanks so much for this content. I'm curious on these thing:

      1. Quotation area which is part of BTP platform, is that a component requires license purchased?
      2. Assume once this component connected to S/4 Product Sourcing, Sourcing Project once published from S/4 will be route to this BTP component and notify Supplier base on pre-defined routing methods (Mail/Fax/EDI...)?

      Thank you

      Author's profile photo Praveen Kunigal Athmaramasetty
      Praveen Kunigal Athmaramasetty
      Blog Post Author

      Hello Duc,

      Thanks for showing interest in this topic.

      SAP S/4HANA for supplier quotation management is the BTP based supplier facing solution. This solution has its own licensing and is available for purchase exclusively in conjunction with the SAP Product Sourcing license.

      Whenever a sourcing project is published then the suppliers participating in the sourcing project will be notified via an email and a Fiori notification.

      Author's profile photo Madi Tatubayev
      Madi Tatubayev

      Hello Praveen,

      Can you tell me how SAP Product Sourcing is licensed?

       

      Author's profile photo Praveen Kunigal Athmaramasetty
      Praveen Kunigal Athmaramasetty
      Blog Post Author

      Hi,

      This product is licensed based on number of users who would create and manage the sourcing projects.

      Regards,

      Praveen