SAP SRM 2005 Overview

SRM Capability
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Procurement Executive's challenge

How do I stream line the req. to pay process? Is my spend reported adequately? How can I shorten contract negotiation?

How can I give my buyers the right focus?

How can I get better price breaks?

Are we a hurdle to fast new-product introduction? Why are my PO administration cost so high?

How do I enforce contract compliance?

Are we making informed sourcing decisions?

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Addressing Procurement Challenges..SRM

Business Challenge
Limited price negotiation margin Lengthy sourcing process Poor visibility of spend Little factual support for sourcing decisions Lengthy new product design Lengthy contract negotiations Poor Contract Compliance

SRM Capability
Dynamic Auctioning and bidding Online RFx Management Integrated spend analysis and supplier evaluation tools

Value
Price reduction through auctioning Accelerated Sourcing Process Improved sourcing decisions and supplier performance management Faster time to market

Collaborative product design Collaborative contract negotiation Visibility of approved supplier catalogues and prices online Document Management Approval workflow, automatic PO generation, simple requisitioning process RFQ, procurement, receiving , invoicing and matching process automation Supplier self service Contract management

Consolidation of volume and reduction of procurement cost Transaction cost reduction

High administrative cost per PO

Lengthy and inefficient requisition to pay process Little focus by buyers on sourcing and contract management work
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Operational costs savings in procurement and A/P areas Buyers focus on strategic sourcing processes, instead of transaction processing
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SAP SRM
mySAP Supplier Relationship Management is a purchasing platform for sustainable savings and value generation through full-cycle sourcing and procurement.
Builds long-term foundation
for current and future supplier-facing business processes

Provides repeatable savings

and ongoing unit cost reductions instead of one-time wins

Closes the loop between sourcing

and procurement, within the enterprise, and across the supply base

Support Business Change

because its flexible processes extend beyond multiple business units and spend categories

Delivers value by reducing risk,

tapping innovation, differentiating products, and improving margins

Increase Supplier Participation

by reducing risk, tapping innovation, differentiating products, and improving margins

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What SAP SRM is not?

SRM is not a Financial application SAP R/3 is the financial system of record for most BP applications. Related P2P functions like budget creation, GL postings, GL reconciliations, AFE setup, payment remittances, etc. should continue to be handled in R/3. SRMs seamless integration to R/3 can be leveraged to ensure that boundary and process control functions set up in R/3 are validated as part of the P2P process (budget checks, cost object validations, COA validations, etc.,) SRM is not an Inventory Mgmt. System These applications which traditionally handle inventory management functions should continue to be handled in these applications (SAP_MM) SRMs seamless integration to R/3 and ability to integrate to other legacy applications makes it possible to monitor, check, validate, and integrate inventory demand while establishing your own rules of governance around sourcing execution in P2P.`

SRM is not a Work Management application Those applications which traditionally handle management and planned maintenance of assets should continue to be handled by these applications SRM should be used as a facilitating engine for handling document integration, messaging, process control and document output activities for demand requests which originate from these applications (SAP_MM, SAP_PM, etc.,)
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SRM Business Process Framework

Business Strategy

SRM facilitates the collaborative planning and execution of the supply chain with suppliers in support of the organizations business strategies.
Customer Segmentation Channel Management Product Portfolio Management Sales & Channel Mgmt BTO, CTO, MTS SC Network Design Customer Service Levels Operating Strategic Model Sourcing Business Strategy Capability Core SRM Capability Complimentary SRM Capability Make vs. Buy Spend Profile Strategy Commodity Rationalization Supplier Rationalization

Planning

New Product Introduction Product Lifecycle Management Configuration Management Forecast Management Demand Planning Supply Planning Transportation Planning Supply Chain Planning

Part Rationalization Value Engineering Product / Component Retirement eRFX Negotiation & Dynamic Bidding Supplier Contract Management Management Supplier Management Spend Profile Data Analysis Catalog Purchases Direct Materials Purchases Purchase Receipts

Execution

Procurement Integrated Logistics Inventory Mngmt. Supply Chain Execution

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SRM Technology Characteristics

SRM is poised to capitalize on the extended supply chain opportunity by forming tight interdepartmental and inter-enterprise associations through advanced collaborative processes and technologies.
SRM Enabling Technologies
Automation: Automatic movement and processing of transactions to execute processes with suppliers Integration: Provide a consolidated view of all of an enterprises planning and execution systems as if the enterprise had a virtual enterprise system Visibility: Provide trading partners with visibility of information and process flows in and between organizations. Views are customized by role and aggregated via a single portal view. Collaboration: The sharing of information and the ability for suppliers to input information directly into an organizations virtual system. Optimization: Tools that provide enhanced analytic capabilities that can be accessed within the organization or by suppliers to evaluate the effectiveness of the relationship.
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Supplier Relationship Management (SRM) Enterprise System Framework

Direct Channel
Virtual Enterprise System Sourcing & Procurement Product Lifecycle Mgmt Supply Chain Plan & Exec Supplier

In direct channel

Net Markets

Manufacture

Host Enterprise Sales & Dist HR & Financials W/H Transport Thirdparty Service Providers

Contract Manufacturer

3PL Warehouse s Customer

Potential Savings

Soft Savings
Transaction savings
58% transaction savings from paper to electronic

Hard Savings
FTE reduction
Elimination of XX transactions will reduce Y transactional buyers

Cycle time reduction

50% sourcing cycle time reduction through use of eSourcing tools

Increase # of bid events

Sourcing cycle time reduction enables more spend thru the sourcing process over a given period of time = $ Savings

eInvoice transactions
36% savings in electronic invoice processing

Minimize invoice cycle time

Increase payment discount yields Adjust payables staffing

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SRM Components
Strategic Sourcing
Sourcing analytics Supplier evaluation RFx & auctions Contract management

Operational Procurement
Self-service procurement Plan-driven procurement Services procurement

Supplier Enablement
Supplier portal Supplier connectivity

Content
Content consolidation Catalog content management

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SRM Process Areas

Procurement / Purchasing Direct Procurement Indirect Procurement eProcurement Shopping Cart / Requisition Requestor / Requisitioner Supplier / Vendor Workflow Strategic Sourcing Purchase Order (PO) PO Response Advanced Ship Notice Change Order Receipt / Confirmation Service Entry Sheets Contracts Catalogs Punch-out / Roundtrip Budget checks / commitments Invoices Credit Memos / Debit Memos 2-Way Matching 3-Way Matching Evaluated Receipt Settlement Reverse Auction Sourcing / Bids Categories / Material Groups PCards

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Self Service Procurement

Self-service procurement empowers employees to create and manage their own requisitions for MRO materials and services. This relieves purchasing departments of a huge administrative burden, and it makes the procurement process faster, more cost effective, more user-friendly, and more responsive.

Shopping Cart Creation

Workflow Approval

Operat. Sourcing

Ordering

Goods Receipt

Invoice Handling

SAP Enterprise Buyer

mySAP SRM

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Plan Driven Procurement

Plan Driven Procurement allows us to procure material/service requirements from planning systems, for example Material Requirements Planning (MRP), Plan Maintenance (PM), or Project Systems (PS). A large portion of a company's total procurement expenditure is on materials used in core business processes that are managed by enterprise systems for planning and production. Plan-driven procurement therefore has to integrate supply chain management with e-procurement.

Generate Demand

Sourcing

Ordering

Delivery

Inventory Managmnt

Invoice/ Analysis

SAP Enterprise Buyer

mySAP SRM

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Services Procurement

Compared to procurement scenarios of materials, services procurement is much more complex and by far less standardized. Furthermore demands for services are generally not specified in detail regarding quantity, duration and price until the confirmation of the service performed by the service provider. Services can be consulting, cleaning services, technical services, catering and so on.

Requisition

Order

Order Response

Service Entry

Invoice

SAP Enterprise Buyer

mySAP SRM

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Supplier Selection: Bid Invitations

Sourcing describes a global concept of determining sources of supply, as well as the Sourcing application in mySAP Supplier Relationship Management. The objective of the sourcing concept is the effective selection of a source of supply. If there is no source of supply or if you are looking for new source of supply, you can create a Bid Invitation so that Business partners can submit their quotations within the mySAP SRM

Transfer of requirement

Creation of RFx

Bid Invitation

Awarding the Bid

Follow-on Process

SAP Enterprise Buyer

mySAP SRM

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Supplier Selection: Live Auctions

Sourcing describes a global concept of determining sources of supply, as well as the Sourcing application in mySAP Supplier Relationship Management. The objective of the sourcing concept is the effective selection of a source of supply. If there is no source of supply or if you are looking for new source of supply, you can create a Bid Invitation so that Business partners can submit their quotations within the mySAP SRM. In this scenario the negotiation process takes place online in Live-Auction cockpit

Transfer of requirement

Creation of Live Auction

Bid Invitation

Awarding the Bid

Follow-on Process

SAP Enterprise Buyer

mySAP SRM
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Contract Management

Negotiating tools Prepare contracts (does not include authoring and redlining activities) Pricing conditions Approve and release contracts Controls over usage and visibility (usage by location) Distribution Call off against open contracts Release order tracking Monitoring and Alerts Sourcing Integration Catalog Integration

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Spend Analysis

Global Spend Analysis Generic Spend Analysis Standard Data Extractors from Transactional Systems (SAP, SRM Server, Legacy) Standard Business Content for SRM suite Supports Development of customer views Master Data Mapping Market Data Import from External Sources (Dunn & Bradstreet) Corporate Spend by Product Category Vendor spend allocation Monitor Contract Compliance Monitor Maverick Spend

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Supplier Registration & Selection

Requirements collaboration Vendor Selection Vendor Catalog Integration (internal/externally hosted (Dunn & Bradstreet) using OPI RF(x) Functions Bidding document creation Bid Publication Supplier Registration Online Bid Response Bid Tabulation and Analysis Bid Acceptance Reverse Auctioning Award and Decision Notification Workflow Control Functions Purchasing Document Creation (Purchase Order/Contracts)
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Content Management

Catalog Authoring Tool Load catalog content from external sources using various file formats Load internal data Filtering Classification Enrichment Catalog values check (authorized values) Approval Process Distribution Catalog Search Engine Quick search Advanced Search Navigation thru classification Views Management Contract Integration Special support for Manufacturer part #
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Contracts Contracts get released in SRM Contract data is published to CCM via XI Contract items are displayed and searchable in the catalog and accessible through OCI Product Master Selection of relevant Product Masters in SRM Server Product Master data is published to CCM via XI Product Master data is merged with external data and searchable accessible through OCI

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Example: SRM Main Page

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Example: Shopping cart

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Example: Supplier Self Service

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Example: Catalog

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SRM Business Benefits

Governance:
Policy changes to enable the business case Example: Delegation of Authority

Analytics:
Program metrics to ensure savings are achieved Example: Category Management Reporting

Governance Operating Model:

Operating model enhancements that drive spend under management Example: Centralize Sourcing activites

Processes: Analytics Operating Model

Consistent procurement processes across organization Example: Eliminate standing open purchase orders

Processes

Technology Solutions Technology Solutions:

Technology solutions to enable sourcing and compliance benefits Example: Operationalize contracts through electronic catalogs
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Process Value Drivers

Capability Self Service Requisitioning Services Procurement Component Enterprise Buyer Professional Catalog Content Mgmt Enterprise Buyer Professional Catalog Content Mgmt Supplier Self Service Enterprise Buyer Professional Integration w/ Backend system Bidding Engine Live Auction Cockpit Supplier Self Service CFolders (PLM) Inventory Collaboration Hub (SCM) Supplier Self Service Business Warehouse Value Drivers Compliance Process Compliance Process Compliance Process Sourcing Process Sourcing Compliance Process Compliance Process Sourcing Compliance
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Plan Driven Procurement Strategic Sourcing (RFx) Reverse Auctions Supplier Collaboration

Electronic Invoice and Settlement Spend Analytics

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In Conclusion
Operationally, the value of SRM lies in the collaborative interactions between traditional supply chain domains.
Supply Chain Domain Value Levers
Reduced time to market Reduced SKU proliferation Design and Source Improved content mgmt. Reduce material costs Supplier Relationship Management Improved contract mgmt Source and Plan Improved sourcing forecasts Increased inventory visibility Plan and Buy Improved inventory mgmt. Reduced purchase cost Source and Buy Increased contract compliance Reduced transaction costs **Source: Press articles
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Potential Benefit Areas*

25- 50% lower design cycle time^ 25-50% reduction in parts^ 40-80% savings in eng. admin. time^ 5-20% reduction in material costs 20% increase in labor prod.** 40% lower premium freight-in costs** 25-50% cut in inventory costs** 25-50% cut in inventory costs** 10-30% of non-contract spend**^ 2-5% of contract spend** 60-90% lower transaction costs** ^Source: Accenture experience
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