Preparing SRM Customers for S/4HANA Sourcing and Procurement

In the near future, operative purchasing, collaboration with suppliers, and tenders will be processed through a supplier network. SAP S/4HANA in combination with the Ariba Network offers significant benefits.

Since SAP launched SAP S/4HANA, it has become clear that purchasing, supply-chain processes, and collaboration with suppliers could also benefit from the solution. However, this doesn’t mean the immediate replacement of current products such as SAP Supplier Relationship Management (SAP SRM).

“SAP will provide mainstream maintenance for SAP SRM 7.0 until 2025,” explains Kai Finck, senior vice president and head of SAP Ariba Center of Excellence. “But the future is SAP S/4HANA Sourcing & Procurement, which natively integrates SAP S/4HANA with cloud-based SAP Ariba solutions.”

In the meantime, SAP is helping customers transition and realize further potential benefits. The new solution is designed particularly to meet the changing needs of purchasing departments.

Benefits of SAP Ariba with SAP S/4HANA

The following scenarios outline the benefits of SAP Ariba cloud solutions in combination with SAP S/4HANA.

Doing Business with Suppliers

Companies and suppliers can digitalize the source-to-pay process end to end, and across all purchasing categories. A catalog order, for example, is automatically, and electronically forwarded to the supplier in real time. Amendments to the order can be transferred at any time, and the invoices are received electronically. Details such as invoice amount, address, and value-added tax rate are checked automatically.

“This guarantees that the invoice receipt process can be fully automated making paper-based invoices a thing of the past,” explains Finck.

It is estimated that three-quarters of all company invoices are still paper-based, and every fifth one contains errors. The automated process thus reduces the effort for accounts payable, and radically accelerates the overall process. Finck predicts that employees will be able to process three times as many invoices as they have done in the past:

“Furthermore, a quicker process means that approved invoices can be paid quicker, so purchasing companies can claim additional discounts.”

There are also benefits for the suppliers. Compared to the SAP Supplier Self-Service portal that has already been implemented by many SAP SRM customers, the complete service — including the integration of new suppliers — will be offered by SAP on the Ariba Network.

“In our shared service center in Prague and other locations worldwide, it is the main task of over 500 employees to connect new suppliers to the network,” says Finck. There are currently 2.3 million suppliers. SAP Ariba onboards suppliers on behalf of the customer.

“This used to be the job of purchasing departments, but it was often an overwhelming task,” explains Finck. “Nowadays, purchasing defines the priorities, and we get the job done.”

Calling for Tenders in the Cloud

The Ariba Network does not only support the handling of order and invoice processes, but also the entire tender and award process in collaboration with the supplier. Customers looking to place an order for PCs, component parts or services direct their request to the suppliers in the cloud-based Ariba Network, choose the best supplier from the available offers, and finally draw up a contract with them.

Catalogs and Guided Buying

In accordance with the terms negotiated, suppliers are able to publish their catalogs online through the Ariba Network. This reduces the efforts of maintaining procurement catalogs. Ad hoc purchasing will also be possible using spot buy capability. Here, an employee can purchase items from suppliers without the need for a master agreement between the company and the supplier in question.

SAP Ariba solutions ensure compliance with companies’ purchasing policies, and handle the entire process.

“These capabilities have been brought together with guided buying in one user-friendly app, and appeals to employees in the user departments as it helps them flexibly purchase goods and services,” explains Finck.

Optimizing Material Planning

While SAP S/4HANA plans production material demand, the SAP Ariba platform is checking whether the supplier can deliver. “From SAP S/4HANA triggers a process that refers materials to the SAP Ariba Network, which in turn passes the requirement on to the suppliers,” explains Finck.

A benefit of SAP S/4HANA is that the material planning no longer takes place at large intervals, as is still often the case in companies. Instead, it’s event-driven, and takes just a few minutes, so it can take place more than once a day.

“Owing to the volatility of the markets, and the expectations of users, requirements are changing fast,” explains Finck. “For this reason, it’s important to continually adapt production plans to the customer’s needs, and to be able to provide the suppliers with these requirements in real time.”

Through the SAP S/4HANA architecture, these changes can be fed to the suppliers in real time, and adjustments can be made faster than ever before, whilst avoiding any unnecessary effort.

SAP S/4HANA and SAP Ariba: Cutting Costs, Optimizing Processes, Being Compliant

Finck highlights the following benefits of SAP S/4HANA Sourcing & Procurement.

Reduced costs and improved efficiency

The digitalization and optimization of purchasing and accounting processes across all purchasing categories help businesses and their suppliers work better together. This way, companies can work together in real time, and respond flexibly to demand fluctuations.

“SAP S/4HANA Sourcing & Procurement enables you to track goods and cash flows at any time, and manage working capital actively,” explains Finck. “In times of low interest rates, companies have a vested interest in paying their supplies as early as possible through dynamic discounting to obtain further discounts, or to set up supply chain finance programs which safeguard against supplier default risks. Yet this is only efficient if the invoices are electronically available in the system, and if the processes are running in real time.”

Regulatory Compliance

Employees working in company business departments that occasionally use external catalogs for purchasing can rely on this process adhering to company policies. Does the price exceed the allocated limit? Is the employee allowed to buy the selected product? Is the company dealing with a supplier that upholds the same ethical principles, such as zero tolerance of child labor, for instance? Account and master data have already been checked, as have independent supplier ratings, and ratings from other customers.