Supplier Relationship Management

Dilip Sadh

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Supplier Relationship Management ( SRM )
 Part of SAP Business Suite software, SAP SRM offers a comprehensive solution for managing
procure-to-pay operations in large and midsize companies.

 Robust, user-friendly self-service functionality relieves procurement from burdensome administrative

tasks that add little value to the Company.

 Users can shop in internal and supplier- hosted catalogs, create and manage their own requisitions,
approve requests, check status, and follow up on receiving and invoicing processes.

 Integrated with the SAP ERP application, SAP SRM enables centralized control of procurement
operations. With SAP SRM, the procurement department can manage centralized sourcing and
contracts across direct, indirect, and services spend throughout the company.

 The solution features tight backend integration to SAP ERP and personalized role-based user
interfaces that give employees convenient access to exactly the functionality they require.

 Powerful workflow functionality enables transparent and compliant procurement policies.

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Overview of Business Scenarios
 The SRM Solution offers capabilities in the following areas :

 Self Service Procurement

 Service Procurement

 Plan Driven Procurement

 Sourcing / Contract Management

 Supplier enablement

 Catalog Management

 Analytics

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Self Service Procurement
 Self-service procurement functionality empowers every employee in the company to create and
manage their own requisitions with a user-friendly, sophisticated browser-based interface.

 With the application, users can search for goods and services in an online catalog with pre negotiated
and contracted items, add them to the shopping cart, and initiate approval workflow. The approval
workflow results in an approved purchase order being electronically sent to the supplier.

 The application also handles special requests quickly – for example, one-time purchases and
requirements entered as free text and non catalog requisitions.

 Robust workflow functionality routes documents for approval in compliance with approved procurement
policies. For ex : If the value of SC is > the value that the user can spend, the system triggers a
financial approval ( Managers). If SC’s are to be completed by operational purchaser , completion
workflow is triggered.

 If SAP SRM is integrated with your back-end financial solution, confirmation of receipt can
automatically trigger the appropriate invoicing and accounts payable activities.

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Plan-Driven Procurement
 The plan-driven procurement functionality in the application enables companies to integrate operational
procurement processes with back-end SAP or non-SAP planning, operations, and inventory
management solutions .
 The SAP SRM application takes requirements from an SAP or non-SAP plant maintenance application
in the form of purchase requisitions and carries out automatic procurement requirements.
 This lets you centralize procurement processes for demand originating from multiple back-end
systems, driving supplier transactional efficiency and leveraging centralized contracts.
 Can also be integrated to SUS.

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Service Procurement
 SRM supports procurement of Simple Services, Unplanned Services and Procurement of labor.
 Simple Service procurement is similar to procurement of indirect materials and can be done by either
using service master , Catalogs or free text.
 Services procurement can be challenging due to the complexities involved in defining the quantity,
duration, and price of services to be consumed. To facilitate provision for such complexities, SRM
supports procurement of unplanned Services using the limit functionality where a limit of value is
specified and also a validity period. The system verifies the services being confirmed are within the
value limits and the validity period.
 Procurement of external staff is a combination of self service procurement , sourcing and supplier
collaboration scenario.

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Strategic Sourcing
 The Sourcing process enables purchasers to identify and assign sources of supply for procurement
transactions. eRFx and reverse auction are the most commonly used sourcing tools.
 SRM Sourcing – Overview of functionalities
• Demand Consolidation using the Sourcing Cockpit.
• Automatic and manual source of supply identification and assignment.
• Vendor lists and quota arrangement.
• Supplier registration and qualification.
• Online RFx and live auctions
 Sourcing Cockpit : The sourcing cockpit is a purchaser's work list where a purchaser can process
purchasing requirements from the backend ERP system and shopping Carts from SAP SRM that
require a purchaser's action.
 With the help of sourcing cockpit, users can view external requirements, aggregate demand, negotiate
operational and central contracts for operational use in a heterogeneous application landscape and
create PO’s .

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 Bidding Process
 An RFQ can be created for a requisition that does not have a source of supply identified or from an
expiring contract or manually from within the bidding engine.
 Bid Evaluation - After an RFx or a live auction occurs, SAP SRM supports side-by-side comparison of
bids to evaluate proposals based on price as well as delivery times, experience with the supplier,
dependability, and ability to deliver. The completion of the sourcing process results in the creation of
centralized contracts or purchase orders for procurement execution.
 Live Auction Process - Unlike an RFx, where bids are hidden from other bidders, a live auction
leverages market dynamics to drive down costs through direct competition. In this process, selected
suppliers receive an e-mail invitation to participate through the bidding engine functionality of SAP
SRM. Bidders can enter the live auction cockpit and participate in a synchronous live auction.

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Contract Management
 SAP SRM supports centralized contract management and decentralized fulfillment, enabling
procurement organizations to develop central contracts that help drive compliance across the
company.
 A central contract in SAP SRM can be used as a source of supply in parallel, in both SAP SRM and
SAP ERP, providing the opportunity to attain better volume discounts through contract release
aggregation.
 You can manage renegotiation of terms for contracts that are about to expire.
 SAP SRM enables enhanced and improved contract distribution for central contracts through
sophisticated and efficient grouping of contract line items across different locations in the SAP ERP
application.
 Operational Contracts include Product Category and Normal Contracts.
 Make contract updates, online and offline, with user-friendly mass change functionality.

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Supplier Self Services
 SAP SRM features supplier self-service functionality that facilitates supplier collaboration, streamlines
procurement processes, and improves visibility into order and shipment status.
 With the application, suppliers do not need their own solutions to supply goods and services. All that is
needed is direct Internet access to the purchaser’s procurement solution through a Web browser.
 With supplier self-service functionality, suppliers can view purchase orders, send confirmations and an
ASN to the purchaser, and create invoices based on an ASNor on orders. You can collaborate on
purchase orders with supplier response functionality, allow automatic inbound delivery generation and
goods receipt notification, and provide access to catalogs and delivery schedules.
 Supplier self-services also support service item hierarchies and limits.

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Catalog Management
 Catalog Management: This is the process of managing the catalog content that needs to be presented to the end
users. A catalog provides users a list of products and services in an Organized and searchable format.

 Types of Catalogs: The different types of Catalogs are a ) Supplier Hosted b ) Broker hosted and the buyer internally
hosted.
• Supplier Hosted Catalogs: These are catalogs that are hosted and managed by your Suppliers.
• Broker Hosted Catalogs: These are hosted and managed by content aggregators, brokers or the Marketplace.
• Internal Hosted Catalogs: These are Catalogs that are hosted and managed by your own Organization.
 While the Supplier hosted and the broker hosted exists outside the Company’s firewall, the internally hosted
catalogs are hosted and maintained in the Company’s own firewall.

 Round trip or Punch out: After products are selected in the Supplier Catalog , the round trip service automatically
brings the required product details into the shopping cart back into the buying application i.e the shopping cart in the
SRM. The Roundtrip function in SAP is called the SAP Open Catalog Interface (OCI) . The OCI incorporates external
product catalogs into the SRM solution.

 Catalog Strategy – Key reasons :

 The key to an effective spending is to drive the largest possible amount of spending via negotiated Catalogs.
 Cost Savings and Compliance are two key reasons to implement the Catalog Solution in the first place.

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System Landscape
 The following technology components enable the business scenarios in SRM.
 SAP EBP: SAP EBP Promotes Self Service Procurement. It is a Web based solution that facilitates
procurement of direct and Indirect goods and Services.
 Bidding Engine: It is an Internet solution that provides Organizations the ability to strategically source
and obtain prices for goods and services. Tools such as Rfx, Auctions, Reverse Auctions and Bid
evaluations to create bid invitations and auctions.
 Supplier Self Services: SUS is an hosted internet solution that facilitates Organizations to collaborate
with their business partners. A Web browser is all that is required for accessing SUS.
 SAP MDM : MDM as a solution enables Organizations to manage Enterprise and Supplier Content.
 BI : All SRM Analytics are handled in BI.
 XI : XI is a middleware application used to integrate and exchange data between other SAP and non
SAP applications.
 Enterprise Portal or SAP Net weaver Portal : SAP NetWeaver Portal offers a single point of access
to SAP and non-SAP information sources, enterprise applications, information repositories, databases,
and services inside and outside your organization - all integrated in a single user experience.

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Technical Scenarios in SRM
 SRM provides the following technical scenarios for Implementation.

 Classic Scenario

 Extended Classic Scenario

 Standalone Scenario

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Classic Scenario
 In the classic deployment, all materials management documents
(such as purchase orders, goods receipts, service entry sheets, and
invoices) exist in one or more back-end applications.
 SAP SRM supports shopping cart creation and the entry of
confirmations and invoices. SAP SRM then communicates the
information to SAP ERP, which creates the active documents.
 This type of deployment is appropriate if your company wants to:
 Enable a wide user group – including employees from
beyond the procurement department – to enter
requirements expeditiously and with minimal training
required
 Have the procurement department operate solely with
the functionality in the back-end application, without
transferring procurement activities to SAP SRM
 Leverage advanced central contract distribution functionality in SAP
SRM to manage central contracts.

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Extended Classic Scenario
 In the extended classic deployment, you can create shopping carts
and purchase orders directly within SAP SRM before transferring the
data to one or more back-end applications. The purchase order in
SAP SRM is the leading purchase order. The information that is
transferred to the SAP ERP application is not an exact copy of the
purchase order, but a much leaner, read-only version. This copy
supplies the reference needed to create goods receipts, service
entry sheets, and invoices in the back-end application. With this
deployment option, SAP SRM supports the entry of confirmations
and invoices and copies them to SAP ERP.
 With the extended classic deployment, you can leverage extended
central contract management functionality as a source of supply in
SAP SRM.
 This type of deployment is appropriate if your company wants to:
 Use the breadth of the self-service procurement
functionality in SAP SRM
 Confirm and invoice against stock items
 Take advantage of the flexibility offered by entering confirmations
and invoices through the self-service procurement functionality in
SAP SRM

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Standalone Scenario
 In the stand-alone deployment, the entire procurement process is
handled by SAP SRM. The application creates the shopping cart and
all follow-on documents locally.
 Accounting processes (financial accounting and controlling) must still
be handled by back-end applications. However, all validations and
approvals are handled directly by SAP SRM. SAP provides migration
tools to bring materials management data from company applications
into the application product master. This type of deployment is
appropriate if your company:
 Does not have a materials management application, and
you want to handle the entire process within SAP SRM,
integrating only to an accounting application
 Prefers to use the streamlined self-service procurement
functionality in SAP SRM for specific product categories
(typically, indirect materials and services)
 Does not need back-end functionality, such as plant maintenance or
warehousing, for certain product categories, and you want to move
the procurement process for these categories completely out of the
back-end application, making the process quicker.

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Thank You

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