Supplier Relationship Management Dilip Sadh


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.


Overview of Business Scenarios

The SRM Solution offers capabilities in the following areas :

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Self Service Procurement Service Procurement Plan Driven Procurement Sourcing / Contract Management Supplier enablement Catalog Management Analytics


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.


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.


Service Procurement
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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.


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 .


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.


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.


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


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


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.


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

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Take advantage of the flexibility offered by entering confirmations and invoices through the self-service procurement functionality in SAP SRM


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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