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SAP Solution in Detail SAP Supplier Relationship Management

Realize SavingS in PRocuReto-Pay PRoceSSeS with SaP SRM


EnAblE STRATEgIc PRocuREMEnT To Add VAluE To YouR coMPAnY

The SAP Supplier Relationship Management (SAP SRM) application supports fully integrated procure-to-pay processes for goods and services. With the application, you can optimize the efficiency of your procurement processes and centralize sourcing and contract management activities. SAP SRM provides robust integration to your companys software and can connect to relevant data and processes in your SAP ERP application. It enables you to cut costs and improve the management and performance of your procurement operations; empower users with flexible, role-based access and definitions; and provide clear insight into spend and supplier data.

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Slashing Costs and Saving Time Automate Procurement Processes with SAP SRM Efficiency in Operational Procurement Self-Service Procurement Shopping carts Supplier Selection and communication budget, In-Stock, and Real-Time Availability checks Approving or Rejecting Shopping carts Services Procurement collaborative Service Requisitioning Services Sourcing Service confirmation and Supplier collaboration Plan-driven Procurement Improve Efficiency, compliance, and Quality Standards Procurement cards Purchase order Management Receiving and Returns Invoice and credit-Memo Processing Payment and Accounting operational Reporting catalog Management Centralized Sourcing bidding Process live Auction Process bid Evaluation

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Centralized Contracts contract development contract Execution and Monitoring Efficient Supplier Connectivity Supplier collaboration Supplier Self-Services Supplier Qualification and Evaluation Deployment classic deployment Extended classic deployment Stand-Alone deployment one-client deployment Benefits of User-Friendly Procurement Reduce Process costs, Accelerate cycle Times deepen and Enrich Supplier Relationships Act Strategically with data Visibility Reduce Total cost of ownership, unify Solutions and data learn More About SAP SRM Quick Facts

SlaShing coStS and Saving tiMe

EMPoWER EMPloYEES And STREAMlInE PRocuRE-To-PAY PRocESSES

companies in all industries are looking to procurement operations to reduce costs, increase efficiency, and make a positive impact on the bottom line. At the same time, procurement faces unique challenges in supporting critical company operations and making sure youre open for business. Procurement department resources are consumed by users across the company for routine tasks from ordering office supplies to maintenance, repair, and operation (MRo) items and services such as machine parts and janitorial labor. With traditional procurement operations, paper-based processes are slow, error-prone, and costly. Transaction costs are often extremely high compared with the value of the goods and services purchased. Frequent errors and maverick buying create inefficiency. Manual and nonintegrated systems impede transparency, preventing corporate decision makers from understanding the impact of procurement choices and making it difficult to consolidate procurement power across the company. Many organizations have centralized procurement operations to improve efficiency and performance and cut costs. but if procurement is consolidated without the technological support needed to automate and manage processes, business operations can be adversely affected. Without streamlined integration and automated processes, procurement resources are taxed by

activities such as processing requisitions and answering status queries. Automating transactional and rote processes frees the procurement department to focus on more strategic, valueadded activities such as timely sourcing procedures, contract execution, and the identification and tracking of new suppliers. The SAP Supplier Relationship Management (SAP SRM) application can help organizations like yours cut procurement costs, improve effectiveness, and enable the department to make more value-added contributions to the business. Part of SAP business Suite software, SAP SRM is an integrated procure-to-pay solution that automates core procurement processes (see Figure 1). With its customizable user interface, flexible role definitions, and powerful functionality, SAP SRM provides clear insight into spend data and helps optimize the efficiency of your procurement operations.

Automate Procurement Processes with SAP SRM


SAP SRM offers a comprehensive solution for managing procure-to-pay operations in large and midsize companies. Robust, user-friendly selfservice functionality relieves procurement from burdensome administrative tasks that add little value to the company. The application makes procurement processes faster, cheaper, and more user friendly. 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 back-end integration to SAP ERP and personalized role-based user interfaces that give employees convenient access to exactly the functionality they require. Power ful workflow functionality enables transparent and compliant procurement policies.

Requisition and purchase order management Supplier Centralized collaboracontracts tion SAP SRM Centralized sourcing Supplier qualification and evaluation Spend reporting

Figure 1: SAP Supplier Relationship Management

SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

efficiency in oPeRational PRocuReMent

ExcEllEncE In PRocuRE To PAY

operational procurement functionality in SAP SRM enables automated and efficient procurement processes for direct and indirect materials and services. With the application, you can reduce cycle times and costs for key procurement performance indicators such as requisition-to-purchase order time. You can also automate compliance with purchasing policies and contracts. The functionality in SAP SRM

also facilitates procure-to-pay activities and enables efficiencies resulting in cost savings and contributing to your RoI (see Figure 2). 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.

Service procurement functionality facilitates a range of activities, from the procurement of routine maintenance services to more complex project services. For example, with SAP SRM, you can perform collaborative requirements definition with suppliers; create sourcing, time, and delivery-based purchase orders; and use receipt and invoice management functions.

Chief procurement officer Supplier manager


Supplier evaluation and collaboration Procure-to-pay management Supplier qualification Procurement Supplier Catalog Supplier onboardmanageevaluation ing ment Employee Supplier review feedback Suppliers SelfOrder registra- collaboration tion Bid creation and submittal Order collaboration Service entry Invoice collaboration Tracking Goods Demand of demand and sercreation satis- vices confaction firmation Demand planning and creation Goods Shopping Returns and sercart managevices concreation ment firmation Source assignment RFx* processing and awarding Contract execution Centralized contract repository Source assignment Purchase order processing Policy automation Source- Demand of-supply aggregatracing tion Definition of sourcing guidance Contract creation Contract distribution Contract compliance Operational reporting

Sourcing professional
Centralized sourcing

Contract manager
Centralized contract management

Professional buyer
Requisition and purchase order management

*Request for information, request for quote, or request for proposal Figure 2: Comprehensive Procure-to-Pay Automation with SAP SRM

SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

Plan-driven procurement functionality enables the transfer of demand generated from planning, maintenance, and project systems to SAP SRM for efficient and streamlined processes. The application facilitates and enables centralized sourcing, contract utilization, and procurement processes.

and initiate approval workflow. The approval workflow results in an approved purchase order being electronically sent to the supplier. creating requisitions and purchase orders with SAP SRM is straightfor ward and efficient. After the users add items to a shopping cart, the solution automatically generates requisitions and routes them through the approval process. upon approval SAP SRM creates purchase orders and dispatches them to suppliers over the Internet, without the delay or expense of additional user intervention. Employees can manage their own purchase orders in line with company rules, with catalogs of the most frequently ordered services and materials. Purchases can be restricted to approved suppliers and established business rules to enforce limits for individuals and departments. The solution continuously monitors spending, giving managers and executives greater visibility. Robust workflow functionality routes documents for approval in compliance

Self-Service Procurement
The self-service procurement functionality in SAP SRM empowers all company employees to create and manage their own requisitions with a userfriendly Web interface (see Figure 3). SAP SRM helps ensure that employee transactions comply with purchasing policies and triggers internal controls via a powerful role-based workflow. This process reduces the procurement departments administrative burden and delivers efficiency and compliance by streamlining and standardizing the process across the globe. With the application, users can search for goods and services in an online catalog with prenegotiated and contracted items, add them to the shopping cart,
SAP SRM
Your company Purchase request Create shopping cart

with approved procurement policies, helping ensure complete transparency and automation of governance. Employees can check the status of their orders at any time and confirm receipt from their desktops. Managers and other approvers can review and approve requests via e-mail. users can perform accounting and budget validation activities, commitment updates from the back-end costing application, and stock availability checks from the back-end inventory application. The application also handles special requests quickly for example, one-time purchases and requirements entered as free text and noncatalog requisitions. connectivity with electronic marketplaces allows your company to find new suppliers and obtain more competitive prices. And if SAP SRM is integrated with your back-end financial solution, confirmation of receipt can automatically trigger the appropriate invoicing and accounts payable activities. Shopping carts users start the purchasing process by creating a shopping cart in SAP SRM.

Approve shopping cart

Create purchase order

Enter goods receipt

Verify and approve invoice

Process payment

Supplier

SAP ERP

Confirm purchase order

Send advance ship notice

Ship goods

Create invoice request

Figure 3: Self-Service Procurement

SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

You can search for products in catalogs, use predefined shopping cart templates for repetitive orders, enter a request using descriptive free text for noncatalog items, or enter master product numbers. Administrative assistants can shop on behalf of their managers or a specific group of employees. The application is flexible to meet the needs of individual employees. SAP SRM notes a users most common method for finding something to buy for example, ordering from a catalog and automatically offers that method at the next logon. once you have filled your shopping cart, you can order the products right away or hold the purchase for completion at a later time. Integrated with your master-data solutions, the application improves productivity and accuracy with data fields prepopulated from the configuration of the master data and catalog. users can change information such as ship-to addresses and accounting assignments, improving efficiency for procurement operations that are centralized for a geographically distributed group of employees. SAP SRM facilitates oversight and control of procurement activities. If a shopping cart is incomplete or contains a noncatalog free-text request, the cart is routed to a professional buyer work queue for attention. The buyer can then fill in the missing details, assign a source of supply before further approval, and generate a purchase order. Purchase orders can be configured to request a confirmation and delivery notice response from the supplier.

Limit Shopping Carts Self-service procurement functionality in SAP SRM supports limit shopping carts, which have a value limit and validity period. This makes sense when you are buying office supplies or placing small service orders and need to cap costs according to a budget. Receipt confirmations and invoices can be limited to help ensure cost compliance. You can create internal and supplier-visible attachments to expedite processes. For example, you can provide suppliers with detailed technical descriptions of the item you want to purchase, or give internal approvers additional information about the request. Supplier Selection and communication SAP SRM enables you to improve supplier collaboration and self-procurement processes by communicating required delivery schedules to suppliers. These schedules are entered as delivery schedule lines for an item in the purchase order. When converting a shopping cart to a purchase order, purchasers can add and verify all the necessary supplier data. If a supplier hasnt been determined yet, purchasers can use sourcing features and functionality to find reliable suppliers quickly for example, through the vendor list of evaluated suppliers. or, purchasers can issue different kinds of requests to suppliers such as request for information (RFI), request for quote (RFQ), or request for proposal (RFP). (RFx is used to refer generally to these three different types of requests.) Multiple members of a team can jointly create and manage a shopping cart with teambased purchasing functionality.

budget, In-Stock, and Real-Time Availability checks SAP SRM helps you stay within your budget, verify if items are in stock, and verify availability with suppliers in real time. For example, the application can check the back-end financials application for budget limits on submitted carts. If the budget is exceeded for an item, SAP SRM sends a message, and the item can be changed in the shopping cart. budget checks can take place at different points in the process: when a shopping cart is created, at the approval stage, or when the purchase order is created. When a stockable item is ordered, SAP SRM first tries to obtain it from stock before triggering a process to procure it from an external source. With SAP SRM, users can check product availability in real time, making procurement highly efficient and avoiding costs for items that are already stocked. Approving or Rejecting Shopping carts When a user releases a shopping cart for ordering, SAP SRM checks whether an approval is needed. The application triggers a workflow based on the data in the shopping cart who is buying what and the preconfigured settings that enforce the purchasing policy and approval limits. different criteria can initiate an approval workflow, including product category or the total value of a shopping cart. Managers can review shopping cart and budget details, approve or reject shopping carts, and add comments. If

SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

one or more managers need to approve a shopping cart, the application submits the cart for approval automatically. Automated work item notifications can be sent to employees to alert them of shopping cart submission issues. Supervisors can approve shopping carts online via e-mail, PdAs, and blackberry devices, and with desktop approval widgets. You can change the approvers, add additional approvers, and add reviewers to your approval process using the approval preview area of the shopping cart, the shopping cart status area, or the in-box. You can add or change approvers to cover for managers on vacation, helping ensure that processes continue without interruption and accelerating the procurement cycle.

range of services commonly used across major industries such as timebased and deliverable-based services. This includes service demand that originates in your back-end SAP ERP application. With supplier enablement, sourcing, contract management, and procurement functionality, the application enables you to improve services procurement activities and establish cost-saving measures. SAP SRM helps facilitate and coordinate services-supplier collaboration: define and price services and bid for the best supplier based on cost, availability, and other terms (see Figure 4). The result is an increase in the speed and visibility of the services procurement process. With the application, you can drive business value across the company and streamline the procurement of services with enhanced RFx functionality. collaborative Service Requisitioning With service requisitioning, a service requirement is driven by the plant maintenance or project system. The service
Supplier

description is taken from the model service specification, and companies can also specify a limit for unplanned services. The service requisitions are then automatically transferred from SAP ERP into the sourcing cockpit in SAP SRM. The hierarchical structures of requisitions in SAP ERP are maintained in SAP SRM. Services Sourcing In the sourcing cockpit, purchasing professionals can aggregate demand, assign sources of supply, and conduct sourcing events. An RFx is created based on an external service requisition in the SAP ERP application. The userfriendly interface enables users to navigate the entire hierarchy or just a portion of it. You can also modify original service hierarchy structures by adding lines and sublines. Item numbering functionality is flexible, enabling purchasing professionals to personalize numbering schemes. When replying to an RFx, bidders are able to conduct expressive bidding and propose alternative, substitute,

Services Procurement
Services procurement can be challenging due to the complexities involved in defining the quantity, duration, and price of services to be consumed. SAP SRM helps you manage procurement resources and monitor costs for a wide
Your company Sourcing cockpit

SAP SRM

RFx

Sales order

Confirmation

Invoice

SAP ERP

Your company Work order from project applications Purchase request Contract Purchase order Service entry Invoice

Figure 4: Services Procurement

SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

or supplemental services. This functionality applies to line items and is utilized only if authorized by the purchasing professional. The model service specifications in SAP ERP can also be shared with the catalog for the SAP SRM application. Functionality for the catalog for SAP SRM is provided by the SAP netWeaver Master data Management (SAP netWeaver MdM) component and includes master data and catalog management functionality. When maintaining an RFx, the purchasing professional transfers outlines, including the entire hierarchical structure, from the catalog into the RFx. The bidder also transfers items from a catalog into the RFx response if adding further items is allowed. An awarded RFx response is then uploaded to the catalog for SAP SRM. once an RFx has been awarded to a supplier, a purchase order is created in the back-end SAP ERP application. This includes any items that had been modified during the bidding event.

Service confirmation and Supplier collaboration SAP SRM enables collaboration on services-related documents with supplier self-service functionality, empowering your suppliers to take a more active role in the process and helping build stronger relationships with valued business partners. The application enables you to maintain confirmations, or service entry sheets, for services per formed. Purchase orders containing service items, along with their hierarchies and limits, can be transferred and processed by the application. You can also create purchase orders containing service items and their hierarchies and limits. Suppliers can create advance shipping notifications for both services and materials. The application automatically generates confirmation messages and service entry sheets to move the process along and help ensure transparency. Suppliers can enter unplanned services manually or select from a catalog based on a limit entered in an SAP ERP purchase order. Suppliers can also

maintain invoices for services per formed based on an accepted confirmation.

Plan-Driven Procurement
The plan-driven procurement functionality in the application enables companies to integrate operational procurement optimization processes with back-end SAP or non-SAP planning, operations, and inventory management solutions (see Figure 5). With SAP SRM, it is possible to integrate incoming demand signals generated by SAP and non-SAP applications for plant maintenance, project management, and production planning. This lets you centralize procurement processes for demand originating from multiple back-end systems, driving supplier transactional efficiency and leveraging centralized contracts. 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.

SAP SRM

Your company Sourcing* cockpit Demand aggregation RFx

Supplier Sales order Confirmation Invoice

SAP ERP

Your company Work order from project applications Purchase request Contract Purchase order

*If source of supply needs to be determined Figure 5: Plan-Driven Procurement

SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

Purchasing teams can leverage a range of sourcing functionality in SAP SRM to efficiently aggregate demand and find optimal sources of supply. by integrating with core logistics operations, SAP SRM helps companies address direct materials procurement, which often forms a significant proportion of overall spend. Follow-on documents can default to an advance shipping notification. Improve Efficiency, compliance, and Quality Standards With contract compliance functionality, plant maintenance, production, and quality planners can purchase direct materials and MRo goods at the locations where demand is generated and

at correct pricing and terms. SAP SRM also increases efficiency and cost savings for direct material-related spot bids and supplier selection needs. Plan-driven procurement functionality enables you to increase the scope and depth of compliance by capturing and automating exception situations (see Figure 6). You can decrease prices for spot buys by sourcing a competitive offer even in a rush-order situation. Improve the quality of the end product while sourcing under time pressure by maintaining quality standards. Increase delivery reliability for customer orders by speeding up the sourcing process (in case of material shortages).

Procurement Cards
Procurement card functionality simplifies the procurement of low-cost MRo items and office supplies, and has become a common self-service procurement payment method. Procurement cards can be issued to employees electronically, and a hard copy can be provided as well. With procurement card functionality, employees can make their own procurement decisions, subject to built-in limits and controls. This eliminates the need for an approval process. A single invoice is sent to the user organization at the end of each month, and SAP SRM reconciles the total amount with the

SAP and Non-SAP Applications Third-party order processing (for example, sales and distribution and materials management functionality in SAP ERP) RFC* Plant maintenance (for example, project management functionality in SAP ERP) Project systems (for example, project systems functionality in SAP software) Planning and materials management (for example, non-SAP applications) XML

RFC

RFC

SAP SRM Purchasers work list (sourcing cockpit) Centralized contracts Purchase orders Bidding and auctions

*Remote function call Figure 6: Integration to Multiple Back Ends for Plan-Driven Procurement

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SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

back-end solution in a single operation. As a result, individuals in the organization no longer need to enter individual goods receipts or invoices. The procurement card functionality in SAP SRM makes procurement even more efficient. It provides your company with control over procurement card use, enables more efficient transaction processing, and provides an effective way to pay for purchases made online.

and order posted. You can display basic details of the order by navigating directly from the requisition.

Receiving and Returns


SAP SRM enables a range of powerful receiving and return functionality. You can allow more individual control or instead, centralize processes according to the requirements of your organization. When goods are delivered or ser vices rendered, the solution creates a confirmation. desktop-receiving functionality automatically sends confirmation receipts to employees. Individuals can create confirmations for items in their shopping carts and display and process confirmations. When confirming services performed, employees can refer to limit purchase orders. An internal dispatcher or receiving department can receive goods and create confirmations for them centrally. For example, an administrative assistant can process confirmations for an entire department. The application lets you put confirmations on hold for temporary or incomplete orders and gives you the option of automatically creating a follow-on document when you confirm. If desired, suppliers or service providers can also confirm the delivery of goods or performance of services.

Purchase Order Management


upon receiving shopping cart approval, the SAP SRM application automatically creates a purchase order and transmits it to the supplier. Purchase orders can be created in SAP SRM or the backend SAP ERP application, depending on the deployment model selected. If the item required is likely to be in stock, the back-end application can create a reservation. For items that need to be sourced externally, the back-end application converts the purchase requisition into a purchase order and transmits it to the supplier. Employees are alerted when a purchase order has been sent to the supplier. You can check the status of an order at any time in the workflow process. order status examples include shopping cart created, shopping cart approved, shopping cart approved with gaps or errors and sent to procurement department,

The SAP SRM application can help organizations like yours cut procurement costs, improve effectiveness, and enable the department to make more value-added contributions to the business. Part of SAP business Suite software, SAP SRM is an integrated procure-to-pay solution that automates core procurement processes.
SAP SRM also helps you catch mistakes made during the creation of a confirmation and make corrections with partial cancellations on individual lineitem levels. If items are delivered below quality standards, the application lets you return the items with an explanation of the reason for return and specific instructions to the supplier for resolving the issue.

SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

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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. The application makes procurement processes faster, cheaper, and more user friendly.
Invoice and Credit-Memo Processing
decentralizing invoice and credit-memo handling activities reduces the workload for accounting and other departments. With the SAP SRM application, employees, accounts payable clerks, suppliers, and service providers can display and process invoices and credit

memos. If suppliers choose not to have invoices created automatically by an electronic message, they can create invoices manually, based on goods receipt or service entry. With the application, purchasers can approve invoices using a workflow process. SAP SRM functionality supports tax withholding, along with making changes to invoice posting dates and currencies. The solution allows the simulation of a financial invoice and the creation of subsequent debits and credits for an invoice that requires correction after it has posted. users can enter an invoicing party if the invoice was sent from a different party than the supplier. You can also enter invoices that do not have corresponding purchase orders and credit memos that do not reference a purchase order for example, invoices for goods with a low purchase value. A corresponding purchase requisition or confirmation is not required. SAP SRM supports the evaluated receipts settlement process, an automatic settlement procedure based on confirmations. The procurement organization must have an agreement with the supplier under which the supplier does not create an invoice for each order transaction. Instead, the solution automatically posts an invoice document based on the purchase order and confirmation and sends the document to the supplier electronically. This eliminates invoice variances and communication errors, and speeds the completion of

transactions. With the evaluated receipts settlement process, the solution can also automatically generate credit memos if goods are returned.

Payment and Accounting


once a supplier approves an invoice, the payment process begins and is completed according to the agreed upon terms, either through an automated remittance or in the traditional manner with a paper-based remittance. Accounts payable processing takes place in the SAP ERP application, which transfers the payment information to the accounts payable or general ledger. SAP ERP checks the amounts and determines the accounts to be posted, and then creates accounting and controlling documents and reduces commitments.

Operational Reporting
Working with the SAP netWeaver business Warehouse (SAP netWeaver bW) component, a data warehouse solution, SAP SRM provides sophisticated reporting functionality. SAP netWeaver bW is part of the SAP netWeaver technology platform, which powers SAP SRM. operational procurement analysis helps analyze purchasing data for procurement processes. This includes reports that let cost center managers monitor purchases in their departments, monitor budget utilization, analyze maverick buying, and so on.

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SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

The SAP SRM application enables increased visibility and transparency, for better oversight and control of purchasing activities. With the reports, users at different levels can monitor purchasing, drill down to details for individual shopping carts, and aggregate data by category, product, or requester. SAP SRM lets you make operational checks of individual procurement behaviors and strategic evaluations of spend data. Powerful query functionality enables users to search and access transactional documents. The application provides role-based access with a userfriendly interface to query and access documents across the SAP SRM
Source of Information Catalogs, products, and hierarchies from suppliers

application and other integrated company applications. Advanced users can create custom queries for frequently tracked transactions.

Catalog Management
Electronic catalogs and shopping cart functionality drive user adoption by making available a rich, user-friendly repository of products. Integrated with SAP business Suite, SAP SRM works with the catalog for SAP SRM, which is powered by SAP netWeaver MdM, to offer sophisticated master data and catalog management functionality (see Figure 7).

Robust administration functionality enables catalog managers to costeffectively load, review, and manage access to supplier catalogs. Suppliers may provide catalogs in xMl or simple Microsoft Excel spreadsheets. catalog managers can import catalog data and use sophisticated data management tools to map the catalog items to a companys product schema. Standard schemas such as the united nations Standard Products and Services code (unSPSc) and ecl@ss are supported, as are custom schemas. Advanced functionality allows complex data mapping of catalog items with multiple product schemas within SAP SRM and integrated back-end solutions for data harmonization. Product information can be enriched with images, attachments such as detailed product specifications, and brochures, further encouraging user adoption. Workflow approval allows control over catalog activation and usage for purchase transactions. other sources of supply such as contracts and records can be imported and offered to users for a one-stop shopping experience. catalog managers can control employee access to catalogs with role-based permissions and catalog views that can be restricted to authorized users. Managers can format catalog search fields and configure the user interface to sort and display fields such as item details. With open catalog interface functionality, access to catalogs can be provided from multiple solutions.

Procurement System

Search items in catalog

catalog
Products, contracts, and suppliers from SRM back-end system Mapping and enriching imported product content Use catalog items in procurement, for example, transfer to shopping cart

ocI* interface

Purchasing information records and contracts from ERP back-end system

Ordering items from the catalog for SAP SRM creates purchase order items (and updates the SRM contract)

*open catalog interface


Figure 7: Catalog for SAP SRM (Powered by SAP NetWeaver Master Data Management)

SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

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centRalized SouRcing

IncREASE EFFIcIEncY WITh onlInE nEgoTIATIng

negotiating better purchase terms is the cornerstone to delivering cost savings. To improve centralized sourcing efficiency, SAP SRM helps aggregate demand, decrease cycle time, and increase visibility via efficient online bidding, auctions, and RFx. Electronic RFx and reverse auctions help you achieve savings and increase supplier participation and transparency. You can assess the capability levels of suppliers, understand market pricing, collaborate effectively, and select the best suppliers for your needs. The end result is improved supply base management and supplier collaboration. SAP SRM supports integrated supplier negotiation and award processes. demand data from SAP SRM and multiple SAP ERP applications are aggregated and sourced for follow-on contract and purchase order execution. The application enables initial bid preparation, electronic RFx and reverse auctions, bid evaluation and supplier selection, and the creation and management of centralized contracts. Tight integration between sourcing and operational procurement in a heterogeneous application landscape enables you to simplify sourcing across the company by aggregating demands from multiple SAP ERP applications. With the SAP SRM, you can negotiate central contracts for operational use in a heterogeneous application landscape. With SAP SRM, you can improve supplier evaluation and status visibility, drive change using collaboration tools,

and make awards based on a combination of price and nonprice variables. The application supports multiround processing, online and offline monitoring and maintenance, weighting and scoring, lotting, versioning, and bidding in different currencies. The following sections describe the sourcing cockpit functionality in SAP SRM in greater detail.

Bidding Process
SAP SRM helps companies achieve savings by conducting online bidding events and issuing RFx. using the applications RFx functionality, companies can invite qualified suppliers to submit proposals for supplying goods and services per the specified requirements. Procurement professionals can use the sourcing cockpit to view purchase requisitions originating from SAP SRM and other integrated applications, such as SAP ERP. You can configure SAP SRM to support automated sourcing without the need for procurement professionals to process the requirement in the sourcing cockpit. For example, an RFQ is automatically created from a purchase requisition in SAP ERP. An RFQ can be created for a requisition that does not have a source of supply identified or from an expiring contract. Procurement professionals can aggregate requirements, identify sources of supply, manage quota arrangements among suppliers, and invite suppliers to

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SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

register and participate. Suppliers can self-register online, indicate categories they are interested in, and provide additional categoryspecific information. When creating an RFx, the procurement team can enable multiple rounds of bidding. You can permit suppliers to confirm their participation in the event and modify their responses and bids, including changes to lot line items. Surrogate bidding functionality is available for cases where the supplier cannot bid directly within the SAP SRM application. The solution also supports bidding in alternate currencies. users can collaborate with suppliers during the bidding process to finalize specifications and prepare documents. For example, the application supports design collaboration through integration with the collaboration Folders application.

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. The procurement team can configure information for bidders using a variety of auction types, such as dutch auctions or auctions with rank-only or blind bidding. You can allow proxy and surrogate bidding and can enable suppliers to lot bids, provide bids in alternate currencies, and provide factored-cost bidding. The application allows bidders to monitor bidding activity, conduct live chat with suppliers, and place bids. The pro-

curement professional can see real-time information on the sourcing cockpit. new bid information is immediately updated in user-interface displays such as charts and current price tables.

Bid Evaluation
After an RFx or a live auction occurs, SAP SRM supports robust bid evaluation, including functionality for weighted score analysis. The application enables 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 (see Figure 8).

SAP SRM

Your company Request aggregation RFx Auction Supplier award

Your company

SAP ERP

Purchase request

Purchase order

Contract

Figure 8: Centralized Sourcing

SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

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centRalized contRactS

dRIVE conTRAcT coMPlIAncE AcRoSS ThE coMPAnY

Electronic catalogs and shopping cart functionality drive user adoption by making available a rich, userfriendly repository of products. Integrated with SAP business Suite, SAP SRM works with the catalog for SAP SRM, which is powered by SAP netWeaver MdM, to offer sophisticated master data and catalog management functionality.

SAP SRM supports centralized contract management and decentralized fulfillment, enabling procurement organizations to develop central contracts that help drive compliance across the company. contract parameters can be made available to all business units, helping users throughout the organization secure the most favorable terms and conditions. A central repository for central contracts is available in SAP SRM and multiple back-end SAP solutions. Powerful contracts functionality helps procurement organizations optimize contract setup and utilization, with tools for managing changes to the contracts.

With the application, you can set up complex discount types for procurement contracts such as value discounts, quantity stepladder discounts, group discounts, and rebates based on accumulated release values. 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. Make contract updates, online and offline, with user-friendly mass change functionality.

Contract Development
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. during contract creation, procurement professionals can leverage existing contracts, saving time and helping ensure compliance to standardized contract terms and best practices. Rule-based approval workflow and version control drive the contract-authorization and contractrelease strategy, which enhances the procurement departments ability to enforce contract compliance and promote contract usage.

Contract Execution and Monitoring


contract execution presents serious challenges including the following: Enforcing compliance with negotiated terms Availability of contracts for local purchase organizations to reduce contract creation time and maintenance Managing discounts based on company-wide contract usage Time-consuming contract maintenance SAP SRM streamlines the centralized contract execution process by distributing contracts from a central contract repository to one or more SAP ERP applications (see Figure 9). The contract data, which is relevant for a source-ofsupply determination, is sent to SAP

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SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

ERP where it can be used as a source of supply. based on goods or services required, SAP SRM identifies the optimal contract for the request, taking into account price, delivery time, volume, and location. After distribution and release, values are transferred back to SAP SRM. harmonized contracts between SAP SRM and SAP ERP leverage contract hierarchies, release-based rebates, and discount across contracts. SAP SRM enables you to leverage conditions across contract hierarchies to offer the most optimal discounted price across all procurement departments. Real-time rebate calculations and the ability to immediately transfer contract items to the master data management catalog help ensure that all employees only use contracted items, eliminating maverick off-contract purchases. before purchase orders are
Your company

processed in the back-end application, SAP SRM is called for price calculation. You can optimize contract utilization and cost reductions with SAP SRM, as the application consolidates contract compliance accumulators and tracks contract usage and call-offs across SAP SRM and other applications connected, including multiple SAP ERP applications. SAP SRM offers flexibility in setting operational contracts and allowing payment terms and currency at the distribution level, multiple alert thresholds for expiration dates, and target or released values or quantities. Exchange rate thresholds on the contract level help control and mitigate currency fluctuation risk. With its automated contract compliance functionality, the SAP SRM application helps organizations extract the most value from negotiated contracts.

SAP SRM

Contract

Purchase order

Your company

SAP ERP

Manufacturing resource planning run

Purchase request

Purchase order

Figure 9: Centralized Contracts

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efficient SuPPlieR connectivity


IMPRoVE SuPPlIER RElATIonShIPS

Improved connections with suppliers help you reduce efforts for procuring goods and services, and managing and controlling relationships with suppliers. Enhancing communication with suppliers helps you define requirements more accurately and align resources to the requirements more closely. deeper supplier relationships can lead to reduced costs, faster cycle times, and higher-quality materials a win-win situation.

can share reports with suppliers, such as contracts due to expire, histories of order values, supplier evaluation reports, and lists of consignment stock at the customer location. SAP SRM facilitates collaboration with suppliers for complex service-order definition, bidding, and auctions. Supplier users can view RFx details, offer counterproposals, confirm bids, and use online chat functionality for clarifications. Supplier Self-Services SAP SRM features supplier selfservice functionality that facilitates supplier collaboration, streamlines procurement processes, and improves visibility into order and shipment status. The functionality integrates suppliers into the procurement process and reduces the costs of procurement cycles by improving the exchange of business documents and shortening the time it takes to process the content of these documents. 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 purchasers procurement solution through a Web browser. Suppliers can react rapidly to order functions received from the host. Suppliers register and provide any

Supplier Collaboration
companies intent on maximizing operational efficiency for procurement transactions need to extend automation and electronic processes to the supplier stakeholders. SAP SRM enables collaboration between employees, professional procurement staff, and suppliers for all phases of procurement processes including collaboration for complex requisitions, sourcing, order management, and invoicing. Supplier selfservices functionality supports and enhances relationships while making integration with suppliers of all sizes economical and manageable. Suppliers can access orders from their customers with a Web browser inter face and perform follow-on tasks such as creating an order response, advance ship notice, invoice or credit memo, or reviewing goods and service confirmations. With SAP SRM, you

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SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

additional information you request regarding the category of goods or services they provide. Suppliers must be approved before being activated to collaborate on transactions. The procurement administration team can assign advanced capabilities to specific suppliers, authorizing them for activities such as managing their own data and submitting invoices. Suppliers can inform you about packaging and shipments just executed through an advance shipping notification (ASn). With supplier self-service functionality, suppliers can view purchase orders, send confirmations and an ASn to the purchaser, and create invoices based on an ASn or 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. Enable order management with response modification functionality to fill purchase requisitions. Supplier self-services also support service item hierarchies and limits.

Supplier Qualification and Evaluation


SAP SRM helps procurement operational teams manage supplier relationships more effectively with tools to assimilate supplier data, measure

operational procurement functionality in SAP SRM enables automated and efficient procurement processes for direct and indirect materials and services. With the application, you can reduce cycle times and costs for key procurement performance indicators and automate compliance with purchasing policies and contracts. SAP SRM facilitates procure-topay activities and enables efficiencies resulting in cost savings and contributing to your RoI.

performance, and drive optimal supply base decisions. You can access supplier information from sourcing cycles and quantitative data from procurement transactions such as purchase orders, goods receipts, and invoices. Perform supplier analysis with qualitative information and feedback from multiple stakeholders. SRM provides Web survey functionality to collect data from users through the various steps in the procurement process for example, information on the packaging quality of goods during the goods receipt process. You can also use Web surveys to gather supplier data. Supplier managers can monitor surveys, and automated reminders and e-mail invitations make the data collection process efficient. You can set up key performance indicators such as price, service level, and quality in a hierarchal, weighted structure. Quantitative and qualitative Web survey information is interpreted in SAP netWeaver bW, producing consolidated supplier evaluation scores based on the weightings. If desired, you can allow suppliers to access this data to promote joint performance management.

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dePloyMent

dEPloY SAP SRM To SuIT YouR oRgAnIzATIonS nEEdS

SAP SRM supports several types of deployment to suit your organizations needs. depending on your choice of deployment, follow-on documents are created in SAP ERP or directly in the SAP SRM application.

Classic Deployment
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 preentry 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

The self-service procurement functionality in SAP SRM empowers all company employees to create and manage their own requisitions with a user-friendly Web interface. SAP SRM helps ensure that employee transactions comply with purchasing policies and triggers internal controls via a powerful role-based workflow.
Extended Classic Deployment
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

Stand-Alone Deployment
In the stand-alone deployment, the entire procurement process is handled by SAP SRM. The application creates

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SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

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. An added benefit is increased performance, because you need fewer remote function calls to the back-end application. 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

Wants to continue to procure some items (such as direct materials and services) using the materials management functions of your back-end solution

One-Client Deployment
The one-client deployment of SAP SRM suits companies that would like to implement the simple procurement functionality of SAP SRM without a separate installation of the SAP SRM application. This deployment option is focused on low total cost of ownership (Tco) and operates within your backend SAP ERP application. It is only available if you have a single instance of SAP ERP and do not have any plans to integrate SAP SRM functionality with multiple instances of the SAP ERP application. This type of deployment is appropriate if your company wants functionality to enable: Services procurement for external staffing and RFx Self-service procurement Supplier self-service procurement in connection with services and self-service procurement operational usage of contracts

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BenefitS of uSeR-fRiendly PRocuReMent

IncREASE EFFIcIEncY, cuT coSTS, And Add VAluE

SAP SRM helps increase the flexibility and efficiency of your companys procurement processes. With the application, you can reduce costs and empower the procurement department to take a more strategic, value-added role in operations. SAP SRM enables you to automate requisition and order management with user-friendly catalog functionality. You can reduce cost and cycle times, drive contract and policy compliance with centralized sourcing, and increase transaction efficiency with supplier connectivity and collaboration. You can improve supplier management with tools for supplier qualification and evaluation, and deliver valuable insight to stakeholders across the company with sophisticated spend reporting. Integrated with your SAP business Suite software and SAP ERP, the SAP SRM application helps drive efficiency while lowering your Tco.

of your organization. Electronic catalogs and shopping cart functionality drive user adoption and provide a rich user-friendly repository of products. by automating previously manual procurement tasks such as approving shopping carts, generating invoices, and processing payments you can significantly reduce transactional costs. SAP SRM helps ensure rapid procurement of time-critical or recurring material needs by automating the entire requisition-topay process, cutting procurement cycles and reducing lead times. With efficient procurement processes for direct and indirect materials and services, you can reduce cycle times and costs for key procurement indicators such as requisition-to-purchase order. The application empowers every employee in the company to create and manage their own requisitions with self-service procurement functionality.

SAP SRM helps facilitate and coordinate services-supplier collaboration and services definition and pricing. With the application, users can bid for the best supplier based on cost, availability, and other terms thus increasing the speed and visibility of the services procurement process. The application supports integrated supplier negotiation and award processes and enables initial bid preparation, electronic RFx and reverse auctions, bid evaluation, and the creation and management of centralized contracts. The application helps you stay within your budget, verify if items are in stock, and check availability with suppliers in real time. You can check product availability in real time, making procurement highly efficient and avoiding costs for items that are already stocked. Robust administration functionality enables catalog managers to cost-effectively load, review, and manage access to supplier catalogs. You can also evaluate suppliers and give incentives and preferences to the highest performers.

Reduce Process Costs, Accelerate Cycle Times


SAP SRM provides a comprehensive solution for managing procure-to-pay operations in large and midsize companies. The end result is procurement processes that are faster, cheaper, and more user friendly. Robust, user-friendly self-service functionality automates procurement processes and relieves procurement from burdensome administrative tasks that add little value to the company. The application offers a range of powerful receipt and return functionality to allow more individual control or centralize processes to match the requirements

Deepen and Enrich Supplier Relationships


SAP SRM enables collaboration between employees, professional procurement staff, and suppliers for all phases of procurement processes. SAP SRM features supplier self-service functionality that facilitates supplier collaboration, streamlines procurement processes, and improves visibility into order and shipment status. The application enables electronic transactions and helps improve supplier communications and self-procurement processes by sharing important scheduling and product data with suppliers.

Act Strategically with Data Visibility


SAP SRM is an integrated, comprehensive solution that provides process transparency across suppliers and the procure-to-pay cycle, with sharp visibility into procurement and supplier data. The application enables increased visibility for better oversight and control of purchasing activities. Working with the SAP netWeaver bW component, SAP SRM provides rich reporting functionality. The application also helps you improve

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SAP Solution in Detail Realize Savings in Procure-to-Pay Processes with SAP SRM

The applications plan-driven procurement functionality enables companies to integrate operational procurement optimization processes with back-end SAP or nonSAP planning, operations, and inventory management solutions. You can centralize procurement processes for demand originating from multiple back-end solutions, driving supplier transactional efficiency and leveraging centralized contracts.
productivity and accuracy through integration with master data management functionality. SAP SRM makes possible the integration of operational procurement optimization processes with back-end SAP or non-SAP planning, operations, and inventory management solutions.

Managers and supervisors can review shopping cart and budget details, approve or reject shopping carts, and add comments, for greater operational control and visibility. With the application, you can facilitate oversight and control of procurement activities with automatic professional buyer work-queue functionality.

improving efficiency and transparency and giving you greater control. Services procurement functionality helps you optimize supplier collaboration and enables you to define and order services. Procurement and sourcing functionality enables you to slash the cost of requisitioning and procuring nonproduction goods and services, such as office supplies and equipment repairs. SAP SRM supports several types of deployment to suit your organizations needs. depending on your choice of deployment, follow-on documents are created in back-end solutions or directly in the SAP SRM application.

Reduce Total Cost of Ownership, Unify Solutions and Data


because SAP SRM is part of SAP business Suite, it works with SAP ERP and your other SAP business Suite applications to close the loop on your procurement processes. SAP SRM leverages your companys master data and applications, reducing your Tco and improving RoI. SAP SRM supports centralized contract management and decentralized fulfillment, enabling procurement organizations to develop global contracts that help drive compliance across the company. With the application, you can leverage conditions across contract hierarchies to offer the most optimal discounted price across all procurement organizations. You can improve efficiency for procurement operations that are centralized for a geographically distributed group of employees, reducing redundancy and unifying processes and information. centralized sourcing functionality provides greater visibility into demand signals across the organization. The application centralizes sourcing and demand aggregation processes,

Learn More About SAP SRM


To learn how SAP SRM can help your company strengthen its procure-to-pay processes and improve its competitive standing, contact your SAP representative or visit us online at www.sap.com/srm.

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Quick factS

www.sap.com /contactsap

Summary The SAP Supplier Relationship Management application helps streamline and manage procure-to-pay processes for goods and services. Business Challenges Reduce procurement costs and increase efficiency Enable procurement to make a positive impact on the bottom line while supporting critical business processes Provide technical support needed to consolidate, streamline, and centralize procurement operations Key Features Self-service procurement let employees manage their own purchases with shopping carts and search for goods and services in an online catalog Services procurement Manage procurement resources and costs for commonly used services such as time-based and deliverable-based services Plan-driven procurement Integrate operational procurement optimization processes with back-end SAP or non-SAP solutions Centralized sourcing Aggregate demand, decrease cycle time, and increase visibility via efficient online bidding, auctions, and requests to suppliers Centralized contracts Maintain central contracts that drive compliance and reduce off-contract procurement Supplier connectivity Enable supplier collaboration, supplier self-services, and qualification and evaluation Business Benefits Automate requisition and order management and empower procurement to take a more value-added role in operations Increase the speed and visibility of the services procurement process and optimize supplier collaboration Integrate operational procurement optimization processes with back-end SAP or nonSAP planning, operations, and inventory management solutions Gain greater visibility into demand signals across the organization, capture more savings by reducing supplier prices, and shorten sourcing cycle times Develop global contracts that help drive compliance across the company and improve efficiency for centralized procurement operations for a geographically distributed group of employees Improve supplier management with tools for supplier qualification and evaluation Find Out More For more information, call your SAP representative or visit us online at www.sap.com/srm.

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