2. developing a sap

8/12/2019 2. Developing a SAP

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1 The Rise of SRM Background and Context

2 Spend Management Business and Technical

Considerations

SAP SRM Rapid Evolution

3 Demystifying the SAP Acronym Malaise

5 SAP SRM 7.0 and Beyond

We Can Help

Contacts

Table of Contents


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The Rise of SRM Backgroundand Context

Organizations are reconsidering their existing investments

in spend management solutions. To understand why, one

must first understand how the original value proposition of

spend-management software vendors has evolved.

To find the origins of automated procurement, you do

not have turn back the pages very far. Ariba, one of the

original pioneers of eProcurement along with Commerce

One, began selling its original Operating ResourceManagement System (ORMS) to companies in 1997. The

ORMS value proposition was quite simple: It aimed to

automate the buying process for indirect materials for all

employees in a corporation, thwart maverick purchases,

and reduce spending by letting everyone know that

their buying actions were being monitored. This value

proposition proved to be hugely successful, allowing the

early pioneers to garner tremendous market share. During

that land grab, the ERP players largely failed to keep up

with advancements in Sourcing, Category Management,

and Contract Management as well as supplier enablement

capability. That situation changed, however, when the

early pioneers decided to focus their R&D efforts on theSoftware-as-a-Service (SaaS) solution. This shift gave ERP

vendors sufficient time to catch up: They enhanced their

spend-management offerings, ultimately eliminating many

of the advantages once held by the early pioneers.

1 Developing an SAP Procurement Technology Strategy SRM 7.0 and Beyond


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Demystifying the SAPAcronym Malaise

SAP breaks SRM down into six categories: Purchasing

Governance, Sourcing, Contract Lifecycle Management,

Collaborative Procurement, Supplier Collaboration, and

Supply Base Management. In addition, SAP provides

various sourcing and procurement capabilities outside

of its specific SRM offering, e.g., SAP E-Sourcing. These

capabilities are not on the same code base, yet they may

share some base-level functionality, thereby adding another

alternative for users to consider.

To better explain this solution offering, we have placed

the capabilities of the SAP SRM Suite in the context of

how we believe customers typically view the source-to-

pay business. Accordingly, we have broken down the

components of SAP SRM 7.0 into the following groups:

analytics, sourcing, contract management, procure-to-

pay (for indirect, direct, and services spend), and supplier

collaboration. This depiction is based upon our review of

SAP documentation and marketing materials as well as our

observation of testing activities.

Analytics SRM 7.0 analytics provides the ability tocapture, analyze and present procurement information

from both SAP SRM and other sources, e.g., third-party

data enrichment or other source systems. It offers an

OLAP environment for power-analyst types as well as

dash-boarding and workbook-level viewing for all team

members. Built off SAP NetWeaver BI, SRM analytics

can also integrate with a separate deployment of SAP

Spend Analytics (another product) to allow drill down and

navigation over specific spend and supplier information

contained outside of the immediate SRM environment.

Organizations that need to deploy a stand-alone spend

analytics solution should consider SAP Spend Analytics.

Sourcing SRM 7.0 offers core sourcing capability

including a centralized sourcing hub, RFx/auctioning,

and bid evaluation/awarding. SAP continues to sell the

current release of the E-Sourcing tool (formerly Frictionless)

separately. Specific sourcing capabilities in SRM 7.0

include: support for services procurement in sourcing,

line-item revision levels on documents, chat, withdrawal

and versioning of bids, enhanced bid comparisons and

new auction formats. Other new capabilities include

flexible routing of information (i.e., to temporary contacts),

RFx processing and bidding flexibility, automation and

globalization features, and streamlined sourcing processes

to model real-world strategic sourcing activities. SRM

7.0 still does not provide some of the advanced sourcing

capabilities available with the SAP E-Sourcing solution,

but it may still be sufficient for certain organizations.

SAP E-Sourcing should be considered for its complex lot

structures and bidding formats, flexibility around workflow

and role definition, and collaborative sourcing capabilities.

Contract management SRM 7.0 has a unified contract

object that allows companies to build one central

contract that reflects both local SAP SRM contracts as

well as contracts within an ERP environment. SRM 7.0

contract management also includes the ability to let

users provide additional information such as contract

line descriptions and supplier part numbers within the

SRM portal environment, flexibility to control and access

payment terms on both the item and distribution levels,

and contract search capability, e.g., searching on the

basis of payment terms. In addition, SRM 7.0 contract

management also offers:

Grouping of items

Audit trails

New alert thresholds for contracts

Distribution and integration of contract data and catalog

information

Change, revision control and versioning for contracts

New exchange rate thresholds

Flexibility around currencies within a contract

Systems and record integration

Revision-level management

Flexibility around discount release management based on

pre-defined criteria

Procure-to-pay SAP offers an array of enterprise

purchasing features designed to support self service

requisitioning, complex services requisitioning, and plan-

driven direct materials procurement.

Self Service- Like the rest of SAP SRM 7.0, procure-

to-pay enhancements include a new UI and workflow

that allow users to organize, plan and modify their work

in a customized portal framework. Actual tasks, such

as catalog search, take place in separate application

windows. Other features involve control and exception



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management over decentralized processes (such as

front-line user requisitions) and role-based tasks and

workflows for all user-levels defined in the application.

Catalog management/MDM capabilities include message

handling (including status and warnings) and running

totals for shopping carts. Enhancement Package 4,

which will become available around the same time as the

SRM 7.0 ramp-up, will provide the ability to consolidate

business documents and queries from both ERP CentralComponents (ECC) and SRM in a single screen. It will

also guide users to the appropriate tool for direct,

core purchases in the case of ECC and indirect in the

case of SRM for a specific logon, shopping cart,

requisition process, and/or purchase-order creation/

management.

Plan-driven procurement SRM 7.0 plan-driven

procurement capabilities support integration across

both procurement and operational functions. Many

processes such as sourcing, order management,

contract management, collaboration and payment are

now linked in a common environment. This function

can automatically create orders based on long-termcontracts, automatically create and route content such

as RFxs inside an organization as well as externally to

suppliers, and allow centralized search of content across

SRM components.

Services procurement SRM 7.0 includes a range of

new features designed to help companies drive end-

to-end services procurement processes, starting with

services-specific sourcing templates and workflow, then

extending to monitoring of services categories based

on time, deliverables and goals. SRM 7.0 also provides

support for third-party services ranging from contingent

labor/staffing to maintenance and construction services.

SAP Services procurement now includes a services-drivensupplier collaboration capability to help align internal and

external resources as well as facilitate compliance. From

an administrative perspective, SRM 7.0 incorporates the

transfer of external services items including hierarchical

structures into the application.

Supplier Collaboration SRM 7.0 includes a basic

supplier portal and self-service capability for entering

information, allowing suppliers to nominate themselves

as potential candidates for doing business with the

company. Procurement organizations can define

customizable questionnaires for suppliers to fill-out. These

web-based surveys provide flexibility based on a number

of factors including category dependent questions,

allowing procurement teams to tailor questionnaires tospecific audiences based on initial screen questions in

the registration process. SRM 7.0 will also monitor and

proactively alert team members based on changes in a

supplier profile or a new addition to the supplier database.

SAP also now enables companies to manage supplier

performance by preparing survey forms and scorecards

at any time in the supply management process from

initial qualification through ongoing supplier development

initiatives. It also aids companies in creating and

distributing the surveys both internally and externally and

then rolling up the responses into a common environment

for further analysis.

General Technology Enhancements SRM 7.0 includes

a variety of general technology capabilities that the

procurement suite uses throughout its components. These

include a UI with two distinct interfaces: 1) organization,

planning and monitoring; and 2) execution. Transition

between the two interfaces is relatively seamless for

the user. SRM 7.0 facilitates workflow flexibility and

configurability throughout by featuring configuration-

based implementation. This enables flexibility without

requiring code modification, allowing business users to

customize their own environments more quickly. SRM 7.0

will also eventually include Duet functionality. The result of

a joint venture between Microsoft and SAP, Duet is a highlydifferentiated set of functionality that allows frontline users

to manage much of their SRM workflow, e.g., approvals,

within a Microsoft Office environment rather than

within the SAP application. Other underlying technology

capabilities include functional and design improvements to

SRM-MDM as well as enhanced integration into both SAP

and non-SAP data sources and applications.

Developing an SAP Procurement Technology Strategy SRM 7.0 and Beyond 4


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SAP SRM 7.0 and Beyond

As organizations consider this new release, they should

also be aware that SAP also offers other procurement

technology solutions sold outside of the SRM 7.0 banner.

These include SAP E-Sourcing and Contract Lifecycle

Management (CLM), both built on the legacy Frictionless

application code base, as well as SAP Spend Analytics,

a new offering. In the case of E-Sourcing and CLM, SAP

continues to support and develop both its organically built

technology (SRM 7.0) and its acquired solutions because

each of the applications presents d ifferent feature/function

capability with commercial grade integration targeted

for 2010 (based on current roadmap plans). Companies

seeking a more strategic application of sourcing and

contract management capability may wish to consider

SAPs stand-alone modules rather than SRM 7.0.

Regardless of which platform SAP customers select for

sourcing and contract management and irrespective of

the timing of their SRM 7.0 upgrades or implementations

there are a number of strategies and tactics that

procurement organizations can pursue to improve their

existing return on investment. These include focusing,

as previously discussed, on supplier enablement and on-

boarding, and cleaning up and enriching their supplier

information on a regular basis. The latter forms thefoundation not only of spend analysis but also of supply

risk management, supplier diversity initiatives and, in the

case of government contracting, small business reporting.

Procurement organizations unsure of their specific needs

should consult a third-party specialist.

We Can Help

Deloitte has provided consulting services to help hundreds

of Global 2000 organizations in their efforts to enhance

their procurement and operations capabilities. We know

that every situation is unique. Our experience, working

with SAP and many other technology providers, has given

us a vast reservoir of knowledge to help you evaluatesolutions for your specific situation. After all, there is

no single, predefined path that a company can take

around spend management and the overall procurement-

technology environment. Indeed, there are many options

open. Sorting through them and identifying those that are

most appropriate and cost-effective, and that will, above

all, provide the best return in a specific situation, is more

than possible we help our clients do that everyday.

Contacts:

Jonathon MagickSupply Chain StrategyDeloitte Consulting LLP

Tel: +1 213 593 3645Email: [email protected]

Michael CheathamSr. ManagerDeloitte Consulting LLP

Tel: + 1 312 486 4012Email: [email protected]



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As used in this document, Deloitte means Deloitte Financial Advisory Services LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/

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Copyright 2011 Deloitte Development LLC. All rights reserved.

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