Today’s geopolitical climate is complex and more volatile than ever. We can now see with the naked eye the disruption caused by COVID-19 around the globe and the immense pressures it has caused and will continue to cause for the foreseeable future on the global supply chain and the economy.
As procurement professionals, we are seeing a real shift in the way we view the need for software, be it a procurement system or a fully integrated system. We hear cloud buzzwords (“in the cloud”, “fully integrated cloud solution” that does X and Y), and many other words that really do not answer fundamental questions such as: what does it really mean? And how can it benefit companies who are now dealing with a tremendous pressure to cut costs, increase efficiency and implement different ways of collaboration in a world that has been severely hit by a pandemic?
With the world changing, the software needs to facilitate ideas and collaboration beyond the traditional local ERP infrastructure. This is a profound and forward-looking change in how procurement systems should work – beyond the local firewall and into the clouds. We have ticked the local, or paper procurement process from an end-to-end business process system point of view – but what we need to know now is what this procurement system does for us in facilitating the human experience. This shift is what will differentiate SAP from its competitors, and I believe SAP already has the capability. Let me explain why.
From the early days, SAP has been very aggressive with their cloud procurement strategy, with important acquisitions in this field. SAP purchased Ariba in 2012, then complemented their offering by adding FieldGlass that same year, and finally purchased Concur in 2014. In all honesty, the list of acquisitions and SAP’s strategy deserve an article of its own. If you would like to know more about SAP acquisitions, click here.
In short, SAP acquired a wide array of highly sophisticated puzzles, and the reason why I call these software puzzles is because in the near-term future, SAP’s most important task is to have these puzzles, or solutions, along with S/4 HANA, behave in an integrated manner providing a holistic SAP Cloud Platform.
In the upcoming years, more integration links will be built and be out of the box in future SAP releases. However, these integrations are not yet fully native. SAP is working hard to have all its solutions related to acquisitions integrated out of the box. I have discussed in a previous blog SAP’s efforts with integrating SAP Ariba with SAP Ariba Integration Gateway with SAP and Non-SAP ERPs, you can read it here.
In this article, I want to share with you the efforts that SAP has made, and keeps undertaking with SAP Ariba. And so, I’ll start by introducing SAP Ariba as a cloud procurement solution and demonstrate where it stands against its competitors. Secondly, I’ll shed some light on the SAP Ariba-Ariba Network powerhouse – and its use– case regarding collaboration between buyers and sellers. Finally, I will state examples of how the system can be used to foster strategic supplier relationships and increase your supply chain department’s efficiency.
SAP Ariba – Introduction
Ariba was an independent company, up until it was acquired by SAP in 2012 for $4.3 billion USD. I believe that SAP’s strategic decision to purchase Ariba added a critical leverage against its competitors. The reason why I am saying this is because SAP Ariba Network is years ahead of its competitors with regards to adoption. Ariba Network has about four million suppliers with no signs of slowing down.
This is best explained by James Lee, Chief Operating Officer at SAP Ariba and SAP Fieldglass: “SAP Ariba is the only true procure, source-to-settle, end-to-end solution provider that also addresses all of the expense categories. We also possess the largest B2B network in the world,” he explains. “We have more than 4 million suppliers and buyers in over 190 countries connected to our network and nearly $3 trillion USD in commerce is flowing through it annually. Based on commerce value, we’re larger than eBay, Alibaba, and Amazon combined — that’s a pretty incredible number.”
SAP Ariba Network is the backbone of SAP Ariba that facilitates the interaction between purchasing departments or regular buyers and suppliers. It transcends the local firewall that protects your local ERP systems and IT infrastructure. It allows you to communicate with your suppliers in the cloud through a secure web interface.
True collaboration between buyers and sellers is achieved with the network. You get tools and dashboards to reach reduced inventory levels by leveraging real-time demand and supply forecasting by integrating your supplier’s operations with Ariba Network. Another example in SAP Ariba is true collaboration between buyers and suppliers with order confirmations, advance ship notices, and PO to invoice flip functionality –a great tool in SAP Ariba where the supplier flips the PO into an invoice and sends it via Ariba Network back to your ERP system.
The process areas in SAP Ariba span the full sourcing and procure-to-pay process. These include SAP Ariba Sourcing and SAP Ariba Discovery, SAP Ariba Buying, SAP Ariba Buying & Invoicing, SAP Ariba Contract Management, SAP Ariba Spend Analysis, SAP Ariba Supplier Lifecycle and Performance, and Ariba Supplier Risk.
SAP Sourcing
SAP Sourcing solution works for all spend categories. This solution is capable of all sourcing event types, including requests for information, requests for proposals, large-capacity RFP, reverse, and forward auctions. SAP Sourcing solution also supports sealed envelope bidding, which is a process commonly used in the public sector to solicit bids that should be sealed until the moment they are open at a specific time.
The solution supports end-to-end process management, from product specification, to sourcing and then contract management, which is also integrated with SAP S/4 HANA. It comprises advanced negotiation and supplier selection functions. It is also used in conjunction with SAP Ariba Network, where all the information regarding pricing, agreements, and negotiations can be directly communicated and submitted by the buyer to the vendor. This saves time and effort by optimizing the bidding process as the entire process can be managed within two interfaces: the supplier portal and the buyer sourcing portal, where both parties are connected through the SAP Ariba Network.
SAP Ariba Discovery
Similar to a marketplace, SAP Discovery gives you access to Ariba Network suppliers, with over 20,000 products and service categories, 24 supported languages in more than 180 countries. This essentially means that you can leverage SAP Ariba Network and find suppliers that you have not yet conducted business with.
The service allows buyers to find new suppliers and read profile information. Technically, this solution is a service, and it is best used in conjunction with Ariba’s Sourcing module. You can also broadcast your sourcing posts within the module. If you are having issues finding a service or solution, you can use this function to find suppliers that are potentially interested in bidding to your event, in your area of operations or worldwide.
The solution can be best used in today’s disruption of global supply chains. Many of the suppliers that you are dealing with in this pandemic are having major backlogs of orders. They are not able to fulfill your orders within the usual timeframes, or to fulfill your demand because they are missing a SKU that makes your order.
On March 12, 2020, SAP opened the doors for any buyer to post immediate sourcing needs without paying any fees until June 30, 2020. You can give Ariba Discovery a try here, for free.
“We are witnessing unprecedented disruption to global supply chains as the effects of the coronavirus continue to unfold,” said Chris Haydon, President of SAP Procurement Solutions. “By removing barriers, we aim to help accelerate connections between buyers and suppliers so they can quickly fulfill immediate supply needs during this time.”
SAP Ariba Contracts
AKA “signing the deal.” The solution is responsible for contract and agreement management and is integrated with the leading electronic signature vendors such as Adobe Sign and DocuSign. Contract compliance allows collaboration, internally or externally with the vendor to review and revise contract information, while maintaining full version history tracking.
SAP Ariba Contracts is natively integrated into SAP Ariba Sourcing, where the result of the sourcing project that you created is usually the award of a contract. Typically, after the sourcing project is completed, a supplier or multiple suppliers are awarded one or multiple contracts. After the sourcing project is reviewed by the bidding team, the award is sent for approval in the sourcing module. Once approved, all the information that was captured in the sourcing project is transferred to the Contract module. This helps save time and effort and keep all the information in a single repository for better tracking. Finally, once the contract is fully approved and published, the items you added earlier on to your sourcing cycle become actual catalog items – automatically!
SAP Ariba Catalogs and Guided Buying
SAP Ariba offers a catalog shopping experience similar to what we are used to online with giants like Amazon or eBay. Catalog items are created automatically once a contract is fully published, or by allowing a supplier to add their items directly and push them through Ariba Network, thus saving the buyer time and effort as suppliers are managing their own inventory and prices. Catalog items can also be created manually when linked to a PO.
SAP guided buying functionality or shopping with catalogs is exactly designed this way. Guided buying functionality falls within the SAP Buying and Invoicing module and integrates with SAP S/4 HANA. It provides functional buyers and end users an elegant, simple and streamlined solution to shopping online, all while enforcing company procurement policies. It also offers a very adaptive and responsive approval workflow to make sure that every requisition is approved at all the required levels.
As you can see in the video above, the layout is clean, intuitive, and very simple to use. SAP likes to call this a millennial experience. This essentially means that the guided buying experience does not require intensive training, as the solution is as simple as shopping on eBay or Amazon. It also means that the solution is rated as a consumer grade user experience, with easy data access across all devices. You can comfortably shop on your phone with Ariba Mobile.
SAP Ariba Buying
Buying supports the procure-to-order and procure-to-pay processes for items and services. It includes Purchase Requisitions, Purchase Orders, Shipping Notices and stops at invoicing and reconciliation.
SAP Ariba Buying and Invoicing
Spans the entire lifecycle of purchasing from requisitioning to ordering, receiving to invoicing and reconciliation.
SAP Ariba Supplier Relationship Management
This module provides the user with unique aspect to manage the supplier lifecycle. With Ariba Network, you can first have the supplier fill in all the information that you need: contact info, bank info, etc. This is called Supplier Onboarding. You can also send the supplier questionnaires on specific topics to qualify them for a precise spend category. This is called Supplier Questionnaires. If you are managing certain policies or insurances that you want your supplier to keep updating, you can use this functionality to have the supplier update their outdated documents. This is called Supplier Self-Service, while also keeping your system updated with as little human interaction from your side as possible. Finally, you can use this module to manage supplier risk, by making risk prevention a natural part of your procurement process. The solution also provides a two-way integration sync, meaning your supplier records are bi-directional, synchronized between your ERP and SAP Ariba.
Spend Management With SAP Ariba Spend Analysis
The nature of spend management has evolved over time. Technically speaking, spend management is the management of business expenditures. It entails processes necessary to gather all information related to expenditure. Expenditures can fall into the direct spend category, which is the essential spend to manufacture your product. These can be raw materials or even services. Indirect spend is the dollar amount that is not related to the manufacturing of your product, but is essential to sustain your business. Travel and External workforce expenses also fall within the category of spend. The process of cost management involves collecting these points and having the right analytics tools so that you can come up with informed decisions that can save costs and increase profitability.
How to Deploy SAP Ariba
There are different options that you can choose to transact on the Ariba Network, all depending on your current procurement strategy and IT infrastructure. You can choose to go full steam ahead with running the cloud versions of the Sourcing, Purchasing and Invoicing solutions offered by SAP Ariba, or you can choose to rely on Ariba Network to handle the secure communication channel to the suppliers, while relying on SAP S/4 HANA for internal document flow, inventory control and finance.
You can find here different examples of connecting SAP Ariba either as a stand-alone solution or integrated with SAP S/4 HANA. In the following examples, I am going to show you how SAP Ariba is best integrated with SAP S/4 HANA. User Cases – SAP Ariba and S/4 Hana
1. MRO, Indirect, and Services Procurement with SAP Ariba Guided Buying:
Indirect demand can come from any person in the company. Users should spend as little time as possible understanding how the User Interface works.
In this example, requisitions are managed in SAP S/4 HANA either manually or through a material requirement planning (MRP) run, and then pushed to Ariba Catalogs which can be either hosted by the supplier or managed internally. If the items are found in the catalogs, the PO process is initiated iaman SAP Ariba when the user submits the items in their cart for approval, and then pushed back to SAP for internal control via SAP Ariba Integration Gateway. At the same time, the same PO is sent to the supplier to complete the Supply Collaboration part.
2. Direct Procurement
Direct procurement in SAP typically starts in SAP S/4 HANA. Demand comes from the planning run in the MRP, which triggers a Purchase Requisition when demand falls within certain parameters.
Conclusion
SAP has identified incredible innovative solutions to tackle the corporate need to integrate its business process from finance, HR, supply chain, production and inventory with SAP ERP. Today, SAP is pushing the boundaries into the cloud to focus more on the human aspect, leveraging the power of the internet to increase collaboration, innovation, and facilitate integration between buyers and sellers.
The shift that we are seeing now is that procurement is not a backdoor department anymore, solely responsible for getting supplies, getting the best deal, and signing paperwork. It has been transcended through the power of the internet, it has become more important in harnessing strategic relationship with suppliers and in the world’s new geopolitics. It has finally been provided with tools to analyze big data to make better-informed decisions. SAP Ariba has leveraged Intelligent Spend Management enabling spend data coming together from across all sources and categories and allow for smarter, faster spending decisions.
Collaboration in SAP Ariba comes in different shapes and forms. The simple goal of Supply Collaboration is to facilitate interactions and meetings, with a goal shared by buyers and sellers to cut costs and improve existing processes. By leveraging the power of SAP Ariba Network, companies can enable true collaboration with their existing vendors. By opening another world of opportunity with Ariba Discovery they can discover suppliers with whom they have never transacted with in the past.
In a new world filled with uncertainties and unprecedented worldwide economic slowdown, access to an effective, fully integrated supply chain system that allows you to collaborate with your current suppliers, while also giving you the opportunity to discover new ones – all provided through a single point of access - is what differentiates SAP solutions from the rest of the pack.
We at Createch will be more than happy to show you SAP Ariba in action, contact us!
References:
- SAP Ariba Business Processes Functionality and Implementation – SAP Press
- SAP Ariba Contracts.PDF
- SAP Ariba Sourcing Solutions brief.PDF
- SAP Ariba Contract Invoicing
- SAP Intelligent Spend Management Ariba Whitepaper
