Self-service procurement: how far can you go in decentralizing your purchasing?

Introduction

SAP S/4HANA allows you to implement an end-to-end self-service procurement process for your business users via easy-to-use Fiori applications. The question now arises whether you can fully decentralise the procurement process without having procurement experts involved. In this blog, I describe the difficulties we faced during the roll-out of a purchasing project and the insights we gained in the months after.

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Applications used in Self-Service Procurement

Procure to Pay (P2P) process steps

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Overview of Procure to Pay steps

There are many steps and actions between identifying a need and paying a supplier for the goods delivered or services provided. Self-service procurement allows you to maximize business involvement in the process without overburdening Accounting and Procurement. It provides you with handy tools to carry out the many steps in an efficient way, from creating a Purchase Requisition (PR), until the handling of invoices. This with full transparency in all the different steps.

Two other processes that are strongly intertwined with purchasing, are the source-to-contract process and master data management. Before making a financial commitment with a supplier, all contracts need to be in place – from a signed quotation to specific contracts as a Service Level Agreement or a Non-Disclosure Agreement.

And of course, when you start working with a new supplier or a new product, the master data must be set up.

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Extra steps influencing Procure to Pay process

 

Full decentralization of procurement

In a large company with several entities, we ensured that each of the more than 1,000 employees could make purchasing requests. In line with the set-up of self-service procurement in S/4HANA, they were also in charge of doing the goods receipt for services and goods that were not processed through a warehouse. In case there was a quantity or price mismatch on the invoice, action was needed from the requestors of the purchases.

We identified three types of self-service purchasing that apply to all employees:

  1. purchases via internal (hosted) catalogues with fixed price agreements for different suppliers, or via external (punchout) catalogues for orders on websites of specific suppliers;
  2. purchases via free text PRs to order goods that are not available in any catalogue;
  3. purchases of services, which are considered as milestone purchases with fixed delivery dates; the creation and processing are similar to the process of free text PRs for goods and, therefore, simple for the end-users.

We trained all employees, set up defaults to further simplify ordering, and built a set of clear instructions. Although everyone in the business was fully convinced this was the right way to go, we had to revise the whole model after only a couple of months. Hundreds of invoices were blocked due to missing goods receipts, reclasses were needed because of wrong account assignments, and deliveries were delayed as a result of missing contracts or master data in the system. Nevertheless, everyone was convinced of the added value of self-service procurement. The involvement of the business in the creation of purchase orders was vital. That is why we started looking for a better way to use the tools of S/4HANA.

We decided to split procurement into two categories:

  • creation and handling of catalogue ordering
  • creation and handling of free text PR’s

There was no need to change the catalogue order process. This procurement process runs smoothly and correctly thanks to the fixed-price arrangements, contracts and master data that are in place already, and the receipt of goods by the central warehouse team. Creating correct PRs is easy as all data comes directly from the catalogue item. The requests are automatically converted into POs and sent to the suppliers without any involvement of Procurement.

However, we had to revise the creation of free text PRs, mainly for services. Many employees were occasionally involved in the procurement process, and it was not their core task. Even though the tools were easy to use, several steps in the process required extra attention. For example, the Goods Receipt was not done timely, purchase orders were not updated with new information, and the financial data kept were not appropriate.

In each team, we appointed a business expert user for these type of purchases. This person is responsible for creating free text PRs for everyone in the team. This setup allows us to get the best out of the self-service procurement in S/4HANA. The business expert user creates a PR on behalf of the requester. This person is immediately involved, as the approval workflow starts with him/her. Via the ‘Confirm Receipt of Goods’ application, both the business expert user as the requester can complete the receipt of goods for the services or goods ordered. The reporting tools allow both to monitor the entire process.

All departments, from procurement to accounting, controlling and legal, now have one user per team who is the single point of contact. You only need to explain changes in the process or the system to a select group of people. They use the system regularly and therefore know the importance of each step. This has led to improvements in each step of the flow. Purchases are made on time, costs are allocated to the correct objects in the right period, and invoices are paid timely.

Conclusion

Self-service procurement in S/4HANA provides you with all the tools to easily handle the purchase-to-pay process. The applications are user-friendly, self-explanatory and provide transparency at every step of the process. However, it is essential to think about how to use these tools to your maximum advantage.

Every employee can easily order his or her own purchasing needs. By creating multiple catalogues (hosted, punchout, Ariba), you can start the whole process from any end-user in your company.

For the purchase of items outside the catalogues, the on-behalf functionality of self-service procurement provides an excellent and workable solution that minimizes the risks of errors in the different steps of the purchasing process.