Changing and increasing priorities of procurement organizations
Over recent years, the top priorities facing procurement organizations were cost reduction, compliance, operational efficiency, and risk management. Today, procurement businesses are required to expand their remit to include digital transformation, and working more closely with strategic suppliers to foster innovation, reduce time to market (product commercialization), and drive sustainability.
However, key barriers remain, such as an inability to assess risk and collaborate with suppliers, as well as inadequate technology. High performing procurement organizations have strategies in place to overcome these challenges while others simply feel overwhelmed.
The recent pandemic affected almost every business function, and procurement is no exception. There is a need to review previous strategies that created, or simply adapted, to increasing levels of complexity due to globalization, extended supply chains, mergers and acquisitions, and low-cost country sourcing. Thus, the agenda of the Chief Procurement Officer (CPO) is no longer just focused on cost savings and operational procurement efficiencies. There are now broader initiatives to consider. In short, CPOs need to build a culture of evolution rather than just managing the status quo.
Digital procurement and the Intelligent Enterprise
By digitalizing procurement, businesses can address current challenges and stay future-proof. As mentioned previously, CPOs can expand their value proposition to include continuous improvement, becoming more agile and resilient, reducing global supplier footprint, and linking critical data and processes to external sources and third-party systems.
With SAP Business Technology Platform (SAP BTP), organizations can develop and deliver digital technologies to become Intelligent Enterprises. For CPOs to fully benefit from business intelligence, data in the source-to-pay IT landscape and business processes must be integrated. This comprehensive approach helps capture, manage, and govern data and provide integrated business processes to drive better business outcomes. Intelligent capabilities can then be used, such as machine learning and automation, to optimize processes and drive innovation. Also, new ways of consolidating, connecting, and accessing information can all be leveraged. Spend compliance can be built into every transaction.
More effective spend management can be delivered through technologies which transform procurement processes and make leading practices a reality at a practical level. SAP BTP can help fulfill the critical expectation among CPOs that the technology they adopt must be at least a 95% functional fit (SAP Benchmarking). Also, it uniquely provides a full suite of platform technologies to accelerate development and deployment with specialized capabilities. This is realized through data and analytics outcomes, integration enablement, and extensible and personalised application solutions:
• Data and analytics solutions provide robust, flexible spend analytics which enable total spend visibility across regions and business units. Also, it allows access to reliable data, and in real-time, procurement functions can be more efficient in savings tracking with finance functions, spend reconciliation with suppliers, etc.
• Integration solutions connect data from applications across the IT landscape so that all source to pay processes can be integrated. User experience and procurement efficiency are improved by delivering more comprehensive business processes combined with simplified workflows. For example, lean, automated, and integrated workflows speed up approvals and help to ensure compliance.
• Extension solutions help to overcome operational issues that require new processes, people behaviors, and workforce skills. However, not all answers to these issues are available off the shelf. True procurement transformation involves extending current processes and personalizing buying experiences. Used in this way, procurement organizations can take advantage of scenario modelling and what-if analysis with real-time data.
Use case brought to life
Digitize SAP Ariba Sourcing Leveraging SAP BTP for Should Cost Models:
Current market conditions have placed even more focus on spend management due to prevailing inflationary economic climate, geo-political tensions, pandemic recovery, etc. In these times, businesses need an effective and accurate way for Should Cost modelling for both direct and indirect spend categories.
• Should Cost modelling done using spreadsheets and manual analysis
• Price negotiations not guided with right price discovered using cost driver trends
• Lack of insights to ensure prices in-line with market price index
• Derive further insight from the supplier bids with the digital sourcing process
• Variance analysis, dynamic forecasting capabilities, interactive analytics
• Visualize and analyze the various factors for Should Cost and Root Cause analysis on historic data
• Creation of what-if simulation models
• Machine learning and advanced predictive capabilities to improve model accuracy
Should Cost modelling supports periodic benchmarking of prices where there is a provision in supplier agreements. This is particularly relevant for procurement organizations focused primarily on cost savings. For procurement businesses looking for ways to embed sustainability, the same thinking for Should Cost modelling can be applied to model the effect on pricing when recalibrating the balance between global versus local sourcing to reduce the carbon footprint for delivered items.
Benefits of enhanced intelligent spend management
Investments in advanced digital solutions are a key enabler for success. Strong digital capabilities can help procurement organizations to improve data visibility and the ability to collaborate with suppliers, enabling greater agility both within and across the extended supply networks:
Helps toward overcoming barriers with funding as CPOs can work toward building strategies for intelligent technology, such as Internet of Things (IoT), artificial intelligence/machine learning, etc.
Enables organizations to transform procurement processes to make leading practices a reality, and not just filling gaps in solution capabilities
Makes smarter purchases by connecting, managing, and governing procurement data and activities
Evolves procurement strategies more easily as needs change with modern and personalized buying experiences
Strengthens compliance by embedding procurement capabilities into existing applications and business processes with pre-built applications
Gain indisputable value from your current investments
Critical reviews of current procurement tools sometimes result in the conclusion that invested solutions need to be replaced. However, SAP BTP allows procurement organizations to positively review their current investments and build upon them to further their transformation journey. Every business has their own view of leading practices and where they fit. SAP BTP enables organizations to personalize the extension of their current capabilities of source to pay processes, or to go beyond merely “filling gaps” by placing leading practices within their grasp.
Suggested further reading
This blog post is part of a series on SAP Business Technology Platform, covering the following topics:
• Why Technology Completeness Matters to the Success of a Business Technology Platform
• How a Clean ERP Core Breaks the Code of Your Data’s Secret Language
• Digital Platforms Drive Innovation in HR to Deliver Trusted Employee Experiences
• How a Single Platform Turns Even the Smallest Projects into Big Outcomes
• Innovation in Procurement: Making All the Right Connections on a Single Platform
• Helping the World Run More Sustainably with Single Platform