Collect and manage cost breakdown information during direct material sourcing in SAP Product Sourcing and SAP S/4HANA for product sourcing

Today, I would like to introduce an amazing feature that customers have been requesting for quite a long time: Collecting and managing cost breakdown information for the direct material during the sourcing process

This feature is available to customers in cloud (2208 CL), private cloud, and on-premise versions (2022 OP).

To identify cost-reduction opportunities, and to negotiate a win-win deal, a sourcing manager needs to understand the drivers of each item being sourced from the suppliers. This is generally performed by collecting cost breakdown information from the suppliers as part of their submitted quotation.

The sourcing manager analyzes the cost drivers for every item quoted by the supplier to determine opportunities for further cost reduction and begins negotiation with the supplier. This process eventually leads to the selection of one or more suppliers with long term contracts and negotiated long-term savings in line with the products’ projected growth plan.

Capabilities:

  • Create cost breakdown templates

              Picture 1: Screenshot of one of the template created in the system (Click to enlarge)

  • Set items in the sourcing project as relevant for collecting cost breakdown information

       Picture 2: Setting ‘item’ in the sourcing project as ‘Cost Breakdown’ relevant (Click to enlarge)

  • Publish sourcing projects to invited suppliers
  • Collect cost breakdown information from suppliers using the shared cost breakdown spreadsheet template
  • Compare cost breakdown cost elements at item level in the Compare Supplier Quotations application

                 Picture 3: Screenshot of the quotation comparison application (Click to enlarge)

  • Determine cost drivers and negotiate with suppliers to award business to one or more suppliers

Benefits:

  • Customers can use their existing cost breakdown excel documents to create standard cost breakdown templates
  • Simplified and easy to use quotation comparison application to compare ‘Cost elements’ shared by suppliers via cost breakdown templates
  • Improved trust between sourcing manager and suppliers

Take a look at this short video to better understand the new feature: https://sapvideoa35699dc5.hana.ondemand.com/?entry_id=1_wac1s9ng

I believe this blog and video have helped you understand this new feature. Pls share your feedback or thoughts in a comment.

Pls follow my profile for future blogs related to SAP Product Sourcing.

Praveen Kunigal Athmaramasetty

Product Manager, SAP Procurement LoB- Source to Contract