Procurement transformation with SAP Ariba

Reduce indirect costs, standardise processes and improve working capital while concurrently increasing controls and reducing operating risk.

In B2B procurement, a major challenge faced by buyers is seamless communication with the suppliers. Lack of a digital framework leads to inefficiency, elevated risks with poor cash flow and higher operating costs, wasted resources, delayed payments and most importantly, dissatisfied partners. While it is important to automate the supply chain, doing that alone will not suffice. A technology partner who understands the bigger picture, the complexities of managing a healthy supply chain and who can connect every part of the purchasing process while giving suppliers a way to better manage and grow their business is the need of the hour, and that’s where SAP Ariba comes in.

Market recognitions

1. Forrester evaluated SAP Ariba leader out of eight prominent contract lifecycle management solution providers. It has the highest possible scores in market presence, globalisation and integration.
2. SAP Ariba is in the leaders’ quadrant for both the Gartner 2018 Magic Quadrant for Strategic Sourcing Application Suites and the Gartner 2018 Magic Quadrant for Procure-to-Pay Suites.

Ariba is the most comprehensive solution for buyer and supplier digital collaboration. This standalone system can work around sourcing, supply chain, procurement and invoicing. By implementing Ariba, one can derive proven benefits such as simplified connectivity, improvements in process efficiency, enhanced visibility, real-time status into key orders, deliveries, invoices, payments and other vital business activities. Its varied solutions ranging from the Ariba Strategic Sourcing Suite that manages sourcing projects and relationships, to Ariba Commerce Automation/Ariba Supply Chain Collaboration, which fully automates and optimises the client’s commerce chain and Ariba Spend Visiblity that helps gain insight into spends to make procurement strategies, is creating value for both buyers and suppliers and is reengineering how procurement gets done in this new, digital economy.

The Procurement Maturity Assessment Model can be useful in identifying major gaps in an organisation’s procurement process as compared to a defined goal, and to draw a specific chain of actions for improvement. This four-step model helps client move from tactical buying to world-class procurement while deriving value from each stage of maturity.

1. Reactive
       • Does not need to be anticipated; predominately tactical buying
       • No organisation-wide procurement strategy, large supplier base
       • Low skills and resource, little career planning
2. Developing
       • Track commercial measure of performance, targets for savings
       • Selected supplier base consolidation
       • Training and recognition of skills required
3. Advancing
       • Trained and qualified resources
       • Formal planning processes, KPIs in place
       • 50-60% spend under management
       • Focus on supplier relationship and longer term/bigger value contracts
       • Collaboration on cost improvement and risk sharing
       • Technology enabled P2P
4. High-performing
       • Procurement strategy aligned to corporate
       • Data-driven decision making
       • Full support over purchasing cycle
       • Business planning optimises all commercial aspect, tax, investment and people

Client impact

1. Client background and challenges: The client present across 160 countries in the world and multiple ERP systems like SAP and Microsoft are working in the backend for procurement activities. All requisitions for purchase and quotation discussions with vendors was being done offline and by way of emails. The client was looking for a central system to manage procurement activities for companies worldwide.
   
   PwC intervention: Our SAP team worked with the client to understand the challenges and provided solutions that could cater to sourcing and supplier relationship needs. As part of this review process, we suggested SAP Ariba Buying with Commerce Automation to enable effective collaboration between the buying team and suppliers. The main objective of the intervention was to do away with the manual approach of working over emails and centralising procurement activities.
   
   Our solutions and approach: We supported the client in their vision for centralising the procurement activities by implementing Ariba Buying that covers activities like PR, quotation comparison and PO awarding. Supplier collaboration was also taken into consideration by implementing Commerce Automation. By implementing both the solutions, the company benefited from discounts owing to mass procurement for different businesses from the same vendor, collaborating with the vendors, which further helped in the audit and compliance for the procurement activities.
2. Client background and challenges: One of the largest chip makers in the US had a high touch-sourcing model leading to high material acquisition and planning costs. The approved vendor list and approved part list was not integrated with product development, which led to product complexity. Moreover, the client’s oversight and involvement in subcontractors’ procurement increased overhead costs. The supplier performance evaluation was not based on data-driven metrics, reducing objectivity in sourcing and in business award decisions. The purchase order and the contract process had limited automation, which led to an increase in manual efforts to manage transactional processes. 
   
   PwC intervention: We were engaged for understanding these challenges faced by the client and provide solutions that could cater to the sourcing and supplier relationship needs. As part of this review process, we suggested the SAP Ariba Strategic Sourcing Suite, which consisted of sourcing, contract management and supplier lifecycle performance management.
   
   Our solutions and approach: We supported the client in their vision of supplier enablement and cost reduction in sourcing process. An as-is process study and a total cost analysis and process simulation was undertaken with Ariba Sourcing Suite as the main component. We outlined a strategy that focused on savings opportunities and cost. We also provided subject matter experts in terms of design and integration with the backend SAP system, developing the process design documents which included the challenges faced, solutions and other integration strategies.
   
   Through Ariba Strategic Sourcing Suite, we helped the client have an integrated collaboration with suppliers to ensure timely two-way systematic communication for forecast, order, supply commit, procurement documents and RFP documents. With this, the client was not only able to systemically capture supplier performance based on transaction data and provide an actionable report for performance to target and corrective actions but was also able to share RFQs and receive quote responses with vendors through digital modes.
3. Client background and challenges: One of the largest retailers in UK, a leader in both electronics and telecommunication services retail, had huge spend in Goods Not for Resale (GNFR) with more than 4,000 vendors. The client is an entity formed from mergers and has multiple ERP systems in its landscape operated across different business divisions. Discrete procurement systems and lack of centralised and scalable Source-to-Pay (S2P) systems hindered the client’s ability to realise the full value of its procurement capabilities. The client was seeking to reduce its operating costs, automate operations and provide better services to its business units.
   
   PwC intervention: We were engaged to redefine and standardise the S2P processes, led the technical and functional configuration of S2P modules as part of finance transformation programme. As part of the Ariba implementation programme, SAP Ariba Strategic sourcing Suite and Ariba Buying were integrated with S4HANA. This happens to be one of the first projects in the UK to implement Ariba Guided Buying Solution integrated with SAP S4HANA.
   
   Our solutions and approach: We supported the client to confirm the current state of the S2P processes and develop a future state model. The team established standardised and streamlined processes that enhanced end user experience while providing visibility into transactions, driving compliance against negotiated contracts. A phased roll-out strategy for each Ariba module was devised. PwC outlined an implementation strategy that focused on savings opportunities and advised the client’s category managers on implementing Ariba Strategic Sourcing Suite in the first phase prior to P2O solution.
   
   We also implemented each module in an integrated scenario, developed technical and functional requirement documents, provided subject matter expertise in the design of financial and master data integrations with SAP, outlined transactional and legacy data migration strategies and oversaw all testing activities. Finally, we managed the supplier enablement activities which were critical to the success of any S2P implementation. The team prioritised vendors in alignment with category management efforts, developed vendor communication materials and conducted weekly calls with the client and Ariba teams to monitor progress. The initiative facilitated vendor rationalisation and identified opportunities to forge strategic partnerships with select vendors.