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Supplier Relationship Management

Dilip Sadh

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Supplier Relationship Management ( SRM )

Part of SAP Business Suite software, SAP SRM offers a comprehensive solution for managing

procure-to-pay operations in large and midsize companies.

Robust, user-friendly self-service functionality relieves procurement from burdensome administrative

tasks that add little value to the Company.

Users can shop in internal and supplier- hosted catalogs, create and manage their own requisitions,

approve requests, check status, and follow up on receiving and invoicing processes.

Integrated with the SAP ERP application, SAP SRM enables centralized control of procurement

operations. With SAP SRM, the procurement department can manage centralized sourcing and

contracts across direct, indirect, and services spend throughout the company.

The solution features tight backend integration to SAP ERP and personalized role-based user

interfaces that give employees convenient access to exactly the functionality they require.

Powerful workflow functionality enables transparent and compliant procurement policies.

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Overview of Business Scenarios

The SRM Solution offers capabilities in the following areas :

Self Service Procurement

Service Procurement

Plan Driven Procurement

Sourcing / Contract Management

Supplier enablement

Catalog Management

Analytics

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Self Service Procurement

Self-service procurement functionality empowers every employee in the company to create and

manage their own requisitions with a user-friendly, sophisticated browser-based interface.

With the application, users can search for goods and services in an online catalog with pre negotiated

and contracted items, add them to the shopping cart, and initiate approval workflow. The approval

workflow results in an approved purchase order being electronically sent to the supplier.

The application also handles special requests quickly – for example, one-time purchases and

requirements entered as free text and non catalog requisitions.

Robust workflow functionality routes documents for approval in compliance with approved procurement

policies. For ex : If the value of SC is > the value that the user can spend, the system triggers a

financial approval ( Managers). If SC’s are to be completed by operational purchaser , completion

workflow is triggered.

If SAP SRM is integrated with your back-end financial solution, confirmation of receipt can

automatically trigger the appropriate invoicing and accounts payable activities.

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Plan-Driven Procurement

The plan-driven procurement functionality in the application enables companies to integrate operational

procurement processes with back-end SAP or non-SAP planning, operations, and inventory

management solutions .

The SAP SRM application takes requirements from an SAP or non-SAP plant maintenance application

in the form of purchase requisitions and carries out automatic procurement requirements.

This lets you centralize procurement processes for demand originating from multiple back-end

systems, driving supplier transactional efficiency and leveraging centralized contracts.

Can also be integrated to SUS.

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Service Procurement

SRM supports procurement of Simple Services, Unplanned Services and Procurement of labor.

Simple Service procurement is similar to procurement of indirect materials and can be done by either

using service master , Catalogs or free text.

Services procurement can be challenging due to the complexities involved in defining the quantity,

duration, and price of services to be consumed. To facilitate provision for such complexities, SRM

supports procurement of unplanned Services using the limit functionality where a limit of value is

specified and also a validity period. The system verifies the services being confirmed are within the

value limits and the validity period.

Procurement of external staff is a combination of self service procurement , sourcing and supplier

collaboration scenario.

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Strategic Sourcing

The Sourcing process enables purchasers to identify and assign sources of supply for procurement

transactions. eRFx and reverse auction are the most commonly used sourcing tools.

SRM Sourcing – Overview of functionalities

• Demand Consolidation using the Sourcing Cockpit.

• Automatic and manual source of supply identification and assignment.

• Vendor lists and quota arrangement.

• Supplier registration and qualification.

• Online RFx and live auctions

Sourcing Cockpit : The sourcing cockpit is a purchaser's work list where a purchaser can process

purchasing requirements from the backend ERP system and shopping Carts from SAP SRM that

require a purchaser's action.

With the help of sourcing cockpit, users can view external requirements, aggregate demand, negotiate

operational and central contracts for operational use in a heterogeneous application landscape and

create PO’s .

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Bidding Process

An RFQ can be created for a requisition that does not have a source of supply identified or from an

expiring contract or manually from within the bidding engine.

Bid Evaluation - After an RFx or a live auction occurs, SAP SRM supports side-by-side comparison of

bids to evaluate proposals based on price as well as delivery times, experience with the supplier,

dependability, and ability to deliver. The completion of the sourcing process results in the creation of

centralized contracts or purchase orders for procurement execution.

Live Auction Process - Unlike an RFx, where bids are hidden from other bidders, a live auction

leverages market dynamics to drive down costs through direct competition. In this process, selected

suppliers receive an e-mail invitation to participate through the bidding engine functionality of SAP

SRM. Bidders can enter the live auction cockpit and participate in a synchronous live auction.

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Contract Management

SAP SRM supports centralized contract management and decentralized fulfillment, enabling

procurement organizations to develop central contracts that help drive compliance across the

company.

A central contract in SAP SRM can be used as a source of supply in parallel, in both SAP SRM and

SAP ERP, providing the opportunity to attain better volume discounts through contract release

aggregation.

You can manage renegotiation of terms for contracts that are about to expire.

SAP SRM enables enhanced and improved contract distribution for central contracts through

sophisticated and efficient grouping of contract line items across different locations in the SAP ERP

application.

Operational Contracts include Product Category and Normal Contracts.

Make contract updates, online and offline, with user-friendly mass change functionality.

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Supplier Self Services

SAP SRM features supplier self-service functionality that facilitates supplier collaboration, streamlines

procurement processes, and improves visibility into order and shipment status.

With the application, suppliers do not need their own solutions to supply goods and services. All that is

needed is direct Internet access to the purchaser’s procurement solution through a Web browser.

With supplier self-service functionality, suppliers can view purchase orders, send confirmations and an

ASN to the purchaser, and create invoices based on an ASNor on orders. You can collaborate on

purchase orders with supplier response functionality, allow automatic inbound delivery generation and

goods receipt notification, and provide access to catalogs and delivery schedules.

Supplier self-services also support service item hierarchies and limits.

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Catalog Management Catalog Management: This is the process of managing the catalog content that needs to be presented to the end

users. A catalog provides users a list of products and services in an Organized and searchable format.

Types of Catalogs: The different types of Catalogs are a ) Supplier Hosted b ) Broker hosted and the buyer internally

hosted.

• Supplier Hosted Catalogs: These are catalogs that are hosted and managed by your Suppliers.

• Broker Hosted Catalogs: These are hosted and managed by content aggregators, brokers or the Marketplace.

• Internal Hosted Catalogs: These are Catalogs that are hosted and managed by your own Organization.

While the Supplier hosted and the broker hosted exists outside the Company’s firewall, the internally hosted

catalogs are hosted and maintained in the Company’s own firewall.

Round trip or Punch out: After products are selected in the Supplier Catalog , the round trip service automatically

brings the required product details into the shopping cart back into the buying application i.e the shopping cart in the

SRM. The Roundtrip function in SAP is called the SAP Open Catalog Interface (OCI) . The OCI incorporates external

product catalogs into the SRM solution.

Catalog Strategy – Key reasons :

The key to an effective spending is to drive the largest possible amount of spending via negotiated Catalogs.

Cost Savings and Compliance are two key reasons to implement the Catalog Solution in the first place.

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System Landscape

The following technology components enable the business scenarios in SRM.

SAP EBP: SAP EBP Promotes Self Service Procurement. It is a Web based solution that facilitates

procurement of direct and Indirect goods and Services.

Bidding Engine: It is an Internet solution that provides Organizations the ability to strategically source

and obtain prices for goods and services. Tools such as Rfx, Auctions, Reverse Auctions and Bid

evaluations to create bid invitations and auctions.

Supplier Self Services: SUS is an hosted internet solution that facilitates Organizations to collaborate

with their business partners. A Web browser is all that is required for accessing SUS.

SAP MDM : MDM as a solution enables Organizations to manage Enterprise and Supplier Content.

BI : All SRM Analytics are handled in BI.

XI : XI is a middleware application used to integrate and exchange data between other SAP and non

SAP applications.

Enterprise Portal or SAP Net weaver Portal : SAP NetWeaver Portal offers a single point of access

to SAP and non-SAP information sources, enterprise applications, information repositories, databases,

and services inside and outside your organization - all integrated in a single user experience.

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Technical Scenarios in SRM

SRM provides the following technical scenarios for Implementation.

Classic Scenario

Extended Classic Scenario

Standalone Scenario

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Classic Scenario In the classic deployment, all materials management documents

(such as purchase orders, goods receipts, service entry sheets, and

invoices) exist in one or more back-end applications.

SAP SRM supports shopping cart creation and the entry of

confirmations and invoices. SAP SRM then communicates the

information to SAP ERP, which creates the active documents.

This type of deployment is appropriate if your company wants to:

Enable a wide user group – including employees from

beyond the procurement department – to enter

requirements expeditiously and with minimal training

required

Have the procurement department operate solely with

the functionality in the back-end application, without

transferring procurement activities to SAP SRM

Leverage advanced central contract distribution functionality in SAP

SRM to manage central contracts.

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Extended Classic Scenario In the extended classic deployment, you can create shopping carts

and purchase orders directly within SAP SRM before transferring the

data to one or more back-end applications. The purchase order in

SAP SRM is the leading purchase order. The information that is

transferred to the SAP ERP application is not an exact copy of the

purchase order, but a much leaner, read-only version. This copy

supplies the reference needed to create goods receipts, service

entry sheets, and invoices in the back-end application. With this

deployment option, SAP SRM supports the entry of confirmations

and invoices and copies them to SAP ERP.

With the extended classic deployment, you can leverage extended

central contract management functionality as a source of supply in

SAP SRM.

This type of deployment is appropriate if your company wants to:

Use the breadth of the self-service procurement

functionality in SAP SRM

Confirm and invoice against stock items

Take advantage of the flexibility offered by entering confirmations

and invoices through the self-service procurement functionality in

SAP SRM

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Standalone Scenario

In the stand-alone deployment, the entire procurement process is

handled by SAP SRM. The application creates the shopping cart and

all follow-on documents locally.

Accounting processes (financial accounting and controlling) must still

be handled by back-end applications. However, all validations and

approvals are handled directly by SAP SRM. SAP provides migration

tools to bring materials management data from company applications

into the application product master. This type of deployment is

appropriate if your company:

Does not have a materials management application, and

you want to handle the entire process within SAP SRM,

integrating only to an accounting application

Prefers to use the streamlined self-service procurement

functionality in SAP SRM for specific product categories

(typically, indirect materials and services)

Does not need back-end functionality, such as plant maintenance or

warehousing, for certain product categories, and you want to move

the procurement process for these categories completely out of the

back-end application, making the process quicker.

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Thank You