SRM Sample Report

DRIVING PROFITABLE GROWTH THROUGHPROCUREMENTSRM/PROCUREMENT BENCHMARKING RESULTSApril 13, 2010

SAP PERFORMANCEBENCHMARKING

Prepared for: Company ABC

The data in this report is illustrative and does notreflect an actual company or actual benchmarks.

SAP CONFIDENTIAL - Page 2 - For subject company internal use only - This page is from the benchmarking analysis prepared for subject company and subject to the terms,conditions and assumptions contained in the benchmarking analysis. Information contained herein is not a guarantee of future results, performance or cost savings.

Table of Contents

Executive Summary 2Assessment ObjectivesPerformance to PeersStrategies for ImprovementSupporting Best PracticesEnabling Solutions

Detailed Benchmarking Results 8

Case Studies 27

Appendix 29

Statement of Confidentiality and Exceptions

The information and analysis contained herein are the confidential and proprietary materials of SAP AG. No part of this publication may bereproduced or transmitted in any form or for any purpose without the express written permission of SAP AG. The information containedherein may be changed without prior notice.

The furnishing of this document shall not be construed as an offer or as constituting a binding agreement on the part of SAP AG and/ or itsaffiliated companies (“SAP”) to enter into any relationship. SAP provides this document as guidance only to illustrate estimatedcomparisons between the subject company and other companies with respect to certain key performance indicators and drivers.

These materials may be based upon information provided by the subject company, information provided by other companies andassumptions that are subject to change. These materials present illustrations of potential performance and cost savings, and do notguaranty future results, performance or cost savings. The materials are provided solely for internal review and use by the subjectcompany. SAP makes no representation or warranties of any kind with respect to these materials, and SAP shall not be liable for errors oromissions with respect to these materials.


For more information about the SAP Performance benchmarkingprogram, visit www.sap.com/usa/solutions/benchmarking orcontact [email protected]

The supply side of business has been actively monitored for valueopportunities over the last decade, as global competition has introducedlower costs and more players. Supplier relationship management (SRM)and procurement processes have a major impact on an organization’sability to compete and be profitable. Investment in sourcing andprocurement has consistently yielded high returns and impacted othercore processes throughout the organization.

The objective of this analysis is to evaluate your current performanceand practices in comparison with your peers, to identify opportunities forimprovement, support organizational targets and propose strategies toachieve those targets.

These “high-impact” strategies for procurement include:• Improving purchasing power• Collaborating with suppliers to jointly reduce costs along the supply

chain• Streamlining and automating sourcing and procurement processes• Increasing purchasing control on spend categories

In this report, you will find:• A comparison of your current KPI levels against those of selected

peers, as well as the potential benefit you may realize by closing thegap to top performance levels

• High-impact strategies and key levers that can help you achieve topperformance levels

• Recommended actions for delivering high-impact value strategies• Solutions that can help you achieve the high-impact strategies faster

and more effectively

As always, SAP stands ready to assist you as you pursue optimizedperformance through improved SRM and procurement practices.

http://www.sap.com/usa/solutions/benchmarkingor

mailto:[email protected]


KPI Benchmark Performance Potential Benefit (in Millions)1

Procurement CostsAs % of Spend

Average Annual Savings(Overall) (in %)

Spend ManagedStrategically(Overall) (in %)

Maverick Spend(Overall) (in %)

1) Average Annual Savings improvement is not counted in potential benefits range to avoid double counting with benefits from increasing managed spend andreducing maverick spend

2) Full KPI results can be found in Section 2, Detailed Benchmarking Results3) All currency in this report is in U.S. Dollars The selected peer group is High Tech industry.4) Benefits totals may not add up exactly from subtotals displayed on this page as they are calculated based on exact, not rounded numbers

Performance of Primary KPIs2 and Potential Benefit (in millions of selected currency3)

BENCHMARKING RESULTS AND VALUE POTENTIALESTIMATED BENEFITS4 OF

Primary Performance Indicators

The SAP performancebenchmarking survey assessedyour company’s performanceagainst 22 KPIs. This summaryhighlights the four indicators thatdetermine the majority of businessvalue in the majority ofprocurement-related businesscases.

These KPIs include:procurement costs as apercentage of spendaverage annual savings across allspend categoriesstrategically managed spend(regular process exists to analyze

spend, source and evaluatesuppliers)maverick spend (contract in placebut circumvented by employees)

The Benchmark Performancecolumn above compares your KPIs(indicated by the black arrow) withthose of your primary peer group(indicated by the top 25%, average,and bottom 25% values).

Identifying the High BenefitOpportunities

The Potential Benefit columnabove calculates the value ofclosing the gap between yourcompany’s KPI performance and

that of the peer average and the topperformers. With this information,you can prioritize the improvementareas that can help yourorganization achieve the greatestfinancial return.

What’s the Bottom Line?

The opportunity for improvement issignificant. When we calculate themeasurable benefits of achievingtop performance, your potentialvalue could range up to $45.4M

99.772.063.3

Bottom 25% Average Top 25%

82.4

20.5 4.413.7 1.0


1.0 0.41.9


0.3


8.06.6 10.04.3

1.2

44.2

77.4

0.0

0.0

0.0

0.0

0.00.0 - 0.0

0.0 - 77.4

0.0 - 44.2

1.20.0 -

UP To $45.4M

Benefit of Closing Gap to Top 25%Benefit of Closing Gap to Average


RECOMMENDED IMPROVEMENT STRATEGIESBASED ON YOUR SURVEY RESULTS

Procure-ment Costs

Collaborate withsuppliers to jointlyreduce costsalong supplychain

Streamline andautomatesourcing andprocurementprocesses

Increasepurchasingcontrol on spendcategories

SpendManagedStrategically

MaverickSpend

AverageAnnualSavings

Strategies Sub-StrategiesPrimary KPIsand Value

Capability

Improvepurchasingpower

0.0 0.0

0.0 77.4

0.0 44.2

0.0 1.2

Based on the KPIs that offer the greatest potential value, we can now identify the high-impact strategies to driveimprovement in these areas. Our high-impact strategy framework breaks each strategy down into more detailedsub-strategies. These sub-strategies are then mapped to the supporting best practices and KPIs that we track inour benchmarking database, leveraging the data from top performers in your peer group.

The graphic below shows strategies that can improve the primary KPIs, as well as an evaluation of yourorganization’s current support for each strategy (based on the benchmarking results). Top 25% performance isindicated with a , between average and top 25% performance is indicated with a and below-averageperformance with an . Primary high-impact strategy recommendations (red/yellow/green) are based on theaggregate performance of the sub-strategy assessments (red indicates a significant opportunity for improvement).

Drive adoption of self-service procurement toolsIntegrate processes within Procurement as well as outsideStandardize & automate procurement processesStreamline workflow across procurement processes and reduceauthorization steps

Increase supplier responsibilities for data maintenance & invoice settlementEvaluate and pay on suppliers’ performance (e.g., quality)Improve supplier visibility of demandIncrease supplier responsibilities for inventory managementIntegrate suppliers into planning and development

Consolidate buying categories and optimize supplier baseDrive best price (e.g. e-auctions, global sourcing, new suppliers)Reduce sourcing and contracting cycle times

Provide analytics for spend visibility and controlBring more non-managed categories /services under controlEstablish procurement function as a strategic enablerStrengthen spend controls and measure/enforce compliancePro-actively monitor contract terms, rebates, volume tiers and renewals

Benefit of Closing Gap to Top 25%(in million currency)

Benefit of Closing Gap to Average Top 25% performance for supporting best practices and KPIsBetween average and top 25% performance for supporting best practices and KPIsStrategies to focus: below average performance for supporting best practices, KPIs


Strategy Your Best Practices with High Importance, Low Adoption Process

Collaborate withsuppliers to jointlyreduce costsalong supply chain

Suppliers enter invoices directly into the Buyer's system Financial Settlement

System fully supports XML industry extensions and EDI interfaces Supplier Collaboration

Ability to approve suppliers via supplier portal; ability for suppliers to maintaintheir own information Supplier Enablement

Real-time visibility into supplier performance Supplier PerformanceManagementWeb-based management cockpit for reporting performance

Improvepurchasing power

Ability to share contracts with other employees for collaborationContract Management

Contract management system pre-populates relevant information in contract

Increasepurchasing controlon spendcategories

Ability to monitor supplier compliance with contract terms Contract Management

Best Practices To Help Close the Gap

SUPPORTING BEST PRACTICESCLOSING THE PERFORMANCE ACHIEVEMENT GAP

Best Practices as KeyEnablers of Performance

There are many best practices thatsupport the high-impact strategieson the previous page. Adoption ofthese best practices to enable thesehigh-impact strategies will helpdrive improvement in the relatedKPIs. The key is to prioritize those

strategies and best practices thatwill most impact your organization.The table below lists best practicesrated by you as important, but whichyou have adopted to a lesserdegree than your peers. Whenadopted, these best practices –most of which are enabled bytechnology – can help you close thegap between your company’s

performance and that of high-performing peers.Details on key practices can befound beginning on page 13 of thisreport, listed by process areaidentified in the table below.

SAP CONFIDENTIAL - Page 7 - For subject Company Internal Use Only - This page is from the Benchmarking Analysis prepared for subject Company and subject to the terms,conditions and assumptions contained in the Benchmarking Analysis. Information contained herein is not a guarantee of future results, performance or cost savings.

ENABLING SAP SOLUTIONSPROVIDING THE TECHNOLOGY FOUNDATION

SAP Solutions to Enable High-Impact Value Strategies

AnalyzeSpend Source Contract Requisition Order Invoice

& Pay

Spend Analysis& OpportunityIdentification

Spend Analysis& OpportunityIdentification

Strategic Sourcing& Negotiations

Contract LifecycleMgt. and Compliance

Operational Procurement to PayOperational Procurement to Pay

Increasepurchasing controlon spendcategories

Collaborate withsuppliers to jointlyreduce costs alongsupply chain

Streamline andautomate sourcingand procurementprocesses

ImprovePurchasingPower

Targeted areas for high-impact improvement

SAP Solutions: TheFoundation for OptimizedPerformance

SAP provides end-to-end,integrated support for the entiresourcing and procurement process.SAP’s solutions have been built toenable best practices, such as theones listed on the previous page, ineach sub process.

Target Areas for High-ImpactImprovement

Based on our analysis of KPIs andbest practices, you should focusyour improvement efforts on the

areas highlighted in red.

Here is how SAP’s technologydifferentiates in the above areas:

Spend analysis and opportunityidentification: SAP best aggregatesinto a global view of spend acrossall sources.

Strategic Sourcing andNegotiations: SAP uniquelyprovides a ‘best in class’ sourcingplatform for lowest pricenegotiations.

Contract Lifecycle Management andCompliance: Only SAP enforces

contract terms & reduces ‘maverick’spend through a fully integratedend-to-end process.

Supplier Collaborations: SAP bestmitigates risk by aligning supplierperformance with operations.

Potential Next Steps

SAP has a structured approach toanalyze pain points and calculatevalue potential in more detail, andcan also help you understand SAP’ssolution capabilities. Please contactyour account team for furthersupport.


Table of Contents

Executive Summary 2

Detailed Benchmarking Results 8Study BackgroundKPI ResultsBest Practice Assessment Results

Case Studies 27

Appendix 29


By Spend By Revenue

43%35%

9%14%

<1 B >=1 B, <5B

>=5 B,<10 B

>=10 B

41%

21% 19%

9%5% 6%

<500 M >= 500 M< 1 B

>= 1 B <2.5 B

>= 2.5 B< 5 B

>= 5 B <10 B

>=10 B

By Industry Sector (N= ) SAP SRM/ProcurementBenchmarking

The SAP benchmarking databasefor SRM/procurement now includesinformation collected from morethan 400 companies. Using thisinformation, the benchmarkingprocess conducts peer comparisonagainst companies within the sameindustry, revenue band, or spendbracket.

How does this help? Companieswithin an industry often managesimilar procurement spends orexperience comparable levels ofachievable average savings.Further, companies within the samerevenue or spend range typicallyshare similar scale in procurementoperations.

Selected Peer Comparisons

To accurately reflect yourcompany’s position, thisbenchmarking study leverages twopeer groups for comparison. Thetable at left shows the selected peergroups as well as the sample size.Executive summary results werebased on the primary peer group,shown as P1.

.

STUDY BACKGROUNDPEER COMPARISON PROFILE

Company Response:

Company Response:Company Response:

High Tech

5.10B

483

4,300.00M

7.7%

12.4%

7.5%

6.4%

3.9%

3.3%

4.8%

3.1%

2.7%

10.4%

4.1%

2.5%

1.0%

5.4%

2.5%

0.4%

6.8%

4.8%

3.3%

2.3%

2.1%

Defense and Security

Service Providers

Postal Services

Railways

M edia

Who lesale Distribution

Financial Services

EC&O

Healthcare

Life Sciences

Telecommunications

Public Sector

Aerospace

Retail

IM &C

Automotive

High Tech

Oil and Gas

Others

M ill Products

Chemical

Utilities

Consumer Products

Peer Group Selected N

Primary(P1)

High Tech 26

Secondary(P2)

All Companies 483


Category Metric CompanyPeer Group P1 Peer Group P2

Average Top 25% Average Top 25%

Effe

ctiv

enes

s

% Average Annual Savings Direct 8.0 7.2 12.5 5.2 10.4

Indirect 8.0 6.1 10.3 5.4 11.6

Services 8.0 5.0 7.9 5.3 11.4

% of Spend ManagedStrategically

Direct 90.0 78.2 100.0 71.8 95.9

Indirect 70.0 65.7 93.2 47.5 81.4

Services 70.0 63.3 99.0 52.5 90.6

% of Maverick Spend Direct 0.0 5.0 1.0 6.6 1.0

Indirect 20.0 11.7 5.0 13.8 2.9

Services 10.0 23.3 5.0 13.1 2.7

% of Spend Sourced Via e-Auctions

Direct 15.0 12.2 48.0 7.9 31.6

Indirect 0.0 18.9 66.2 8.0 31.3

Services 30.0 9.5 37.3 4.9 19.7

% Average Savings through e-Auctions

Direct 9.0 12.6 20.0 8.2 17.3

Indirect 10.0 17.0 8.6 17.9

Services 10.0 13.5 22.0 9.8 21.5

PO Error Rate (in %) 4.0 5.2 0.8 6.8 0.8

Orders Requiring Expediting (in %) 4.0 16.3 2.0 15.9 2.0

Note: Color commentary based on the Peer Group 1 benchmarks unless mentioned otherwise* Indicates lack of data points in the peer group necessary to determine benchmarks

Performance Summary: Effectiveness

The tables on this page and the next page compare the effectiveness and efficiency of your procurementprocesses with that of peer companies. Effectiveness metrics generally measure the impact or quality of theprocess. We have color-coded your company’s response, so you can easily focus on the KPIs with the greatestpotential for improvement, which appear in red.

Below Average Between Average and Top 25% Top 25% Outlier

PERFORMANCE INDICATOR SUMMARYEFFECTIVENESS


Category Metric CompanyPeer Group P1 Peer Group P2

Average Top 25% Average Top 25%

Effi

cien

cy

FTE’s per Billion of Total Spend (overall) 30.2 112.9 35.5 125.8 25.4

% of FTEs in Strategic & Expertise Functions 80.0 54.4 82.3 47.6 74.9

% of FTEs in Transactional Function 20.0 45.6 17.7 52.4 25.1

Overall Procurement Cost as % of Spend 0.3 1.0 0.4 0.9 0.2

Cycle Time For New Contract Creation (in weeks) 3.0 9.1 2.7 9.4 2.1

Note: Color commentary based on the Peer Group 1 benchmarks unless mentioned otherwise* Indicates lack of data points in the peer group necessary to determine benchmarks

Performance Summary: Efficiency

The table below shows key efficiency indicators and the performance of your organization against its peers.Efficiency metrics generally relate to cost and the cycle time of processes.

Below Average Between Average and Top 25% Top 25% Outlier

PERFORMANCE INDICATOR SUMMARYEFFECTIVENESS AND EFFICENCY


Company Best Practice Importance Compared to CoverageContrasted Against Peer Responses (Peer Group 1)

0

1

2

3

4

5

6

1 2 3 4 5 6 7 8 9 10 11 12 13

Average Coverage Top 25% Coverage Company Coverage Company Importance

1 = No Coverage5 = Full Coverage

BEST PRACTICES SUMMARYCOVERAGE AND IMPORTANCE

Best Practices AssessmentResults: Summary

In the benchmark survey you ratedthe importance of certainprocurement best practices as wellas how well your company executesagainst those practices. Thefollowing chart compares yourprogress against your statedpriorities. It compares how well youhave “covered” or adopted the bestpractices for given sub-processes(as indicated by the red line with the

importance you associated with thebest practices for the sub-process(yellow line).

The chart also shows theperformance of average peers andtop-performing (top 25%) peers, asindicated by the dark and light bluebars. To identify potential areas forimprovement, look for areas whereyou see a dip in the red line belowpeer average values (indicating lowbest practice coverage) or a large

gap between the red and yellow lines(indicating a significant gap betweenyour company’s capabilities and theimportance you associated withthem). These areas may warrantfurther attention.

Best Practices AssessmentResults: Details

The following pages display yourdetailed best practice assessmentresults for each of the sub-processesshown in this chart.

1. Strategy and Leadership2. Compliance3. Sourcing: Category Management and Spend Analysis4. Sourcing: Supplier Evaluation and Negotiation5. Supplier Performance Management6. Contract Management7. Supplier Collaboration

8. Requisitioning9. Order Processing10. Material Receipt11. Financial Settlement12. Supplier Data Management13. Supplier Enablement

SAP CONFIDENTIAL - Page 13 - For subject company internal use only - This page is from the benchmarking analysis prepared for subject company and subject to the terms,conditions and assumptions contained in the benchmarking analysis. Information contained herein is not a guarantee of future results, performance or cost savings.This information is provided by SAP on an "as-is" basis without warranty of any kind, and subject to the "General Disclaimer" and other terms of use stated athttp://www.sap.com/company/legal/copyright/. Any results or comparisons shown are for general information purposes only and any particular data or analysis should not beinterpreted as demonstrating a cause and effect relationship. Comparable performance on one given key performance indicator does not guaranty comparable performance onanother key performance indicator.”

Best Practice Ranking – Peer Group P1


Best Practice ListingCompanyInternal

Gap

1Procurement plays a strategic role withinthe organization and actively participatesin business unit decision-making

2

2 Organization operates a single,integrated procurement system 1

0

1

2

3

4

5

6

1 2Average Coverage Top 25% Coverage

Company Coverage Company Importance

CoverageRanking:

Best Practices for Strategy and Leadership: Impact on Managed Spend and Savings

Although the two selected best practices impact many KPIs, their potential impact on spend managed strategicallyand average annual savings is especially significant. Compared with organizations that have low adoption of eachbest practice, companies with high adoption across the entire procurement database also perform significantlybetter, on average.

Best Practice Adoption/Spend Managed Strategically (Direct)

Procurement plays a strategic role within the organizationand actively participates in business unit decision making

76%61%+ 25%

Low High

Organization operates a single, integrated procurementsystem

5.6%3.8%+ 46%

Best Practice Adoption/Average Annual Savings (Direct) Low High

STRATEGY AND LEADERSHIP

Top 25%Between Average and Top 25%Below AverageCoverage

Ranking:

http://www.sap.com/company/legal/copyright/.



0

1

2

3

4

5

6

1 2 3Average Coverage Top 25% CoverageCompany Coverage Company Importance


Gap

1 Contract compliance is directed, or evenmandated, by system controls 1

2Stakeholders have access to accurateand timely reporting of contractcompliance to catch maverick activity

2

3

System provides various standardanalysis and reports to monitorpurchasing operations and provide adetailed analysis of compliance-relatedpurchasing activities and procurementprocesses

0

Best Practices for Compliance: Impact on Maverick Spending

Adoption of best practices in compliance has a direct effect on maverick spending. The table below shows howmaverick spending decreases, on average, as best practices are adopted.

Best Practice Adoption/Maverick Spending (Direct)

Contract compliance is directed, or even mandated, bysystem controls 3.2%5.2%

- 40%

Low High

System provides various standard analysis and reports tomonitor purchasing operations and provide a detailedanalysis of compliance-related purchasing activities andprocurement processes

2.7%5.3%- 50%

COMPLIANCE


CoverageRanking:


Ranking:




0

1

2

3

4

5

6

1 2 3 4 5Average Coverage Top 25% Coverage



Gap

1Organization fosters supplier competitionfor commodity spend to further reduceprice and achieve true market value

0

2Organization has ability to accuratelymeasure both direct and indirect spendusing a single repository of data

1

3Organization conducts regular spendreviews to identify new areas of contractopportunity

1

4

Buyers and commodity managers haveaccess to a sourcing cockpit andregularly analyze supply strategy/perform portfolio analysis for keycommodities. There is an ongoing focuson sourcing cycle time reduction

2

5

System has ability to aggregatepurchases across all business units foraccurate global analysis of supplierspend data

-1

SOURCING: CATEGORY MANAGEMENT

Best Practices for Category Management: Impact on Managed Spend and Savings

Most best practices for category management impact both average annual savings and spend managedstrategically. Below are two examples comparing the difference between low and high adoption of best practices.

Best Practice Adoption/Spend Managed Strategically (Direct)

Organization conducts regular spend reviews to identify newareas of contract opportunity

75%60%+ 24%

Low High

System has ability to aggregate purchases across all businessunits for accurate global analysis of supplier spend data

5.6%4.1%+ 35%

Best Practice Adoption/Average Annual Savings (Direct) Low High


CoverageRanking:


Ranking:




0

1

2

3

4

5

6

1 2 3 4 5

Average Coverage Top 25% CoverageCompany Coverage Company Importance


Gap

1

Supply base is reviewed on a regularbasis against key performance indicators(KPIs); Weighting and scoring matricesare used in bid analysis/ award

1

2Organization has a balanced focusbetween price and performance andconsiders TCO

3

3

Organization negotiates and managesinnovative contract terms and conditionsincluding vendor owned/ managedinventory, automatic replenishment,early-pay discounts, volume discounts/rebates and index-based pricing forcommodities

1

4

Formal Request for Information,Proposal, and Quotation process is inplace to collect multiple supplierresponses for both new and renegotiatedbuys

0

5

Multiple suppliers are invited toparticipate in RFx and Reverse auctionprocesses to increase the accuracy ofmarket price

0

Best Practices for Supplier Evaluation and Negotiation: Impact on Average Savings

Best practices adoption for supplier evaluation and negotiation directly increases purchasing power. Leveraging e-auctions is an effective way to increase supplier competition at low transactional cost, while enhancing priceaccuracy.Best Practice Adoption/Average Annual Savings

Organization has a balanced focus between price andperformance and considers TCO

5.3%3.8%+ 38%

Low High

Multiple suppliers are invited to participate in RFx and reverseauction processes to increase the accuracy of market prices

8.2%5.7%+ 45%

Best Practice Adoption/E-Auction Savings (Overall) Low High

SOURCING: SUPPLIER EVALUATIONAND NEGOTIATION


CoverageRanking:


Ranking:




0

1

2

3

4

5

6

1 2 3 4



Gap

1

Suppliers' performance is measured on aregular basis to review if suppliers aremeeting contract terms and to gainleverage in negotiation

0

2

System tracks quantitative and qualitativeKPIs (key performance indicators) ofSupplier performance; performance isregularly communicated to suppliers

2

3System provides real-time visibility to thesuppliers performance for pro-activeimprovements

3

4

Internal team has access to a web-basedmanagement cockpit interface forreporting performance results. Theinterface is predefined yet flexible andenables companies to deliver graphical,numerical, and verbal information tovarious levels within the organization

3

Best Practices for Supplier Performance Management: Impact on Average Annual Savings

Managing supplier performance through regular reviews and leveraging that information for future negotiations canhelp you identify suppliers with whom you would like to develop stronger relationships – leading to better priceleverage and increased savings. Identifying your most reliable suppliers – those that regularly meet service levelagreements – can also help you consolidate your supply base and reduce supply risk.

Best Practice Adoption/Average Annual Savings

Suppliers' performance is measured on a regular basis to reviewwhether suppliers are meeting contract terms and to gain leverage innegotiation

5.2%4.8%+8%

Low High

System provides real-time visibility about suppliers’performance to enable proactive improvements 5.8%5.1%

+ 14%

Best Practice Adoption/Average Annual Savings Low High

SUPPLIER PERFORMANCE MANAGEMENT


CoverageRanking:


Ranking:



Best Practice Ranking – Peer Group P1Best Practice Listing

CompanyInternal

Gap

1 Organization has single, centralizedrepository of supplier contracts 1

2

Organization has ability to monitorsupplier compliance with contract terms;Organization performs regular reviews ofexisting contracts to insure terms andconditions are being met

3

3

Contract management system isintegrated with RFX/ e-Auction system topre-populate relevant information into thecontract

4

4Ability to share contracts with otheremployees for collaboration: red-lining,versioning, etc

4

0

1

2

3

4

5

6

1 2 3 4

Average Coverage Top 25% Coverage


CONTRACT MANAGEMENT

Best Practices for Contract Management: Impact on Cycle Time for New Contracts and MaverickSpend

Best practices for contract authoring and monitoring can accelerate contract cycle times and decrease sourcingcycles, which can increase your purchasing power. In addition, centralized contract management can help trackcontract adherence, thus enhancing control of maverick spend and increasing spend under management.

Best Practice Adoption/Cycle Time For New ContractCreation (in weeks) and Maverick Spend

Organization has single, centralized repository of supplier contracts 9weeks

11weeks

-12%

Organization has single, centralized repository of suppliercontracts 6.6%8.6%

-24%

Best Practice Adoption/Maverick Spend

Low High


CoverageRanking:


Ranking:

Low High



Best Practice Ranking – Peer Group P1Best Practice Listing

CompanyInternal

Gap

1

Company facilitates order collaborationthrough a supplier portal for orderacknowledgements, advanced shippingnotifications, and confirmations

0

2 Supplier portal supports stockrequirements inventory level checks 3

3 System fully supports XML industryextensions and EDI interfaces 3

4Organization has implemented suppliermanaged inventory and collaborativereplenishment

1

5

Strategic Suppliers are viewed as part ofthe team and collaborate withEngineering as well as Sourcing to insurecomponents and finished products canmeet expectations

1

6

Suppliers are able to maintain their owndata, pre-enter goods receipts (ASNs),and pre-enter invoices on behalf of thebuying organizations (approval isrequired)

3

7 Organization involves suppliers in productdevelopment at the design stage 1

0

1

2

3

4

5

6

1 2 3 4 5 6 7Average Coverage Top 25% Coverage


SUPPLIER COLLABORATION

Best Practices for Supplier Collaboration: Impact on Overall Procurement Costs

Enhancing supplier collaboration – through increased supplier responsibility for better inventory management or byinvolving suppliers at the product design stage – is beneficial. These best practices help reduce inventory anddecrease the risk of product failure. Providing better demand visibility to suppliers also reduces expedited orders,since suppliers are better prepared to service orders. Increasing suppliers’ responsibility for maintaining their owndata alleviates workload of procurement FTEs, reducing headcount and overall procurement costs.Best Practice Adoption/Overall Procurement Costs

Suppliers are able to maintain their own data, pre-enter goodsreceipts (ASNs), and pre-enter invoices on behalf of the buyingorganizations (approval is required)

0.8%1.0%-20%

Low High


CoverageRanking:


Ranking:




0

1

2

3

4

5

6

1 2




Gap

1On line item catalogs used for self-services requisition -1

2

System enables online order approvalsand workflow and employs an electronicapproval process for shopping carts andpurchase requisitions

-1

Best Practices for Requisitioning: Impact on Average Days for Requisition to PO Processed and% of FTEs in Transactional Functions

Self-service requisitioning mechanisms can boost end-user involvement in the procurement process, therebyreducing procurement process costs. Manager self-service and online order approvals can expedite the POcreation and approval process, reducing lead time and impacting procurement costs.Best Practice Adoption/Average Days for Requisition to POProcessed

Online item catalogs used for self-services requisition 2.6days

4.8days

-47%

Low High

Best Practice Adoption/% of FTEs in TransactionalFunctionsSystem enables online order approvals and workflow and employs anelectronic approval process for shopping carts and purchaserequisitions

47.1%53.7%-12%

Low High

REQUISITIONING


CoverageRanking:


Ranking:




0

1

2

3

4

5

6

1 2 3 4




Gap

1

System processes POs automatically (nointervention necessary) and submits themelectronically to suppliers 1

2Organization uses integrated platform forindirect, direct and services procurement 2

3 Buyers have online access to PO status 1

4

Change Orders/ PO Acknowledgementsare controlled and re-communicated tothe supplier electronically 2

ORDER PROCESSING

Best Practices for Order Processing: Impact on PO Error Rate and Orders Requiring Expediting

Order processing best practices can help reduce error rates, therefore reducing rework and related costs.Providing buyers with online access to PO status can help them decrease the number of hours spent pursuingorder delivery and reduce order expedition. This frees up time for other value-adding activities and reduces thecost of transactional activities.

Best Practice Adoption/Orders Requiring Expediting

Buyers have online access to PO status13.5%17.3%

-22%

Low High

Best Practice Adoption/PO Error Rate

System processes POs automatically (no intervention necessary)and submits them electronically to suppliers 6.1%9.4%

-35%

Low High


CoverageRanking:


Ranking:




0

1

2

3

4

5

6

1 2 3




Gap

1Receiving system is highly integrated withother systems such as purchasing andinventory

0

2

Advanced Ship Notifications (ASNs) areenabled electronically to allow for pre-receipt of the items. As a result, only theapproval of the receipt is required by theend-user

1

3 Evaluated Receipt Settlement utilized totake advantage of early payment discount 2

MATERIAL RECEIPT

Best Practices for Material Receipt: Impact on Lost Discounts

Best practices adoption in material receipt can reduce the number of FTEs required for material handling. Timelyacknowledgement of material receipts from end-users can improve lead time tracking for the entire procurementcycle. ASNs can provide end-users with timely order information and reduce errors in receipts. Evaluated receiptsettlement systems reduce the invoice settlement effort and prevent the loss of early payments discounts,decreasing costs and increasing savings.

Best Practice Adoption/Lost Discounts

Evaluated receipt settlement utilized to take advantage of earlypayment discount 6.0%13.0%

-54%

Low High


CoverageRanking:


Ranking:




0

1

2

3

4

5

6

1 2 3 4 5 6



Gap

1Invoice entry is automated by XML, EDI,or other means to alleviate the workloadof AP

2

2Tools to support electronic invoicing,online supplier invoice inquiries anddispute resolution

2

3 Suppliers are given the ability to enterinvoices directly into the Buyer's system 3

4

3-way Invoice matching is enabled toinsure the invoice reflects what wasordered and delivered; invoices can bematched electronically with order andreceiving information

0

5AP Managers spend time monitoring andevaluating AP processes rather thanentering invoices into the system

-1

6

The AP system automatically alerts anddoes not accept receipt of goods when itfinds differences between invoice, orderand receipt [within defined tolerances]

0

FINANCIAL SETTLEMENT

Best Practices for Financial Settlement: Invoice Error Rate and % of FTEs in TransactionalFunction

Electronic invoicing can help reduce both staffing requirements for financial settlement processes (and their relatedcosts) as well as invoice errors.Best Practice Adoption/% of FTEs in Transactional Function

Invoice entry is automated by XML, EDI, or other means to alleviatethe workload of AP 44.1%54.0%

-18%

Low High

Best Practice Adoption/Invoice Error Rate

Tools support electronic invoicing, online supplier invoice inquiries,and dispute resolution 5.0%5.9%

-15%

Low High


CoverageRanking:


Ranking:




0

1

2

3

4

5

6




Gap

1

Master data is synchronized betweenvarious systems (accounting, purchasing,etc) to prevent data duplication andaccurate reporting

1

2

System gives supplier the ability tomaintain their own data and upload theirown content to the Buyer's catalog andSupplier Data Management repository

3

SUPPLIER DATA MANAGEMENT

Best Practices for Supplier Data Management: Spend Under Management

When procurement data resides on different systems, and those systems cannot reconcile data or perform thedata classification and enrichment essential for spend analysis, companies lack visibility into their spend.Organizations that ensure data synchronization across various systems are better able to aggregate spend data,which provides them with the visibility needed for spend analysis. Increasing suppliers’ responsibility to maintaintheir own data frees up procurement FTEs for other value-adding activities and reduces the overall cost of theprocurement function.

Best Practice Adoption/Spend Under Management

Master data is synchronized between various systems (accounting,purchasing, etc.) to prevent data duplication and ensure accuratereporting

61.9%54.4%+14%

Low High


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Ranking:




0

1

2

3

4

5

6




Gap

1 Suppliers have capability to self-registervia supplier portal 2

2

Purchasers have the ability within thesystem to approve suppliers that registervia the supplier portal; once suppliers areapproved, they can maintain their ownadministrative information and addadditional users

2

SUPPLIER ENABLEMENT

Best Practices for Supplier Enablement: % of FTEs in Transactional Function

Supplier enablement is a prerequisite for better supplier collaboration. Supplier portals provide suppliers with toolsto self-register and better manage their catalogs and other product information. Portals also help ensure thatprocurement data remains current and they can reduce sourcing efforts.

Best Practice Adoption/ % of FTEs in Transactional Function

Purchasers have the ability within the system to approvesuppliers that register via the supplier portal; once suppliers areapproved, they can maintain their own administrative informationand add additional users

38.9%51.0%-24%

Low High


CoverageRanking:


Ranking:



Table of Contents

Executive Summary 2


Case Studies 27

Appendix 29


SAP® SRM HELPS PITNEY BOWES SAVE MILLIONSWITH STREAMLINED SPENDING PROCESSES


Table of Contents

Executive Summary 2


Case Studies 27

Appendix 29Study ScopeDetailed Company and Peer ProfileDiagnostic Framework


SRM/Procurement Benchmarking Study Scope

Strategy and LeadershipCompliance

Sourcing: Category Management and Spend AnalysisSourcing: Supplier Evaluation and NegotiationSupplier Performance ManagementContract ManagementSupplier Collaboration

RequisitioningOrder ProcessingMaterial ReceiptFinancial SettlementSupplier Data ManagementSupplier Enablement

Strategy,ComplianceManagement

Expertise –BasedActivities

TransactionalActivities

DriveEfficiency

DriveEffectiveness

STUDY SCOPEFULL PROCUREMENT PROCESS COVERAGE


Regions/ Divisions Included:

Participant Information:

Company Facts

Industry High Tech

Annual Revenue (in millions) 5,100.0

Operating Income (in millions) 442.0

Supplier and SpendProfile

Total Annual Spend (in millions)

Total 4,300.0

Direct 2,400.0

Indirect 300.0

Services 1600.0

Controllable Spend (in millions)

Total 3,880.0

Direct 2,400.0

Indirect 230.0

Services 1,250.0

“Active” Suppliers 20,000

Total POs Processed Annually 10,000

Staffing Levels and Costs Sourcing and Procurement FTEs 130.0

Annual Procurement Function Costs (in’000s) 12,000.0

Technology

SAP SRM/ Procurement IT Systems Deployed Other, Non SAP

Other SRM/ Procurement IT Systems Deployed

Single Enterprise Wide System Yes

Entire Company

XXX, Director Global ERP Program,Company ABC International

ContractManagement Spend Under Contract (in %)

Direct 80.0

Indirect 40.0

Services 70.0

COMPANY SNAPSHOTFINANCIAL AND PROCUREMENT PROFILE


Area Function FTE'sAverage Cost/

FTE(in ’000s)

TotalHeadcount Cost

(in ’000s)

Strategy-RelatedStrategy and Leadership

19.5 90.0 1,755.0Compliance

Expertise Based

Sourcing: CategoryManagement/ Spend Analysis

84.5 80.0 6,760.0

Sourcing: Supplier Evaluation &Negotiation

Supplier Performance

Contract Management

Supplier Collaboration

Transactional

Requisitioning

26.0 15.0 390.0

Order Processing

Materials Receipt

Financial Settlement

Supplier Data Management

Supplier Enablement

Total 130.0 N/ A 8,905.0

COMPANY BASELINESTAFFING AND COST PROFILEU.S. Dollar


By Revenue

21% 21%7%

29%

7%14%

<500M

>= 500M < 1

B

>= 1 B< 2.5

B

>= 2.5B < 5

B

>= 5 B< 10 B

>=10 B

By Spend

By Industry Sector (N = ) High Tech26

Company Response:4,300.0M

PARTICIPATING COMPANY PROFILE: INDUSTRY,REVENUE, AND SPENDPEER GROUP 1 (P1)

100.0%

0.0%

Aerospace

Automo tive

Chemical

Consumer Products


EC&O

Financial Services

Healthcare

IM &C

M edia

M ill Products

Oil and Gas

Life Sciences

Postal Services

Public Sector

Railways

Retail

Service Providers

Telecommunications

Utilities

Wholesale Distribution

Others

High Tech

30% 35%

22%13%

<1 B >=1 B,<5 B

>=5 B,<10 B

>=10 B

5.10BCompany Response:

Company Response:


By Revenue

By Spend

By Industry Sector (N = )

43%35%

9%14%

<1 B >=1 B, <5B

>=5 B,<10 B

>=10 B

High Tech

5.10B

Company Response:

Company Response:

483

Company Response:

6%5%9%19%21%

41%

<500M

>=500 M< 1 B

>= 1 B< 2.5

B

>= 2.5B < 5

B

>= 5 B< 10 B

>=10B

4,300.0M

7.7%

12.4%

7.5%

6.4%

3.3%

3.3%

4.8%

10.4%

4.1%

2.7%

2.5%

2.5%

5.4%

2.3%

6.8%

4.8%

3.1%

2.1%

1.0%

0.4%

Aerospace


Service Providers

Postal Services

Railways

M edia

Wholesale Distribution

Financial Services

EC&O

Healthcare

Life Sciences

Telecommunications

Public Secto r

Retail

IM &C

Automotive

High Tech

Oil and Gas

Others

M ill Products

Chemical

Utilities

Consumer Products

PARTICIPATING COMPANY PROFILE: INDUSTRY,REVENUE AND SPENDPEER GROUP 2 (P2)


61%

39%

Yes No

22.7% 22.7%

13.6%

27.3%

9.1%

0.0%

4.5%

<1,000 1,000 -2,500

2,500 -5,000

5,000 -9,999

10,000 -20,000

20,000 -30,000

30,000+

20,000

48%

10%14% 14% 14%

<10,000 10,000 -20,000

20,000 -50,000

50,000 -100,000

100,000 -250,000

>250,000

10,000Company Response:Company Response:

Other, Non SAPCompany Response:

YesCompany Response:

29%

19% 20%

32%

R/3 SAP ERP SAP SRMExtended

Procurement

No SAP

PARTICIPATING COMPANY PROFILE: SPEND,SUPPLIERS, AND PURCHASE ORDERSPEER GROUP 1 (P1)

By Number of ActiveSuppliers

By Annual PO Volume

SingleEnterprise-Wide System

Sourcing and ProcurementSystems Deployed