Making services procurement yield savings through SAP SRM 7.0
Share of Services spend as percentage of total procurement spend has been growing steadily over the years and is expected to grow further. However many organizations are still facing challenges when it comes to managing services procurement.
Major pain points related to services procurement:
Typically services spend account for roughly around twenty (20) percent of the total purchasing volume, however procurement organizations do not have as much negotiation power over services spend as they have for material buying. Most of the purchasing organizations still struggle when buying services. The typical problems involve lack of transparency, maverick buying and poor supplier collaboration in services spend.
Though the services spend constitute a sizable chunk and offers good opportunity for easy saving, managing services is not on the radar of most of the purchasing organizations. The problem is compounded by lack of visibility and creation of silos in various functions leading to cost leakages across entire processes.
How can SAP SRM help in managing services spend:
SAP SRM 7.0 provides following features to manage services:
• Strategic Sourcing of services through SRM bidding engine
• Supplier collaboration for service entry and invoice creation
• Support for multilevel hierarchical services allowing easy management of complex services.
As SRM is tightly integrated with ERP (SAP ECC) system, it provides a seamless flow of business processes in services procurement scenario till the final payment to supplier.
Service specifications for complex work can be maintained in a tiered hierarchical structure in ERP system. This helps in easy ordering and data maintenance. Whenever a services requisition is created within ERP system, the requisition can be sent to SRM system for sourcing based on certain criteria.
After successful sourcing, requisition can be converted into Purchase Order and sent to supplier portal for supplier collaboration processes. Supplier users can create service entry and send to ERP system for acceptance by Requester. Upon acceptance, supplier can create invoice and send it to ERP system for payment processing. Depending upon configuration payment status check can be enabled for supplier through supplier portal.
The major benefits of this solution are:
• Reduced costs and cycle times through collaborative services procurement.
• Improved transparency and visibility across end to end processes
• Automation of service entry and invoicing process by bringing supplier in loop
• Easier tracking of services performed and available Purchase value
• Increased compliance to competitive pricing due to state-of-art bidding features of SAP SRM
• User friendly UI of SAP SRM leading to easy adoption of system
The limitation with this solution is its restriction to SRM classic scenario implementation. However customers can adopt the solution in extended classic scenario through a small custom development.
Overall this solution offers good value proposition for customers who are having SRM 7.0 implemented and have considerable services spend to leverage cost savings.