SAP Solution Brief

SAP Business Suite Integrated Sourcing and

Procurement for Sustainable
Savings
A Closed-Loop Approach Reduces
Costs, Increases Compliance
Sustainable savings in pro­
curement can be realized
only by closing the loop
between your strategic
sourcing activities and your
procurement order cycle. The pursuit of operational excellence opportunities. With disparate, decentral­
in the area of procurement starts with ized systems and inconsistent master
How can you create a trans­ the recognition that procurement is not data requiring many manual manipu­la­
parent, comprehensive, and an isolated activity. It’s part of a conti­n­ tions, these organizations often fail to
uum of activity that starts with spend aggregate and get clean spend data.
fully integrated source-to-pay analysis and the sourcing of goods and For example, there are duplications and
process? With software and services. It extends through the man­ inconsistencies in how items are identi­
agement of your contracts and suppliers fied and how vendors are named and
services from SAP. and proceeds through to operational tracked. You may have procurement
procurement and the day-to-day actions personnel in six locations ordering the
associated with ordering, tracking, same item under three different names
and receiving goods and services from – from “paper” to “stationery” to
those suppliers. “office supplies.” They’re ordering from
four different suppliers, which are, in
In an economy with high market ve­locity, reality, the same supplier whose name
low margins, and unavoidable spending has been spelled four different ways.
increases, it is critical to tune and refine You may have preferred vendors with
each part of this process, and even solid negotiated contracts, but you may
more important to bring all the parts of also have maverick procurement depart­
this process together. By integrating all ments that procure goods and services
aspects of the sourcing and procure­ from other vendors.
ment processes – end to end – you can
gain the kind of complete transparency Eliminating these inconsistencies and
that leads to sustainable savings, lower gaining complete visibility into spending
operational costs, and ongoing compli­ is a critical first step in the pursuit of
ance with contracts, corporate guide­ savings opportunities. Only when you
lines, and regulatory requirements. gain full transparency into the entire
source-to-pay process can you deliver
How do you realize this vision? sustainable savings.
Integrated software and world-class
services from SAP can help. Software from SAP can help you gain
both the visibility and the control you
Maximize Savings Opportunities need to realize these goals. With com­
and Spend Under Management plete support for spend classi­fi­cation,
supplier normalization, and supplier
Start with the basic critical questions: enrichment, you can consolidate spend
how much are you spending now and data from multiple sources and automat­
where are you spending it? If you can’t ically cleanse duplicate and incon­sistent
answer completely, you’re not alone. data. As a result, you gain real insight
Many procurement organizations still into just how much you are spending,
have poor visibility into their spending, on what, and with whom. For example,
which often results in missed savings you can identify off-contract buying
anomalies, price variances among This covers everything from collabora­ the functionality you need to manage
identical commodities, and in­consistent tive project management, online re­ all aspects of a contract proactively
performance among vendors. You can quests for information and proposals, and transparently – from inception
view spend through multiple filters – and reverse auctions to sourcing through negotiation and finalization.
from classes of goods and services analyses, a centralized self-managed You can take advantage of a single
to regions and enterprise divisions – vendor database, and contract manage­ repository for all procurement contracts,
and then you can use the insight to ment. You can even use the software enabling groups within the organization
put plans in place to drive savings to define metrics for supplier perfor­ to find them easily and use them consis­
downstream. mance scorecards that will help you tently. You can track actual contract
manage suppliers and keep your usage and performance-related details,
Transform Savings Opportunities integrated sourcing and procurement and stay on top of imminent contract
into Negotiated Savings process streamlined over time. expirations.

Greater insight into overall organi­za­ Capture Negotiated Savings in Deliver Sustainable Savings
tional spend helps identify oppor­tu­ni­ties Your Contracts Through Operational Procurement
for increasing savings. It may become
immediately apparent where spend is With deep insight into enterprise All these efforts to understand and
fragmented and where groups within spend and initiatives to optimize your manage spend, optimize the supplier
your organization would benefit from an supplier environment, you and your network, and integrate savings oppor­
optimized supply base and aggregated internal stake­holders can truly work tunities through improved contract
contracts. You might see right away together to develop a solid negotiating management can result in tangible sav­
where there are opportunities to foster strategy and execute upon it. The lock ings. But these savings will be realized
competition among vendors for better on meaningful savings, however, only when connected with an opera­
prices, terms, or performance guaran­ requires a well-managed contract. And tional procurement system that all your
tees. But do you have a formal, consis­ just as there may be inconsistencies agents can use on a day-to-day basis.
tent sourcing process that enables you in supplier relationships, there may also
to find the suppliers with capabilities be inconsistencies among contracts. SAP supports this fully integrated
and prices that are best aligned with Consequently, enforcement of contrac­ approach to sourcing and procurement
your savings objectives? tual obligations may not be as rigorous with software that helps you manage
as it should be. Negotiated terms and and control spend from end to end.
Again, integrated software from SAP conditions may not always be honored This approach helps reduce operational
can help you identify and engage with because different groups are unaware costs by standardizing and automating
these suppliers. You can streamline of them or may be using redundant con­ the entire procure-to-pay process, in­
the entire sourcing process, define and tracts. Either way, negotiated savings cluding support for requisitions, opera­
apply sourcing best practices, collabo­ may be lost. tional sourcing and contracts, purchase
rate with different procurement groups, order processing, supplier collabora­
and extend the transparency of the Integrated contract management tion, and settlement.
spending analysis into the realm of sup­ controls can help you capture nego­
plier identification and management. tiated savings in contracts that all Such a unified operational process can
SAP® software can also provide you your procurement organizations can also help you ensure compliance with
with the functionality you need to nego­ leverage in the operational procure­ contracts and policies by embedding
tiate savings effectively with suppliers. ment process. SAP software provides terms and conditions within transactions
and improving collaboration with suppli­ the foundation for service-oriented
ers to facilitate the actual procurement architecture, SAP NetWeaver enables
of goods and services. You gain identi­ Software and services you to evolve your current IT landscape
fied savings, sustain better relationships from SAP can provide into an integrated, strategic environ­
with suppliers, and move your entire ment that supports business change.
pro­curement process toward new levels the functionality you In short, SAP NetWeaver provides the
of operational excellence. need to fully connect best way to enhance business applica­
tions, integrate your business partners,
Delivering an Integrated Solution: the source-to-pay pro­ and facilitate data sharing within your
SAP Software and Services cess for maximized global supplier network, even among
systems that are not running SAP
Software and services from SAP cost savings. software.
can provide you with the functionality
you need to realize this integrated Realize Real Benefits Through
model and fully connect the source- procurement environment. With easy an Integrated Approach
to-pay process for maximized cost access to relevant information, your
savings: personnel can accomplish more – and Your organization can gain real, sus­
• The SAP BusinessObjects™ Spend accomplish it more quickly and more tainable savings by transforming frag­
Performance Management applica­ consistently. mented sourcing and procurement
tion helps you aggregate, normalize, operations into one fully integrated pro­
classify, and enrich spend data while The SAP Services organization can cess. SAP software and services can
providing analytical tools designed help you assess your procurement facilitate this evolution and help you
for ease of use. pro­cesses and show you a clear road gain complete transparency over the
• The SAP E-Sourcing application helps map to an integrated approach based entire source-to-pay process throughout
you manage negotiation activities on best business practices developed your organization. Ultimately, that helps
including category and project man­ during more than 140,000 business you realize end-to-end savings and
agement; requests for proposals, engagements in 120 countries. SAP transform the entire sourcing and pro­
information, and quotation; forward implementation and ongoing support curement function to play an increasingly
and reverse auctions; contract services help your IT organization keep strategic role in your operations.
generation and management; and your SAP software operating at peak
supplier management. levels to support your business goals. For More Information
• The SAP ERP Operations solution
helps you manage the entire procure- Powered by the SAP NetWeaver® To learn more about how SAP software
to-pay process including requisitions, Technology Platform can help your organization achieve op­
operational sourcing and contracts, erational excellence by integrating
purchase order processing, supplier At the heart of this integrated solution sourcing and procurement activities,
collaboration, and settlement. lies the SAP NetWeaver® technology call your SAP representative today or
platform. SAP NetWeaver unifies tech­ visit us on the Web at www.sap.com
You can empower your procurement nology components into a single plat­ /solutions/executiveview/operations
personnel to be more productive than form, enabling organizations to reduce /source-and-procure/index.epx.
ever by providing personalized, role- IT complexity and obtain more business
based interfaces into this operational value from their IT investments. As
Quick facts www.sap.com /contactsap

Summary
Transforming procurement from a disconnected back-office function into a strategic function
that links spend analysis, strategic sourcing, contract management, and operational pro­
curement can help an organization overcome the biggest barrier to delivering on cost-saving
objectives. Closing the loop between sourcing and procurement creates the transparency
needed to identify opportunities to deliver tangible cost savings.

Business Challenges
• Identify savings opportunities
• Source the optimal supply base
• Optimize contract value
• Deliver sustainable savings

Key Features
• Spend analysis – Fully understand and classify spend; cleanse and normalize spend
data from multiple sources; normalize and enrich supplier information
• Strategic sourcing – Manage supplier negotiation activities, requests from suppliers,
forward and reverse auctions, contract generation and management
• Contract management – Manage contracts from negotiation through finalization and
integration into day-to-day procurement activities
• Operational procurement – Standardize and automate the entire procure-to-pay
process, including support for requisitions, operational sourcing and contracts, purchase
order processing, supplier collaboration, and settlement

Business Benefits
• Sustain savings by closing the loop between sourcing and procurement and ensuring
greater transparency into sourcing and procurement activities
• Maximize savings by enabling sourcing and procurement personnel to interact with an
optimized supplier base in accordance with well-defined procedures and well-negotiated
contracts
• Help ensure compliance with contracts and policies by managing all aspects of the life
of a contract and ensuring its consistent use throughout the organization
• Reduce operational costs by automating procurement operations to eliminate manual 50 090 796 (09/07)
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