Lower Costs and Faster Upgrades with the Cloud

August 26, 2013 by Uta Spinger 0

Photo: ArcelorMittal

ArcelorMittal is the world’s leading steel and mining company, with a presence in more than 60 countries and an industrial footprint in over 20 countries. Standardized and efficient processes are absolutely essential for its operations. With raw material costs running at $60 billion, the stakes are high.

That’s why the company has been using SAP Supplier Relationship Management (SAP SRM) for many years. Month for month, it processes 5,800 free-text purchase orders, 8,371 catalog purchase orders, and 5,000 RFQs in SAP SRM. As ArcelorMittal operates globally, the company inevitably has a highly diversified product portfolio.  These factors make its process and IT infrastructure complex.

SAP Supplier Relationship Management as best practice

ArcelorMittal launched its Integra project to reduce this complexity and harmonize its fragmented procurement processes by introducing a standard procurement system worldwide. That system is SAP SRM 7, which it implemented in most of its locations in 2011 as a ramp-up customer. Anurag Tiwary, head of IT (Global Purchasing & Sourcing, Logistics, back office IT applications ), says: “The great achievement of our Integra project with SAP SRM is to have a standard process for our complex purchasing process with diversified people, different languages, countries, and products. SAP SRM is a very strategic tool, ensuring that we follow the self-service procurement as a best practice.” The company started out with SAP SRM 2, so the ArcelorMittal IT team already knew the solution inside out – and they were aware of both its strengths and its weaknesses. ArcelorMittal reports, for example, that users were initially unhappy about the look and feel of SRM 5 and lack of integration with the Enterprise Portal connection. Even after significant achievements with SRM, a continuous improvement project is on the way to improve user friendliness, performance and compliance.

Next page: User experience improved

Following last year’s upgrade to SRM 7 and stabilization of the helpdesk, ArcelorMittal has witnessed a significant improvement in user experience. ArclorMittal is really happy about the self-service procurement module  and its integration with e-catalog and the SAP Contract Lifecycle Management OnDemand (SAP CLM OnDemand) cloud solutions that the company implemented. “Our users appreciate SAP CLM in the cloud,” says Anurag. “For instance, they can adapt the CLM portal to their needs.” That’s why ArcelorMittal is looking to invest in more cloud solutions, such as one to handle its RFQ process. Integrated in the procurement platform, an electronic catalog solution was deployed during 2012, with some 126 catalogs representing $70 million of expenditure per year.

Upgrading is easy in the cloud

“Speed is remarkably good in the cloud”, says Anurag. “Upgrading our SAP CLM cloud solution required a one-to-two-week test phase. Compare that with the five months we needed to upgrade SAP SRM.”

Although ArcelorMittal had set up a private cloud to manage sensitive data, initially some people at the company and a number of business partners were a little skeptical about their first cloud project. However, when SAP took over the implementation and hosting, their fears were allayed and everything went very smoothly.

Customizing the solution to fit the company’s requirements was easy after process standardization, and without the vast customization traditional systems require and that often makes support more difficult.

Greater productivity, lower costs

Another key factor that measures the success of an IT project is its impact on productivity and costs. Thanks to standardized and automated processes, tools, and master data, ArcelorMittal’s procurement processes are now faster, and the cloud strategy has cut IT expenditure remarkably.  “If I compare the cost for infrastructure and maintenance for on premise SAP CLM, I can say that we saved 20% on IT cost with cloud on CLM ,” says Anurag.

Next page: Contract negotiation made easier via automated workflows and approval processes

Having one system helps ensure compliance, as the legal department has an overview of all contracts and their lifecycle. The SRM project made processes, such as the RFQ process transparent, enabling auditors to check that contracts are awarded fairly. Automated workflows and approval processes make contract negotiation easier: Employees can view approval status at any time in the system, rather than having to search for the paperwork.  A dashboard improves reporting.

An upgrade to SAP SRM 7.03 SAP HANA is slated to take place by the end of next year, and Anurag is also looking at a mobile strategy: “I believe in the future of mobile and cloud.”

SAP CLM at a glance

    • Cloud based solution: no internal infrastructure dependency.
    • Best in class contract compliance and monitoring capability (e.g. contract risk management with alerts, enhanced discipline in applying global and regional contracts)
    • Data accuracy & transparency: single version of truth for all – tendering, contract, PO, invoice
    • Increased productivity of buyers, legal and other stakeholders: e.g. automated online approval workflows, streamlined process for buying items from negotiated contracts and e-catalogs (self-service procurement),  online bidding/auction process, contract authoring

ArcelorMittal

ArcelorMittal is the world’s number one steel and mining company, with around 246,000 employees in more than 60 countries. ArcelorMittal is the leader in all major global steel markets, including automotive, construction, household appliances and packaging.

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