Optimized Procurement Processes For Automotive Suppliers

May 2, 2005 by admin

As a highly innovative sector, the automotive industry is characterized by intensive competition. The success of manufacturers and suppliers is largely dependent on their ability to react swiftly to ever more specific requests from customers. Suppliers are integrated into manufacturers’ processes at a very early stage. Automated processes and just-in-time and just-in-sequence supply are key factors for survival on the market. An important consequence of this is the rigorous demand for powerful IT solutions on both sides.

SupplyOn

SupplyOn

SupplyOn contributes to the competitiveness of the sector by enabling manufacturers and suppliers to handle procurement processes quickly and easily via an electronic marketplace. In pursuing its goal of providing added value, the company needed to fulfill the following requirements:

  • Establish a flexible IT system landscape that extends across application boundaries and creates consistent processes for manufacturers and suppliers.
  • Achieve integrated data management, including standardized access to the marketplace. This is after all an important prerequisite for efficient transaction handling.
  • Implement a standardized registration and enabling process for suppliers across all marketplace applications to reduce errors and the need for manual input.
  • Reduce the high administration overhead that has grown out of the separate management of master data and users in the individual applications.
  • Facilitate the integration of new applications in order to react flexibly to market demands without drastically increasing administration overheads.

SupplyOn therefore looked for a flexible solution that links business processes across different applications, standardizes the registration process, centralizes the log-on procedure, and reduces the systems’ administration overhead.

Solution package and implementation

At the beginning of 2003, SupplyOn opted to implement SAP NetWeaver. The central technology platform provides SupplyOn with an integrated workflow of the following core marketplace processes: The Sourcing Manager optimizes the inquiry and quotation process and quotation assessment, for instance by means of preconfigured requests for quotation and the option of holding auctions to conclude transactions quickly. Buyers use the Business Directory – a standardized, company-independent information platform – to locate the correct supplier quickly. This enables them to search for specific material groups and production options, while the results lists can be used directly as a mailing list for requesting quotations. The Performance Monitor provides buyers with a reliable means of assessing suppliers from a transparent quality management perspective. Documents such as standards and drawings are consistently integrated into the buying process via the Document Manager. The WebEDI functionality covers all ordering and supply processes and payment transactions along the entire supply chain. This also gives small and midsize suppliers access to consistent supply chain management processes.

Two-phase implementation

SAP NetWeaver was implemented in two phases and was supported by SAP Consulting and Seeburger. In the first phase, SupplyOn implemented the SAP Exchange Infrastructure (SAP XI) and SAP Web Application Server (SAP WebAS) between November 2003 and April 2004. In this phase, the complete marketplace infrastructure (with the exception of the Supply Chain Directory) was implemented along with the Sourcing Manager, Business Directory, Document Manager and Performance Monitor applications. In the second phase, from May to September 2004, SupplyOn completed the marketplace infrastructure with the implementation of the Supply Chain Directory and integrated WebEDI.

Results

The implementation of SAP NetWeaver has had a demonstrably positive effect on business process costs and administration costs at SupplyOn. The company has achieved an ROI of 88 percent on this investment with a payback period of around five years. The Total Cost of Ownership, that is the total costs of the infrastructure, software, and administration, will be reduced by 8.3 percent within five years and 16.7 percent within ten years.

Quantifiable benefits

One of the key quantifiable results included in the ROI and TCO calculations is increased sales effectiveness, with the internal overhead of contract processing being reduced by 17 percent. Customer management has also improved. The overhead for formal contract amendments, such as changes of address, is 20 percent lower. New contracts or content-related changes, such as the extension of services or upgrades, can be implemented faster.
Calculated over ten years, SupplyOn will achieve average process cost savings to the tune of 14.7 percent. The company can invest the funds that this frees up in customer targeting, thus driving its growth.

Qualitative benefits

As well as the benefits that can be measured directly, SAP NetWeaver has brought about a wide range of improvements whose benefits can only be quantified at a later point in time. By way of example, new business processes (applications) in the marketplace can be set up quickly, easily and cost-effectively, by integrating them into the portal. Corresponding processes, for instance in the quality field, are currently being drawn up. The registration and log-on processes become simpler and more secure for the customer. Single Sign-On gives the customer standardized access to reserved applications and services. The marketplace becomes easier and faster to use. If status changes are made, the new data is automatically submitted to Registration Management.
The uniform data quality of master, user, and business service data prevents errors and speeds up the efficient handling of transactions across the entire procurement process. This dispenses with the need for follow-up queries or the time-consuming exchange of supplementary files via e-mail or mail.

Well-positioned for the future

In addition to short-term quantitative and qualitative results, SupplyOn’s investment in SAP NetWeaver has created the foundation for future process improvements and cost savings. The company is thus in a position to integrate new applications seamlessly into the SupplyOn portal.

Marketplace infrastructure

Marketplace infrastructure

The Web Portal enables central access to the SupplyOn marketplace and role-based navigation. User Management enables SupplyOn to manage all users centrally, assign roles, and authenticate and authorize users. The master data of all companies registered on the marketplace is managed via Master Data Administration, and all relevant logistics-related master data and business relationships are managed by the Supply Chain Directory (SCD). Business Service Management enables all SupplyOn marketplace services to be managed and made available to suppliers.
The Single Sign-On &Security component enables a uniform log-on across the entire marketplace. The EAI /data replication functionality ensures that all master data relating to the individual applications is automatically replicated, and also maps cross-application processes.
A significant proportion of the quantifiable improvements results from the fact that SAP NetWeaver dispenses with the costly process of programming interfaces. These costs, known as “opportunity costs”, can be verified and calculated. They consist mainly of development and implementation costs that can be avoided, thus producing savings. These costs would have been considerably more than the volume of expenditure actually incurred by the project.

Direct link to customer and supplier portals

This new central infrastructure ultimately enables SupplyOn to create the conditions in which the marketplace can continue to be developed flexibly, safeguarding the financial success of the company. In addition to the current savings of 17 percent in terms of the TCO over the next 10 years, SupplyOn also believes that further process improvements will enable the TCO to be reduced yet further. The simplified Change Management and the Application Integration Guide are key factors in this regard, the latter defining the technical and practical integration of new applications.
SupplyOn is planning to further promote the integration of the IT infrastructure and to link the marketplace directly to customers’ staff portals and automotive manufacturers’ supplier portals. The implementation of SAP NetWeaver also presents completely new ways of generating potential added value. In future, collaborative engineering will enable business processes to be supported in the context of development partnerships in the automotive sector without friction losses.
See www.supplyon.com for further information.

Dr. Christian Stöcklmayer

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