Procurement Becomes a Strategic Business Function at SuKarne

Discovering opportunities for a business to improve processes and operations does not have to be an exhausting adventure. Sometimes challenges can be seen in broad daylight. That was the case for SuKarne, a Grupo Viz company based in Mexico, thanks to innovation and technology adoption.

World Class and Northern Roots

With corporate headquarters in Culiacán, Sinaloa, in northern Mexico, SuKarne is one of the four organizations established by Grupo Viz. What emerged 52 years ago as a family initiative is now the third-largest beef fattener in the world and the fifth-largest beef supplier in North America.

The company’s success has been sustained by an infrastructure consisting of five comprehensive livestock units, four in Mexican territory and one in Nicaragua; seven processing plants, with an installed capacity of 2 million head of cattle per year; 10 distribution centers across Mexico, the U.S., and Central America and 400 distribution routes; more than 220 livestock purchase and conditioning centers; and more than 300 owned stores. In addition, since its facilities have the necessary international sanitary and industrial certifications, SuKarne is a big exporter — its products are available in six countries on four continents. In fact, it is estimated that SuKarne is responsible for 70% of the meat exports of the Mexican economy.

SuKarne today has 13,000 direct workers, collaborates with more than 100,000 agricultural and livestock suppliers, and serves more than 80,000 customers, such as supermarket chains, although most are micro-businesses like small butchers and restaurants.

The numbers speak for themselves: the Mexican economy has a true powerhouse in the global market for animal protein.

First Steps: Goodbye to Paper-Based Billing

Before adopting SAP Ariba solutions, SuKarne’s Procurement department would not have surprised anyone from an innovation perspective. In fact, as in many organizations, it was a highly traditional corporate area serving a registry of more than 5,000 suppliers, 2,000 of them active, not including suppliers of livestock and raw materials for livestock feed, which are served by another area of ​​the corporation.

In these circumstances, recalls SuKarne Chief Procurement Officer Gonzalo Padilla, the work was bureaucratic, prone to human errors, and without real business value. “Between 60 and 70% of the team’s time was spent on managing invoices: reviewing them, ensuring that none had been misplaced, and taking them in-person to a colleague’s desk in the Accounts Payable area. All this, despite the fact that electronic invoicing had been implemented in Mexico for a while,” Padilla shares.

Common mistakes, derived from human execution, were not unusual in this environment: lost or misplaced invoices, which delayed payments and ignited the anger of suppliers; processes interrupted by the modification of a process or corporate policy, and even by the vacations of a person involved in the process; and long sessions at Accounts Payable desks to review and reconcile issues, which tended to cause friction between departments.

“The Procurement area concentrated on management tasks that did not add business value; we dedicated ourselves to seeking payments and not seeking negotiations,” says Padilla.

Aware of its challenges and taking advantage of a reorganization that brought Padilla’s team into the Finance department, the Procurement team set out on an innovation journey with the implementation of the SAP Ariba Strategic Sourcing solutions, part of SAP’s Intelligent Spend Management concept.

Initially, thanks to SAP Ariba Contracts, the billing processes were digitalized and automated, reducing the administrative and transactional burdens of the team while also reducing human errors and non-essential interactions with the Accounts Receivable area. In this way, the Procurement department was able to focus more on generating value for the business, including conducting strategic negotiations for the company.

SuKarne’s suppliers were resistant to the new model at first. “They did not see the benefits, perhaps because we were in the initial process of discovering and understanding them, and therefore the process of supplier adoption was slower,” recalls Padilla. “Once the advantages were evident, a communication campaign was implemented that was very important since it showed the benefits: invoices from suppliers would not be parked on a desk and the payments would come out on time.”

Extending the Power of Innovation

Billing was not the only area of improvement. SuKarne also began a digital transformation project encompassing the entire organization, which implied defining and rethinking processes, creating operation manuals, documenting transactions in the various areas, and establishing continuous improvement policies, among other tasks that are essential in these types of innovative initiatives.

Within this framework, Padilla’s team, taking advantage of the end-to-end source-to-pay solutions – SAP Ariba Strategic Sourcing and SAP Ariba Buying and Invoicing – expanded its digital procurement capabilities. After an internal analysis of the different tasks and goals of the Procurement area, multiple opportunities were detected to boost productivity to new levels:

Self-purchase catalogs

Taking advantage of the functions of SAP Ariba Catalog, self-purchase catalogs were created for items in which Padilla’s department uses prenegotiated contracts. At SuKarne, this tool is already being used for purchases of stationery, general services, materials, and some aspects of marketing. Catalogs are very easy to use, implement, and manage so the company has full visibility and control of transactions. Quality remains high since the catalogs include images of the product, price, characteristics, etc. In addition, the company was able to adapt this resource to its branding, so the catalogs today are known as the “Compras SK” portals.

Contract generation process

Before the implementation of SAP Ariba Contracts, when a contract was generated, Legal had to go through an internally developed tool, which provided very basic functionality and did not offer any certainty in terms of time. Now, with SAP Ariba Contracts, from the moment a supplier registers in the SuKarne system, the provider can find all the legal and commercial information they need on the platform. In addition to speeding up activity, this allows for timely monitoring of contracts and easy reviews.

Audits

Being part of the agri-food industry, SuKarne is constantly audited by authorities, industrial organizations, institutions, and even clients. An important part of these reviews focuses on suppliers — how they are evaluated, what criteria are used to qualify them, what policies and action plans do they have, etc. SuKarne found a solution in the SAP Ariba Supplier Management portfolio with SAP Ariba Supplier Lifecycle and Performance and SAP Ariba Supplier Risk. In the past, when an audit was submitted, the company had to put in place a plan to address that specific item. Today, the evaluation of suppliers is carried out all the time, through very friendly, digital tools. When an audit is submitted, SuKarne now has real-time information accessible immediately.

In order to achieve these advances, a decisive factor, according to Padilla, was the support of the SAP team. “Through seminars and constant support, the team not only explained the capabilities of the solutions to us, but also guided us in the task of adapting existing processes to the platform, how to get more out of the innovation we were adopting,” he says.

Challenge Overcome: The Year of the Pandemic

From Culiacán, SuKarne’s Procurement department continues to explore – and discover – the benefits of investing in innovation. With the guided sourcing and guided buying capabilities within the SAP Ariba solution suite, the company hopes to improve other procurement and sourcing processes and increase the efficiency of Procurement interactions with other corporate divisions.

These future projects will be led by a totally transformed department – a Procurement team with the capacity to provide value to the business in a new and strategic way. The solutions implemented help ensure SuKarne has complete visibility and robust analytical functions via SAP Ariba Spend Analysis.

“The platform allows us to see how the organization’s spending moves; which categories grow the most; which supplier, especially if it is a strategic one, are we ceasing to serve,” comments Padilla. The data obtained is specified in reports, which are sent to SuKarne’s central corporate information system supporting decision-making in the organization.

In 2020, the year in which the global economy was severely affected by the pandemic, SuKarne managed to protect its supply chain, which, in turn, safeguarded its business operations.

“Through the platform, we detected that there were suppliers and categories that were falling. Thanks to the information, we discovered that they were companies facing financial difficulties due to the health crisis, which is why our purchase orders were declining,” Padilla points out. “With regard to strategic suppliers, this allowed us to detect risks to the operation and, in some cases, to think of ways to support them.” And in that sense, another benefit cannot be ignored: technology adoption in an unfavorable economic environment can help to guarantee punctual payments.

With the support of its Procurement area, 2020 was difficult, but not catastrophic, and SuKarne succeeded in this new context. Beyond operational continuity, the power of technology had a positive impact on suppliers, who could have been most affected by the pandemic.