In a global survey published as “The New Face of Purchasing” the Economist Intelligence Unit (EIU), a business information service of the Economist Group, interviewed over 350 senior executives from a wide variety of industries on the challenges facing the purchasing function. Over 91 percent of the survey respondents from within the purchasing function agreed that purchasing strategies will be very important or vital to extending their companies’ competitive advantage in the next ten years.
The survey identifies three key drivers that will define the dramatic shift in power of the purchasing function as it transforms from a tactical, transactional role to that of a strategic, net contributor to shareholder value by enhancing profitability. These three drivers are:
- Globalization; the inexorable rise of global supply markets means that worldwide reach is no longer a differentiator but a necessity for survival in a global business environment.
- Cost pressures; 41 percent of survey respondents said that cost leadership will be one of the top factors driving their business over the next ten years.
- Innovation; early collaboration with suppliers can make a significant difference to quality and design delivering differentiation and bottom line results.
The survey goes on to say that, in order to meet these challenges head on, “The New Face of Purchasing” must evolve and adapt by increasing the scope of the supply management function, deepening supplier relationships, elevating the influence of the Chief Purchase Officer (CPO) and by exploiting technology to the full.
With solutions to support the full purchasing processes from spend management, sourcing and contract management through to operational procurement and supply base management, mySAP Supplier Relationship Management (mySAP SRM) already supports “The New Face of Purchasing” and already addresses the survey’s three key drivers.
Exploiting globalization opportunities with an enterprise purchasing platform
Fully 50 percent of respondents agreed that globalization will be one of the two top factors affecting their companies’ supplier management strategies. SAP’s approach is to provide a complete purchasing platform that supports all facets of the global company as well as seamlessly integrating into complementary systems such as supply chain planning and execution and Enterprise Resource Planning (ERP).
Globalization can, paradoxically, also mean increasing the number of suppliers that need to be managed. Through discovery, qualification and contract the supplier management process is key. Dealing with the large numbers of small suppliers is one reason why supplier enablement is taking off and the re-emergence of the e-marketplaces is supporting this trend. By providing automated links for supplier orders and invoices the purchasing organization can focus on developing deeper and more collaborative relationships with strategic suppliers who will deliver real value to the business. Timely performance management, around key performance indicators of price, quality and deliveries, through the use of mySAP SRM Supplier Enablement (including automated surveys, scorecards and dashboards), can also allow more effective relationships with strategic suppliers.
For ease of use and simplicity mySAP SRM delivers a solution that allows suppliers to access key documents via a browser. In addition, via the use of the SAP Supplier Network, the purchasing organization can extend its relationship to thousands of non-strategic suppliers. The SAP Supplier Network addresses the typical interactions needed to execute E-Procurement transactions for indirect materials.
Reducing cost pressures with a strategic procurement solution
As supply markets react to the threat of increased uncertainty of oil prices, terrorism and globalization the need for cost leadership through strong negotiation and procurement systems becomes imperative. In the area of negotiation many companies have explored the use of E-Auctions and are now investigating ways to integrate these one-off events into their core business processes. By capturing and maintaining key data elements they can build templates and knowledge management systems for reuse across different categories of spend. The result is that by making staff more efficient and effective, the amount of spend under management can be increased and this in turn delivers more savings. The key here is to take the notional savings identified through the sourcing process and deliver them to the bottom line through effective contract management, requisitioning and procurement systems. SAP fully supports these processes through the use of mySAP SRM Strategic Sourcing (comprising Negotiation and Contract Management) and SAP E-Procurement.
It is in the area of “operational procurement” systems that a company can control expenditure and ensure adherence to negotiated contracts. This is one of the most mature areas of mySAP SRM and by building on a strong platform and, through the use of browser-based applications, all users can benefit from sophisticated E-Procurement functionality. SAP’s solution here is embedded in the core business applications and provides user requisitioning, shopping carts and approvals to automate the buying process and provide an easy to use and flexible tool for all requisitioners.
Innovation through a collaboration environment
The survey acknowledges that the majority of a product’s cost is locked in at the design stage. With this in mind many organizations are now looking at ways of bringing buyers, suppliers and design teams together at the beginning of the product development lifecycle to drive cost down. This “collaborative” approach means virtual teams can work together rather than push the problem along to the next link in the chain and rely on purchasing to “do the deal”. 35 percent of the respondents agreed that this approach would significantly improve time to market
In SAP’s vision innovation is achieved throughout all the solutions described in this paper. Through the use of collaboration tools, such as Collaboration Folders (cFolders), and the Supplier Portal, SAP supports the inter-working of buyers, suppliers and product development teams as well as other business stakeholders who have an increasing role to play in driving change throughout the organization. At the same time knowledge is retained, integrity and auditability are assured and internal as well as external governance, such as that required by Sarbanes-Oxley, is managed. Innovation is the key to the new face of purchasing and SAP provides the environment to foster it and let it grow.
SAP is setting the agenda for purchasing
The EIU survey identifies globalization, cost pressures and innovation as the key drivers that will impact purchasing in the next ten years. In responding to this many companies are investing in technology to facilitate a transition to the “new face of purchasing” that will help maintain a company’s competitive advantage. As a leading procurement and sourcing vendor SAP is responding to the survey’s challenges by delivering a proven solution that supports the full requirements of the new organization. mySAP SRM is a complete platform for purchasing which is fully integrated with all core business processes and systems to close the loop for supply management.