How to move from Tx ME21N in SAP to a next-level source-to-pay process.
What are we going to talk about?
Why and how to evolve your source-to-pay processes at SAP towards digital transformation, identifying the widely recognized goals and challenges on this path, based on reports from Mackinsey & CO and Google Cloud.
Digitization is mandatory, a natural evolution of S2P processes.
In the McKinsey & CO article entitled “A road map for digitizing source-to-pay”(https://www.mckinsey.com/capabilities/operations/our-insights/a-road-map-for-digitizing-source-to-pay), they state, “By applying a new form of analysis to the hundreds of individual tasks involved in the source-to-pay process, we found that nearly 60 percent of them have potential to be fully or largely automated using currently available technologies…not only in transactional activities, such as order and invoice processing, but also in strategic sourcing elements, such as supplier selection and management.”
It’s from 2017, but most companies still need to improve their S2P process, especially the ones we’re talking about, companies that use SAP, both SAP ECC and even the latest SAP S/4HANA.
As mentioned in this article, there are good examples of digitization in consumer purchases, such as the automatic purchase of cartridges when your printer is low on ink, but it’s not the same story for large enterprises. The whole S2P process, of course, involves different and more complex scenarios than simply buying the same cartridge, from the same supplier, at the same time.
The article goes on to discuss the list of tasks that have been done and the potential for new technologies to improve and automate them, but I just want to stick with the statement about the potential that exists, and a good reason to start down this path, because they find that “Industry benchmarks suggest that most organizations waste 3 to 4 percent of their total external spend on excessive transaction costs, inefficiency and non-compliance” and that, is a lot of money as a total external spend for an average company running on SAP.
Objectives
So what do we look for when trying to digitize S2P processes? There are a few “must-haves” that we have found to be common goals in advanced S2P processes. Some of them are trends that are becoming mandatory for any process undergoing a digital transformation today, while others are especially relevant for S2P processes.
Visibility
Sourcing and purchasing are processes that affect almost every part of an organization, whether as a requester of goods or services, a buyer responsible for managing the purchase or any other stakeholder.
In addition, the volume of items processed monthly by a large organization is enormous, and the minimum process steps (from requisition, purchase order, release, goods receipt and invoice) with associated key information such as supplier, dates, days at each step must be presented to all stakeholders in an understandable manner.
This visibility improves the shipping process in a number of ways and eliminates a great deal of time spent on phone calls and emails answering “what is the status of my purchases?” questions.
Giving suppliers the option to view and check their outstanding deliveries beyond a simple email is another important feature.
User experience
With mass transactions, user experience becomes more than just an aesthetic feature. It is necessary because a modern, intuitive and intelligent UX is the best way to reduce errors and rework. A good way to save time is to avoid overwhelming users with multiple fields that are not necessary, not required or, in some cases, always have the same value and can be resolved with variants or rules.
In this jungle of elements and documents, it is imperative to have clarity and understanding of information with the ability to see “just what I need” for each stakeholder.
Data-driven decisions.
Sourcing and purchasing decisions must be based on real data. Eliminate the need for complex Excel spreadsheets for supplier selection based on specific criteria that can be analyzed and, in some cases, automatically scored, such as price, best delivery time, financial statements, local support, warranty period, etc.
Decisions to approve, return or reject documents must go beyond simply pressing a red or green button. It is necessary to analyze historical pricing behavior, process risks (split purchases, unreferenced documents, etc.), purchasing cycles, inventory levels and historical supplier relationships.
Much of this information already exists in SAP. However, it needs to be simplified, grouped and presented in a simple and unified way.
Easy and massive RFI / RFQ
Typically, and in the right sense, core spend (direct purchasing where 80% – 90% of spend is consolidated) requires large and extensive RFI and RFQ processes to obtain contracts, fixed suppliers, and therefore is typically invested with a focused approach to serve only this important segment.
However, long tail spend “also referred to as C-material spend, tail spend comprises 80-90% of all purchased items, primarily low-volume and often one-time or infrequent orders that are shipped to a wide range of suppliers” (from the article “Long tail, big savings: Digital unlocks hidden value in procurement” (https://www.mckinsey.com/capabilities/operations/our-insights/long-tail-big-savings-digital-unlocks-hidden-value-in-procurement ) represents a significant opportunity to save money (between 5% and 10%, according to the same article).
With this in mind, the goal is to create simple RFI and RFQ processes to get the most out of the process through competition. The more purchases that are made through RFQ, of course easily and quickly, the more possibilities for savings and automated, auditable decisions. In a future article we will take a closer look at long tail spend and bidding processes.
Collaboration
Suppliers are key business partners in the supply chain process. It is important to enable a technology solution that provides a friendly, bi-directional and simple communication channel for new orders, delivery dates, possible delays and delivery scheduling. This helps to avoid bottlenecks in the warehouse and ensures smooth operations.
Challenges
Now we have what we need, but what about the obstacles in the way?
Data strategy.
Large companies are investing heavily in natural language processing (NLP) and artificial intelligence (AI) tools. For some processes, this is certainly a game changer, but for much of the S2P data (supplier master data, material data) is already structured and stored in SAP. A cost-effective and quick first step is to focus on ensuring the quality and governance of SAP data.
There are two trends in Google Cloud’s Data and AI Trends 2023 report (https://cloud.google.com/blog/products/ai-machine-learning/top-5-data-and-ai-trends-this-year) that caught my attention and I want to bring into this context, and in my opinion they are really related:
- “Say goodbye to data silos.” A really interesting prediction from Andi Gutmans (VP & GM, Google Databases) is that by 2026, 7 PB per second (yes, PER SECOND) will be generated. And only 10% will be originals, the remaining 90% will be replicas. A good example could be this article, if we create a pdf, make it downloadable to replicate to your computer, then share it to 2 or 3 colleagues by email, so there are 2 or 3 copies on the mail server, then it gets downloaded to 2 or 3 more laptops, and maybe to another iPhone and so on. Instead, you just share the URL (thank you for doing so 😊), and all your friends will be connected directly to the main source (we contribute to not creating “data pollution” 😊 ).
The same happens in S2P, data warehouses, data export from ERP’s, all occupying unnecessary storage space in new servers, which now, with efficient integrated technologies, better processing capacity, on-memory technology (in the case of SAP S/4HANA), it is more efficient to deploy web applications fully integrated with the main data source.
- “Embrace the era of the open data ecosystem.” Similarly, easy integration aims to reduce replication and siloed data in closed databases. Of course, security must be kept in mind at all times (and there are trends and tools to address it, which are also mentioned in the report).
The blessing and curse of SAP: Complexity makes it unfriendly.
SAP ERP (ECC and S/4HANA) is a leading software, which include functionalities for a wide variety of scenarios, processes, tested in various industries around the world. And it is understandable that to meet this wide threshold of scenarios the designs have become more and more complex, with abstract configurations and concepts, but in the end this solves and adapts to the scenarios (the blessing), but the inseparable companion is the unfriendly (the curse ☹).
One solution to take advantage of the complexity without being affected 😊One solution is to develop applications as another layer on top of the ERP, where intelligent design and UX digest the requirements and deliver almost plug and play and very user friendly solutions, simplifying not only the use, but also the deployment, initial configuration and maintenance of master data that often end the dreams of many SAP improvement projects.
Transactional work is as important as charts and KPIs.
Many companies have spent a lot of money and focus on business intelligence solutions, analytics, reporting and KPI creation. Taking for granted that transactional data, from which all of the above will be built, the primary source, is being recorded in an easy, structured and error-free manner.
The more user-friendly the solutions are to assist users in day-to-day transactions, the easier it will be to create intuitive charts and KPIs to help make decisions.
Automating tasks, using templates to populate fields, and validating rules for data aims to build a robust transactional database that requires less manipulation to be useful.
A final challenge of digitizing S2P processes in SAP is how to reduce transaction navigation: Tx ME51N to create a PR, then ME59N to release, ME21N to create a PO, and so on. Even with standard Fiori APPS, you have to navigate between different tiles that became new versions of transactions. So trying to automate and consolidate functionality on the same screen is a good deal for users.
Building bridges, how to move from the old ME51N transaction to a procurement ninja process.
Along the lines of the McKinsey article “A road map for source-to-pay digitization”, they state: “For companies, the next step is to identify the best targets for automation within their own processes. Organizations can do this by first assessing the current level of automation they have in place, compared to what is technically achievable for each task in the S2P process. They can then estimate the value of closing each gap.”
In the S2P steps, from master data, through PR, RFI, RFQ, PO, releases, good receipt, billing, there could be different levels of need for automation and improvement, so segmentation is always a good approach.
Recognizing that you must clean house as the first step, make sure the master data is well, transactional operations are easy to manage, integrated, user friendly. With this foundation, you can move to the next level, through full process automation. Knowing where to define the tasks to automate and the rules and criteria on which to base them, leveraging trending technologies such as intelligent workflows, RPA, AI. And all this doesn’t have to be a long road of pain, starting S2P digitization through out-of-the-box add-ons with web integration, Fiori or SAP BTP is an efficient way.
In addition, as the McKinsey article “A road map for source-to-pay digitization” states, “even more importantly, by freeing hiring staff from routine tasks, automation allows them to spend time looking for innovative sources of additional value.”
And finally, to underscore why efforts to digitize S2P processes make sense, the same article states, “The digital landscape is advancing rapidly. Companies that are prepared to experiment while taking a thoughtful, focused approach to implementing these technologies are likely to realize savings worth up to 3.5% of all external spending.”
Our solution
Yes, I’m sorry, I’m going to end by talking about our solutions. If you want to leave at this point, I can understand that. But let’s be honest, if you’re still here, you probably want to know how we can help you deal with this whole mess. 😊.
In Innova through the experience of thousands of users, and hundreds of companies in different industries, we have developed a suite of solutions, delivered as Apps almost plug and play (in a SAP context) can be implemented by Add-ons and deployed in almost all architectures: web in Front-End servers, SAP Fiori or SAP BTP.
Our applications add an amazing user experience, enhance functionality and add validations at almost every step of the Source-to-pay process:
Master Data:
- SiDM Materials
- SiDM Providers (SAP ECC) or SiDM BP (S/4HANA)
Purchases:
- SiTRACK tracks the entire S2P process, from the creation of a purchase requisition through approval, bidding processes, ordering, goods receipts and invoices to the evaluation of each step. Numerous functions are available to manage and streamline purchasing.
- SiGO Bid and Tender Management, to create RFI and RFQ processes, invite suppliers to a portal to upload their bids, automatically compare and evaluate them, propose a winner, and create orders from them.
- SiLI Intelligent Releases, to review and approve purchasing documents (PR, PO, Contract and SES) with analysis and mobility.
Storage:
- SiGE Delivery Management, to guide suppliers in scheduling delivery dates and times and avoid bottlenecks in warehouses.
- SIMA Warehouse Movements, a warehouse operation with total mobility, 100% paperless and with supports such as photographic registration, digital signature and geolocation.
SRM:
- SiPORTAL, a supplier portal to communicate about orders, confirmations, status, accounts receivable, invoice upload options. S2P is a step towards the collaboration that is required.
Feel free to schedule a demo of our applications and see you in the next article.
AI tools such as ChatGPT, Deepl and Microsoft Designer have been used in the creation of this article for translation and grammar correction purposes.
