{"id":4677,"date":"2023-06-28T03:43:07","date_gmt":"2023-06-28T08:43:07","guid":{"rendered":"https:\/\/innovapps.net\/digitization-of-source-to-pay-processes-in-sap\/"},"modified":"2025-03-24T07:15:13","modified_gmt":"2025-03-24T12:15:13","slug":"digitization-of-source-to-pay-processes-in-sap","status":"publish","type":"post","link":"https:\/\/innovapps.net\/en\/blog\/digitization-of-source-to-pay-processes-in-sap\/","title":{"rendered":"Digitization of Source-to-pay processes in SAP"},"content":{"rendered":"\t\t
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How to move from Tx ME21N in SAP to a next-level source-to-pay<\/em> process.<\/span><\/h3>

What are we going to talk about?<\/span><\/h3>

Why and how to evolve your source-to-pay<\/em> processes at SAP towards digital transformation, identifying the widely recognized goals and challenges on this path, based on reports from Mackinsey & CO <\/strong>and Google Cloud<\/strong>.<\/span><\/p>

Digitization is mandatory, a natural evolution of S2P processes.<\/span><\/h3>

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)<\/a>, 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.”<\/span><\/p>

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.<\/span><\/p>

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. <\/span><\/p>

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.<\/span><\/p>

Objectives<\/span><\/h3>

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. <\/span><\/p>

Visibility<\/span><\/h4>

Sourcing<\/em> 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.<\/span><\/p>

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.<\/span><\/p>

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.<\/span><\/p>

Giving suppliers the option to view and check their outstanding deliveries beyond a simple email is another important feature.<\/span><\/p>

User experience<\/span><\/h4>

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. <\/span><\/p>

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.<\/span><\/p>

Data-driven decisions.<\/span><\/h4>

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. <\/span><\/p>

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. <\/span><\/p>

Much of this information already exists in SAP. However, it needs to be simplified, grouped and presented in a simple and unified way. <\/span><\/p>

Easy and massive RFI \/ RFQ<\/span><\/h4>

Typically, and in the right sense, core spend<\/em> (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.<\/span><\/p>

However, long tail spend<\/em> “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<\/a> ) represents a significant opportunity to save money (between 5% and 10%, according to the same article).<\/span><\/p>

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<\/em> and bidding processes. <\/span><\/p>

Collaboration<\/span><\/h4>

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. <\/span><\/p>

Challenges<\/span><\/h3>

Now we have what we need, but what about the obstacles in the way?<\/span><\/p>

Data strategy.<\/span><\/h4>

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. <\/span><\/p>

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)<\/a> that caught my attention and I want to bring into this context, and in my opinion they are really related:<\/span><\/p>