Duncan Mills Mastering SAP PM 2011

Duncan Mills, SAP Australia Pty Ltd

Successful Contract Management With SAP: Ensuring Your Team Reduces Spend While Increasing Performance… It IS Possible

Mastering SAP Plant

Maintenance

Introduction & Overview

The larger the island of knowledge, the longer the shoreline of wonder.

Ralph W. Sockman

Mastering SAP Plant

Maintenance

Maintenance and Procurement

“Identify cost types will lead to a …reduction in maintenance costs while holding equipment availability steady, and often improving it.” Michael Huggins,

Australian Journal of Mining, July 2009

Internal Labour $ Stocked Spares $ Purchased parts $ Purchased services $

WORK ORDER

Reduce number of work orders AND cost per work order

Mastering SAP Plant

Maintenance

What I’ll cover

• Maintenance and Procurement: High level process

• SAP Solutions for managing procurement

• Strategic Sourcing

• Contract Lifecycle Management (CLM)

• Operational Procurement

• Open Text Invoice Management

• Spend Performance Management and

• Data Enrichment & Classification

• Questions

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Maintenance Slide 6

SAP Sourcing and CLM Drive Efficiency, Increased Savings Opportunities, and a Quick Time to Value

Maintenance Work Order

Project Systems WBS (grouping

Indicator)

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Maintenance Slide 7

SAP Sourcing / SAP Sourcing OnDemand

SAP Contract Lifecycle Mgmt (OnPremise

or Ondemand)

SAP SRM & SAP ERP

SAP Invoice Mgmt by OpenText

Supplier Connectivity via SUS, SNC and Crossgate

SAP Spend Performance Management

SAP Data Enrichment & Classification

(OnDemand)

SAP Procurement Portfolio Integrated Solutions Enable the End-to-End Source-to-Pay Process

Supplier Management

Sourcing Contract

Management Operational

Procurement Invoice

Management

Spend Analytics

SAP Supplier InfoNet

(OnDemand) Planned

Mastering SAP Plant

Maintenance Slide 8 © SAP 2010/ Page 8

SAP Sourcing Delivers the Strategic Sourcing Process

Enables the strategic sourcing process across all categories of spend

Delivers sourcing strategy and project

management capabilities

Manages supplier identification, qualification

and on boarding

Provides extensive RFI, RFQ, RFP and Auction

tools and templates

Enables effective bid negotiation, evaluation and awards

Drives rapid time to value via On- Demand or On-Premise Deployment and ERP integration

Sourcing

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Maintenance Slide 9

Sourcing Strategy Delivers Effective Strategy & Project Management

Benefits Capabilities Sourcing Strategy

Monitor and Track All Projects

Establish Sourcing Process and Methodology

Drive Process Repeatability and Shorter Cycle Times

■ Effective project management

and increased visibility

■ Enables best practices for

reduced cycle times

■ Effective templates enable

better methodology

■ Provide consistent interface

for managing the end to end

project

■ Drive transparency into

sourcing status and next steps

■ Deliver comprehensive reports

for insight and visibility

© SAP 2010 / Page 9

■ Monitor and track all projects, costs and savings

■ Establish process and project governance

■ Create “blueprint” for sourcing methodology

■ Define project strategy, timeline, owners, and collaborators

■ Configure alerts and reminders for key timeline activities

■ Workbench access to key reports

Sourcing

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Maintenance Slide 10

Project Management Sourcing

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Supplier Qualification Provides Effective Identification & On Boarding

Benefits Capabilities Supplier Qualification

■ Simple supplier self-registration and self maintenance

■ Effective identification and on boarding

■ Transparent supplier evaluation

© SAP 2010 / Page 11

■ Configurable registration

providing key information

including – business

classification, categories

supplied, insurance

certifications, and

sustainability criteria

■ Searchable supplier repository

by range of characteristics

■ Supplier managed updates

■ Supplier single point of access

■ Integration ability to initiate

the creation of a supplier in

ERP

■ Easy to use supplier registration

reduces cycle time

■ Enables fast supplier

identification and selection

■ Provides effective management

of supplier information

■ Streamlines access to event and

centralization of information

■ Delivers effective supplier

creation process

Sourcing

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Supplier Registration Sourcing

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RFX/Auction Management Provides Extensive Sourcing Tools

Benefits Capabilities RFX/Auction Management

■ Enables simple to complex RFIs, RFQs, and RFPs

■ Supports Reverse and Forward Auctions

■ Drives robust sourcing process best practices

© SAP 2010 / Page 13

■ Streamlines RFx creation and

reduce cycle time

■ Enables consistent use and

compliance with best practices

■ Drives more effective scoring

and bid evaluation

■ Provides ability to manage

complex events

■ Supports multiple auction

types to enable wide range of

strategies

■ Enables insight and

transparency to effectively

manage auctions

■ Delivers sophisticated sourcing

event reporting

■ Create, select RFI, RFQ, or RFP template ■ Extensive libraries inclusive of schedules, questions, and supporting information ■ Sophisticated multi currency bid scoring and weighting ■ Support for heavy bidding volume with multiple suppliers ■ Flexibility to create many auction types to support different strategies ■ Comprehensive bidding window to manage auctions ■ Full project management status reporting

Sourcing

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RFX Management Sourcing

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RFX Management

Sourcing

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RFX Management

Sourcing

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Negotiate and Award Drives Effective Bid Negotiations & Awards

Benefits Capabilities Negotiate and Award

■ Enables comprehensive scoring and evaluation

■ Streamlines the negotiate and award process

■ Provides real-time insight and transparency

■ Automated system scoring enabled

through complex algorithms

■ Team and collaborative scoring

■ Detailed side-by-side bid comparisons

on price and non-price factors

■ Weight scores to establish a total

value score per supplier

■ Real-time Q&A discussions with

suppliers

■ Flexible auction disclosure rules and

automatic extensions

■ Auction real- time count down clock

and updates

© SAP 2010 / Page 22

■ Provides an effective tool to

streamline scoring

■ Enables team scoring

■ Drives bid comparisons and

evaluations

■ Delivers total and attribute

scoring per supplier bid

■ Supports collaboration across

team members and suppliers

■ Delivers maximum auction

enablement and engagement

■ Enables auction status insight

and transparency from start to

finish

Sourcing

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or Ondemand)

SAP SRM & SAP ERP





(OnDemand)


Supplier Management

Sourcing Contract


Procurement Invoice

Management

Spend Analytics


(OnDemand) Planned

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Maintenance Slide 28 © SAP 2010 / Page 28

SAP Contract Lifecycle Management Supports the Entire Contract Lifecycle

■ Automates the contract creation cycle

from draft to reviews and approvals

■ Includes contract authoring with

clause and template libraries

■ Creates a contract repository with

access-controlled search and reporting

■ Includes standard integration with SAP

ERP-MM for procurement contract

compliance

■ Deep bi-directional integration within

the source to contract process

■ Provides deployment options including

On-Demand and On Premise

Contract Management

Mastering SAP Plant


Contract Creation Streamlines the Contract Creation Process

Benefits Capabilities Contract Creation

■ Enable contract creation from draft to

review/approval to execution

■ Include the right stakeholders and

decrease cycle times

■ Contract workspaces include

configurable header data, item data,

contract documents, and other

information

■ Contract creation from controlled

templates based on clause library

■ Customizable content within the

document and provision of clause

choices

■ Integration with MS-Word for draft

generation

■ Document management with check-

in/out, redlining, version compare

■ Secure document access for third

parties via portal

■ Review and approval workflow with

document phasing

■ Captures and reports on all key

information by contract type

© SAP 2010 / Page 29

■ Minimizes legal risks

■ Provides end-user flexibility

■ Leverages a commonly used

toolset ■ Allows for internal and

external collaboration

■ Keeps a complete audit trail of

the negotiations process

■ Eliminates need for emailing

Contract Management

Mastering SAP Plant


Contract Visibility and Repository Provides Full Contract Portfolio Visibility

Benefits Capabilities Contract Visibility / Repository

■ Centralized contract repository for

standard data collection and reporting

■ Empowers users to pro-actively

manage the contract portfolio

■ Single contract repository across the

organization

■ Robust free text search across

repository, within contract documents

and clauses

■ Ability to view and manage

agreements, change header data or

create amendments

■ Secure access controls on each

contract in the system

■ Out of box reports aggregating

repository data

■ Alerts for expirations or key

thresholds

■ Define extra data fields or sets of

information to capture and track

■ Eliminate disparate databases

or tools

© SAP 2010 / Page 30

■ Quickly locate any contract or any

language/phrase in the entire

repository ■ Understand critical contract

details and process amendments

quickly ■ Provide self-service access to

requisite personnel

■ Dramatically reduce reporting

cycle times ■ Pro-actively engage in re-sourcing

or re-sale activities ■ Easily maintain and track unique

corporate information

Contract Management

Mastering SAP Plant


Contract Compliance and Execution Drives Improved Contract Compliance

Benefits Capabilities

■ Ability to capture all pricing and

payment terms and other KPIs within

the contract workspace

■ Included audit area to schedule and

track results

■ Out of box reports to identify low

performing contracts

■ Standard integration with SAP ERP-

MM for creation of outline

agreements and contract execution

■ Creation of document references

between CLM and ERP for insight

into contract usage and accruals

■ Track all critical information

about the contract’s

performance

© SAP 2010 / Page 31

Contract Execution and Compliance

■ Manage all pricing, legal, and

delivery terms

■ Ensure commitments and pricing

are being met throughout the contract

lifecycle

■ Be reminded when audits are

required and capture all results

■ Pro-actively resolve issues on

low-performing agreements

■ Quickly establish operational

agreements to enforce

compliance at time of

transactions ■ Easily view relevant

operational data in the back

end

Contract Management

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Contract Lifecycle Management Contract

Management

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ERP Outline Agreement Contract

Management

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Management

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or Ondemand)

SAP SRM & SAP ERP





(OnDemand)


Supplier Management

Sourcing Contract


Procurement Invoice

Management

Spend Analytics


(OnDemand) Planned

Mastering SAP Plant


Operational Procurement

Benefits Capabilities Procurement from work order or project

■ Centralized contract repository

accessed from work order

■ Select goods or services

■ Procurement from the work

order

■ Access all master contracts

from the work order

■ Work order information can

feed procurement reporting

■ Maintenance buyers can see

where the spend is occurring

© SAP 2010 / Page 49

■ Quickly locate any contract or any

language/phrase in the entire

repository from the work order

■ Understand critical contract

details and process amendments

quickly

■ Provide self-service access to

requisite personnel

■ Dramatically reduce reporting

cycle times ■ Pro-actively engage in re-sourcing

or re-sale activities ■ Easily maintain and track unique

corporate information


Mastering SAP Plant


ERP Purchase Requisition Operational

Procurement

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Procurement

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Procurement

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Progress Claim Entry

Notification, service entry, variations...


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Services Entered Operational

Procurement

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Purchase Order updated Operational

Procurement

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or Ondemand)

SAP SRM & SAP ERP





(OnDemand)


Supplier Management

Sourcing Contract


Procurement Invoice

Management

Spend Analytics


(OnDemand) Planned

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Invoice Management CEO “how can we improve our bottom line?”

CFO “I have limited visibility into my accounts payables related liabilities.” Financial Analyst

“Use of cash discounts is

low, cost of capital is

rising.”

Supplier “Doing business with that company is difficult as they are unable to tell when they pay their invoices.”

Accounting “We cannot say which invoices we have received across different departments and we have no control over the time-to-payment.”

Purchaser “We could lower the cost of goods if we could make systematic use of cash discounts.”

Accounts Payables “We spend more than 50% of our time responding to calls and emails from suppliers requesting state of invoice or complaining about late payment.”

Is this organization prepared to:

Increase process efficiency

Reduce finance operating costs

Make use of cash discounts

Invoice Management

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Invoice Management

Comment Trigger workflows Post invoices

Invoice Recognition

Collaboration & Monitoring

Invoice Completion

Invoice Verification

OCR Option for SAP Invoice Management

ERP (FI/AP)

Payment

SAP Invoice Management

Prüfung und Vervollständigung

UMWANDLUNG

VERIFY AND COMPLETE

EXCEPTION HANDLING

APPROVE

Automated reconciliation and posting

TRANSFORM PAY

OCR

Validation

Inbox (incoming mail / fax)

PREPARE

SAP Archiving by Open Text*

* or another SAP ArchiveLink-certified repository

Scanning

Archiving

Invoice Management

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Invoice Management – Duplicate Check

Familiar SAP Look & Feel

Early & Automated Duplicate Detection

Automated or Manual Data

Entry

Immediate Data

Validation

Invoice Management

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Invoice Management – Price Discrepancy

© SAP

2008 /

Page

60

One-click Access to Supporting Information

Complete Process History

Role-Based Process Options

Best Practices Exception Handling

Transparent Role-Based

Routing

Invoice Management

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Invoice Management - Analytics

©

SAP

2008 /

Page

61

Analyze KPIs with SAP Graphics

Analyze Using Over 50 Criteria

Full Access to SAP Functions

Complete Overview of All

Processed Invoices

Your Choice of Reporting

Currency

Total Process Summary

One-Click Access to

Invoice Details

Invoice Management

Mastering SAP Plant




or Ondemand)

SAP SRM & SAP ERP





(OnDemand)


Supplier Management

Sourcing Contract


Procurement Invoice

Management

Spend Analytics


(OnDemand) Planned

Mastering SAP Plant

Maintenance

Spend Performance Management

GL

P-Cards T&E

BI

ERP

Data Enrichment & Classification

* Note: The Data Enrichment & Classification service is an add-on service separately priced.

– Gain full spend visibility • Automated data capture from SAP and non-SAP

• Data accuracy for faster insights

– Increase spend under management • Set up performance targets

• Collaborate effectively to act on insights

– Rapidly identify savings opportunities • Find and act on savings potential

• Pro-actively monitor contract compliance

– Reduce supplier risk • Pin-point supplier risks and supply concentration

• Find and act on qualified alternate suppliers

Maximize Savings – Minimize Supplier Risk

Spend Analytics

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3rd Party Risk Rating

3rd Party Credit Rating

3rd Party Legal Rating

Government/ Public data

Newsfeeds

Integrated Data Management Enables Accurate Spend Visibility

Global Business Compendium

Transactional Knowledge

Base

Phase 1: Supplier Data Standardization & Enrichment

Phase 2: Spend Data Classification

SAP SRM Non-SAP Spend data

ERP P-Card/ T&E

SAP extractors (ECC, SRM)

Data Integrator ETL license for non-SAP systems

Support to bring in 3rd party data feeds

Global coverage

1.6T transactions in knowledge base

100+ external data sources

Supplier Financial/Risk data

Diversity/Government watch lists

Over 130 pre-built spend analysis models

Out of the box support for supplier risk analysis

Set and Track Performance Targets with Spend Advisor

Comprehensive set of Analytics functionality

Briefing Book supports stakeholder collaboration

* Note: The Data Standardization and Enrichment service is an add-on service separately priced.

Data Integration

Spend Data Validation, Enrichment and Classification

Spend and Supplier Risk Analysis

Spend Analytics

Mastering SAP Plant

Maintenance

SAP Result

Accuracy of Spend Data – Mystery Solved Behind The Scenes!

Traditional

19%

25% 56%

ThompsonElectronics

InternationalServices

Vendor Effective Net Invoice Volume in

Document Currency

Thompson Inc. $189,000

Int. Services $177,400

Carrier $109,000

Thompson Germany $29,700

Hamilton Sundstrand $151,000

Thompson Supplies $28,100

Sikorsky $310,000

Int’l Services $119,200

Pratt & Whitney $262,000

Overall Result $1,375,400

Group ID Partner Vendor Effective Net Invoice Volume in

Document Currency

Thompson

Electronics

Thompson Inc. $189,000

Thompson

Germany $29,700

Thompson

Supplies $26,100

Total $246,800

International

Services

Int. Services $177,400

Int’l Services $119,200

Total $296,600

United

Technologies

Corporation

Carrier $109,000

Hamilton

Sundstrand $151,000

Sikorsky $310,000

Pratt & Whitney $262,000

Total $832,000

Overall Result $1,375,400

Accelerate Savings

Spend Analytics

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Maintenance

Data Enrichment and Classification OnDemand Solution Overview

• A cloud-based, network application that combines spend data with global content and services

to improve data reliability for strategic sourcing and spend analytics.

How can I aggregate all my spend data in one place and

be sure it’s accurate?

Manage accuracy and completeness of company-wide spend data from multiple sources

Gather data from SAP and non-SAP sources

Data Collection

My supplier identities are obscured due to poor data quality and lack of content!

Increase leverage opportunities with normalized suppliers

Improve decision-making with enriched content

Enrichment

How do I know what I’m really buying?

Increase visibility to both direct and indirect spend

Improve understanding of spend activity with a consistent structure for goods and services

Classification

How can I add my own knowledge into the process?

Incorporate subject matter expertise with the Revision tool

Apply changes to the current cycle and future cycles for continuous improvement

Revision

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Problem – Unreliable Data

Duplicate suppliers

Incomplete ownerships

1

2

Unassigned or inconsistent categories

3

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Maintenance

Historical Average - 53% Reduction Supplier Validation and Enrichment Spend Classification

40%

13%

47% Duplicates

Subsidiaries

Unique Suppliers

8% 4%

52%

36%

4% 9%

58%

29% Not classified

Level 1

Level 2

Level 3

Spend

Transactions

Historical Average – 96% Classified

Benefits

Improved Supplier Management

Leverage

Business insights and compliance (diversity, risk)

Benefits

Improved Understanding of Spend

Consistent structure for goods and services

Visibility to direct and indirect spend

Solution – Data Enrichment and Classification OnDemand

Mastering SAP Plant

Maintenance

• Normalizes the supply base and supplements it with additional information for improved leverage and decision making.

Enrichment

Parse data into appropriate columns

Standardize firm names, common words and abbreviations

Cleanse and validate addresses

Consolidate duplicates

Standardize

Validate supplier identities by matching them against the Global Business Compendium

Multi-step match process uses various combinations and permutations of names, addresses and geographic ranges to identify a supplier

Review exceptions

Validate

Extract “Golden Record” (the best content from the best source)

Corporate ownerships (legal – 51% owned)

Diversity indicators Risk and financial

indicators (by arrangement)

Business information Industry information

Enrich

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Maintenance

• Organizes spend transactions by what was purchased within a goods and services hierarchy to ensure a consistent and complete understanding of purchasing activity.

Classification

DEC enables interchangeable taxonomies by using a central “hub” code that is cross-referenced to various taxonomies

ISO 22745 compliant SAP Purchase Code

Dictionary UNSPSC Custom by arrangement

Taxonomy Classification

Review and revise classifications as needed

Filter on specific criteria Drill by category View details Sort by columns Change categories at

various levels of aggregation

Review

Multivariate (statistical) approach uses customer-specific history and the SAP transaction knowledge

Semantic rules based on key words and phrases to supplement initial “training” phase

Manual classification to add direct knowledge

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Industry Coding Coding the vendor master

Limited depth

Frequently misapplied due to budgets

Accounting tells us why not what

Accounting Approach COA Rules

Not all purchases have valid descriptions

Assumes repetitive similarity in description

Forces micro vs. strategic analysis

Item Description “Cataloging”

Not organized for sourcing - Resource

based

Too generalized for in depth sourcing

Assumes a supplier sells one thing

Competing Methods of Spend Classification

Issue Method

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Maintenance

Questions

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Key Takeaways

‘Cross-Train’ - reducing maintenance costs through improving procurement processes

The SAP sourcing and procurement portfolio provides the best opportunity to drive increased speed of productivity across your organization - no matter how diverse

There is an ever-increasing importance of managing all aspects of your source-to-pay process to obtain realized cost savings

In today’s market, you need to drive incremental, as well as quick wins through phased implementations and flexible deployment options – on premise, hosted or on-demand

Mastering SAP Plant


Duncan Mills

Engineering Informatics

[email protected]

+61 410 429 867

With help from: Chris Brock, SAP Australia Lachlan Eddy, SAP Australia

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Duncan Mills Mastering SAP PM 2011