ECM for Strategic SourcingMaximize Operational Excellence

This paper considers current challenges and trends in strategic sourcing; what organizations should look for in a strategic sourcing solution; and the benefits a fully

content-integrated, strategic sourcing solution can deliver to organizations running SAP® business platforms.

J A N U A R Y 2 0 1 4

Table of ContentsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Strategic Sourcing is a Multi-Step Improvement Process . . . . . . . . . 4

Challenges and Trends—Strategic Sourcing Relies on Centralized Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

What Kind of Strategic Sourcing Solution is Right for Your Organization? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The Right SAP Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Maximize SAP Procurement Solutions to Meet the Big Data Challenge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

OpenText and SAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

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ECM for Strategic Sourcing

IntroductionThe combination of Big Data, expanding global supply chains, disconnected organizational processes and hard-to-access internal information silos significantly complicates the procurement process for today’s companies. The amount of data coming into organizations and available via the Internet is staggering, stretching information management processes and applications to the limit. Most organizations, in fact, have multiple applications to manage content, often disconnected from each other in function and format.

This is particularly true for organizations using SAP solutions as their core business platforms. In these cases, it remains a major challenge to integrate unstructured content into ERP (enterprise resource planning) and SRM (supplier relationship management) workflows and enable stakeholder collaboration. Information ends up stored haphazardly across the organization and employees spend inordinate amounts of time searching for it or recreating it entirely. This limits the company’s access to authoritative information, prevents a 360-degree content overview and heightens legal and regulatory risk.

Most organizations invest significant time and money to overcome these obstacles. Yet strategic sourcing, the procurement process devoted to continuously improving and re-evaluating a company’s purchasing and supply chain management activities, remains an especially difficult area to manage.

As austerity measures are stepped up, cost cutting will be the key focus area for governments and enterprises alike. Supply chain innovation and procurement transformation will continue to remain favored levers for generating cash to sustain long-term growth.1

1 GEP. “Strategic Sourcing and Procurement Outlook 2013.” Accessed at http://www.slideshare.net/patanjalimishra/trend-reportstrategicsourcingandprocurementoutlook2013 on June 14, 2013.

SPENDANALYTICS

SUPPLIER MANAGEMENT

STRATEGICSOURCING

CONTRACTSMANAGEMENT

ORDERTO PAY

The source-to-settle sub-processes

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ECM for Strategic Sourcing

Strategic Sourcing is a Multi-Step Improvement ProcessStrategic sourcing involves several specific steps for identifying suitable suppliers and developing a sourcing strategy, all while minimizing risk and costs. These include:

n Current assessment (what is the company buying and where?)

n Supply market assessment (who offers what?)

n Total cost analyses (how much does it cost to provide those goods or services?)

n Identification of suitable suppliers (who best suits organizational needs and standards?)

n Development of sourcing strategies (where to buy what—considering the demand-and-supply situation—while minimizing risk and costs)

n Supplier negotiation (for products, service levels, prices, geographical coverage, etc.)

n Implementation of a new supply structure, results tracking and restart assessment

n Negotiations with the supplier about organizational payment terms

When trying to maximize the execution and effectiveness of these steps, you need to incorporate a broad range of unstructured information into each stage of the process.

Content and Collaboration Support the Strategic Sourcing Process

DEVELOPPROCUREMENT

PLAN

MATCH NEEDSTO SUPPLY

CAPABILITIES

CLARIFYPURCHASING

REQUIREMENTS

DEVELOPINVENTORYSTRATEGY

ANALYZECOMPANY’S

SPEND PROFILE

SEEK OPPOTUNITIESTO IMPROVE

EFFICIENCY & VALUE

COLLABORATE WITHSUPPLIERS TO IDENTIFY

OPPORTUNITIES

n LoB requirements defined & commnicate with them

n Develop RFP, RFQ, RFI based on Line of Business requirements

n Budget approval—meeting minutes

n Supplier evaluation scorecard

n Corporate policy & procedures for procuring goods/services

n Published list of preferred vendors

n Create procurement portal for employees

n Create portal for suppliers

n Inventory—notification of when good/services are to be consumed to tie to real-time purchasing

n Policies & procedures for accessing and communicating accurate order fulfillment

n Evaluate supplier performance

n Evaluate supplier risk

n Optimize supplier base

n Manage supplier compliance

n Communicate with suppliers

n Questionnaires

n Answers to RFP, RFQ, RFIs

n Emails, product specifications

n Cost of goods, product quality

n Create supplier workspaces per supplier

n Price sheet

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ECM for Strategic Sourcing

Challenges and Trends—Strategic Sourcing Relies on Centralized Information Organizations looking to achieve continuous improvement in strategic sourcing must also take into account a number of current trends and challenges.

Internal Collaboration and Communication Employees often don’t understand their own company’s corporate procurement policies and procedures or, if they do, don’t adhere to them. Purchasing habits and procedures can become entrenched in an organization’s culture, becoming hard to change and improve. Part of this is related to the historical lack of communication and collaboration between the procurement department and the various business functions for whom they make purchases. This leads to a range of potential problems, such as developing relationships with unsuitable suppliers and a lack of stakeholder transparency into sourcing processes and boundaries.

Technology plays a major part in this schism. Without the ability to pull purchasing information into organization-wide SAP ERP and SRM platforms, as well as standard Microsoft® Office applications, organizations cannot fully share unstructured information—such as contracts, bid proposals, supplier certificates, credit verification, supply chain manifests and supplier disputes—between stakeholders to enhance decision-making.

Inquiries between stakeholders and suppliers also slow down because the method of communication and the means for publishing questions and answers are likewise siloed. This is further complicated if the requisitioner and buyer don’t know each other, as coordi-nation and knowledge transfer around ordering and supplier selection fade even further out of the process.

Maverick BuyingHaving a large number of low-volume suppliers has a negative impact on internal cost-per-order. The appearance of having a huge “shelf” of suppliers to choose from not only raises the possibility of purchasing without an adequate decision-making process, it also increases supplier maintenance costs and the time required to find the right supplier when ordering. As such, the current trend is to focus on fewer suppliers that are highly compatible with the organization’s needs and procurement policies. This approach also improves the potential to embed favorable discounts directly into contracts.

Spend analytics can help identify instances of maverick buying, but in scenarios where there is neither a purchase order nor a contract, and no system to track low-volume purchases, it’s virtually impossible to determine who selected the supplier and who should be advised not to use that supplier in the future.

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ECM for Strategic Sourcing

Supply Chain RisksThe supply chain is fraught with risk. These can arise from financial issues, trade disputes, geography, lack of regulatory compliance or global catastrophes and black swans, to name a few. It’s critical that an organization gathers in-depth knowledge about its suppliers, but this is not possible if contracts are the only significant connection between supplier and organization. Rather, a constant process of review and proper research is necessary.

While third-party tools as well as the providers themselves can provide a great deal of support, sourcing functions need access to key information and checklists within one inte-grated system to deliver a truly strategic process. This can also support the buyer-supplier relationship. Suppliers like to minimize cumbersome activities such as providing mandatory documentation and certifications, and applications that include client self-service capability and automatic reminders for documentation deliverables reduce their effort.

Another frequently overlooked factor is that predictable payment behavior and a high customer rating raise the chances that a key supplier will help you by delivering more (or less) than is contractually mandated in critical situations.

Increased IndependenceWhile buyers need to enhance internal communication and collaboration in selecting suppliers, this can lead to a less intimate relationship with the supplier. Rather than being based on traditional criteria like personal and informal communication, these newer relationships may be based on knowledge, research and need-product compatibility. This becomes more difficult, however, if there are no tools and mechanisms in place to share internal knowledge and learning. In these cases, buyers across the organization may lack access to past trans-actional information that can influence and improve future purchases.

ReplicabilityReusing purchasing standards across similar sourcing projects makes the overall process run more efficiently and helps organizations refine their own procurement policies and procedures.

What Kind of Strategic Sourcing Solution is Right for Your Organization?Organizations often have a distributed application landscape to support their sourcing needs that may consist of several SAP solutions, either standalone or in combination, including: SAP ERP, SAP SRM and possibly SAP Sourcing. For all the efficiency SAP brings to an organization’s business landscape, an SAP-only solution set can limit your strategic sourcing capabilities and potential. Implementing ECM integration as a foundational and consolidating solution can have a significant positive impact by eliminating multiple repositories, reducing duplicate content, limiting maverick buying and minimizing the amount of work and content that remains out of context and outside your SAP platform.

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ECM for Strategic Sourcing

The Right SAP IntegrationHow it works

Once an organization recognizes the need to extend their SAP capabilities, what should they specifically look for in an ECM solution? An advanced strategic sourcing solution should provide:

A 360-degree view of supplier information n Easy access to complete supplier information for all procurement projects

n Improved information sharing and re-use

Business workspaces for procurement collaborationn The ability to prepare proposals in collaboration with all relevant parties

n Systematic reuse of know-how and methodologies from past projects

Compelling messaging for line-of-business and supplier communicationsn Consistent and compelling messaging across all channels

n Reduced cost and complexity around multi-channel document generation and distribution

SAP SRM AND/OR SAP ERP SAP NETWEAVER PORTAL

SAP SPEND ANALYTICS

CLARIFY PURCHASINGREQUIREMENTS

COMPLIANT ARCHIVING/RECORDS MANAGEMENT

INTRANET

DEVELOP INVENTORYSTRATEGY

SUPPLIERINSIGHT & HISTORY

ANALYZE COMPANY’SSPEND PROFILE

SPENDANALYTICS

SEEK OPPORTUNITIESTO IMPROVE

EFFICIENCY AND VALUE

PROCESSANALYTICS

CREATE REQUISITIONS

SPECIFICATIONSCATALOGS

EXTENDED ECM

MANAGE TRENDS

360 DEGREE VIEW(SUPPLIER HISTORY)/

CAPABILITY)

CREATE REPORTS

DISTRIBUTE REPORTS

ROLE-BASED WORKLOAD

CYCLE TIMES

COLLABORATE WITHSUPPLIERS TO IDENTIFY

OPPORTUITIES

DOCUMENT PRESENTMENTEXTENDED ECMPORTAL CONTENT MGMT

CO-INNOVATION

PRODUCTREQUIREMENTS

Transactional SAP metadata can be associated with each piece of managed content, meaning users can always access the relevant content from their business process without needing to jump into certain transactions or user interfaces.

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ECM for Strategic Sourcing

Improved management of supplier communications n The ability to manage supplier and supporting documentation and communications as

corporate records

n Automatic deletion of content at end-of-life

Storage and preservationn Risk protection against disaster-related content loss (i.e., fire, flood, explosion)

n Reduced paper storage, printing and copying costs

Publishing and self servicen Increased availability of standardized procedures

n A portal enabling self service for employees, contractors, suppliers and other key stakeholders

Document communicationn Customized documents produced and delivered as needed

n Reduced cost and complexity of multi-channel document generation and distribution

In the long term, the right strategic sourcing solution should reduce the total cost of the procurement cycle as a percentage of revenue, increase your number of active suppliers and limit the number of maverick buying purchases per annum.

Working in Future Tense—Companies See Rising Sourcing Benefits in Content Integration2

What do the best achieve?

TOTAL COST OF PROCUREMENT CYCLE AS % OF REVENUE

TOTAL COST OF PROCESS PER PURCHASE ORDER

0.13% TOP PERFORMER

0.30% AVERAGE

0.66% BOTTOM

$20.87 TOP PERFORMER

$53.01 AVERAGE

$146.38 BOTTOM

2 APQC OSBCSM Benchmarking Data.

“Best run procurement teams on average save 53% more when streamlining.”

“Best run companies save $126 per purchase order.”

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ECM for Strategic Sourcing

As Big Data continues to build and supply chains continue to expand, organizations that fail to implement an extended ECM-based strategic sourcing solution are likely to fall behind early-adopting competitors. Benefits that savvy companies can realize include:

Easy adoption across the organization n Users benefit from 360-degree transparency

n Full search capability helps locate missing information

Increased employee adherence to the corporate programn Documented policies and procedures guide employees on how to procure goods

properly, reducing the expense and wasted resources associated with maverick buying

Less unnecessary spendingn By knowing what the needs of the business are through comprehensive information access,

you can procure goods at the right time, in the right quantities and at the right price

Change management support n The ability to trace and monitor results and progress drives continuous improvement and

the ability to replicate methods and learnings

n Solution-embedded educational materials can help employees learn and adapt more effectively to a new procurement culture

Better supplier communication and collaborationn Improved communication with suppliers can shorten the selection process

n Purchasing from reputable suppliers who participate in long-term partnerships can generate built-in savings that are outlined during the selection process

Reduced regulatory risk n Manage all corporate documents in accordance with your official retention schedule

Improved decision makingn Having a view into all supplier and stakeholder correspondence associated with procured

goods and services helps ensure all decisions are based on accurate information

Maximize SAP Procurement Solutions to Meet the Big Data ChallengeToday’s businesses are under pressure. Big Data and old data—one growing rapidly and the other often static and inaccessible—threaten the viability of organizations that are not adapting to the information age. Improving strategic sourcing while reducing costs is an imperative as businesses look to trim waste and drive productivity wherever possible. However, companies that cannot leverage and integrate unstructured data into their SAP platforms and solutions face an uphill struggle—and the information hill is getting higher every day.

To learn more about how OpenText ECM solutions can help your organization maximize existing SAP strategic sourcing capabilities, go to: www.opentext.com/sap

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OpenText and SAPAn SAP partner since 1992, OpenText continues to be a leader in the Enterprise Information Management market across all major functional areas and industries. Thousands of custom-ers of all sizes deploy solutions from OpenText, resold as solution extensions by SAP, to seamlessly connect unstructured information to SAP business processes. Our integrated solutions enable customers to realize the full value of digital data, as information is easily discovered, captured, managed, governed, secured, and leveraged.

Designed and built to deliver seamless integration from the outset, OpenText and SAP solutions have helped clients dramatically improve relationships with their customers, employees, partners, suppliers and regulatory agencies.The following solutions are available to extend the procurement features and capabilities of your SAP platform and integrate ECM with key SAP business processes:

OpenText Extended ECM for SAP SolutionsLeverage ECM within your SAP Business Suite (i.e., ERP, SRM) solutions to reduce the risks and costs of document mismanagement, minimize redundancy, increase information worker productivity and collaboration and enhance regulatory compliance. Harness the power of integrating SAP data with content from across the enterprise to support the business process.

OpenText Document Presentment and Live Add-On for SAP SolutionsAutomate the creation and multi-channel distribution of highly personalized documents and communications, i.e., contracts, purchase orders, supplier onboarding packages. SAP Business users can compile, edit, review and approve, print or email documents directly in their native SAP UI and process, without relying on scarce IT resources. Direct archive and business workspace integration ensures 360-degree view of all documents throughout their lifecycle.

OpenText Portal Content Management for SAP SolutionsProvides the document management and collaboration capabilities tightly integrated into the SAP NetWeaver® Portal. Portal users can add, change, view and share documents in a structured collaborative manner. Using Portal Content Management integrated into SAP NetWeaver Portal leads to cost savings due to process efficiencies, higher employee or supplier satisfaction and better work results due to better collaboration.