SRM Sample Report

Supplier Relationship ManagementBenchmarking Results

Name of Speaker, SAP Value EngineeringDecember 16, 2010

ABC Company

Please view the click to notes section for instructions to update theslides. All the manual edits are highlighted in red for the template.

SAP CONFIDENTIAL - - For subject Company Internal Use Only - This page is from the Benchmarking Analysis prepared for subject Company and subject to the terms,conditions and assumptions contained in the Benchmarking Analysis. Information contained herein is not a guarantee of future results, performance or cost savings.

Statement of Confidentiality and Exceptions

The information and analysis contained herein are the confidential and proprietary materials ofSAP AG. No part of this publication may be reproduced or transmitted in any form or for anypurpose without the express written permission of SAP AG. The information contained hereinmay be changed without prior notice.

The furnishing of this document shall not be construed as an offer or as constituting a bindingagreement on the part of SAP AG and/ or its affiliated companies (“SAP”) to enter into anyrelationship. SAP provides this document as guidance only to illustrate estimated comparisonsbetween the subject Company and other companies with respect to certain key performanceindicators and drivers.

These materials may be based upon information provided by the subject Company, informationprovided by other companies and assumptions that are subject to change. These materialspresent illustrations of potential performance and cost savings, and do not guaranty futureresults, performance or cost savings. The materials are provided solely for internal review anduse by the subject Company. SAP makes no representation or warranties of any kind withrespect to these materials, and SAP shall not be liable for errors or omissions with respect tothese materials.


Agenda

1. Executive Summary2. Detailed Benchmarking Results3. Case Studies4. Appendix


ASUG/ SAP Benchmarking –Designed to Get Actionable Results

Launched end of 2004 as a forum to exchange metrics and bestpractices

Program covers 26 processes, with 5,000+ participants who leveragethe program to:

Build a business case for change

Compare performance to leading companies, industry peers, andbetween regions/ divisions

Assess value realization, year-over year

Prove success

SRM/ Procurement program launched end of 2005

Over 350 participants to date


Participating Company Profile: Industry,Revenue and Spend – Overall Database

By RevenueBy Industry Sector Industrial Machinery andComponents 1.00B

Number of Companies in SRM Overall Database:

Company Response: Company Response:

514

By Spend Company Response:

40.70%

20.60% 19.10%

9.05%4.52% 5.53%

<500 M >= 500 M <1 B

>= 1 B <2.5 B

>= 2.5 B <5 B

>= 5 B <10 B

>=10 B

535.00M

8.6%

12.3%

7.2%

7.0%

3.3%

3.7%

5.1%

2.9%

2.7%

9.7%

4.1%

1.0%

5.4%

2.5%

2.3%

0.4%

7.0%

4.7%

3.1%

2.1%

1.9%

Defense and Security

Service Providers

Postal Services

Railways

M edia

Wholesale Distribution

EC&O

Healthcare

Financial Services

Life Sciences

Public Sector

Telecommunications

Aerospace

Retail

Automotive

High Tech

IM &C

Oil and Gas

Others

Chemical

M ill Products

Utilit ies

Consumer Products

Note: Several miscellaneous industries have been grouped under “Others”

Peer Group Selected N

Primary Peer Group (P1) Peer 1 53

Primary Peer Group (P2) Peer 2 87

51.5%

31.1%

9.2% 8.2%

<1 B >=1 B, <5 B >=5 B, <10 B >=10 B


Benchmarking Results and Value Potential:Benefits Range1 of

KPI Benchmark Performance Potential Benefit (in millions)3

Procurement Costs as % ofSpend

Average Annual Savings(Overall) (in %)

Spend Managed Strategically(Overall) (in %)

Maverick Spend (Overall)(in %)

14.35.91.4

80.355.0 95.3

Bottom 25% Average Top 25%



7.2

5.9

68.7

0.6 0.11.6


0.7

6.3 3.29.5

1) Average Annual Savings improvement is not counted in potential benefits range to avoid double counting with benefits from increasing managed spend andreducing maverick spend. Benefits totals may not add up exactly from subtotals displayed on this page as they are calculated based on exact, not roundednumbers

2) Full KPI results can be found in the detailed benchmarking assessment3) All currency in this report is in USD

Benefit of Closing Gap to Top 25%

Benefit of Closing Gap to Average

1.1

8.4

44.9

3.3

0.6

3.7

0.3

0.60.6 3.3

0.3 44.9

0.6 1.1

3.7 8.4

$ 4.9 M - $ 56.6 M

Performance of Primary KPIs2 and Potential Benefits (in millions of selected currency)


Key Value Strategies

Increase supplier responsibilities for order status, product data maintenance & invoicesettlementEvaluate and pay on suppliers’ performance (e.g., quality)Improve supplier visibility of demandIncrease supplier responsibilities for inventory managementIntegrate suppliers into planning and development

Consolidate buying categories and optimize supplier baseDrive best price (e.g. e-auctions, global sourcing, new suppliers)Reduce sourcing and contracting cycle times

Drive adoption of self service procurement toolsIntegrate processes within Procurement as well as outsideStandardize & automate procurement processesStreamline workflow across procurement processes and reduce authorization steps

Collaborate withsuppliers tojointly reducecosts alongsupply chain

Improvepurchasingpower

Increasepurchasingcontrol on spendcategories

Streamline andautomatesourcing andprocurementprocesses

Provide analytics for spend visibility and controlBring more non-managed categories /services under controlEstablish procurement function as a strategic enablerStrengthen spend controls and measure/enforce compliancePro-actively monitor contract terms, rebates, volume tiers and renewals

ProcurementCosts

SpendManagedStrategically

MaverickSpend

AverageAnnualSavings

Recommended Improvement Strategies and Current Capabilities

0.6 3.3

0.3 44.9

3.7 8.4

0.3 *

Top 25% performance for supporting best practices and KPIsBetween average and top 25% performance for supporting best practices and KPIsStrategies to focus: worse than average performance for supporting best practices , KPIsX

Benefit of Closing Gap to Top25% (in million currency)

Benefit of Closing Gap to Average


Supporting Best Practices

Strategy Your Best Practices with High Importance, Low Adoption Process

Streamline andautomate sourcing andprocurement processes

Electronic Advanced Ship Notifications (ASNs)Material Receipt

Evaluated Receipt Settlement

Automatic PO processing and submission Order Processing

On line item catalogs used for self-services requisition Requisitioning

Single, integrated procurement system Strategy and Leadership

Master data synchronized between various systems Supplier Data Management

Collaborate withsuppliers to jointlyreduce costs alongsupply chain

Supplier portal for order acknowledgements, advanced shipping notifications, andconfirmations

Supplier CollaborationSupplier portal supports inventory level checks

Improve purchasingpower

Ability to share contracts with other employees for collaborationContract Management

Contract management system pre-populates relevant information in contract

Formal RFI, RFP and quotation process in place Supplier Eval. andNegotiationRegular reviews of supply base against KPIs

Increase purchasingcontrol on spendcategories

Access to sourcing cockpit with portfolio analysis capabilities

Category ManagementAnalytical tools to enable global supplier spend analysis

Regular spend reviews in place

Single repository of data for direct and indirect spend

Accurate and timely reporting of contract compliance

ComplianceContract compliance mandated by system controls

Various standard analysis and system reports provide details on maverick buying

Ability to monitor supplier compliance with contract termsContract Management

Single, centralized repository of supplier contracts


Supporting SAP solutions

High ImpactValue Strategies

Supporting SAP Solutions

SAP Solutions to Enable High-Impact Value Strategies

Collaborate withsuppliers tojointly reducecosts alongsupply chain

Improvepurchasingpower

Streamline andautomatesourcing andprocurementprocesses

Increasepurchasingcontrol on spendcategories

SAP

SRM

SAPContractLifecycle

Mgt.

SAP Supplier Relationship Management (SRM)

SAP Contract Lifecycle Management

SAP

ERP

-Ope

ratio

ns

SAP

Spen

d Pe

rfor

man

ceM

anag

emen

t

SAP BusinessObjects Spend Performance Management

SAP ERP - Operations

SAP

E-So

urci

ng

SAPInvoiceMgt. byOpenText

SAPSNC

SAP Invoice Management by OpenText

SAP Supply Network Collaboration (SNC)

SAP E-Sourcing


Agenda



SRM: Performance Indicator Summary –Effectiveness

Category Metric CompanyPeer Group P1 Peer Group P2

Average Top 25% Average Top 25%

Effectiveness

% Average Annual SavingsDirect 6.0 4.4 9.5 5.6 11.1

Indirect 4.0 4.9 9.9 5.3 11.5Services 4.0 3.9 8.1 5.3 10.7

% of Spend Managed StrategicallyDirect 70.0 81.9 100.0 74.8 96.5


% of Maverick SpendDirect 6.9 6.8 1.5 3.8 0.9


% of Spend Sourced Via e-Auctions

Direct 0.0 9.1 37.0 8.7 33.8Indirect 0.0 7.3 30.0 11.2 41.7

Services 0.0 3.2 13.2 5.8 24.2

% Average Savings through e-Auctions

Direct 0.0 7.7 17.5 8.9 20.0Indirect 0.0 8.1 20.0 10.4 21.7

Services 0.0 7.9 18.0 9.0 20.0PO Error Rate (in %) 2.0 9.5 1.3 7.0 1.4Orders Requiring Expediting (in %) 25.0 11.4 1.4 13.3 1.4

Note: Color commentary based on the Peer Group 1 benchmarks unless mentioned otherwise* Indicates lack of data points in the peer group necessary to determine benchmarks

Top 25%Between Average and Top 25%Below Average OutlierRanking:


SRM: Performance Indicator Summary –Efficiency

Category Metric CompanyPeer Group P1 Peer Group P2

Average Top 25% Average Top 25%

Efficiency

FTE’s per Billion of Total Spend (overall) 93.5 74.9 18.4 89.5 19.0

% of FTEs in Strategic & Expertise Functions 40.0 52.3 77.4 50.7 76.5

% of FTEs in Transactional Function 60.0 47.7 22.6 49.3 23.5

Overall Procurement Cost as % of Spend 0.7 0.6 0.1 0.7 0.2

Cycle Time For New Contract Creation (in weeks) 8.0 10.1 2.8 9.6 3.0

Note: Color commentary based on the Peer Group 1 benchmarks unless mentioned otherwise* Indicates lack of data points in the peer group necessary to determine benchmarks

Top 25%Between Average and Top 25%Below Average OutlierRanking:


SRM: Improved Best Practices Adoption DrivesValue

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Strategy andLeadership

Regulatory andCompliance

Sourcing:Category

M anagement

Sourcing:Supplier

Evaluation &Negotiation

SupplierPerfomanceM anagement

ContractM anagement

SupplierCollaboration

Requisitioning OrderProcessing

M aterialReceipt

FinancialSettlement

Supplier DataM anagement

SupplierEnablement

Average Coverage Top 25% Coverage Company Coverage Company Importance

Company Best Practice Importance Compared to Coverage Contrasted Against Peer Responses (Peer Group P1)

1 = No Coverage5 = Full Coverage


Best Practice ListingCompanyInternal

Gap

1Procurement plays a strategic role within theorganization and actively participates in business unitdecision-making

2

2 Organization operates a single, integratedprocurement system 2

Strategy and Leadership

Best Practice Ranking – Peer Group P11 = No Coverage5 = Full Coverage

0

1

2

3

4

5

6

1 2Average Coverage Top 25% CoverageCompany Coverage Company Importance

Coverage Ranking:

Best Practices for Strategy and Leadership: Impact on Managed Spend and Savings

Best Practice Adoption/ Spend Managed Strategically (Direct)

Procurement plays a strategic role within the organization and actively participates in businessunit decision-making

76%61%+ 25%

Low High

Organization operates a single, integrated procurement system 5.6%3.8%+ 46%

Best Practice Adoption/ Average Annual Savings (Direct) Low High

Top 25%

Between Average and Top 25%

Below AverageCoverage Ranking:


0

1

2

3

4

5

6

1 2 3

Average Coverage Top 25% CoverageCompany Coverage Company Importance


Gap

1 Contract compliance is directed, or even mandated,by system controls 4

2Stakeholders have access to accurate and timelyreporting of contract compliance to catch maverickactivity

4

3

System provides various standard analysis andreports to monitor purchasing operations and providea detailed analysis of compliance-related purchasingactivities and procurement processes

2

Best Practice Ranking – Peer Group P11 = No Coverage5 = Full CoverageCoverage Ranking:

Compliance

Best Practices for Compliance: Impact on Maverick Spending

Best Practice Adoption/ Maverick Spending (Direct)

Contract compliance is directed, or even mandated, by system controls 3.2%5.2%- 40%

Low High

System provides various standard analysis and reports to monitor purchasing operations andprovide a detailed analysis of compliance-related purchasing activities and procurementprocesses

2.7%5.3%- 50%

Top 25%





Sourcing: Category Management

0

1

2

3

4

5

6

1 2 3 4 5Average Coverage Top 25% CoverageCompany Coverage Company Importance


Gap

1Organization fosters supplier competition forcommodity spend to further reduce price and achievetrue market value

1

2Organization has ability to accurately measure bothdirect and indirect spend using a single repository ofdata

4

3 Organization conducts regular spend reviews toidentify new areas of contract opportunity 2

4

Buyers and commodity managers have access to asourcing cockpit and regularly analyze supplystrategy/ perform portfolio analysis for keycommodities. There is an ongoing focus on sourcingcycle time reduction

2

5System has ability to aggregate purchases across allbusiness units for accurate global analysis of supplierspend data

4

Coverage Ranking:

Best Practices for Category Management: Impact on Managed Spend and Savings

Best Practice Adoption/ Spend Managed Strategically (Direct)

Organization conducts regular spend reviews to identify new areas of contract opportunity 75%60%+ 24%

Low High

System has ability to aggregate purchases across all business units for accurate global analysisof supplier spend data 5.6%4.1%

+ 35%

Best Practice Adoption/ Average Annual Savings (Direct) Low High

Top 25%




Sourcing: Supplier Evaluation and Negotiation

0

1

2

3

4

5

6

1 2 3 4 5



Gap

1Supply base is reviewed on a regular basis againstkey performance indicators (KPIs); Weighting andscoring matrices are used in bid analysis/ award

2

2 Organization has a balanced focus between priceand performance and considers TCO 2

3

Organization negotiates and manages innovativecontract terms and conditions including vendorowned/ managed inventory, automatic replenishment,early-pay discounts, volume discounts/ rebates andindex-based pricing for commodities

1

4

Formal Request for Information, Proposal, andQuotation process is in place to collect multiplesupplier responses for both new and renegotiatedbuys

2

5Multiple suppliers are invited to participate in RFx andReverse auction processes to increase the accuracyof market price

-

Best Practice Ranking – Peer Group P11 = No Coverage5 = Full CoverageCoverage Ranking:

Best Practices for Supplier Evaluation and Negotiation: Impact on Average SavingsBest Practice Adoption/ Average Annual Savings

Organization has a balanced focus between price and performance and considers TCO5.3%3.8%

+ 38%

Low High

Multiple suppliers are invited to participate in RFx and Reverse auction processes to increase theaccuracy of market price 8.2%5.7%

+ 45%

Best Practice Adoption/ E-Auction Savings (Overall) Low High

Top 25%





Supplier Performance Management

0

1

2

3

4

5

6

1 2 3 4



Gap

1Suppliers' performance is measured on a regularbasis to review if suppliers are meeting contractterms and to gain leverage in negotiation

2

2System tracks quantitative and qualitative KPIs (keyperformance indicators) of Supplier performance;performance is regularly communicated to suppliers

2

3 System provides real-time visibility to the suppliersperformance for pro-active improvements 2

4

Internal team has access to a web-basedmanagement cockpit interface for reportingperformance results. The interface is predefined yetflexible and enables companies to deliver graphical,numerical, and verbal information to various levelswithin the organization

2

Coverage Ranking:

Best Practices for Supplier Performance Management: Impact on Average Annual Savings

Best Practice Adoption/ Average Annual Savings

Suppliers' performance is measured on a regular basis to review if suppliers are meeting contractterms and to gain leverage in negotiation 5.2%4.8%

+8%

Low High

System provides real-time visibility to the suppliers performance for pro-active improvements 5.8%5.1%+ 14%

Best Practice Adoption/ Average Annual Savings Low High

Top 25%





Contract Management


Gap

1 Organization has single, centralized repository ofsupplier contracts 3

2

Organization has ability to monitor suppliercompliance with contract terms; Organizationperforms regular reviews of existing contracts toinsure terms and conditions are being met

2

3Contract management system is integrated with RFX/e-Auction system to pre-populate relevant informationinto the contract

4

4 Ability to share contracts with other employees forcollaboration: red-lining, versioning, etc 3

0

1

2

3

4

5

6

1 2 3 4


Coverage Ranking:

Best Practices for Contract Management: Impact on Cycle Time for New Contracts and Maverick Spend

Best Practice Adoption/ Cycle Time For New Contract Creation (in weeks) and Maverick Spend

Organization has single, centralized repository of supplier contracts 9weeks

11weeks

-12%

Low High

Organization has single, centralized repository of supplier contracts 6.6%8.6%-24%

Best Practice Adoption/ Maverick Spend Low High

Top 25%





Supplier Collaboration


Gap

1Company facilitates order collaboration through asupplier portal for order acknowledgements,advanced shipping notifications, and confirmations

2

2 Supplier portal supports stock requirements inventorylevel checks 3

3 System fully supports XML industry extensions andEDI interfaces 1

4 Organization has implemented supplier managedinventory and collaborative replenishment 1

5

Strategic Suppliers are viewed as part of the teamand collaborate with Engineering as well as Sourcingto insure components and finished products can meetexpectations

1

6

Suppliers are able to maintain their own data, pre-enter goods receipts (ASNs), and pre-enter invoiceson behalf of the buying organizations (approval isrequired)

1

7 Organization involves suppliers in productdevelopment at the design stage 1

0

1

2

3

4

5

6

1 2 3 4 5 6 7Average Coverage Top 25% CoverageCompany Coverage Company Importance

Coverage Ranking:

Best Practices for Supplier Collaboration: Impact on Overall Procurement CostsBest Practice Adoption/ Overall Procurement Costs

Suppliers are able to maintain their own data, pre-enter goods receipts (ASNs), and pre-enterinvoices on behalf of the buying organizations (approval is required) 0.8%1.0%

-20%

Low High

Top 25%





Requisitioning

0

1

2

3

4

5

6

1 2



Gap

1 On line item catalogs used for self-servicesrequisition 2

2System enables online order approvals and workflowand employs an electronic approval process forshopping carts and purchase requisitions

1

Coverage Ranking:

Best Practices for Requisitioning: Impact on Average Days for Requisition to PO Processed and % of FTEs inTransactional Functions

Best Practice Adoption/ Average Days for Requisition to PO Processed

On line item catalogs used for self-services requisition 2.6days

4.8days

-47%

Low High

Best Practice Adoption/ % of FTEs in Transactional Functions

System enables online order approvals and workflow and employs an electronic approval processfor shopping carts and purchase requisitions 47.1%53.7%

-12%

Low High

Top 25%




Order Processing


0

1

2

3

4

5

6

1 2 3 4



Gap

1System processes POs automatically (no interventionnecessary) and submits them electronically tosuppliers

4

2 Organization uses integrated platform for indirect,direct and services procurement 1

3 Buyers have online access to PO status 1

4Change Orders/ PO Acknowledgements arecontrolled and re-communicated to the supplierelectronically

2

Coverage Ranking:

Best Practices for Order Processing: Impact on PO Error Rate and Orders Requiring Expediting

Best Practice Adoption/ Orders Requiring Expediting

Buyers have online access to PO status13.5%17.3%

-22%

Low High

Best Practice Adoption/ PO Error Rate

System processes POs automatically (no intervention necessary) and submits them electronicallyto suppliers 6.1%9.4%

-35%

Low High

Top 25%





Material Receipt

0

1

2

3

4

5

6

1 2 3



Gap

1 Receiving system is highly integrated with othersystems such as purchasing and inventory 1

2

Advanced Ship Notifications (ASNs) are enabledelectronically to allow for pre-receipt of the items. Asa result, only the approval of the receipt is requiredby the end-user

3

3 Evaluated Receipt Settlement utilized to takeadvantage of early payment discount 3

Coverage Ranking:

Best Practices for Material Receipt: Impact on Lost Discounts

Best Practice Adoption/ Lost Discounts

Evaluated Receipt Settlement utilized to take advantage of early payment discount 6.0%13.0%-54%

Low High

Top 25%





Financial Settlement

0

1

2

3

4

5

6

1 2 3 4 5 6



Gap

1 Invoice entry is automated by XML, EDI, or othermeans to alleviate the workload of AP 0

2 Tools to support electronic invoicing, online supplierinvoice inquiries and dispute resolution -

3 Suppliers are given the ability to enter invoicesdirectly into the Buyer's system 1

4

3-way Invoice matching is enabled to insure theinvoice reflects what was ordered and delivered;invoices can be matched electronically with order andreceiving information

1

5AP Managers spend time monitoring and evaluatingAP processes rather than entering invoices into thesystem

0

6

The AP system automatically alerts and does notaccept receipt of goods when it finds differencesbetween invoice, order and receipt [within definedtolerances]

1

Coverage Ranking:

Best Practices for Financial Settlement: Invoice Error Rate and % of FTEs in Transactional Function

Best Practice Adoption/ % of FTEs in Transactional Function

Invoice entry is automated by XML, EDI, or other means to alleviate the workload of AP 44.1%54.0%-18%

Low High

Best Practice Adoption/ Invoice Error Rate

Tools to support electronic invoicing, online supplier invoice inquiries and dispute resolution 5.0%5.9%-15%

Low High

Top 25%





Supplier Data Management

0

1

2

3

4

5

6

1 2



Gap

1Master data is synchronized between varioussystems (accounting, purchasing, etc) to prevent dataduplication and accurate reporting

2

2System gives supplier the ability to maintain their owndata and upload their own content to the Buyer'scatalog and Supplier Data Management repository

2

Coverage Ranking:

Best Practices for Supplier Data Management: Spend Under Management

Best Practice Adoption/ Spend Under Management

Master data is synchronized between various systems (accounting, purchasing, etc) to preventdata duplication and accurate reporting 61.9%54.4%

+14%

Low High

Top 25%




Supplier Enablement


0

1

2

3

4

5

6

1 2Average Coverage Top 25% CoverageCompany Coverage Company Importance


Gap

1 Suppliers have capability to self-register via supplierportal 2

2

Purchasers have the ability within the system toapprove suppliers that register via the supplier portal;once suppliers are approved, they can maintain theirown administrative information and add additionalusers

1

Coverage Ranking:

Best Practices for Supplier Enablement: % of FTEs in Transactional Function

Best Practice Adoption/ % of FTEs in Transactional Function

Purchasers have the ability within the system to approve suppliers that register via the supplierportal; once suppliers are approved, they can maintain their own administrative information andadd additional users

38.9%51.0%-24%

Low High

Top 25%




Agenda



SRM Customers


“By removing the bottlenecks, we have seen significanttangible and intangible benefits, as well as savings, mySAP SRM has played an important role in that.”

Stephen Donovan,

Head of E-ProcurementSouth African Breweries

Company South African Breweries LtdLocation Sandown, SandtonIndustry Consumer ProductsProducts/Services Beer BrewersRevenue € 9.6 billionEmployees 40,000

Web Site www.sabreweries.comSAP® Solution and Services my SAP SRMPartner PwC, SAP Consulting

ChallengesIncrease control over the purchasing process for non-productionmaterialsReduce supplier baseEliminate maverick spendIncrease the quality of information for decision makingIdentify and eliminate overspendingLeverage purchasing volumes for discounts, rebates, and morefavorable terms and conditions with suppliers

ObjectivesEliminate procurement inefficiencies throughout SAB Ltd.’s 7manufacturing plants, 52 distribution sites, and companyheadquarters

Implementation HighlightsmySAP SRM rolled out at 60 locations across South Africa in 12months, with a concurrent hardware refresh

Why SAPSAB Ltd. wanted to leverage its existing investment in SAP®softwareCompany required a long-term solution from a stable vendorKeeping application in SAP stable would minimize integrationcomplexity and maintenance effort

BenefitsmySAP SRM has enabled catalog-based buying, enforcingcompliance with pre-negotiated terms and conditionsWith greater transparency, SAB Ltd. can now see exactly what itis using, and can renegotiate deals with suppliers on this basis,driving real, tangible savingsNon-production spend has decreased by 0.71%, or some € 5.3million in real termsSAB Ltd. has been able to standardize the equipment it procures,lowering support and maintenance effort

South African Breweries Ltd. drives down indirect spendand improves its procurement efficiencies with my SAPSRM

http://www.sabreweries.com/


Agenda



SRM: Study Scope

Strategy,ComplianceManagement

ExpertiseBased Activities

TransactionalActivities

The benchmarking study included analysis across 13 key SRM/ Procurement business processes

Strategy and LeadershipCompliance

Sourcing: Category Management and Spend AnalysisSourcing: Supplier Evaluation and NegotiationSupplier Performance ManagementContract ManagementSupplier Collaboration

RequisitioningOrder ProcessingMaterial ReceiptFinancial SettlementSupplier Data ManagementSupplier Enablement

DriveEfficiency

DriveEffectiveness


CompanyFacts

Industry Industrial Machineryand Components

Annual Revenue(in millions) 1,000.0

Operating Income(in millions) 75.0

Supplier andSpendProfile

Total Annual Spend(in millions)

Total 535.0

Direct 500.0

Indirect 5.0

Services 30.0

Controllable Spend(in millions)

Total 534.5

Direct 500.0

Indirect 4.5

Services 30.0

“Active” Suppliers 5,000

Total POsProcessedAnnually

98,000

StaffingLevels andCosts

Sourcing andProcurement FTEs 50.0

AnnualProcurementFunction Costs(in’000s)

4,000.0

Technology

SAP SRM/Procurement ITSystems Deployed

Other, Non SAP

Other SRM/Procurement ITSystems Deployed

Other Application

Single EnterpriseWide System No

ABC Company: Company Snapshot

Regions/ Divisions Included: Participant Information:

1Q1 – Average of the top 25% responses for a particular KPI2Q4 – Average of the bottom 25% responses for a particular KPI

Entire Company Joe Smith, Procurement Manager, ABC

ContractManagement

Spend UnderContract (in %)

Direct 87.0

Indirect 30.0

Services 85.0


Area Function FTE'sAverage Cost/

FTE(in ’000s)

TotalHeadcount Cost

(in ’000s)

Strategy RelatedStrategy and Leadership

10.0 65.0 650.0Compliance

Expertise Based

Sourcing: CategoryManagement/ Spend Analysis

10.0 65.0 650.0

Sourcing: Supplier Evaluation& Negotiation

Supplier Performance

Contract Management

Supplier Collaboration

Transactional

Requisitioning

30.0 65.0 1,950.0

Order Processing

Materials Receipt

Financial Settlement

Supplier Data Management

Supplier Enablement

Total 50.0 N/ A 3,250.0

Company Baseline: Staffing and Cost ProfileU.S. Dollar


39.00% 39.00%

9.80% 12.20%

<1 B >=1 B, <5 B >=5 B, <10 B >=10 B

By Industry Sector Industrial Machinery andComponents By Revenue 1.00B

Number of Companies in Peer Group P1:

Participating Company Profile: Industry,Revenue and Spend – Peer Group P1


53

30.00%

17.00%22.00%

13.00% 13.00%

4.00%

<500 M >= 500 M <1 B

>= 1 B <2.5 B

>= 2.5 B <5 B

>= 5 B < 10B

>=10 B

By Spend Company Response: 535.0M

100.0%

Aerospace

Automotiv e

Chemical

Def ense and Security

EC&O

Financial Serv ices

Healthcare

High Tech

IM&C

Media

Mill Products

Oil and Gas

Lide Sciences

Postal Serv ices

Public Sector

Railway s

Retail

Serv ice Prov iders

Telecommunications

Utilit ies


Others

Consumer Products



0.00%

63.80%

21.70%14.50%

<1 B >=1 B, <5 B >=5 B, <10 B >=10 B

Industrial Machinery andComponents By Revenue 1.00B

Number of Companies in Peer Group P2:

Participating Company Profile: Industry,Revenue and Spend – Peer Group P2


87

By Spend Company Response:

97.44%

2.56%

<500 M >= 500 M <1 B

>= 1 B <2.5 B

>= 2.5 B <5 B

>= 5 B <10 B

>=10 B

535.0M

By Industry Sector

10.3%

13.8%

12.6%

6.9%

9.2%

3.4%

5.7%

3.4%

1.1%

4.6%

4.6%

1.1%

2.3%

1.1%

6.9%

1.1%

4.6%

1.1%

1.1%

Aerospace

Defense and Security

Lide Sciences

Service Providers

M edia

EC&O

Postal Services

Public Sector

Railways

Healthcare

Telecommunications

Automo tive

Financial Services

High Tech

Oil and Gas


Chemical

IM &C

Others

Retail

M ill Products

Consumer Products

Utilit ies



Participating Company Profile: Spend,Suppliers and POs – Peer Group P1

23.8%

33.3%

11.9% 11.9%9.5%

4.8% 4.8%

<1,000 1,000 -2,500

2,500 -5,000

5,000 -9,999

10,000 -20,000

20,000 -30,000

30,000 +

5,000

38%

19%

10%14% 14%

5%

<10,000 10,000 -20,000

20,000 -50,000

50,000 -100,000

100,000 -250,000

>250,000

98,000 By Number of ActiveSuppliers

By Annual PO Volume Company Response:Company Response:


Participating Company Profile: IT Landscape –Peer Group P1

Single Enterprise– Wide System

Sourcing & ProcurementSystems Deployed

Other, Non SAPCompany Response: NoCompany Response:

20.9%16.3%

30.4% 32.4%

R/3 SAP ERP SAP SRMExtended

Procurement

No SAP

48%

52%

Yes No


Streamline and Automate Sourcing and ProcurementProcessesFor Reduced Procurement CostsLevel 2 Strategy Best Practice Process

Drive adoption of self -service procurementtools

Buyers have online access to PO statusOrder Processing

Change orders/PO acknowledgements are controlled and re-communicated to the supplier electronicallyOnline item catalogs are used for self-service requisition

RequisitioningSystem enables online order approvals and workflow and employs an electronic approval process for shopping carts andpurchase requisitions

Integrate processeswithin and outsideprocurement

Receiving system is highly integrated with other systems, such as purchasing and inventory Material Receipt

Organization uses integrated platform for indirect, direct, and services procurement Order Processing

Organization operates a single, integrated procurement system Strategy andLeadership

Master data is synchronized between various systems (accounting, purchasing, etc.) to prevent data duplication andensure accurate reporting

Supplier DataManagement

Standardize andautomate procurementprocesses

Tools support electronic invoicing, online supplier invoice inquiries, and dispute resolution

FinancialSettlement

3-way invoice matching is enabled whenever possible to ensure the invoice reflects what was ordered and delivered;invoices can be matched electronically with order and receiving informationAP managers spend time monitoring and evaluating AP processes, rather than entering invoices into the systemAP system automatically sends alerts when it finds differences between invoice, order, and receipt (within definedtolerances), does not accept receipt of goods"Evaluated Receipt Settlement" utilized to take advantage of early payment discount Material ReceiptSystem processes POs automatically (no intervention necessary) and submits them electronically to suppliers Order Processing

Streamline workflowacross procurementprocesses and reduceauthorization steps

ASNs are enabled electronically to allow for pre-receipt of the items. As a result, only the approval of the receipt isrequired by the end-user Material Receipt

Level 2 Strategy KPI

Standardize andautomateprocurementprocesses

PO Error Rate (in %)

FTEs per billions of total spend (overall)

% of FTEs in transactional functionStreamline workflowacross procurementprocesses and reduceauthorization steps

Orders requiring expediting (in %)


Collaborate with Suppliers to Jointly reduce Costs AlongSupply ChainFor Reduced Procurement Process Costs and Higher SavingsLevel 2 Strategy Best Practice Process

Increase supplierresponsibilities fororder status, productdata maintenance, andinvoice settlement

Invoice entry is automated by XML, EDI, or other means to alleviate the workload of AP FinancialSettlementSuppliers have the ability to enter invoices directly into the buyer's system, requiring approval by AP

Company facilitates order collaboration through a supplier portal for order acknowledgements, advanced shippingnotifications, and confirmations

SupplierCollaborationSystem fully supports XML industry extensions and EDI interfaces

Suppliers are able to maintain their own data, pre-enter goods receipts (ASNs), and pre-enter invoices on behalf of thebuying organizations (approval is required)System gives suppliers the ability to maintain their own data and upload their content to the buyer's catalog and supplierdata management repository

Supplier DataManagement

Suppliers have capability to self-register via supplier portal SupplierEnablementPurchasers have the ability within the system to approve suppliers that register via the supplier portal; once suppliers are

approved, they can maintain their own administrative information and add additional users

Evaluate and pay onsuppliers’ performance(e.g., quality)

Suppliers' performance is measured on a regular basis to determine whether they are meeting contract terms and to gainleverage in negotiation

SupplierPerformanceManagement

System tracks quantitative (price and delivery) and qualitative (quality and service) supplier performance KPIs;performance is regularly communicated to suppliers

System provides real-time visibility into supplier performance for pro-active improvements

Internal team has access to a web-based management cockpit interface for reporting performance resultsImprove suppliervisibility of demand Supplier portal supports inventory level checks for stock requirements Supplier

CollaborationIncrease supplierresponsibilities forinventory management

Organization has implemented supplier-managed inventory and collaborative replenishment SupplierCollaboration

Integrate suppliers intoplanning anddevelopment

Strategic suppliers are viewed as part of the team and collaborate with engineering as well as sourcing to ensurecomponents and finished products can meet expectations

SupplierCollaborationOrganization involves suppliers in product development at the design stage (participative design)


Improve Purchasing PowerFor Enhanced Annual Savings

Level 2 Strategy Best Practice Process

Consolidate buyingcategories andoptimize supplier base

Organization fosters supplier competition for commodity spend to further reduce price and achieve true market value CategoryManagement

Drive best price (e.g.,e-auctions, globalsourcing, newsuppliers)

Supply base is reviewed regularly against KPIs; weighting and scoring matrices are used in bid analysis/awardSupplier Evaluationand Negotiation

Organization has a balanced focus between price and performance and considers total cost of ownership

Multiple suppliers are invited to participate in RFx and reverse auction processes to increase the accuracy of market price

Reduce sourcing andcontracting cycle times

Contract management system is integrated with RFX/e-auction system to pre-populate relevant information into thecontract Contract

ManagementAbility to share contracts with other employees for collaboration: red-lining, versioning, etc.Formal request for information, proposal, and quotation process is in place to collect multiple supplier responses for bothnew and renegotiated buys

Supplier Evaluationand Negotiation


Consolidate buyingcategories andoptimize supplier base

% Average Annual Savings - Direct

% Average Annual Savings - Indirect

% Average Annual Savings - Services

Drive best price (e.g.,e-auctions, globalsourcing, newsuppliers)

% of Spend Sourced via e-Auctions – Direct% of Spend Sourced via e-Auctions – Indirect% of Spend Sourced via e-Auctions - Services% Average Savings through e-Auctions - Direct% Average Savings through e-Auctions - Indirect% Average Savings through e-Auctions - Services

Reduce sourcing andcontracting cycle times Cycle Time For New Contract Creation (in weeks)


Increase Purchasing Control on Spend CategoriesFor Greater Spend Control, Reduced Maverick Spending andIncreased SavingsLevel 2 Strategy Best Practice Process

Provide analytics forspend visibility andcontrol

CategoryManagement

Buyers and commodity managers have access to a sourcing cockpit, which they use to regularly analyze supply strategyand perform portfolio analysis for key commodities. There is an ongoing focus on sourcing cycle-time reductionSystem has ability to aggregate purchases across all business units for accurate global analysis of supplier spend data

Bring more non-managed categoriesand services undercontrol

Organization conducts regular spend reviews to identify new areas of contract opportunity CategoryManagement

Establish procurementfunction as a strategicenabler

Procurement plays a strategic role within the organization (e.g., organization has a Chief Procurement Officer who reportsto the CEO) and actively participates in business unit decision making

Strategy andLeadership

Strengthen spendcontrols andmeasure/enforcecompliance

Contract compliance is directed, or even mandated, by system controls

ComplianceStakeholders have access to accurate and timely reporting of contract compliance to identify maverick activitySystem provides various standard analyses and reports to monitor purchasing operations ; also provides a detailedanalysis of compliance-related purchasing activities and procurement processes

Pro-actively monitorcontract terms,rebates, volume tiers,and renewals tomaximize contractvalue

Organization has single, centralized repository of supplier contracts ContractManagementOrganization has ability to monitor supplier compliance with contract terms; organization performs regular reviews of

existing contracts to ensure terms and conditions are being metOrganization negotiates and manages innovative contract terms and conditions including vendor-owned or -managedinventory, automatic replenishment, early-pay discounts, volume discounts/rebates, and index-based pricing forcommodities

Supplier Evaluationand Negotiation


Bring more non-managed categoriesand services undercontrol

% of Spend Managed Strategically - Direct

% of Spend Managed Strategically - Indirect

% of Spend Managed Strategically - ServicesStrengthen spendcontrols andmeasure/enforcecompliance

% of Maverick Spend - Direct% of Maverick Spend - Indirect% of Maverick Spend - Services

SRM Sample Report

Documents

Transcript of SRM Sample Report