Transform Procurement with Integrated Processes creation for supporting business functions –...

Dr. Marcell Vollmer, CPO, SAP SE

#SAPPHIRENOW

Transform Procurement with

Integrated Processes

Public

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 2 Public © 2015 SAP SE or an SAP affiliate company. All rights reserved. 2 Public

Agenda

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SAP at a Glance

Future Trends and Innovations

in Procurement

SAP’s Evolution of Procurement

from Service to Function

SAP at a Glance

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 4 Public

2015 outlook and path to 2020 – Run Simple, simple wins Fast cloud growth, growing highly predictable revenue and operating profit

€1.95B to €2.05B

Cloud subs (constant

currency)

8% to 10%

Cloud and software (constant

currency)

€5.6B to €5.9B

Operating profit (constant

currency)

€3.5B to €3.6B

Cloud subs

€21B to €22B

Total revenue

65% to 70%

Support + cloud subs –

share of revenue

€6.3B to €7B

Operating profit

€7.5B to €8B

Cloud subs

€26B to €28B

Total revenue

70% to 75%

Support + cloud subs –

share of revenue

€8B to €9B

Operating profit

2015 guidance

ambition

2020 ambition

Across 25 industries

In 180 countries

253,000 customers

70+ million cloud users

40+ million on-premise users

74,400+ employees

€17.6B revenue full year 2014 (IFRS)

© 2015 SAP SE or an SAP affiliate company. All rights reserved.

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Future Trends and

Innovations in Procurement


Changing business environment increases

pressure on companies

© 2015 SAP SE or an SAP affiliate company. All rights reserved.

Accelerating technological change • Changing business models

• Faster innovation cycles

• Expanding partnerships and channels

• Use of Big Data for decisions

Regulatory changes • Increasing disclosure

requirements

• Country-specific regulations

• Industry-specific disclosures

Increasing globalization • Expansion into new markets

• Global process standardization

• International supply chains

• Increased off- and near-shoring

Economic volatility • Volatility in markets

• Decreased stock valuation

• Slow economic growth

• High expense ratio

More competition • Pricing pressures

• New sources of competition

• Decreased budgets and spending

Greater risk • Supply chain disruption

• Financial risk and fraud

• Commodity risk

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Accelerating technological change Business landscape transformation: 2020 is increasingly digital and networked

1 ScienceDaily. ScienceDaily, 22 May 2013.

2 Technology Adoption Report: Business Networks, Ardent Partners, 2014.

3 Internet of Things (IoT) 2013 to 2020 Market Analysis: Billions of Things, Trillions of Dollars, IDC, 2013.

4 Statista, 2014.

Next 2 years

90% of the world data has been generated1

40% growth in adoption of business networks2

212B things will be connected3

9B mobile users in the world4

51% of workloads

processed in the cloud

Last 2 years

End of 2020 By 2020 In 2020


http://www.sciencedaily.com/releases/2013/05/130522085217.htm

http://www.sciencedaily.com/releases/2013/05/130522085217.htm

http://cporising.com/2014/10/09/introducing-ardent-partners-technology-adoption-report-on-business-networks/

http://cts.businesswire.com/ct/CT?id=smartlink&url=http://www.idc.com/getdoc.jsp?containerId=243661&esheet=50721954&newsitemid=20131003005687&lan=en-US&anchor=Internet+of+Things+(IoT)+2013+to+2020+Market+Analysis:+Billions+of+Things,+Trillions+of+Dollars&index=4&md5=59da372afbdafaa6e8563b0f5d6412f0

http://www.statista.com/statistics/218984/number-of-global-mobile-users-since-2010/


Future trends for procurement 3 trends in the market – from service to function

Value creation for supporting business functions – procurement as business value enabler

Value creation is more important than procurement savings, which are not hitting the bottom line.

Focus on implementing new innovations to deliver business value and drive transition to sourcing

“services” instead of “goods.”

Digital economy – business networks to revolutionize sourcing for procurement

Use cloud networks to link various platforms and consolidate spend while achieving real-time

collaboration. Enable the function to harness the power of predictive analytics to be first to get

competitive market insights and drive better business decisions. Use network and analytics to

improve working capital and reduce transactional costs by end-to-end process automation including

public cross-industry procurement catalog and marketplaces.

Use of shared services concepts – sourcing factory

Rely on intelligent managed service concepts including centralized category management to

discover untapped spend (like for small countries) and to increase compliance.

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3 © 2015 SAP SE or an SAP affiliate company. All rights reserved. 8 Public

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Future Trends and Innovations in

Procurement

1 Value creation for supporting

business functions –

procurement as

business value enabler


Future trends and innovations in procurement Business value enabler – value creation

–Value creation is more important than procurement savings, which are often not hitting the bottom line. A buyer

role needs to advise the business and be a valued partner to focus on strategic sourcing decisions rather

than ordering goods or services. Systems will connect to order automatically and monitor status; delivery will be

fully automated.

Services not goods Automated ordering Product creation

Services Warehouses 3D printing

–The role of a buyer will change significantly as procurement transitions from goods to services. Buyers will be

asked to provide solutions to the business and implement new (supplier) innovations that align with

strategic objectives and deliver business value.



Future trends and innovations in

procurement

2 Digital economy –

business networks to

revolutionize sourcing

for procurement


–Business network spend distribution

Evolution of procurement towards a strategic function How to explain best business networks in a “digital economy”?

–Ariba Network will be the B2B network of the future.

–Ariba Network combines:

–Transitioning to a fully integrated and automated PO-to-invoice process will be a must in the future to

reduce transactional costs and free up resources to focus on value-adding activities in the end-to-end process.

Global capital and

operational spending

for the Global 2000

are distributed across

different categories.

SAP’s business

networks can help

companies address

all of the spend

categories.

Source: Spend

Categories for Global

Top 2000

26% Direct and

supply chain

21% Indirect and

MRO 46% Contingent labor

and services

7% Travel and

expenses

The social media capabilities of

– -like shopping marketplace

– End-to-end automation for all transactions


Evolution of procurement towards a strategic function CPO and CFO value proposition on Ariba Network and catalog of catalogs

Automation Increase in invoice automation

within short timeframe

SAP: +50% in 12 months

Productivity Increase in overall productivity

for procurement

SAP: +20% in 18 months

Invoicing Reduction in procurement

costs using cloud solutions

from Ariba and the Ariba

Network (from €11.5 to €6.7

per invoice) Example: SAP

CFO value CPO value

Spend Will be utilized to a high

extent to realize additional

savings (margin impact)

PO Increase in overall productivity

for procurement to automate

purchase orders

100% Compliance and capturing of

all information and knowledge

on the network

–Ariba Network provides benefits for both

Ariba cloud-based solutions for goods

Fieldglass for services

Concur for travel

Transaction automation on

the combined network of

Ariba (an SAP company),

Fieldglass (an SAP

company), and Concur (now

part of SAP

SAP can sell to both CPO and CFO!

Probably CFO can support getting budget for CPO as he or she benefits with

real-cost savings business case

–CPO to leverage purchasing power and

reduce transactional costs

CFO to reduce transactional costs by

invoice automation


Example: purchase order invoice automation and Run Simple Automation of invoice to pay – eliminate manual, no value-adding tasks

–Transitioning to a fully integrated and automated PO-to-invoice process will be a must in the future to reduce transactional

costs and free up resources to focus on value-adding activities in the end-to-end process.

Manual paper-based process from purchase order to invoice Purchase order to invoice fully automated on Ariba Network

–Invoice management will change from a paper-based invoice-handling process with manual data entry on two screens to a networked

automated invoice solution without manual process steps.

–Almost all invoices today are getting created by a system (ERP, Word, Excel, and others). Invoice gets printed and mailed. Before the receiving

company had to open the envelope, scan the invoice, and either enter the data manually or try to capture the information using an OCR system.

Invoice creation

in a system

Printing Mail,

shipping

Manual

data entry

Scanning Purchase order

creation and invoice

data

Purchase order

data conversion in invoice


Future trends and innovations in

procurement

3 Use of shared

services concepts –

sourcing factory


Sourcing factory Utilize organizational capabilities

Problem:

Strategic spend is managed by global categories

or on regional level with strategic and preferred

suppliers.

Tail spend and spend for small countries

(tier 3 countries) are not or partly managed, which

leads to missed savings opportunity and non-

compliance risk.

Solution:

Sourcing factory model is an answer to better

manage not globally or regionally covered spend.

–Intelligent managed organizational concepts are required to manage untapped spend areas or serve very small countries in a compliant way.

A sourcing factory model – captive or as managed (outsourced) service – will expand the reach of procurement organizations in the future.

Managed by

Global Categories

Option 1:

Captive Shared Service or

Center of Expertise concept

Option 2:

Oursourced / Managed

Services

Spend to be shifted to

preferred suppliers or into

captive / managed service

High automation (spot buy, spot quote, eSourcing)

Sourcing on business networks or based on global supply database to ensure fast and compliant processing of non-strategic spend

SAP’s Evolution of Procurement

from Service to Function


Evolution of procurement at SAP towards a strategic function The transformation journey towards Run Simple and business value enabler role

Today

Operational Strategic partner

Regional

purchasing

SAP SRM 5.0 SAP SRM 7.02 Cloud

Change

management

Tactical

Procurement

operations

People

development

Business partner

leadership

Global

categories

Processes and systems E2E, P2P, and cloud systems;

networks; mobile

Organization Globalization category

management

People Development and change

management


“Source-to-Pay” @ SAP Implementation of a globalized category management organization

Use purchasing power and achieve

sustainable savings across all geographies

Deliver best-in-class procurement

processes and highest possible service

levels to internal customers

Mitigate risk to SAP

Be a fair partner to our suppliers


>€3.8 billion Spend FY 2014

>710,000 Annual invoices

>970,000 Trips

CPO and business owner for “Source-to-Pay”

Pay

Accounts payable and

travel and expenses

Source-to-purchase

Strategic and tactical

procurement

Purchase

Operational

procurement

Source-to-pay strategy group

IT Marketing Facility Mobile Services

Procurement solutions excellence team

Request, order,

and receive

goods and

services

Perform invoice

processing and

payment

Execute closing

and

reconciliation

Execute pre-

trip, on trip, and

expense entry;

auditing


Evolution of SAP’s procurement function Organization source-to-pay, people development and change, processes and systems: cloud only


Organization and people Globalization category management

Pay Accounts payable and

travel and expenses

Source to purchase Strategic and tactical

procurement

Purchase Operational

procurement

Ariba for goods,

Fieldglass for services, and

Concur for travel

Processes and systems E2E, P2P, and cloud systems;

networks; mobile


Delivering total workforce management Companies acquired in the last 8 years (>€25B)



Run Simple: real-life examples from GPO @ SAP Ease of use and optimized user interfaces for procurement, analytics, and travel

Catalog ordering with Ariba Network Spot Buy

(ebay) live – ebay-like shopping

New SAP Fiori launchpad for approvals live Easy-to-use app

Improve to Run Simple

Old SRM catalog

NEW catalog with Ariba Network Spot

Buy ebay integration (live in U.S. since

November)

Tablet access

enabled Innovate new ideas to Run Simple

Old workflows

SAP Fiori launchpad: approval

app and desktop version

available for all workflows, like

shopping cart, shopping cart

tracking, access SAP Fiori

launchpad Tablet or smartphone

access enabled

https://pgpmain.wdf.sap.corp/sap/bc/ui5_ui5/ui2/ushell/shells/abap/FioriLaunchpad.html



https://internalstore.sap.com/sap/cp/ui/resources/cstore/html/SolutionDetails.html?pid=0000000911&pcntry=US&sap-language=EN&_cp_id=id-1416746610378-0




Ariba cloud solutions Strategic and tactical procurement

Source to purchase (Strategic and tactical procurement)

Ariba Spend Visibility

Ariba Supplier Information and

Performance Management

Ariba Sourcing

Service procurement

Ariba Contract Management

Catalog

Procurement dashboards are key to

manage the procure-to-pay process

and to define sourcing strategies.

Rely on the supplier management

program on Ariba (SIPM) and

implement preferred supplier

strategy to consolidate and optimize

spend allocation.

Utilize purchasing power and highly

standardized and automated e-

sourcing solution; benefit from e-

auctions.

Use cloud-based technology to procure

and manage the non-employee

workforce, incl. contingent workers and

services such as statement of work

(SOW) projects, offshore labor, and

independent contractors.

Access Ariba’s new catalog for a

Google-fast and eBay-like shopping

experience.

Procurement integrated CMS solution

eliminates paper and ink from the

creation, execution, and management of

any type of contractual agreement.


Run Simple: real-life examples from Source-to-Pay @ SAP Ease of use and optimized user interfaces for spend visibility on SAP HANA

Before After PO and non-PO spend aggregated

SRM

ERP

ERP

PO spend

BW

Non-

PO spend

SRM

ERP

ERP


Achievements: source-to-pay automation, business networks,

and shared services

Streamline entire source-to-pay process Achievements: facts and figures

3 months Implementation time

>4,000 Suppliers on

Ariba Network

268,000 Documents

transmitted

50% Increase in

automation

20% Productivity gain

<1B Purchase order

value sourced

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 25

Utilize economies of scale and control through

shared services

Cut costs through automated data extraction and

process automation

Create workforce efficiency through streamlined

processes including mobile approvals

Reduce errors at the source

Improve working capital management through

better visibility into cash requirements

Optimize cash discount utilization including dynamic

discounting

Public


Key take-aways on transforming procurement Run Simple and get linked are key success factors for the future


Transform organization to fit future needs

Develop people and manage change

Implement end-to-end processes and cloud

systems to automate transactional processes

Use the power of social, supplier, and

business networks to get innovations and to

deliver solutions to the lines of business

Transform

to Run Simple

Get linked

to stay relevant

Transform Procurement with Integrated Processes creation for supporting business functions –...

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