SAP Direct Procurement @apsolut

The easiest way to digitalize the procurement of direct materials for highly technical products

The daily routine in direct procurement

In practice, direct material procurement is a lengthy and complex process. Demand identification, demand notification, demand coverage, contracts, orders, payment and more: the entire purchasing process is often not mapped in a homogeneous and transparent system landscape, resulting in increased manual effort and a lack of transparency within departments and between colleagues.

One of the most important parts of Direct Procurement is Direct Material Sourcing, as it identifies the supplier stakeholders that will later directly influence the quality and production of the products.

What is Direct Material Sourcing?

Direct Material Sourcing is part of Direct Procurement and focuses on planning and procuring materials that you do not produce yourself or need to source externally due to make-or-buy considerations. In practice, this is often a time-consuming and not very transparent process. You have to select suppliers, test prototypes, ensure qualities, compare prices, communicate with suppliers and much more. Then it's on to the tendering phase and the comparison of the offers.

This can be an elaborate process with many unanswered questions and decisions:

  • Can Supplier A supply me with the right amount of materials over the next 5 years?
  • Do the specifications or designs of my products change frequently?
  • How do the conditions of Suppliers A and B differ?
  • Do I have the valid and current drawing/bill of materials available?
  • Do I know the raw material price development in my material group?
  • Supplier C can also deliver, but only from Date X.
  • How do I ensure the use and monitoring of the concluded contracts with suppliers?

Do you know these thoughts and procedures? The complexity of integration throughout the procurement and contracting process leads to interruptions and impedes process efficiency. Diverse information must be saved transparently and clearly, so that even far in the future, it can be traced, why which decision was made and auditability remains guaranteed. Perhaps your products are also subject to certain approval processes or special guidelines. And especially with highly technical products, standards and qualities must be maintained. The premise often applies: Not the cheapest supplier must be found, but the right one.

Challenges in the SAP Direct Procurement process

Manufacturing companies that use SAP often still perform their direct procurement manually using Excel and e-mail, or use other software solutions that have to be integrated with SAP in an extremely time-consuming manner.

You may already be using a central platform, but the likelihood is high that it is not integrated end-to-end into your system landscape, and your data is probably not stored in a uniform way and therefore not comparable

Each offer is set up differently. There are different structures, file formats, naming and more. In short, an extensive amount of effort is required to generate a complete and transparent comparison of a wide variety of supplier offers.

Does this scenario sound familiar?

You have to compare the offers manually, create an overview and hand it over as a decision template in a comprehensible way.

For new developments with new suppliers, this is a time-consuming and nerve-racking challenge.

But even with existing suppliers, extensive renegotiations of contracts are necessary due to changes in the underlying raw material indices, exchange rate changes or contract expiration.

Legal requirements in the direct procurement process

New legal requirements such as the Supply Chain Sourcing Obligations Act also pose new challenges for direct material buyers:

  • Does your supplier pay attention to climate protection?
  • Are there assumptions that they may be using child labor or not disposing of harmful substances properly?

All these factors are added to the pure offers as parameters relevant for comparison and make a quantitative as well as qualitative comparison of the suppliers more difficult.

At the same time, there is information from artificial intelligence as well as data from third-party providers (Ecovadis, D&B, Creditrefom, and many more) that make the evaluation of suppliers even easier - be it risk data or even geopolitical events that can influence the delivery.

But have you really found the most efficient and transparent process for your company?

Why collaboration is important for direct procurement

  • How can my colleagues track my work, if I change work areas or even spontaneously drop out?
  • Do other employees have all contact details, information, previous offers and the negotiated conditions or contracts for suppliers available?
  • How integrated are all key stakeholders in the processes?
  • How can you ensure that your colleagues can continue their work without delay?
  • How do you ensure necessary compliance requirements?

Based on these questions, you can see that transparency, collaboration and compliance are important building blocks in procurement. The goal must be to standardize and document highly manual processes, so that all stakeholders can see the current status at any time. One way to ensure this is to create a system landscape that is as homogeneous as possible so that data is automatically transferred to the right departments.

Solutions for Direct Procurement with SAP

With its latest product, SAP S/4HANA Product Sourcing, SAP has initiated a revolution in direct procurement.

Learn more here: SAP S/4HANA Product Sourcing

Your partner for SAP Direct Procurement: apsolut!

Introducing a new tool in the area of direct procurement is a challenge. We are happy to take on these complex transformation projects. Talk to us, network with us on LinkedIn to receive Direct Procurement news at any time.

Ihre persönlichen apsolut-Ansprechpartner

Your personal apsolut contact

Hans-Jörg Koch
Hans-Jörg Koch
Partner

Your personal apsolut contact

Rene Bäuchle
Rene Bäuchle
Associate Partner

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