Changing Dynamics: Driving Direct Materials Sourcing and Supplier Collaboration
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The document discusses the challenges and trends in direct materials sourcing and supplier collaboration, highlighting the increasing complexity of manufacturing supply chains and the inefficiencies in current sourcing processes. It emphasizes the need for integrated solutions and automation to improve visibility, reduce risks, and drive savings in procurement. The SAP Ariba Network is presented as a comprehensive platform to streamline sourcing and collaboration across various spend categories.
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Changing Dynamics: Driving Direct Materials Sourcing and Supplier Collaboration
- 1. Joseph Bacarro and Bhawna Bhatia, SAP August 30, 2016 Changing Dynamics: Driving Direct Materials Sourcing and Supplier Collaboration Public
- 2. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 2Public Important information This information reflects the status of SAP Ariba solution planning as of June 2016. All such information is confidential information (per the contract between our companies), and must not be further disclosed, as stated in the confidentiality clause of that contract. This presentation contains only intended guidance and is not binding upon SAP or Ariba to any particular course of business, product strategy, and/or development. Its content is subject to change without notice. SAP and Ariba assume no responsibility for errors or omissions in this document. SAP and Ariba shall have no liability for damages of any kind including without limitation direct, special, indirect, or consequential damages that may result from the use of these materials.
- 3. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 3Public Trends and challenges Changing business environment Increasing globalizationEconomic volatility More competition Greater riskAccelerating technological change Regulatory changes Run live!
- 4. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 4Public Complex manufacturing supply chains inhibit supply visibility Contract manufacturers Subassembly suppliers Large enterprise OEM Component suppliers Raw material suppliers
- 5. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 5Public Managing direct spend today Multiple outdated sourcing and supplier collaborations 69% of direct materials source-to-pay processes are manual of contracted direct materials spend is noncomplaint30% 57% of enterprises cannot integrate sourcing initiatives into corporate data management of buyers have poor visibility into source of supply65% of manufacturing is outsourced in a typical company32% of suppliers lack visibility into customer order management70% Source: Supply Chain Insights 2014Sources: Chainlink Research, Paystream Advisors Sourcing collaboration Supply chain collaboration Custom portalsEDI VANs Direct connectManualSeparate solutions for indirect spend Highly customized on-premise systems Standalone niche vendor solutions Finance collaboration Results in…
- 6. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 6Public Moving toward demand-driven value network models Process Anticipating Network Orchestrating Value proposition Event horizon Functional Reacting Integration Collaboration 1980s 1990s 2000s 2010s Months LiveWeeks Days
- 7. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 7Public Executives are ready to act Procurement executive’s Sources: CPO Rising – The Agility Agenda, by Ardent Partners, March 2015; 2013 Aberdeen Group Chief Supply Chain Officer Survey, November 2013, McKinsey 2013
- 8. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 8Public What if you could… © 2016 SAP SE or an SAP affiliate company. All rights reserved. 8 Manage source-to-contract processes on a single solution Address all categories of direct and indirect spend Integrate source-to-contract processes to ERP and execution systems Public
- 9. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 9Public Source-to-pay in the overall value chain Plan Plan Make Deliver EnablePlan Make Deliver EnableMake Deliver Enable Source Operational Procurement SourceDesign Plan SourcePlan Make Deliver EnableSourcePlan Make Deliver EnableMake Deliver Enable Source-to-pay Request and Buy Invoice and Pay Source and Contract Design Subcontractor Subassembly suppliers Component suppliers Raw materials Logistics service providers SUPPLIER COLLABORATION DIRECT AND SUPPLY CHAIN Component inventory data Sourcing events Self-billing POForecast/demand Forecast commit PO confirmation Component consumption notice Invoice Advance ship notice Bids Ariba Collaborative Supply Chain SAP ERP/SAP PLM or SAP S/4HANA SAP Integrated Business Planning or SAP APO Ariba Collaborative Sourcing, professional edition SAP ERP or SAP S/4HANA Ariba Collaborative Sourcing, professional edition Ariba Collaborative Supply Chain Ariba Supply Chain Finance Banks Supply chain finance Operational procurement Returns
- 10. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 10Public Ariba Collaborative Sourcing, professional edition (material sourcing) Collaborate source to contract for all spend types on one platform
- 11. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 11Public Existing financial system SAP/ Non-SAP YOUR TRADING PARTNERS Packaging suppliers Raw material suppliers Subcontractors Distributor/transporter/ logistics provider Distribution centers Ariba Network US$1.1 trillion of commerce 2.2 million suppliers Millions of transactions One connection Scalability and simplicity with a single business network Embedded supplier onboarding services End-to-end process orchestration to validate and enforce compliance Network intelligence, data, and insights to reduce supply chain risk World’s largest network of trading partners Portal/mobile Customer What is the Ariba Network?
- 12. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 12Public Ariba Network for direct materials Supply chain collaboration Collaborative processes Forecast visibility and collaboration Direct materials purchase order collaboration Scheduling agreement release Subcontracting order collaboration Consigned inventory collaboration Buyer Purchase order/subcontract order Schedule agreement release Component inventory data Goods receipt notice Supplier/contract manufacturer Component receipt notice PO confirmation Component consumption notice Advance ship notice Self-billing/ERS invoice Component ship notice Consignment inventory status Payment Invoice Forecast commit Forecast/demand Manufacturing visibility ** ** B2B only, UI/upload planned in upcoming releases
- 13. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 13Public Let us look at how… The contract manufacturing collaboration process works Buyer Contract manufacturer Subcontract purchase order Component inventory status Goods receipt notice Component receipt notice PO confirmation Component consumption notice Advance ship notice Self-billing/ERS invoice (Option A) Component ship notice Payment Invoice (Option B) Manufacturing visibility * * B2B only, UI/upload planned in upcoming releases Business benefits Allows buyer to leverage purchasing power while maintaining visibility and control into contract manufacturing process Improves visibility into availability of supply, inventory, and production status
- 14. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 14Public Forecast visibility and commit collaboration process Buyer Supplier/contract manufacturer Forecast Forecast: Net demand generated by MRP (purchase requirements, planned orders, scheduling agreement forecast releases) from ERP systems or unconstrained supply plans from advanced planning systems Forecast commit Mfg. planning visibility * * B2B only, UI/upload planned in upcoming releases Business benefits Provides suppliers with near real-time visibility into demand forecast; ability to more effectively schedule operations and plan capacity usage to meet the customer’s requirements Allows suppliers to provide commitment against the buyer- requested forecast quantities Ability for buyer to plan based on the commitment from the suppliers to manage the constrained planning process
- 15. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 15Public Supply chain collaboration Insert 3 minute video
- 16. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 16Public Digital transformation for direct material • Latency • Compliance Price reduction 3%-5% Compliance 60%-75% • Inventory , lead time • Stock outs and lost sales • Lead time by 10% • Inventory by 30% • Lack of visibility, accuracy • Too much expediting • Higher service levels • Expedites by 40% • High contract leakage • No discount management • Discount, free cash • Automation, DPO Customer 40M/B (buyer), 5M/B (supplier) Revenue acceleration Inventory Challenges Value Collaborative sourcing RFx, BOMs, compliance, contracts, pricing $ Collaborative planning Forecast, inventory, manufacturing visibility Collaborative execution POs, changes, confirmations, ASNs, returns Collaborative finance Invoices, ERS, status, SC finance, payments Ariba Network US$1 trillion spend 2 million trading partners Operating expense Expectations ↑ Digital experience Faster innovation Perfect order Full transparency Global Complex Responsive Efficient Contract manufacturers Direct suppliers Distribution partners 3PLs N-tier suppliers Internet of Things Extended supply chain SAP S4/HANA Digital core ATP MM Demand Supply Control MRP IBP
- 17. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 17Public Direct material sourcing and supply chain collaboration case Run Simple, run live SCALABLE AND REDUCED RISKS Risk management REDUCED CONTRACK LEAKAGE Increased savings REDUCED INVENTORY AND INCREASED VISIBILITY Free cash flow and improved cash-to-cash cycle FASTER ONBOARDING Ease to do business EARLY INSIGHTS INTO BUSINESS Increased transparency and new business Financialvalue LOW HIGH Buyers Suppliers DOCUMENT AUTOMATION Controls and automation DOCUMENT AUTOMATION Increased visibility and process efficiencies Run Simple, run live Competitive advantage $20 million savings for every $1 billion direct spend 25% planning improvement $1-2 million savings and $20 million free cash flow for every $1 billion inventory balance Save $1 - $4 per document 4x improvement in process efficiency REDUCED INVENTORY LEVEL Increased order fill rates and inventory turns Coll. Sourcing Professional Coll. Supply Chain
- 18. Thank you Contact information: Joseph Bacarro Senior Solutions Advisor SAP Procurement and Business Network Solutions SAP Australia M +61 466 518 305 E [email protected] Bhawna Bhatia Senior Value Adviser Network Value Organization SAP India M +91 9987966690 E [email protected] #SAPAribaLive
- 19. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 19Public Please complete session survey Locate session Click Surveys button Select Breakout Session Survey Rate session