Time and again Steven Freemantle encounters procurement managers who feel that their SAP systems hinder, rather than aid, the satisfaction of their organisations’ purchasing needs. This definitely need not be the case. There is an urgent requisite for this crucial supply chain function to go back-to-basics. Instead of employing more people or adding new functionality to their SAP suite, procurement managers need to learn how to exploit the standard SAP functionality their companies bought when SAP was originally implemented.
In this month’s SmartProcurement, Freemantle, of SweetThorn Thought Leadership, discusses the five leading practices that procurement managers should employ to make use of SAP toolsets that have been around since at least the 1990s.
1. Clean house
It seldom comes as a surprise to most procurement managers and executives that their buyers wrestle with overdue purchase orders and purchase requisitions. What is often surprising though, is the magnitude of this challenge. SAP has a standard set of housekeeping tools that equips buyers and managers to find the exact number of overdue purchase orders as well as the oldest one. Very often the oldest purchase order dates back to the SAP go-live date!
For many procurement professionals using SAP, the broader consequences of overdue purchase orders (other than customer service issues) are often misunderstood. The most significant consequence is that SAP’s ability to proactively prompt and alert buyers to potential inventory shortages and missed customer requirements is entirely dependent on accurate dates. This is a very basic premise, yet poor housekeeping inside SAP remains a significant issue.
2. Stop working off of Excel lists
In an attempt to manage these housekeeping challenges, expeditors and buyers work off lists of overdue purchase orders and requisitions that have been downloaded into Excel. This practice is extremely inefficient and encourages silo-based thinking. It is not uncommon for run-of-the-mill procurement activities to also be executed in this way.
By using Excel lists, and not SAP’s standard buyer dashboards and reports, procurement happens in an isolated vacuum, failing to take into account the potential effects on the rest of the supply chain. This practice fosters a culture where buyers focus on the number of purchase order lines they can churn out in any given day, rather than a practice of professional buying that exactly balances demand and supply by avoiding customer service issues and unnecessary purchases. Buyers must learn to work inside SAP using their dashboards to validate their buying decisions in accordance with the demand they see inside SAP.
Buyers must be able to see the full impact of their day-to-day activities. They will not see this unless they are working inside SAP, using SAP’s standard buyer dashboards.
3. Learn to manage by exception
SAP has an incredibly powerful set of supply chain exception management tools. These were cleverly and specifically built to allow buyers, planners and inventory controllers to manage only stock where something is going to, or has already gone wrong – instead of managing every single material. Buyers and their managers need to understand how to access these exception monitors, interpret the messages that SAP presents and do away with the exception, thereby ensuring that their buying has delivered the intended result.
Very simply, these toolsets will help the procurement community to proactively keep demand and supply in balance.
It is worth noting that if you have housekeeping issues and prefer working off of Excel lists these exception monitoring tools will not be very helpful.
4. Get your supplier lead times under control
It is not unusual for exception messages in SAP’s monitors to seem absolutely insurmountable. Aside from housekeeping, another common cause for exception message to pile up is inaccurate lead times (and other poor quality MRP master data). By addressing these causes, supply chain exception monitoring will become less daunting.
Once again, there are standard tools inside SAP that will assist buyers to manage supplier lead times. These tools must be used first to get lead times accurate inside SAP. The next step is to ensure that lead times are strictly adhered to. With this in place the focus must shift to reducing lead times. A portion of this lead time reduction is achieved through automation.
The remarkable benefits of automated procurement cannot be achieved without the four previously stated practices being well entrenched as part of procurement’s daily routine. Automating with poor house keeping; buyers working outside of SAP; no exception management and inaccurate supplier lead times will only mean that the undesirable outcomes will happen much faster. Address these four challenges and automation becomes a valuable reality.
Consideration must be given to another basic and somewhat overlooked fact: not all procurement activity can be automated. Consider which buying activities can be fully automated and which cannot. There are also varying levels of automation that can be applied through SAP – ‘assisted’ (SAP creates a purchase requisition); ‘trusted’ (SAP creates a purchase order for release); and ‘full’ (SAP transmits the purchase order directly to a supplier). In keeping with the theme of this article, leading procurement practice dictates that you use your standard SAP reports to validate these automation decisions.
Getting ahead and staying ahead by following these five practices is not an SAP technology issue, it is a people issue. The departure point must be to get a grip on the magnitude of these challenges, using your existing SAP toolsets. Armed with this information, procurement managers and executives must dramatically alter their organisation’s SAP culture through a process of training, education and change management.This change must be brought about using your data, your people, your processes and your existing SAP tools and reports. You have paid for the tools; it is time to start using them!
For more information on streamlining SAP in your organisation, please contact Steven Freemantle of SweetThorn Thought Leadership, on firstname.lastname@example.org.