Duncan Mills Mastering SAP PM 2011

Successful Contract Management With SAP: Ensuring Your Team
Reduces Spend While Increasing Performance… It IS Possible
Duncan Mills, SAP Australia Pty Ltd

Introduction & Overview

The larger the island of knowledge,
the longer the shoreline of wonder.
Ralph W. Sockman

Mastering SAP Plant
Maintenance

Maintenance and Procurement
“Identify cost types will lead to
a …reduction in maintenance
costs while holding equipment
availability steady, and often
improving it.” Michael Huggins,
Australian Journal of Mining, July 2009

WORK ORDER
Internal Labour $
Stocked Spares $
Purchased parts $
Purchased services $

Mastering SAP Plant Reduce number of work orders AND cost per work order
Maintenance

What I’ll cover
• Maintenance and Procurement: High level process
• SAP Solutions for managing procurement
• Strategic Sourcing
• Contract Lifecycle Management (CLM)
• Operational Procurement
• Open Text Invoice Management
• Spend Performance Management and
• Data Enrichment & Classification
• Questions
Mastering SAP Plant
Maintenance

SAP Sourcing and CLM Drive Efficiency, Increased
Savings Opportunities, and a Quick Time to Value

Maintenance
Work Order

Project Systems
WBS (grouping
Indicator)

Mastering SAP Plant
Maintenance Slide 6

SAP Procurement Portfolio
Integrated Solutions Enable the End-to-End Source-to-Pay Process

Spend Contract Operational Invoice
Analytics Sourcing
Management Procurement Management

Supplier Management
SAP Supplier
InfoNet
(OnDemand)
SAP Spend SAP Planned
SAP Sourcing / SAP Contract Lifecycle SAP SRM & SAP SAP Invoice Mgmt
Performance
Sourcing OnDemand Mgmt (OnPremise ERP by OpenText
Management
or Ondemand)
SAP Data Enrichment Supplier Connectivity via SUS, SNC and
& Classification Crossgate
(OnDemand)
Mastering SAP Plant
Maintenance Slide 7

SAP Sourcing Sourcing
Delivers the Strategic Sourcing Process

 Enables the strategic sourcing process across
all categories of spend

 Delivers sourcing strategy and project
management capabilities

 Manages supplier identification, qualification
and on boarding

 Provides extensive RFI, RFQ, RFP and Auction
tools and templates

 Enables effective bid negotiation, evaluation
and awards

 Drives rapid time to value via On- Demand or
Mastering SAP Plant On-Premise Deployment and ERP integration
Maintenance Slide 8
© SAP 2010/ Page 8

Sourcing Strategy Sourcing
Delivers Effective Strategy & Project Management
Capabilities Benefits
Sourcing Strategy
■ Monitor and track all projects, ■ Effective project management
 Monitor and Track All Projects
costs and savings and increased visibility
 Establish Sourcing Process and
■ Establish process and project ■ Enables best practices for
Methodology
governance reduced cycle times
 Drive Process Repeatability and
Shorter Cycle Times ■ Create “blueprint” for sourcing ■ Effective templates enable
methodology better methodology
■ Provide consistent interface
■ Define project strategy,
for managing the end to end
timeline, owners, and
project
collaborators
■ Drive transparency into
■ Configure alerts and
sourcing status and next steps
reminders for key timeline
activities ■ Deliver comprehensive reports
for insight and visibility
Mastering SAP Plant ■ Workbench access to key
Maintenance reports Slide 9

Sourcing
Project Management

Mastering SAP Plant
Maintenance Slide 10

Supplier Qualification Sourcing
Provides Effective Identification & On Boarding
Supplier Qualification
■ Configurable registration ■ Easy to use supplier registration
■ Simple supplier self-
providing key information reduces cycle time
registration and self
maintenance including – business ■ Enables fast supplier
classification, categories identification and selection
■ Effective identification and
supplied, insurance
on boarding ■ Provides effective management
certifications, and
■ Transparent supplier sustainability criteria of supplier information
evaluation ■ Streamlines access to event and
■ Searchable supplier repository
by range of characteristics centralization of information

■ Supplier managed updates ■ Delivers effective supplier
creation process
■ Supplier single point of access
■ Integration ability to initiate
the creation of a supplier in
Mastering SAP Plant ERP

Sourcing
Supplier Registration

Mastering SAP Plant

RFX/Auction Management Sourcing
Provides Extensive Sourcing Tools
RFX/Auction Management
■ Create, select RFI, RFQ, or ■ Streamlines RFx creation and
■ Enables simple to complex
RFIs, RFQs, and RFPs RFP template reduce cycle time
■ Supports Reverse and Forward ■ Extensive libraries inclusive of ■ Enables consistent use and
Auctions schedules, questions, and compliance with best practices
■ Drives robust sourcing process supporting information ■ Drives more effective scoring
best practices ■ Sophisticated multi currency and bid evaluation
bid scoring and weighting ■ Provides ability to manage
■ Support for heavy bidding complex events
volume with multiple suppliers ■ Supports multiple auction
■ Flexibility to create many types to enable wide range of
auction types to support strategies
different strategies ■ Enables insight and
■ Comprehensive bidding transparency to effectively
window to manage auctions manage auctions
■ Full project management
■ Delivers sophisticated sourcing
status reporting event reporting
Mastering SAP Plant
© SAP 2010 / Page 13

Sourcing
RFX Management

Mastering SAP Plant

Negotiate and Award Sourcing
Drives Effective Bid Negotiations & Awards
Negotiate and Award
■ Automated system scoring enabled ■ Provides an effective tool to
■ Enables comprehensive scoring
through complex algorithms streamline scoring
and evaluation
■ Streamlines the negotiate and ■ Team and collaborative scoring ■ Enables team scoring
award process
■ Provides real-time insight and ■ Detailed side-by-side bid comparisons ■ Drives bid comparisons and
transparency on price and non-price factors evaluations
■ Weight scores to establish a total ■ Delivers total and attribute
value score per supplier scoring per supplier bid
■ Real-time Q&A discussions with ■ Supports collaboration across
suppliers team members and suppliers
■ Flexible auction disclosure rules and ■ Delivers maximum auction
automatic extensions enablement and engagement
■ Auction real- time count down clock ■ Enables auction status insight
and updates and transparency from start to
Mastering SAP Plant
Maintenance
© SAP 2010 / Page 22
Slide 22 finish

Sourcing
RFX Management

Mastering SAP Plant


Analytics Sourcing

Supplier Management
SAP Supplier
InfoNet
(OnDemand)
Performance
Management
or Ondemand)
(OnDemand)
Mastering SAP Plant

Contract
SAP Contract Lifecycle Management Management
Supports the Entire Contract Lifecycle

■ Automates the contract creation cycle
from draft to reviews and approvals
■ Includes contract authoring with
clause and template libraries
■ Creates a contract repository with
access-controlled search and reporting
■ Includes standard integration with SAP
ERP-MM for procurement contract
compliance
■ Deep bi-directional integration within
the source to contract process
■ Provides deployment options including
On-Demand and On Premise
Mastering SAP Plant
© SAP 2010 / Page 28

Contract
Contract Creation Management
Streamlines the Contract Creation Process

Contract Creation Capabilities Benefits
■ Contract workspaces include ■ Captures and reports on all key
■ Enable contract creation from draft to
review/approval to execution
configurable header data, item data, information by contract type
contract documents, and other
■ Include the right stakeholders and information ■ Minimizes legal risks
decrease cycle times
■ Contract creation from controlled
■ Provides end-user flexibility
templates based on clause library
■ Customizable content within the
document and provision of clause ■ Leverages a commonly used
choices toolset
■ Allows for internal and
■ Integration with MS-Word for draft external collaboration
generation
■ Eliminates need for emailing
■ Document management with check-
in/out, redlining, version compare ■ Keeps a complete audit trail of
■ Secure document access for third the negotiations process
Mastering SAP Plant
Maintenance parties via portal 29
Slide

Contract
Contract Visibility and Repository Management
Provides Full Contract Portfolio Visibility

Contract Visibility / Repository
■ Single contract repository across the ■ Eliminate disparate databases
■ Centralized contract repository for
organization or tools
standard data collection and reporting
■ Robust free text search across ■ Quickly locate any contract or any
■ Empowers users to pro-actively repository, within contract documents language/phrase in the entire
manage the contract portfolio repository
and clauses
■ Understand critical contract
■ Ability to view and manage
details and process amendments
agreements, change header data or
quickly
create amendments ■ Provide self-service access to
■ Secure access controls on each requisite personnel
contract in the system ■ Dramatically reduce reporting
■ Out of box reports aggregating cycle times
repository data ■ Pro-actively engage in re-sourcing
■ Alerts for expirations or key or re-sale activities
thresholds ■ Easily maintain and track unique
■ Define extra data fields or sets of corporate information
Mastering SAP Plant information to capture and track
© SAP 2010 / Page 30

Contract
Contract Compliance and Execution Management
Drives Improved Contract Compliance

Contract Execution and Capabilities Benefits
Compliance ■ Ability to capture all pricing and ■ Track all critical information
payment terms and other KPIs within about the contract’s
■ Manage all pricing, legal, and
the contract workspace performance
delivery terms
■ Be reminded when audits are
■ Ensure commitments and pricing ■ Included audit area to schedule and required and capture all results
are being met throughout the contract
lifecycle
track results ■ Pro-actively resolve issues on
low-performing agreements
■ Out of box reports to identify low ■ Quickly establish operational
performing contracts agreements to enforce
compliance at time of
■ Standard integration with SAP ERP-
transactions
MM for creation of outline ■ Easily view relevant
agreements and contract execution operational data in the back
end
■ Creation of document references
between CLM and ERP for insight
Mastering SAP Plant into contract usage and accruals

Contract

Contract Lifecycle Management Management

Mastering SAP Plant

Contract


Mastering SAP Plant

Contract

ERP Outline Agreement Management

Mastering SAP Plant

Contract


Mastering SAP Plant


Analytics Sourcing

Supplier Management
SAP Supplier
InfoNet
(OnDemand)
Performance
Management
or Ondemand)
(OnDemand)
Mastering SAP Plant

Operational

Operational Procurement Procurement

Procurement from work order or
project ■ Procurement from the work ■ Quickly locate any contract or any
language/phrase in the entire
■ Centralized contract repository order
repository from the work order
accessed from work order
■ Access all master contracts
■ Select goods or services ■ Understand critical contract
from the work order details and process amendments
■ Work order information can quickly
feed procurement reporting ■ Provide self-service access to
■ Maintenance buyers can see requisite personnel
where the spend is occurring ■ Dramatically reduce reporting
cycle times
■ Pro-actively engage in re-sourcing
or re-sale activities
■ Easily maintain and track unique
corporate information
Mastering SAP Plant
© SAP 2010 / Page 49

Operational

ERP Purchase Requisition Procurement

Mastering SAP Plant

Operational


Mastering SAP Plant

Operational

Progress Claim Entry Procurement

Notification, service entry, variations...

Mastering SAP Plant

Operational

Services Entered Procurement

Mastering SAP Plant

Operational

Purchase Order updated Procurement

Mastering SAP Plant


Analytics Sourcing

Supplier Management
SAP Supplier
InfoNet
(OnDemand)
Performance
Management
or Ondemand)
(OnDemand)
Mastering SAP Plant

Invoice
Management
Invoice Management
CEO CFO
“how can we improve our “I have limited visibility into my
bottom line?” accounts payables related
Purchaser
Financial Analyst “We could lower the cost of goods if
liabilities.”
“Use of cash discounts is we could make systematic use of
cash discounts.”
low, cost of capital is
rising.” Is this organization prepared to:
 Increase process efficiency
Accounts Payables
“We spend more than 50% of our
time responding to calls and emails
 Reduce finance operating
from suppliers requesting state of costs
invoice or complaining about late
payment.”
 Make use of cash discounts
Supplier
Accounting
“Doing business with that
“We cannot say which invoices we have received
company is difficult as they are
across different departments and we have no
unable to tell when they pay
control over the time-to-payment.”
their invoices.”
Mastering SAP Plant

Invoice
Management
Invoice Management
Inbox Invoice Invoice Collaboration & Invoice Payment
(incoming Recognition Verification Monitoring Completion
mail / fax)

Prüfung und
VERIFY AND EXCEPTION
PREPARE TRANSFORM APPROVE PAY
COMPLETE HANDLING
Vervollständigung
Scanning OCR Trigger workflows Comment Post invoices

Archiving UMWANDLUNG
Validation

Automated reconciliation and posting

SAP Archiving by OCR Option for
Open Text* SAP Invoice
Management
SAP Invoice Management ERP (FI/AP)
* or another SAP ArchiveLink-certified repository
Mastering SAP Plant

Invoice
Management
Invoice Management – Duplicate Check

Familiar SAP
Look & Feel

Automated or
Manual Data
Entry
Immediate
Data
Validation

Early &
Automated
Duplicate
Detection

Mastering SAP Plant

Invoice
Management
Invoice Management – Price Discrepancy
One-click Access
to Supporting
Information

Role-Based
Process
Options
Transparent
Best Practices Role-Based
Exception Routing
Handling

Complete
Process
History

Mastering SAP Plant

Invoice
Management
Invoice Management - Analytics
Analyze Using Analyze KPIs
Over 50 Criteria with SAP Your Choice
Graphics of Reporting
Currency

Total Process
Summary

Full Access to One-Click
SAP Functions Access to
Invoice Details
Complete
Overview of All
Processed
Invoices

Mastering SAP Plant
©


Analytics Sourcing

Supplier Management
SAP Supplier
InfoNet
(OnDemand)
Performance
Management
or Ondemand)
(OnDemand)
Mastering SAP Plant

Spend

Spend Performance Management Analytics

Maximize Savings – Minimize Supplier Risk
– Gain full spend visibility
• Automated data capture from SAP and non-SAP
• Data accuracy for faster insights
– Increase spend under management
• Set up performance targets
• Collaborate effectively to act on insights
Data Enrichment & Classification
– Rapidly identify savings opportunities
• Find and act on savings potential ERP
• Pro-actively monitor contract compliance GL
BI
– Reduce supplier risk P-Cards T&E
• Pin-point supplier risks and supply concentration * Note: The Data Enrichment & Classification service is an add-on service separately
priced.

• Find and act on qualified alternate suppliers
Mastering SAP Plant
Maintenance

Integrated Data Management Enables Accurate Spend
Analytics

Spend Visibility
Spend and Supplier Risk Analysis
Over 130 pre-built spend analysis models
Out of the box support for supplier risk analysis
Set and Track Performance Targets with
Spend Advisor
Comprehensive set of Analytics functionality
Briefing Book supports stakeholder collaboration
Government/
Phase 1: Supplier Data Phase 2: Spend Data
Public data Spend Data Validation,
Standardization & Enrichment Classification
3rd Party Enrichment and Classification
Credit Rating Global coverage
3rd Party Risk 1.6T transactions in knowledge base
Rating 100+ external data sources
3rd Party Supplier Financial/Risk data
Legal Rating Global Business Transactional
Compendium Knowledge Diversity/Government watch lists
Newsfeeds Base
Data Integration
SAP extractors (ECC, SRM)
Data Integrator ETL license for non-SAP systems
SAP SRM P-Card/ Non-SAP ERP Support to bring in 3rd party data feeds
T&E Spend data * Note: The Data Standardization and Enrichment service is an add-on service separately priced.
Mastering SAP Plant

Accuracy of Spend Data – Mystery Solved Spend
Analytics

Behind The Scenes!
Traditional SAP Result
Effective Net Invoice Volume in Effective Net Invoice Volume in
Vendor Group ID Partner Vendor
Document Currency Document Currency

Thompson Inc. $189,000 Thompson Inc. $189,000
Thompson
Int. Services $177,400 Thompson $29,700
Germany
Electronics Thompson
Carrier $109,000
Supplies
$26,100
19% Thompson
Total $246,800 Electronics
Thompson Germany $29,700
Int. Services $177,400
International
Hamilton Sundstrand $151,000 Int’l Services $119,200
Services International
Total $296,600 56%
Thompson Supplies $28,100 25% Services
Carrier $109,000

Sikorsky $310,000 Hamilton
$151,000
United Sundstrand
Technologies Sikorsky $310,000
Int’l Services $119,200 Corporation
Pratt & Whitney $262,000
Pratt & Whitney $262,000 Total $832,000

Overall Result $1,375,400 Overall Result $1,375,400

Accelerate Savings
Mastering SAP Plant
Maintenance

Data Enrichment and Classification OnDemand
Solution Overview
• A cloud-based, network application that combines spend data with global content and services
to improve data reliability for strategic sourcing and spend analytics.
Data Collection Enrichment Classification Revision

How can I aggregate all my My supplier identities are How do I know what I’m How can I add my own
spend data in one place and obscured due to poor data really buying? knowledge into the process?
be sure it’s accurate? quality and lack of content!
 Incorporate subject matter
 Manage accuracy and  Increase visibility to both expertise with the
 Increase leverage direct and indirect spend
completeness of company- Revision tool
opportunities with
wide spend data from  Improve understanding of  Apply changes to the
normalized suppliers
multiple sources spend activity with a current cycle and future
 Gather data from SAP and  Improve decision-making consistent structure for cycles for continuous
non-SAP sources with enriched content goods and services improvement
Mastering SAP Plant
Maintenance

Problem – Unreliable Data

1
3
Duplicate Unassigned or
suppliers inconsistent
2 categories
Incomplete
ownerships

Mastering SAP Plant

Solution – Data Enrichment and Classification
OnDemand
Supplier Validation and Enrichment Spend Classification
Historical Average - 53% Reduction Historical Average – 96% Classified
4%9%
29% 8% Not classified
4%
Duplicates Spend Level 1
40% 36%
47% Subsidiaries Transactions Level 2
Unique Suppliers Level 3
52%
13%
58%

Benefits Benefits
Improved Supplier Management Improved Understanding of Spend
Leverage Consistent structure for goods and services
Business insights and compliance (diversity, risk) Visibility to direct and indirect spend

Mastering SAP Plant
Maintenance

Enrichment
• Normalizes the supply base and supplements it with additional information for improved leverage and
decision making.

Standardize Validate Enrich

 Parse data into  Validate supplier identities  Extract “Golden Record”
appropriate columns by matching them against (the best content from the
 Standardize firm names, the Global Business best source)
common words and Compendium  Corporate ownerships
abbreviations  Multi-step match process (legal – 51% owned)
 Cleanse and validate uses various combinations  Diversity indicators
addresses and permutations of  Risk and financial
 Consolidate duplicates names, addresses and indicators (by arrangement)
geographic ranges to  Business information
identify a supplier  Industry information
Mastering SAP Plant
Maintenance  Review exceptions

Classification
• Organizes spend transactions by what was purchased within a goods and services hierarchy to ensure a consistent and complete
understanding of purchasing activity.

Taxonomy Classification Review

DEC enables  Multivariate (statistical)  Review and revise
interchangeable approach uses customer- classifications as needed
taxonomies by using a specific history and the  Filter on specific criteria
central “hub” code that is SAP transaction  Drill by category
cross-referenced to various knowledge  View details
taxonomies  Semantic rules based on  Sort by columns
 ISO 22745 compliant key words and phrases to  Change categories at
 SAP Purchase Code supplement initial various levels of
Dictionary “training” phase aggregation
 UNSPSC  Manual classification to
Mastering SAP Plant
Maintenance  Custom by arrangement add direct knowledge

Competing Methods of Spend Classification
Method Issue
 Not all purchases have valid descriptions
Item Description
“Cataloging”  Assumes repetitive similarity in description
 Forces micro vs. strategic analysis
Accounting Approach  Limited depth
COA Rules
 Frequently misapplied due to budgets
 Accounting tells us why not what
Industry Coding  Not organized for sourcing - Resource
Coding the vendor master based
 Too generalized for in depth sourcing
Mastering SAP Plant
Slide 71
 Assumes a supplier sells one thing
Maintenance

Questions

Mastering SAP Plant
Maintenance

Key Takeaways
‘Cross-Train’ - reducing maintenance costs through
 improving procurement processes

The SAP sourcing and procurement portfolio provides the
 best opportunity to drive increased speed of productivity
across your organization - no matter how diverse

There is an ever-increasing importance of managing all
 aspects of your source-to-pay process to obtain realized
cost savings

 In today’s market, you need to drive incremental, as well as
quick wins through phased implementations and flexible
Mastering SAP Plant
deployment options – on premise, hosted or on-demand

Duncan Mills
Engineering Informatics
duncan.mills@ei-anz.com
+61 410 429 867

With help from:
Chris Brock, SAP Australia
Mastering SAP Plant
Slide 74
Lachlan Eddy, SAP Australia
Maintenance

Duncan Mills Mastering SAP PM 2011

Duncan Mills Mastering SAP PM 2011

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