Status
Owner	RUSNAK-ext, Peter
Stakeholders	MCCARTNEY-ext, Stephen ANIDO, Marcela EL YAOUTI, Abide Guyonnaud, Gaëlle

Issue

The purpose of this Key Decision Document (KDD) is to elaborate on the solution recommended to manage the indirect procurement process, on the new S/4HANA system.

Recommendation

"Guided Buying with SAP Ariba Buying" is recommended as the indirect procurement process for Syensqo. This recommendation is based on several key factors, including a high degree of integration with S/4HANA, simplified and intuitive user interface for procurement tasks while ensuring policy compliance for everyday purchases, and the strategic alignment within the SAP ecosystem. It also permits catalog items to be called from Plant Maintenance Work Orders and for indirect spend for both PM and normal items to go through the same approval process.

Background & Context

Currently, all indirect purchases for both goods and services are handled in SAP SRM7 that works with both ERP systems. EZBuy platform that is built on top of SRM7 offers an “Amazon like” experience and serves as the gateway to Ariba Catalogs. Here, shopping carts for non-stock catalog items are assembled and then sent back to SRM7 for the approval and ordering processes to proceed.

Ariba Catalogs are utilized by 14 countries, encompassing a total of 200 internal non-stock material catalogs and 140 punchout catalogs.

During the fourth quarter of 2023, more than 90k Purchase Order (PO) line items were created, with 37% of these being catalog line items.

Below is the architecture of the existing procurement solution. EZBuy is just a frontend, the whole business logic and data are in SRM7.

SyWay Project > KDD041 - Indirect Procurement using S/4HANA > SRM_Architecture.jpg

Plant Maintenance Integration - Catalogs

Currently there are two ways for users to create Purchase Requisitions for non-stock items (indirect materials, Services) for Plant Maintenance work orders:

Use SRM7 and utilise the above catalogs to create pre-sourced item quickly and easily, but that only creates a financial charge to the WO
Manually create the items in the Plant Maintenance Work Order and PM auto-creates the PR in SAP, but has to be sourced

Having two processes means that the investment made in 340+ catalogs can be used by PM users, but it leads to confusion and impacts on PM reports.

Requisitions created automatically by PM Work Orders are sent to SRM7 for approval by a customisation so that all approvals follow the same process.

Assumptions

Syensqo's future ERP system will be based on S/4HANA Cloud Private Edition. This is also subject to a separate KDD Technical Infra - Private vs Public Cloud vs On-Premise

Constraints

The SAP SRM product is effectively deprecated; it will exit mainstream maintenance in 2027 and SAP have been for some time migrating its functionality into Ariba
S/4 HANA and SAP SRM cannot be installed on the same system.
The procurement solution of S/4HANA is not a successor of SAP SRM and it has limited capabilities compared to SAP SRM.
"Procure to Pay with SAP Ariba Buying and Invoicing" process is deprecated and will not be enhanced in upcoming releases. SAP recommends to use "Guided Buying Capability with SAP Ariba Buying" instead.
Plant Maintenance Work Orders also generate Purchase Requisitions for indirect items. These will need to be approved by the same mechanism as 'normal' indirect spend.

Impacts

Implementing Guided Buying with SAP Ariba Buying can significantly enhance the procurement process, offering benefits in terms of user experience, compliance, efficiency, and cost savings. However, the transition requires careful planning considering factors such as change management, system integration, and user training to fully realize these benefits

Change Management: Implementing a new system requires effective change management to ensure user adoption and to realize the full benefits of the platform.
Integration: Integration of Guided Buying with S/4HANA cloud or other systems needs to be carefully planned to ensure seamless data flow and process continuity.
Training and Support: While Guided Buying is designed to be intuitive, providing adequate training and support is crucial to help users navigate the new system and processes effectively.

Business Rules

Currently, no specific business rules have been identified. Further updates may be determined during the detailed design phase.

Options considered

Indirect procurement, which involves the acquisition of goods and services that are not directly incorporated into a product being manufactured, can be managed through various solutions, each with its own set of features and capabilities.

Option A: SAP SRM 7 (As-Is)

SAP SRM 7 is a legacy procurement solution designed to optimize the procurement process, focusing on supplier collaboration and efficiency. This is what Syensqo uses as of 2024 with ECC.

However, the SRM product is reaching the end of its lifecycle, with product support by SAP ending in 2027. Furthermore it is not natively included or specifically designed to run as part of the S/4HANA suite. Its Shopping Cart functionality was replaced with the S/4HANA Self-Service Procurement functionality based on the Purchase Requisition document. This is thus not a feasible option for the future design.

Option B: SAP S/4HANA Materials Management (MM)

SAP S/4HANA MM is part of the larger SAP S/4HANA Enterprise Resource Planning (ERP) suite, offering comprehensive materials management and procurement functionalities. It is designed for businesses looking for an integrated solution that covers all aspects of their operations, including procurement.

Integration: One of the key strengths of S/4HANA MM is its deep integration with other modules within the S/4HANA suite, such as Finance (FI), Controlling (CO), Sales and Distribution (SD), and more. This integration facilitates seamless data flow across departments, enabling more efficient operations and decision-making.
Functionality: S/4HANA MM provides a wide range of procurement functionalities, including purchase requisition, purchase order management, vendor management, inventory management, and invoice verification. It supports both direct and indirect procurement processes.
Analytics: Embedded analytics in S/4HANA MM offer real-time insights into procurement activities, helping organizations to monitor performance, identify bottlenecks, and optimize their procurement processes.
Flexibility: While primarily designed for on-premise deployment, S/4HANA also offers cloud and hybrid options, providing flexibility to businesses in how they deploy and manage their ERP systems.

Option C: Procure to Pay with SAP Ariba Buying

SAP Ariba Buying is a comprehensive cloud-based procurement solution designed to manage the end-to-end procure-to-pay process. It offers a wide range of functionalities to automate and optimize procurement tasks. This process is represented by SAP-standard scope item 1ZM .

Procure to Pay with SAP Ariba Buying combines the simple and elegant shopping experience and the user guidance of Ariba Buying and Invoicing with integrated business processes and data transparency of SAP S/4HANA Cloud as the digital core.

Comprehensive Procurement Solution: It covers all aspects of the procurement process, from requisition to payment, including supplier management, contract management, and spend analysis.
Customization and Control: Offers extensive customization options to tailor the procurement process to the specific needs of the organization. This includes custom workflows, approval rules, and integration capabilities with ERP systems like SAP S/4HANA.
Collaboration and Supplier Management: Facilitates direct collaboration with suppliers through the Ariba Network, enabling efficient communication, negotiation, and performance tracking.
Spend Visibility and Control: Provides detailed insights into procurement spending, helping organizations to identify savings opportunities and enforce compliance with procurement policies.

The following picture illustrates the process. However, although this process is the most-frequently used by existing Ariba customers, the process became deprecated by SAP in 2020, and will not be enhanced in upcoming releases. It is thus also not a good option for the future.

SyWay Project > KDD041 - Indirect Procurement using S/4HANA > loio0870592bd4cd4173bfad867b6c7b8da6_LowRes.png

Option D: Guided Buying with SAP Ariba Buying

Guided Buying is an add-on capability to SAP Ariba Buying that focuses on enhancing the user experience by providing a simplified and intuitive interface for procurement tasks. It is designed to help users make the right purchasing decisions in compliance with company policies. It combines the guidance for requisitioners provided by guided buying with the proven procurement processes provided by SAP S/4HANA Cloud. This process is represented by SAP-standard scope item 2NV .

User Experience: Guided Buying stands out for its user-friendly interface, designed to provide a consumer-like shopping experience. It guides users to the right items and preferred suppliers, making it easier for employees to purchase goods and services in compliance with company policies.
Policy Compliance: Guided Buying helps enforce procurement policies by guiding users to approved suppliers and negotiated contracts, thereby ensuring compliance and leveraging pre-negotiated savings.
Spot Buy Capability: Includes features like Spot Buy for handling non-sourced or emergency purchases by accessing a curated catalog of suppliers for immediate needs.
Integration: While Ariba can be used as a standalone procurement solution, it also offers integration capabilities with SAP S/4HANA and other ERP systems, ensuring data consistency and process efficiency across platforms.
Supplier Network: Ariba's extensive supplier network is a significant advantage, offering access to a wide range of suppliers and enabling competitive sourcing, supplier discovery, and collaboration.
Plant Maintenance Integration: Guided buying can be integrated with the PM module and allow catalog items to be called from the Work Order.
Approvals in S/4 HANA: This process allows approvals in S/4 HANA for indirect spend allowing the same approval setup to cover normal indirect spend and Purchase Requisitions from Plant Maintenance Work Orders.

In this scenario, employees create requests for catalog items, existing materials, planned lean services, limit items for material and service, or free-text items by adding them to a request in Guided Buying. Then the request is replicated to SAP S/4HANA Cloud, where a purchase requisition is created and approved. In the request in Guided Buying, employees can see the document numbers of the follow-on documents that were created in SAP S/4HANA Cloud.

SyWay Project > KDD041 - Indirect Procurement using S/4HANA > image-2024-7-26_11-28-36.png

Evaluation

For organisations running SAP S/4HANA Cloud, Private Edition, the recommended indirect procurement process is Guided Buying with SAP Ariba Buying that combines the guidance for requisitioners provided by guided buying with the proven procurement processes provided by SAP S/4HANA Cloud . It offers numerous benefits to the indirect procurement process, including improved user experience, spot buy support and allows procurement organisations to scale self-service procurement across spend categories while enforcing compliance and potential cost savings. In addition, Guided Buying can be integrated with PM and be called directly from the Work Order, allowing catalog items to be fully integrated with the Work Order and resulting in only one single standard process.

This table provides a snapshot of the key advantages and disadvantages associated with each procurement solution.

	Option A: SRM7	Option B: S/4HANA MM	Option C: P2P with Ariba Buying	Option D: Guided Buying with S/4HANA
Pro	Comprehensive P2P functionalities Strong supplier collaboration Centralized procurement control High degree of customization	Seamless integration with S/4HANA modules Real-time analytics Flexible deployment options	Scalable cloud-based solution Comprehensive P2P functionalities Collaboration with suppliers Spot Buy capabilities	User-friendly interface Enhances policy compliance Comprehensive P2P functionalities Spot Buy capabilities Tactical Sourcing capabilities Seamless integration with S/4HANA Integrates with PM module Allows Approvals on S/4 HANA
Con	Less intuitive user interface Not natively supported by S/4HANA Nearing end of life in 2027	Complex system with steep learning curve Significant implementation and maintenance costs Requires effort for customization	Learning curve for new users Ongoing subscription costs Deprecated by SAP since 2020. Does not allow Approvals on S/4HANA	Limited customization for complex processes Ongoing subscription costs

Option A "SRM7" is not natively supported by S/4HANA and since SRM7 is also nearing end of lifecycle it is not recommended as a long term solution.

Option B "S/4HANA MM" brings deep integration with other S/4HANA modules, however lacks advanced user interface and guided buying capabilities and policy compliance controls. The procurement solution of S/4HANA is not a successor of SAP SRM7 and it has limited capabilities compared to SAP SRM7.

Option C "P2P with SAP Ariba Buying" has been deprecated and will not be enhanced in upcoming releases and therefore it is not recommended as a long term solution.

Option D "Guided Buying with S/4HANA" combines the advantages of option B and option C and adds additional capabilities that focus on simplifying the buying process and improving compliance with procurement policies. It also natively integrates with S/4HANA and SAP Business Network, as shown below.