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Small and medium size companies can simplify their procurement process by making contracts with their suppliers. If you have contracts with your suppliers, the purchasing process can be done automatically. Before you make a contract, it is wise to send and Request for Quotation (RFQ) to selected suppliers and based on the quotations select one or more suppliers and make contracts with them. If you use SAP Business ByDesign, you use a so-called Suite in Box. This means that in SAP Business ByDesign you have “all you need” to run your business including sourcing functionality. So, if you have SAP Business ByDesign, use the sourcing functionality available there, it is out of the box, you need no extra integrations to other systems.
I will in this blog describe and demonstrate the Sourcing functionality readily available in SAP Business ByDesign.
In this blog I will follow Almika Ltd. that is planning to sell beach accessories during the summer season. There are 3 products they plan to sell:
They have identified 3 suppliers and want to have a Quotation from these suppliers and based on Quotations, make a contract with 2 suppliers. To ensure that the purchases are distributed to both supplier, Quota Arrangement will be used.
The process is divided into 3 main phases as indicated in the diagram:
The Sourcing process is covered by Sourcing and Contracting "Work Center" in SAP Business ByDesign. To demonstrate the purchase process, the Supply Planning "Work Center" is used. To make the process more user friendly, add the relevant App’s to My Launchpad as shown below.
When the App “New RFQ” is opened you are guided through the process of making the RFQ. The process starts with adding in general information about the RFQ. This includes:
The next step is to add line Items.
The RFQ can both handle stocked material and requisites (non-stock). For stocked materials, the Material Number must exist in the system and for non-stock a Product Category must be maintained.
On line items you maintain:
The next step is to Add Bidders, the bidders must exist in the system.
When the bidders are added it is possible to Review and Check the RFQ before it is Sent to Bidders in accordance too maintained Output Settings per bidder.
The bid manager will receive mails form the different Bidders with Quotations. These Quotations must be added into the system. In the list Request for Quotations the RFQ must be selected and then select New Quote.
New Quote opens a guided process to first select the Bidder and then add inn relevant information and prices from the Quotation. Attachments can be assigned to the quotation, both on header level and on item level.
When all information is added, check the Quote and Submit it. The Quotation is now saved in the system.
After maintaining all Quotations, select the Compare Quotes button on the RFQ. All Quotes on the RFQ is opened, the Quotes can be Awarded or Declined.
For all awarded Quotations there will automatically be made Purchasing Contracts. These Contracts will be used bye the Supplier Determination Engine during the purchase process.
The Document flow of the RFQ shows all Quotations and Contracts that is a result of the RFQ process.
In this example, two suppliers are awarded contract. This is often done to ensure sourcing capabilities. If several suppliers are awarded it is also important to ensure that all awarded suppliers get part of the business. To handle this SAP Business ByDesign has Quota Arrangements. The Quota Arrangements are maintained on product level and uses a percentage for distribution of quota among contracted suppliers.
In the Purchase Process the Supplier Determination Engine uses the Quota Arrangements to distribute the Purchase Order to the different contracts as shown in the figure below. In this example, Product Planning is used and when Planning Proposals are Released, Purchase Orders are made automatically.
SAP Business ByDesign has a built-in Sourcing Functionality. The sourcing functionality can be used on Contracts and Purchase Orders. The built in Sourcing Functionality has some limitations but is feasible on sourcing processes with limited complexity.
For more complex sourcing process, the SAP Business ByDesign may not be feasible. In these cases, an external system may be used for the Sourcing Process, for example SAP Ariba. When contracts are awarded in the external system, these contracts can be created in SAP Business ByDesign using API’s. The purchasing process will then be performed in SAP Business ByDesign. Using the approach with external system, requires integration and a more complex system landscape but may be feasible for organizations where sourcing is one of the key processes.
I will in this blog describe and demonstrate the Sourcing functionality readily available in SAP Business ByDesign.
Background Story
In this blog I will follow Almika Ltd. that is planning to sell beach accessories during the summer season. There are 3 products they plan to sell:
- Beach Balls
- Rubber Ducks
- Swimming Rings
They have identified 3 suppliers and want to have a Quotation from these suppliers and based on Quotations, make a contract with 2 suppliers. To ensure that the purchases are distributed to both supplier, Quota Arrangement will be used.
The process
The process is divided into 3 main phases as indicated in the diagram:
- Make the RFQ
- Award Contracts
- Purchase Process
Figure 1: The demonstrated out of the box Sourcing process
The Sourcing process is covered by Sourcing and Contracting "Work Center" in SAP Business ByDesign. To demonstrate the purchase process, the Supply Planning "Work Center" is used. To make the process more user friendly, add the relevant App’s to My Launchpad as shown below.
Figure 2: App’s for Sourcing and Contracting
Make the RFQ
When the App “New RFQ” is opened you are guided through the process of making the RFQ. The process starts with adding in general information about the RFQ. This includes:
- RFQ Description
- Deadline
- Currency
- Type of RFQ (Contract or Purchase Order)
- Target Value
- Notes for Bidders
Figure 3: RFQ General Information
The next step is to add line Items.
The RFQ can both handle stocked material and requisites (non-stock). For stocked materials, the Material Number must exist in the system and for non-stock a Product Category must be maintained.
On line items you maintain:
- All Items with Quantity and Values
- Adding Remark for Bidder on Item Level when appropriate
Figure 4: RFQ Items
The next step is to Add Bidders, the bidders must exist in the system.
Figure 5: Supplier assigned as Bidder
Figure 6: RFQ Add Bidders
When the bidders are added it is possible to Review and Check the RFQ before it is Sent to Bidders in accordance too maintained Output Settings per bidder.
Figure 7: RFQ as sent to bidders
Award Contracts
The bid manager will receive mails form the different Bidders with Quotations. These Quotations must be added into the system. In the list Request for Quotations the RFQ must be selected and then select New Quote.
Figure 8: Make New Quote
New Quote opens a guided process to first select the Bidder and then add inn relevant information and prices from the Quotation. Attachments can be assigned to the quotation, both on header level and on item level.
Figure 9: Select Bidder and add in prices
When all information is added, check the Quote and Submit it. The Quotation is now saved in the system.
After maintaining all Quotations, select the Compare Quotes button on the RFQ. All Quotes on the RFQ is opened, the Quotes can be Awarded or Declined.
Figure 10: Comparing and awarding Quotes
For all awarded Quotations there will automatically be made Purchasing Contracts. These Contracts will be used bye the Supplier Determination Engine during the purchase process.
The Document flow of the RFQ shows all Quotations and Contracts that is a result of the RFQ process.
Figure 11: Documents in ByD related to RFQ process
Quota Arrangements
In this example, two suppliers are awarded contract. This is often done to ensure sourcing capabilities. If several suppliers are awarded it is also important to ensure that all awarded suppliers get part of the business. To handle this SAP Business ByDesign has Quota Arrangements. The Quota Arrangements are maintained on product level and uses a percentage for distribution of quota among contracted suppliers.
Figure 12: Quota Arrangements
Purchase Process
In the Purchase Process the Supplier Determination Engine uses the Quota Arrangements to distribute the Purchase Order to the different contracts as shown in the figure below. In this example, Product Planning is used and when Planning Proposals are Released, Purchase Orders are made automatically.
Figure 13: Automatic Purchase Orders to different suppliers based on Quota Arrangement
Conclusion
SAP Business ByDesign has a built-in Sourcing Functionality. The sourcing functionality can be used on Contracts and Purchase Orders. The built in Sourcing Functionality has some limitations but is feasible on sourcing processes with limited complexity.
For more complex sourcing process, the SAP Business ByDesign may not be feasible. In these cases, an external system may be used for the Sourcing Process, for example SAP Ariba. When contracts are awarded in the external system, these contracts can be created in SAP Business ByDesign using API’s. The purchasing process will then be performed in SAP Business ByDesign. Using the approach with external system, requires integration and a more complex system landscape but may be feasible for organizations where sourcing is one of the key processes.
