Supplier Evaluation in S4 HANA

[Meka_Maduvandi_K]

Supplier Evaluation in S4 HANA - Introduction

Supplier evaluation is the process of assessing a supplier's ability to meet a business's needs through qualitative and quantitative assessments. Based on the feedback gathered through questionnaires, a scorecard is obtained for each supplier evaluated. The scorecard helps us to assess a supplier's strengths and shortcomings and to initiate measures for improvement. Scorecards also enable you to easily compare suppliers within a peer group.

Questionnaires are usually filled out by stakeholders in the procurement process. By taking part in an evaluation, these stakeholders act as appraisers.

Process Flow Diagram:

Business Roles:

Who is Category Manager?

A "category manager" in supplier evaluation is a procurement professional responsible for overseeing the evaluation process for a specific category of goods or services a company buys.

Role: /SRMSMC/CATEGORY_MANAGER. In the personalization object of the role, SLC: PFCG Role Attributes (/SRMSMC/PFCG_ROLE_ATTRIBUTES) the Category Manager role checkbox is ticked.

In SAP S4 HANA Supplier Evaluation, the category manager is responsible for the following:

Managing Purchasing Categories

• Create, change, and deactivate purchasing categories
• Assign suppliers, internal team members, and material groups to a purchasing category

Evaluating Suppliers

• Create and Change evaluation templates
• Trigger evaluations to appraisers
• Review evaluation responses and scorecards

Who is Questionnaire Manager?

In supplier evaluation, a "questionnaire manager" is the individual responsible for creating, maintaining, and managing the questionnaires used to assess potential suppliers; They select the relevant questions and sections and assigning weightages to different criteria within the questionnaire, ensuring a comprehensive evaluation is conducted. 

Role: /SRMSMC/QUESTIONNAIRE_MANAGER. In the personalization object of the role, SLC: PFCG Role Attributes (/SRMSMC/PFCG_ROLE_ATTRIBUTES) the Questionnaire Manager role checkbox is ticked.

In SAP S4 HANA Supplier Evaluation, the questionnaire manager is responsible for the following:

Managing Questionnaires

• Create questions and sections in the question library.
• Create questionnaires along with weightage criteria for collecting specific information, such as information about product quality or delivery reliability.
• Organizes the questionnaires in such a way that they can easily be reused within the supplier evaluation process.
• Assigning the purchasing categories for which questionnaires are relevant.

Who is Appraiser?

In supplier evaluation, an "appraiser" is an individual within a company who is responsible for assessing and rating a supplier's performance based on established criteria.

Role: /SRMSMC/EVALUATION_APPRAISER. In the personalization object of the role, SLC: PFCG Role Attributes (/SRMSMC/PFCG_ROLE_ATTRIBUTES) the Appraiser role checkbox is ticked.

In SAP S4 HANA Supplier Evaluation, the appraiser is responsible for the following:

Evaluating Suppliers

• Receive e-mails requesting them to fill out evaluation questionnaires
• Fill out questionnaires and return them to Category Managers

Steps to evaluate suppliers in S4 HANA

1. Manage Purchasing Categories

"Purchasing categories" in supplier evaluation refers to the classification of goods and services a company buys from different suppliers, grouping similar items together to better assess and manage supplier performance based on specific product or service categories, like "office supplies," "IT hardware," or "raw materials," allowing for a more targeted evaluation process when reviewing each supplier within that category

Open Manage Purchasing Categories App. Customizing Settings is as follows:

SPRO -> Material Management -> Purchasing-> Supplier Evaluation-> Supplier Evaluation by Purchasing category -> Switch to Supplier Evaluation by Purchasing Category -> Check the box.

1.1 Enter the General information (Name, Person Responsible) of Purchasing Category.

1.2 Enter the Suppliers whom should be evaluated under this Purchasing Category.

1.3 Enter the Employees (Internal Team) who are responsible for this Purchasing Category and the suppliers under the category.

1.4 Add the attachments if necessary.

1.5 Enter the Material Groups under the Purchasing Category (optional).

1. Supplier Evaluation Weighting and Scoring

"Supplier evaluation weighting and scoring" refers to a method in supplier evaluation where different criteria used to assess a supplier are assigned weights based on their relative importance to the company, allowing for a more nuanced evaluation by prioritizing certain aspects like questionnaire, quality, price, or delivery time when calculating an overall score for each supplier.

Open Supplier Evaluation Weighting and Scoring App. Customizing Settings is as follows:

SPRO -> Material Management -> Purchasing-> Supplier Evaluation-> Supplier Evaluation by Purchasing category->Determine Criterion-> Select one of 6 Criterion (Time, Quality Notification, Quantity, Questionnaire, Inspection Lot, Price) ->Maintain Weightage and Active Check Box

SPRO -> Material Management -> Purchasing-> Supplier Evaluation-> Supplier Evaluation by Purchasing category->Determine Criterion Scores->Maintain the score for variance %

2.1 If you would like to set specific weighting for each purchasing category, you can use this app. Otherwise settings can be done in SPRO as given above will suffice.

2.2 Select the criterion and click on + icon.

2.3 Enter the Purchasing Category and Weighting %

2.4 Enter the Variance % and the Scoring for a particular Purchasing Category.

1. Manage Questions

Questions and sections are used in questionnaires that you use in the supplier qualification and supplier evaluation processes.

Open Manage Questions App. Customizing Settings is as follows:

SPRO -> Material Management -> Purchasing-> Supplier Evaluation-> Basic Settings for Supplier Evaluation-> Create Question Library for Supplier Evaluation-> Maintain EN and click execute.

SPRO -> Material Management -> Purchasing-> Supplier Evaluation->Number Ranges for Supplier Evaluation->Define Number Ranges for Questions

SPRO -> Material Management -> Purchasing-> Supplier Evaluation->Number Ranges for Supplier Evaluation->Define Number Ranges for Sections

SPRO -> Material Management -> Purchasing-> Supplier Evaluation->Number Ranges for Supplier Evaluation->Define Number Ranges for Question and Section groups

3.1. Enter the Question Type (Yes / No, Multiple or Single Answer, Free Text), Question Name, Question Text and Explanation etc. You can upload any attachments if required.

3.2 Enable Attachments, Comments from Appraisers, Internal Note and save the question.

3.3 Similarly, enter Section Name, Section Title, Explanation, Internal Note etc.

1. Manage Evaluation Questionnaires

Manage Evaluation Questionnaires App helps us to manage the repository of all questionnaires available for usage in the evaluation process. We can organize questionnaires depending on the information we want to gather, and we can create specific questionnaires.

• Questionnaire 1 is about product quality: To which extent do suppliers meet your quality expectations?
• Questionnaire 2 is about service attitude: What kind of experience have appraisers within your company gained with suppliers when they needed support?

Open Manage Evaluation Questionnaires App. Customizing Settings is as follows:

SPRO -> Material Management -> Purchasing-> Supplier Evaluation->Number Ranges for Supplier Evaluation->Define Number Ranges for Evaluation Questionnaires

4.1 Enter the External Questionnaire Name. (name visible to appraisers)

4.2 Enter the Internal Questionnaire Name, Person Responsible. Purchasing Category.

4.3 Add the Section and Question from the previous step. Maintain the Target and Minimum Score for the Questionnaire and Individual Section/ Questions. You can also make a question as mandatory, disqualifying etc.

4.4 Once questionnaire is saved, set the status to released.

1. Manage Evaluation Templates

In the group based  evaluation templates are set up for peer groups of suppliers within particular purchasing categories and include the questionnaires relevant to identify their strengths and shortcomings. Therefore, supplier peer groups as well as the appropriate appraisers are assigned to evaluation templates in the group-based process.

Open Manage Evaluation Templates App. Customizing Settings is as follows:

SPRO -> Material Management -> Purchasing-> Supplier Evaluation->Number Ranges for Supplier Evaluation->Define Number Ranges for Supplier Evaluation Templates

SPRO -> Material Management -> Purchasing-> Supplier Evaluation->Number Ranges for Supplier Evaluation->Define Number Ranges for Supplier Evaluation Requests

5.1 Enter the Basic Date such as Evaluation Template Name, Deadline for Response (in Days), Internal Note, Purchasing Category to whom the evaluation is launched, Person Responsible etc.

5.2 Enter single or multiple Appraisers who are going to be evaluating / scoring the suppliers. Note: The appraiser should have a SAP user ID that has a Business Partner. Refer to the SAP resource how to do the BP synchronization. Creating Approvers | SAP Help Portal

5.3 Enter the Suppliers who will be evaluated once the template is launched. Usually, supplier list from Purchasing Category will be adopted her automatically.

5.4 Enter single or multiple questionnaires that should be launched to appraisers for evaluation. Similarly, enter the target and minimum score for the template. Weightage can be set for the questionnaires individually.

5.5 Here, you can edit the assignment of appraisers to suppliers and assignment of questionnaires to suppliers.

5.6 Enter the Evaluation Template Name and the text to be added in the Appraiser's Email Invitation.

5.7 Once the template is saved, set the status to released and click Start Group Based Evaluation to launch the template to appraisers. The email sent to appraisers from SOST is given for your reference.

1. Evaluate Suppliers

In supplier evaluation, "evaluation responses" in evaluate suppliers app refers to the answers or information provided by appraisers when completing a supplier evaluation questionnaire or form in response to the assessment criteria set by the company. 

Open Evaluate Suppliers App. Customizing Settings is as follows:

SPRO -> Material Management -> Purchasing-> Supplier Evaluation->Number Ranges for Supplier Evaluation->Define Number Ranges for Evaluation Responses

SPRO -> Material Management -> Purchasing-> Supplier Evaluation->Number Ranges for Supplier Evaluation->Define Number Ranges for Evaluation Scorecards

6.1 The appraiser has to login the app. Here the appraiser can see the introduction for questionnaire, deadline for response, number of questions answered etc.

6.2 The appraiser can answer the questions and upload attachment if necessary. They save their response as draft or submit their responses. The status of the evaluation response can be new (yet to respond by appraiser) or submitted (submitted by appraiser).

1. Monitor Responses

Monitor responses" in supplier evaluation refers to the ongoing process of actively tracking and reviewing a supplier's performance against established key performance indicators (KPIs) over time with the help of appraiser's response to the supplier evaluation questionnaire.

7.1 This application helps the category manager to review the responses from appraisers. The status can be Pending for Reply (appraiser is yet to evaluate the supplier) or Returned (appraiser has completed the supplier evaluation)

7.2 The overall score can be seen and the number of questions answered can also be seen. Individual responses to each section and questions can also be viewed by Category Manager through this app.

Based on step 2's scoring and weighting criteria, SAP also offers standard analytical apps to evaluate the supplier based on Price, Quantity, Time etc.

• Supplier Evaluation by Price - With the Supplier Evaluation by Price app, you can determine the score of a given supplier in an organization based on the variance in the price of ordered items and invoiced.
• Supplier Evaluation by Quantity - With the Supplier Evaluation by Quantity app, you can determine the quantity variance, which is based on the variance between the ordered quantity and the delivered quantity of items.
• Supplier Evaluation by Time - You can use this app to determine the score of a given supplier in an organization based on the difference in time between the ordered date of items and delivered date of items.

1. Display Scorecards

Evaluation scorecards show the overall result of a supplier evaluation for one supplier. One scorecard exists for each supplier and evaluation request.

1. Managing Tasks and Activities

This app helps buyers to collaborate with colleagues from their purchasing team or from other departments on supplier-related activities. As a part of supplier evaluation activity, a buyer might be requested to complete parent activity and sub tasks such as site visitation, inspect the production facility, check the general feedback in the market about the supplier etc. Such activities can be tracked and monitored via these applications.

Open the Manage Procurement Related Activities App. Customizing Settings is as follows:

SPRO -> Material Management -> Purchasing-> Activity Management ->Number Ranges for Activities

SPRO -> Material Management -> Purchasing-> Activity Management ->Number Ranges for Tasks

SPRO -> Material Management -> Purchasing-> Activity Management ->Define Activity Types-> Enter Activity Type and Description

9.1 The Activity Manager is given access to this application. Enter the Basic Data for activities such Activity Name, Activity Type (from SPRO settings above), Purchasing Category, Person Responsible, Duration, Priority, Status, Activity Description etc.

9.2 Enter the supplier list for whom the activity or task has to be completed as part of supplier evaluation process. Similarly, enter the buyer/employee who is responsible for completing the parent activity and sub tasks.

9.3 Enter attachments if any and enter the sub tasks to be created under the parent activity.

9.4 Once the task is saved, set the status as submit and send.

9.5 The Activity Manager can view and monitor the status of the activities and tasks via this app.

9.6 The Activity/Task Participant can update the progress of their tasks and submit the proof via the Process Procurement Related Tasks App.

9.7 The Activity/Task Participant can view the list of activities and tasks assigned to them along with the status.

9.8 Here the Activity/Task Participant can enter the message to the purchasing team, update the attachment proof and save the task. Once the task is saved, the task can be submitted.

9.9 The Activity/Task Participant can also view the status of the tasks via the Manage Procurement Related Activities App.

9.10 The emails will sent to Activity/Task Participant and Activity Manager.

Activity Manager Role: /SRMSMC/ACTIVITY_MANAGER

An Activity Manager in Supplier and Category Management can do the following:

• Create and change activities, and indicate which suppliers are affected by the activities
• Create tasks for employees and define a due date for the tasks
• Request clarification for tasks
• Set the status of tasks to Completed

Activity/Task Participant Role: /SRMSMC/ACTIVITY_PARTICIPANT

An Activity Participant in Supplier and Category Management can do the following:

• Work on tasks by entering text into the Communication field
• Depending on the progress made, save the task or submit the task.

1. Supplier Classification

"Supplier classification" in supplier evaluation refers to the process of categorizing suppliers based on factors like their strategic importance, performance, risk level, and spend volume, allowing a company to prioritize and manage relationships with different supplier groups effectively.

10.1 Open the Display Suppliers Procurement App. Enter the Supplier Number.

10.2 Here, you can see the Activities and Evaluation History for the supplier.

10.3 Under the Classification Tab in the app, the Buyer can also maintain the Strategic Importance, ABC status of the supplier, Spend Volume etc. The buyer can also rate supplier on the basis of Risk, Labour Policy, Social and Environmental Responsibility for a specific duration.