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Digital transformation is a priority for procurement, centralization is a critical component of getting it done

Businesses are asking more of procurement, so procurement is asking more of itself and of its technologies. In fact, according to a 2022 Economist survey, 66% of companies intend to embark on digital transformation of their procurement function.

One key component of that transformation is centralization in some form that same study highlighted that 40% of companies are seeing procurement move towards more centralization.

What does all of this transformation and centralization hope to accomplish? Well, as broader economic and regulatory forces are changing, procurement still needs to deliver on key priorities for the business. Truly balanced procurement comes from establishing an operating model that optimizes:

  • Global & Regional Compliance: Adhering to regulatory and procedural requirements in all of the markets where they do business.

  • Speed: End-to-end time from demand to intake of goods and services.

  • Visibility: Ad-hoc visibility of global demands, orders, and supplier contracts.

  • Savings: Use economies of scale to improve terms and decrease prices.

  • Reduced Risk: Pooling risks and effectively executing mitigation strategies across the process

As organizations increasingly move towards centralization, they typically choose one of two models to get there:

  • Either a distributed model, where purchasing organizations are distributed throughout their organization, while also being integrated from a systems, process and standards perspective.

  • Or a unified model where a singular purchasing organization offers services for the entire organization.

Many challenges complicate and slow down the digital transformation

Most organizations run into challenges on this path to transformation and centralization, and the two most common challenges are budgets and technology.

In fact, that same Economist survey we reference earlier found that:

  • 35% of CPOs are facing budget constraints.

  • 31% are afraid of the uncertainty, outdate technology will create issues on their path to improvement.

And those concerns are well-founded. The reality is, disconnected systems make the digital transformation and centralization of procurement increasingly difficult to deliver, creating inefficiency, inaccuracy, and unnecessary complexity.

  • Buyers from different business units may be working with the same suppliers, but with different supplier IDs and different pricing, terms.

  • It’s difficult to ensure contracts are used in every system and with every purchasing organization, so policies, controls, and discounts get applied consistently company-wide.

  • Data are disjointed and inconsistent, constraining your ability to see what you’re spending, when and where.

  • Any centralization of procurement or shared services model requires central category or contract managers. Lead buyers have to jump in and out of different systems as they try to manage spending across the company and get full visibility into demand, orders, and statuses.

Unfortunately, traditional solutions usually cause more problems than they solve. No matter if you’re pursuing a unified or distributed strategy to centralization, you have to consider to rework and reconfigure the procurement processes, within each individual solution, spread across your business to make them consistent:

  • Harmonizing the systems and your master data.

  • Adding new interfaces and middleware to create uniformity.

  • Managing the resulting cost and complexity in keeping the system running and up-to-date.

Or you had to replace your ERP Landscape System by System.

Either, of course, are time-consuming, disruptive, and costly.

SAP S/4HANA for Central procurement

SAP S/4HANA for Central Procurement solves this problem, delivering all the benefits of centralization without all the costs and complexities of change.

So whether you’re looking to centralize procurement through a unified or distributed model, we can help make it happen because:

  • It’s designed for lead category buyers and offers a shared services model to consolidate procurement facts to get visibility across multiple ERPs.

  • And it’s designed to deliver the benefits of a uniform, centralized procurement system, across all buying channels, without actually reworking the individual ERP solutions in your company.

  • Plus, it allows organizations dealing with a lot of mergers, acquisitions and divestitures to plug-in and unplug new organizations and their systems.

  • You can take advantage of digital innovation faster within this central procurement layer

  • And see the benefits of centralization across direct and indirect categories, without the costs and complexity of change.

It's like a remote control for Procurement

Remote Control for Procurement

Large enterprises often have dozens to hundreds of enterprise resource planning (ERP) systems. These systems are not connected, which makes it difficult to access siloed data. Connecting these disparate systems to SAP S/4HANA for Central Procurement, you can deploy SAP S/4HANA for Central Procurement as a cloud solution.

The flexibility offered by SAP S/4HANA for Central Procurement, can help organizations to reduce the complexity of multiple back-end systems and move toward digitalization, while keeping an eye on their budget. It also enables them to continue, using familiar systems, without facing the disruption of migrating to a new technology.

With SAP S/4HANA for Central Procurement, you can bring disparate processes under consistent, centralized control. Now you can take the processes managed in each disconnected system and manage them from this Central Procurement Solution. So while every individual transaction is still processed within each individual back-end system, with each individual business unit, you have central control of everything from requisitioning to analytics. Yet you can still offer each business unit the flexibility to make purchases, when they need it.

  • There’s no risk of slowing down each team or losing local control and if there’s a need for a business unit, to make a purchase within their system, they can do it.

  • And the central team still gets the process data and visibility.

  • You can centrally manage key procurement steps and information, sharing data back and forth and essentially directing each unique process and system, spread across your company, from one central place.

  • And you don’t have to go through the work of harmonizing supplier, material or other procurement related master data for requisitions and purchase orders – your data stays where it is.

SAP Central Procurement is particularly valuable if:

  • You’re running multiple instances of SAP ERP and/or non-SAP ERP instances.

  • You have no procurement visibility across multiple ERP instances.

  • Diverse ERP landscape with different brands, versions, customizations, workflows, and processes.

  • Off-contract spend due to contracts tied to individual ERP instances.

  • Lost savings due to missing out on economies of scale and leveraging procurement across all ERP instances.

  • Limited spend analytics

  • Difficulties integrating new and acquired business units and their backends

The Solution is natively integrated with SAP ERP ECC and SAP S/4HANA, and further SAP Solutions, which is unique in the market. SAP S/4HANA for Central Procurement can also leverage procurement data from non-SAP systems via standard APIs.

Orchestrate core procurement activities from a single, centralized command center

With S/4HANA for Central Procurement, you can see what’s happening across the business, without jumping in and out of multiple systems, or disrupting existing solutions and workflows, you’ve spent years defining and refining. The following scenarios are covered:

Orchestrate procurement activities from a centralized command center

Central requisitioning:

  • Centrally manage requisitions across all connected procurement systems.

  • Deliver a consumer-grade, guided buying experience to end users

  • Guide buyers to preferred suppliers and sustainable options, pre-negotiated rates

  • Drive adoption and boost compliance with end users

  • Reduce cycle times and costs with self-service buying

  • Manage source of supply for individual requisitions

Central Purchasing:

  • Analyse global spend for requisitions and purchase order

  • Centrally manage demand across all connected ERPs

  • Assign sources of supply and create Purchase Orders

  • Aggregate demand for optimized sourcing

  • Increase spend compliance and cost savings through aggregation

Central Contracting:

  • Manage aggregated consumption of items in central contracts

  • Monitor global planned purchasing spend across connected back-end ERP systems

  • Contract consumption analysis of central contracts based on back-end PO release history

  • Track operational requisition metrics like cycle times and touchless rates

Central Sourcing:

  • Aggregate demand requests into central sourcing requests for quotations

  • Cost savings through demand aggregation and spending leverage

  • Shared services enablement

  • Bundle demand from disconnected ERPs into central RFP

  • Award suppliers and distribute purchase orders in disconnected backend ERPs

Central Analytics:

  • Drill in to get an instant, accurate look at operational details

  • More timely decision making

  • Reduce manual efforts to consolidate spend information

  • Monitor health of procurement process for continuous process improvement

Native Integration:

  • SAP Ariba sourcing

  • SAP Ariba Guided Buying

  • SAP Ariba Contracts

  • SAP Business Network for Procurement

  • SAP Commodity Management

Preconfigured standard scenarios:

With SAP S/4 HANA for Central Procurement, you can integrate your SAP S/4HANA system (which acts as a hub system) with other connected systems in your system landscape. SAP S/4HANA, SAP S/4HANA Cloud, or SAP ERP act as connected systems. These following preconfigured integration scenarios, the so called scope items, serve as an enabler and can be deployed fast and easily:

  • Central Requisitioning (1XI)

  • Central Purchase Contracts (2ME)

  • Central Purchasing (2XT)

  • Central Purchasing Analytics (1JI, 2ME, 2XT)

  • Guided Buying for Central Procurement with SAP Ariba Buying (3EN)

  • Central Procurement with Ariba Sourcing (4QN)

  • Contract for Central Procurement with SAP Ariba Contracts (4B0)

  • Central Sourcing (3ZF)

For details: https://me.sap.com/processnavigator


Avoid integration complexity, see company-wide benefits

With SAP S/4HANA for Central Procurement, you can bring consistency, efficiency, visibility and control to procurement across your organization.

It’s like integrating dozens of disconnected ERP solutions without the cost, time, and risk of integrating them.

  • Transactions are still processed in each individual business unit’s ERP solution (global control, local execution).

  • Data doesn’t have to move and you don’t have to create a common data structure – you use what’s already there in each system.

  • Some professional buyers can work in SAP S/4HANA for central procurement, other professional buyers can work in their business unit’s solution and everyday requisitioners can use Guided Buying, and all the data and processes flow automatically.

With SAP S/4HANA for Central Procurement, you avoid all the complexity of integration, and all you see are the benefits.

And, if you’re on a path towards tighter orchestration and integration company-wide, including a broader transformation to the Intelligent Enterprise with SAP S/4HANA, SAP S/4HANA for Central Procurement is an important step.