How Intelligent Spend Management enables procurement to optimize resources and increase the bottom line
The challenges of the modern procurement department
According to SAP’s Benchmarking Program, 52% of the procurement organization’s time is spent on transactional activities. Competition, demanding customers, and a complex value chain have forced organizations to become more aggressive in addressing their operations which directly affects purchasing teams across the world. The procurement network has already undergone tremendous strain in attempting to reduce costs, ensure on-time delivery, and provide quality supplies by relying increasingly more on data analytics to improve efficiency, build a stronger bottom line, and enable enterprise transformation and innovation through digital tools.
If traditionally the procurement department has always had an important role in improving efficiency in business operations and enterprise transformation while delivering an optimal stakeholder satisfaction, nowadays, procurement specialists are focusing on value creation and not just savings, shifting the paradigm of the role.
The solution to reaching these new goals and ambitions is incorporating advanced technologies such as the Intelligent Spend Management solution that helps organizations manage and optimize costs related to indirect and direct materials, travel expenses, and external workforce. By centralizing costs, finance and procurement leaders across the organization get total control of each spend category and are able to quickly identify misallocated funds.
A solution like SAP S/4HANA that incorporates intelligent spend management capabilities can bring company-wide spending data into a single, real-time view that will bring the following benefits to the procurement team:
1. Rationalize ongoing system costs related to maintenance, application management or upgrades by adopting a modern platform to deliver innovations at a rapid pace.
2. Meet customer needs and avoid damage to business or reputation by developing an agile and resilient supply chain management.
3. Support and drive a corporate sustainability agenda by transitioning towards a purpose-driven procurement that fosters environmental sustainability in the supply chain.
So, how can Intelligent Spend Management enable a more sustainable and optimized procurement process?
Top 5 value areas for Intelligent Spend Management
In today’s highly competitive business environment, there is huge pressure on businesses to reduce costs while maintaining the same level of service or better. Intelligent Spend Management enables companies to do this by improving sourcing strategies, increasing visibility into spend and optimizing supplier relationships. Here are 5 of its main value drivers:
1. Increase in the bottom line
One of the main areas that the Intelligent Spend Management impacts is improving operational productivity, optimizing costs and increasing the bottom line by increasing spend under management with better sourcing and tactical savings. Its advanced capabilities improves working capital by unlocking payables and transforming balance sheet liability into a major strategic asset and it also improves.
2. Improve compliance and risk management
By introducing a Spend Management solution, procurement teams will be able to reduce ineffective spending using contracts and guided buying. The improvement is also of qualitative nature since procurement teams will be able to gather insightful information about their third party vendors which will ensure the supplier partner compliance and improve the relationship.
3. Strengthen supply chain resilience
In today’s ever changing economic landscape, companies need to be agile and disruption ready. Among many of its advantages, it will reduce time to market time, improve agility and accuracy of inventory forecasting, and also reduce time to productivity for new external employees.
4. Improve top line
The Intelligent Spend Management also helps companies increase the top line by improving funds management and enabling companies to reinvest savings in engineering operations to accelerate speed to market or in reimagining business models.
5. Become more sustainable
Aligning a business with current sustainability demands is on every organization’s priority list and technological solutions such as SAP’s Intelligent Spend Management are highly valuable in enhancing brand value by improving relationships with the vendors, reducing carbon footprints and respecting the rights of people in the value chain.
Spend Management solutions
The Intelligent Spend Management solutions from SAP combine all the advantages of SAP Ariba, SAP Fieldglass and SAP Concur and support organizations on their way to becoming an intelligent enterprise. By centralizing this advanced framework, companies are able to connect buyers and suppliers in a digital marketplace, control inbound and outbound costs, and achieve greater spend transparency. Additionally, Intelligent Spend Management solutions help manage an increasingly external workforce, from initial onboarding to final quality assessment.
By digitizing and unifying these processes in a compliant and goal-oriented manner, SAP’s cloud-based solutions give companies full control over the following expenses and areas:
- Direct spending: The purchase of goods and services, directly affecting the end product.
- Indirect spending: The purchase of goods or services that support day-to-day business.
- Outside labor: Independent contractors, temporary forces and service providers.
- Travel and expenses: Expenses related to business travel and other business related activities
The most advanced Spend Management solutions
Backed by an extensive global buyer and supplier network, SAP Ariba facilitates interaction between purchasing departments, regular buyers and suppliers and fosters a true collaborative partnership.
With its comprehensive yet intuitive dashboards, SAP Ariba provides real-time supply and demand forecasts by integrating the company’s and suppliers’ activities into the system. All order confirmations and shipping notifications are stored in the ERP system and approved orders are automatically transferred to invoices.
SAP Ariba SNAP
The SAP Ariba Snap solution developed by SAP specifically for small and medium-sized enterprises (SMEs) is the most powerful procurement software in the market. It offers simplified, intelligent expense management that can be adjusted in scope and price to your company and scaled as required. Easy to deploy, customize, and manage, SAP Ariba Snap reduces the complexity of your spend management and improves cash flow and spend control.
Additionally, with SAP Ariba Snap, you can customize preferred supplier master agreements, contracts, procedures, and pricing to deliver a superior business experience to your partners
The emergence of a hybrid working model combined with the cultural shifts brought on by the pandemic, has created a new way of working. According to SAP, external workers now account for 42% of personnel expenses, showing that companies are turning to external resources to achieve their goals. Another key component of intelligent spend management is transforming the service provider selection process. SAP Fieldglass, SAP’s intelligent solution for vendor management, gives companies an overview of their external workforce, helps save costs and improves the service quality of their service providers. This advanced solution has several valuable capabilities such as Contingent Workforce Management for procurement and management of external workers, Services Procurement for simplified procurement of services, and Worker Profile Management for managing worker profiles.
One of the most important costs that procurement manages are expenses associated with business trips that represent the largest expenditure item in many companies, so it’s imperative that these costs are managed in a reliable environment. SAP Concur offers a suite of secure, cloud-based tools to solve any travel and expense management challenges. This advanced solution can record and report all relevant processes, including travel planning and booking, travel accounting and travel expense management, and feed the information into a dashboard that can be accessed either on a desktop or a mobile device, simplifying the management of travel expenses.
Here at NTT DATA we’ve incorporated both SAP Concur and Ariba and therefore transformed our Spend Management improving both the numbers as well as the quality of experiences for our employees. Since transitioning to an Intelligent Spend Management solution, we’ve saved millions of dollars in annual spend, reported over US$3 million in annual rebates from contingent labor sourcing with SAP Fieldglass solutions, processed 14,000 invoices per month and issued 7,500 expense cards worldwide. We’ve also exceeded key milestones including the $100 million value capture target, improved supplier competition and monitoring, and counted on a more flexible and agile procurement system supporting workers at home and clients worldwide.
Jan Amman, NTT DATA SAP global offering lead for Life Science