This Blog applies to
Strategic and Operational Sourcing professionals that deal with external relationships to their own, in terms of buyer-seller.
The purpose of this blog is to share information and experiences within the Vendor Management profession and to build a relationship with YOU, the reader. We would like to engage you in a discussion that addresses the challenges in our daily business, to share ideas and explore how we can collaboratively find the best possible solution.
During the establishment phase of the Vendor Management Office (VMO) as part of SAP Global IT, one of the core challenges was to identify how we can further increase quality output while reducing risks for SAP. We successfully completed a related internal project, and as part of our evaluation we contacted external organizations, companies and consulting firms. The results were clear, we are not alone in facing these issues – they are universally shared across all companies and industries. The key challenges include the following:
- How to establish and practice Sourcing Governance
- How to run effective Operational and Strategic Vendor Management functions
- How to develop relationships (internal and with vendors) from a “transactional” mentality to a “business partnership” mentality
- How to create innovative and effective Sourcing Strategies
- How to establish new ways of thinking, embracing trends, and best-in-class Sourcing Models (fit-for-purpose such as “Factories”)
- How to improve Demand Management through e.g. better forecasting
Over the last two years we have successfully ensured high levels of quality, added business value, and decreased costs in high double digit percentage ranges. This was done whilst significantly reducing risks throughout the SAP Global IT Organization. We achieved this by implementing a number of initiatives, and here our top three:
- Established centralized End-to-End Sourcing Services
- Driving new Engagement Models
- Established Performance Measurement Programs and a Reporting & Demand Management Function
Now is the time for us to shift gears.
We are seeking your collaboration to further solidify a best-in-class Vendor Management function, and together with you pioneer a model for others to follow. All companies with IT services and functions, whether internal, outsourced or a mixture of the two, are facing the same challenge: management of the multisourced vendor environment to benefit the organization.
In order to do this successfully here at SAP, I would like to take advantage of the vast knowledge of my colleagues and peers. I wanted to develop a series of blogs on this topic that allows us to share ideas, to inspire thought and debate, to benefit not only SAP, but every one of us. My goal is to create a platform for collaboration that will build solid Vendor Management relationships, to further the success of Global IT and SAP at large. Below is the first blog, and the series will be updated every 8-12 weeks. Please feel free to connect with us in this community if you have Vendor Management related ideas or challenges. You may also contact me directly at: Harald.Vetter@sap.com, or join me at: LinkedIn, Xing, SAP Intranet, and Facebook.
While establishing the Global IT VMO, we identified some core steps we needed to take to be successful.
Step 1: we established the Global IT VMO vision.
What do we do for our organization, SAP Global IT, and how can we sum it up in one statement?
“We maximize value for SAP through optimal management of innovative, flexible and enduring supplier relationships, while minimizing associated risks”
Step 2: we identified the SAP Global IT Vendor Management Mission
- Ensure spend transparency and market intelligence for “Smarter-Sourcing”
- Develop a solid supplier base that optimally meets SAP Global IT’s sourcing requirements
- Establish strong supplier engagements and optimize delivery output
- Ensure successful management and fulfillment of supplier engagements
Step 3: we formulated a concrete plan for: What does “best-in-class” mean for the Global IT VMO?
- Clear, defined and documented provision of services
- Standardized processes and templates
- Comparison of effort vs. benefit per service
- Guaranteed response times (Service Level Agreements)
- Process Performance Indicators
The key to influencing internal customers, to support and work with us, was to show where we add-value and increase the deliverables. Providing results and leveraging them as a business case for engaging other Business Units, continues to be the best way to do this. Below are two illustrations of our Service Offers & Engagement Steps (the Global IT VMO process map) and the Service Map & Service Detail description.
VMO Process Map:
VMO Service Map & Service Detail Description:
For details on the VMO services, including those that overlap with responsibilities from other departments, please review our Process Map, or visit the VMO Portal page on the SAP intranet. If you are a non-SAP AG employee, please contact us directly to receive detail information.
What drives us in Global IT VMO? Vendor Governance
Challenge: To overcome the “paper” status and move to the “action” status.
At the beginning of 2012 we started offering E2E services in the SAP business unit known as ‘Application Services’ (AS). VMO is now involved at the start of all sourcing activities, and we have well established processes and a proven track record within AS. We achieved this through the following steps while incorporating what we have outlined earlier:
- Demand Management – before budget allocation. This enables us to overcome silos and reduce the reservation from our colleagues due to our service map and Business Case creation.
- Optimal Contract Models – finding the right contract fit-for-purpose. Do the stakeholders know what the “best fit” is? We need to explore possible consolidation of requirements into an existing Factory Model, as an alternative to the creation of a new Statement of Work (SoW) for niche requirements.
- RFx and pre-RFx support and consultation. Defining and quantifying requirements in order to ensure the right responses from vendors, with the support from SAP’s procurement organization and the relevant lines of business.
- Supplier Relationship Management. Actively engaging with suppliers on various topics.
- Shared Service Centers. Leverage Third Party/External Resources Management (internally known as the “C-User Handling Team”) for all “body-leasing/staff augmentation” requirements across Global IT.
- Contract Management. During contract execution and post contract execution, the contract has to be managed and the supplier’s performance monitored in line with point 4.
These six points are vital to influence and optimize our daily behavior to reduce service deliverable times, risks, ensuring leaner processes, improved quality, and to secure double digit percentage cost reductions. Additionally, the influence from VMO, in conjunction with support from other organizational units, ensures the best possible results for SAP. For example, by involving our colleagues from procurement, we can provide demand forecasts and volumetric data that is useful in wider activities.
Coming up in the next editions of the Global IT VMO blog I will describe how we tackle the following topics:
- External Third-Party Resource Management
- Vendor Reporting, Portfolio and Performance Management
- Supplier Relationship Management (SRM) within SAP
- Contract Models within SAP (e.g. factory models)
- Operational Sourcing Exercises and Methodologies (RFx activities, requirements definition/s, negotiation planning, etc.)
- Escalation Management
- Investment Committee Approval/Management
- Strategic Commodity Plans (SCPs) (commodity and sub-commodity strategies with all stake holders)
- Wider Souring Strategies (additional to SCPs)
As stated at the beginning, we would like to actively engage your collaboration, and we are asking you to share your thoughts, ideas and any questions you may have. All of your feedback is of value to us! It will assist us in the collaborative approach to resolve any related challenges with the goal to get the best possible results benefiting Global IT and SAP at large.