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Folks am sure that most of you would be eagerly waiting for the sequels in this series and hope you were able to tune into my Social Networking and Sustainability Procurement Blogs that led to the delay in this series. Nevertheless, it isn’t too late to catch-up.

Wanted to put out this post just before moving out for the much awaited #sapteched 2011at Las Vegas, it will be great to hear from you and stay connected socially via the twitter hashtag #sapteched and also follow my twitter handle @tridipchakra and track my #sapteched specific tweets with the hashtag #SAPSRM #SAPCLM #procurement

RECAP: Our first How important are Templates to the SAP Procurement Community – Part 1 was a summary of the over-all initiative of templates to optimize the “next level sourcing and procurement platforms”. It’s not a mandate that Templatization needs to be Commodity Driven, it is a “type”, but in our research and follow-on, we considered the strategy to be Commodity Driven Templatization to ensure that chunk of the hard-work into templatization initiative comes in from the Spend Analytics and Rationalization exercise.

We had split our Blog to understand 3 main phases of achieving template excellence in the enterprise

Phase 1: Identification of 5 enterprise-wide commodities commonly used (Ex, MRO, Office Supplies, and IT Hardware). This step is mainly done so that the effective usage of templates and process provides up-stream data for effective commodity driven Spend Analytics.

Phase 2: Map model and design the templates on the SAP procurement platform

Phase 3: Build these templates on SAP SRM, SAP Sourcing, SAP CLM, SAP MM. Aim is to use standard functionality with 5% customizations if required specific to any industry vertical.

 

In today’s Blog, we will visit the high-level activities of arriving at the top 5 Commodities that constitute to majority of spend in the enterprise. We will also visit the concept of Commodity Rationalization to enrich the exercise for accurate & efficient spend analytics.

Procurement and Commodity experts have their own approach and experiences and iterations. However my experience in the #procurement space has led me to accept the fact that this is a

5 Step process and widely used, each enterprise does it in their style with an available set of tools. Don’t call me crazy when you see the sequence of how our construct worked, but this is one of the many different ways this can be done.

Step 1: Get Spend Data from disparate sources (SAP, non-SAP)

¨      Are you confused: Don’t be, this is one crude approach : This is the start point for spend analytics, but if you don’t look at procurement from a transactional stand-point, we can use the same route to arrive at great commodity analysis, just by analyzing data, if your ERP or SRM landscape has disparate data sources where procurement data is linked to commodity data, you have your denominator ready.

¨      Accounting data is a typical dump that most consultants get thrown on their face when they attempt #Commodity Rationalization exercises, but you need to accept it with a pinch of salt and move on with what you have

Tangible outcome of the Step1 exercise: Use some structure and logic to suck up the top spend pointing commodities

 

 

Step 2: Match and Merge & rationalize the spend categories / commodities

¨      Don’t call us crazy: we all know that MDM Data Manager is typically used for Content Management, however, we can do this also by using the Match and Merge functionality using the MDM Data Manager, it’s a crude method, but nothing stops you from doing so, all that you are trying to do is import the gibberish commodity data from Step 1 and use your procurement experience with various commodities to match and merge (use protocol or a standard to determine the truth: explained below)

¨      You can use a protocol like UNSPSC, eCATT or eOTD whatever you consider the rationale for an output that you would consider “Go To Market” and convincing

¨      If you don’t want to use MDM Data Manager, do it in spread-sheets or in MS Access or any other custom tool that can identify duplicates using a specific logic that you have attributed. Feel free to use any technique that could identify situations like

¨      Don’t stop at this, if you have the expertise dealing with commodities from a different angle, bring in that perspective into the rationalization exercise, its very important to go by industry than making it generic, as commodity heuristics and behavior varies majorly with the way business and industries moderate them.

Tangible outcome of the Step2 exercise:Refined list of Commodities that are classified using a standard (Ex UNSPSC etc), this is data that you consider real and could be follow-on master data on which you could craft your commodity strategies

 

 

 

Step 3: Perform Spend Analytics across the rationalized spend categories / commodities

¨     Everyone knows this and there are standard platforms available, Ex SAP SPM, SAP BI/BO, Oracle BI or even a homegrown BI system, the results should reflect

¨     Rationalized massaged spend data from Step 3 can be a good source of performing Spend Analytics exercise to further refine the results that lean to those categories standing out for us to build the future state templates that could automate Sourcing and procurement processes downstream

¨     Since the end to end enterprise wide P2P or S2P process lean : Sourcing-> Contract Management-> Procurement->Spend Analyticsis a circle, any where you start, you are going to end up on one of the touch-points.

Tangible outcome of the Step3 exercise: Refined list of commodities that speak their importance for themselves

 

 

Step 4: Review your results via brain-storming session with the Category managers / Sourcing Specialists

¨      To drive the perspective from a Category Management stand-point, don’t just rely on the output of Spend Analytics and the final Commodities that actually would stand out for your REUSABLE TEMPLATIZATION CAPABILITIES and STRATEGIES FOR THE SOURCING DEPARTMENT.

¨      Have brain storming sessions hearing out the real-time challenges and the importance of the final few that stood out for the optimization exercise

¨      Form strategies for those commodities, the challenges you have sourcing them and the IT Application side enterprise support you would require to help provide the most optimized approach for the Sourcing & procurement leaders inside your Enterprise.

¨      Have a SWOT analysis for the exercise

¨      Split the categories into Direct / Indirect / Complex Services / Government so that working on the classification of templates becomes easier

¨      Create a final plan and a final list and a preliminary template roll-out strategy (note: Templates can be detailed, but the re-use function needs to be simple, user needs to spend as less time as possible once they are rolled out), else the exercise will FAIL OUT

Tangible outcome of the Step4 exercise: Refined Category / Commodity list and the Templatization strategies.

In our next blog we will go further in our story to map-model-Create a Commodity Strategy for Template Design & Re-use

¨      This needs to be done keeping the Supplier base in mind, all parameters internal and external including risk needs to be documented.

¨      Commodity segmentation supplier-wise and commodity wise would help steer the formulation of the commodity templates with greater meaning.

¨      Every move that’s laid out to form a Commodity strategy should look at savings quantification, via the template exercise there has to be a method to ascertain the optimization of work that leads to greater team efficiency.

¨      Identify the re-usable parameters for the Commodity Templates & have the final set of Commodities / Product Categories for which the templates need to be designed for re-use

 

 

Flash News from the #SAPAnalytics and #SAP Procurement shop

Yesterday, we just tweeted about the release of the SAP BusinessObjects Data Enrichment and Classification product going GA, the features and processes supported are mentioned below, follow the twitter handle @SAP_Procurement @tridipchakra to hear more on the #SAP #SupplierInfoNet release in the near future:

Features and product inclusions:

·                  Data collection – Ensure a complete and accurate aggregation of spend from multiple, disparate systems including SAP and non-SAP sources.

·                  Enrichment – Improve leverage and decision making by normalizing the supply base and supplements it with additional information from trusted sources.

·                  Classification – Ensure a consistent and complete understanding of purchasing activity by organizing spend transactions by what was purchased within a goods and services hierarchy.

·                  Revision – Achieve greater accuracy and continuous improvement by incorporating subject matter expertise into the process.

 

Not may have shared with me about your specific challenges with Templates inside your SAP landscape, it would be great to see you all collaborate on this early so that we can help you cut your cumbersome process as of today and build a optimized foundation on which your Sourcing & Procurement strategies rely.

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