Stepping to the Cloud with the Ariba Network

This a great article exploring how a hybrid procurement model (Ariba and on premise SRM) help to mitigate modern procurement challenges.

(Source: Arnie Klemm, SAPInsider, URL)

For buyers and suppliers, the cloud offers a host of benefits to mitigate some of the biggest challenges in the procurement space. On the buyer side, maverick spending can be greatly reduced and greater visibility into the entire procurement process can be achieved. For the supplier, purchase order (PO) and invoicing automation are as beneficial as the cost advantages from being a preferred vendor in a large supplier network.

Therefore, cloud procurement is an increasingly popular option to bring buyers and suppliers together in a shared network, and helps to explain why the Ariba Network has onboarded more than one million suppliers. Supplier concerns are trending downward as suppliers are starting to understand that the benefits of moving their catalogs to the cloud outweigh the transaction costs.

Migrating to a cloud-based procurement system, though, is not without its challenges. Suppliers, especially smaller ones, can be put off by new transaction fees. Buyers have ROI concerns: Are they generating enough spend through the system to make it worthwhile? Are they taking full advantage of automation possibilities? Having helped onboard many suppliers as an implementation alliance of the Ariba Network, PwC knows full well the concerns from both buyers and suppliers.

New lines of communication between buyers and suppliers start to open with the onboarding process through the Ariba Supplier Information Performance Management solution. Beginning at supplier registration, documents that include pertinent seller information such as certifications are forwarded to buyers, which facilitates the qualification process and offers visibility into the catalogs of preferred vendors. Regular meetings with suppliers to monitor mutual key metrics lead to collaboration beyond performance.

Advantages of a Hybrid Model

For many organisations on the Ariba Network, a hybrid procurement deployment that integrates Ariba solutions with an on-premise SAP Supplier Relationship Management (SAP SRM) implementation has been the interim entryway in the cloud, providing access to the cloud and the Ariba Network while retaining existing front-end requisition processes.

The hybrid model takes the shopping cart of SAP SRM and leverages the Ariba Network for catalogs. The on-premise SAP SRM model hinges on creating requisitions using existing material master data, then purchasing shopping cart items through the solution’s integration with email, fax, EDI, or another purchasing model. In a hybrid deployment, front-end processes do not change all that much. The requisitioner still places items into a shopping cart, although in a hybrid configuration, and the requisition isn’t predicated off material master data. Instead, the requisitioner fills a shopping cart with catalog items over the Ariba Network, with the supplier maintaining the catalog. This method generates an automated PO that goes to the connected supplier after the approval process through the Ariba Network, which entails little change for requisitioners; they are still using SAP SRM to complete the transaction.

The requisitioner has the added benefit of taking advantage of the dynamic catalog or punch-out, where the catalog is stored on a supplier’s servers. The supplier can make updates quickly, and through the Ariba Network, the requisitioner can see the updates in seconds. To accommodate this flexibility and collaborative requisitioning, the supplier essentially creates a buyer-specific catalog.

As an interim transition to the cloud, a hybrid procurement deployment has many benefits. The Ariba Supplier Information Performance Management solution, supplier-based catalogs, and Ariba Discovery modules facilitate supplier onboarding and help to manage a new stream of suppliers. In the long term, businesses that have taken this approach often see that moving more of their procurement environment to the Ariba Network is likely a logical step to take advantage of the additional integration possibilities.

Simplified Payment Processes

On the supplier side, automation of the PO process doesn’t end with the PO creation through the catalog. When a supplier receives a PO via the Ariba Network through its preferred method of communication, the network provides the ability to begin what is called the PO flip. When an order is processed and fulfilled, an invoice is electronically generated from the PO and sent back through the network to the buyer. End-to-end automation continues when a goods receipt is generated that verifies a match between the PO, the invoice, and the goods received. This automation leads to simplified three-way matching and streamlined payments, helping buyers to capitalise on early payment discounts. Additionally, suppliers can take advantage of dynamic discounts that enable them to receive payments more quickly.

For organisations that are considering transitioning to a cloud procurement model, deriving value from an Ariba Network implementation can start with a hybrid model. And for suppliers, this often serves as a way to introduce more than just a product or product line, but to help introduce new procurement processes that save time, money, and paperwork.

For organisations that are considering transitioning to a cloud procurement model, deriving value from an Ariba Network implementation can start with a hybrid model.