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How to Bolster Your Purchasing Operations with SAP S/4HANA Cloud

by Patrick Imhen, Business Analyst and Senior SAP MM/SD/PM Functional Consultant, ZOCODE Limited

July 19, 2017

Discover the impact of the SAP S/4HANA Cloud streamlined procure-to-pay business solution on purchasing operations. Learn about the procure-to-invoice process with insight on certain new features.

Based on my testing experience, I explain some of the functionalities of the streamlined procure-to-pay business solution within the SAP S/4HANA Cloud 1705 release. In this release, the streamlined procure-to-pay functionality is one of the first business solutions that leverages predictive analytics within SAP S/4HANA Cloud.

I provide you with some insights about how operational procurement leverages embedded predictive analytics to provide business insight within SAP S/4HANA Cloud. I also explain how the procure-to-invoice business transactions run within SAP S/4HANA Cloud.

How SAP S/4HANA Cloud Can Help Your Organization Become a Smart Business Operation

The streamlined procure-to-pay business solution within SAP S/4HANA Cloud provides organizations with the visibility and insights required to perceive buying patterns, vendor performances, opportunities to reduce costs, and increased savings. Companies can rapidly adopt new strategies base on embedded real-time analytics in the purchasing transactional process. This is a paradigm shift from what was obtainable in the purchasing operations on traditional ERP systems such as SAP ERP Central Component (ECC). Even the procure-to-pay process in SAP S/4HANA on premise is not at the same pace as in SAP S/4HANA Cloud. Organizations can continuously experience high-technology innovations because of the quarterly software updates by SAP.

Overview of the Embedded Predictive Analytics Capabilities of the SAP S/4HANA Cloud Procure-to-Pay Business Solution

The SAP S/4HANA Cloud leverages SaaS for ERP (SaaS ERP). The whole idea is to transform your Big Data to intelligent data using the logic of process-centric embedded predictive algorithms to obtain precise analytical insights. The procure-to-pay business solution within SAP S/4HANA Cloud has some available embedded process predictive analytic features, such as embedded predictive analytics for contract consumption in procurement, Stock Champion Solution Proposal spend analysis, real-time monitoring of expiring contracts, overdue purchase orders or urgent purchase requisitions, and requests for quotation items for which no bids were submitted in time for the deadline. Real-time insights of these features obtained from the Procurement overview page are based on some defined key performance indicators (KPIs).

(Note: Stock Champion Solution Proposal is an analytic application within SAP S/4HANA Cloud that makes projections on the state of stock based on real-time insights and proposes ranked solutions for stock expirations and shortages before they become a real issue.)

The embedded predictive analytics for contract consumption in Procurement is a new feature in SAP S/4HANA Cloud. With this capability, a contract consumption rate can be predicted based on historical data. Consider, for instance, that an existing procurement quantity contract of two years’ tenure with 500,000 pieces of pedals as the target quantity has been released up to 90 percent as at the 16th month due to high production of bicycles. (A two-year contract is 24 months long, and this statement indicates that the contract has reached month 16 of the 24-month period.) That implies that only 50,000 pieces of pedals will be left for the remaining eight months. The predictive analytic functionality embedded in the contract consumption process can predict when this contract is likely going to be consumed 100 percent. This insight can help a purchaser to proactively call up a renegotiation of the contract that could lead to a possible reduction in price.

With the new supplier evaluation weighting and scoring functionality, supplier evaluation is automated to power real-time spend monitoring. This helps managers of purchasing operations in organizations swiftly identify and respond to unfavorable prices and easily identify cost-saving opportunities, enhancing buying patterns and enforcing strategic vendor choices. Spending can be monitored based on purchasing group, material group, supplier evaluation, purchasing value, or invoice value.

Another new feature that comes with the procure-to-pay business solution within SAP S/4HANA Cloud is the ability for users to create custom fields. The extensible process for purchasing documents provides this feature. Traditionally, this used to be a technical task, but now it is simplified, creating flexibility for how users consume the business solution. Also the SAP CoPilot integration for procurement-related activities is a digital assistant that enhances user collaboration. With the SAP CoPilot users can exchange real-time information with coworkers, chat with colleagues, and even take notes, thus making teamwork more efficient.

A Walk Through the Purchase-to-Invoice Process

In this section, I walk you through the steps for creating a purchase order and posting a goods receipt and a supplier invoice. I also describe some new features based on my trial experience with the SAP S/4HANA Cloud.

SAP S/4HANA Cloud provides role-based access via SAP Fiori app launchpads. In this task, I use the role of a purchaser for the procure-to-invoice process. To get to the transaction apps, go to the SAP Fiori app launchpad and click the Procure to Invoice option as shown in Figure 1.

 


Figure 1
Purchaser role-based launchpad

Create a Purchase Order

One of the new features you can use when creating a purchase order in SAP S/4HANA Cloud is mass changing. You can now trigger a change to fields in multiple purchase orders. To create a purchase order, launch the Manage Purchase Orders app by clicking the tile shown in Figure 2.

 


Figure 2
Open the Manage Purchase Orders SAP Fiori app

The system then displays an overview screen to manage a purchase order. In this screen you can use the search filter to call up existing purchase orders or create a new purchase order. To create a new purchase order, click the plus sign as shown in Figure 3.

 


Figure 3
Create a purchase order

The system displays the New Purchase Order header (the menu headings are below the New Purchase Order header in Figure 4). Enter a number in the field under Supplier.
 


Figure 4
Enter a supplier number in the New Purchase Order header screen

After you enter the supplier number, the system populates the other fields based on available information from master data.

In Figure 4, note that the following titles of several segments of the document are listed in the purchase order header menu:

• Items
• Limit Items (This is a new feature that enables the creation of limit items for services in purchase orders.). It is used to control costs of services on a purchase order when the cost is not initially determined. The purchaser sets the expected price value and overall limit at the limit item level.
• Delivery and Invoice
• Supplier Address
• Attachments (used to attached documents or a website URL)

To add an item to be purchased, click the Items tab on the header menu. When the item level shows up, click the plus sign to add a new item as shown in Figure 5.


Figure 5
Add a new item

The system displays the item overview (Figure 6). The item details are automatically populated when you enter a number in the field under Material. One new feature is the Add from Document link. This feature enables you to add a material from a previous purchase order document for reordering (Figure 6). This feature provides ease of navigation and accelerates the task of creating purchase orders. To add material from a previous purchase order, you can click the Add from Document link.
 


Figure 6
Enter a material number in the item overview screen

To see the item details, click the Items overview. The item details screen then appears (Figure 7).


Figure 7
Prompt to show the material price from master data (item details)

Based on the system intelligence, you can see in Figure 7 that the system has generated a prompt to show the material price from the master data. This feature gives a buyer a quick insight on price difference (i.e., effective price versus material price).

After the price has been determined, you can navigate the different sections of the item details by clicking the title on the menu. For example, to input a freight price, click Pricing on the menu bar. This action opens the pricing section (Figure 8). To add a new price condition type for freight, click the plus sign.

 


Figure 8
Click the plus sign to add a pricing element (item details)

After you click the plus sign to add pricing elements, the Add Price Element schema appears for the new price condition type to be added (Figure 9).

 


Figure 9
Add a new price element (item details)

Click the Condition Type field and select the FVA1 (freight/value) condition type and in the Amount field, input .2 as the amount value. Click the Add button on the right to add the new freight condition type to the price for the item.

When you are done with the item details, it is important that you click the Apply button at the bottom left of the item details screen (this button is not shown) to apply your input or changes. After you click the Apply button, the system returns you to the item overview screen (Figure 6).

On the purchase order document you can attach files or website URLs by clicking Attachments in the menu as show in Figure 10. To add an attachment click the plus sign or click the Add a URL link to add a website URL. This function is relevant when you need to send along other documents, when information on a website is required to be sent with the purchase order to the vendor, or when an attachment is required for record purposes. In this example, I did not use the attachment feature.

 


Figure 10
Add attachments or URLs to a purchase order

(Note: The issue log messages are highlighted at the bottom left of the document (Figure 11). Click it to see the issues [they could be warning or error messages]. For my example, there is just one message. After you click the issue log messages, the system displays an issue log list [in my example, it is a warning message as shown in Figure 11]. To see details of a message item on the list, click the item.)
 


Figure 11
The issue log list

Now you save the purchase order by clicking the Order button at the bottom right of the document (this document is not shown) and then the purchase order number is generated on the purchase order overview display screen (Figure 12).

 


Figure 12
The number of the saved purchase order is generated

On the purchase order overview display screen, you can click the supplier or material number and the system then displays a list of follow-on transaction links. This feature gives easy navigation.

For instance, you can quickly see the stock overview of this material item by clicking it. The system displays several follow-on transaction links. Click the Stock – Single Material link to display the stock overview for this material (Figure 13).

 


Figure 13
A list of follow-on transactions

In the next screen (Figure 14) the stock overview shows 200 pieces of the material in plant 1710 and storage location 171E.

 


Figure 14
The stock overview

Now that you know the stock level of the material item, you can carry out the goods receipt transaction in the SAP S/4HANA Cloud. To post a goods receipt, return to the home page by clicking the home page icon at the top left of the document.

Post a Goods Receipt

When you post a goods receipt in SAP S/4HANA Cloud, you can determine the stock level of a storage location at the point of entry. To post a goods receipt, click the Post Goods Receipt for Purchase Order tile (Figure 15).

 


Figure 15
The Post Goods Receipt for Purchase Order app launchpad

This action launches the Goods Receipt app (Figure 16). Enter the purchase order number in the Purchase Order field. With this action, the content of the purchase order is referenced into the goods receipt document as shown in Figure 16.

 


Figure 16
Enter a number for the goods receipt

In Figure 16, note that you are posting the material to unrestricted use stock type in storage location 171E. When you clicked the Storage Location link, the system automatically generates the stock level for the storage locations in the plant that you selected—171E (Kanban) with 200 pieces of the material under unrestricted use stock type (Figure 17). This function provides you with visibility on the stock level in the plant, thus improving stock management.

 


Figure 17
Storage locations stock level

A store administrator can make a decision based on this insight (depending on his or her company policy) to probably post 100 pieces of the material to storage location 171E and the remaining 100 pieces as an immediate intervention to storage location 171B even though the procurement was initially for only storage location 171E. You can also click the item overview as shown in Figure 16 to see the item details. This action displays the item details (Figure 18).

 


Figure 18
The item details screen

Click the Apply button to apply any entry or changes made in the item details.

Now post the goods receipt and the material number is generated (Figure 19). To post a goods receipt, click the Post button at the bottom right of the goods receipt document.

 


Figure 19
A generated material number

You can display the material document by clicking the material number document link (Figure 19). After you click this link, the system displays the material document (Figure 20).

 


Figure 20
The material document

In the material document, select the Document Flow button. You then can see the transaction flow from the purchase order. Clicking the document pads (Purchase Order, Material Document, or Accounting Document) shown in Figure 20 displays the documents’ details. Also from the material document you can reverse the goods receipt by clicking the Reverse button at the top right of the document. You can also use the Related Apps link to navigate to other related transactions.

Because you are done exploring the material document, click the home page icon at the top left of the document. This action returns you to the home page to launch the Stock Single Material app to check the impact of the goods receipt on the stock level in storage location 171E.

Check the Impact of the Goods Receipt on the Stock Level for Storage Location 171E

To check the impact of the goods receipt on the stock level for storage location 171E, click the Stock Single Material app tile as shown in Figure 21.

 


Figure 21
Click the Stock Single Material app tile

This action launches the Stock Single Material screen, which is the stock overview (Figure 22). After you enter the material number in the Material field, the stock overview details are displayed. Note that the stock has increased from 200 to 400 in the unrestricted use stock type as shown in Figure 22.

 


Figure 22
Stock overview update

Create a Supplier Invoice

Just like the traditional procurement process, creating a supplier invoice also requires verifying the supplier invoice for correctness. To create a supplier invoice, click the Create Supplier Invoice app tile (Figure 23).

 


Figure 23
Click the Create Supplier Invoice app tile

This action launches the Supplier Invoice screen (Figure 24). In this screen input the invoice document date and gross invoice amount in the invoice document header.

 


Figure 24
The supplier invoice header screen

Now click the Purchase Order References link on the menu and then enter a number in the field under Purchase Order. The purchase order is then referenced into the invoice as shown in Figure 25.

 


Figure 25
The purchase order referenced into the invoice

If you click the purchase order number, the system displays related transactions to which you can navigate from this screen (Figure 26).

 


Figure 26
The purchase order history

Also, from the invoice item overview, you can view the Purchase Order History by clicking the View button. This feature provides you with process visibility that can help prevent mistakes and save time.

The invoice balance is 0.00 USD, which means it is balanced. You post the invoice by clicking the Post button at the bottom right of the document. The invoice document number is generated as shown in Figure 27. Click the OK button.

 


Figure 27
The invoice document number

This is where the procure-to-invoice process ends.

Tips to Consider Before Moving to SAP S/4HANA Cloud

I recommend that organizations that have deeper industry-specific requirements and need full process flexibility and configuration scope opt for the SAP S/4HANA on-premise edition. That is because SAP S/4HANA Cloud focuses more on a standardized framework of ERP processes with guided process flexibility. SAP S/4HANA Cloud offers a limited number of streamlined processes though it has a quarterly innovation cycle that can best match the speed and dynamism of the digital economy, it may not give full capabilities for deeper industry-specific modifications.

I also recommend that organizations that have deeper industry-specific requirements adopt the two-tier landscape model if they have subsidiaries that could be allowed some independence. In such a scenario, the subsidiaries or subsidiary may be in a different business. While the headquarters still runs on ECC or SAP S/4HANA, the subsidiaries are allowed to go with the SAP S/4HANA Cloud, thereby allowing flexibility and ease of adopting innovation.

Finally, organizations taking on the capabilities of SAP S/4HANA Cloud must understand that a smart business operation can only be effective with the right attitude of the users. Therefore, although SAP provides the system governance for the SAP S/4HANA Cloud, organizations must set up a framework to properly administer people governance to maximize the use of SAP S/4HANA Cloud’s capabilities. 

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Patrick Imhen

Patrick Imhen (patrick.imhen@zocoderesources.com) is a business analyst and a certified SAP ERP consultant with proficient knowledge, skills, and experience in Materials Management (MM), Sales and Distribution (SD) and Plant Maintenance (PM) gathered from successful SAP implementations projects, support, training, business process analysis, modeling, unit testing, and integration testing. He has profound understanding of the supply chain process across industries and helps organizations cut the cost of operation and improve process optimization. He has more than 10 years’ experience in the business environment and six years’ experience in the SAP domain.



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