Christopher Haydon, president, SAP Procurement Solutions
Q&A with SAP on procurement: Digital Commerce 360 B2B spoke with Chris Haydon, president of SAP Procurement Solutions, about trends in e-procurement and how SAP is working with companies to improve their supply chains.
DC360: E-procurement is one aspect ofB2B ecommerce that is not easily understood by everyone. How do you explain it?
Haydon: To put it simply, e-procurement is using digital technology and networks to find and purchase goods and services a company needs to produce the products and services it sells. In B2B ecommerce, e-procurement streamlines the process from sourcing to payment to help ensure that businesses have the goods and services that meet all of their specifications, from a corporate-approved vendor and for the right price. The goal is to help businesses facilitate the entire process end to end in a way that drives value. This includes finding the right suppliers, negotiating and managing contracts and discounts, and processing invoices and payments. Also, e-procurement platforms help manage a large and often geographically dispersed network of suppliers by providing visibility into the entire purchasing process, thereby reducing complexity, increasing efficiency and enhancing relationships with trading partners.
DC360: What is e-procurement’s role and relationship to B2B ecommerce?
Haydon: E-procurement technology helps automate parts of B2B ecommerce by streamlining procurement processes across the buying organization, increasing transparency and access to data insights across the buying process, and ensuring businesses are getting the right product at a price that fits their budget.
DC360: Is e-procurement just for big companies? How can a small- to medium-sized company use this technology?
Haydon: SAP Procurement Solutions can be tailored for companies of all sizes, including midsize companies looking to streamline and achieve real-time visibility into spend, collaborate more effectively with suppliers, mitigate risk, and ensure compliance. With cloud-based procurement solutions and access to Ariba Network, which is the largest digital business network in the world, SAP helps companies digitalize the source-to-pay process end to end. Midsize companies benefit from real-time visibility and control of company-wide spending. They can find new sources of supply and negotiate real cost savings, simplify contract approvals and management, and help employees quickly and easily buy from preferred suppliers. This results in reduced invoicing errors and capturing more early-payment discounts; improved cash flow and optimized working capital.
DC360: How is COVID-19 changing what companies of all sizes are doing with e-procurement technology?
Haydon: COVID-19 significantly disrupted supply chains across the globe, leaving organizations of all sizes in a scramble to locate alternative suppliers as quickly as possible in order to maintain business continuity. E-procurement technology enabled these organizations to access a much larger supplier base and communicate in real time on immediate sourcing needs.
To help maintain reliable and transparent supply chains during this unprecedented disruption, SAP opened access to SAP Ariba Discovery so any buyer can post immediate sourcing needs, and any of the millions of suppliers on Ariba Network can respond with their ability to deliver the goods and services—without any fees. This offer was set to expire at the end of June, but we’ve decided to extend it through the end of 2020 in light of how SAP Ariba Discovery has been helping businesses find new sources of supply in these challenging times.
Since launching this offer on March 10, buyer postings increased 61% and supplier responses increased 438% compared with the pre-offer period of January 10 – March 9.
Additionally, many businesses are turning to contingent workers to support business continuity. In fact, we are seeing a surge in demand for external workers in industry sectors such as logistics, pharma, hospitals, medical devices and retail.
DC360: Amid the COVID-19 pandemic, is use of e-procurement technology by companies of all size accelerating or decelerating?
Haydon: The global supply chain disruption caused by COVID-19 put a spotlight on procurement operations in a way nothing ever has before. We expect to see use of e-procurement technology increase as digitalizing procurement will only help companies as they look to build greater resilience into their supply chains, reduce risks, and drive cost savings. In fact, an IDC report published this month forecasts the worldwide procurement applications market to be $7.4 billion by 2024, growing at a 5.9% compound annual growth rate.
DC360: How has e-procurement technology changed in the past year, and what new features and applications can we expect to see in the next 12 months?
Haydon: Digital solutions continue to enhance and advance e-procurement practices, creating even more transparency for suppliers throughout each step of the process. The introduction and advancement of artificial intelligence has improved digital procurement intelligence, matching buyers with the right suppliers for their specific needs. This also plays a significant role in data-driven analytics that can provide insights to buyers around each aspect of their purchase—from where it is made to when it will arrive.
These advancements have enabled a new wave of sustainability options. For example, SAP is building a global marketplace for suppliers of recycled plastics and plastic alternatives, enabling brands to connect more sustainably with new recycled plastics and alternative supply sources through waste picker communities.
Looking ahead, we’ll see technology like AI continue to evolve, along with the data transparency and insights that e-procurement solutions can provide. With businesses always keeping an eye to the bottom line, they will lean on e-procurement, supported by AI, to recommend negotiations or automate discounts and ensure there is accuracy and transparency across all pricing and contracts. Furthermore, businesses will shift from using data as an analytical tool and instead start leveraging it to make real-time decisions – and even predictions. More companies will start to realize the potential of their data to intelligently guide decisions, using it to reach greater levels of success.
DC360: What specific trends are you seeing across the Ariba Network?
Haydon: Ariba Network continues to be the largest digital business network in the world and it grows daily. In the first quarter of 2020, more than 25,000 new suppliers joined Ariba Network, bringing the total number of companies connected to 4.8 million and providing organizations with more sourcing options as they adjust supply chains in this state of disruption. More than US$3.3 trillion in global commerce flows annually through Ariba Network.
One trend we are seeing now in this pandemic era is that indirect is the new direct, meaning that indirect materials—things like masks and hand sanitizer—have become direct materials for most businesses requiring a more strategic sourcing plan.
We are also seeing buyers looking for new suppliers to fulfill critical sourcing needs during COVID. To date, the top category is, not surprisingly, medical with personal protective equipment leading the way. It’s followed by computer hardware, software and telecom, then lab equipment, construction and maintenance services and tech and engineering services.
DC360: What are the biggest challenges companies of all sizes face implementing e-procurement technology?
Many organizations face internal roadblocks such as budget restrictions, access to clean data, and available staff for the implementation and change management required. While procurement leaders within an organization understand the importance and value of digital transformation, they struggle with where to begin or they lack the approval of the C-suite. This contributes to lower adoption rates. However, for many organizations, COVID-19 put a spotlight on the importance of procurement operations, which may accelerate some digitalization initiatives. Still, organizations, regardless of size, must institute a clear approach to this transformation—investing in the right talent and technologies, and outlining specific goals and priorities.
The list is long of what could possibly go wrong for procurement in an increasingly volatile and interconnected world. COVID-19 just shot to the top of the worst that could happen, but other events threaten at any time, from natural disasters and trade wars, to sanctions and cybercrime. To compensate for and mitigate risks, organizations carry excess inventory and build redundancies into the supply chain that lower the velocity and agility of operations. To overcome these challenges, companies need an intelligent and open network that delivers the enhanced visibility, greater efficiency, continuity, and improved collaboration that help supply chains thrive in the face of disruption.
DC360: What’s new in the way of new e-procurement features and functions from SAP Procurement Solutions?
Haydon: SAP provides complete integration capabilities with ERP systems—both on-premise and in the cloud. Buyers and suppliers can connect through Ariba Network, which is an open platform that can be accessed no matter the back-end system in use. It also has a number of integration options, including SAP Ariba Cloud Integration Gateway with its out-of-the-box integration points with SAP ERP systems, such as SAP ECC, SAP S/4HANA On-prem and S/4HANA Cloud.
Connecting systems securely and reliably is mission-critical for organizations, and traditional integration methods have raised challenges around complexity and speed. With SAP Ariba Cloud Integration Gateway, customers accelerate implementation from months to weeks, reduce costs and enable faster adoption of new innovations from SAP Ariba.
DC360: What’s new in the way of new e-procurement features and functions from SAP Procurement Solutions?
Haydon: E-procurement technology is a key function to cost savings, creating value by leveraging SAP’s unmatched ecosystem—more than 4.8 million companies are connected on Ariba Network, and that number is growing every day. SAP solutions deliver negotiated savings directly to a business’ bottom line and give the business more control over costs—and risks—in the buying process. With this increased visibility and buying power, operating and supply chain costs are lowered because of a reduction in buying cycles (often by 50%). Efficiency increases, reducing processing costs (often by 25% to 60%) through an improvement in order accuracy and effective inventory management.
DC360: What’s new in the way of new e-procurement features and functions from SAP Procurement Solutions?
Haydon: In addition to our recent efforts to support customers during the COVID-19 pandemic with solution offers, SAP Procurement Solutions and SAP S/4HANA Cloud are now fully integrated to deliver an end-to-end source-to-pay process as part of our intelligent suite of solutions. This integration further provides complete visibility and control to help our customers better achieve their business goals by effectively managing all spend categories.
Users benefit from a harmonized user experience—consistent across all solutions, with guided tours, embedded learning and digital assistant—on a single platform, with a seamless source-to-pay process. Some other key benefits include access to embedded intelligence for more informed decision-making, real-time reporting and analytics, and a lower cost of ownership and rapid ROI by eliminating the need for costly services and support.
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