How SAP S/4HANA Makes Procurement Processes More Intelligent

Interview with Thomas Latajka, Managing Director valantic ERP Services, about innovations in procurement processes with SAP S/4HANA

SAP currently regards its vision and mission as helping companies become “intelligent enterprises” with its Business Suite SAP S/4HANA. There are also new possibilities and changed flows for purchasing processes in the course of digitalization. Thomas Latajka, Managing Director at valantic ERP Services and SAP S/4HANA expert, reports from his own consulting practice how it is possible to better design and further automate the procurement process with S/4HANA; how real-time data, analyses, and simulations can actually be used; and what the intuitive Fiori interface really offers when it comes to simple, mobile use.

Thomas, as a digitalization company and SAP ERP specialist, you are currently involved in S/4HANA projects with several customers. What are purchasing departments currently focusing on with digitalization?

It’s true that in many purchasing departments, our customers are still relying on completely analog processes. Now as before, there is a lot of printing and faxing everyday. Classic approval processes involve signatures. With the conversion to SAP S/4HANA, however, companies would like to take the step toward digitalization. This development is driven by several factors. On the one hand, there are stricter compliance processes, both internally and externally. Customers are requiring manufacturers to provide increasingly transparent audit processes, and producers have to react to this in order to continue serving customers in their industries, whether in the food, pharmaceutical or chemical industry or as an automotive supplier. Here, aspects such as a traceable dual control principle for approval processes are important, and of course it should be possible to handle these on the go; other critical topics are supplier assessment and transparent, traceable reference source location. All of these topics are driving companies’ digitalization and play a role in the conversion to S/4HANA.  

Where precisely does S/4HANA come into play?

Many medium-sized companies that are still working with SAP ECC systems are handling their purchasing processes on-premise. Thus, the new S/4HANA system becomes the digital core and technological basis for digital change at these companies and it plays a decisive role in their handling of procurement processes. New functions that the S/4 system makes available, for example in the areas of machine learning and artificial intelligence; topics such as electronic incoming invoice processing, contract monitoring, and transparent inventory overview; and stock in transit for inter-company business will continue to become more important. SAP has interesting points on its development road map and will expand the intelligent features in S/4HANA tremendously. And here we’re not talking about development that will take several years, but rather changes that will likely be made in coming releases in the next twelve to eighteen months.  

Where can S/4HANA provide benefits as compared to SAP ECC?

On the one hand, the technological basis of S/4HANA is a much higher-performance HANA database under the application system. This can make much more precise and better information available to the user in real time at the push of a button. Of course companies want to use this intensively and be in a position to completely change their processes. In contrast to this, the SAP ECC system uses a pull approach. That is, the user has to search for data actively in the ECC system and extract it: He logs into the system, selects a function, has to provide various selection parameters, execute the function, and then in the end receives information from which he can derive that there is a particular critical situation at his company, one to which he has to react quickly. Thanks to the possibilities that the Fiori elements and the HANA database offer, we can transform this pull approach into a push approach. The SAP S/4 system is in a position to make users aware of critical situations right away using events, analytical dashboards, and appropriate Fiori tiles; that is, live tiles. Therefore, the user no longer has to search in the system; the system notifies him directly so he can react appropriately. Another benefit of the Fiori approach as compared to the old ECC world is significantly improved collaboration within the company when the concern is data exchange, whether between individual departments or employees.  

What is the typical content of projects that are companies implementing in this sector?

A big topic for our customers in the food industry is supplier assessment. Customers would like to be able to prove with the push of a button and in real time that they have a handle on their entire supply chain down to the supplier. The S/4 system offers many interesting visual features here. 

Another important topic is approval processes in procurement processes. Today, as mentioned above, these are frequently still analog. With the conversion to S/4, our customers would like to digitalize these processes and make them mobile. In the ECC system, this mobile aspect was generally only possible with the use of third-party software. With S/4HANA and Fiori, we have a high-performance tool with which we can fulfill these requirements much better since they are available out of the box with Fiori. 

In addition, our customers are focusing on cost pressures. Thanks to the new visualization possibilities with Fiori apps, we can assess the price-performance ratio for suppliers much faster and easier than was the case with the ECC system. Quality and price are put into perspective quickly, something that can now be displayed graphically very well. For the purchaser, it is therefore clear at a glance which should be the optimal supplier for his procurement process. 

Last but not least, of course our customers are interested in keeping their inventories as low as possible. With real-time possibilities for inventory monitoring, purchasers have much more efficient tools than under ECC. Furthermore, new functions are being added, such as contract monitoring; that is, monitoring of when which contract expires. This way, it’s easier to ensure cost-effective suppliers for the long term under S/4HANA. 

What recommendations can you make for optimizing purchasing processes?

Recommendation 1: You should generally use the change from ECC to S/4HANA as an opportunity to put processes that have existed at the company for years on the test bench. Precisely in purchasing, we frequently find not yet-digitalized flows in the process. That’s precisely the right time to break away and orient processes toward the future in order to fully exploit the optimization potential of S/4.  

Recommendation 2: Bring in an expert partner with S/4 experience. You shouldn’t underestimate that fact that S/4HANA is new software; some of the proven features from the ECC world remain, but SAP is making innovations at a rapid pace. One innovation release here follows the other, and new features appear quarterly, so that it is difficult for companies to remain on the ball and detect and use the features that are important for them. Therefore it makes sense to find a partner who works with S/4HANA all the time. Precisely in purchasing, the new, modern interfaces provide significantly potential that can generally only be revealed completely by experts.  

Recommendation 3: Pay attention to a lean, transparent method of introducing S/4HANA projects. From our point of view, classic blueprint projects with a waterfall methodology are simply no longer up-to-date. They are also time-consuming and expensive. In the meantime, we have developed methods that make it possible to handle such projects much more efficiently. That’s an advantage for customers and the consultants as well, for both profit when project progress can always be monitored transparently.