Describing the buying and delivering direct materials process

Today's consumers expect customized products, delivered promptly and at a good price - all of which affects your supply chain, inventory levels and profits.

For example, your customer may want the product delivered tomorrow and customized to their specific needs. The end consumer can have demands related to size, brand, time, and shipment. Also, that same customer could be concerned with how the product got there and how that has an impact on the environment.

This video describes the benefits of using SAP solutions for buy and deliver including describing the direct PO and subcontractor PO processes.

Certain subprocesses assist the buy and deliver phase by increasing supply chain visibility, proactive exception management, user based configurability.

These subprocesses include :

• Multi Tier Collaboration
• Scheduling agreement
• Return
• Handling Units
• Quality Collaboration

Multi tier collaborations is an end-to-end closed loop process orchestration that supports drop ship orders from lower tiers into upper tier or contract manufacturing locations. This allows a visibility of related goods receipts and provides visibility to logistics providers to manage transportation as needed between tiers.

These capabilities allow buyers to run complex collaboration scenarios efficiently across multiple parties. Additionally, there is increased transparency that eliminates the need for safety buffers such as inventory, capacity and workforce. Order fulfillment will improve as there will be supply chain visibility across multi-tier supply chains and inventory reduction.

The buyer will share the component forecast created in the planning process or system such as SAP Integrated Business Planning

The Supplier then:

1. Reviews the forecast and, after running planning of its own, share a commitment, with any differences then being made visible to the buyer
2. Give an opinion on the forecast, which might be different from the buyer’s opinion – both can have a discussion on the root cause
3. Share potential upside capability, such as if more can be delivered. This can be leveraged by the planner when running "what if" scenarios

Any shipment, including from the lower or higher tiers or manufacturing locations, come with related goods receipt capabilities. Logistics providers have full visibility to manage transportation between tiers.

Scheduling agreement shortens the process time and reduces the amount of paperwork you are faced with. Additionally, one deliver schedule can replace a large number of discrete purchase orders or contract release order. You can carry out your manufacturing operations on Just in Time principle. Delivery scheduling enables vendors to plan and allocate their resources more efficiently

Scheduling agreement extends rolling delivery schedules to suppliers and indicates the degree to which the lines of schedule are binding.

The benefits of utilizing scheduling agreements include:

• Improved visibility into availability of supply
• Greater transparency for suppliers into longer-term and near term demands of their customers
• Flexible invoicing options including self billing and supplier generated invoicing

The return process deals with the business process of returning goods back to the vendor and then receiving credit for the returned items.

The buyer creates a purchase order with return items in the system. The purchase order is based on a standard purchase order except the adding of a return flag on one or more items, which initiates the return delivery of the items back to the vendor.

The return purchase order goes to the vendor, the return delivery is sent to the shipping department where the items are picked and shipped back, and the purchase order is now created and sent to the supplier through the Ariba network.

Handling Units is a clear and efficient user interface with packing instruction support. It has a unit based PDF (bar code) generation based on industry standards with B2B and portal enablement. Additionally, it has enhanced UI to support handling unit visual presentation and control, packing instructions support through CSV and new business rules.

A benefit for suppliers is that it can provide shipments based on packaging specifications and benefit from easier label printing and automatic packaging saving time resources for suppliers. Buyers on the other hand benefit from efficient goods receipt processing.

Quality Notification

Buyer and supply ability to collaborate on deviation during manufacturing, inspection or post goods receipts.

Quality Inspection

Supplier ability to send inspection results along with certificate

Quality Review

Unstructured collaboration tool for buyer/supplier. Customer can define their own review type

Suppliers and customers can use quality notifications as a joint record to provide details and resolutions about defects observed in products or subcontracting components. This can be initiated by either trading partner.

Different Types of notifications:

• Customers notify the supplier about problems with a finished product.
• Supplier notifies the contractor about problems with subcontracting components that the customer has sent to the supplier.
• Supplier/contract manufacturer notifies the customer about problems during production.

Customers can use quality inspections as a joint record to request for an inspection of products at the supplier’s location prior to shipment or invoicing process – certain criteria that these products have to meet to pass those standards (there may be other systems). This can be done pre or post shipment similar to notifications.

If it is done before a shipment, the supplier would have to do that inspection then give the documentation back to the buyer who would then list out what was detailed in the inspection and characteristics of what those inspections were.

Customer request supplier to conduct a quality inspection on product based on customers inspection plan and characteristics .Customer can also share usage decision based on results to suppliers. Finally, Customer can choose to either stop shipment, refuse payment or request credit based usage decision

Quality Inspection notes can come in three forms:

• Pending: Inspection request is received by supplier and no inspection results are pending
• Submitted: Inspection results are submitted by supplier. Supplier can still update the results
• Reviewed: Inspection results are submitted by supplier and supplier cannot do anymore edits of the inspection results

The buyer then provides a usage decision status before the product can move on:

• Not valuated: Usage decision is not done yet
• Accepted: Usage decision is accepted by the buyers
• Rejected: Usage decision is rejected by the buyers

Quality review allow supply chain teams to collaborate and review documents in a secure, collaborative web based environment. This can be used for communications that may or may not be related to a transaction such as product order, quality notification, or custom. Buyers and supplier quality users have the ability to opt for email notifications.

Quality review provides easier, threaded communication between buyer and supplier users. It creates a reduction in cycle time for reviews and eliminates administrative burden. Finally, it is easy to find the review based on different criteria and keyword search.

For further study on relevant topics, consider the courses available in the following Learning Journeys on the SAP Learning Hub: