Working with Sourcing and Contract Management

Objectives

After completing this lesson, you will be able to:

  • Work with sourcing and contract management

Sourcing and Contract Management

Paige Discusses Sourcing and Contract Management

Note
See what Paige has to say about the possibilities for Sourcing and Contract Management in SAP S/4HANA:

Purchase Contract Management

The following are features of Purchase Contract Management in SAP S/4HANA:

  • Dynamic and flexible search and filtering across entire contract work-lists.

  • Monitor contracts in contract work-lists and access additional information about status, approval, and validity instantly. The list offers graphical elements to visualize, for example, contract consumption.

  • Direct navigation to contract and supplier object pages.

  • Insight to action capabilities:

    The SAP Fiori app shows a list of purchasing contracts, which offer a quick Edit functionality. An application example of this editing functionality would be to extend the validity of a certain purchasing contract. It is no longer necessary to open the complete contract document for simple changes to a contract.

  • Business card information of the supplier.

Note
For strategic contracts, SAP Ariba Contracts or SAP Contract Lifecycle Management (not part of SAP S/4HANA) may be used. These solutions offer features such as:
  • Contract templates

  • Draft concept

  • Contract clause library

  • Versioning

  • Microsoft Word integration

A screenshot is shown of the app Manage Purchase Contracts.

For operational contract management, the SAP Fiori app Manage Purchase Contracts (Version 2) is provided. For central procurement, the SAP Fiori app Manage Central Purchase Contracts is available.

In the SAP ERP system, users can use transaction codes such as ME3M to generate a list of purchasing contracts. In SAP S/4HANA, the mentioned SAP Fiori apps provide the users with more information with fewer clicks, allowing the user to monitor contracts in contract work lists and receive instant information about consumption, status, and validity of the purchasing contracts.

When monitoring purchasing contracts, both low usage and high usage cases need to be monitored to either renew a contract or phase out the contract. With the SAP Fiori app Manage Purchase Contracts (Version 2), users can immediately see contracts with a high contract consumption and also with a critical status. In addition to the smart filter bar for flexible search, this app also provides a quick action to renew (change validity end or target value) a contract directly. Navigation to other object pages, such as a supplier or a specific contract, is also supported.

Other Useful Apps and KPIs for Working with Purchasing Contracts

Other useful apps for working with purchasing contracts are:

  • Unused Contracts: This KPI displays the number of contracts not used over the previous year to date.

  • Contract Expiry: This KPI helps a customer to identify purchasing contracts that expire within a certain time frame. It is also possible to use the app to find the number of expiring contracts, the target amount, and the released amount of the expiring contracts.

  • Contract Leakage: This KPI helps a customer to identify the spend of purchase orders that do not have a contract reference, although an existing contract could have been used.

  • Value Contract Consumption: This KPI displays the consumption percentage of value contracts from the previous year to date. Using this KPI, it is possible to find the target and released amount of certain contracts.

  • Quantity Contract Consumption: This KPI displays the consumption percentage of quantity contracts from the previous year to date. Using this KPI, it is possible to find the target and released quantity of certain contracts.

Note
The consumption calculation is based on the value, not on the quantity.
Note

A mass change option to create new purchasing contracts and/or update existing purchase contracts using Microsoft Excel is available since the 2022 release of SAP S/4HANA. This mass change option exists for more objects, such as for purchase requisitions. You can also delete purchase contract items using Microsoft Excel.

Collaborative Sourcing

SAP S/4HANA can integrate with Ariba Network and SAP Ariba Sourcing for an RFQ, This can be done without a supplier specified in the document.

In SAP ERP, a request for quotation (RFQ) always requires a supplier to be specified. In addition, it is only possible to enter one supplier quotation per request for quotation (RFQ). This logic does not comply with several sourcing integration scenarios that a customer might require, like SAP Ariba Sourcing and the Spot Buy capability of SAP Ariba. This is why in SAP S/4HANA, the behavior of the system is different. In SAP S/4HAHA, it is, for example, possible to send a request for quotation (RFQ) via an SAP Fiori app to an external sourcing platform without a supplier specified in the document. In SAP S/4HANA, it is also possible to receive and enter multiple supplier quotations for one request for quotation (RFQ).

Source Determination and MRP

Source Determination during an MRP Run

In SAP S/4HANA, source determination during the planning run (MRP run) is possible without using a source list.

The priority sequence in source of supply determination during an MRP run is shown, This sequence is explained below.

The system determines the possible sources of supply for a purchase requisition according to the following priorities:

  1. Quota Arrangement:

    If a quota arrangement exists for a material, it has the highest priority. It is only possible to enter suppliers and plants in a quota arrangement, but no outline agreement items. If outline agreement items are to be found as sources, then these items need to be added to a source list with MRP indicator 1 (Record relevant to MRP) or 2 (Record relevant to MRP. Sched. lines generated automatically). If delivery times have been entered in the info records for a certain material that deviate from the delivery time maintained in its material master record, MRP-relevant source list entries for the material in question should also be maintained. This in addition to the quota arrangement.

  2. Source list:

    If there is no quota arrangement, the system checks the existing source list entries for which the MRP indicator 1 or 2 has been set. If the indicator is set for more than one item, the system takes the first item with an MRP indicator.

  3. Scheduling Agreement:

    If several valid scheduling agreements exist, MRP selects a scheduling agreement with active releases first. If this can not be found, MRP selects the scheduling agreement with the smallest document number.

  4. Contract:

    If several valid contracts exist, plant-specific contracts have higher priority than cross-plant contracts. If there are several contracts available that are maintained on the same organizational level, MRP selects the one with the smallest document number.

  5. Info record with Automatic Sourcing indicator:

    If there is no quota arrangement maintained and also no source list, MRP can assign an info record as a source of supply that is marked as relevant for automatic sourcing.

For priority 5: If the indicator is set for more than one info record, the system assigns a source according the following priorities:

  1. Plant-specific info records have higher priority than info records on purchasing organization level

  2. Smallest supplier number

  3. Smallest purchasing organization number

  4. Smallest purchasing group number

For materials that do not match any of these options, the system generates procurement proposals without a source of supply assigned.

A screenshot is shown of the creation of an info record, and in particular the field Auto.Srcg.

The Automatic Sourcing indicator in an info record is specific to SAP S/4HANA, and is not available in SAP ERP.

MRP Live

SAP S/4HANA features MRP Live, an MRP run optimized for SAP HANA. MRP Live reads material receipts and requirements, calculates shortages, and creates planned orders and purchase requisitions all using one database procedure. This minimizes the volume of data that has to be copied from the database server to the application server and back, which considerably improves performance.

A screenshot is shown of the first screen of the MRP Live run, using the SAP GUI.

MRP Live has the following advantages:

  • The definition of the planning scope is more flexible.

  • MRP Live allows the planning of a selection of materials with all their components, materials for which a certain production planner is responsible, or one material across several different plants.

If a material is transferred from one plant to another, the stock transfer requirement is not known in the supplying plant until the material has been planned in the receiving plant. MRP Live determines the sequence in which materials have to be planned across several plants.

The traditional MRP functionality is also still available in SAP S/4HANA This is often referred to as Classic MRP. If, for example, MRP lists are required, the traditional MRP functionality (that is, classic MRP) needs to be used. MRP Live does not support the creation of MRP lists.

Note

SAP note 1989922 is a collective note and lists all relevant notes for transaction code MD01N (MRP Live).

In SAP S/4HANA, materials that for whatever reason can’t be planned with MRP Live, are automatically planned with classic MRP during a planning run.

Manage Different Sources of Supply

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