Defining Product Sourcing Business Process

Direct materials procurement is a complex process and can lead to inefficiencies.

Master Data in Disparate Systems

How do you keep your vendor details in synch with the ERP vendor record when it is spread across three systems, one of which is Microsoft Excel?

What about when you have different ERPs – even more master data challenges.

Contract Leakage

Replicating the information manually, and keeping it up to date, is a challenge. If the terms negotiated by the sourcing team are not in the ERP with the MRP process creates the purchase orders for the materials, the company loses money.

Limited Process and Data Integration

What about the important Material Master record stored in ERP? How do you create sourcing events without direct access to your material master database?

To date, customers have managed their direct materials sourcing in one of the following ways:

• Standalone niche vendor solutions that cover part of the process or a small category of their direct spend.

• Highly customized on-premise ERP or procurement systems.

• Partial coverage with current sourcing solutions for indirect spend, such as SAP Ariba Sourcing.

• Entirely manual use spreadsheets, with no end-to-end systemic process.

SAP Ariba Sourcing through the direct spend capability helps customers address some of their concerns by a series of features allowing 360 view into the materials that require sourcing activities and integrating materials and bills of materials from the ERP to Ariba.

This lesson focuses on detailing the business processes covered by product sourcing capability of SAP Ariba.

When introducing a new product, you must coordinate with suppliers throughout the development process to get initial costs, as the product is refined, and once the product is fully developed. As a buyer, you need up-to-date specification documents and roll-up costs.

The new product sourcing functionality provides buyers with an accurate picture of evolving product costs by delivering the following benefits:

• Use BOM Quote to get quotes and facilitate collaboration with suppliers.
• See how the product costs roll up at whatever costing level you choose to set.
• Use Item 360° to get a holistic view of your parts.

After a product is launched, the buyer’s focus is on sustainability, adjusting sourcing to improve product costs.

Usually employees in change of direct materials within an organization have very specific tasks on the day to day. The following is a list of the most common user personas in product sourcing and their associated tasks.

1. Sourcing Operations
   • Assign program and plant to a BOM.
   • Assign owners to materials.
   • Get a pricing quote.
   • Update BOM and material splits and estimates.
2. Sourcing Manager
   • Get a pricing quote.
   • Update BOM and material splits and estimates.
3. Sourcing Administrator
   • Manage master data, such as plant, program, and part type.
   • Upload historical pricing, pinning, owners, and splits.
   • Monitor the PIR message queue.

Users must be assigned the appropriate product sourcing system permissions to be able to perform these tasks in the SAP Ariba system. The relevant system permissions will be discussed in detail in a subsequent lesson.