Exploring Central Contracting

Central Procurement offers Central Purchase Contracts scenario that enables you to create, change, and display contracts created centrally in the hub system. A central purchase contract is a global long-term agreement between an organization and a supplier regarding the supply of materials or the performance of services within a certain period as per predefined terms and conditions. This enables purchasers from various parts of a company at different locations to take advantage of the negotiated terms and conditions. The central purchase contracts are created in the SAP S/4HANA hub and distributed to the connected systems.

Now you can see what’s happening across the business without jumping in and out of multiple systems or disrupting existing solutions and workflows you’ve spent years defining and refining.

As a result, you can:

• Manage aggregated consumption of items in central contracts.
• Monitor global planned purchasing spend across connected back-end ERP systems
• Contract consumption analysis of central contracts based on back-end PO release history
• Track operational requisition metrics like cycle times and touchless rates

Now you can see what’s happening across the business without jumping in and out of multiple systems or disrupting existing solutions and workflows you’ve spent years defining and refining.

As a result you can:

• Centrally manage requisitions across all connected procurement systems.
• Deliver a consumer-grade, guided buying experience to end users
• Guide buyers to preferred suppliers and sustainable options, pre-negotiated rates §Drive adoption and boost compliance with end users
• Reduce cycle times and costs with self-service buying
• Manage source of supply for individual requisitions

The figure shows the Integration Scenarios in Central Contracting.

The origin for a central contract can be central sourcing. However, one or more backend PRs can also be bundled into a central contract, or through an Ariba Strategic Contract, which generates operational contracts. The central contract is distributed to the connected systems after it has been created. A contract or a scheduling agreement is also created from the central contract and updated with the central contract. The local contracts consume the central contract. This can be monitored in the central contract. Analytics functions can optionally be connected using the SAC. The connection of product sourcing for automotive customers is also optional.

To view this diagram in detail, refer to page 20 of the Course Diagrams PDF.

With Commodity Pricing, purchasers can apply complex pricing formulas, commodity weights, and price conditions in an easy way in Central Procurement.

The first screenshot shows the commodity facet of the central contract, where the purchaser can add included raw materials and their weights. The second screenshot shows the conditions facet of the central contract where the purchaser can add commodity conditions according to the added raw materials before. The condition is attached to the Commodity Pricing Engine, which will calculate the commodity price with formulas and terms.

• Central Purchasers can add any number of commodities, which are part of the contracted material.
• For each commodity, the individual weight per one unit of the material can be entered.
• A Gantt Chart displays each price validity per main condition where filter options offer business users a convenient overview.
• The conditions amounts table provides insights into the main and supplement conditions per selected validity period.