Name: Transformation of Service Procurement: Lean Services with Item Hierarchies - Sourcing and Procurement in SAP S/4HANA and SAP S/4HANA Cloud
Uploaded: 2023-1-30
Duration: 693 s
Description: This video introduces the transformation of service procurement from complex to collaborative user experience. First off, you'll learn about the transformation from MM-SRV to lean services. Next, you'll see the process flow where the topics lean services and item hierarchies will be introduced. Ultimately, a purchase order with item hierarchies will be shown.

Share feedback

<p><u><strong>Planned maintenance of Practice Systems</strong></u></p>

Planned maintenance of Practice Systems

Why create an SAP account?

Enhance your learning experience

SAP Learning

Choose your subscription

Manage your subscription

Live Sessions

Hands-on Practice

Certification

My Learning

Ready to start learning?

<div>This video introduces the transformation of service procurement from complex to collaborative user experience. <br>First off, you'll learn about the transformation from MM-SRV to lean services. Next, you'll see the process flow where the topics lean services and item hierarchies will be introduced. Ultimately, a purchase order with item hierarchies will be shown.</div>

Transformation of Service Procurement: Lean Services with Item Hierarchies - Sourcing and Procurement in SAP S/4HANA and SAP S/4HANA Cloud

Hi everyone, I would like to welcome you to my first microlearning. In this video I will introduce the transformation of service procurement from complex to collaborative user experience. More specific videos regarding how to create the master data and how to use lean services with item hierarchies and different business objects will follow. Here's an overview what we will discuss in this session. We will first start with the transformation from MM-SRV to lean services. Then I will come to the process flow where I will introduce the topics lean services and item hierarchies. At the end, I will show a purchase order with item hierarchies. My name is Sandra and I work as a business process consultant in the customer success service area. Through several projects, I have been able to gain deep experience in sourcing and procurement, focusing on service procurement with lean services. Procurement of services is a complex business process and takes various forms because of the nature of the service, but also of the context where it takes place. The process is different depending on the ability of the buyer to define precisely what needs to be done in advance when ordering. Also the risks associated, the controls which are required and the need to know the service performer and to manage them. To increase the experience of our end users we analyze different personas of this process. Here we have in mind a maintenance or project planner, a procurement officer and a supplier. These are the three people who usually interact when it comes to procurement of spare parts, services and materials. The maintenance planner wants to have a quick ordering and to easily find things like services, materials, contracts in the system. Regarding the maintenance work, there should be no disruption. The procurement officer wants to have a higher degree of contract compliance and automation because manual processes can lead to errors. In addition, he wants to have an optimal source of supply so that everything is delivered and performed in quality, in budget and on time. When we look at the supplier and his expectations, he wants to have a complete and precise description of services, wants to know exactly what, when, where, and how much is required to be provided. And then he also wants to have a contingency of his unplanned work. Otherwise, he must go back and change the order, which becomes very cumbersome. After the pandemic, the last years have shown how important it has become to be digital and to understand the supply chain also in the service procurement area. So, with these three personas in mind and their challenges, we have taken up to transform the external services procurement process. from the existing complex way of managing it to a collaborative one. We have transformed it from a mere buyer and supplier centric persona to a more engaging and holistic services supplier relationship management. On the left side we see the classic service process in an ECC system. This functionality is also known as MM-SRV. Here, services and materials were handled completely differently. There were master records for each independently, material master records and service master records. This differentiation of master records also brought some disadvantages. For example, source of supply determination for services was not possible as for materials. In addition, it was only possible to combine one set of service specifications into one item. So the linkage was only possible to the hierarchy header. On the right side, we now see the new service procurement in SAP S/4HANA 2022 on-premise and cloud release SAP S/4HANA 2208. It is called Lean Services Procurement to distinguish it from the ECC classic service procurement. The term Lean signifies that the new service procurement focuses on the concepts of lean-managed principles. It tries to avoid waste and an inefficient data processing. The architecture of Lean Services Procurement differs significantly from the MM-SRV-based services procurement. The product master record has been introduced, a harmonized and centralized master data object. We will take a closer look at it on the next slide. At the architectural level, since SAP S/4HANA 1708 cloud release, both materials and services procurement are harmonized by sharing the same set of master as well as transactional data. As already mentioned, the product master record is for materials and services. And it can now be used in all documents, for example, purchase requisitions or purchase orders. Even the setup of workflows or sourcing does not distinguish between services and materials. For service procurement, item category D is no longer needed. Services are now purchased like materials with item category blank. So that the system can differentiate between materials and services. The product type group is used. 1 stands for material and 2 for service. Services don't have a delivery date, instead we enter the start and end date of the service period. Also, a service performer can be selected based on the business partner to define exactly who should perform the service. If you want to work with limits, you can use the item category E like enhanced limits. Here, we plan an expected value and an overall limit per item. The expected value would then be the net value, for example, in the purchase order. And the overall limit specifies up to which value you can enter service entry sheets. Another big advantage is that we can now apply workflows or source of supply determination based on contracts, purchasing info records for the procurement of services. One thing I would like to highlight is that we have a lot of analytical Fiori apps to analyze purchasing processes. Here, too, it makes no difference if you evaluate materials or services because all the line items are considered. We believe these features offer transparency in the procurement process compared to the previous release of service procurement MM-SRV. What is now added with phase two or in the second step is that we can also use item hierarchies to structure business objects and create so-called model product specifications. This is available as of SAP S/4HANA 2022 on-premise or 2208 in cloud release. On the one hand, there are the model product specifications as a master record, but also the functionality to represent materials and services with item hierarchies and business objects, such as purchase requisitions, purchase orders and contracts. An item hierarchy is a structured view of items in all dimension documents. A hierarchy list can contain item sets and functional items. A functional item can be a stock or non-stock material, a spare part, a service product, or even a free text material or service. Here we now see the service process with item hierarchies. SAP ECC customers and asset-intensive maintenance and construction industries have been using MM-SRV-based service hierarchies. These customers transforming to SAP S/4HANA can now use the new item hierarchies. One possible starting point is the model product specification, in which materials and services are listed in a structured way. Services and materials as free text or with product master record can be planned together. This makes sense especially if the first initial planning is done by a maintenance planner or the business department. For example, for new construction of a plant or maintenance of large machines. This model product specification can then be converted into a purchasing contract by the procurement department when the supplier and prices are known and negotiated. The buyer then takes care of the order and after the service has been performed or the materials have been delivered, the goods received in the service entry sheet can be posted. With the Fiori App Manage Service Entry Sheets, the goods receipt also for materials can now be posted if the product type group is 1. For services with product type group 2, we post the service entry sheet. The second starting point can also be the manually created purchase requisition. When converting to a purchase order, the purchase requisition can be taken over completely. It is also possible to place partial orders for individual nodes if, for example, individual project phases were planned as subnodes. At the end of the procure-to-pay process, the invoice verification is performed. Customers coming from an ECC system can migrate their model service specifications to a hierarchy contract in SAP S/4HANA. With the old model service specifications, the prices were also specified. This is changed with the new model product specifications, as materials and services are planned here with the corresponding quantities. Price negotiations are the responsibility of the purchasing team, which is why the prices are stored in the contract. Therefore, it's recommended to migrate from model service specification to a purchasing contract. How does an item hierarchy look like in the system? Here we see on the example of a purchase order how we can build up such a hierarchy. With lean services or materials, we could previously only create flat lists and list out the individual items. Now we can create up to five levels and divide and structure large purchase orders or other business objects like purchase requisitions and contracts. However, we can only create up to five outline levels, but this does not restrict the individual positions under the nodes. By activating the item hierarchy business function, new buttons are enabled in the Fiori apps and backend transactions. This allows switching from flat lists to lists with hierarchies. New functionalities, such as the creation of item sets and the use of new Fiori app Manage model product specifications, are provided. If you want to stay up to date, take a look at the SAP blog Collaborative Services Procurement. And for further information, the Best Practices Scope Items procurement of services, and collaborative services procurement with SAP S/4HANA, SAP Ariba Business Network, and SAP Fieldclass are the right choice. This is the end of our presentation. As key learning of this session, we have seen how to transform your services procurement from MM-SRV to lean services. I also showed you the procure to pay process flow from the creation of an MPS or purchase requisition up to the invoice verification. I hope you enjoyed this microlearning. For further learnings, check out the openSAP courses. Thank you and goodbye.