1. Supporting the Procurement Process with SAP
Chapter 7
Supporting the Procurement Process with SAP
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Learning Objectives
Q1. What are the fundamentals of a Procurement process?
Q2. How did the Procurement process at CBI work before SAP?
Q3. What were the problems with the Procurement process before SAP?
Q4. How does CBI implement SAP?
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Learning Objectives
Q5. How does the Procurement process work at CBI after SAP?
Q6. How can SAP improve the integration of supply chain processes at CBI?
Q7. How does the use of SAP change CBI?
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4. What are the fundamentals of a procurement process?
Three activities
Order; Receive; Pay
Figure 7-1 Main Procurement Process Activities and Roles
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5. What are the fundamentals of a procurement process?
Supporting the Inbound Logistics Process in the Value Chain
Procurement of raw materials needed for production
Figure 7-2 Procurement Process within the Value Chain of CBI
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6. What are the fundamentals of a procurement process?
Linking the fundamentals of the procurement process with Inbound Logistics in the Value Chain
Figure 7-4 Main Procurement Process Activities, Sub Activities, Production Process and Inventories
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7. How did the Procurement process at CBI work before SAP?
Six Roles
Two roles performed by people
Warehouse Manager and Accountant
Four roles performed by separate computer applications with separate databases (DB)
Sales DB; Purchase Order DB; Warehouse DB; and Accounting DB
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8. How did the Procurement process at CBI work before SAP?
Information Systems Silos
Sales DB: Monitor demand for materials
Purchase Order DB: Manage purchase order information
Warehouse Database: Manage inventory levels
Accounting DB: Manage payables
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9. How did the Procurement process at CBI work before SAP?
CBI’s Procurement process
Involved several roles
Resulted in information silos
Inefficiencies
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10. What were the problems with the Procurement process before SAP?
Warehouse Problems
Accounting Problems
Purchasing Problems
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11. What were the problems with the Procurement process before SAP?
Warehouse problems:
Growth in finished goods inventory
Limited space for raw materials
Lack of visibility into price discounts
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12. What were the problems with the Procurement process before SAP?
Accounting problems:
Three-way match for payment was a challenge
Correcting discrepancies were labor intensive
Time delays in updating accounting data
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13. What were the problems with the Procurement process before SAP?
Purchasing problems:
Purchasing wasn’t centralized
Inexperienced users
Errors in data entry
Pressure for greater financial controls
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14. What were the problems with the Procurement process before SAP?
ERP
Provides solutions to CBI’s problems
CBI selects SAP to provide ERP solutions
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15. How does CBI implement SAP?
CBI had to reexamine and refocus their strategy
Involved three activities
Determine industry structure
Commit to a specific competitive strategy
Develop objectives and measures for processes
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16. How does CBI implement SAP?
Determine industry structure
Porter’s Five Forces
Strong rivalry with low switching costs
FIGURE 7-9 Determine Industry Structure with Five Forces Model
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17. How does CBI implement SAP?
Commit to a specific competitive strategy
Differentiation strategy of responsiveness
Focus on high end bikes
FIGURE 7-10 Four Competitive Strategy Options and CBI’s Competitive Strategy
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18. How does CBI implement SAP?
Develop objectives and measures for processes
Supported by an IS consulting firm
FIGURE 7-11
Objectives and Measures
for the New Procurement
Process
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19. How does CBI implement SAP?
Clear approach to implementing SAP
Found their position in their industry
Defined a competitive strategy
Created objectives and measures for their processes
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20. How does the Procurement process work at CBI after SAP?
Maintained same three major activities
Order; Receive; and Pay
Single shared database
Solutions to prior problems
Purchasing
Warehouse
Accounting
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21. How does the Procurement process work at CBI after SAP?
Purchasing
New purchasing department centralized purchasing activities
Data entered in a single, shared database
Automated internal company document
Purchase Requisition (PR)
Easy conversion of PR’s to Purchase Orders
Reduces errors
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8/22/2011
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23. How does the Procurement process work at CBI after SAP?
Purchasing
FIGURE 7-13 Purchase Order Screen in SAP for 20 Water Bottles and 30 Water Bottle Cages from Space Bike Composites
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24. Purchasing Process—Context Diagram
8/22/2011
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25. Purchasing Process—Level 0 Diagram
8/22/2011
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26. Sample Purchase Order Screen
8/22/2011
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27. How does the Procurement process work at CBI after SAP?
Warehouse
Goods receipts entered into same database as PO’s
SAP verifies the goods received against the PO
Immediate update to inventory
Accounting impacts automatically updated in the same database
SAP documents this in the database
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28. How does the Procurement process work at CBI after SAP?
Goods Receipt
FIGURE 7-14 Goods Receipt Screen in SAP
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29. How does the Procurement process work at CBI after SAP?
Accounting
Three-way match completed by SAP
Less labor intensive
Incoming invoices are compared to PO and Goods Receipt for verification
Payment simplified
Accounting updated automatically in SAP
SAP documents these steps in the database
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30. How does the Procurement process work at CBI after SAP?
Invoice Three-Way Match
FIGURE 7-15 Enter Incoming Invoice Screen in SAP
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31. How does the Procurement process work at CBI after SAP?
Payment
FIGURE 7-16 Post Outgoing Payments Screen in SAP
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32. How does the Procurement process work at CBI after SAP?
Benefits of SAP for CBI’s procurement process
Single database
Shared information in real time
Reduction of errors
Improved financial controls
Increased responsiveness
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33. How can SAP Improve the Integration of Supply Chain Processes at CBI?
Supply Chain Process Integration
Improving Supply Chain Process Integration by Sharing Data
Improving Supply Chain Process Integration by Increasing Process Synergy
Other IS That Improve Supply Chain Processes
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34. How can SAP Improve the Integration of Supply Chain Processes at CBI?
Supplier Relationship Management (SRM)
Returns Management
Supplier Evaluation
FIGURE 7-17 Sample of Supply Chain Processes
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35. How can SAP Improve the Integration of Supply Chain Processes at CBI?
Supply Chain Process Integration
Supply Chain Management (SCM)
Tools, techniques, and management activities
Integrates across supply chain processes
Supports organizational strategies
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36. How can SAP Improve the Integration of Supply Chain Processes at CBI?
Improving Supply Chain Process Integration by Sharing Data
process integration improves with sharing data
FIGURE Examples of
Process Integration by Sharing Data
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37. How can SAP Improve the Integration of Supply Chain Processes at CBI?
Improving Supply Chain Process Integration by Increasing Process Synergy
Processes are mutually supportive
FIGURE 7-19 Examples of Process
Integration by Process Synergy
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38. How can SAP Improve the Integration of Supply Chain Processes at CBI?
Other IS That Improve Supply Chain Processes
Augmented reality
RFID
Sensors
Robotics
3D printing
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39. How can SAP Improve the Integration of Supply Chain Processes at CBI?
Sharing Data
Increasing Process Synergy
Other IS That Improve Supply Chain Processes
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40. How does the Use of SAP Change CBI?
New skills are needed
Process focus
More data sharing
Outsourcing
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Ethics Guide
Procurement Ethics
“Buy-In”
External sourcing
In-house procurement
Discussion Questions
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Conclusions
Q1. What are the fundamentals of a Procurement process? Q2. How did the Procurement process at CBI work before SAP? Q3. What were the problems with the Procurement process before SAP? Q4. How does CBI implement SAP? Q5. How does the Procurement process work at CBI after SAP? Q6. How can SAP improve the integration of supply chain processes at CBI? Q7. How does the use of SAP change CBI?
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