By: Ganesh Satam, Associate Principal - Package Implementation, LTIMindtree

Introduction

The past few years exposed the vulnerabilities of global supply chains. The traditional just-in-time approach that was being used to reduce operational costs and maximize efficiency faltered quickly when faced with economic, social, and political disruptions of global proportions. It quickly became apparent that intelligent enterprises would fuel the supply chain of the future. A recent McKinsey survey found that most companies are planning to significantly revise their inventory management strategy, including decoupling points and buffer strategies.

This blog talks about how the SAP Ariba integration can help enterprises streamline the selection of material sourcing channels, utilize in-house inventory to fulfill requirements, and increase network resilience.

Current business scenario

Enterprises that use disparate solutions for different business functions do not get complete visibility into their operational processes. For example, if a business uses an e-procurement solution for indirect spending and SAP S/4HANA for direct spending management, they lack visibility of material stock in warehouses. The buyers might end up reordering items even if sufficient stock exists in the warehouse inventory. This leads to a longer lead time for requirement fulfillment and non-moving inventory for some materials.

New Features of SAP Ariba

Most organizations prefer to fulfill procurement requirements from the inventory before procuring externally, and SAP Ariba Buying and Invoicing (B&I) can help them do that.

Buyers can now create reservations for the material against the current stock in Enterprise Resource Planner (ERP) with the help of the SAP ERP integration. Reservations are system documents in inventory management that highlight the requirement for a certain number of goods for production, cost center, and any other need. The purpose of the reservation is to reserve the material against the cost object so that the ERP can issue it against the reservation. If the material is unavailable, the external purchasing process can be initiated.

Use case

Suppose there’s a requirement of material “A” for production. The buyer will log in to Ariba B&I and select material “A” from the catalog for procurement. The catalog will indicate its availability in the inventory by checking through the ERP, with help from the SAP Ariba integration.

The buyer can enter the required quantity to the checkout cart. In the purchase requisition created, the items from the inventory are listed separately in the “Line Items From Inventory” section.

Once added to the cart, the account assignment and required details will be entered to submit the requisition in B&I, and it will go through the approval process.

Once the requisition is approved, the reservation documents are sent to SAP ERP to reserve the items and confirm the reservation. Based on the response from SAP ERP for each reservation document, the status displays as either Reserved or Failed in the buying solution from SAP Ariba.

The warehouse clerk will post the goods issued against the reservation and deliver them to the buyer/production floor.

Below are the prerequisites to leverage this functionality:

SAP Ariba

1. Configure the SAP Integration Suite, managed gateway for spend management, and SAP Business Network to:
   1. Integrate catalog data from an SAP ERP to SAP Business Network
   2. Check the stock of inventory items and make reservations
2. Collaborate with SAP Ariba shared services team to enable reservation-related parameters at the site level
3. Execute InventoryFieldsLoader task in Ariba

ERP

1. Maintain master data, such as material master, for relevant plant and storage locations and purchasing information records in ERP
2. Import tasks, load organization structure, and relevant master data to SAP Ariba

Business Benefits

Here are some of the business benefits that can be observed from this SAP ERP integration:

1. Reduced lead time for requirement fulfillment: Business requirements are fulfilled immediately through the items available in the stock
2. Reduction in non-moving inventory: Buyers can check inventory stock before placing an order in Ariba. If the item has sufficient stock the buyer can decide to create a reservation for the item
3. Separate reservation workflow process: The warehouse or stockroom manager can approve the reservation requisition to skip external procurement workflow.

In closing

McKinsey highlights that a resilient supply chain is based on three independent factors with: end-to-end supply chain visibility, implementing scenario planning, and having a high master-data quality. Integration of SAP Ariba B&I with your ERP can help your business become fast, agile, and efficient with a future-proof supply chain.

To know more about how you can benefit from our SAP solutions, visit us at https://www.ltimindtree.com/enterprise-solutions/sap/.

Resources:

https://www.mckinsey.com/capabilities/operations/our-insights/taking-the-pulse-of-shifting-supply-chains

https://www2.deloitte.com/xe/en/insights/focus/supply-chain/digital-brain-supply-chain-management-with-machine-learning.html