Sourcing

Supplier Relationship Management supports your sourcing activities in determining,

negotiating, and documenting sources of supply for your demands, managing the
complete contract life cycle, and providing employees and suppliers with up-to-date
and accurate information about prices. You can also track and monitor supplier
performance by identifying top- and low-performing suppliers, products, and product
categories. For more information, see Sourcing.

Figure 2: Sourcing Process

The standard sourcing process runs as follows:

A sourcing demand is identified in one of the following ways:

The system cannot find any existing sources of supply for materials or services that are
contained in purchase requests.

An existing purchasing contract expires and needs to be renewed.

The system automatically creates a sourcing request based on a purchase request that
needs to be sourced or based on an expiring purchasing contract.

A buyer can manually create a request for quotation (RFQ) and send it to one or more
bidders. The system can also automatically create an RFQ based on a sourcing request
and send it to the supplier.

The system receives quotes from one or more bidders. A buyer can compare, award,
and reject quotes.
The system creates a purchase order or purchasing contract as a follow-up document
based on a winning quote.

For more information, seePurchase Request Processing, Purchasing Contract

Processing, and Request for Quotation Processing.

Key Features of Supplier Relationship Management

To streamline your company’s strategic and operational procurement processes,

Supplier Relationship Management helps you integrate and automate processes, and
continuously assesses the effectiveness of your procurement activities and supplier
relationships.

Integration

Supplier Relationship Management fully integrates your strategic and operational

procurement processes with the following:

Supply Chain Management

For stock materials, Supplier Relationship Management interacts with Supply Chain
Management by:

Receiving purchase requests from supply planning

Receiving product specification data to be used in purchase requests and purchase

orders

Informing supply planning about created purchase orders and their changes

Receiving information from confirmed inbound deliveries and returns to supplier, which
then automatically updates purchase orders within Supplier Relationship Management.
Supply Chain Management also forwards information from confirmed inbound
deliveries and returns to supplier to Supplier Invoicing in Supplier Relationship
Management

Reconciling the delivered quantity in posted supplier invoices and confirmed inbound
deliveries

Attaching quality inspection documents defined within quality planning to purchase

orders and contracts, and sending them to suppliers to help ensure that the proper
quality inspections are carried out

Creating supplier invoices based on third-party purchase orders

Creating purchase documents based on intercompany stock transfer

Customer Relationship Management

For third-party procurement, Supplier Relationship Management interacts with

Customer Relationship Management in the following way:

An employee, buyer, or accountant can select a sales order item or a service order item
as account assignment in the shopping cart, purchase order, goods and services
receipt, or supplier invoice.

An employee, buyer, or accountant can select a customer address as a delivery address

in the shopping cart, purchase order, goods and services receipt, or supplier invoice.

Project Management

For services procured for projects, Supplier Relationship Management interacts with
Project Management by:
Receiving purchase requests from projects with account assignment to projects

Creating shopping carts, purchase orders, goods and services receipts, and supplier
invoices with account assignment to projects

Sending information about created shopping carts, purchase orders, goods and
services receipts, and supplier invoices to Project Management

Assigning projects to RFQs and contracts in order to track purchasing projects, and to
track RFQs and contracts related to any other type of project

Creating goods and services receipts based on approved time sheets for projects filled
in by external service agents or by project leads on their behalf

Financial Management

Using purchase documents, such as purchase orders, posted goods and services
receipts, or posted supplier invoices, Supplier Relationship Management informs
Financial Management about the following:

Account assignment (cost centers, projects, sales orders, service orders)

General ledger information (based on the product category or account determination

group)

Taxes

Expenses

Automation
By automating the procurement process, Supplier Relationship Management minimizes
the amount of employee involvement required to complete tasks. The following
describes the possible automation of the individual steps in a standard procurement
process.

Demand Entry

An employee can enter a demand directly in the system using self-service shopping. If
an employee adds products from catalogs to a shopping cart, the system automatically
determines the price and supplier, and can also create the purchase order
automatically.

In supply planning, the system can automatically create purchase proposals and
release them to purchase requests.

Approval

The system can automatically route purchase documents, such as shopping carts,
purchase orders, goods and services receipts, purchasing contracts, or supplier
invoices, for approval.

Using approval limits, approvers can automatically control spend.

Source Determination

If available, the system automatically assigns suitable sources of supply based on

contracts or list prices. If several contracts exist for one product, a buyer can use quota
arrangements to influence which supplier delivers what quantity of the product, or a
buyer can define a contract or a list price as a fixed source of supply.

Depending on purchasing volume and the relevance of goods and services to be

purchased, you might not negotiate contracts with your supplier. In this case you can
use list prices as a lean alternative to maintain price master data and automate your
purchasing process.

For more information, see Source Determination.

Purchasing Contract Negotiation with Current Supplier

Once a buyer decides to renegotiate an existing contract directly with the current
supplier, the system automatically creates a sourcing request, based on which it also
creates a request for quotation (RFQ). The system automatically sends the RFQ to the
current supplier.

When a buyer accepts a quote, the system automatically creates a purchasing contract
based on the quote.

Tax Determination

Based on the country of a company, a supplier, and the type of procured products, the
system automatically determines taxes. For more information, see Tax Determination
and Withholding Tax Determination.

Purchase Order Creation

If the system automatically determines the source of supply, it can also automatically
create a purchase order depending on the defined settings. For more information,
seeAutomatically Created Purchase Orders .

Sending Purchase Orders

The system automatically sends out purchase orders to suppliers using the defined
output channels, such as fax, print forms, or interactive forms by e-mail or electronic
data exchange (EDX).

Purchase Order Acknowledgments

If the system sends a purchase order to a supplier using an e-mail with an attached
interactive form or electronic data exchange (EDX), the system automatically creates
the purchase order acknowledgment in the system based on the supplier’s response,
and informs the buyer about deviations from the purchase order.

Goods and Services Receipts for Projects

Depending on the settings in the purchase order, the system can automatically create
goods and services receipts based on time sheets for projects that were filled in by
external service agents or project members (on behalf of service agents).

Supplier Invoices

The system can receive electronic supplier invoices using EDX; no manual effort is
required.

Using evaluated receipt settlement (ERS), the system automatically creates supplier
invoices based on posted goods and services receipts and inbound deliveries. For more
information, see Supplier Invoice Processing Using Evaluated Receipt Settlement.

Using recurring invoices, for example to make regular payments for rent, leasing, or
insurance, the system automatically creates supplier invoices on defined due dates
based on information your company has entered into templates in the system. For more
information, see Recurring Invoices for Supplier Invoices.
An accountant can scan paper invoices instead of entering them manually; the system
automatically searches for the purchase order number and adds the purchase order
number as a reference to the supplier invoice. Based on the purchase order number, the
system creates an invoice proposal. For more information, see Quick Guide for Invoice
Entry (in Supplier Invoicing) and Uploading Scanned Supplier Invoices Using Automatic
Upload Service.

For more information about automating the procurement process, see Automation of
Supplier Relationship Management.