A little History
In the late 90’s the indirect purchasing model was not supported by systems. Typically, there would be contracts and preferred suppliers, but it was very difficult to prevent maverick spend and non-compliance with policy.
It was the early days of the internet and one of the early internet (or intranet) scenarios was to use a simplified browser-based interface to create purchase requisitions by selecting items from a more user-friendly list of items, which quickly became catalogues. The objective was to digitize the old paper based requisitioning system and drive compliance through an interface that the infrequent user could easily navigate. The interface was intended to require little training and to have a reduced set of functionalities to support very basic purchasing.
Quickly after this, we saw the emergence of true e-procurement solutions from companies such as Ariba and Commerce One. They really added an improved user experience for requisitioning or shopping baskets, plus improved cataloging and the emergence of Punch Out – the ability to connect to a vendor catalog and pull back details into a shopping basket. These systems also addressed the setup and management of approvals, for both spend and invoices.
Ariba had a somewhat different approach, focusing on its network. As well as developing its e-procurement software, they put much effort into vendor enablement and on-boarding as many vendors as possible to their network. They realized that there was value in getting to a critical mass of vendors (Today there are over 2.5 Million Vendors). Their network or platform is now probably their greatest asset.
In the late 90’s I was at a conference where some of the early adopters were sharing success stories. It was interesting that the benefits came in 3 principal areas:
- Time savings through use of an efficient UI and shopping basket process
- Elimination of maverick spend
- Improved Pricing Negotiated with Vendors (this was not scalable because many of the vendors gave favorable deals so that they could get some live and referenceable e-procurement installations)
In 2012 SAP purchased Ariba! So how does that play with SAP customers’ existing procurement investments?
What is Ariba Today?
Today Ariba is really two things in my opinion:
- The Ariba Network, the worlds largest B2B trading platform
- Several UI and Connectivity options, which support different benefits
Some of the Ariba Network dimensions are truly massive:
- 2,700,000 companies
- 250M documents annually (PO’s & Invoices)
- A new vendor added every minute
- Commerce of 1.3 Trillion USD (more than Alibaba and eBay combined)
- 195M catalog items
- 14M users
- 1.4 M contingent workers timesheets
The scale of the network enables the functionality to delivery more impactful benefits. For example, the network enables powerful sourcing for direct and indirect items. It does this effectively because it has millions of vendors onboard.
This is exciting because it allows us to define new ways of doing business rather then the simple removal of paper from traditional processes.
SAP’s latest UI, improves efficiency in 2 key ways. Firstly, it provides an efficient and pleasing UX, whilst providing additional pertinent information, such as requesting additional justification and providing warnings and better process visibility.
For example, you select a higher than normal specification laptop and receive a warning that additional approvals are required, which could add time to the approval process. It can simultaneously request that you add justification for the upgrade ahead of time.
Global Track and Trace
Global track and trace is a cloud-based solution that SAP has developed to address the ever-growing demands for traceability across the end to end supply chain. It is possible to send traceable events to it from the Ariba network. This is a solution that deserves more detailed consideration, so I plan to write an article specifically addressing it in the future.
Network Enabled Collaboration
Existing point to point solutions can be used to improve supply chain visibility through the traditional messages such as order confirmation and shipping notification. These are excellent at improving the transactional efficiency of the supply chain and improving accuracy of short term planning and available to promise calculations. For example, we have deployed many point to point ASN solutions, that improve visibility of inventory in transit and streamline receiving processes.
The Ariba Network allows this effort to be leveraged for multiple partners, instead of reworking the connectivity for every new partner. This multiplier effect is valuable, but it is possible to leverage the network to further improve inventory visibility through deeper visibility.
The Ariba roadmap promises to deliver real time inventory and capacity visibility across the extended supply chain – these can be adopted as (capacity and inventory) constraints. It remains to be seen how effectively SAP can drive adoption of these capabilities but the scale of the network and SAP’s track record in transaction processing means that we should take this offering seriously.
What Are the Connectivity Options?
There are several connectivity options that can be selected depending on the existing procurement solution landscape
- On-Premise Procurement with Ariba Network. Purchasing done with ECC or on-premise SRM, then connecting into the Ariba Network for orders, acknowledgements and Invoicing. This also enables vendor inventory visibility. Note that it is also possible to use the Ariba Catalog from SAP ERP. This approach leverages the existing procurement capabilities but takes advantage of the improved connectivity and visibility of the network.
- Hybrid Procurement with Ariba Network. Procurement processes managed both on-premise and, in the cloud.
- Full Cloud Procurement with Ariba Network. Procurement all supported by Ariba with standard connectivity back into S4 or ECC. Note that Ariba can also be used to support Invoice matching and payment
There are over 100 standard connections that can be used to support different combinations of purchasing in the cloud and on premise. Fore example, the P2O scenario supports requisitioning and ordering using Ariba, but passes invoices into ECC or S4Hana for matching and payment.
A successful implementation of Ariba enabled procurement involves more than a system implementation. As well as classic change management, Ariba has adopted the concept of a flight plan. This involves defining a strategy for segmenting suppliers and onboarding them to the Ariba platform. Its important to understand that even if vendors are already operating on the platform, enabling them for a new customer is not as simple as hitting a switch. The flight planning methodology is an effective way to leverage Ariba’s tools and experience.
Ariba for Direct Procurement
SAP has delivered some benefits to entice direct procurement onto the Ariba platform. It will be interesting to see how much traction this approach gains.
- Improved connectivity and visibility (see above)
- Sourcing and vendor collaboration
- Integration with PLM
- Integrated vendor qualification
These are valuable capabilities but the ability to leverage the Ariba Network for connectivity – supplier collaboration is the area that can deliver the greatest value. The ability to integrate through the Ariba network into Integrated Business Planning delivers improved supply chain visibility.
We are seeing a massive investment in the Ariba platform from SAP. There are some exciting developments that are delivering new ways of exploiting connectivity and supply chain visibility. The case for deploying Ariba is stronger than ever.