How does SAP S/4HANA transform commodity procurement ?

SAP S/4HANA is one of the most deployed post-modern ERPs. Whilst the ERP of the 20th century concentrated on the digitization of business processes, the post-modern ERP focuses on the digital transformation of the business process. In this blog, I will talk on how SAP S/4HANA transforms commodity procurement.

What functionality does SAP S/4HANA provide for commodity procurement?

  • Enable procurement of commodities and help create commodity contracts based on market quotes
  • Automate price calculations and streamline the invoicing process
  • Extend ERP functionalities that automate commodity-based contractual pricing and enable provisional, differential, and final procurement invoicing

What are the benefits of using S/4HANA to manage commodity procurement?

  • Increase hedging coverage for commodities by automating the identification of forecast purchase volumes as risk exposures and by helping to hedge them efficiently
  • Reduce procurement function by providing embedded formulas to automate very complex price calculations for commodities
  • Reduce procurement total spend by expanding the ability to fix commodity prices with financial derivative instruments

What are the functional changes in the commodity procurement functionality in SAP S/4HANA compared to SAP ECC?

  • Definition of commodity pricing engine (CPE) formula and terms in configuration or, alternatively, as master data from document creation
  • Simplified CPE reference date routine (application independent); ability to use the same formula and term for sales as well as for purchasing
  • Simplified use of factory calendar in CPE

What are the innovations which S/4HANA has brought in for commodity procurement functionality?

  • Enhancement of derivative contract specification key to allow industry standard terms in market data capture and CPE formula definition
  • Deprecation of redundant commodity master and market data entities (quotation source, type, or name)
  • Deprecation of unused CPE routines
  • CPE formula assembly using BRF+, state-of-the-art technology
  • Process simplification through reduction of queues and background processing, resulting in higher performance and better reliability
  • Unification of customer and vendor master data under business partner
  • Easy-to-use formula assembly definition using business rules framework plus (BRF+) technology, such as better visualization and allowing the use of ranges, placeholders, and so on
  • Support for visual harmonization of commodity management transactions by a new visual theme called “Belize” in SAP Fiori 2.0

Recently, a high tech manufacturer decided to migrate from SAP ECC to SAP S/4HANA. If you would like to understand why they moved from SAP ECC to SAP S/4HANA, then I suggest reading this whitepaper. It explains the business benefits and technical benefits accrued as a result of the SAP S/4HANA migration.

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