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.