Sourcing and Contracts Insights from the SAP Ariba Benchmark Program

Transcription

1 Sourcing and Contracts Insights from the SAP Ariba Benchmark Program November 2017

2 Sourcing and Contracts Insights from the SAP Ariba Benchmark Program 2 /16

3 Background and Key Definitions The information outlined below will help you understand the objective, scope, and contents of this paper. Objective This paper summarizes observations made by the SAP Ariba analytics team about the benchmarking survey and provides our recommendations for improvement on key performance indicators (KPIs). Over US$400B in spend analyzed (~$80B in SAP Ariba Sourcing spend, ~$60B in SAP Ariba Contracts, ~$160B in SAP Ariba Buying and SAP Ariba Buying and Invoicing, and ~$100B in SAP Ariba Spend Analysis Scope of This Paper Highlight trends and best practices Compare benchmarks of top performers with average performers Compare benchmarks of select metrics with the previous year Analyze the key categories sourced/procured Provide recommendations to improve benchmark scores Background of the SAP Ariba Benchmark Program Launched in 2002 for Ariba customers Today includes 200+ SAP Ariba customers across 24 SAP industry groups Based on benchmarking survey covering strategic sourcing, operational procurement, and treasury and accounts payable processes SAP Ariba solutions covered are SAP Ariba Spend Analysis, SAP Ariba Sourcing, SAP Ariba Contracts, SAP Ariba Buying, and SAP Ariba Buying and Invoicing Close to 3,500 UNSPSC categories (classes) analyzed Research Definitions Quartiles are defined by equally dividing the data points for each given metric into four groups Report includes the following benchmarks for each metric: Top quartile: 25% of companies with the highest values; minimum value of top quartile is considered as the benchmark value Average: Arithmetic average of all data points for the metric The paper evaluates: 1. Top quartile performance compared to average performers 2. Top quartile performance in compared to top quartile performance in Time Period of the SAP Ariba Benchmark Program September 2015 to August 2016 Participate in the benchmarking survey at SAP Value Lifecycle Manager Address your queries to Sourcing and Contracts Insights from the SAP Ariba Benchmark Program 3 /16

4 2015 SAP SE or an SAP affiliate company. All rights reserved.

5 Table of Contents Overview 6 Key Highlights 7 Strategic Measures to Improve Performance Appendix Sourcing and Contracts Insights from the SAP Ariba Benchmark Program 5 /16

6 Overview Increasing Adoption of Sourcing Solutions to Drive Higher Cost Savings Strategic sourcing provides the single greatest opportunity to impact the cost, quality, and performance of your supply chain and is among the quickest paths to increase savings and improve revenues. To stay competitive, it is vital to leverage solutions and approaches that help your company accurately evaluate the total cost impact of sourcing decisions, shorten the amount of time and effort spent on administrative tasks, and effectively discover suppliers and manage supplier information to drive sustainable results. Strategic Sourcing Best Practices Strategy Development Define profile categories Assess market dynamics Identify savings opportunities Develop sourcing strategy Sourcing and Negotiating Identify and qualify suppliers Negotiate best-value agreements Derive optimal award allocations Drive project collaboration Standardize processes and manage knowledge Monitoring and Managing Suppliers and Agreements Quickly implement supplier agreements Track and realize savings Manage supplier performance In order to achieve sustainable cost savings, it is imperative for companies to:- Identify cost-cutting opportunities Define and execute a supplier selection process Create contracts that convert them into actual savings Sourcing and Contracts Insights from the SAP Ariba Benchmark Program 6 /16

7 Key Highlights Trends 01 Sourcing savings have increased year over year 03 Sourcing spend under management is higher than in previous years 02 Organizations that conduct sourcing events on SAP Ariba Sourcing demonstrate a higher savings per measurable event 04 Portion of addressable spend sourced is significantly higher for top performers 05 New and more complex spend categories are being sourced through SAP Ariba Sourcing 06 Sourcing events with a higher supplier participation rate and competitiveness generally lead to higher savings 07 Reverse auctions for specific spend categories drive higher savings than traditional requests for proposal (RFPs) 09 Organizations are sourcing faster with lower demonstrated sourcing cycle times 08 There is a noticeable reduction in the proportion of contracts that are evergreen/perpetual 10 Organizations that conduct sourcing events on SAP Ariba Sourcing are able to conduct more sourcing events per full-time equivalent (FTE) Sourcing and Contracts Insights from the SAP Ariba Benchmark Program 7 /16

8 Key Highlights Trends 6% 10% Total Strategic Sourcing Savings Rate ( ) 5% 8% Total Strategic Sourcing Savings Rate ( ) Top performers achieve 58% more savings than average performers by managing spend through sourcing systems Savings have increased 24% over the previous year 8% 14% Sourcing Savings Rate through SAP Ariba Sourcing ( ) 5% 7% Sourcing Savings Rate through SAP Ariba Sourcing ( ) Top performers save 81% more than average performers through SAP Ariba Sourcing Top performers savings through SAP Ariba Sourcing have increased 94% over the previous year 68% 82% Sourcing Spend under Management (as Percentage of Addressable Spend) Top performers have 21% more spend under strategic management than average performers 70% 43% Percentage of Addressable Spend Sourced in Benchmark Time Period Top performers source 63% more addressable spend compared to average performers Average Top Quartile Sourcing and Contracts Insights from the SAP Ariba Benchmark Program 8 /16

9 Key Highlights Trends 35 Number of Bids Placed per Event - SAP Ariba Sourcing 56 Top performers receive 60% more bids per event compared to average performers 10% 17% Sourcing Savings Rate from Awarded Auction Event - SAP Ariba Sourcing 8% 12% Sourcing Savings Rate from Awarded RFP Event - SAP Ariba Sourcing Savings achieved through auctions is 40% higher than RFPs for events conducted on SAP Ariba Sourcing 1% 9% Evergreen/Perpetual Contract Count ( ) 2% 10% Evergreen/Perpetual Contract Count ( ) Usage of perpetual contract count has decreased by 31% from the previous year Top performers have 88% fewer perpetual contracts than average performers 57 Average Sourcing Cycle Time from Requirements Definition to Contract Signature (in Days) 30 Top performers have 47% lower sourcing cycle time than average performers Total Sourcing Events per FTE ( ) Total Sourcing Events per FTE ( ) Sourcing users of topperforming companies conduct 73% more sourcing events than average performers Average Top Quartile Sourcing and Contracts Insights from the SAP Ariba Benchmark Program 9 /16

10 Strategic Measures to Improve Performance Spend Management Enable maximum sourcing spend through an e-sourcing platform to drive sourcing benefits Increase management of spend through a documented strategy and predefined contract terms Aggregate purchases across all business units and spend types for accurate global analysis of supplier spend data Conduct regular spend reviews with internal stakeholders to influence more sourcing spend under management Sourcing Events Increase number of sourcing events to drive competitiveness and savings in addition to cost reduction and operational benefits Boost supplier participation in sourcing events to obtain more competitive pricing Put a formal request for information, proposal, and quotation process in place to collect multiple supplier responses for both new and renegotiated buys Increase competitive bidding by conducting more auctions in comparison to RFPs Enable customer/supplier matching to help in discovery and assessment of new suppliers Spend Management Sourcing Events Cycle Time FTE Productivity Cycle Time Review internal process to identify root causes of longer sourcing cycle time (for example, may include too many gates for review/approval) Implement technology solutions to significantly reduce cycle time and improve commodity classification and category management through automation FTE Productivity Review internal processes to identify areas for automation to increase FTE productivity Increase usage of an e-sourcing platform to enable more suppliers and transactions over the sourcing platform which increases FTE productivity and throughput Additionally, use e-sourcing to reduce sourcing errors and increase operational efficiency of sourcing professionals Sourcing and Contracts Insights from the SAP Ariba Benchmark Program 10 /16

11 2015 SAP SE or an SAP affiliate company. All rights reserved.

12 Appendix Category Analysis We analyzed close to US$80B in sourcing spend covering approximately 180 UNSPSC families. Certain sourcing categories yielded significant savings. Our benchmarks also indicate that there are specific categories that are ideal for auctions. Top 10 Commodities that Yielded the Highest Savings Transportation repair or maintenance services Material packing and handling Passenger transport Lubricants, oils, greases, and anti-corrosives Travel facilitation Reproduction services Information technology service delivery Oil and gas exploration services Manufacturing support services Laboratory supplies and fixtures ~30% ~40% Top 10 Sourcing Commodities (Contributing to ~90% of Total Spend) Minerals and ores and metals Passive discrete components Structural materials and basic shapes Packaging materials Well drilling and construction services Chocolate, sugars, sweeteners, and confectionaries Dairy products and eggs Mail and cargo transport General building construction Clothing ~0.5% ~30% Top 10 Commodities that Yielded the Highest Savings through Auctions in Comparison with Savings Achieved through All Sourcing Methods Material packing and handling ~35% Reproduction services Well drilling and construction services Lighting fixtures and accessories Domestic appliances Metal waste and scrap Marine transport Office and desk accessories Passive discrete components Computer equipment and accessories ~25% Savings Rate via Auctions Normal Savings Rate Sourcing and Contracts Insights from the SAP Ariba Benchmark Program 12 /16

13 Appendix Benchmarks by Industry Benchmarks provided are for top quartile Total Strategic Sourcing Savings Rate Services 13.7% Public Services NA Financial Services 11.4% Energy & Natural Resources 9.7% Discrete Manufacturing NA Consumer Products 5.4% General 9.7% Sourcing Savings Rate (as Percentage of Spend Sourced) SAP Ariba Sourcing Services 14.0% Public Services 25.0% Financial Services 19.0% Energy & Natural Resources Discrete Manufacturing 15.0% 15.0% Consumer Products General 11.0% 14.0% Sourcing Spend Under Management (as Percentage of Addressable Spend) Services 82.0% Public Services 94.0% Financial Services 82.0% Energy & Natural Resources 89.0% Discrete Manufacturing Consumer Products General 82.0% 84.0% 85.0% Sourcing and Contracts Insights from the SAP Ariba Benchmark Program 13 /16

14 Appendix Benchmarks by Industry Benchmarks provided are for top quartile Percentage of Addressable Spend Sourced in Benchmark Time Period Services Public Services Financial Services 70.0% 63.0% 73.0% Energy & Natural Resources 96.0% Discrete Manufacturing Consumer Products General 66.0% 69.0% 70.0% Number of Bids Placed per Event SAP Ariba Sourcing Services 52.7 Public Services NA Financial Services 60.8 Energy & Natural Resources 80.0 Discrete Manufacturing 59.6 Consumer Products 45.3 General 56.0 Evergreen/Perpetual Contract Count (as Percentage of Total Contract Count) SAP Ariba Sourcing Services 0.8% Public Services 0.5% Financial Services 2.5% Energy & Natural Resources 0.9% Discrete Manufacturing 1.9% Consumer Products General 1.1% 1.3% Sourcing and Contracts Insights from the SAP Ariba Benchmark Program 14 /16

15 Appendix Benchmarks by Industry Benchmarks provided are for top quartile Average Sourcing Cycle Time from Requirements Definition to Contract Signature (in Days) Services Public Services NA NA Financial Services 45.0 Energy & Natural Resources 28.0 Discrete Manufacturing NA Consumer Products 19.0 General 30.0 Total Sourcing Events per FTE Services 6.6 Public Services Financial Services Energy & Natural Resources 25.9 Discrete Manufacturing NA Consumer Products General Sourcing and Contracts Insights from the SAP Ariba Benchmark Program 15 /16

16 SAP SE or an SAP affiliate company. All rights reserved. No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP SE or an SAP affiliate company. The information contained herein may be changed without prior notice. Some software products marketed by SAP SE and its distributors contain proprietary software components of other software vendors. National product specifications may vary. These materials are provided by SAP SE or an SAP affiliate company for informational purposes only, without representation or warranty of any kind, and SAP or its affiliated companies shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP or SAP affiliate company products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty. In particular, SAP SE or its affiliated companies have no obligation to pursue any course of business outlined in this document or any related presentation, or to develop or release any functionality mentioned therein. This document, or any related presentation, and SAP SE s or its affiliated companies strategy and possible future developments, products, and/or platform directions and functionality are all subject to change and may be changed by SAP SE or its affiliated companies at any time for any reason without notice. The information in this document is not a commitment, promise, or legal obligation to deliver any material, code, or functionality. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, and they should not be relied upon in making purchasing decisions. SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other countries. All other product and service names mentioned are the trademarks of their respective companies. See for additional trademark information and notices SAP SE or an SAP affiliate company. All rights reserved. 16