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SAP Sourcing is a component of Supplier Relationship Management, a component of SAP Business Suite, whose other components include SAP ERP Central Component, Customer Relationship Management and Extended Warehouse Management.
SAP Sourcing in Supplier Relationship Management (SRM) is an on-premises, holistic procurement product meant for a globalized and complex supply chain. Companies often implement SAP Sourcing as a natural extension of the Materials Management component in SAP ERP Central Component (ECC), which does not offer the depth and breadth of procurement software that SAP SRM Sourcing provides.
Here's what the SAP Sourcing component in SRM offers.
The Sourcing Cockpit is a purchaser dashboard that enables the buyer to consolidate and process purchasing requirements. These requirements can come directly from the purchasing carts created in SRM, or even from an ERP system, such as ECC.
The Sourcing Cockpit enables the purchaser to get help with proposing sources of supply; searching vendors for a product or a service that is not yet maintained in a company's database; or creating a purchase order, contract, bid invitation or auction.
The quota arrangement in SAP Sourcing works the same way it does in ECC. A quota arrangement enables a purchaser to allocate a quota of required materials to two or more suppliers.
This approach of dividing requirements among multiple sources of supply is to avoid depending too heavily on one or a limited number of suppliers, as well as to maintain a balanced supply from multiple sources so as to prevent supply chain disruption.
The vendor list functionality in SAP Sourcing is similar to the source list functionality in ECC. A vendor list is a preferred or approved list of vendors or suppliers for materials or services.
With Sourcing, it is also possible to incorporate potential suppliers who still aren't part of a company's SRM vendor list to facilitate the procurement process. It is also possible to block or apply stringent procurement checks to suppliers that have failed to meet a company's procurement guidelines.
Supplier self-registration and qualification
This self-service feature enables a supplier or service provider to complete an initial registration process for the offered products or services. The system then initiates the shortlisting and selection process by sharing the company's questionnaire that the supplier can fill out, and the system can then evaluate whether the offered products or services meet the company's vendor selection criteria.
While approved suppliers are listed as vendors in the vendor list (see above), the remaining potential suppliers are informed as to the reasons they were not selected.
Sourcing with RFx -- bidding and tendering
The term RFx is used as a general term to represent different types of bidding or requests for quotation. This could be a standard and simple request for quotation for a material or a service, where the specifications are already known, or a request for information or expression of interest where a purchaser reaches out to potential suppliers for detailed information on a product or service so as to eventually make a decision.
For complex purchasing requirements, such as turnkey projects, the request for proposal option works well, as it enables the detailed listing of products, services, after-sales and installation services, warranties, and performance guarantees, which can all be managed effectively.
Bidding with collaboration
Here, the system uses a web-based document and asset sharing tool known as Collaboration Folders (cFolders) to enable suppliers to submit technical drawings, product specifications and additional documentation relevant to a bid so that these documents are considered during a technical evaluation.
The supplier only has access to the specific folder that belongs to its company. The buyer has access to all the folders from different suppliers in cFolders.
Live auction -- reverse auction
The Live Auction Cockpit (LAC) enables a company to use the option of a reverse auction. A reverse auction is a bidding process where the qualified and shortlisted materials suppliers or services providers compete in a live and transparent bidding process to win a company's business. All participating bidders can see each other's bid prices to help them decide to either lower their bid prices or opt out of the bidding or auction process.
In case a bidder is facing technical issues during the auction process, the LAC also provides the option for the company's representative to maintain and update a bid price on the bidder's behalf.
What's included with SAP Supplier Relationship Management?
A supply chain framework where suppliers and buyers win
SAP Materials Management offers inventory valuation functionality
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