Over the past year I have led a group of German CPOs from companies such as Bayer, ThyssenKrupp, Siemens, RAG, E.on, Deutsche Post, Deutsche Telekom and Henkel in a campaign to improve the procurement functionality in SAP's enterprise resource planning software.
Our aim, specifically, is to ensure that its supplier relationship management (SRM) suite becomes far more strategic, so that it can provide better management information to all CPOs and their procurement colleagues who rely on SAP systems across their companies.
Why are we doing this?
The world of procurement is changing. It's not just a transactional function any more; it's much more strategic. In the past, if you had 50 or 60 companies under one roof it might just be stationery and travel you wanted to source centrally. Now, as companies focus on their core competencies - in our case, energy - it's vital to have central access to the SAP systems in all those companies in order to reduce costs and to bundle procurement volume.
We need to work out who is demanding what from within our company and our subsidiaries, so we can pool our resources and have just one person responsible for buying stationery, IT hardware or power cables, for example. We also want to know who's likely to need, say, new cleaning services in the next 12 months.
At the moment that's not possible with SAP SRM. The system is excellent transactionally, but it has no way of telling us how much we've saved and there's nothing that allows us to automatically reduce a department's budget as a result of a procurement saving. While there are indicators for almost every tool and machine in SAP, there's no indicator for the biggest cost group of a company - procurement performance.
RWE has a number of subsidiaries across the globe. We probably have 30 SAP systems but these are not all connected. We can't have one group strategic buyer for a product or service because to see what has been ordered across the whole group, we have to collect the data on every purchase from each SAP system. Also, if we sign a framework contract for the group, we have to enter it into every SAP system. That's not only very time-consuming, it also means there's a high likelihood of errors.
To avoid these disadvantages at RWE, we have developed our own corporate procurement portal to give us this visibility of spend within all of our SAP systems. We would like SAP to build this functionality as a standard into its SRM software, and we're happy to share our knowledge so the company can make use of this with other customers.
What has happened so far?
When I first approached SAP, it agreed these elements were missing but argued we were two years ahead of the market. That was a nice compliment but I didn't think it was true. So I contacted other CPOs and found that 90 per cent of them faced the same issues. Later, when we met SAP to discuss this, even its own CPO said he needed these strategic functions. Every quarter his CFO asks him how much money he has saved and he has no management information on this key indicator.
We then got in touch with Henning Kagermann, SAP's CEO, and have since had a number of meetings with SAP board members. RWE is a big SAP customer and I'm pleased to say it is taking our concerns seriously. Already it has tripled its development resources on the SRM module, and we expect major improvements to be made in version 6.0, which is about to be released, and version 7.0, which is scheduled for release in Q1 2008.
We appreciate the fact that SAP is taking our concerns seriously. We also recognise that it cannot address them all in one module. There will always be a need for best-of-breed solutions, but there are some strategic elements of its system that aren't quite right or are missing, and we want these to be improved.
What are the next steps?
We've held a couple of workshops with SAP so it can understand exactly what we want and we can prioritise what we need, ahead of another meeting with the SAP board at the end of March. If the improvements are as good as we expect, then it's just a matter of keeping the pressure up and moving at SAP's speed. But if we're not, say, 20 or 30 per cent there, then we'll have to increase the pressure a bit.
In the meantime, we're looking for other CPOs to get in touch and give us their support. If you have the same issues as us, it will take this from a German-led campaign to an international movement, and this will increase our chances of success.
Ulrich Piepel (ulrich.piepel@rwe.com) is CPO of utilities company RWE, based in Dortmund, Germany
