Purchasing Analytics Monitors KPIs

The SAP S/4HANA purchasing analytics dashboard provides immediate access to critical operating factors.

By Darren McGregor, Illumiti

Purchasing analytics is one of the most powerful tools the SAP S/4HANA enterprise-resource-management (ERP) system puts at your disposal. SAP makes it easy to activate this essential resource, which provides instant access to critical purchasing-related data, keeps you up to speed with industry best practices, and can save your operation time and money.

In the S/4HANA environment, as part of the procurement overview, SAP offers a purchasing analytics dashboard. This component consists of a series of tiles that show the status of key performance indicators (KPIs), from purchasing spend to upcoming contract expirations, to supplier evaluation, in real time. In other words, anytime you look at one of these tiles, you’re seeing live data. You can refresh the information whenever you wish and view it for a specified length of time.

Because procurement changes so quickly, S/4HANA helps your organization stay on top of KPIs by letting you set a visual-alert threshold that flags outliers. Let’s say that the business can handle 50 purchase orders with ease, but things get more difficult at 75, and become a problem after that. You can set the number in the Overdue Purchase Order Items tile to stay green until 50, turn yellow between 51 and 75, and flash red starting at 76.

Some manufacturing companies have no visibility into procurement KPIs because they don’t track them. Instead, they operate reactively by waiting for someone to notice that too many purchase orders are overdue or purchasing spend has reached capacity. Other organizations manage procurement data manually, compiling it into spreadsheets at month-end, but it can take days to get that information to the supervisors who need it. In some cases, the process is especially time-consuming because it involves assembling data from different systems.

With S/4HANA purchasing analytics, there is no waiting for someone to send you a report. As a manager, when you look at your dashboard one morning, you might see five red tiles—a sign that it’s time for a deeper dive into each of those areas. If the Overdue Purchase Order Items tile is red, that could mean you’re unable to provide raw materials to your line.

The purchasing analytics dashboard also alerts you to off-contract expenditures. If someone in the company buys a widget off-contract, and you already have a deal with that vendor, your staff member may just get off-the-shelf pricing. To make matters worse, they don’t know that you’ve already put a service-level agreement in play and negotiated how long shipping will take. Off-contract spending can affect manufacturing, operations, stockouts, and overall spending for the quarter or the year.

On the purchasing spend side, besides contract leakage, the dashboard covers non-managed spend—anything not on a purchase order—and group activities.

For example, how many purchase orders is the company creating per month, per buyer? S/4HANA also lets you evaluate vendors based on criteria such as quantity, time, price, and product quality. In a competitive industry, this helps the company stay on budget, avoid manufacturing delays, and meet delivery dates.

To gain access to these features, activate Fiori Tiles. S/4HANA will automatically populate the Fiori tiles, using data it has already gathered. Note that, if your organization is one of the many with a procurement system that interfaces with SAP, you must transfer that information under the SAP umbrella so it can become part of the data set.

When it comes to purchasing analytics, stick to best practices. That means using the elements that SAP has already provided, such as requisitions and contracts, but also paying close attention to the KPIs that your dashboard monitors. From purchase order value to supplier quality, the dashboard will show exactly which KPIs you’re tracking and which ones you aren’t. EP

Darren McGregor is a solutions architect at Illumiti, Thornhill, Ontario, one of the leading SAP Partners in North America. He can be reached at DMcGregor@illumiti.com.