7 SAP procurement automation tips to maintain plant uptime

With companies constantly striving to maximise output and reduce operational costs, the days of parts and materials planners having their own personal buyer are long gone. Centralised procurement is quite the norm. Often in these environments one hears that “when the buyer sat next to me we never had the issues around material and parts availability that we now have since procurement was centralised. I don’t even know who my buyer is, or where they sit, and most of them don’t even know what it is I want them to buy.”

However, if you are using SAP, it should provide the sense that the buyer is sitting in the office next door, writes Steven Freemantle of SweetThorn Thought Leadership, in this month’s SmartProcurement.

SAP should be used as the vehicle to quickly and accurately facilitate communication between buyers and their planners. The fact that the buyer sits in a centralised location, perhaps even far away, should not shake your planner’s confidence that procurement has the ability to deliver the parts and materials needed to keep production running.

There is some work to be done with your SAP system to instil dependable confidence.

The departure point is acknowledging, as a group, that poor application of SAP’s tools by purchasing, production planning and plant maintenance can impede procurement’s ability to play their role in ensuring plant uptime.

With that understanding in place, here are some tips you can follow to ensure that procurement is better able to use SAP to keep production lines running.

1. Material classification, numbering and descriptions

While the creation of material masters is not typically the function of procurement, buyers and planners are ultimately the users of this kind of static master data. I encounter many organisations that complain that it is impossible to find the materials they want to buy on the system.

Classification, numbering and descriptions add some sanity to managing reams of material masters. Be sure that everyone participates in and certainly understands the logic behind these important master data naming conventions.

2. Accurate and relevant master data

Aside from eliminating duplicate material masters, which is an extension of the point above, procurement and inventory controllers need to own and keep clean the dynamic portion of material master data – lot sizes, re-order points, MRP types and so on. I seldom see a good application of the many combinations of standard MRP settings that speak to well-thought through inventory stocking strategy decisions reflected in a healthy and varied use of SAP’s dynamic MRP master data.

If you have the favourite setting that is encompassed by PD-EX (you’ll know if you have this), then you are not exploiting the power of SAP’s varied stocking strategy rules, all of which drive much better inventory replenishment proposals into procurement.

All of your parts and materials do not behave in the same way, so one solution (PD-EX) does not fit all.

3. Manage your lead times

If you do not trust your supply lead times inside SAP, then you can just about forget SAP doing a good job for you. Inaccurate lead times mean that buyers will need to adjust delivery dates on any purchase order where material lead times do not reflect absolute reality. Also, your internal customers will have no indication of when they can realistically expect their parts and materials.

As long as your lead times are inaccurate you can forget about automating. Automating procurement with lousy lead times will generate a significant amount of supply chain noise a whole lot quicker.

4. Manage your dates

Once you are sure that you have good lead times in your master data (materials, info records and alike) you can begin to manage alignment between your requirements dates and the purchase order dates, and suppliers’ confirmed delivery dates.

If the expected delivery date changes, update it in SAP – that way more than just the buyer and supplier will know when the material will arrive. It is simple really, SAP must reflect your reality and that means your dates must be accurate – to the day!

5. Buyers must be gate-keepers

Following on from this, with accurate lead times in your master data, buyers will be able to push back on unrealistic requirement dates. If lead times are inaccurate, procurement cannot blame the end users for ignoring them, but once that has changed buyers can engage their internal customers when orders are placed with unrealistic delivery dates, which is a simple conversation: the requisitioner either re-plans their work or production is willing to pay the expediting costs associated with emergency-style freighting.

6. Get your planners to plan more inside SAP

As you start to better manage material master data and dates inside SAP, another function of gate keeping is to get the planning community to plan more inside SAP. Some may even feel that planning does not plan at all, of which I cannot be sure, but it can be said that planning inside SAP is often very poor or non-existent.

I am often asked how far into the future you need to plan and my usual response is: how long is your longest replenishment lead time? While this is not always a realistic yard stick, it is a good start to the idea that the longer the future planning window (inside SAP) the better procurement is able to ensure material availability for plant reliability.

Firming a plan on Friday, for work that needs to be done next week, is not planning…

You may snigger at that statement, but I assure you it happens in many, many companies (in South Africa and abroad). Under those circumstances, procurement is actually planning (not very well) for plant stability, by trying to guess what parts or raw materials will be needed in the coming months.

You will know this is happening in your company if there are complaints from executives around extraordinarily high inventory value.

7. Automate, automate, automate

Once your master data is accurate, your lead times real and your demand and replenishment dates managed, then you are ready to begin automating. Then and only then.

Once again, you need to take a not-one-solution-fits-all approach. I have written about this in the past, not all procurement activity can be automated. Consider which buying can be fully automated and which cannot. Once that is understood then you should consider which level of automation can be applied through SAP.

There are 3 kinds:

• ‘assisted’ (SAP creates a purchase requisition);

• ‘trusted’ (SAP creates a purchase order for release);

• ‘full’ (SAP transmits the purchase order directly to a supplier).

A word of caution: any kind of automation, without good planning, good master data, superb date and lead-time management will not enhance procurement’s contribution to plant stability. In fact, fully automating under these circumstances will only make the shambles hit the fan faster…
For more information on getting the most out of SAP, contact Steven Freemantle on stevenf@sweet-thorn.com