World-Class Operational Procurement Powered by Technology

Case Study – Using SAP SRM at ABSA

The ability to manage supplier relationships has never been more important. The necessity for governance and control over expenditure with suppliers is simply not up for debate any more, Peter Alkema, Head of CAO OPS Absa, tells SmartProcurement.

“World wide, organisations are facing challenges to grow or even maintain inflation neutral revenue streams. If they are unable to manage their costs they enter a perfect storm of “closing jaws” as their falling revenues trend towards rising costs. Our recent series on World Class Operational Procurement has been widely and enthusiastically received as a clarion call to return sanity to the back office, says Alkema.

“Operations in cash rich organisations have become complacent, overweight and riddled with duplications and inefficiencies during the last five to ten years of unprecedented economic growth and expansion.

“Automating and enabling key functions such as purchasing and supplier relationships ensures tight control as well as data-rich and robust processes. In 2006, Business Day reported that Absa had successfully implemented SAP in critical operational functions and expected to derive bottom line savings in excess of R300-million over the next five to ten. The Procure-to-Pay process at Absa was one of these capabilities now fully enabled by SAP SRM, the core purchasing and supplier relationship management module in the SAP suite of products.

“In partnership with SAP and Accenture, Absa moved from legacy architecture and disparate, broken purchasing processes to a completely overhauled way of managing the complete value chain of operational procurement.

“As part of the Barclays transaction in 2005, Absa Group Sourcing was launched as the newly mandated department in Absa to manage strategic sourcing and oversee all expenditure across the group. While bringing internationally proven strategic sourcing skills and capabilities to Absa, Barclays also needed proven technology to enable the Procure-to-Pay function. Running SAP in its global headquarters in London meant that the Absa value proposition of full SAP automation would not only strengthen its newly acquired South African operation, but also offer synergies with its own systems.

“In 2007, its first full year of operation, the SAP SRM system originated over R2,5-billion of spend, or nearly one quarter of Absa’s external costs. Last year, this figure more than doubled to over R5-billion, meaning that in excess of 50% of its external spend was going through an automated, group wide channel.

“So far in 2009, channel compliance to the SAP SRM Procure-to-Pay process has been achieving a world class 80%. The leadership, skills and internal focus on this function in Absa Group Sourcing, along with the SAP SRM investment has proved a robust architecture for successfully delivering the Procure-to-Pay process,” concludes Alkema.

In September a breakfast and three hour workshop will be hosted in Johannesburg and Cape Town that will showcase this achievement. Decision makers and executives in your organisation will have the opportunity to engage with Absa on its SAP SRM journey to world-class operational procurement.

For more information on the breakfast sessions click here or please contact Erieka Santos at 0861 334 326 or email her at admin@smartprocurement.co.za.