At SAP Sapphire, I had the chance to attend a session with an executive from Graham Packaging, who hosted a discussion about going down the On Demand route with SAP SRM. This organization is no stranger to eProcurement. They had originally shifted off of the Commerx platform (running Commerce One) onto an internal SAP/EBP procurement platform and then eventually to a hosted version of the platform (5.0) with Hubwoo. Part of the switch to the hosted SRM solution with Hubwoo involved process change around standardization of workflow, approvals and related processes. Previously, Graham Packaging had done significant customization, but the switch to Hubwoo required them to make these changes (which they were not unhappy with in the end).
Today, they maintain a hosted environment for SRM and an installed environment for their SAP ERP system -- with full integration between the two. Going live with Hubwoo and fully integrating On Demand SRM was a six-month process. Initially, Graham went live at 6 facilities, but had rolled SRM On Demand out to a total of 62 by the following month. They now have 850 suppliers integrated into the system, representing approximately $200 million of spend (spread across 100 facilities). This represents a huge improvement from their previous internally installed efforts where they were only to implement 35 supplier catalogs and push $30 million through the system (and it took them 2 years to implement 200 suppliers). This resulted in less than 10% of their spend coming from selected catalog items (relative to 81% with the Hubwoo On Demand solution).
In addition, the previous implementation suffered from inconsistent pricing and lacked narrowly defined category classifications. There was little or no data capture of their supplier's names, SAP coding or UNSPSC classification associated with the spend running through the system. This only enabled them to analyze their spend by vendor plant or searching on a broad description. Today, Graham realizes consistent pricing from suppliers and can classify their purchases at the UNSPSC level while also capturing SAP material numbers. They have complete visibility into their SRM-based spending at the vendor, business unit and plant levels.
In the earlier installed implementation, Graham lacked visibility into preferred suppliers, products and pricing, forcing users to go to one of three systems for ordering. This resulted in management by active management (so to speak) requiring the procurement organization to manually review 90% of orders. The story today could not be more different. Users login to a single system that enables a largely exception-based approach to the ordering process with limited manual intervention ( <20% of spend is manually reviewed by the procurement organization).
Overall, Graham also appeared pleased with the quick implementation, ongoing support and enhancements and increased visibility to drive savings through "vendor consolidation, standardization and sourcing" that the SAP SRM On Demand approach provided. Going forward, Graham is planning on integrating its remaining 2000 suppliers into the system (representing $300 million in spend) by July of this summer. Future efforts will include direct materials suppliers (as well as spare parts suppliers for service parts replenishment). They also expect to use the Hubwoo hosted invoicing solution to gain greater operating efficiency.
Graham Packaging's experience with SAP SRM On Demand suggests that a linear progression from On Demand to an installed environment is not the only way companies move through an eProcurement maturity curve. It confirms the benefits of the On Demand business model to rapidly drive supplier enablement and the ability to bring large amounts of spend under management relatively quickly.