Smith & Nephew Procurement Transformation – a SAP Ariba Conference Highlight

We’re going to be featuring a number of articles based on last week’s SAP Ariba event in Prague, so let’s start with a customer case study which saw two of the youngest delegates giving an impressive account of themselves.

Redefining your source to pay process for the Digital Age” featured Andrew Croston, VP Global Indirect Procurement at medical equipment firm Smith and Nephew (S&N), who set the scene and then handed over to two of his team, Dominic Cunnew and Daniel Silver, both just a year or two into their careers. (Our picture shows Croston with Alex Atzberger, SAP Ariba CEO, in a different session last week).

S&N is a FTSE-100 firm with some $4.6 million in annual sales. It is highly international – there are procurement folk everywhere in the world really from Brazil to China. Since he arrived 18 months ago, Croston has led a transformation programme, aimed at delivering value through reducing supplier numbers (from 20,000+), creating a global procurement team, managing risk and compliance better, and investment in technology of course. Savings are also an important part of that wider set of goals. Croston likened the programme to climbing Everest – “we had a few people fall off their ropes on the way, but we’re getting there,” he said.

The challenges were familiar ones to many large organisations - reduce costs, improve control and compliance, achieve greater spend visibility, consolidate the supply base, and work more efficiently. The starting point was a number of different ERP, requisitioning and indeed sourcing systems. SAP Ariba was selected because of modules such as Spot Buy (with low value purchases executed via eBay), P2P, and guided buying which together allow procurement to drive compliance whilst providing a better user experience.

Guided buying has been well received. It enables more centralisation of spend, consolidates business with approved suppliers, provides data that can then be used in further category planning, and above all is easy to use for the stakeholders. Spot Buy has increased visibility for tail spend (low-value purchases), and has allowed S&N to replace the one-time ad hoc vendors with a single Spot Buy “proxy vendor”. It has filled what were previously gaps in catalogue provision and enabled the firm to make easier price comparisons.

In terms of implementation, the process started with a design workshop, involving finance and other stakeholders. A series of “build workshops” followed, then integration testing (always a critical point) to ensure fit with existing finance systems. Acceptance testing was carried out with both groups and some key individuals. “We had to check the language within the platform worked globally too”.

The “go live” was accompanied by lots of publicity from procurement, with reviews and feedback to build better performance. The system handles spend limits and approvals of course, including different workflows depending on both spend level and the category e.g. consulting has a different approval route to mist items. The ordering and approval screens we saw in the session looked very easy to use and intuitive.

The firm also went live with three upstream modules last September – supplier onboarding, sourcing, and contract management. Since then, procurement has executed 16 RFIs, 236 RFPs, and 9 e-auctions. “We could do more e-auctions but this was very new idea for us, so we had to take it slowly”, they said.

One SAP Ariba “product” that is not well known, but has been very useful for S&N is the “savings forms”. These capture data on the benefits from procurement projects, including different savings types, baselines, actuals and so on. Savings can be allocated in quite a sophisticated manner, and there is a lot of flexibility in how the forms can be used. Reporting can be delivered in different ways too – by individuals, by team etc. The team can amend forms after the event too e.g. if volumes are lower then savings will be adjusted downwards.

All in all, it is was a good session and this looks like an impressive programme that seems to have reached a good level of maturity and benefits delivery remarkably quickly. One interesting point about change management came up in the questions. Arguably, it may have been easier to get the new processes embedded in S&N because previously there weren’t very strong standard processes in the business. In some ways, that might make life easier compared to a situation where the organisation starts with very definite processes and systems that have to be radically changed.

However, that is not to play down the success here; so well done to Croston, Cunnew and Silver (which does sound like a top firm of New York attorneys), and no doubt many others in their team.

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