SAP Ariba Buy Process Guide

for Indirect Procurement

CUSTOMER
Adoption of e-Procurement varies widely across
organizations – Several factors drive increased adoption
and utilization
We have observed the following as key drivers for users to achieve
full functionality of their e-Procurement solutions:

An application strategy that is linked to business

45% strategy and alignment

of organizations have a Easy to use tools and solutions

Procurement application
strategy that is linked to its
Business Strategy* Flexibility and support for various
spend categories This document
addresses these

25% Understanding the complexities of the

spend category
2 drivers.

of organizations truly use

Engineering the process before automating the
the full functionality of their
process
e-Procurement solutions*
User-adoption and change management support /
training to stakeholders

* Source: The Hackett Group, “Understanding

e-Procurement Part I”, (2014)

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Overview of this Buy Designing an effective P2P strategy
Process Guide requires an understanding of the different
buy and invoice options as well as
advantages and disadvantages of each
option. In addition, there are other factors to
Purpose of this document: consider: managing compliance, balancing
 Showcase the different buying risk tolerance and efficiency advantages,
while ensuring that the process is user-
options available within SAP Ariba
friendly to the buyer
 Highlight spend categories best
suited for each option
 Outline the benefits and
considerations of each option
 Layout the application of each
option
 IN PROGRESS! Additional
information will be provided per buy
process for additional details and
best practices

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Buy Processes Available for Indirect Procurement

Buy Process Description Best Used For

SKU based items such as Office supplies,

Buyer selects items from a company specific
Catalog promotional products, non-inventoried
catalog for purchase.
MRO, IT hardware and peripherals

Infrequent, one-off purchases fulfilled via

Buyer selects items from a public marketplace
1 Spot-Buy
catalog (e.g. eBay, Grainger, etc.) for purchase.
public marketplace eCatalog; can include
non-sourced categories
Buyer selects item from a company specific
Materials & services to include facilities
catalog linked to a contract based on item,
Contract Based Requisition maintenance, items on consignment, items
commodity code or supplier (e.g. volume based
with tiered pricing, etc.
discounts).

Simple and complex services for recurring,

2 Invoice against Contract
Contract pricing terms are entered into the
milestone, or fixed fee activities to include
application without the need for a PO. These
consulting, professional services, snow
terms are available for the supplier to invoice.
removal, janitorial services, rent

Simple and complex products and services

Tactical Sourcing or Collaborative Requisitioning
Tactical Sourcing / between buyer and supplier supporting,
3 Collaborative Requisitioning clarification on specifications, spot-quotes and 3-
bids and a buy.
Buyer enters information manually into
4 Non-Catalog Requisition requisition, in many cases with a supplier quote
attached.
AP group creates invoice in system for payment
5 Non-PO invoice or Supplier creates invoice and routes to buyer
for payment
that require collaboration between buyer
and supplier to include materials with
variable pricing, marketing services, temp
labor, etc.
Infrequent, one-off purchase; sourced
through existing suppliers for materials &
services not in a catalog
Infrequent, one-off, and low-dollar
purchases such as catering services,
employee reimbursements, charitable
contributions, etc.

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1. Catalog

Description
A catalog based requisition is created based on an item that is selected from a supplier catalog. A supplier catalog item will contain a description of the item, price,
unit-of-measure, and other details about the item. There are various types of catalog options available including punchout, catalog interchange format (CIF), and user-
created catalogs.
 Punchout catalogs are interactive catalogs that are content-rich and may mimic a supplier’s e-commerce website. Punchout catalogs are typically maintained and
hosted by a supplier
 CIF catalogs are static catalogs that contain the basic information necessary for a purchase. CIF catalogs are typically maintained by a supplier and loaded by the
customer.
 User-created catalogs are static catalogs that contain the basic information necessary for a purchase. User-created catalogs are created by customers on behalf of
suppliers and as such have to be maintained by the customer

Benefits Considerations Categories That Are Best Suited SAP Ariba Product
• Drives compliance to preferred • Work with suppliers to control • Any sourced categories with Recommendation
suppliers and pre-negotiated the items available in catalog, predefined items at predefined • SAP Ariba Buying
prices e.g. you may not want your rates • SAP Ariba Catalog – for catalog
• Accelerates purchasing of Office Supplies catalog to • Office supplies content only. Requisitions and
frequently purchased items; contain IT hardware items. Purchase Orders will need to be
• Printed Materials (commercial
reduces requisition to PO cycle • Catalogs should be user friendly print, business cards, etc) generated from originating ERP
times with easy to understand item system
• Promotional products
• Reduces ad hoc and maverick descriptions and product
images. • Computer equipment and
buys
peripheral
• Easy to use for decentralized • Catalogs have to be audited
periodically to ensure that prices • Basic services e.g. waste
purchasing
are per negotiated rates removal, uniform services that
• Standardized information require a PO to request service
(especially true for punchout
captured for better spend
catalogs).
analytics
• Depending on how sophisticated
your supplier is, additional
capabilities can be delivered via
punchout catalogs. For example,
some suppliers display inventory
information, others can create
orders on behalf of the requestor
and post them on the punchout
5
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site for requestors to “pick-up”.
1. Spot-Buy

Description
Spot-Buy is a feature that provides customers access to an online Marketplace with top rated and commercially vetted suppliers. This feature allows the buyer to forgo
setting up new suppliers for these purchases, which typically amounts to 5% to 15% of the indirect spend.

Benefits Considerations Categories That Are Best Suited SAP Ariba Product
• Gain visibility and control over • Optimize the settings of Spot • Non-sourced categories Recommendation
non-sourced spend and Buy to align to company • Non-standard office supplies & • SAP Ariba Buying
purchases off-contract. objectives. Spot Buy can be technology peripheral items • SAP Ariba Catalog – for catalog
• Reduces the need for users to setup with wide or narrow content only. Requisitions will
• Non-contracted MRO
purchase outside of SAP Ariba. controls using Administration, need to be generated from
(maintenance, repair, and
Workflow, and Visibility tools. originating ERP system
• Automate ad-hoc requests with operations)
Some examples include: limiting
a quick and easy Spot-Buy • Infrequent one-off purchase
to approved content, requiring
requisition
approval in advance of order
• Ability to perform quick price placement, excluding items
comparisons on items that are based on categories that are
available from multiple suppliers covered in existing catalog, etc.
• Content rich catalogs that • Customers with few sourced
contain millions of SKU’s categories can consider using
• No catalog maintenance Spot Buy for all employees to
• Minimize supplier setups for ad- start your program. Over time
hoc purchases. Only one as categories are sourced,
supplier is setup in your ERP to contracted catalogs can be
utilize Spot Buy. added and category turned off in
Spot Buy.
• Spot Buy utilizes PayPal for
Payments, which is a great
opportunity to leverage the
Corporate Card Program and
increase rebates. (note – SAP
Ariba provides standard reports
to reconcile expense charges
back to the original cost center
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1. Contract Based Requisitions

Description
A contract based requisition is a requisition that is tied to a contract based on item, commodity code or supplier. A contract in SAP Ariba contains the supplier terms
and conditions, goods or services provided, description of items, price, unit of measure, etc. A contract in Ariba can either be created as a standard contract or a
Blanket Purchase Order (BPO) contract. A BPO contract is an agreement to spend a specific amount with a supplier over a specific time period. There are various
configuration settings available for contracts usage in Ariba including the ability to create releases against contracts, setting various limits for purchases, and setting
pricing terms, etc.

Benefits Considerations Categories That Are Best Suited SAP Ariba Product
• Requestor can create a contract • Contracts need to be set up and • Simple goods and services to Recommendation
based requisition relatively carefully maintained to ensure including facility maintenance, SAP Ariba Contract Compliance
quickly and tie back to accurate agreement start and direct materials, etc. engine is included with the
negotiated contract terms and end dates, item/service prices • Dock door repairs following:
pricing and other contract data • SAP Ariba Buying
• Roofing
• Contract items can be made to • SAP Ariba Catalog – for contract
• Asset maintenance
appear in a catalog – allowing content only. Requisitions and
user to purchase using catalog • Items on consignment
Purchase Orders will need to be
like experience • Any supply arrangement where generated from originating ERP
• Ability to support a tiered rate supplier does not furnish catalog system
card that automatically applies but customer wants to
discounts based on volume or standardize items and prices
spend on an aggregate or per
order basis
• Ability to set limits and pricing
terms on contracts
• Ability to ensure buyer
compliance to contracts

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1. In creating catalog based requisitions, we recommend
reviewing the following process considerations
Description Considerations

Create Request Requestor creates a request by selecting items from a catalog,

Approval: Whether approval is required for catalog based requisitions and type of
based on Catalog whether it’s a regular catalog, a catalog linked to a contract
approval required (financial approver vs supervisor approval vs others)
or from the Spot Buy marketplace.

Whether catalog based requisitions are immediately converted to PO and sent to

Create PO Approved requisition is then converted into a purchase order (PO)
supplier or whether catalog based requisitions may still require buyer review

• PO delivery mechanism: Ariba Network vs ERP system. Ariba Network is

recommended to take advantage of a single mechanism for sending electronic orders.
Spot Buy orders must be delivered over the Ariba Network.
Transmit PO Purchase order is transmitted to the supplier
• Order confirmations: Whether suppliers should send order confirmations when PO’s
are received
• Advanced Shipping Notice: Whether suppliers should send Advanced Shipping Notices

• Receiving: Receipt or no receipt for catalog based purchases.

Receive Physical order is received from supplier and order is received in the • Other considerations: Receiving based on commodity type or dollar value of purchase,
system Centralized receiving.

• Organizations gain maximum efficiency by receiving electronic supplier invoices over

Invoice is either sent electronically by supplier or manually (paper
the Ariba Network via cXML, EDI, or PO flip.
invoice)
Create Invoice • Invoice requirements: There are numerous invoice requirements that can be added
Invoice process is not applicable where a supplier pcard or Paypal
on the Ariba Network to ensure supplier compliance (refer to the Ariba Network
is used as a form of payment, e.g. Spot Buy.
Buyer Administration guide for detailed options)

Invoice that fully matches to the PO and receipt is auto-approved

for payment
Approve Invoice Invoice reconciliation threshold: Consider the invoice mismatch thresholds for orders
Invoice that does not match has to be reconciled
and varying thresholds based on spend categories
Invoice process is not applicable where a supplier pcard or Paypal
is used as a form of payment, e.g. Spot Buy.

• Pay Supplier
Pay Supplier Invoice that has been approved is sent to ERP for payment
• Spot Buy - Payment to supplier is made through PayPal, funded by a corporate card
or Paypal funded account.

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2. Invoice against contract/BPO

Description
An invoice against contract/BPO is a process that allows the user to pay for a product or service where a PO is not required. While a PO is not required for this
process, an invoice against contract/BPO still allows the system to track all the necessary information to ensure compliance to purchasing policies and contract
information. This process is typically used for service type purchases where there are recurring invoices that can be fixed or variable in nature.

Benefits Considerations
• Process efficiency for long term • Since no PO is created, it is
service engagements by important that Strategic
eliminating the need for a Sourcing, Contract Management
Purchase Order and allowing and Procurement Operation
payment against a pre- processes are integrated to
negotiated contract following the achieve the following 4
terms and pricing on the contract objectives:
• Maintains pricing and contract 1. Clear deliverables and pricing
controls for variable and defined in the contract that are
recurring Invoices consistent with invoicing
• Maintains compliance to 2. Financial approval and cost
company policies center information obtained
• Ensures data for purchases are 3. Contract Owner established for
captured in the same repository ongoing expense management
system allowing for centralized of the contract
data capture and spend analysis 4. Level of compliance to enforce
Categories That Are Best Suited SAP Ariba Product
• Consulting Recommendation
• Professional Services • SAP Ariba Buying and Invoicing
• SAP Ariba Invoice Management
• Adverting & Media
• Outsource Services (Services, • SAP Ariba Contract Invoicing
BPO, ITO)
• Simple and complex services
and recurring activities (e.g.
snow removal, janitorial
services, landscaping)
• Recurring payments e.g. rentals
and leases

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2. In creating invoice against contract, we recommend
reviewing the following process considerations
Description Considerations

Create Request Contract is approved, signed and provided to central team to • Key information will need to be supplied along with contract, e.g. accounting details.
based on Catalog create in SAP Ariba. • Contract Type: Supplier vs. Commodity vs. Item Level Contract
Contract Business Owner is notified • Receiving against Contract: Consider whether to allow receiving against contract
• Invoicing against Contract: In Contract Workspace, allow Invoicing against Contract

Pricing terms are setup for contract • Depending on the Contract Type created (from above), the pricing functionality will
Create PO Contract is setup with no-release required vary

• Ensure supplier is aware that any invoice against contract requires reference the
Transmit PO Contract information is sent to supplier along with Contract Number
Contract Number on the invoice

Physical goods or service are received from supplier and goods or • Receiving: Whether to perform receiving/no receiving on invoice against contract. For
Receive service are received in the system Services, receiving can be replaced by invoice approval
• Receiving: Receiving is not commonly done for Invoice against contract
• Other considerations: Receiving based on commodity type or dollar value of purchase

• Organizations gain maximum efficiency by receiving electronic supplier invoices

Invoice is either sent electronically by supplier or manually (paper submitted over the Ariba Network.
Create Invoice invoice) • Invoice requirements: There are numerous invoice requirements that can be added
Electronic invoice from supplier is matched against Contract on the Ariba Network to ensure supplier compliance (refer to the Ariba Network
Number Buyer Administration guide for detailed options)

• Invoice reconciliation threshold: Consider the invoice mismatch thresholds for

Invoice that fully matches to the contract is auto-approved for
contracts and varying thresholds based on spend categories
Approve Invoice payment
• Specialized invoice approval by contract owner for Services spend (in lieu of
Invoice that does not match has to be reconciled
performing receipt transaction)

Pay Supplier Invoice that has been approved is sent to ERP for payment • Pay Supplier

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3. Collaborative requisitioning

Description
Collaborative requisitioning is a requisition that is created collaboratively with a supplier. After a requisition is created and fully approved internally, it is then sent to the
supplier for review. The supplier will have the ability to reject or submit a proposal to update the request. Once the updated request has been reviewed and approved
by the buyer, the requisition can then submitted for approval. The approved requisition then becomes a purchase order. A collaborative requisition can be sent to one
or many suppliers for collaboration and to receive a quote before selection of the supplier.

Benefits Considerations Categories That Are Best Suited SAP Ariba Product
• Allows buyer and seller to agree • Collaborative requisitions are • Simple and complex products Recommendation
on specifications prior to most common with preferred and services that require • SAP Ariba Buying
material/service being suppliers where there are collaboration (price or scope is
purchased standard processes and unknown) between buyer and
• Allows flexibility and variation procedures in place. However, seller including materials with
based on the type of category potential suppliers can be on- variable pricing, printed material,
for purchase i.e. temp labor boarded fairly quickly as well marketing services, custom
requires different requirements • Suppliers have to be “enabled” configured products such as
compared to buying marketing on Ariba Network in advance of office furniture, etc.
material executing the collaboration • Custom projects where supplier
• Allows competitive bidding with process can build PO to define discrete
multiple suppliers – if items and services required
configuration is setup as such in • In public sector (schools,
the request government organizations, etc.)
• Allows customer to enforce where competitive bidding is
policy that requires collaboration required
(ex: any purchase over $X has
to be collaboratively bid)

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3. In creating collaborative requisitions, we recommend
reviewing the following process considerations
Description Considerations

Create Request • Requestor creates a collaborative requisition by selecting an item • Consider the following types of approval in a collaborative requisition:
from a catalog or by creating a non-catalog collaboration request • Pre-collaboration: Approval before the collaborative requisition is sent to the
based on Catalog
• Policy requires collaboration on submitted requisition based on supplier for input
certain conditions • Collaboration: Approval of supplier collaboration input
• An approved collaboration request is then sent to the supplier (s) • Post Collaboration: Final approval of collaborative requisition before it is turned
for collaboration into a PO
• After supplier collaboration is complete, an award is made to • Suppliers have to be enabled on the Ariba Network before they can effectively
finalize the requisition with selected supplier (s) participate in an on-line collaboration

Create PO A fully approved collaborative requisition is then turned into a PO • Buyer Review: Whether collaborative requisition may still require buyer review

• Collaboration Order delivery mechanism: Ariba Network vs ERP system. Ariba Network is
recommended to take advantage of a single mechanism for sending electronic orders
Transmit PO PO from collaborative requisition is transmitted to the supplier • Order confirmations: Whether suppliers should send order confirmations when orders are
received
• Advanced Shipping Notice: Whether suppliers should send Advanced Shipping Notices
Physical order/service is received from supplier and is received in • Receiving: Whether to perform receiving/no receiving. Refer to previous slide for
Receive the system guidance on receiving

• Organizations gain maximum efficiency by receiving electronic supplier invoices via

Create Invoice Invoice is either sent electronically by supplier or manually (paper cXML and EDI but PO flip is an alternative option
invoice) • Invoice requirements: There are numerous invoice requirements that can be added
on the Ariba Network to ensure supplier compliance (refer to the Ariba Network
Buyer Administration guide for detailed options)

Invoice that fully matches to the collaboration order is auto- • Invoice reconciliation threshold: Consider the invoice mismatch thresholds for orders
Approve Invoice approved for payment and varying thresholds based on spend categories
Invoice that does not match has to be reconciled

Pay Supplier Invoice that has been approved is sent to ERP for payment • Pay Supplier

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4. Non-catalog requisition

Description
A non-catalog requisition is one that is created by entering data manually into the requisition. In a non-catalog requisition, the requestor is generally required to enter
all the required information into the requisition before the requisition is considered complete. Non-catalog requisitions do not use existing buyer or supplier catalogs, or
contracts. As a result, there is low process efficiency and they are more time consuming to manage from the business and Procurement point of view. The use of non-
catalog requisitions should be limited and carefully controlled.

Benefits Considerations Categories That Are Best Suited SAP Ariba Product
• Effectively used for off-contract • Periodically review and analyze • Infrequent one-off purchase Recommendation
use of goods and services that non catalog requisitions and • Typically PO’s that have a • SAP Ariba Buying
are not repeatedly needed; or, determine optimal channel complex set of deliverables that
effectively used for highly strategy. are not repeatable
customized purchases that are • Information entered onto
unique to the specific PO requisition may be limited and
• Flexibility for the type of may vary in terms of details
purchase that is being made provided by the requestor (the
• Flexibility in the amount and type requestor may only fill in the
of information that is entered into minimum required information) –
the requisition for the supplier this leads to insufficient data and
inconsistent data for spend
• May generally be able to create
analysis
a requisition relatively quickly
• Pricing information which is user
provided maybe incorrect which
may lead to invoice
reconciliation errors
• Requires strict controls – must
route to Centralized Purchasing /
Responsible Buyer (s) for review
and approval
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4. In creating non-catalog requisitions, we recommend
reviewing the following process considerations
Description Considerations

Create Request Requestor creates a non-catalog based request by manually

• Type of approval required (financial approver vs supervisor approver)
entering purchased item/service data into requisition

• Non-catalog requisitions should require buyer review to ensure compliance to

Create PO Approved requisition is then converted into a purchase order (PO)
company policies

• PO delivery mechanism: Ariba Network vs ERP system. Ariba Network is recommended to

take advantage of a single mechanism for sending electronic orders
Transmit PO Purchase order is transmitted to the supplier • Order confirmations: Whether suppliers should send order confirmations when PO’s are
received
• Advanced Shipping Notice: Whether suppliers should send Advanced Shipping Notices

Physical order is received from supplier and order is received in the • Receiving: Whether to perform receiving/no receiving on non-catalog based
Receive system purchases.
• Other considerations: Receiving based on commodity type or dollar value of purchase

• Organizations gain maximum efficiency by receiving electronic supplier invoices via

Invoice is either sent electronically by supplier or manually (paper cXML and EDI but PO flip is an alternative option
Create Invoice invoice) • Invoice requirements: There are numerous invoice requirements that can be added
on the Ariba Network to ensure supplier compliance (refer to the Ariba Network
Buyer Administration guide for detailed options)

Invoice that fully matches to the PO is auto-approved for payment • Invoice reconciliation threshold: Consider the invoice mismatch thresholds for orders
Approve Invoice Invoice that does not match has to be reconciled and varying thresholds based on spend categories

Pay Supplier Invoice that has been approved is sent to ERP for payment • Pay Supplier

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5. Non-PO based invoice

Description
A Non-PO based invoice is an invoice that is created:
 Electronically by a supplier via cXML/EDI
 Automatically by scanning a paper invoice via Invoice Conversion Services or OpenICS
 Manually by a supplier entering data on the Ariba Network
 Manually by AP managing data entry
Non-PO Invoices are not a preferred solution for most spend because the lack of a Purchase Order in the procurement process prevents end-to-end spend
management. This approach can provide benefits, however, by adding control via workflow and approval rules to spend that does not justify full PO treatment

Benefits Considerations Categories That Are Best Suited SAP Ariba Product
• Allows organizations to pay • Invoice from supplier may not • Infrequent or one-off purchases Recommendation
supplier while keeping track of have a lot of info/data resulting • Low-dollar value purchases • SAP Ariba Buying and Invoicing
spend and associated in data that has limited use for • SAP Ariba Invoice Management
• Employee reimbursements
information (supplier, purchased spend analysis
information, etc.) in one central • Charity payments
• Workflow process to obtain
repository allowing for business and fiscal approval for • Leases
centralized data capture and payment of invoice adds some • Tax payments
spend analysis control and visibility • Unplanned / one-off services
• Provides workflow routing to • Without explicit rules to limit
capture approval for Invoices usage, employees may exploit
that do not have a PO/Contract, this channel to avoid a more
which enhances AP policies to rigorous procurement process
ensure approval in advance of
payment.

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5. In creating non-PO invoices, we recommend reviewing
the following process considerations
Description Considerations

• The types of suppliers (low dollar, infrequent) for which Non-PO Invoicing is a good
Invoice is either sent electronically by supplier or manually (paper
Create Invoice fit are those that are less likely to sign up for network services. As such, it is
invoice). If the invoice is sent manually, it can be entered by the
important to consider how to efficiently handle paper-based invoices.
business user or by a centralized group (e.g. AP)

• Invoice approval: Consider the number of and thresholds for approvals needed to
Approve Invoice Invoice has to be approved before it is paid approve a non-PO invoice. Triggering management review at a lower dollar limit
than other purchases is a good way to prevent misuse / overuse of this channel.

Pay Supplier Invoice that has been approved is sent to ERP for payment • Pay Supplier

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TAKE ACTION
Map spend categories to the appropriate buy process as a part of flight
planning. Customer category mapping example shown below.

IT Products & Services Example Buy Process Mapping

Annual Sample
Subcategory % Primary Process Alternative Process
Spend Vendors
Catalog
Software X % ABC Contract based catalog
Invoice against contract

Networking Catalog
X % ABC Contract based catalog
Equipment Invoice against contract
Data Storage X % ABC Invoice against contract
Catalog
Hardware X % ABC Spot-Buy
Invoice against contract
Disaster Recovery
X % ABC Invoice against contract

Web Hosting Invoice against contract

X % ABC
Contract based catalog
Total $XX 100%

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