SAP: No Longer 'Horrible'

By Baselinemag  |  Posted 2004-08-01 Print this article Print

SAP came late to the supplier-relationship management software dance. But it's making up for lost time.

SAP would win the "most improved award" among supplier-relationship management software makers. The company admits it was a latecomer to the SRM fiesta. Moreover, SAP's earliest e-procurement offerings were "horrible, absolutely horrendous" in terms of how difficult they were to use, says Tim Tulio, e-procurement systems manager at Air Products and Chemicals, which in 2000 opted for Ariba's software instead.

Now, SAP claims to have the market lead with $150 million in license revenue from its SRM software last year. "We've come a long way on ease of use and integration," says Faheem Ahmed, product marketing manager at SAP.

One problem with the old way SAP did online procurement: It forced everyone to tab through at least three dense screens, even just to order a box of paper clips. "The common complaint we've had is that SAP's requisition screens are too complicated," says Jeff Williams, director of Tyson Foods' Procure to Pay program.

Tyson today uses SAP's R/3 system to let 2,000 employees order 500,000 items from 5,000 vendors. The company is rolling out SAP's Enterprise Buyer 4.0, which contains all order information on a single page and self-populates many fields that used to require manual entry. "Now users just need to know what they want, how many and when they want it," says Williams.

SAP had to iron out some wrinkles on the way. In November 2002, office furniture maker Steelcase launched SupplySync, which lets the company place orders with and provide inventory data to 255 suppliers, based on SAP's software. Rob Poel, manager of supply chain management, says the software was immature at the time and still has some "stability issues": "We were down for an entire day at one point." But overall, he says, the system has helped lower supply chain costs, letting Steelcase process 68% of its invoices electronically.

While SAP touts integration among its SRM modules and core R/3 software, customers say the pieces don't always work together as neatly as they'd like. Dow Corning wants to hook SAP's inventory database to Enterprise Buyer (a feature slated for the next release) so that when a work order is submitted, if all the required items aren't in inventory the system will kick off a purchase order to the appropriate supplier. "That's one area where we'll absolutely be using SAP's SRM," says Lori Schock, the company's global business process manager.

Supplier Relationship Management

3999 West Chester Pike,
Newtown Square, PA 19073
(610) 661-1000

Ticker: SAP (NYSE)

Employees: 30,166

Shai Agassi
Executive Board Member
In charge of the company's overall technology strategy, he oversees development of mySAP Supplier Relationship Management (SRM), among other product lines.

Manfred Heil
SVP, Supplier Relationship Management
Directly responsible for SRM products, he joined SAP in July. Previously he was vice president of Ariba's European operations. He founded Goodex, an e-sourcing services firm based in Germany, which Ariba acquired last year.

Enterprise Buyer processes orders and manages product catalogs imported from suppliers. Bidding Engine handles auctions and requests for quotation, with tools to identify winning suppliers. Supplier Self-Services lets vendors view order status and provides content-management features.

Reference Checks

Tyson Foods
Jeff Williams
Dir., Procure to Pay
Project: Meat processor, which operates 150 U.S. plants, plans to let workers purchase items through Enterprise Buyer instead of requiring them to use R/3.

Dow Corning
Lori Schock
Global Business Process Manager
(989) 496-4000
Project: Maker of silicone-based products uses Enterprise Buyer to submit 3,000 to 5,000 procurement requests per month.

Seattle Public Schools
Tom McBroom
Mgr., Business Systems
Project: School district rolled out Enterprise Buyer and SAP Financials in 2000; the system lets 600 staff members order office supplies, educational materials and other products.

Valero Energy
Peter Hyk
Procurement Systems Development
(210) 345-2000
Project: Texas oil refiner lets 100 users in its retail business unit order 2,000 items, such as gas-pump nozzles, via Enterprise Buyer.

Rob Poel
Mgr., Supply Chain Management
(616) 698-4757
Project: Office furniture company deployed SAP's SRM suite in 2002; while the software was "immature," the company expected future versions to integrate well with R/3.

Xerox UK
Mark Stewart
E-Procurement Project Manager
Project: Copier and office equipment maker standardized purchasing processes in 14 European countries with Enterprise Buyer, which lets 1,500 users order from 15,000 suppliers.

Executives listed here are all users of SAP's products. Their willingness to talk has been confirmed by Baseline.

SAP Operating Results*

Gross margin63.4%63.9%62.0%
Operating profit$874.74M$2.17B$1.71B
Net profit$577.52M$1.36B$533.74M
Net margin14.3%15.3%6.9%
Earnings per share$1.86$4.36$1.70
R&D expenditure $594.43M$1.25B$954.31M

* Fiscal year ends Dec. 31; YTD reflects first six months
Figures are based on period-end exchange rates from euros
Sources: company reports; OANDA.COM

Other Financials**
Total assets - $8.34B
Stockholders' equity - $4.78B
Cash and equivalents‡ - $3.34B
Long-term debt - None
Shares outstanding - 1.24B
Market value as of 7/27 - $48.33B

** As of June 30, 2004, except as noted
‡ Includes short-term investments


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