Are supplier-driven transformations a realistic goal? Putting SAP Business Network's talking points to the use case test

(David Gutierrez of Mabe at SAP Spend Connect '22)

Nothing is more of a drag than a closed mind. I've been critical of SAP's Business Networks approach - both the strategy and the messaging.

However, instead of turning a cold shoulder, the SAP Business Networks team engaged me repeatedly, even luring me to the SAP Spend Connect Live show this fall. What I learned shifted my thinking.

In my Spend Connect 2022 review, I concluded that if SAP can turn its separate Business Networks assets into a coherent experience - via one unified portal - that could change their ERP play:

These projects have the potential to change how we think about ERP. Why shouldn't supplier integration and collaboration be considered a core ERP concept?

My greatest worry before Spend Connect Live?

My fear was that this event would feel like Ariba Live, with a fresh coat of paint. It was not. I talked with customers in multiple spend areas.

Mabe - digital transformation includes your supplier network

Alas, good customer content from Spend Connect Live got buried in my fall travel circus. So in 2023, I got updates. First up?  David Gutierrez,  Evaluation Engineer with Mabe. Via their headquarters in Mexico City, Mabe designs, produces, and distributes appliances to more than 70 countries. When I spoke to Gutierrez this fall, his team was in the midst of launching a global Ariba rollout. In my Spend Connect Live review, I raised this question: why don't more digital transformations start with suppliers?

We've talked so much about customer-driven transformations, but isn't a supplier-driven transformation worth charting out as well?

While I don't get the sense that Mabe's transformation is entirely supplier-driven, it's certainly a factor. As Gutierrez told me:

The vision of the company to make the digital transformation happen begins four years ago, from planning to implementing the vision.

The pandemic brought curve balls, but it also reinforced the need for change, including supplier management:

With this planning, we began to find all the tools to solve this, and to make ourselves a more digital company. We decided to implement the SAP Business Network, and the implementation began in 2020.

For Mabe, bringing all its suppliers onto Ariba is no small undertaking. As Gutierrez told me, change management efforts included their suppliers - to convince them to make the move. Obviously, if your suppliers don't embrace the new platform, your business network isn't going to work out. Yes, you can sometimes force your suppliers to buy in, but that's not the ideal course of action. Gutierrez said the new user experience helped Mabe to get the majority of suppliers to embrace the new platform.

So was this transformation about eliminating manual processes? Gutierrez:

More the paperwork... We have a lot of paperwork, a lot of emails, a lot of information. The idea is to have all the information in one portal. Some internal users, in the past, said 'My Excel is better than the system.'

Gutierrez knew he had to make a change -  and make the Mabe user experience in SAP Business Network better than spreadsheets. Time for an external (and internal) change management approach. Mabe has enlisted the help of their services partner Sintec to make it all happen.

When we spoke at Spend Connect Live, Mabe was still in the midst of their supplier rollout for Mexico; 300 suppliers were live - about half of total. So what was the key to getting them on board? Gutierrez said it was about pro-active communication of the upcoming changes. Mabe made sure to explain the benefits of moving to the new system: less paperwork, a faster system, easier to manage remotely via cloud access. Gutierrez said yes, there were questions about the security of the cloud, but those were addressed by explaining how the information is stored, and how data risks are minimized.

After the holidays, Gutierrez sent a progress report: they are still working on the Mexican supplier rollout. February looks to be busy, with 50-75 new suppliers onboarding. Once the Mexican rollout is completed, Mabe will "need to implement the use of SAP Business Network in the other plants like Colombia, Ecuador, Argentina." In his update, Gutierrez wrote that he also wants to expand the scope of the supplier relationship:

We want to work with more suppliers in forecast and response and supply, and also to investigate further the replenishment process with some suppliers. Also, we are working to increment the number of suppliers to make invoices and credit notes in Ariba. This reduces a lot of time in our process.

KUKA - modern robotics versus data silos

I got a different angle from Dr. Christian Liedtke, Principal Consultant with KUKA AG. KUKA is an Ariba (and S/4HANA) customer, but that's not Liedtke's focus. He is highly active with the SAP Business Network's Asset Collaboration. And yet, KUKA is not themselves an Asset Collaboration customer. How does that work? At Spend Connect Live, Liedtke cleared up my confusion. KUKA is a German manufacturer of industrial robots and factory automation systems. Liedtke's team discovered that SAP Asset Collaboration is crucial to their go-to-market - and their customer differentiation.

As Liedtke explained, the issue goes back to industrial data silos:

This strategy of the entire industry for decades was: 'We need to bind the customer exclusively to us... Therefore, we somehow need to hack the customer and never let them go.' So that's why we are in all those silos.

But in the Industry 4.0 era, that approach backfires. One example? Industrial climate control. Liedtke explains:

To do Industry 4.0, you somehow need to exchange data. You need to connect different solutions with each other. Just talking about our robots - we are very big in automotive automation. So we do for example, point welding for manufacturing. In earlier years, nobody would have ever cared about the climate you have around.

But the customer does not accept that anymore - that they have to take care of it for themselves. They want an integrated solution that is just controlling it... So we have to exchange data with the climate control. How do you do that? We never thought about something like this. And so now I'm closing this big loop.

And closing that asset data loop is where the SAP Business Network fits in. Liedtke:

That's what the Business Network from SAP is offering. It's a kind of consolidation layer between those different silos... Of course, it also has a second task. Now, we've done so many pilot cases, or proof of concepts in the industry. And this is all just fooling around, it's like, R&D guys playing with something. But at some point, in production, you want to have the information in your business process, you need to bring it in your ERP system. And that's where SAP comes into the role.

In Europe, 95% of the companies also use SAP as an ERP system. So it's the the only go-to place to have an independent network that is connecting all the different silos, and connected upstream then with your ERP system. So that's why we teamed up with SAP and are actually doing this. Now we're quite successful together, showing customers what the future is going to look like.

Therefore, SAP Business Network's Asset Collaboration is now integral to how Liedtke's team goes to market - and has been for the last three years. Today, Liedtke doesn't see how KUKA can serve its larger robotics customers without SAP:

We're doing this by actually providing those models in what was formerly called the Asset Intelligence Network. But those AIN models are in the SAP Business Network. We provide them for our customers. Of course, if you have a customer who's pretty small with maybe one robot, they will never be interested in such a solution, with a model of one robot.

But if you have a customer like an automotive OEM, who has like 20,000 or 30,000 robots from us, and of course from other robot builders as well, then it's of real interest, because if you get all those models' master data just automatically, it spares you dozens of employees that are just sitting there for years and crunching numbers into some kind of Excel sheet, to actually fill in what kind of equipment is there. And once the spreadsheets are finally ready, the first ones have already changed. So having a solution that automatically provides that information and keeps them updated, is, for for large customer, an absolute must to do it that way.

Tell us more on why this benefits KUKA customers?

Well, it helps us because we can help our customers... If we are the ones who are taking the headaches away from our customers, they will come back to us. And they will say, 'Next time, I want a Kuka robot, because they are offering all that.' So we are actually doing quite a lot on the soft skills side, to convince our customers that we are the best solution.

Given the price points for quality robotics, it makes sense to create a unique value proposition - not to mention a more sophisticated sales approach, where you are solving problems, not just pushing product. What has KUKA achieved with SAP? You can read more about KUKA's view on their SAP partnership on their site, but Liedtke told me about one proof of concept in particular, with a massive European customer of both SAP and KUKA:

They were evaluating the SAP Business Network, and they were looking a partner to actually try this and SAP, we because of our relationship said, 'Okay, you have KUKA robots, do you want to try it with KUKA robots?' And they were fascinated, and we could show them the benefits that you get out of such a business network.... This leads to all kinds of solutions.

My take

Recently, Liedtke updated me on their progress. Have the economic headwinds changed his approach?

With digitization and robot-based automation, customers are investing in their own future viability, especially in the face of difficult economic conditions. But despite these difficulties, it is clear that KUKA offers the right solutions for major developments such as reshoring of production, i.e. relocation back to the home region, shortages of skilled workers or the global desire of customers to make their own processes more flexible and resilient.

The latest figures from the International Federation of Robotics (IFR) also confirm this trend: more than 517,000 new industrial robots were installed in factories worldwide in 2021, 31% more than in the previous year. China in particular recorded high growth rates, with the number of robots delivered here increasing by 51%. The stock of operational robots around the globe reached a new record of around 3.5 million units.

Concerning our actual plans with the SAP Business Network for Asset Management, KUKA and SAP have teamed up for a joint proof of concept at two automotive OEMs.

Both companies mentioned the productivity drag of old school spreadsheets. That should keep those of us who get too futuristic about the future of supply networks humble. Customers are still bearing down on fundamental data/process problems. In my SAP Spend Connect Live review, I wrote:

From what I can tell, spend customers are energized by SAP's approach here - though the ones I talked to are really focused on one area of spend. Or even within one area, like appliance producer/distributor Mabe, which is now expanding its Ariba supplier onboarding from Mexico to internationally.

But there is a broader context:

However, many of the customers are engaged in some type of broader transformation, of which these spend projects are a part. Which raises a potent question: what does a supplier-driven transformation look like? What are the levels of maturity? How can you stack up quick wins, and assess your progress?

After SAP Spend Connect Live, I asked ASUG CEO Geoff Scott for his take on how SAP's Business Network push fit in with ASUG member priorities. Scott told me that the impact of consumer UIs is changing expectations around spend management:

There's no better sense of the need to live in an integrated world than what you see happening in spend today. Organizations need to process payments faster; they need to get sales orders done. We want the back end of commerce to work as easily as the front end does. Our experiences as consumers - we now are trying to carry them into our experiences as employees, and they don't equate necessarily one for one. But they need to.

Along those lines, Scott told me that ASUG members would welcome hearing more from SAP on workflow automation and ease of use in spend:

You and I were talking just a minute ago about low-code and no-code. In an incredibly complex area like spend management, how does all that come together to drive simplicity and drive speed?

I believe what Scott is calling for here lines up well with SAP's work on a unified supplier portal. I also think SAP is still fleshing out how customers in one part of the Business Network can derive value across the network. Customers, meanwhile, still have their hands full with their own transitions, with plenty of data silos and manual processes to work through.

Do these customers support SAP's direction? I think so - but they also remind us that the Business Network of the future isn't necessarily what's needed in 2023. What's needed are the steps towards shorter term ROI, while demonstrating that a smaller use of the SAP Business Network has a way of evolving into deeper engagement.

I don't think those proof points are there just yet, but from the stories I heard at Spend Connect Live, customers are aware that installing a procurement point solution would be limited thinking at best. There is a broader change in play here - and SAP is getting a lot better at making that case. Whether those proof points will get fleshed out in 2023 is an SAP story to watch.

Updated February 15, 10:30 am US PST, with a few smaller tweaks for reading clarity. I also added Geoff Scott's views on spend to the "My take" section.