Insights on Procurement: SR Analysis - Part II (2024)

Sanction Request (SR) refers to a concise and confidential note that's used for taking approval from management before processing purchase order against a purchase request. It's scrutinized meticulously by multiple authorities with different impact levels. Depending on the SR value, SR basis and Delegation of Power (DoP), the final approval authority can vary from Head of Dept. to CEO of the company.

The basis of SR can be:

1. Lowest offer basis
2. Higher than lowest offer basis
3. Single party basis
4. Proprietary basis
5. Change order

SR consists of information like item detail, vendor panel, SR/order basis, tabulation sheet, delivery terms, payment terms etc. These information are highly sensitive in order to maintain fair play among vendors and has the ability to affect credibility of purchasing organization. Hence, SRs have limited access even within organization and its access requires prior approval.

Unlike order data (that can be collected using SAP tcodes), SR data can be classified as semi-structured data and an analyst has to take an extra pain of converting this data into meaningful fields. But the pain is worth taking because of the following outputs that an order data can hardly achieve or partially achieve:

1. Vendor Database: While the order data provides you list of winning vendor, SRs contains list of all participating vendor along with item list that they had bid for.
2. Optimal vendor panel size: A plot between %discount vs panel size and PR-SR lead time vs panel size can provide insight to optimal vendor panel size for your Procurement organization.
3. Descriptive analysis of final result: Final result for each vendor can be plotted to see how many time a vendor has come out as 1st, 2nd, 3rd and so on. It can be fruitful to shortlist vendors for future vendor development programs.
4. Historical discount pattern: A box plot of negotiated discount for each vendor can reveal the discount pattern of vendors. If you can delve deeper and understand its discount behavior depending upon competition level in vendor panel, a lot of information on pricing strategy of vendor can be found.

In order to get above outputs, an analyst need to capture initial price, final price, negotiated discount and final rank. He/she can use simple excel tools like graph, pivot, box and whisker to generate above output and use SR analysis to equip procurement manager with an extra lever before entering into the negotiation room to create value for the organization.