SAP Ariba provides a rigorous set of controls, processes, and workflows in all the solution areas to avoid the principal-agent problem. To counter this conflict of interest, organizations can seek to establish systems of checks and balances in procurement operations and systems. The purchasing agent’s interests may not always align with the principal’s in practice.Īs a result, a conflict of interest scenario may arise, whereby the agent colludes with the supplier, accepting bribes or less overt forms of payment in kind to steer the deal to the favored supplier. Thus, the purchasing agent in this interaction holds a powerful position, as the purchasing agent can influence or even decide the outcome of this situation in favor of a particular supplier. Under this pressure to win, suppliers are tempted to create an “edge” wherever possible to win the bid. Procurement transactions typically operate as zero-sum games, whereby a supplier either wins the deal and does business with the purchasing company or doesn’t. SAP Ariba (Overcoming the Principal-agent Problem)Īlso known as the agency problem, the principal-agent problem refers to a conflict of interest that can occur when an agent acts on behalf of an organization. In the following sections, we’ll discuss the SAP Ariba tools that help businesses overcome these challenges. The main considerations and challenges for the procurement process include the following: the principal-agent problem, demand planning, suppliers, purchase agreements, consumption of goods, invoicing, and analysis.

SAP Ariba Overcomes These Procurement ChallengesĪs with any process, procurement’s complexity arises in the steps and details.

In this blog post, we’ll cover the basics. SAP Ariba offers a comprehensive array of tools and solutions to cover core procurement activities and challenges.

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