Fonterra - SAP Best Tech Awards 2025 Spend Management
Fonterra's SAP-enabled Source to Pay transformation delivers outstanding impact Download the DocumentBest Tech SAP
Industry WebsiteProduct and Services Featured SAP Solutions
Manufacture and
export of dairy
products
www.fonterra.comMilk, butter, cheese, yoghurt and
nutritional ingredients
SAP S/4HANA; SAP Ariba; SAP Business
Network
Fonterra is one of the top six dairy companies in the world, with a turnover of $23bn, making it Aotearoa New Zealand’s largest company.
Fonterra is owned by over 9,000 New Zealand dairy farmers who supply more than 16 billion litres of milk each year. With over 26 manufacturing sites in New
Zealand, 95% of local production is exported to more than 130 countries. Through the spirit of co-operation, Fonterra’s famers along with 16,000 employees
share the goodness of milk, with a vision to be the source of the worlds’ most valued dairy products.
Fonterra’s current processes, IT and data landscape is highly complicated, including 6 core legacy ERP systems. To streamline and standardise operations,
Fonterra is undergoing strategic multi-year transformation programmes with SAP.
Fonterra’s ‘Source to Pay Programme’ is a procurement transformation project, which included the launch of E-Commerce to transact with vendors electronically
through the SAP Business Network as well as a refreshed SAP Ariba Guided Buying platform to improve processes, simplify buyin g channels, and create a better
user experience.
Fonterra’s ‘Pūnaha Programme’ is driving the core system of record replacement, from SAP ECC to S/4HANA, which is Fonterra’s biggest technology investment
and transformation to date, impacting almost every part of the Co-operative.
Fonterra’s SAP-enabled Source to Pay
transformation delivers outstanding impact
Spend Management
Industry WebsiteProduct and Services Featured SAP Solutions
Manufacture and
export of dairy
products
www.fonterra.comMilk, butter, cheese, yoghurt and
nutritional ingredients
SAP S/4HANA; SAP Ariba; SAP Business
Network
Fonterra is one of the top six dairy companies in the world, with a turnover of $23bn, making it Aotearoa New Zealand’s largest company.
Fonterra is owned by over 9,000 New Zealand dairy farmers who supply more than 16 billion litres of milk each year. With over 26 manufacturing sites in New
Zealand, 95% of local production is exported to more than 130 countries. Through the spirit of co-operation, Fonterra’s famers along with 16,000 employees
share the goodness of milk, with a vision to be the source of the worlds’ most valued dairy products.
Fonterra’s current processes, IT and data landscape is highly complicated, including 6 core legacy ERP systems. To streamline and standardise operations,
Fonterra is undergoing strategic multi-year transformation programmes with SAP.
Fonterra’s ‘Source to Pay Programme’ is a procurement transformation project, which included the launch of E-Commerce to transact with vendors electronically
through the SAP Business Network as well as a refreshed SAP Ariba Guided Buying platform to improve processes, simplify buyin g channels, and create a better
user experience.
Fonterra’s ‘Pūnaha Programme’ is driving the core system of record replacement, from SAP ECC to S/4HANA, which is Fonterra’s biggest technology investment
and transformation to date, impacting almost every part of the Co-operative.
Fonterra’s SAP-enabled Source to Pay
transformation delivers outstanding impact
Spend Management
Challenges
Fonterra’s Source to Pay process is complex with over $6.7bn global spend, 1 million invoices, across 15,000 vendors.
Some of the key challenges faced include:
• Lack of contract visibility and spend connected to contracted rates: Over $3 billion of spend was not linked to a contract, and contract
information was not digitized in the Ariba system, making it hard for employees to buy at the right price (contracted rates). This resulted in some
vendors charging up to 50% more than agreed contracted rates.
• Not buying from preferred vendors: Preferred and qualified vendors weren’t visible in the system which contributed to over 700 one-time vendors,
being set up each year. This is a missed opportunity to consolidate spend and negotiate better deals with vendors.
• Manual and inefficient processes: Processes were hard to follow so we observed poor procurement practices such as 30% of purchase orders
being raised after the invoice was received. Procurement teams spent most of their time on reactive tasks, leaving little tim e for strategic activities.
• Frustrated vendors: Of the 1 million invoices received annually, many required manual intervention to process, leading to late payments. Lots of
time was spent trying to get information for vendors about when they would receive payment.
• Legacy systems: The existing ERP was highly customised, making it difficult to leverage tech upgrades without significant development time and cost.
Fonterra’s Source to Pay process is complex with over $6.7bn global spend, 1 million invoices, across 15,000 vendors.
Some of the key challenges faced include:
• Lack of contract visibility and spend connected to contracted rates: Over $3 billion of spend was not linked to a contract, and contract
information was not digitized in the Ariba system, making it hard for employees to buy at the right price (contracted rates). This resulted in some
vendors charging up to 50% more than agreed contracted rates.
• Not buying from preferred vendors: Preferred and qualified vendors weren’t visible in the system which contributed to over 700 one-time vendors,
being set up each year. This is a missed opportunity to consolidate spend and negotiate better deals with vendors.
• Manual and inefficient processes: Processes were hard to follow so we observed poor procurement practices such as 30% of purchase orders
being raised after the invoice was received. Procurement teams spent most of their time on reactive tasks, leaving little tim e for strategic activities.
• Frustrated vendors: Of the 1 million invoices received annually, many required manual intervention to process, leading to late payments. Lots of
time was spent trying to get information for vendors about when they would receive payment.
• Legacy systems: The existing ERP was highly customised, making it difficult to leverage tech upgrades without significant development time and cost.
Solution
The vision was to enable a better user experience, improve vendor and risk management, create greater transparency, simplify and standardise systems,
enabling cost savings to be made.
Fonterra embarked on a multi-year project (2022-2025) to implement the following SAP solutions across the Source to Pay processes:
• SAP Business Network: Digitises transactions and documents between Fonterra and Vendors, including electronic Purchase Orders and invoices,
removing manual steps and administration efforts.
• SAP Ariba Buying: Guides people to buy from right vendor, at the right price, in the right way, with a better user experience and compliant purchasing.
• Contracts in the system: Digitises contracts within SAP Ariba Buying, to link purchases directly to contracts for better spend tracking and visibility.
• Guided Sourcing: Simplifies sourcing capability for large sourcing events. A dashboard provides visibility and real -time information to manage guided
sourcing needs, such as projects and expiring contracts.
• Vendor management: Integrates vendor risk management, including certificates in Supplier Lifecycle and Performance (SLP) and ability for vendors to
self-service maintenance of their data.
• Data-driven category strategies: Provides analytics and insights to identify opportunities including, vendor, contractual arrangements and buying
channel, as well as risk analysis.
The above was underpinned by change management, business engagement and standing up an enduring model for continuous improvement:
Change management initiatives included a Change Champion Network to drive adoption, improved compliance scorecards to track adherence to processes,
and extensive training (13,000+ eLearn completions, 80+ workshops). Most importantly we set up an ongoing capability that includes reporting and
governance to really embed the change and continually improve.
The vision was to enable a better user experience, improve vendor and risk management, create greater transparency, simplify and standardise systems,
enabling cost savings to be made.
Fonterra embarked on a multi-year project (2022-2025) to implement the following SAP solutions across the Source to Pay processes:
• SAP Business Network: Digitises transactions and documents between Fonterra and Vendors, including electronic Purchase Orders and invoices,
removing manual steps and administration efforts.
• SAP Ariba Buying: Guides people to buy from right vendor, at the right price, in the right way, with a better user experience and compliant purchasing.
• Contracts in the system: Digitises contracts within SAP Ariba Buying, to link purchases directly to contracts for better spend tracking and visibility.
• Guided Sourcing: Simplifies sourcing capability for large sourcing events. A dashboard provides visibility and real -time information to manage guided
sourcing needs, such as projects and expiring contracts.
• Vendor management: Integrates vendor risk management, including certificates in Supplier Lifecycle and Performance (SLP) and ability for vendors to
self-service maintenance of their data.
• Data-driven category strategies: Provides analytics and insights to identify opportunities including, vendor, contractual arrangements and buying
channel, as well as risk analysis.
The above was underpinned by change management, business engagement and standing up an enduring model for continuous improvement:
Change management initiatives included a Change Champion Network to drive adoption, improved compliance scorecards to track adherence to processes,
and extensive training (13,000+ eLearn completions, 80+ workshops). Most importantly we set up an ongoing capability that includes reporting and
governance to really embed the change and continually improve.
Impact
Reduced late invoice
payments and improved
vendor experience.
80% eLearning completion
rate with over 3,000
completions, supporting
users through adoption.
On track to generate $20
million in annual savings.
Positive employee
feedback, highlighting easier
purchasing and better
reporting on spend against
contract.
Fonterra’s procurement transformation, in partnership and collaboration with SAP, has delivered strategic value to its Sourceto Pay capability, positioning
the Co-operative for continued global success:
• Enhanced efficiency and cost savings: By digitising and standardising procurement processes, Fonterra is on track to achieve $20 million in annual
savings.
• Improved data transparency and decision-making: SAP Ariba provides real-time visibility into procurement spend, contract compliance, and
supplier performance, allowing for better risk management, more informed sourcing decisions, and stronger vendor relationship s.
• Strengthened compliance and risk management: Simplification and digitisation have increased compliance with procurement policies and
processes. Digitised contracts ensures employees buy off the negotiated price and terms, mitigating financial and operational risks.
• Scalability and future-readiness: With modern, standardised SAP solutions, Fonterra is now positioned to leverage future technology advancements,
including the upcoming roll-out of SAP S/4HANA, that will continue to transform Fonterra’s ways of working.
• User experience: The solution makes it easier for employees to follow the right process and buy from the right vendors and the right price. A better
user experience means people are more likely to comply and we can capture savings.
• De-risks S/4HANA Programme: Vendors transacting across the SAP Business Network enables future transactions with Vendors from S/4HANA.
Reduced late invoice
payments and improved
vendor experience.
80% eLearning completion
rate with over 3,000
completions, supporting
users through adoption.
On track to generate $20
million in annual savings.
Positive employee
feedback, highlighting easier
purchasing and better
reporting on spend against
contract.
Fonterra’s procurement transformation, in partnership and collaboration with SAP, has delivered strategic value to its Sourceto Pay capability, positioning
the Co-operative for continued global success:
• Enhanced efficiency and cost savings: By digitising and standardising procurement processes, Fonterra is on track to achieve $20 million in annual
savings.
• Improved data transparency and decision-making: SAP Ariba provides real-time visibility into procurement spend, contract compliance, and
supplier performance, allowing for better risk management, more informed sourcing decisions, and stronger vendor relationship s.
• Strengthened compliance and risk management: Simplification and digitisation have increased compliance with procurement policies and
processes. Digitised contracts ensures employees buy off the negotiated price and terms, mitigating financial and operational risks.
• Scalability and future-readiness: With modern, standardised SAP solutions, Fonterra is now positioned to leverage future technology advancements,
including the upcoming roll-out of SAP S/4HANA, that will continue to transform Fonterra’s ways of working.
• User experience: The solution makes it easier for employees to follow the right process and buy from the right vendors and the right price. A better
user experience means people are more likely to comply and we can capture savings.
• De-risks S/4HANA Programme: Vendors transacting across the SAP Business Network enables future transactions with Vendors from S/4HANA.
“”“Fonterra's partnership with SAP on two strategic programmes, across SAP Ariba,
SAP Business Network and SAP S/4HANA solutions, is transforming our operations
for the future.
The deployment of SAP Ariba and SAP Business Network has significantly improved
our end-to-end Source to Pay processes, enhancing the user and vendor
experience, while strategically preparing for the integration of S/4HANA.
The business benefits, including process simplification, better spend visibility, and
robust compliance to procurement standards, have unlocked immense value.”
Toby Granwal, Fonterra Chief Information Officer
SAP Business Network and SAP S/4HANA solutions, is transforming our operations
for the future.
The deployment of SAP Ariba and SAP Business Network has significantly improved
our end-to-end Source to Pay processes, enhancing the user and vendor
experience, while strategically preparing for the integration of S/4HANA.
The business benefits, including process simplification, better spend visibility, and
robust compliance to procurement standards, have unlocked immense value.”
Toby Granwal, Fonterra Chief Information Officer