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Should Any of Your Supply Chain Management Processes Be Updated?

by Albrecht Diener and Johann Thalbauer | SAPinsider

July 1, 2003

Albrecht Diener, Senior Vice President, SCM GBU, SAP, and Johann Thalbauer, Vice President, SCM Product Management, SAP, discuss the role of supply chain networks in the current business climate, and the new functionalities and processes introduced by SAP SCM 4.0.
 

Q. Forrester Research claims that “accelerated business forces are changing the principle foundations of supply chains.” Do you agree? And if that’s the case, does that render your customers’ current installations obsolete?

Frankly, you’d be hard pressed to find a supply chain executive who does not agree with this assessment. The velocity and volatility of business forces means all of us are experiencing global competition, outsourcing challenges, mass customization, and mounting pressure to attract and retain more customers by producing better-quality and more innovative deliverables. Moreover, those deliverables have to be produced in a faster and more profitable fashion. There is no question that the current business climate is reshaping supply chains. They now need to operate as loosely coupled networks, rather than in the traditional linear fashion. And they also have to be adaptive, so that they are prepared to share knowledge and intelligently adjust to constant, dynamic change and all the challenges that go along with that. This is why you see the industry embracing the term adaptive supply chain network, and more importantly, the principles this term embodies.

As to the matter of obsolescence, ask yourself whether your supply chain network can readily adapt to these pressures. Does it offer you end-to-end visibility across extended supply networks? Does it include analytic functions for historical, real-time, and predictive views? What about planning processes that can account for business variability? Can it sense and respond to supply chain events so that you can react more effectively to fast-moving market conditions? Does it offer collaborative processes that foster and enforce increased supplier reliability? And do you have end-to-end controls for executing manufacturing, transportation, and warehouse management processes?

These are the principles upon which adaptive supply chain networks are being built. If your answer to these sorts of questions is “No,” there are certainly elements of your supply chain in need of updating.

Q. How does one move entrenched supply chain processes in this direction?

Incrementally! Supply chain networks offer ample opportunity for optimization: demand management, production management, inventory management, order management, and service management.

Start with the area or areas that make the most sense for you. Goodyear, for instance, focused efforts on inventory. Those efforts lowered their inventory by 30%. Colgate-Palmolive focused on forecasting to achieve a 98% accuracy rating. The SAP SCM 4.0 application suite — which is comprised of SAP Advanced Planning & Optimization, SAP Inventory Collaboration Hub, and SAP Event Management — supports all these critical supply chain management areas in the following ways:

  • SAP Advanced Planning & Optimization (SAP APO 4.0) provides sales and operations planning, trade promotion management, and Collaborative Planning, Forecasting, and Replenishment (CPFR).

  • SAP Inventory Collaboration Hub (SAP ICH 4.0) enables you to collaborate with suppliers on inventory planning to meet production schedules. Suppliers actually gain visibility into your inventory.

  • SAP Event Management (SAP EM 4.0) delivers supply chain performance management and extended inventory visibility. Its capabilities include monitoring, alerts, and the ability to quickly resolve process exceptions.

These three applications are not new to mySAP SCM. They were previously available. But this is the first time that the three come in one, comprehensive offering, and can be installed and maintained as a single system, instead of three different ones.

Now, all this functionality is at your disposal. There is ample flexibility for you to address your unique optimization concerns. And there is ample new and enhanced functionality to make current APO, ICH and EM customers take notice. (See the checklists of new and enhanced features below.)

New Processes Introduced by SAP SCM 4.0

Product interchangeability in the supply chain
Planning without final assembly in CTM (Capable To Match)
Planning on hierarchies with aggregation and disaggregation
Order promising with product characteristics-based substitution
Order promising with consideration of safety stock
Transportation planning of returns
Product process confirmation
Cross-plant production
Flexible Order Transaction (FOT) — e.g., split, merge, and product change
Visibility patterns to support Procurement, Fulfillment, and Manufacturing processes
Supplier Managed Inventory (SMI)
Long-term service and maintenance planning

Process Enhancements Introduced by SAP SCM 4.0

Vendor Managed Inventory (VMI)
Promotion planning
Subcontracting
Supply Network Planning with enhanced Optimizer
Distribution planning enhancements
Order promising with consideration of stock transfer requests/orders in Product Allocation
Backorder processing of scheduling agreements and stock transfer orders
Transportation planning with optimization
Classical production planning and scheduling —usability
Integration of the quality inspection lot
Campaign planning
Block planning
Multiple output planning
High-volume production planning with Model Mix Planning (MMP)
Rapid Planning Matrix (RPM) Collaborative management of delivery schedules

Q. You’re suggesting a significant increase in functionality, yet supply chain executives are under inordinate pressure to curb the total cost of ownership. How do you reconcile the two?

You reconcile the two with the right technology. We are well aware of the mandates for supply chain profitability, and that a non-trivial component of that profitability equation is bound up in total cost of ownership. Keeping TCO in check requires:

  • A persistent data model across all supply chain management applications
  • Combined planning, collaboration, coordination, and execution
  • Improved IT operational costs through ease of administration, and few SCM interfaces
  • Faster process changes with the same application knowledge base
  • Fully supported, open integration with SAP and non-SAP systems alike
  • Uncompromising levels of stability and performance

SAP SCM 4.0, because it is built on the SAP NetWeaver technology stack, delivers on all counts.

Lastly, it should be noted that placing APO, ICH, and EM on one consolidated platform makes SAP SCM 4.0 easier and less costly to install1 and maintain.

Q. What advice can you offer customers who are evaluating adaptive supply chain management solutions?

Aside from the obvious pointers — proper functionally, TCO, and ease of use — look for a comprehensive end-to-end supply chain management offering. You need support for integrated end-to-end business scenarios. Look to a solution that will enable you to move beyond local process improvements to holistic process enablement and control of the extended supply chain. You need visibility and control across the full expanse of your supply chain network in order to harness all available resources, especially in the wake of changing conditions.

Make sure that the solution accounts for industry-specific scenarios. For example, special provisions are needed for planning functions in the aerospace and defense industry; the high-tech industry needs flexible order transactions. Functionality that is designed specifically for your industry is key to your ROI. We’ve gone to great lengths to do this, and like all things that constitute a high ROI for customers, it wasn’t easy.

SAP SCM 4.0 Technology Highlights
SAP SCM 4.0 runs on the SAP NetWeaver platform, which means:

  • The entire SCM application suite can be run in the SAP Enterprise Portal, if you elect.

  • Integration with SAP Business Intelligence (BI) is built into SAP SCM 4.0. A complete set of KPIs, for example, is available in SAP BI. So is an advanced set of analytics, which enable the collection and computation of analytics of performance numbers across your extended supply chain.

  • Interfaces are based on XML and on SAP Exchange Infrastructure (XI) to streamline document exchange.

  • The foundation of the SAP NetWeaver technology stack is the robust and scalable SAP Web Application Server.

Lastly, remember that at the end of the day, supply chain management practices are about maximizing your return on relationships with your suppliers! Collaboration is key, and technology can play a pivotal role in enabling this collaboration. Shared insights and visibility can help you link to customers and partners to more accurately plan, more quickly replenish, and further accelerate suppliers’ reaction times.

Vendors who fail to optimize their relationships with suppliers stand to lose out. If it takes too long for your suppliers to react, you can’t have the right components on hand to manufacture goods. Customers are too well informed these days to settle for late shipments. They’ll simply choose a different vendor.

Are You Ready to Ramp Up?

Many customers elect to be part of SAP's "ramp-up" programs. Enrollment is now open for the SAP SCM 4.0 Ramp-Up program.

For details about SAP Ramp-Up, visit
www.service.sap.com/scm -->mySAP SCM Key Information


1 Two installation options are available for SAP SCM 4.0.

The first is the Full Version, which includes all application components of SAP SCM 4.0 and the full benefits of the entire suite.

The second is the Lean Version, for customers who:

  • Need to get up and running quickly, without the need for advanced planning and optimization
  • Need to support collaboration, coordination, or extended visibility across a heterogeneous applications environment
  • Desire a 3-tier, easy to implement set of applications which can be shared across business partners via use of a browser

This version includes SAP ICH 4.0 and SAP EM 4.0.




Albrecht Diener
,
Senior Vice President,
SCM GBU, SAP


Johann Thalbauer
,
Vice President,
SCM Product Management, SAP

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