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Special Feature: mySAP Supply Chain Management (SAPinsider Vol. 4, Iss. 4)

by SAP and Partners | SAPinsider

October 1, 2003

by SAP and Partners SAPinsider - 2003 (Volume 4), October (Issue 4)
 

Is Your Supply Chain Ready to Respond to Changing Markets, Competitors, and Demands? mySAP SCM and Partners Help You Manage an Adaptive Supply Chain Network


Brian S. Dunch
Director,
SCM PLM Global Product Marketing,
SAP Global Marketing, Inc.

>>INSIDE<<
mySAP SCM Helps Improve HP Enterprise Server Group’s Supply Chain Management

Microsoft Saves Millions in Annual Inventory Costs and Bolsters Quality and Control Across SKUs, Forecasting Units, Distribution Centers, and Manufacturing Facilities

Manage 5 Major Supply Chain Management Challenges with mySAP SCM and
SEAL Consulting Inc.


Is Your Supply Chain Operating at Top Performance?
Do You Even Know?

With relentless pressure to cut costs coupled with a sluggish economy, companies are challenged to do more with less. At the same time, companies can’t expect to “save their way” to market leadership. So it is imperative for companies to cut costs while at the same time position themselves to grow revenue and beat the competition.

It is precisely this kind of challenge that underscores the impact of effective supply chain management on lowering total operating costs and increasing efficiency. Supply chain management excellence can help companies compete and win.

The New Need for Highly Responsive Supply Chain Networks

Competition is no longer viewed as company-versus-company — it is viewed as supply chain-versus-supply chain. To thrive, companies need to focus on their core competencies, while working closely with supply chain partners to collectively deliver complete products and services to market. Speed and efficiency are critical. The traditional supply chain — where information flows in a linear, step-by-step fashion — is simply too slow and costly, and unable to meet customer needs in fast-changing markets.

Companies need to network their supply chains to cut delays and costs out of operations, shorten time-to-market and time-to-volume, and, especially, adapt to meet the needs of customers on an increasingly individual, “market of one” basis.

This reality is driving the emergence of the adaptive supply chain network — a community of organizations in which information is shared instantaneously and network partners are able to collaborate to quickly and intelligently respond to changes in customer demand.

The adaptive supply chain network is dramatically different from the traditional approach, and it requires dramatically different solutions. To be effective, SCM solutions must extend beyond the four walls of the corporation. They must support higher levels of visibility, velocity, and flexibility. And they must let companies work closely with widely dispersed suppliers, customers, and partners to mass-customize products, serve global markets while meeting local specifications, and work with the increased speed and accuracy required in a dynamic, competitive world.

Supply Chain Successes with Direct, Positive Impact on the Bottom Line

With mySAP Supply Chain Management (mySAP SCM), SAP is delivering the most adaptive supply chain management solution available on the market. It is the only solution that enables complete integration of supply chain planning, execution, coordination, collaboration, and manufacturing.

In fact, a recently completed benchmarking study commissioned by SAP and conducted by the independent consultancy firm Pittiglio Rabin Todd & McGrath (PRTM) shows that companies that have implemented mySAP SCM run more cost-efficient supply chains than the market average.

The study evaluated the supply chain performance of over 100 global SAP customers, and compared the results against a larger, pre-existing database comprised of over 400 companies representing the market average as well as SAP customers. The results achieved by these more efficient supply chains can translate into millions of dollars in savings and revenue gains for their companies.

To learn more about the results of this study, don’t miss the January 2004 issue of SAP Insider, where a complete review of the study and its implications will be described.

mySAP SCM has helped provide bottom-line benefits to businesses of
various sizes and types in a range of industries, including companies such as Palm, ITT Night Vision, Dow Corning, and Volvo.

Palm
The world’s leading provider of handheld computers reduced planning cycle times by 50%, lowered channel inventory by 32%, and decreased cash-to-cash cycle time from 23 to 14 days.

ITT Night Vision
This leading manufacturer of night-vision equipment for the U.S. and Allied armed forces shortened planning cycle times, improved capacity utilization by 20%, and reduced finished goods inventory by 10%.

Dow Corning
mySAP SCM helped this global, innovative producer of silicone and silicone-based products, technologies, and services improve its customer satisfaction index, increase forecast accuracy by up to 25%, and reduce inventory by nearly 20%.

Volvo Construction Equipment
One of the world’s leading producers of construction equipment reduced shipping lead times by 43%, reduced inventory levels by 53%, and increased sales by 89%.

A Range of Partners and Technology to Enhance Your Supply Chain

SAP is not alone in enabling this vision of the adaptive supply chain network. There is a network of partners that lend support with consulting and implementation expertise, along with other partners offering complementary technology and software.

Technology is one key to this approach to supply chain management. To stay ahead of future customer needs, SAP is embracing innovative technology, such as auto-ID technologies — specifically RFID (radio frequency identification). Customers can accelerate and improve existing supply chain processes by eliminating errors, increasing visibility, and eliminating manual intervention using real-time data captured through sensors across the supply network.

The business world will continue to change, and mySAP SCM and SAP partners will move forward with it. The SAP network is strong, and in the pages to follow you will find just a sampling of the innovation and concrete business benefits that result when partners help SAP realize this vision of enabling the adaptive supply chain network for our customers. We also understand that this revolution in supply chain management is really just getting started, and we will continue to ensure that mySAP SCM provides the capabilities needed by tomorrow’s adaptive supply chain networks.

Visit www.sap.com/scm to learn more about our network of partners, adaptive supply chain management, and customer successes with mySAP SCM.

For more on SAP’s vision for supply chain management and adaptive business networks, read the book by SAP Executive Board Member Claus Heinrich and industry expert Bob Betts, Adapt or Die.

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mySAP SCM Helps Improve HP Enterprise Server Group’s Supply Chain Management

Ian Tindall
SAP Program Manager for Consulting and Integration,
HP Services

HP’s Enterprise Server Group (ESG) builds Unix servers for commercial customers on a “configure to order” (CTO) basis, employing a supply chain that encompasses not only HP and our customers but also contract manufacturers, sub-assembly suppliers, and component manufacturers.

The Challenge: Shorten Change Order Process Times

Two years ago, CTO change orders were taking as much as three weeks to flow from one end of the supply chain to the other. But with new processes designed by HP Services that incorporate SAP Advanced Planning and Optimization (SAP APO) software, HP has shortened the change order process from three weeks to just 24 hours.

The project team, which included ESG planners and HP Services (HPS) consultants, had a two-fold mission:

Improve customer satisfaction

Reduce costs

Each step, or node, in the CTO supply chain requires a check of supply against demand called a “netting” process. We knew that trying to control every component part would involve too much data. So after analyzing Bills of Material, we focused on just those assemblies, sub-assemblies, and component parts that had long lead times, were expensive, or had caused problems in the past.

The Solution: HP Services and mySAP SCM

The solution HP Services developed begins with loading forecast demand into SAP Business Intelligence (SAP BI). Once the data is cleansed, the demand forecast is fed into the SAP APO demand planning (DP) module for consolidation, so that planners can see a single aggregated forecast for the entire enterprise.

The consolidated forecast is then released to the SAP APO supply network planning (SNP) module. This does two things: It propagates forecasts to the lowest level of the product hierarchy, and it nets demand against supply at every node along the supply chain, so that forecasts can be flexed in response to changes in market conditions, material shortages, and strategic sourcing decisions.

SAP APO makes it possible to analyze the effect that changes in demand will have on critical components, to communicate with suppliers, and to develop an action plan to ensure on-time delivery — all within 24 hours. Planners can trace back to the source of demand, by product or location, from anywhere along the supply chain.

The key to the entire process is collaboration at every level. By making it possible to exchange such critical information as stock-on-hand, delivery schedules, and demand, we can reduce inventory — and we can respond to market changes in a fraction of the time it used to take.

With the mySAP SCM-based solution HP Services developed, HP’s Enterprise Server Group is producing more accurate forecasts, has better visibility into sales orders, can control inventory at each node, and has greatly improved communication with suppliers.

The Net Result: Greater Efficiency and Enhanced Customer Service

Not only have we improved customer satisfaction and our own manufacturing efficiency, we have also demonstrated HP Services’ expertise in supply chain management in ways that can also help our customers.

For a comprehensive view of HPS capabilities for SAP, see www.hp.com/go/sap.

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mySAP SCM and a Recent SAP R/3 Enterprise Upgrade
Microsoft Saves Millions in Annual Inventory Costs and Bolsters Quality and Control Across SKUs, Forecasting Units, Distribution Centers, and Manufacturing Facilities

Steve Jenkins
SAP Global Alliance Manager,
Microsoft .NET
Platform Strategy & Partner Group

As Microsoft continues to expand into emerging areas, our investment in SAP continues to expand right along with the business to deliver increasing return on investment. In August 2003, Microsoft completed putting mySAP Supply Chain Management (mySAP SCM) and SAP R/3 Enterprise into production to power new strategic projects and support Microsoft’s operations with SAP’s most recent release.

As background, Microsoft runs its $30 billion business on SAP software and has done so since 1995. The growth and pace of the business had outgrown existing, non-integrated legacy systems. A single, global instance of SAP was originally implemented to deliver consistent financial information across Microsoft’s worldwide businesses. A single view of financial information was critical to enabling the company to truly focus on business operations rather than on debating financial results coming from disparate systems.

Today, every Microsoft employee (over 55,000 now) interacts with our SAP system through easy-to-use self-service applications. SAP is woven through all major business operations including finance, asset management, sales and distribution, material management, human resources, project management, and business intelligence. Already a pervasive SAP customer, Microsoft expanded its licensing commitment by signing a mySAP Business Suite contract in June 2003.

Streamlining Microsoft’s Supply Chain

In September of 2000, Microsoft initiated a project to streamline our forecasting and planning processes on SAP Advanced Planning and Optimization (SAP APO). A global SAP APO instance was implemented in May 2001 to manage our PC hardware, PC software, and Xbox console supply chain planning and forecasting.

Prior to standardizing on SAP, custom tools and applications powered different forecasting processes, causing problems with integration, data latency, inaccuracies, and duplicative headcount. SAP APO brings standard forecasting and planning for six business divisions, 20,000 active SKUs, 50,000 active forecasting units, 26 distribution centers, and 22 manufacturing facilities. In addition to strong agility and quality benefits, Microsoft is realizing a $25 million reduction in inventory costs since implementation, and headcount savings of over 10 people. The initial SAP APO 2.0 installation has now been upgraded to Version 3.0 and has been combined with SAP’s full mySAP SCM solution.

Now, Microsoft is focused on bringing upstream efficiencies and savings to our Xbox component supply chain processes through a project called “XStar.” Microsoft works with a network of suppliers who each provide components used in the manufacturing of our Xbox gaming console. With millions of game consoles now shipped, managing the component supply is a critical activity. Furthermore, the Xbox business model is unique because the gaming console itself is not a profit-making transaction in the first place. So any additional supply chain inefficiencies put further strain on an already unprofitable part of Microsoft’s business.

Microsoft shares information about our internal SAP operations and best practices each calendar quarter through a no-charge, one-day SAP Customer Workshop at Microsoft headquarters in Redmond, Washington. Reservations for this popular program can be made at www.microsoft-sap.com under the “Coming Events” tab.

Microsoft’s implementation of XStar is closely linked to Microsoft’s efforts to upgrade from SAP R/3 4.5B to R/3 4.7 (SAP R/3 Enterprise). SAP R/3 Enterprise contains supply chain functionality needed for the XStar project. One week after SAP R/3 Enterprise was put into production in early August, XStar went live.

An Innovative SAP R/3 Enterprise Upgrade Completed

Microsoft Tested and Successfully Implemented SAP R/3 Enterprise Without Disrupting Users or Its Quarterly Release Cycle

The upgrade to SAP R/3 Enterprise from Release 4.5B that began in July 2002 was a delicate balancing act for our SAP operations group.

Microsoft maintains a disciplined quarterly release cycle, which greatly assists in managing change and enhancing stability. However, from an end-user perspective, the process can appear restrictive and inflexible. Further, Microsoft is running a single, global SAP R/3 instance rather than a set of SAP R/3 systems, which complicates the planning and testing required for the upgrade. Microsoft realized the need to move to SAP R/3 Enterprise to position the company to reach further into emerging markets, such as China, with Unicode compliance, as well as to establish the latest functionality for future supply chain, treasury, and xApp projects being evaluated. The overarching question was, “How can SAP R/3 Enterprise be fully tested and implemented successfully while maintaining the quarterly release cycle and minimizing the impact on business end-users?”

The answer was an SAP upgrade technique called a virtual transport system — a whole new way of managing transports. First, our 4.5B system continued running on its development, test, and production servers. Development on 4.5B continued for our normal August 2002, November 2002, and February 2003 quarterly releases.

While the 4.5B system was maintained, a pair of 4.7 development and test servers and a pair of “virtual transport” development and test servers were installed. New 4.7 development projects were started in 4.7 only, so application development was not duplicated in two environments. Transports were sent to the “virtual systems,” creating a buffer of managed changes.

Using SAP’s upgrade CDs, the upgrade from 4.5B to 4.7 could be practiced repeatedly using the following process:

1. The 4.5 system was upgraded to 4.7.

2. The changes stored in the virtual system were applied to the 4.7 system.

3. The resulting 4.7 system was thoroughly tested.

This process enabled Microsoft to continue to operate our 4.5B system, meet our quarterly release commitments and handle existing business processes, repeatedly test the quality of the upgrade process, and cutover to a new 4.7 development environment. The drawback of this approach is that if development occurs for an extended period under the new 4.7 environment while continuing to run 4.5B in production, the “virtual system” buffers can become laden with changes. To avoid this issue, in May 2003 the focus of the project became the upgrade itself. Therefore, development slowed in general, and the virtual system became unnecessary. Transports could be tracked manually and applied manually.

Virtual systems enabled us to shrink the window of dual maintenance of changes from two quarters to one quarter. They reduced the chance of post-upgrade instability. This process leveraged existing staff effectively. What’s more, it allowed for a steady transition from run/maintain quarterly activities to upgrade responsibilities with minimal new headcount requirements.

Facing Your Own SAP Upgrade? Microsoft’s Platform Advantages Can Amplify Your ROI

Today, business pressures clearly demand doing more with less. Is your company faced with making additional investments to upgrade your SAP system? Is the upgrade project challenging to justify? Are you paying too much for the infrastructure required to run SAP?

An unprecedented number of SAP customers are evaluating upgrading their SAP systems to the latest releases. These upgrade projects can be difficult to justify, and they impose change on your organization. They require additional infrastructure investments. Now may be the time to cap investments in Unix-oriented systems and implement your SAP upgrade on a cost-effective, high-return SAP platform — the Microsoft and Intel platform for SAP. The cost-reduction benefits associated with the Microsoft Platform can be incorporated into your upgrade business case to raise the overall ROI and value proposition significantly. Microsoft, Accenture, Cap Gemini Ernst & Young, HP, Intel, and REALTECH have teamed together to offer a set of upgrade services and promotions available for SAP customers now.

It has been clearly proven that the Microsoft and Intel platform is less expensive to purchase and less expensive to operate while delivering the reliability, availability, and scalability SAP systems require. To learn more about upgrading your SAP system on the Microsoft Platform, visit www.microsoft-sap.com.

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Manage 5 Major Supply Chain Management Challenges with mySAP SCM and SEAL Consulting Inc.


AV Joseph
SCM Global
Project Director,
SEAL Consulting Inc.

Of all the benefits of incorporating supply chain management into your system landscape, there are five key challenges that, in my experience with many such implementations, an SCM solution must help your company overcome:

Consolidating forecasts from your customers and your customers’ customers — even with disparate IT landscapes and complex logistic business processes.

Achieving collaboration across national boundaries with vendors, suppliers, subcontractors, transport agents, and customers for holistic planning.

Providing accurate product availability data to customers, factoring in location and product substitution possibilities based on each customer’s business rules.

Properly decreasing inventory/stock levels, especially for products with high value or short shelf life, while also balancing the need to improve customer service and order fulfillment rates, reduce out-of-stock situations, and expand product margins.

Measuring efficiency of the entire supply chain using established benchmarks and managing constraints proactively before a bottleneck can occur.

Implementing mySAP SCM — A Case Study

When a global, Fortune 300 high-tech customer sought to integrate their global customers and vendors and better manage forecasting, global inventory deployment, and order fulfillment — as well as incorporate integration points between SAP APO, SAP R/3, mySAP Business Intelligence (mySAP BI), and other legacy systems — SEAL Consulting carried out the design and implementation of their SCM landscape (see Figure 1). SEAL completed all stages, from initial design to configuration, in six months.

Figure 1
   mySAP SCM Landscape

The resulting global demand planning solution used SAP Business Information Warehouse (SAP BW) and SAP APO. Integration was achieved through a seamless customer EDI forecast, which flowed through the SAP R/3 EDI gateway to SAP BW and SAP APO demand planning capabilities. Global, regional, and local demand and supply aggregations were matched with existing inventories and capacities, keeping in mind supply network constraints as well as product and location substitution rules.

The client and its supply chain partners now have a clear window into supplier and customer allocations, inventory levels, orders, forecasts, production plans, and key performance indicators. What’s more, the client can utilize excess inventory in its global supply chain and improve inventory turn cycles, while global available-to-promise (ATP) product and location substitution rules have improved customer service levels dramatically, resulting in increased customer satisfaction.

Look to SEAL and SAP to Meet Your SCM Challenges

SEAL Consulting Inc. is an SAP Services Partner providing implementation services and specializing in extended SCM solutions like mySAP SCM and mySAP Supplier Relationship Management (mySAP SRM). SEAL is the right choice for:

  • 3- to 4-week SAP APO prototypes

  • Scoping, sizing, and estimating

  • 4- to 6-month SAP APO implementation

  • Pilot projects and industry-specific solutions

  • Integration with mySAP BI, mySAP SRM, mySAP Strategic Enterprise Management, and mySAP Customer Relationship Management

To learn more, contact SEAL Consulting Inc. at 1-800-330-3070 or visit www.sealconsult.com.

SEAL Consulting Inc. was recognized by SAP America as a recipient of the 2002 SAP Services Partner in Excellence Award.

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Is Your Supply Chain Operating at Top Performance? Do You Even Know?

Prakash Easwaran, PhD
Vice President,
SAP Strategy & Solutions,
Intelligroup

Industry standards for supply chain performance are well established, but until now there has not been a way to easily extract just the right data to benchmark against these standards — a hurdle that can quickly stall even the most well-supported supply chain measurement initiative.

To meet this challenge, Intelligroup has developed ScorPac. ScorPac quickly compiles data from across your SAP R/3 system (see Figure 1) and delivers specific metrics for performance improvement, as defined in the Supply Chain Operations Reference (SCOR) model created by the Supply-Chain Council (www.supply-chain.org).

 

Figure 1
   ScorPac Measures Supply Chain Effectiveness

Measuring Supply Chain Efficiency with ScorPac

Only by measuring supply chain performance can companies establish benchmarks and set quantifiable goals to improve efficiency. SAP R/3 systems were implemented to enable enterprise integration and business process improvements. Although most organizations feel they have realized these benefits, there has been no easy way to measure how well the original objective was truly achieved. ScorPac software not only helps assess your company against its own metrics, it also shows how your organization compares to others in the same industry.

Implementing mySAP SCM Based on Metrics for Faster Time-to-Market and Lower TCO

Customers with mature SAP R/3 systems are evaluating mySAP Business Suite solutions, and for many, deciding where to invest is a challenge. By putting a measurement process in place, ScorPac can help maximize your existing investments and set the direction for a business case and ROI plan for implementing next-generation products. With this easy-to-use tool, you can reduce time-to-market for new solutions at a reduced total cost of ownership.

Measurement for Continuous Improvement

ScorPac also delivers services that go well beyond measurement to suggest best practices for each process. You can set internal goals, compare your performance against industry standards, or create custom measurements. Intelligroup consultants can train your staff in analyzing, interpreting, and enhancing your process chains.

For more on Intelligroup’s ScorPac software, visit www.intelligroup.com/sappractice/scorpac.

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