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Manufacturing in the New Reality: Gain a Sustainable Competitive Advantage Through Real-Time Visibility, a Single Version of the Truth, and End-to-End Collaborative Processes

by Georg Kube and Emiel van Schaik | SAPinsider

July 1, 2009

To create the best experience for customers and maximize their own bottom lines, manufacturers must link — not silo — their product development, manufacturing, and service efforts. Understand the four SAP business processes that are most critical for manufacturers, and walk through the latest SAP Business Suite 7 innovations for manufacturing companies.
 
Manufacturers have a common mission: to create the products that customers need, to build those products efficiently and with high quality, and to support their product portfolio throughout its complete life cycle. Doing so creates a holistic experience for customers — where they’re satisfied with their purchase and are not forgotten after the buy — and extracts the maximum value for manufacturers’ own bottom lines. But executing on this mission requires an ability to link product development, manufacturing, and service processes in such a way that:
  • Engineers have access to previous products’ performance and field data in the product development phase. If an earlier product model had a glitch or malfunction, then engineers need access to that performance information in order to make the right kind of improvements — or to avoid inadvertently breaking something that was working before.

  • Simulation tools and a bi-directional bill of materials (BOM) support the transfer from development to manufacturing. On the simulation side, manufacturers need to connect the virtual world of their 3-D models and computer-aided design (CAD) systems to the real world of their physical plant, materials, and equipment. You don’t want to have to buy a new machine or iterate through unnecessary design cycles to ensure you can actually build what your engineers design. And similarly, for bi-directional BOM, you want to make the best use of the parts and materials on hand.

  • The service organization has transparent access to development and manufacturing data. Manufacturers need to equip their service representatives with ample information — a 3-D model of a product, for example — so they can best service their customers and understand what products, problems, or concerns customers are referring to.
In short, manufacturers need technology that supports their core business processes from end to end. In the current economic situation, best-run manufacturers use these end-to-end capabilities to do two things:
  1. Create unprecedented transparency into the manufacturing and service processes, so they can clearly see where and how to drive down operational costs as much as possible.

  2. Look ahead toward the inevitable economic upturn, when customers will again have the ability to invest and consume. No one can predict when this moment will come, but when it does, it will be crucial for manufacturers to have a portfolio of fresh products to meet customer demands in the new reality — more sustainable, personalized solutions with enhanced performance and usability.
SAP has a reputation for supporting enterprise-wide business processes end to end. And now with the release of SAP Business Suite 7, we have made another major step toward extending this support into the core of what manufacturing enterprises need. With the introduction of value scenarios, SAP now delivers end-to-end business processes that typically span multiple lines of business and cross the boundaries of traditional application sets.

Breaking Apart Traditional Silos: 4 Critical End-to-End Business Processes for Manufacturers

Let’s look at four business processes that are particularly important for manufacturing enterprises to master in order to achieve the above-stated goals. While previous SAP Insider articles have explored some of these processes individually, it’s important to look at how these processes combine to support a product’s entire life cycle — from the early design stages, through sourcing, to manufacturing, and then into the product’s service life.1 The ability to master these processes holistically distinguishes a successful manufacturer from a not-so-successful one.

Integrated Product Development: Shrink Time-to-Profit with Collaboration Networks

Even in a volatile economy, product divisions must continue to condense time-to-profit to distance themselves from competitors. An effective way to decrease time-to-profit is to bridge existing information and communication silos by establishing decision-support dashboards (see Figure 1). Such dashboards enable manufacturers to holistically measure the combination of products, processes, and financials.

Figure 1
This decision-support dashboard tells a product manager when sales of one of his products has dropped dramatically. Drilling down, the manager sees that the number of quality notifications has gone up. Drilling down even more into the quality notifications, the product manager can detect needed changes to the design or supplier of the product.

Software and services from SAP and partners can help you channel development, sourcing, manufacturing, and external partners through one system. This cohesiveness enables collaborative development, embedded sourcing for materials and components, and integrated manufacturing for smooth production ramp-up and market launch. And with SAP’s portal and business intelligence technologies, manufacturers can gain real-time insight into key processes and performance indicators across the entire network.

Efficient Manufacturing Operations: Outperform the Competition with High Operational Efficiency

Manufacturers struggle to reduce costs and maintain high performance levels in their production processes. The widespread existence of disconnected enterprise and plant manufacturing systems impedes cost reduction, creating an inefficient environment that is expensive and difficult to integrate.

World-class manufacturers are turning this challenge into a competitive advantage by going beyond the traditional system integration and interoperability to dynamically align core operational business processes. SAP’s perfect plant framework, for example, provides a 360-degree view of manufacturing operations, enabling visibility and high operational efficiency to drive down costs and cycle times while increasing overall equipment effectiveness.2

Collaborative Demand and Supply Planning: Respond Rapidly to Changing Customer Requests While Safeguarding Profitability

In the face of fragmented markets, distributed supply networks, and varying customer demands and preferences, is it possible to satisfy demanding customers efficiently and profitably? Yes, but it requires that manufacturers can anticipate and respond to dynamic demand and supply signals.

The traditional function-centric and enterprise-centric method of planning limits a company’s ability to anticipate and avoid surprises. Manufacturers need to be able to factor in all elements of demand, whether influenced by their own or their customers’ actions, or even causes beyond their control (natural disasters or labor strikes, for example). At the same time, all channels that make up a manufacturer’s extended network must be able to respond instantly if demand or supply varies. In short, collaboration across the network is key to faster and smarter responses to changes in supply and demand.3

Delivering Efficient After-Sales Service: Foster Enduring Customer Satisfaction While Creating Demand for Your Product Portfolio

Companies looking to maintain their customer base and create additional revenue from existing products can no longer overlook untapped opportunities in their service business; after-sales service is a major growth opportunity. Traditional after-sales service businesses often rely on disparate systems and decentralized data. And they often fail to obtain accurate information from key sources within their business network, hindering their ability to deliver an optimized service experience for their customers.

By aligning operational processes and systems for comprehensive visibility across the entire service network, companies can overcome these challenges and transform their after-sales service businesses into profit centers. This end-to-end approach enables highly efficient operations for developing, marketing, selling, and delivering more profitable service offerings, thus increasing customer loyalty.

The Innovation Continues: Spotlight on New SAP Business Suite 7 Functionality

Through these four (and other) business processes, all enabled by SAP Business Suite 7, SAP offers an innovative approach to addressing manufacturers’ challenges. Using enhancement packages — small functional updates to SAP Business Suite that can be consumed easily and without major updates — we deliver incremental innovation to our manufacturing customers in the following areas:

Configurable Products

Manufacturers have always faced the dilemma of building exactly the products that each customer wants while still keeping their product portfolio relatively simple. Configurable products are the primary strategy for achieving these two goals. However, managing all variants and possible configurations consistently throughout the product life cycle is a challenge for conventional enterprise software. At SAP, we are continuing to invest in technologies that provide unparalleled capabilities for creating and managing product configurations and variations.

Distributed Manufacturing

As manufacturers focus on core capabilities, and former OEM and supplier relationships morph into flexible business networks, the ability to transparently design and run distributed manufacturing operations becomes even more important. Manufacturers need to maximize the innovative potential and specific capabilities of their business network to create the best solutions for customers. SAP is investing in capabilities that link distributed manufacturing operations and provide unprecedented visibility across the extended enterprise.

Plant-Floor Integration

Bridging the gap between the virtual product that is modeled in your CAD system and the physical product that’s created on your plant floor has always been a challenge for manufacturers. From an enterprise application perspective, this means leaving the world of logistics applications and entering the world of manufacturing execution systems (MES), shop floor systems, and machine controllers. To create the top-floor-to-shop-floor visibility that is so direly needed, SAP has invested and will continue to invest in functionality that links existing MES environments or — if these do not exist yet — machine-level controllers into the transactional and analytical capabilities of SAP Business Suite.

Mobile and Remote Service Management

Looking for new revenue streams from existing product portfolios, manufacturers are discovering the area of after-sales service as a profitable source — not only for additional revenue but also for increased customer satisfaction. To create a superior customer experience, new models — like servicing machines and equipment remotely or providing all necessary information to service personnel through mobile devices — provide a competitive advantage. SAP is continuing to support these needs through enhanced enterprise asset and service management capabilities, as well as by delivering enterprise information directly to commonly used mobile devices.

NOTE!
The four enhancements highlighted here are all currently available in SAP Business Suite 7.

Conclusion

For manufacturers stepping up to the challenges of the new reality, SAP provides the end-to-end business process support they need to create the products that their customers want, build them efficiently and with high quality, and support them throughout their entire life cycle. In doing so, manufacturers create a holistic experience for their customers and extract the maximum lifecycle value for themselves.

To make end-to-end processes a core part of your business and IT strategy, contact your SAP account manager or consultant and plan your next steps.

“We need high-quality data. We also wanted to have more control over our processes, so that we would be able to modify them with ease if necessary. With SAP, we are well equipped for the future, because the solution will continue to grow and develop with the enterprise. You can’t survive these days without software like this.”

— Peter Gries,
company spokesman,
Griesson – de Beukelaer GmbH
& Co. KG

 

Additional Resources

 

Georg Kube (georg.kube@sap.com) is Vice President of Industry Solution Marketing for Manufacturing Industries at SAP AG, responsible for matching the SAP portfolio to the needs of manufacturers. Prior to joining SAP two years ago, he worked for Hewlett Packard as Marketing Director and Director of Consulting — European Region, focusing on product lifecycle management. He holds a degree in mechanical engineering and a master’s degree in business marketing.

 

Emiel van Schaik (emiel.van.schaik@sap.com) is Senior Vice President of Manufacturing and Consumer Industries at SAP AG, with global responsibility for defining, shaping, and delivering the next generation of SAP’s industry solutions for these sectors. He joined SAP in 2004 as the head of the Consumer Products and Life Sciences Industry Business Unit. Prior to joining SAP, he worked in the consulting and IT industries for 16 years in different roles, from IT to sales and general management. He holds degrees in mathematical science and international business.



1 See “7 Characteristics of a Winning Product Strategy: Introducing SAP’s Integrated Product Development Approach” by Thomas Ohnemus in the July-September 2008 issue of SAP Insider (sapinsider.wispubs.com). [back]

2 For more about SAP’s perfect plant initiative, see the Special Report on page 29 of this July-September 2009 issue of SAP Insider (sapinsider.wispubs.com). [back]

3 See also “A Supply Network That’s Responsive in Good Times and Bad” by Richard Howells and Dr. Krish Mantripragada in the April-June 2009 issue of SAP Insider (sapinsider.wispubs.com). [back] 


 

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