Special Report


Special Feature: mySAP Supply Chain Management (SAPinsider Vol. 6, Iss. 2)


April 1, 2005

The Way to Make Supply Chain Operations Efficient and Adaptive

Stefan Schaffer,
Senior Vice President Solution Management,
Manufacturing, PLM, SCM,


A Smarter Supply Chain

Catalyst's Integrated Components Extend Capabilities and Value of SAP's Supply Chain Execution

Adobe and SAP Extend Manufacturing Collaborative Processes with the Friendly Face of XML

Manage Payments as an Integrated Part of the Supply Chain

The modern supply chain must resolve the tension between the competing priorities of efficiency and adaptability. Clearly, faster, leaner, and more productive supply chain management lends tremendous leverage. SAP customers are seeing inventory-days-of-supply drop by nearly 40%, cash-to-cash cycle times drop by nearly 50%, and order fulfillment lead time drop by more than 45%.

But these efficiencies — the result of good planning and execution — can take you only so far. Every business inevitably must contend with the unpredictable, and this requires adaptability. Shipments get delayed, customers change orders, quality problems arise, and countless other problems can crop up. Moreover, supply-driven networks are giving way to more competitive demand-driven networks. So if the business networks you have forged with partners and suppliers are not adaptive, you leave yourself exposed to risk.

The Adaptive Business Network is the strategy that creates the right balance between efficiency and adaptability. Networks constructed according to this strategy can sense customer signals; provide real-time awareness across the network; facilitate timely sharing of information, updates, and requirements; and ensure high-performance, coordinated, and adaptive operations among network participants.

Creating such a network is a two-phase process that builds on the foundation of mySAP Business Suite applications, but adds adaptability using SAP NetWeaver and Enterprise Services Architecture to support adaptive business processes. It takes the combined elements of planning, executing, sensing, responding, and learning (see Figure 1).

Planning and executing is the first step. An adaptive business network starts with a solid plan for efficient execution based on what is known — usually forecasts, calendar cycles, and a deep understanding of how capacity and resources will be used. SAP customers already have a solid foundation for efficiency. Your SAP R/3 and SAP APO systems, for example, provide for robust planning and execution.

Figure 1
Dimensions of the Adaptive Business Network

The second step is to design adaptive processes that sense and rapidly respond to the real world. Such adaptability requires several things: Analytics (the process by which companies learn) are integral to every SAP solution nowadays. Support for real-time awareness technologies such as RFID, sensors, and smart tags is part of SAP NetWeaver. And as an open, services-based technology platform, SAP NetWeaver enables networks to be formed easily across lots of different systems and environments, which is a fundamental tenet of any adaptive network.

New Networks and 8 New Rules of Engagement

The Adaptive Business Network is an excellent approach to how businesses should work together. In building such a network, you and your suppliers or customers can start with just a few Web pages that afford each of you better visibility into one another’s processes. Incremental steps such as this are the ideal way to infuse adaptive measures into your current operations. They don’t get built in one fell swoop. It’s a methodical transformation of capabilities. Toward this end, I offer the following advice:

  1. Establish clear, shared objectives that allow the supply network to work for the benefit of all participants, and design your business practices to meet these shared objectives.

  2. Predicate your business relationships on the idea that they will evolve, and design them accordingly. Business today, in many industry settings, is run at a far more rapid clock speed than just a year or two ago.

  3. In your policies, procedures, and service-level agreements, detail how information will be shared, what responsibilities each participant has, and how processes will flow from one participant to the next. Governance of the network should be shared.

  4. Craft contractual arrangements that can be evolved based on mutual agreement of the participants.

  5. A key priority should be the ability to sense customer demand signals — and have them flow across organizational borders to supply network participants — to trigger a coordinated response. Rather than push products into the channel, an adaptive, demand-driven network allows demand to initiate supply network processes.

  6. Define your real-world aware (RWA) strategy, instead of focusing just on one technology like RFID. Identify where sensors — whether they are sensors on the shop floor, RFID readers, or mobile devices — can add value, and focus on those that provide the fastest ROI. Be aware that the return is always in your ability to respond to what you sense.

    Often shop floor integration can bring a much faster ROI than every other RWA technology, since in most cases the sensors are already there. The only problem is the integration into the business processes. If there is a breakdown on the shop floor, it’s not just a local plant operator’s problem. It could be indicative of a supplier, shipper, quality, or scheduling problem. It could also become a customer service problem. Put the information into the proper context and get it to the right parties, and you can react quickly. Lack of shop floor integration (a problem for many manufacturers now) will get in the way of high-speed business networks.

  7. Distribute key performance indicators (KPIs) in conjunction with notifications and triggers for automated responses to virtually every employee — this enables rapid responses to changing conditions on both the supply and demand side.

  8. Remember that Adaptive Business Networks need to be supported by adaptive, services-oriented IT infrastructures. Businesses add, terminate, and change partners and partner requirements with increasing speed these days. A services-oriented architecture (SOA) provides the flexibility to more easily modify business processes as the business changes. What if you have to absorb a new acquisition into your business? What if you have to source supply in a different part of the world? Adding a new supplier need not be a new integration project. The broad capabilities of SAP NetWeaver and an Enterprise Services Architecture enable current and future SAP solutions to support these needs — and to support a more adaptive business.

Lasting Leverage

With an Adaptive Business Network, the leverage you derive from a partnership — or amass across dozens and even hundreds of companies working in a coordinated fashion — can be continually improved. As I look ahead, I see a number of very significant benefits accruing to participants of an Adaptive Business Network:

  • The ability to respond more quickly to customer needs, in a more profitable manner

  • Greater visibility into customer, partner, and supplier activities, and as a result, greater efficiencies, savings, and productivity

  • Accelerated product design to more rapidly respond to market needs

  • Reduced time-to-market, time-to-volume, and time-to-value for new products

  • An increased ability to identify and exploit new revenue opportunities

  • Greater ability to leverage services as a value-add and profitable competitive differentiator

  • Maximized return on assets (ROA) by minimizing downtime, improving equipment reliability and throughput, and extending the life of assets

  • An increase in the capital allocated to core value-creating activities, and a better ability to outsource other processes

The concept of Adaptive Business Networks revolves around the notion of companies working together to fill customer needs. The network is driven by customer demand, and all activities are aligned to fulfill that demand (see Figure 2).

Figure 2
Key Processes of the Adaptive Business Network

Sense and Respond to Change

Until now, most manufacturers have focused on improving planning and execution activities. An Adaptive Business Network adds another dimension — the ability to sense and respond to change. This dimension is absolutely critical. If you are outsourcing manufacturing and don’t have this ability, you leave yourself exposed to tremendous risk.

Consider what happens in an out-sourcing situation: information typically doesn’t flow as quickly, visibility is hindered, and your ability to change is diminished. Adaptive Business Networks mitigate these risks by providing the tools to maintain a high degree of integration across companies.

As another example, look at how Responsive Replenishment within SAP APO helps deal with and respond to change. Consider a consumer goods company that cannot rely solely on the accuracy of their forecasts; for them, Responsive Replenishment complements their forecasts by adding the ability to sense inventories at customer sites early on and respond immediately using subdaily replenishment runs. This allows them to reduce critical stockouts without piling up expensive safety stocks.

Another driver for constant change in today’s economy is the need to bring innovation to market much faster and in a much more effective way than before. SAP’s applications are designed to better support the mission-critical New Product Development and Introduction (NPDI) process across functional silos within a company.

I see strong forces already at work to institutionalize Adaptive Business Networks across all of our enterprises. In fact, I think there will be little choice in the matter. Business networks are becoming less stable. They have to reassemble themselves faster than in the past. It’s not practical to have every new partner integration be a new integration project.

This is why SAP is investing so much in service-enabling architecture, supporting the modeling and assembling of business processes and their required services. It makes adding, terminating, and changing partners easy to do. In resolving the conflict between efficiency and adaptability, the Adaptive Business Network allows companies to stay lean but also respond quickly, which is what today’s business environment demands. The increased robustness of your supply chain means that you’re far more likely to maintain these benefits — even when the unexpected happens.

For more information on SAP's partner program, please visit

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A Smarter Supply Chain


Dennie Norman
Principal Marketing Strategist,
Supply Chain Intelligence,
SAS Institute, USA

For years, demand planners, material managers, procurement professionals, and logistics experts have achieved efficiencies and synergies in the ways they buy, make, move, and sell products and materials. As a result, companies have increased their flexibility, cost-effectiveness, and competitiveness, setting new standards for “best-in-class.” Supply chain management now faces an even greater challenge: getting intelligence out of the vendor and customer network data and delivering business benefits.

Supply chain intelligence (SCI) is designed to assist you in managing uncertainty in your supply chain, from customers to vendors and across your company (see Figure 1). SAP customers can achieve this by making use of the supply chain management data from your mySAP ERP and mySAP Supply Chain Management (mySAP SCM) systems, supported by SAP NetWeaver, plus other internal and external data sources, to deliver unique demand, supply, operational, and customer-related insights. SCI helps you address the supply chain challenges that persist in most enterprises, in particular the need to be proactive rather than reactive, with analytics for the supply chain.

Figure 1
Managing Supply Chain Uncertainty

SAS is an SAP Software Partner with interfaces certified for SAP NetWeaver (the platform of mySAP SCM), for which we offer complementary solutions. SAS Supply Chain Intelligence applies predictive modeling to help planners foresee events and anticipate trends. It does not replace human expertise; companies need to understand what factors can be used as true business predictors, since the past is not always a sufficient guide to the future. But improving the accuracy of demand forecasts by even a small percentage can create exponentially beneficial ripple effects, both forward and backward through the supply chain, including fewer stockouts and lower inventory. Users are able to react faster to changing customer needs without increasing costs or reducing revenue.

Access to information alone isn’t enough, though — companies also need to conduct root cause analysis. For example, if a report from your mySAP ERP or mySAP SCM system indicates high product returns, what are the causes of product failures? How can field failures be detected sooner? Where should problem solvers focus their attention? Procurement professionals often ask how they can minimize total spending without sacrificing quality and delivery. Which suppliers should be part of the optimal supply base?

To better understand costs in the supply chain, it’s important to identify the most profitable customers, plants, or products. This is the kind of detailed intelligence that drives strategic decisions and competitive advantage. The key is to enhance your data with the intelligence that creates a smarter supply chain.

The Dimensions of SAS Supply Chain Intelligence

SCI has a broad mandate: providing an additional layer of intelligence to complement enterprise data and manage uncertainty, whatever the specifics faced by your company. It can drive the search for a profitable business strategy based on enhanced quality and service levels.

SAS 9 is the intelligence platform for all SAS solutions. It is certified for SAP NetWeaver, the framework of mySAP SCM, and ensures access to all relevant data and metadata across the supply chain through tight integration with SAP Web Application Server, the central component of SAP NetWeaver.

Here are just some examples of the ways organizations use SAS SCI to extend their current mySAP SCM landscape in the areas of demand management, strategic sourcing, production quality, warranty analysis, and inventory management.

  • Demand Prediction — SAS high-performance forecasting automatically selects the time series models that best explain your historical data, optimizes all model parameters, and generates high-quality forecasts. This functionality enhances the SAP planning function by reducing the risk of planning against an inaccurate forecast. SAS can accept transactional data and make it forecast-ready by accumulating the data into a time series format. Forecasts are based on data from mySAP ERP and mySAP SCM systems, plus other internal and external information sources, with the highest degree of data quality. External causal factors can be easily incorporated to improve forecast accuracy. Inventory levels can be reduced and service levels maintained or improved; purchasing patterns can be predicted and cash flow projections provided.

  • Production Quality — SCI exploits integrated data to drive problem solving, monitoring, control, and process improvement. Using an analytically driven approach, results can include reduced cycle times, increased product quality and throughput, and better asset utilization — in short, market differentiation through superior quality, greater flexibility, increased speed, and reduced costs.

  • Early Warning — Predictive analytic techniques and data and text mining can uncover patterns in data and text to indicate where and when future failures are likely to occur. Enterprise data such as shop floor records, supplier audits, warranty claims, and call center reports are all rich sources of information that hold clues about potential product failures. Combining structured information managed by mySAP SCM with unstructured data captured by field technicians provides warning of field issues months earlier than processes that are manual or do not include textual data in their analysis, enabling you to take action to reduce the production of defective units.

  • Sourcing Data Quality — Accurate and complete data is an essential support for strategic sourcing. Data quality can be improved through standardizing, cleansing, and rationalizing your supplier master files. Autoclassifying techniques can organize a company’s purchased materials and services according to a standard classification structure like UNSPSC,1 which allows procurement professionals to identify supplier consolidation or volume discount opportunities.

  • Supplier Ranking & Supply Base Optimization — Ranking provides an objective, repeatable, and adaptable measuring system that reliably identifies the best suppliers for your organization, so you can respond effectively to changing business conditions. By using dynamic, weighted averages to add balance and flexibility to your selection criteria, SCI objectively evaluates and prioritizes suppliers based on your specific needs. Further supply base consolidation can be achieved by modeling your ideal supply base for specific commodity groups. Business objectives can be balanced against supply risk, available capacity, and other constraints and filters to generate optimized supply base models.

Predictive analytical modeling techniques, along with optimization across all of the dimensions described above, are at the core of the SAS SCI offering. This gives companies an enhanced understanding of their key business drivers and enables them to achieve disproportionate gains. SAS complements SAP supply chain offerings via SAP NetWeaver integration to drive higher ROI from your investment in mySAP ERP and mySAP SCM.

For more information on SAS, please visit

1The United Nations Standard Products and Services Code (UNSPSC) offers a single global classification system for efficient, accurate classification of products and services. For more information, go to

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Catalyst's Integrated Components Extend Capabilities and Value of SAP's Supply Chain Execution

Michael Godshall
Executive Vice President,
Corporate Development,
Catalyst International

Catalyst International, an SAP Services Partner delivering “best for business” logistics solutions, has notable expertise in enhancing SAP’s Logistics Execution System (LES), a major component of the mySAP Supply Chain Management offering that includes SAP Warehouse Management (SAP WM), SAPConsole Mobile Data Collection, SAP Task and Resource Management (SAP TRM), and SAP RFID. Two Catalyst components — Labor Management and Slotting — work with SAP WM as natural extensions when implementing SAP’s WM and SAPConsole systems.

Leveraging its 25 years of supply chain expertise, Catalyst International has packaged these solutions as plug-in components for platforms such as SAP NetWeaver to help companies achieve faster results than custom designing and a lower total cost of ownership for their logistics solutions investments.

Labor Management: Powerful Solution, Fast ROI

CatalystCommand Labor Management is a powerful planning and reporting tool that enables major improvements in productivity by optimizing each worker’s performance. Since managers, warehouse supervisors, shift leaders, and other users can deploy and manage their resources for maximum productivity, they significantly increase throughput while lowering costs. Plus, unlike other labor solutions, the flexible CatalystCommand Labor Management solution is easily configured to adapt to companies’ specific requirements without custom code.

CatalystCommand Labor Management allows users to establish time standards, calculate estimates for task completion, and compare these estimates with actual times. These functions often reveal roadblocks to productivity, which can then be eliminated to improve organizational performance. Catalyst’s methodology enables system implementation before the integration of engineering standards, which means companies achieve a faster return on investment.

Other application capabilities for SAP-based customers include mapping activities in SAP to various work types in Catalyst’s labor management software, extending work types, and capturing labor on the shop floor. It also offers cross-warehousing reporting for all activities across multiple warehouses.

Slotting: An Untapped Source of Savings

Logistics or warehouse managers must reduce costs and improve customer satisfaction — two goals that seem to be at cross-purposes. In reality, however, by implementing a slotting product and process — identifying the most efficient placement for each item in the distribution center — companies can decrease labor costs for order picking and replenishment by 5% to 8%, and enhance customer satisfaction via quicker order fulfillment and fewer stockouts. Other benefits of slotting include improved productivity, optimal space utilization, and reduced material handling.

Most organizations that are viable candidates for slotting have already installed SAP WM, which provides the data necessary to execute slotting algorithms. Still, slotting applications are underappreciated and underutilized, due largely to the misperception that optimal slotting requires considerable product movement with high transport costs.

A better strategy is to combine slotting with the SAP WM functionality so that users can slot for “free” off the receiving docks, thus eliminating any additional transport costs. The CatalystCommand Slotting solution helps achieve this, and enables SAP WM users to more effectively determine the optimum location of warehouse items — and minimize associated re-slotting costs — without the need for customizing SAP modules.

To download free white papers on these and other Catalyst solutions for SAP customers, visit

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Adobe and SAP Extend Manufacturing Collaborative Processes with the Friendly Face of XML

Rajeev Kak
Group Product Marketing Manager,
Intelligent Document Business Unit,
Adobe Systems Incorporated

Manufacturing in the 21st century has become a complex web of competitive pressures, automation challenges, and increased reliance on outsourcing and extended supply chains. There is a constant push for “better, faster, cheaper” manufacturing. Product life cycles are shrinking. Mass customization is putting pressure on design. Outsourcing is challenging traditional product development management practices.

To answer these challenges, companies have adopted multiple software tools as point solutions for specific steps in the manufacturing product life cycle. The unintended result is an unmanageable diversity of software installations, file formats, electronic document types, and competing standards, both inside the manufacturing companies and their supply chains. This landscape results in a return to lowest-common-denominator workflow — using error-prone paper documents.

Accelerate Collaborative Business Processes

To shrink product life cycles and reduce time to market, manufacturing companies require digital data for better collaboration between manufacturers, vendors, and customers. To that end, companies are turning to mySAP SCM to adapt their supply chain processes to an ever-changing, competitive manufacturing environment. SAP and Adobe, an SAP Software Partner, jointly deliver Interactive Forms based on Adobe software. Part of the SAP NetWeaver platform, these interactive XML-enabled Adobe PDF forms capture and disseminate business-critical data in forms-based processes. Interactive Forms can be developed using Adobe LiveCycle Designer, an easy-to-use design-time environment fully integrated within both SAP NetWeaver Developer Studio and ABAP Workbench.

Now, any of the 700 million users with the free ubiquitous Adobe Reader, including manufacturers and their vendors and customers, can share data digitally, instead of in paper-based processes. The result? Accelerated time to market and improved data quality, as embedded business logic associated with the data fields in the XML schema ensures that data is captured correctly.

Collaboration Example: Streamlining the RFP Process

Consider, for example, how Interactive Forms could streamline the historically paper-intensive RFP process:

  • An automated roundtrip for an RFP package begins with an organization using Adobe LiveCycle Designer to create a set of interactive PDF documents that comes complete with information pertinent to the RFP project and its issuer.

  • Readily distributed to anyone, the RFP package includes active form fields to enable recipients using Adobe Reader to quickly complete required information, annotate where necessary, digitally sign the RFP, and return it via secure email.

  • Once the completed RFP is received, the SAP system retrieves all the data and attachments required to secure an official bid, and automatically incorporates that information into its database of RFP responses.

This sequence relieves organizations from the burden of manually customizing RFPs, shipping documents to vendors, tracking proposals, compiling and entering data, and manually reviewing the results. Each step is automated, and the costly labor associated with the RFP process is substantially reduced.

Collaborate Effectively and Securely — Anytime, Anywhere

Interactive Forms allow developers to create interactive, round-trip processes that users can access and manipulate from within and outside the SAP application. This allows mySAP SCM users to extend their business processes beyond the firewall by deploying secure PDF forms over the Internet, for use either online or offline, enabling users regardless of their technical environment. The result is a simplified user interface for collaboration that doesn’t sacrifice the integrity of your underlying supply chain and business processes.

For more information, visit or

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Manage Payments as an Integrated Part of the Supply Chain

Brett Walker
Chief Technology Officer,
Paymetric, Inc.

Your investment in mySAP Supply Chain Management (mySAP SCM) ensures that your supply chain is flexible and optimized. For the bottom line, financial supply chain transactions must be managed accurately and efficiently, with immediate visibility throughout your SAP environment. But for most organizations, handling procurement-related payments is slow and expensive, with processing costs up to $200 for each invoice.

The MasterCard Corporate Purchasing Card helps eliminate many paper-based process steps, automate remaining steps, and deliver detailed transactional data electronically. Despite the opportunity to reduce cost and streamline procurement processes, many organizations still aren’t realizing the full benefit of their purchasing cards (p-cards).

A Missing Link

Somewhere between the promise of purchasing card efficiencies and p-card management, expected benefits leak out of the system. The problem is that traditional purchasing cards function independently of other business operations, and managing activity between disconnected systems introduces errors and inefficiencies. mySAP SCM provides an adaptive supply chain environment that gives your company a competitive edge. To sharpen that edge, your solution must be equipped with procurement management tools that integrate MasterCard Corporate Purchasing Card transactions with your SAP system.

A Complete Financial Supply Chain Offering for SAP Customers

MasterCard SmartLink from Paymetric helps organizations realize the full benefit of their MasterCard Corporate Purchasing Card by integrating electronic procurement data and payment trans-actions with SAP financials. A robust transaction review and approval process leverages your SAP infrastructure, ensuring that each transaction moves quickly and accurately from purchase to posting in the SAP general ledger and A/P subledger (see Figure 1).

Figure 1
MasterCard SmartLink with SAP-Certified Integration

MasterCard SmartLink provides the missing financial supply chain link, combining SAP process integration with detailed, timely, and accessible information. Consolidating spending data into your SAP environment (including your mySAP SCM, FI, A/P, and MM solutions) provides real insight, so it is easy to analyze procurement spend patterns, control expenses, and leverage supplier relationships. A shortened purchase-to-pay cycle means suppliers benefit from faster payments, more efficient A/R, and stronger cash flow, while buyers retain monthly float on payments to card issuers. These benefits of MasterCard SmartLink create a win-win situation for buyers and their suppliers.

For more on MasterCard SmartLink, visit or

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by SAP and Partners SAPinsider - 2005 (Volume 6), April (Issue 2)

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