Approaching the Ideal

Supply chains are getting faster and faster. The faster they get, the greater the need for visibility. As the degree of fragmentation across supply chains continues to accelerate, the need for visibility continuously increases. This need will have to be met by providing superior collaboration and best-in-class functional capabilities. SAP is committed to drive this vision by working with its customers and helping them build first-rate supply chains.
In December, SAP SCM 5.0 will be delivered, a solution which concentrates on both the adaptive supply chain network and the ability to link the service supply chain with the product supply chain. This solution will give customers the visibility demanded, along with the analytics and collaboration tools, to enable a common information framework across an extended supply network. SAP SCM 5.0 will also allow more seamless information sharing, extend supply network response processes to key customers and suppliers, and provide shorter cash-to-cash cycle times through network-wide information transparency. Companies can synchronize their supply network to increase business intelligence and analytics, better adapt to customer demand, and link their service supply chain with their product supply chain.

The demand-driven supply chain

With more accurate visibility into actual events, SAP customers can shorten response time, get away from reliance on forecasts, and dampen the impact of change. Companies must improve the way they measure the impact of an exception on their operations and finances, so that they can determine the best course of action to resolve that exception. How they measure that impact, by way of the key performance indicators (KPIs) they have established, requires state-of-the-art analytics. (Synchronized supply chain and manufacturing solutions that offer better visibility and analytics will go a long way toward constructing an adaptive supply chain network.)

Three steps to extend visibility

SAP SCM 5.0 enhances supply chain visibility beyond the borders of a single company by including tools that enable collaboration with its supply chain partners. Here are three steps to improve visibility and make the supply chain more demand-driven:

  1. Synchronize the supply chain network. SAP SCM 5.0 comes with tools that enable customers to create frontend demand and backend supply gateways, so that they can share information with the partners in their supply network.
  2. Synchronize supply and demand. SAP SCM 5.0’s demand gateways support Vendor Managed Inventory (VMI); the supply gateways support Supplier Managed Inventory (SMI) and Kanban processes.
  3. Synchronize the KPIs. Not all KPIs are created equal. In a fragmented supply chain environment, analytics are useless if a company’s KPIs are not synchronized with its supply chain partners. SAP, for its part, configures its analytics to conform to the standards established by the Supply Chain Council.

Monitoring transactions

Visibility begins with the tracking, tracing, and monitoring of transactions and business processes, such as the order entry and fulfillment process. For example, if a specific customer order requires a quality event during the production process, there is an impact on the fulfillment capability, requiring a response from the logistics service provider. The faster the propagation of this event across the supply network, and the better the quantification (using analytics) of the impact, the greater the ability to create an “economically justifiable” reaction to this exception.

Analytic Dashboard
Analytic Dashboard

SAP SCM 5.0 contains analytic dashboards that keep executives apprised to the health of their companies’ supply chain and notify them when exceptions occur. These also track key performance indicators, both financial and operational, which provide the information needed to create a real-time performance management environment to enable them to make the right decisions at the right time.

New elements for a new supply chain paradigm

Network Visibility
Network Visibility

The most critical part of a well-running supply chain is visibility. But it’s not just visibility into a company’s own processes, but also into the processes of their partners and customers. How do executives get visibility into their company’s supply chain? Much of it can derive from the analytics and tools built into SAP SCM 5.0 which will be further explained as follows:

1. Service parts planning:

Offers comprehensive functionality for parts demand planning, inventory planning, supply planning, distribution planning, and monitoring.

2. Service parts execution:

Enables business process integration in complex and distributed environments, resulting in higher flexibility, adaptability to business changes, and visibility. SAP SCM 5.0 delivers new service parts management functions for all order fulfillment, warehousing, and transportation activities.

3. Forecasting and replenishment for retail operations:

Supports the fashion segments and other retail customers with enhanced capabilities for replenishing products with long lead times. This tool helps handling seasonal products that are active for a certain period of time in the year, and introducing new products with a short product life cycle that need reference information for forecasting from several similar products.

4. Supply chain planning and collaboration for the apparel and footwear industry :

Supports supply chain planning for apparel and footwear with enhanced capabilities for demand planning. The tool can also help companies with their standard supply network planning with extended aggregation and disaggregation, as well as with store replenishment by enabling the forecasting and generation of high-volume sales orders at the store, style, size, or color level.

5. Supply network collaboration with Kanban and outsourcing:

Enables supplier-managed inventory by communicating replenishment requirements with Kanban signals. Outsourcing manufacturing provides supply and demand visibility and proactive management of inventories that are held at contract manufacturer locations.

6. Adaptive manufacturing with shop-floor integration:

Enhances usability in planning and scheduling transactions, maintenance of the planning environment, and support for integrated business planning. New multilevel scheduling heuristics and handling improvements reduce the manual effort of planners, improving productivity.

7. Extended transportation management:

Includes ease-of-use enhancements for transportation capabilities, such as splitting capabilities based on resource and equipment availability, enhanced carrier optimization capabilities, continuous move capabilities, routing guide, and mode-specific fast order entry capabilities.

8. RFID-Enabled supply chain execution processes:

Companies can grow their RFID implementation using a phased, step-by-step approach – from a standalone, slap-and-ship deployment to complete RFID-enabled business processes that scale to an enterprise-wide RFID rollout.

9. Demand-driven supply networks for the consumer products and chemical industries:

Enables consumer products companies to build demand-driven supply networks to stay competitive and facilitate growth. They can do this by transforming supply chains into hybrid networks to deliver innovation and responsiveness for premium brands, as well as high supply chain efficiency for mass-market products.

10. Project manufacturing for the industrial machinery and components and aerospace and defense industries:

Supports multilevel planning and adaptiveness in bottleneck situations. By determining the critical path and tools for reducing buffer times and rescheduling a multilevel production order network, production planners can identify critical orders or projects and find a solution for bottleneck situations. Visualization of earliest and latest dates, usability improvements in the planning boards, and improved reporting on capacity utilization help simulate the different options to solve disturbances in planning before they cause problems.

11. Supply chain design and analytics:

Includes enhancements to analytics, enabling efficient monitoring of planned and actual lead times on different levels of aggregation, reduced operational costs through exception-based work, extensive automated evaluations of supplier relationship, enhanced responsiveness through up-to-date views of fulfillment performance, and reduced stockout situations by efficiently determining and classifying service losses.
Successful management of supply chain economics is dependent upon how well customers can see the next problem coming down the road across supply chain operations as well as within manufacturing operations. An exception can wipe out a company’s margin for days, weeks, or even months. Companies that are better able to manage exceptions across the extended supply network will be much closer to the ideal of supply chain economics — being demand-driven.
More information:

Source: SAP Insider

Sudipta Bhattacharya
Sudipta Bhattacharya
Hans Thalbauer
Hans Thalbauer