SAP Supply Chain Management

Estimated Students Paula Ibanez Kelvin Thompson IDM 3330 70 MANAGEMENT INFORMATION SYSTEMS SAP Supply Chain Management The Best Solution for Supply Chain Managers in the Manufacturing Field

SAP Supply Chain Management The Best Solution for Supply Chain Managers in the Manufacturing Field Table of Contents Table of Contents... 2 Introduction... 3 Job Description... 3 Tasks Performed... 3 Information Needs... 4 Infromation Created... 5 Traditional Systems... 6 Information System or Technology... 6 Introduction... 6 Functionalities... 7 Availability... 9 Other Alternatives... 10 Conclusion... 11 References... 12 2

SAP Supply Chain Management The Best Solution for Supply Chain Managers in the Manufacturing Field Introduction Most supply chain managers (SCM) are the key ingredient to managing a network of interconnected business components to satisfy end users. It is safe to say that for the most part a supply chain manager should be savvy in the aspects of planning, forecasting, sourcing, purchasing, product assembly, moving, storing and keeping track of products as it flows from its starting point to the consumers. Supply chain managers are very essential to a company s success or failure, because their job requires them to connect different parts of the organization to one another, in turn contributing to 60-80% of a company s revenue. Making sure that all component of the company are working on one accord will give the manager the best opportunity to get all products or services at the right place in the right time. Job Description This technology proposal was designed for a supply chain manager of a manufacturing company in charge of devising strategies for better inventory control and efficiency Tasks Performed One of supply chain manager's chief goals is to effectively control the raw materials that are needed to keep production flowing smoothly. The supply chain manager would also be required to know the number of items that are outstanding; per week, month and year. Every product has a manufactured date so the manager should be aware of that and when it was introduced into the inventory. The way a manager positions its inventory and strategies for stocking the inventory will determine how profitable the company is. Examples of inventory positioning are whether products are first in first out (FIFO), last in first out (LIFO), or on-time production. The main objective is to manage inventory policies to optimize supply chain performance against business objectives, changing market conditions, risk, and supply chain restraints. It is imperative that supply managers know what products to carry, how much, and how to get them from the source to their final destination. Without the use of computers managers would be stuck with the task of counting and recording products one by one. Another important aspect of a supply chain manager is managing an efficient logistics scheme. Not only for the movement of products and inventory, but carrying knowledge is also important for a firm. SCM have to effectively work directly with suppliers so that they can reduce cycle time; whether that entails outsourcing or investing time in their logistics program. Depending on distance from 3

customers and final selling point supply chain managers will determine what types of transportation is most suitable; train, boat, air, or trucks. Supply chain managers are on a vital time scale, so their ability to satisfy customer needs in a timely manner will determine how successful they will be. Also by having a good supplier-customer relationship will give the firm long-term advantages over its competitors. Information processing needs Inventory An inventory manager needs to deal with the following information: Number of items left in inventory The number of items that are left outstanding per week, per month, per year. Dates of fabrication The dates each item has been produced and introduced into inventory. FIFO, LIFO The Company s inventory policy can be either First in First Out or Last in First Out, depending on the type of inventory. Average inventory count each year The time and average count of inventory each year according to the physical count realized periodically. Sales Figures How each product sells based on the type of product, line, and how often they sell. Chain of production How much (in $) material is in raw materials, work in progress, and finished goods. Inventory Obsolescence The average time it takes inventory to become obsolete, depending on the type of product. Cost of Goods Manufactured Total costs of producing a product, including material costs, labor costs, and factory overhead. Inventory Turnover The days it takes to sell each line of products in inventory. Inventory Lines The product lines the company has based on sales and outstanding inventory. New Productions How often the company launch new products. Revision dates How often each product in revised or replaced. Stolen or damaged items How often and the percentage of items in inventory are damaged or stolen. Raw Materials Pricing of materials How much materials costs and how those costs fluctuate throughout the year. Costs of shipping How much it costs for materials to be delivered from the suppliers to the company. Supplier contracts Which suppliers the company does business with, how long the contracts are due, and the specifications to meet the legal requirements of those contracts. Timing The time raw materials arrive, how long they stay as raw materials, and how long it takes for them to be converted into finished goods. 4

Promotions promotions on pricing of materials and new potential suppliers based on costs. Order fulfillment Retailers Which retailers the company contracts with and how often they request new orders. Wholesaling - Percentage of sales the company relies on wholesaling. Transportation Warehouse and retailer locations Location of each warehouse and retailer by state, city, zip code. Type of transportation Types of transportation services the company utilizes for delivery and companies that offer these services. Costs Cost and fees of transportation services depending on type of transportation and destination points. Timing The time required for goods to reach the destination points. Insurance Type of insurance needed to ensure the safety of goods being transported. Packaging Costs and materials used for packaging as well as the type of identification and barcodes. Information they create With the information above, inventory managers need to be able to form strategies such as: Purchasing plans How often materials need to be purchased, from which suppliers, at what cost. This depends on the sales of each product and how long they take to depreciate. It also includes the dates inventory should be peaked, the placement of reorders, and the termination of certain product lines. Distribution routes Which routes are the most efficient depending on transportation method, timing, location, and costs. The objective is to create distribution routes that are efficient and cost effective. Inventory Control Strategies Strategies designed to implement control on inventory. How often a physical count is required and the type of system to use to better control inventory. Information they pass along All the strategies and plans need to be communicated to each department in a system where workers in charge of handling, transportation, and control of inventory can have the necessary information to do their job according to those plans. The workers in the production lines can have access to the system and know how much they need to produce and how often. The workers in charge of inventory control can access the database and know what information management requires concerning inventory, how often they need to create a physical count, and what type of codes and systems to use for each purpose. The workers on the transportation terminals can access the system and know what items to be shipped at which location, using a certain type of transportation service. 5

Traditional Technology The technological advances and new developments of the 21st century, has given SCM's access to sophisticated IT systems that allow them to be efficient across all of their business aspects. Where it used to be unrealistic for managers to control products, shipping and production internationally they are now able to accurately do so. A SAP module can transform a traditional linear supply chain to an adaptive network, allowing a manager to quickly adhere to changes; shortening their cash-to-cash cycle times. What provide help for supply managers are inventory forecasting and replenishment modules. This is an application that tracks current demand for products, forecast future demand, and develops recommended order quantities. A key element in the success of supply chain managers is initiative to protect themselves from disruptions in the supply chain. Millions of dollars can be attributed to poor shipping, loss inventory, and poor tracking. Radio Frequency Id's has been successfully implemented in many companies strategies that have resulted in more efficient supply chains. This technology has given managers unprecedented efficiency and control over shipments, by accurately pinpointing the position and condition of products. ability to understand the whole process from supplier s supplier to customer s customer numeracy and IT skills interpersonal and negotiation skills confidence and integrity organizational and planning skills ability to work under pressure written and verbal communication skills Willingness to work unusual hours (a lot of supply chain activity happens at night). Information System or Technology Introduction SAP Supply Chain Management application is a part of the SAP Business Suite. It functions with a technology platform called SAP NetWeaver, which enables a company to reduce costs in IT while joining technologies into a single platform. This platform helps companies to process information and data in an organizational leveling order to monitor processes and generate coordination in the supply chain. This program focuses mainly on anticipating the demand and expectations of customers efficiently while providing services and products that are considered high-value in today s supply chain management capabilities. The complexity of supply chain management operations and the increase in globalization makes this product very valuable to supply chain managers in the manufacturing industry. The Supply Chain Management Suit designed by SAP provides skills such as coordination, planning, execution, design, and coordination of the supply chain in order to help companies adapt their operations to the ever-changing trends of the industry. 6

This technology consists of an open integration and application platform which is the foundation for a service-oriented architecture, offering an incremental level of responsiveness, flexibility, and openness. The overall result of the adaptation from a traditional and linear system to this technology is a responsive supply network that is driven by demand and adapts to dynamic synchronizations in demand, supply, logistics, planning, and execution of network operations. Functionalities Some of the tools included in the SAP SCM suite are: Obtained from mysap SCM Solutions Brochure The SAP SCM suite offers a range of processes and activities that facilitate the daily supply chain operations as well as logistics and distribution. Based on the needs identified on the job description, the SAP SCM suite has several capabilities that support those needs. The following activities meet the needs of information that managers have on the industry level operations: 7

Need Solution Activities Number of items left in inventory Safety-stock planning Meet desired customer service levels while maintaining a minimum amount of safety stock Inventory obsolescence Dates of fabrication FIFO, LIFO Distribution planning Determine the best short-term strategy to meet demand and to replenish stocking locations Sales figures Demand planning Use state-of-the-art forecasting algorithms for product Chain of production Inventory lines Inventory turnover Cost of goods manufactured New productions Revision dates Stolen or damaged items Purchase of materials and forecasting Manufacturing visibility, execution, and collaboration Production planning and detailed scheduling Physical inventory Material requirements planning based detailed scheduling life-cycle planning and trade promotion planning - Meet and deliver on your production plans by managing production processes and the development of the workforce and resources on the shop floor - Document, monitor, and dispatch inventory across the production life-cycle - Share information with partners to coordinate production and increase visibility and responsiveness on the shop floor - Generate optimized schedules for machine, labor, and overall capacity utilization - Address problems of unequal allocation of constrained materials and capacity, due-date commitments, and sequencing of incoming orders without disrupting existing plans Plan and execute a physical inventory or velocity-based dynamic-cycle counts - Create feasible production plans across different production locations to fulfill demand to the schedule and to the standard expected by the customer - Use the advantages of production planning and detailed scheduling, simulation, and alert monitoring to optimize order sequences that can be released for production Supplier contracts Strategic Sourcing - Identify and evaluate potential vendors based on historical performance and other data - Create long-term plans of sourcing that take into account the company s financial and marketing strategies Timing Packaging Promotions Costs of shipping Planning and dispatching Network Collaboration Optimize, create, and manage planning processes using best-in-class optimization, dynamic routing and scheduling, and continuous-move optimization - Forecast shipment levels, carrier capacity, and equipment allocations - Determine shipment volumes by origin, generate weekly and daily forecasts, and collaborate with logistics service providers 8

Retailers Wholesaling Warehouse and retailer locations Costs Timing of transportation Sales order processing Warehousing and storage management Inbound processing and receipt confirmation Rating, Billing, and settlement Freight Management - Tender your offers directly into you carrier s or forwarder s system over the internet or using XML or electronic data interchange Fulfill a range of contracts or purchase orders by delivering a specific product configuration and quantity or by providing a service at a specific time - Optimize internal movement and storage of goods within a warehouse - Utilize task interleaving to decrease travel and improve efficiencies - Receive and process procured goods into the warehouse with a single RF scan - Capture detailed and overview information using RF identification (RFID)- enabled tools - Evaluate, calculate, and distribute transportation charges for the ordering party and the supply party - Enable financial transactions for customer billing and for supplier invoicing - Use denied-party and embargo lists to ensure compliance for cross-border shipments - Receive, update, and confirm transportation requests - Predefine a specific route through the transportation network with dynamic route determination Availability The SAP SCM Suite is included in the SAP Business Suite. This software is used with the platform SAP NetWeaver, which is included on the installation of the Business Suite. Product license is required to use the product. Licensing is obtained by packages and by name users. The following graph represents the licensing model for the SAP Business Suite: Obtained from SAP Licensing Guide 9

The cost for the SAP Business Suite depends on 4 factors: Implementation, licensing, software, and maintenance. This factor may vary depending on the requirements for the company as well as the features the company needs. All of these services can be provided by SAP. A Business Suite project can start with a minimum of $20,000 per 5 licensed users, including the software and the implementation. Other Alternatives Oracle SCM Oracle SCM is an open integrated solution that ensures companies efficiency by predicting demand fluctuation, organizing and planning operations on the supply chain, and providing industryspecific solutions. Some of the solutions that this program offers are: Advanced procurement, logistics and transportation management, order fulfillment, manufacturing operations management, product life-cycle management, supply chain planning, and optimization. Leverage Gain Accomplish Oracle supply chain management Predictability Adaptability and innovation Alignment Sense, shape, and fulfill demand with best-in-class demand management and real-time sales and operations planning Optimize pricing; plan and manage trade promotions with best-in-class trade promotions management and predictive insight Reduce risk and minimize exposure to unplanned supply chain disruptions with resilient supply chain network design and global visibility Optimal supply with world-class supply management and integrated logistics Accelerated innovation and response to market demands with best-in-class product lifecycle management Enterprise agility with adaptable business processes and composite business flows Synchronize plans and actions across functions with real time sales and operations planning Achieve financial goals through predictable business plans with advanced decision support Drive trading partner alignment with multi-enterprise business process orchestration Obtained from Oracle SCM website 10

The SAP SCM suite is different than the Oracle SCM suite in that it offers more solutions to the supply chain management, as well as multiple benefits for each information need. It provides essential customer service and technical support for the company, as well as more features in the software itself. SAP SCM is more effective in customer satisfaction and problem-solving than the Oracle SCM suite because it addresses more needs and provides more solutions and information on each of their products. Conclusion The new era of globalization makes competition increase and technological trends advance in a rapid pace. Several industries suffer from this changes and one of the most affected in the manufacturing industry. It is important for manufacturing companies to overcome their obstacles and make their operations more efficient in order to survive. The SAP SCM suite provides the best optimal solution for problems with the management of the supply chain. The different information needs and technological advances in the area of inventory, logistics, distribution, and manufacturing make the job of a supply chain manager very difficult and there are always different concerns that arise as well as possibilities to enhance operations and make the supply chain more efficient. The SAP software provided is the best solution to all these problems and it entails more tools and technology to make all these possibilities come true. 11

References Oracle SCM. Oracle.com. Retrieved April 16, 2010 from http://www.oracle.com/us/internal/migration/018265.htm SAP Licensing Guide. SAP.com. Retrieved April 16, 2010 from http://www.sap.com/usa/sme/howtobuy/businessallinone/index.epx SAP Supply Chain Management. SAP.com. Retrieved April 4, 2010 from http://www.sap.com/usa/solutions/business-suite/scm/index.epx SAP SCM Solutions Brochure. SAP.com. Retrieved April 4, 2010 from http://www.sap.com/usa/solutions/business-suite/scm/pdf/bwp_so_mysap_scm.pdf Supply Chain Management (SCM). Wikipedia.ORG. Retrieved March 28, 2010 from http://en.wikipedia.org/wiki/supply_chain_management 12