A comparison of the SAP warehouse management and extended warehouse management solutions

A comparison of the SAP warehouse management and extended warehouse management solutions A comparison of the SAP WM and solutions Page 1

Executive summary Today s complex supply chain realities and difficult economic conditions are making it more important than ever for executives and managers to feel confident in their decisions regarding IT investments. Understanding the many options in selecting a suitable warehouse management system (WMS) is critical for meeting both present and future business requirements. This white paper aims to provide a framework for understanding and assessing two of those options: SAP s WM and solutions. Introduction SAP offers two different WMSs to its customers. The SAP WM application was first introduced as a submodule of its materials management application within the R/3 enterprise software releases. Functionality enhancements were provided with each new release, up to and including the current release of the enterprise resource planning (ERP) software. The SAP was developed as a component of the Supply Chain Management (SCM) business suite. It is separate and distinct from the ERP WM system, in terms of its architecture and functionality. The differences between these systems, and a rationale for assessing and choosing one or the other, is presented in the following sections. A framework for decision-making A framework for gathering relevant information is depicted at right. An initial assessment of the company s business model, focusing on the supply chain, is a necessary first step. While it is important to create metrics based on current volumes and the existing supply chain network, any future changes to the model must also be considered. A high-level description of business requirements should follow the assessment. At this point, the company s needs for system support in key warehouse process areas should become apparent. Weightings can be applied to various requirements to provide a more complete target vision. The documentation and approval of these requirements will speed up the decision-making process and will also increase the believability of the ensuing business case. Page 2 A comparison of the SAP WM and solutions

Understanding your supply chain business model Any decision on a WMS must be preceded by a thorough analysis of your as-is and future business models. Here is a list of suggested business process attributes that should be measured and understood first. Volumes The number of receipts, putaways, picks and transfers within a warehouse must be measured in terms of order lines per day or units per day. Are these volumes expected to increase over time? Does seasonality cause fluctuations in the supply chain at different times of the year? The number of stock-keeping units (SKUs) is also a relevant indicator of volume. Facilities The number of facilities, and the types of activities carried out at each facility, needs to be considered. The emphasis on pick-and-pack activity is typically much higher at distribution center facilities than at manufacturing sites, for example, while manufacturing sites require support for the staging of materials to production areas. The supply chain network may also include one or more third-party logistics providers (3PLs). The number and type of facilities will give you a sense of the overall complexity of your supply chain and provide a starting point for developing your functional requirements for a WMS. Warehouse process complexity Warehouse processes can vary from simple to highly complex. In goods receipt, for example, materials may simply need to be offloaded from trailers or rail cars and forwarded directly to storage areas with no intermediate handling, while other inbound materials may require a sequence of process steps, such as quality inspection, deconsolidation, sorting, relabelling and putaway. Be sure to review all of the processes that are carried out at all the sites: inbound, outbound and internal processes, such as inventory counting and replenishment. A comparison of the SAP WM and solutions Page 3

Understanding your supply chain business model (cont d.) Labor complexity Smaller warehouse facilities can be operated by a few skilled and knowledgeable employees while larger ones can require the efforts of dozens or hundreds of individuals. With higher numbers of workers, it is more important to understand the time and effort expected to be spent on specific warehouse tasks. In order to maximize employee productivity, you need to be able to gauge actual efforts against standard measurements, and to dynamically adjust the flow of the operation according to unique events. A robust labor management system, integrated within the WMS, is necessary to realize these benefits. addition, most warehouses today require real-time data collection and entry using handheld or vehicle-mounted portable computing devices, such as radio frequency (RF) terminals. Radio frequency identification (RFID) may also be part of your current or future plans; your decision on a warehouse system and platform will be influenced by this. Understanding the capabilities of the different WMS options will allow you to quickly assess the suitability of these systems to the needs of your company s supply chain and warehousing operations. The following section highlights and compares the functional abilities of the two SAP warehouse management applications, WM and. Automation and technology Many modern warehouses feature automated storage and retrieval systems (ASRS), conveyor systems or other advanced material-handling technologies. Often, this type of system can be operated as a black box, utilizing interfaces that are designed to exchange master data and business transactions with a host system. But sometimes it s preferable to connect these sub-systems to your WMS directly to provide the ability to manage the equipment as another type of warehouse resource. In Functional capabilities: SAP WM and SAP The WM and capabilities for key functional areas are reviewed and compared below. Warehouse structure and organization Basic warehouse structure WM Storage types, storage sections, storage bins are used to model the physical areas of the warehouse Same structures as in WM Storage type and section may be up to 4 characters in length, as opposed to 3 characters in WM Storage bin numbers may be up to 18 characters in length, as opposed to 10 characters in WM Each storage bin is unique at the warehouse level in Additional warehouse structures Doors, material staging areas, pick areas Structures related to yard management structures like yards, parking spaces and checkpoints are modeled outside of WM, in the LES change to yard management (YM) component Doors, work centers, yards, parking spaces, staging areas are modeled using storage types and storage bins Activity areas are groupings of storage bins and allow optimal creation of warehouse orders and assignment to work queues Page 4 A comparison of the SAP WM and solutions

Functional capabilities: SAP WM and SAP (cont d.) Warehouse structure and organization (cont d.) Organizational structure features WM More than one inventory management (IM) storage location can be warehousemanaged under the same warehouse number Similar to WM multiple IM storage locations can be managed using one warehouse number Stock management Stock types Units of measure Storage units and handling units Batch management Serialized materials Warehouse stocks, vendor consignment stocks, project stocks and customer stocks are supported Stock can be managed in various statuses (unrestricted use, blocked, quality inspection and returns) Rules for mixed storage are applied at the storage-type level Multiple units of measure are allowed per material, including preferred WM unit of measure Storage units (intra-warehouse capability) and handling units (HU) are supported Batches and management on the basis of shelf life are supported Limited functionality available for serial numbers. Requires the use of storage units RF serial number capture possible in outbound delivery only No direct bin-level visibility of serial numbers Same stock categories as in WM Additional stock types are used to distinguish between stocks that have been received and stocks that have been put away within the warehouse Stock types in the and ERP systems are synchronized using the logistics inventory management engine (LIME) All units of measure are also supported in. also supports stock-specific unit of measure, which allows for multiple units of measures of the same material to be stored side by side, i.e., different case/pack size Only handling units are used in. HU tracking is activated at the storage-type level. Handling units are more flexible and easier to use in than in WM It is not necessary to activate handling unit management (HUM) in the ERP system when using handling units in Batch and SLED management are also supported in Batch determination can be carried out in if batches are not specified in the source ERP documents Full support for serial numbers, including tracking to the storage bin level, with or without handling units Hazardous materials Support of hazardous materials is provided Hazardous materials are also supported in Catch weight management Catch weight materials are supported when using the IS-CW industry solution in the SAP ERP system supports catch weight materials in conjunction with an IS CW ERP system, as well as managing CW products directly in without requiring IS-CW in ERP A comparison of the SAP WM and solutions Page 5

Functional capabilities: SAP WM and SAP (cont d.) Inbound processing Putaway strategies Capacity checking Complex (multi-step) inbound processing Quality inspection Exception handling in putaway Deconsolidation of mixed pallets WM One putaway strategy available per storage type: Bulk storage Open storage Fixed bins Addition to existing stock Near picking bin Next empty bin Storage unit type (up to 99 bin positions) Dynamic coordinate quant number Dynamic coordinate reference number Manual bin selection Up to 30 storage types, sections, bin types and storage unit types can be defined in bin searches Capacity checking possible, based on weight, volume and dimensionless capacity figures (material and storage unit type) Not supported Inspection lot sample-handling during putaway (place into stock, leave at dock or send to inspection area) Possible to change destination bin during putaway confirmation, as long as the new bin is within the same storage type as the original putaway bin Not supported Same strategies are supported No limit on the number of storage types, sections and bin types in bin searches Capacity checking possible, based on weight, volume and dimensionless capacity figures (material and handling unit type), as well as maximum quantity capacity. This is new in 9.1 Supported with the use of process-oriented storage control Can execute warehouse inspection during putaway. Also possible to integrate samplehandling with QM system (inspection lots) Possible to change the destination bin to any storage bin in the warehouse (including other storage types) Mixed pallets can be deconsolidated at a work center prior to putaway Page 6 A comparison of the SAP WM and solutions

Functional capabilities: SAP WM and SAP (cont d.) Outbound processing Picking strategies Complex (multi-step) outbound processing 2-step picking Picking into shipping containers Packing Wave picking and multiple processing Proof of delivery WM One picking strategy available per storage type: Partial quantity management FIFO (first-in, first-out) or stringent FIFO Shelf-life expiration date LIFO (last-in, first-out) Large/small quantities included (with rounding) Fixed bin from material master Dynamic coordinate reference number FIFO, GUID based Manual selection of source bins Up to 30 storage types can be searched in source bin selection Not supported Possible to pick cumulative quantity for several orders in one step and distribute to individual orders in a second step Can pick into handling units, which become the shipping handling units. WM supports only a single packaging material to be used per storage type, which is well-suited for pick-to-pallet or pick-to-tote operations Packing of picked items at a packing station. Weigh-scale integration Possible to group open deliveries into waves for mass processing Can combine requirements for multiple deliveries into one picking transfer order Possible to implement proof-of-delivery (POD) integration with relation to customer billing Same strategies are supported. supports unit of measures specific picking strategies, as well as the ability to optimize picking of different size multi-pack combinations to meet customer order quantities while minimizing the need to break packaging stock specific unit of measure No limit on the number of storage types in source bin searches Supported with the use of process-oriented storage control Same 2-step picking capability is available in Pick-HUs are supported in. also has built-in cartonization capability to enable optimized selection of packaging materials for pick and pack Packing of picked items at a work center. Weigh scales can be integrated Advanced wave management capabilities, including automatic wave creation using wave templates Possible to assign items from the same delivery into multiple waves Possible with use of POD functionality within ERP Kit-to-order Not supported Can perform kitting during the picking step, or at a kitting work center, with or without a valueadded services step A comparison of the SAP WM and solutions Page 7

Functional capabilities: SAP WM and SAP (cont d.) Internal processing Warehouse stock optimization Physical inventory Posting changes Replenishment WM Optimizing is possible with offline analysis and manual stock transfers Various inventory methods are possible: Cycle-counting Continuous inventory Annual (wall-to-wall) inventory Zero stock check Dynamic cycle-counting is available as of R/3 release 4.7 with Enterprise Extension Set 2.0 Can post stock to new material or new stock type from within WM Can initiate fixed bin replenishment based on material-specific min/max levels and bin assignments Can also initiate replenishment based on picking requirements Possible to perform slotting in order to determine optimal stock locations based on historical or forecast product movement. Can execute rearrangement of existing stocks following the execution of slotting Same inventory methods are available in Also possible to perform low-stock checks during the picking process Can perform same posting changes from within the system can automate posting changes during storage bin transfers to change stock type and/or storage location by storage type Can initiate fixed bin replenishments using scheduled jobs or based on picking requirements Also possible to trigger (and execute) bin replenishment directly while picking stock from fixed bins. Multiple fixed bins per material are supported Kit-to-stock Not supported Can execute kitting of components in stock to create stock in a new material Complex (multi-step) internal processing Production integration Material staging to production areas Kanban Receipts from production Not supported Various methods are supported: Pick parts (pick list) Release order parts Crate parts Manual staging Possible to de-activate quantity reduction according to stocks already in production Possible to use Kanban technique to supply materials to production areas Back-flushing and receipt of produced materials are supported Supported with the use of process-oriented storage control Same staging methods are available in All provision is managed using outbound deliveries from the warehouse Also possible to use Kanban in material staging Same capabilities as in WM All receipts are managed using inbound deliveries into the warehouse Page 8 A comparison of the SAP WM and solutions

Functional capabilities: SAP WM and SAP (cont d.) Cross-process functionality Radio frequency (RF) support Printing and outputs Environment, health and safety (EH&S) Labor management Radio frequency identification (RFID) Yard management Transportation crossdocking (TCD) Opportunistic crossdocking Task and resource management WM Native support for RF processing available as of R/3 release 4.6B Approximately 50 RF transactions are provided, including goods receipt, goods issue, transfer order confirmation, inventory counting and serial number capture Possible to work with system-guided selection of open transfer orders WM print control settings are used to trigger printing of warehouse documents such as pick lists Output control is available to initiate processing of outputs from delivery documents Supported Not supported (Possible to enter planned and actual transfer processing times for basic workload planning and evaluation) Supported YM capabilities provided as a separate LES component with R/3 release 4.7 with EE 2.0 Not supported Using this functionality, the warehouse can detect and execute opportunities to match inbound materials to outbound requirements dynamically Available only in R/3 release 4.7 with Extension Set 2.0 Introduced as a separate LES component with R/3 release 4.7 EE 1.1 Interleaving Basic interleaving is possible as of R/3 release 4.6C Over 100 RF transactions are provided in for goods receipt, goods issue, task confirmation, packing, deconsolidation, loading, inventory counting and others Can use system-guided selection of open/assigned warehouse orders RF Wizard available for quick and easy changes to transactions uses the post-processing framework (PPF) to trigger all printing and outputs based upon the status of warehouse tasks Standard outputs are delivered in both SmartForms and Adobe forms Tight integration with the EH&S component in the ERP system Supported with implementation of engineered labor standards and distance calculations Can record time against many different task types, both direct and indirect Can be implemented with SAP Auto-ID Infrastructure (AII) and SCM event management systems Fully integrated YM functionality within Transportation units (TUs) are used to represent trailers, rail cars, airline containers, etc., and function similarly to handling units TCD in supports the transfer of HUs among various warehouses or distribution centers to a final place of destination, which can be a DC or a customer s site Fully supported within Functionality is included within and can be activated or deactivated by task type Task interleaving is possible with the activation of resource management in A comparison of the SAP WM and solutions Page 9

Functional capabilities: SAP WM and SAP (cont d.) WM Cross-process functionality (cont d.) Task-splitting Possible to split a transfer order to rebalance workload among users Warehouse order creation rules enable automatic packaging of tasks into optimal work packages for users Two-step confirmation Quantity exceptions Integration to SAP ERP Transportation (LE-TRA) Reverse logistics Direct Store Delivery Value-added services (VAS) Possible to confirm a single transfer with separate pick and transfer steps Possible to confirm transfers with target/ actual quantity differences Supported Putaway of materials received on a return order is supported Functionality available as of R/3 release 4.7 with Extension Set 2.0 Repacking, tagging and other value-added steps can be performed at a work center or during transfer order confirmation Supported as of R/3 release 4.7 with Extension Set 2.0 All transfers can be processed as a removal followed by a placement. Processing times can be captured when processing with RF transactions exception codes are used within all RF transactions to facilitate exception reporting and to trigger follow-up activities Supported Supported Enhanced customer returns process can be activated via integration with SAP Customer Relationship Management (CRM) Includes integration with advanced returns management VAS steps can be integrated seamlessly into inbound, internal and outbound processes Reporting and graphical tools Reporting capabilities Basic reporting of open/confirmed transfers, stock overviews, bin lists, storage unit inquiries, etc. Many reports available in ABAP List Viewer (ALV) format to allow advanced sorting and statistical functions Logistics information system reports also available for summarized and detailed analysis of historical data Warehouse activity monitor gives manager a view of open/overdue warehouse activities RF monitor allows managers to view and reorganize activities and assignments to users Warehouse management monitor provides reporting of all types of warehouse activities, as well as stock and storage bin lists Advanced analytics, dashboards and reporting are possible using standard SAP Business Intelligence (BI) content Page 10 A comparison of the SAP WM and solutions

Functional capabilities: SAP WM and SAP (cont d.) Reporting and graphical tools (cont d.) Workload reporting and analysis WM Rough workload estimator allows warehouse managers to perform labor planning for inbound and outbound processes Labor planning and simulation cockpit permits estimation and reporting of labor time across all warehouse activity types Graphical warehouse layout Not supported uses the easy graphics framework (EGF) to create visual representation of warehouse layouts Shipping cockpit Not available in a single cockpit Ability to perform outbound delivery planning, monitoring and execution of all outbound processes in, including trailer creation, check in/check out, wave management, task execution, print output and invoicing (prior to GI). Graphical sidebar analytics embedded into cockpit General Centralized/ decentralized options Transportation planning Integration with external warehouse automation systems Can implement decentralized WM (dwm) as of R/3 release 4.5A Several ERP systems can be linked to a single dwm instance Advanced transportation planning and vehicle scheduling can be implemented using SAP advanced planner and optimizer (APO), as of SAP ERP 2004 (ECC 5.0) or SAP ERP 2005 (ECC 6.0) Black box interfaces are possible using ALE/IDoc techniques Optimized when used in conjunction with task and resource management (TRM) in the LES system can be run as a decentralized system on a SCM server or it can be centralized as an add-on within the ERP system (if using ERP ECC 6.0 and SCM 5.1 or higher) Can use freight documents and shipments in Transportation management module Integration is available with SAP TM and includes material flow system (MFS) capability to connect directly to programmable logic controllers (PLCs) in external automation systems ALE/IDoc integration is also possible to external WCS Archiving Supported Supported Authorizations Standard SAP authorizations are used to control access to data and transactions Standard SAP authorizations are used to control access to data and transactions A comparison of the SAP WM and solutions Page 11

Other factors to consider Scalability The solution has several advantages over WM in terms of scalability. If your environment requires a single WMS instance to be linked to multiple ERP systems, it is only possible with a decentralized implementation. If there are high-volume conveyor systems or automated storage and retrieval systems that process thousands of packages per day, these can be integrated with SAP using the MFS (material flow system) technology. Costs SCM is a separately licensed product from SAP. This differs from SAP WM, where it is included in the cost of the ERP license. It is important to note, however, that the SCM license cost will be charged for using the advanced functions of ERP WM, such as cross-docking, value-added services or yard management. Future functional enhancements from SAP No further SAP development will occur within WM. All future investment will be within the SCM product. Some common questions (and answers) about WM and Is SAP going to discontinue its support for ERP warehouse management? SAP will continue to support the deployment of ERP WM. SAP considers WM to be an important WMS option for customers not requiring the advanced functionality and scalability of the system. We are using ERP WM today. Will we be required to upgrade to some day? No, you can continue to use the WM system until you decide that a migration to is warranted. Why did SAP decide to build extended warehouse management from the ground up, instead of building on the existing WM system? SAP needed a more scalable solution that could more easily compete with the best of breed WMS applications. It needed a solution that out of the box would have more robust features and an architecture that could address high availability and fast transaction processing. Does the term always refer to the SCM extended warehouse management solution? The terminology can be confusing, but there are really two different forms of, depending on how they are being used. When SAP warehouse management is being used with SAP release 4.7 Extension Set 2.0 or higher releases, it is referred to as ERP. When SAP WM is being used in conjunction with the SCM module, it is referred to as SCM. What types of organizations should be considering as opposed to WM? Typically, SCM is tailored to organizations that have high SKU and line-item volumes, very fast-moving product, complex product movement, cross-docking requirements, detailed packaging and shipping processes, and thirdparty logistics services on either the inbound or outbound side, or both. Page 12 A comparison of the SAP WM and solutions

Which WM application is right for your warehouse? SAP designed SCM so that it could provide the most benefit to warehouses with high activity levels, high volume and complex operations. These and other factors should be considered when determining which application is a fit for your facility. High level of distribution activity and materials movement Designed to benefit warehouse operations that are more distribution-oriented as opposed to material storageoriented (e.g., a production supply facility), SCM supports organizations with core competencies and critical success factors that rely on efficient management, movement and distribution of materials. For such organizations, could potentially be a good fit and could allow you to significantly enhance your labor efficiencies and minimize your labor costs. High level of volume Facilities with a high level of material flow velocity (typically characterized by the number of transfer orders or line items), high transaction volume, a high number of warehouse associates per shift and multiple types of material-handling equipment, are able to benefit from SCM functionality. Typically, the higher the number, the better the fit. For example, if you have 50 trailer loads a day, you will experience much higher benefit from the system than if you only have five. Operational complexity Complex material flows, such as the use of special equipment that cannot physically make certain material moves efficiently, but instead uses pick and drop locations or other operational complexities, such as pallet deconsolidation and other warehouse work center operations, such as packing and repacking, are handled much better in SCM. Value-added services Strong functionality for value-added services is offered within SCM. This includes pricing, labeling, packaging and hazardous materials notes on shipping documents. The higher the level of services offered, the better the fit with these solutions. Summary When determining which option is the right fit for your operations, it is important to consider that is more likely to benefit warehouse operations with high levels of distribution activity, volume and operation complexity. Companies that decide to implement and its inherent capabilities in labor management and resource management could gain the benefits of an accelerated supply chain and improved customer service. For more information on how EY s SAP Supply Chain services can help organizations gain improved operational efficiencies and manage supply chain operations cost, visit EY s IT advisory supply chain services on www.ey.com. A key point to remember is that no new significant functionality will be developed in WM. All future investment will be within the SCM product. It is advisable to always strongly consider your current and future business requirements carefully when making a decision on which WM application to use. If you require a true labor management system or slotting, then may be your answer. If you don t need these technologies but still have complex warehouse movements, WM may work well. A comparison of the SAP WM and solutions Page 13

Authors Doug Scott Senior Consultant, Advisory Services, Ernst & Young LLP Kyle Sorensen Executive Director, Advisory Services, Ernst & Young LLP EY leads the way for supply chain execution and mobility solution services EY is an SAP global services partner that is fast becoming recognized as an industry leader in end-to-end supply chain SAP services. With focus on the logistics execution systems (LES) and the supply chain execution (SCE) components of the SAP application suite, coupled with EY s already established SAP planning and procurement capabilities, EY offers our clients supply chain services that help organizations to gain operational efficiencies and manage costs related to their supply chain operations. Our SAP and supply chain consultants share a wealth of experience and knowledge when it comes to designing and helping implement leading SAP logistics and supply chain services, with noted experience in SAP planning and optimization (APO and S&OP cloud solutions), LES, WM,, transportation management (TM), procurement (including Ariba/SRM), and automatic data collection. Our SAP consultants were, and continue to be, key players in SAP s internal, pre-release testing stage for in Walldorf, Germany. Our consultants also played an integral role with pre-release testing of SAP s native radio frequency data collection product, SAP Console. Our in-depth experience with SAP LES and products and functionality along with our close relationship with SAP provides us with an intimate knowledge of the development vector SAP is applying to the LES and product suite. This allows us to advise customers on strategic operational decisions, provide them with detailed information on key integration points, and quickly assist them in identifying fit/gaps with current and future release levels. EY can help you achieve: Increased supply chain velocity and efficiencies Increased visibility into assets and data streams Increased control over the entire mobility life cycle Change management and business process optimization EY has experienced SAP SCM consultants who can share insights and knowledge in order to assist clients with implementing leading approaches to meet client demands. With strong business-leading practices knowledge and acumen, our team can help to drive supply chain efficiencies throughout your organization. Page 14 A comparison of the SAP WM and solutions

A comparison of the SAP WM and solutions Page 15

EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more of, the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. 2014 EYGM Limited. All Rights Reserved. SCORE no. BT0466 1407-1292234 ED None Information in this publication is intended to provide only a general outline of the subjects covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. Ernst & Young LLP accepts no responsibility for any loss arising from any action taken or not taken by anyone using this material. ey.com