Editor’s notE sAP AddrEssEs toP trEnds in suPPly ChAin tEChnology

tEn tiPs to unloCk sAP PotEntiAl

sAlEs And oPErAtions gEts A Boost

Fill in the Missing links in your sAP supply ChainSAP users sometimes focus on certain features in a tool and neglect the rest. But customers would be well served if they brush off the rust and put everything they’ve invested in to use.

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Efficient supply Chain starts With taking stock

Increased computing power and big data analytics can be used to solve complex supply chain management problems, but these new abilities come at a cost and must be clearly understood for their potential to be reached.

SAP has long been at the forefront of sup-ply chain management (SCM) technologies. It has extended its core ERP offerings with a slew of modules for both the execution and plan-ning sides of the supply chain, from supplier relationship management to demand sensing and logistics. This handbook will help read-ers understand key trends in SAP tools and choose the best SCM products for their SAP environments.

First, Jawad Akhtar examines trends in SAP supply chain technology, including the SAP Business Network, the Internet of Things and mobility. Companies must learn to exploit these technologies for leaner and more efficient SCM—or face competitors who do it first.

Next, Akhtar details how companies can take advantage of SAP ERP’s hidden features to improve their supply chains. He argues that those who complain about the cost of imple-menting advanced SAP tools should first see if their existing SAP system is achieving suf-ficient ROI. He then presents 10 SAP ERP fea-tures that can be used more effectively for SCM.

Finally, for a real-life example of SCM improvement, David Essex profiles how Radi-sys Corp. used E2open’s hosted E2 Planning and Response software to extend its SAP ERP system. Doing so helped the company solve problems that arose when it outsourced man-ufacturing to China. The result was quicker order response and inventory savings of more than $10 million—an ROI any SAP user can appreciate. n

Jim O’DonnellNews Editor, SearchSAP

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sAP Addresses top trends in supply Chain technology

In today’s intertwined economies, com-panies must find ways to improve their supply chain management and logistics processes or face nimbler, more determined challengers.

Optimizing supply chain management (SCM) is a two-pronged effort. Companies must have supply chain planning capabilities that allow them to quickly and comprehensively sense and respond to changes in demand.

Every industry has its own supply chain dynamics and associated challenges, but the fast-moving consumer goods (FMCG) and con-sumer packaged goods (CPG) industries are great examples of the demand-driven supply chain. To locate the leading edge of supply chain technology, follow the software that SAP makes for the FMCG and CPG industries.

Serving consumers in the hyper-connected world of the mobile Internet brings never-end-ing challenges. Feedback—positive or negative —that goes viral on social media can make or

break a brand. Take the June 2015 food-safety scare in India involving Nestle’s Maggi noodles. Nestle had to withdraw the product immedi-ately from shelves and faced massive supply chain disruptions that caused millions of dol-lars in lost sales and tarnished the company’s image. If this can happen to the world’s big-gest food company, with its otherwise enviable record in food safety, how might others handle similar shocks to their supply chains?

Staying on top of the biggest trends in sup-ply chain technology becomes even more important.

EvErything ConnECtEd

To address supply chain concerns, SAP pur-chased Ariba, Concur Technologies and Field-glass and integrated them with its ERP offering.

Ariba provides a cloud-based procurement network and applications, Fieldglass handles

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contract and temporary workforces and Con-cur addresses travel and expense management. Together, the three companies make up the SAP Business Network, which integrates the

various functions involved in completing important tasks. It’s intended to engender business transactions with minimal involve-ment of people.

SAP Ariba deserves to be singled out though. Its huge online commerce and procurement network connects global suppliers with buyers, which can lead to more efficient procurement. It continues to gain strong traction, especially in Europe, where a large installed base of SAP ERP users is considering moving on-premises procurement to the cloud.

Meanwhile, the Internet of Things (IoT) is revolutionizing how companies capture, collate and comprehend enormous amounts of supply

chain data, aided by S/4HANA, SAP’s ERP suite designed to take advantage of the processing power of the HANA in-memory database. IoT could offer the insights that will allow compa-nies more flexibility to manufacture only what customers need. It could also prevent logistical bottlenecks by sensing traffic jams in the sup-ply chain.

Mobile devices allow business people to make quicker decisions and take actions that have a big impact on supply chains. It makes sense to provide them with mobile platforms and applications that can make them work more efficiently. For this, SAP’s main tools are Screen Personas, which allows personalization of an SAP graphical user interface, and Fiori, SAP apps with a device-agnostic user interface.

six stAndBys

Beyond responding to the macro trends, SAP offers six ERP modules that help users stay current with supply chain technology and mas-ter SCM challenges.

n Demand planning is a subcomponent of

sAP Ariba, part of the sAP Business network, connects global suppliers with buyers, helping improve procurement.

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Advanced Planning and Optimization, and it offers granular yet predictable consumer demand data that aligns well with the supply side.

n Supplier Relationship Management (SRM) integrates all stakeholders and data involved in the procurement process, from the person who placed the purchase requisition to information on the status of orders. In addition, SRM pro-vides vendors visibility into pending and sub-mitted invoices.

n Extended Warehouse Management (EWM) continues to meet the increasing demands of supply chain practitioners who require func-tion-rich software to cater to diverse logistics and warehousing needs.

n Manufacturing Integration and Intelligence is a step up from traditional manufacturing that is disconnected from production on the shop floor; it provides real-time updates to ERP.

n Global Trade Services (GTS) efficiently handle the complexities involved in managing cross-border and transcontinental logistics and sup-ply chains by providing extensive applications for customs, legal and regulatory issues, as well as import and export controls.

n Transportation Management (TM) complete-ly integrates with SAP ERP, EWM and GTS to provide complete control of the complexities and challenges of logistics, transportation and the supply chain. —Jawad Akhtar

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ten tips to unlock sAP Potential

Although implementing SAP is often considered a one-time effort, continuous improvements are the secret to unleashing SAP’s full capabilities. But optimizing SAP is possible only when companies use all of the tools available in their existing systems. They also need to upgrade their systems with free enhancement packages that offer a slew of new features.

Consider the case of the SAP enterprise resource planning system, a strong choice for a business application platform. A conser-vative estimate reveals that companies don’t effectively use up to 40% of the standard fea-tures, functionality and tools that SAP offers. This leads to a lower return on investment because companies have already paid for many of those features.

Let’s look at 10 tools and features in an SAP ERP system that typically aren’t used effectively.

sales and operations planning (s&oP). Most companies go through extensive S&OP. Yet few companies take advantage of the S&OP tools, which not only save the time it takes to plan realistic sales or production figures, but also provide greater confidence in the entire plan-ning process. A standard offering can help with complex and flexible planning needs.

Forecasting. Planners often struggle to create a sales or production plan that not only reflects historical consumption of materials but also offers flexibility to choose a forecasting model that best fits business needs. Forecasting is a planning tool that helps predict future sales or consumption of materials based on histori-cal data. It also helps significantly in preventing SAP supply chain disruptions.

Material requirements planning (MrP). SAP sup-ply chain operations are all about maintaining

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a tighter and more efficient link to materials handling—whether it’s raw material procure-ment, in-house production, outsourcing or dis-patching to customers. The fact that relatively few companies put MRP to work remains one of the greater disappointments of SAP supply chain management.

reports and analyses. SAP offers thousands of standard reports that provide real-time infor-mation, as well as standard and flexible anal-yses to help in decision making, but most of these reports are hardly used. Instead, compa-nies opt for custom-designed reports or jump to analytics tools and dashboards, such as SAP business intelligence.

safety stock planning. Few companies are aware that SAP suggests safety stock of materials that can keep planners from facing materials short-ages and having to scramble to coordinate with vendors for rush deliveries.

Automation for efficient replenishment. Com-panies that still manually enter SAP supply chain data into the system should transition

to barcode and radio frequency identification technology that promises efficient replenish-ment and materials handling. SAP offers sev-eral interfacing options. Kanban is a viable yet underused replenishment choice. With the Kanban dashboard, it is easier and more effi-cient for a demand source to request materi-als replenishment from a supply source. Later on and as a step up, companies can adopt an Internet of Things (IoT) approach that inte-grates logistics and SAP supply chain processes to optimize business processes. IoT con-nects machines, operations and processes, and reduces human involvement.

Weaving quality into the sAP supply chain. Qual-ity isn’t a process or a business function. It’s an efficient SAP supply chain’s lifeline. Inte-grating quality gates and quality controls into important logistics and supply chain functions saves enormous costs. It also provides credibil-ity to companies by ensuring no defective raw materials are consumed in production or no defective product leaves the warehouse. Inte-grating quality features, such as statistical pro-cess control, adds enormous value to business

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functions by preventing procurement, produc-tion, logistics and supply chain disruptions through timely alerts of abnormal trends.

Early warning system (EWs). A hidden SAP trea-sure is EWS, which enables business users to set up user-defined prompts that signal poten-tial disruptions to logistics and SAP supply chain operations.

Classification and document management

system (dMs). This cross-application compo- nent of SAP optimizes logistics and supply chain processes. Classification provides op-tions to record diverse and user-defined data that is then available for search and reporting

functions. SAP DMS is much more than a doc-ument repository. Its integration with the pro-curement, production and sales functions of the SAP supply chain provides an option to record additional information that does not generally fit in any specific SAP component but is important for improving business processes.

Engineering change management (ECM). SAP ECM offers effective controls to master the data creation process and thus minimize or eliminate redundant or incorrect master data entries in the system. Having complete, cor-rect and consolidated master data helps busi-ness processes in the SAP supply chain run smoothly. —Jawad Akhtar

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sales and operations gets a Boost

Sales and operations planning is chal-lenging enough without having your operations on the other side of the Pacific. But that’s the situation Radisys Corp. faced when it started outsourcing manufacturing to China.

Fortunately, the company has found a sil-ver lining in the cloud. By adopting E2open’s hosted E2 Planning and Response software, the company linked its on-premises SAP ERP and Steelwedge cloud sales and operations planning (S&OP) software to build a global supply chain planning and execution process. The result has been a much quicker response to prospec-tive orders and inventory savings of $10 million plus.

“When I first joined Radisys, they had a pro-cess, but it was very fragmented, meaning everyone had their own version of the truth,” said Lisa Aleman, senior director of sales and operations at the company, which is based in Hillsboro, Ore. “Although there was a number

that was put out there, there was never a con-sensus [on a] supply-demand number and then [a] revenue picture that would come out of that. Operations might meet with finance, but not necessarily with the business unit. And sales was never really tied into the process at all.”

Radisys hired Aleman expressly to improve the S&OP process and bring in related tech-nology. She had handled S&OP since the mid-1990s for AMI Semiconductor, which was later bought by ON Semiconductor.

When she arrived in 2010, Radisys, which makes wireless infrastructure for telecommu-nications, aerospace and defense, was mostly using SAP Advanced Planning & Optimization (APO). Finding SAP APO too slow and inflex-ible, Aleman and colleagues began in early 2011 to design an implementation of Steelwedge and supply chain planning and collaboration software from icon-scm, which SAP resold as

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an APO add-on. E2open bought icon-scm in 2013 and renamed the product E2 Planning and Response (E2 PR).

“When we were doing the shadow planning with the [previous] contract manufacturer, Radisys noticed that their planning was say-ing that the contract manufacturer can actu-ally produce more than they were saying,” said Steve Lykken, E2open’s vice president of cus-tomer solutions, who was then with icon-scm. “The contract manufacturer had a different planning system.”

All in this togEthEr

Aleman is a strong believer in shoring up business processes before automating them. “People have a lot of difficulty—if they haven’t seen this kind of automation—basically modi-fying their business processes and adopting the automation simultaneously,” she said. “If you can run that process manually, you can work the bumps out of it before you [implement] the automation.”

She had experience implementing complex supply-chain engines from i2 Technologies and

Oracle and knew that data cleansing could take longer than expected, so she built an eight-week gap into the project plan. “When you put these solution sets in, you’re using data differ-ently,” Aleman said. “Although it’s coming from the system, it creates some problems.”

Radisys handled the troubleshooting of the beta system, aided by what Aleman calls E2open’s “robust” error checking. “As infor-mation is sent into the system, it knows when it’s throwing errors, so it would be able to help point us where we [needed] to go look,” she said.

The company went live on Steelwedge first, then on E2 PR, with each implementation tak-ing six months. The vendors are partners and worked on the projects jointly, developing blue-prints and running workshops.

Aleman knew she would need good integra-tion between SAP APO, E2 PR and Steelwedge to offer new commitment options for sales orders, such as capable-to-promise guarantees, which take production capacity into account and are more reliable than available-to-promise formulas, which only consider materials.

“I knew that the bidirectional data feeds did

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not exist, and I thought I would have to write them internally, meaning that I could take com-mitments coming out of the E2open engine and push them directly to SAP without someone having to do that manually,” Aleman said. But thanks to a partnership between E2open and SAP, “my guys didn’t have to do it,” she said.

The integration adapters are essentially bidi-rectional data feeds between Radisys’ appli-cations, including the Agile product lifecycle management system that holds most of the product information and bills of materials (BOMs) that can contain up to 2,500 com-ponents. Parts masters come from SAP ERP; BOMs from Agile; and data files from Enno-conn, the division of Foxconn Technology Group based in Shenzhen, China, that does the manufacturing. Sales order commitments and ship dates in E2open PR go back to SAP. “They now write back, directly to the SAP system, the order delivery dates that we calculated in the plan,” E2open’s Lykken said.

The E2open cloud network makes the dis-tance across the world’s largest ocean all but disappear. “I have full visibility into what’s happening there. I know every purchase order

they’ve placed; I know what inventory they have on the floor; I know what all their lead times are for all of their materials,” Aleman said. “If I take any orders, I don’t have to check with my contract manufacturer. I already know the answer, even before they know that that demand has come in.”

Radisys and Ennoconn employees needed significant training on the new system. Ale-man and a team went to China to give hands-on demonstrations.

Now more than 20 people use E2 PR, all of whom report to Aleman, who is responsible for supply chain planning and execution. That means she oversees everything from demand generation to fulfillment and “owns” execution on the manufacturing floor. “It’s a nice pairing

“ i have full visibility into what’s happening [at the manufacturer.] i know every purchase order they’ve placed.”

—lisA AlEMAn, director of sales and operations, radisys

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because if I need stronger demand, I have the team that basically works that side,” she said. “If I want to take a little risk on the supply side, [I can] also understand what the implication’s going to be for the manufacturing floor.”

The planning engine in E2 PR lets Radisys examine a particular demand for a product and know, for example, if a commitment has already been made and who the customer is, E2open’s Lykken said.

“You can create these priority rules based on any information in the demand, and use them to drive the planning. For Radisys, for exam-ple, their No. 1 rule is they always keep previ-ous [commitments]. They can commit with the confidence that the supply is really there.”

s&oP ACross thE oCEAn

The E2open software has brought a huge change to the S&OP process and allowed Radi-sys to be much more agile in responding to the fast-moving telecommunications market, according to Aleman. For example, sometimes a product’s designer will “float” the demand to manufacturers. “If you can respond first, you’re

going to win the business,” she said.The S&OP process used to take at least two

weeks. “Now, as soon as the demand hits, I have a commitment instantly,” she said. When opportunities arise, Aleman can run scenarios to see if a commitment is feasible—and if not, how to make it happen.

Forecasting, which used to be a serial pro-cess dictated by Radisys’ monthly S&OP sched-ule, can now happen anytime. Before, Radisys’ S&OP and a customer’s S&OP and forecasting cycle “could be out of sync as much as two to three months,” Aleman said. “Now we’ve tied those up tightly.”

The better visibility into supply and demand enabled Radisys to cut $10 million from the past year’s inventory by not having to run all production according to a build-to-forecast model. “We use multiple build models now,” Aleman said.

“When a product is waning in its lifecycle—so it’s very mature and likely to complete its lifecycle—you don’t want to continue to build to forecast, because you don’t know for sure what the demand is going to be, and it leaves you with excess and obsolescence on your

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books,” Aleman said. Now she can shift such products to build-to-order and not make them or buy materials without an order in hand. However, the company still uses build to fore-cast for customers with whom it has vendor-managed inventory partnerships and who are held liable for the material.

Future plans include a pipeline bridge from Steelwedge to Salesforce so salespeople can get a better view of the demand tracked in the E2open system. It will help to align sales incen-tives with the new S&OP. In prior years, sales-people were given incentives based on design wins. Now they’ll be rewarded based on reve-nue from orders that manufacturing fulfills.

Aleman would also like to work with E2open to get more robust inventory reporting and modeling, and she hopes to use E2open’s col-laboration features to bring large customers’ own forecasts into the Radisys tools.

Radisys is nearing the top level of the five-level S&OP maturity model put forth by research firm Gartner. “We’re starting to now work with our customers and having con-versations about what we can do collectively between us,” Aleman said, rather than hav-ing customers “chuck” their demand over the wall and leave Radisys to wrestle with it. “It’s becoming much more of a partnership.”

—David Essex

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ABout

tHe

AutHorS

JAWAd AkhtAr has written two bestselling books, Pro-

duction Planning and Control with SAP ERP and Quality

Management with SAP. A frequent contributor to Search-SAP, he has 18 years of professional experience, 11 with SAP systems. Connect with him on LinkedIn, follow him on Twitter @jawadahl or email him at jawad.akhtar@live .com.

dAvid EssEx oversees editorial strategy and execution for SearchFinancialApplications, SearchManufacturing-ERP and SearchSAP. He has covered IT for 29 years and was previously an editor at now defunct magazines BYTE, PC Resource and 80 Micro. Write to him at dessex@techtarget.com.

Fill In the Missing Links in Your SAP Supply Chain is a SearchSAP.com e-publication.

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