SAP Best Practise for SCM

7/30/2019 SAP Best Practise for SCM

http://slidepdf.com/reader/full/sap-best-practise-for-scm 1/37

SAP SCM 4.1

June 2005

English

SAP Best Practices

for SCM

SAP AGDietmar-Hopp-Allee 1669190 Walldorf Germany

Solution Scope



SAP Best Practices SAP Best Practices for SCM: Solution Scope

Copyright

© Copyright 2005 SAP AG. All rights reserved.

No part of this publication may be reproduced or transmitted in any form or for any purpose withoutthe express permission of SAP AG. The information contained herein may be changed without prior notice.

Some software products marketed by SAP AG and its distributors contain proprietary softwarecomponents of other software vendors.

Microsoft, Windows, Outlook, and PowerPoint are registered trademarks of Microsoft Corporation.

IBM, DB2, DB2 Universal Database, OS/2, Parallel Sysplex, MVS/ESA, AIX, S/390, AS/400,OS/390, OS/400, iSeries, pSeries, xSeries, zSeries, z/OS, AFP, Intelligent Miner, WebSphere,Netfinity, Tivoli, and Informix are trademarks or registered trademarks of IBM Corporation.

Oracle is a registered trademark of Oracle Corporation.

UNIX, X/Open, OSF/1, and Motif are registered trademarks of the Open Group.

Citrix, ICA, Program Neighborhood, MetaFrame, WinFrame, VideoFrame, and MultiWin aretrademarks or registered trademarks of Citrix Systems, Inc.

HTML, XML, XHTML and W3C are trademarks or registered trademarks of W3C®, World Wide WebConsortium, Massachusetts Institute of Technology.

Java is a registered trademark of Sun Microsystems, Inc.

JavaScript is a registered trademark of Sun Microsystems, Inc., used under license for technology

invented and implemented by Netscape.

MaxDB is a trademark of MySQL AB, Sweden.

SAP, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver, and other SAP products andservices mentioned herein as well as their respective logos are trademarks or registered trademarksof SAP AG in Germany and in several other countries all over the world. All other product andservice names mentioned are the trademarks of their respective companies. Data contained in thisdocument serves informational purposes only. National product specifications may vary.These materials are subject to change without notice. These materials are provided by SAP AG andits affiliated companies ("SAP Group") for informational purposes only, without representation or warranty of any kind, and SAP Group shall not be liable for errors or omissions with respect to thematerials. The only warranties for SAP Group products and services are those that are set forth inthe express warranty statements accompanying such products and services, if any. Nothing hereinshould be construed as constituting an additional warranty.

© SAP AG Page 2 of 37




Icons

Icon Meaning

Caution

Example

Note

Recommendation

Syntax

Typographic Conventions

Type Style Description

Example text Words or characters that appear on the screen. These include fieldnames, screen titles, pushbuttons as well as menu names, paths andoptions.

Cross-references to other documentation.

Example text Emphasized words or phrases in body text, titles of graphics and tables.

EXAMPLE TEXT Names of elements in the system. These include report names,program names, transaction codes, table names, and individual keywords of a programming language, when surrounded by body text, for example, SELECT and INCLUDE.

Example text Screen output. This includes file and directory names and their paths,messages, source code, names of variables and parameters as well asnames of installation, upgrade and database tools.

EXAMPLE TEXT Keys on the keyboard, for example, function keys (such as F2) or the

ENTER key.

Example text Exact user entry. These are words or characters that you enter in thesystem exactly as they appear in the documentation.

<Example text> Variable user entry. Pointed brackets indicate that you replace thesewords and characters with appropriate entries.





Contents

1 SAP Best Practices for SCM: Solution Scope...................................................................................7

1.1 Purpose...................................................................................................................................... 7

2 Functional Scope – Supported Business Scenarios......................................................................... 7

2.1 Scenario: S24 Vendor-Managed Inventory.............................................................................. ..7

2.2 Scenario: S33 Supply Chain Performance Management...........................................................8

2.3 Scenario: S35 Make-to-Stock.....................................................................................................9

2.4 Scenario: S37 Make-to-Order with Component Availability Check...........................................10

2.5 Scenario: S38 Make-to-Order with Capacity Check.................................................................11

2.6 Scenario: S39 Advanced Repetitive Manufacturing............................................................... .12

2.7 Scenario: S40 Order Fulfillment............................................................................................... 13

2.8 Scenario: S41 Supplier-Managed Inventory.............................................................................14

2.9 Scenario: S44 Engineer-to-Order: Project Planning & Scheduling...........................................15

2.10 Scenario: S45 Fulfillment Visibility..........................................................................................16

2.11 Scenario: S46 Responsive Replenishment............................................................................17

2.12 Scenario: S47 Release Processing........................................................................................18

2.13 Scenario: S48 Service Parts Order Fulfillment.......................................................................19

2.14 Scenario: S49 Manufacture Planning for Assemblies and Final Assembly ................ ...........19

3 Functional Scope – Functions.........................................................................................................21

3.1 Strategic Planning.................................................................................................................... 21

3.1.1 Strategic Supply Chain Design.......................................................................................... 21

3.1.1.1 Supply Chain Definition...............................................................................................21

3.1.1.2 Supply Chain Monitoring............................................................................................ .21

3.1.1.3 Alert Monitoring........................................................................................................... 22

3.2 Demand Planning.....................................................................................................................22

3.2.1 Forecasting & Lifecycle Planning.......................................................................................22

3.2.1.1 Statistical Forecasting................................................................................................. 22

3.2.1.2 Composite Forecasting............................................................................................... 23

3.2.2 Promotion Planning.......................................................................................................... .23

3.2.2.1 Promotion Definition.................................................................................................... 23

3.2.3 Consensus Demand Planning.......................................................................................... .24

3.2.3.1 Data Handling............................................................................................................. 24

3.2.3.2 Collaborative Demand Planning..................................................................................24





3.2.3.3 Macro Calculation.................................................................................................. .....24

3.2.3.4 Planning with Bills of Materials....................................................................................25

3.3 Supply Planning....................................................................................................................... 25

3.3.1 Supply Network Planning & Outsourcing...........................................................................25

3.3.1.1 Heuristic......................................................................................................................25

3.3.1.2 Optimization................................................................................................................ 26

3.3.2 Distribution Planning..........................................................................................................27

3.3.2.1 Deployment.................................................................................................................27

3.3.2.2 Transport Load Builder................................................................................................27

3.3.3 Customer Collaboration.....................................................................................................28

3.3.3.1 Exchange Data with Customers..................................................................................28

3.3.3.2 Collaborative Planning & Forecasting....................................................................... ..28

3.3.3.3 Automatic Purchase Order Generation for VMI customers.........................................283.3.4 Supplier Collaboration....................................................................................................... 28

3.3.4.1 Data Transfer.............................................................................................................. 29

3.3.4.2 Release Processing.................................................................................................. ..29

3.3.4.3 Inventory Visibility & Simulation.................................................................................. 29

3.3.4.4 Advanced Shipment Notification (ASN).......................................................................29

3.4 Procurement.............................................................................................................................29

3.4.1 Purchase Order Processing............................................................................................... 29

3.4.1.1 Conversion of Demands to Purchase Orders..............................................................29

3.5 Manufacturing.......................................................................................................................... 30

3.5.1 Production Planning & Detailed Scheduling...................................................................... 30

3.5.1.1 Production Planning.................................................................................................... 30

3.5.1.2 Detailed Scheduling.................................................................................................. ..30

3.5.1.3 Capacity Leveling........................................................................................................ 31

3.5.1.4 Scheduling Agreements.............................................................................................. 31

3.5.1.5 Materials Requirements Planning............................................................................... 31

3.6 Order Fulfillment....................................................................................................................... 31

3.6.1 Sales Order Processing..................................................................................................... 31

3.6.1.1 Rules-based Available-to-Promise (ATP)....................................................................32

3.6.1.2 Capable-to-Promise (CTP)..........................................................................................32

3.6.1.3 Multilevel ATP Check.................................................................................................. 32

3.6.1.4 Backorder Processing................................................................................................. 32

3.7 Transportation.......................................................................................................................... 33

3.7.1 Transportation Planning.....................................................................................................33





3.7.1.1 Load Consolidation............................................................................................ ......... 33

3.7.1.2 Mode and Route Optimization.....................................................................................33

3.7.1.3 Carrier Selection....................................................................................................... ..33

3.7.1.4 Collaborative Shipment Tendering..............................................................................33

3.8 Visibility.................................................................................................................................... 34

3.8.1 Accuracy of Sales Planning............................................................................................... 34

3.8.2 Item Fulfillment Cycle Time .............................................................................................. 34

3.8.3 Capacity Utilization ........................................................................................................... 34

3.8.4 Fulfillment Visibility............................................................................................................ 34

3.8.4.1 Fulfillment Tracking & Monitoring................................................................................ 34

3.8.4.2 Alerts & Follow-Up for Fulfillment................................................................................34

3.8.4.3 Fulfillment Analytics.................................................................................................... 34

3.8.5 Transportation Visibility......................................................................................................343.8.5.1 Transportation Tracking & Monitoring......................................................................... 35

3.8.5.2 Alerts & Follow-Up for Transportation......................................................................... 35

3.8.5.3 Transportation Analytics.............................................................................................. 35

3.8.6 Supply Chain Analytics......................................................................................................35

3.8.6.1 Key Performance Indicators........................................................................................35

3.8.6.2 Strategic Performance Management...........................................................................36

3.8.6.3 Operational Performance Management................................................................... ...36

3.8.6.4 Supply Chain Analytical Applications.......................................................................... 36

3.8.6.5 Collaboration Performance Indicator...........................................................................37





1 SAP Best Practices for SCM: Solution Scope

1.1 PurposeThis Solution Scope provides an overview of the processes and functions covered by SAP BestPractices for SCM. It describes the functions and explains their business purposes.

Under Functional Scope – Supported Business Processes or Scenarios, you will find a scenario-based view of the functions. Under Functional Scope – Functions, you will find a view arrangedaccording to groups of functions and based on the relevant SAP Solution Map.

The Solution Scope does not provide technical explanations of how to use the functions.For further information on this topic, see the business process procedure documents.

2 Functional Scope – Supported BusinessScenarios

2.1 Scenario: S24 Vendor-Managed Inventory

The Vendor-Managed Inventory (VMI) scenario enables companies to work closely together with keycustomers. A manufacturer can offer a value-added service to a key customer by taking over thecustomer's inventory management. This allows both the customer and the manufacturer to reducetheir safety stock levels. This scenario shows how to reach this goal using SAP Advanced Planningand Optimization (SAP APO) in combination with the existing SAP R/3 solution

Process Flow

An important prerequisite for the Vendor-Managed Inventory scenario is that the customer providesthe manufacturer with historical data as well as information on current stock levels, and, if necessary, on the sales forecast. This data is transferred using Electronic Data Interchange (EDI)and then saved in SAP SCM.

The Vendor-Managed Inventory scenario consists of the following steps:

• The customer sends the current inventory data and his demands or sales forecast for the

agreed products to the manufacturer.

• The manufacturer produces a long-term demand plan and a short-term replenishment plan.

•

The manufacturer plans delivery quantities and delivery dates and creates a sales order for the calculated quantities.

• The customer receives the sales order and creates a corresponding purchase order.

• A purchase order number is then automatically assigned to the sales order.

Please consider that production planning is not part of this scenario.





Key Points

Both business partners benefit from this kind of cooperation.

Advantages for the customer:

• Lean procurement process

• Optimized quantities and punctual delivery by the supplier

• Lower stockholding costs due to reduced safety stock

• Benefits by taking advantage of the supplier's more advanced planning systems

Advantages for the manufacturer / vendor:

• More solid basis for long-term planning due to customer's transparent historical data and

current stock levels

• Higher customer satisfaction due to increased reliability of deliveries

• More efficient and cost-saving transportation for the supplier

• Improved product positioning and ability to perform sales promotions

2.2 Scenario: S33 Supply Chain PerformanceManagement

Supply Chain Performance Management supports companies in defining and measuring commonsupply chain and business goals across departments.

This scenario includes four examples on how the user can set up the SAP Business Information

Warehouse (BW) within the SAP SCM system and keep track of predefined key performanceindicators.

Function List

This building block describes the configuration that is required for setting up the analysis andevaluation of the following KPIs:

• Capacity utilization

• Order fulfillment lead times

• Forecast accuracy

• Resource and operational data analysis

Key Points

• Supports the selection, evaluation, and reporting of Key Performance Indicators

• Enables decision makers to optimize costs and streamline processes

• Helps to transform supply chain data into strategic information





2.3 Scenario: S35 Make-to-StockThe Make-to-Stock scenario particularly suits the needs of manufacturing industries with make-to-stock production, such as the consumer packaged goods industry. The special focus of this scenario

is on the planning processes from long term demand planning through to short term productionplanning. This scenario demonstrates how SAP Advanced Planning and Optimization (SAP APO)can be used to enhance an existing SAP R/3 solution system with sophisticated planning functions.

Process Flow

All of the planning processes described in this scenario are performed in the SAP SCM system. Thescenario guides the end user through the following steps:

• The demand planner creates a demand forecast for the company's products. The forecast

can be performed at customer or at brand/product group level. The feedback fromneighboring departments such as sales and logistics is also taken into consideration tocreate a consensus-based demand plan.

• The demand planner works together with key supply chain partners via the Internet, to reacha final agreement on the demand plan.

• The production planner performs a short-to-medium term planning run (Supply Network

Planning) based on the demand plan. The purpose is to fulfill the estimated sales volumesand to determine the product flow along the supply chain. The result is a plan that coversboth the quantities that must be transported between two locations (for example, distributioncenter to customer or production plant to distribution center), and the quantities to beproduced and procured.

• The production planner carries out short-term production planning. This includes material

requirements and capacity planning. The system creates receipt elements, planned ordersand purchase requisitions to cover the requirements, and schedules these to the resources.

Advanced tools can be used to increase capacity utilization, avoid bottlenecks and capacity

overload, and reduce lead times. Using the Alert Monitor, you can easily identify exceptionalsituations and deal with them.

Production execution is performed in the backend system, which is usually the SAP R/3 system.Please note that execution functions, such as the handling of the production and purchase orders,are not included in this scenario.

Key Points

• Advanced tool for generating forecasts

• Material requirements planning considering various parties in the supply chain

• Simultaneous material and capacity planning

• Seamless integration between the planning and the execution systems





2.4 Scenario: S37 Make-to-Order with ComponentAvailability Check

The Make-to-Order with Component Availability Check scenario is tailored to fulfill the specific

production requirements of manufacturers of configurable products. The key feature of this scenariois that a component availability check is triggered for a requested product as soon as the sales order is entered into the system. Missing components are identified immediately and the earliest possibledelivery date of the configurable product is determined.

The scenario is particularly suitable for configurable products such as personal computers, enginesor other products from the high tech and machinery industries.

Process Flow

Using the Multilevel ATP function in SAP Advanced Planning and Optimization (SAP APO) allows afast and reliable availability check at component level during sales order entry. The followingexample from the high tech industry lists the steps that are usually included in the Make-to-Order with Component Availability Check scenario:…

• A personal computer manufacturer makes a forecast at components level based on historical

sales data. Based on the results, he orders or plans production of the components that arerequired for final assembly.

• A customer places a sales order for a personal computer. During order entry, the sales

employee chooses the configurable components as desired by the customer and also specifiesthe quantity and the requested delivery date.

• The Available-to-Promise (ATP) check is initially performed for the finished product. If the

finished product is not available, an online component availability check is carried out.

• The multilevel ATP check result is immediately displayed to the sales employee, and he or she

can check if there is any missing component for the order.

•

If the required components are available, the sales order is confirmed for the requested deliverydate. If some components are missing, the system checks whether a component substitutioncan take place (Rules-based component availability check). If the components cannot besubstituted, either, the system creates receipt elements and calculates the earliest possibledelivery date, which is then communicated to the customer

• The production planner schedules production of the missing components and final assembly of

the finished product. …

Key Points

• Reduced inventory of finished products; production is only triggered when a particular sales

order arrives.

•Increased forecast accuracy at subassembly level.

• Increased production transparency; missing components of the finished product are identified

during sales order entry.

• Increased customer satisfaction through reliable delivery dates...





2.5 Scenario: S38 Make-to-Order with Capacity Check

The Make-to-Order with Capacity Check scenario supports manufacturers in providing accurate andmore reliable delivery dates to their customers. If at the time of sales order entry, the requestedproduct is not available, a rough-cut production planning and scheduling is carried out for the most

critical resources. This process allows vendors to determine a realistic availability date for therequested product. Vendors can thus immediately make reliable offers and commitments to their customers for the requested quantity and the delivery date. This feature particularly addresses therequirements of make-to-order manufacturers, which typically include the high tech industry as wellas manufacturers of industrial machinery and components.

Process Flow

The bucket-oriented Capable-to-Promise (CTP) function within SAP Advanced Planning andOptimization (SAP APO) enables vendors to schedule production in the most efficient way to fulfillsales orders. The following example for the high tech industry provides an overview of the stepsinvolved in a Make-to-Order with Capacity Check scenario:

• A CPU supplier receives an order from his customer, a manufacturer of personal computers.

The customer specifies the required quantity of CPUs and the desired delivery date.

• The CPU supplier enters the sales order and checks availability of the requested product.

• Due to the great number of incoming orders after the latest release of a new CPU model, the

requested product may not be available. If the requirement can only be confirmed partially,the system immediately switches to rough-cut production planning for the requested product.It determines a source and explodes the plan. The created planned orders are scheduled byconsidering the available bucket capacity (daily basis). The system determines the earliestpossible availability date of the product.

• The result (confirmed quantities and dates) is displayed in the delivery proposal screen. The

CPU vendor can now confirm the delivery quantities and dates, and, if the customer acceptsthem, can save the sales order.

• The production planner proceeds with production planning of the uncritical products and

detailed scheduling on the resources without changing the committed customer deliverydates. The PP/DS component in SAP SCM is used for this purpose.

Key Points

• Increased production transparency; rough-cut production capacity checks during sales order

entry.

• Clear separation of the sales planner's and production planner's activities.

• Increased customer satisfaction due to reliable delivery dates

• Seamless integration between the execution and planning systems





2.6 Scenario: S39 Advanced Repetitive ManufacturingThe scenario Advanced Repetitive Manufacturing is tailored to meet the requirements of automotivesuppliers and primarily addresses make-to-stock manufacturers. The scenario does not cover the

production planning process of configurable products.

It is especially suitable for manufacturers with a productive ERP solution (SAP R/3) who are dealingwith high volumes of data, and are interested in increasing their production efficiency as well as their response rate to OEM requirements. This scenario demonstrates how SAP Advanced Planning &Optimization (SAP APO) can be used to achieve that goal.

Process Flow

All of the planning processes described in this scenario are executed in SAP SCM. Productionexecution takes place in the backend system, which is usually an SAP R/3 system. This scenariocan be used with an SAP R/3 or an R/3 DI system.

The scenario comprises the following characteristic steps of an automotive supplier:

• The automotive supplier receives the long term forecast figures from the original equipment

manufacturer (OEM) in the form of forecast delivery schedules.

• Production planning is carried out to generate a feasible production plan.

• The product planning table is used as the main tool for repetitive manufacturing: a special

REM heuristic is used to deal with unbalanced capacity issues between different productionlines, the production list can be printed directly from the table for shop floor control.

• The OEM sends short term requirements in the form of Just-In-Time delivery schedules

(JIT).

• Uncritical delivery schedules are confirmed automatically. The planner can easily identify

critical schedules (alert messages) and process them manually.

• The feasibility of the delivery schedules is checked, as well as the availability of the required

materials using a Backorder Processing (enhanced ATP check logic).

• The results, which are partial or complete confirmations, are sent to the OEM.

Key Points

• The planner can focus on critical issues; automated checks can be used for routine work

• Increased production transparency

• Early identification of exceptions

• Higher customer satisfaction





2.7 Scenario: S40 Order FulfillmentThe Order Fulfillment scenario helps manufacturers to optimize their sales order processing toensure that products are delivered to customers in the right quantity, to the correct destination, and

at the appropriate time. It suits the needs of manufacturers of consumer packaged goods whoconsider enhancing their existing SAP R/3 solution with the following features:

• Product availability check (ATP check) during sales order entry

• Backorder processing for reconfirming orders (BOP)

• Transportation planning (TP/VS).

This scenario demonstrates how SAP Advanced Planning and Optimization (SAP APO) can be usedto achieve this goal.

Process Flow

The following steps illustrate the characteristic process flow of the Order Fulfillment scenario:

• A sales employee enters an order request from a customer. The availability of the product is

automatically checked in SAP SCM. If the requested quantity is available, the sales order isfully confirmed for the requested delivery date and the required quantities.

• If the requested product is out of stock, the system performs a rules-based availability

check. To fulfill the order, the system either searches for a similar product at the requestedlocation (product substitution) or searches for the requested product in an alternativelocation (location substitution). As a result, the shipment to the customer may contain a partof the requested product and a product substitute for the remaining order quantity.

• The allocation of available products to sales orders is on a first-come-first-served basis. At

the end of the working day, the sales employee reviews the ATP results and redistributesthe confirmed quantities based on predefined customer priorities or other criteria. The

backorder processing function makes this possible.

• Based on the existing sales orders, the transportation planner generates the outbound

deliveries. The planner consolidates the delivery items to optimize transportation resourcesand minimize costs. The delivery schedule is created and the route and mode of transportation are also selected.

• Additionally, in transportation planning the required transportation service providers (TSP)

are determined. This is done manually, or automatically using specific rules in the system;which are based on the lowest total cost, highest priority, or pre-defined business shareamong the eligible carriers.

Note that this scenario does not include production planning, nor production and transportationexecution.

Key Points

• Increased customer satisfaction through reliable commitments to customers

• Increased stock transparency

• Consideration of customer priorities before final delivery

Reduced transportation costs through optimized transportation planning and vehicle scheduling





2.8 Scenario: S41 Supplier-Managed Inventory

The Supplier-Managed Inventory (SMI) scenario enables cooperation between manufacturers(customers) and their suppliers. The supplier is authorized to monitor the manufacturer's stock levelsand is responsible for stock replenishment. This allows both the supplier and the manufacturer to

reduce their safety stock levels. This scenario shows how to reach this goal using SAP AdvancedPlanning and Optimization (SAP APO) and SAP Inventory Collaboration Hub (SAP ICH) incombination with the existing SAP R/3 solution.

Process Flow

An important prerequisite for the Supplier-Managed Inventory scenario is that both business partnersagree on the minimum and maximum inventory levels for the products obtained by the manufacturer from the supplier.

The SAP Inventory Collaboration Hub (SAP ICH) serves as a jointly used platform for all businesspartners involved in this process.

The Supplier-Managed Inventory scenario contains the following steps:

• The customer periodically transmits current inventory data and gross demand to the SAPICH.

• The supplier regularly logs on to the SAP ICH via the Internet and uses the Inventory

Monitor to check the customer's current inventory data and requirements.

• Any exceptional situations (example: stock below minimum) are displayed in the SAP ICH

Alert Monitor. These warning messages help the supplier to recognize and quickly react tothese situations, and, ultimately, to keep the stock levels always within the defined range.

• Having determined the requirement situation, the supplier can simulate the stock

replenishment to receive optimal planning results for delivery quantities. If the results of thesimulation are satisfactory, they can be used for the real delivery.

•

The supplier plans the delivery, posts a goods issue for the delivery and informs thecustomer with an advanced shipping notification about the exact delivery quantity and theexpected arrival of the goods.

• All goods movements (for example, stocks in transit and posting goods issues) are

automatically updated in the SAP ICH Inventory Monitor

Key Points

Both business partners benefit from this type of cooperation.

Advantages for the manufacturer / customer:

• Optimized, reliable and accurate stock management by the supplier

•Lean procurement process without procurement planning

• Increased attractiveness as a business partner (to its suppliers) due to transparency of

requirement data

Advantages for the supplier:

• Optimized short to mid-term planning due to customer's transparent requirement data

• Cost-saving and user-friendly Internet application





2.9 Scenario: S44 Engineer-to-Order: Project Planning &Scheduling

The scenario Engineer-to-Order: Project Planning and Scheduling suits the needs of manufacturing

industries with Engineer-to-Order production, such as the Industrial Machinery and Componentsindustry (IMC). Due to high product complexity and long duration of the manufacturing process, theentire business process is usually driven in the form of a project. This scenario exemplifies how youcan use SAP Supply Chain Management (SAP SCM) to enhance the existing SAP R/3 solution withsophisticated planning and scheduling functions.

Process Flow

Although some of the project planning and scheduling processes described in this scenario areexecuted in SAP R/3, the scenario focuses on functions that are enhanced by SAP SCM. Used incombination, these two systems provide project management team members with a comprehensivetool to solve the project planning issues. While advanced planning functions are carried out in SAPSCM, project execution takes place in the backend system, which is usually an SAP R/3 system.

The scenario comprises the following characteristic steps:

• Top-down, bottom-up planning on project structure

• Rough-cut planning on network

• Integration of project network and customer specific product structure to SAP SCM

• Project driven production planning

• Project execution

Key Points

• Comprehensive tool for planners to solve planning and scheduling issues driven by project

• Advanced planning and scheduling by using SAP SCM

• Capacity constraints are taken into account

• Improved transparency

• Backlog-free, feasible plan

• Optimization to reach global planning goals across different projects

• Alert function allows to find bottlenecks early

• Simulation of different options





2.10 Scenario: S45 Fulfillment VisibilityThe Fulfillment Visibility scenario supports the delivery process for domestic transportation of goods.The scenario covers the entire outbound delivery process from the sales order entry by the supplier

to the proof of delivery by the customer. Using SAP Event Management (SAP EM) as anenhancement to an existing R/3 solution, planned and unexpected events can be easily monitoredand tracked. This results in increased transparency outside the suppliers' boundaries and increasedcustomer satisfaction. The SAP Best Practices Fulfillment Visibility scenario focuses on therequirements of logistics and postal service providers.

Process Flow

The delivery process used in this scenario involves three different locations in the same country: Thedeparture location, a hub and the destination location.

The following process steps are described:

The customer service representative creates a sales order in the supplier's system. A delivery note

and a shipment are created accordingly.To monitor the delivery process, a set of predefined events is used, such as carrier arrival at thedeparture location, events from the arrival at the hub up to unloading, and proof of delivery at thedestination location of the customer.

The supplier's warehouse staff confirms and reports the actual date and time of expected eventsusing the SAP EM system. The system compares the date and time with the planned deadline of expected events. If there is a deviation, an alert is issued and all involved parties are informed.

In case of an unexpected event, such as a delay of the shipment, the business partner carrier reports the unexpected event in the SAP EM system. Again, SAP EM triggers the follow-upactivities: e-mail notification to the customer and relevant staff of the supplier.

Throughout the entire process, customers can actively monitor and track the status of their purchase

order via the web and report the proof of delivery in SAP EM to confirm the receipt of the delivery.

Key Points

Status retrieval by sales order number, customer purchase order number, delivery number andstatus of delivery/shipment

Events are tracked at delivery level but information on handling unit level can be retrieved as well

Enables event tracking from sales order creation to shipment to the customer, beyond companyboundary by all parties across the supply network

Allows quick adaptation to changing conditions, through proactive notification and alerts to relevantparties within the supply network.





2.11 Scenario: S46 Responsive ReplenishmentResponsive Replenishment is an innovative business scenario that addresses the front-end need for enhanced visibility to demand signals, both continuous turn and promotional related, while managing

a fully automated replenishment process that can respond to daily or sub-daily inventoryreplenishment needs. This scenario enables a manufacturer to proactively assume the responsibilityof sense and respond driven replenishment for key customers, based on actual sales or inventorydata existing at a retailer or point-of-sale stocking facility. Responsive Replenishment is enabled bySAP's Inventory Collaboration Hub (SAP ICH) solution.

Process Flow

The following steps illustrate the characteristic process flow of the Responsive Replenishmentscenario:

• The customer periodically sends sales, stock and promotion data to the vendor.

• The vendor validates the data and if necessary cleanses and corrects the data.

• The vendor uses the corrected sales data to generate a statistical forecast for baseline

demand.

• Based on the promotion data that the customer sent in, the vendor plans and fine-tunes the

promotion demand.

• The vendor carries out replenishment planning for the customer locations on the basis of the

demand.

• The vendor groups the replenishment quantities into economically optimal transport loads.

• Transport Load Builder shipments with the vendor-generated purchase order numbers are

transferred to the customer and the vendor’s backend system respectively.

•

As a result, sales orders are generated automatically in the vendor's backend system.

Key Points

Collaborative planning between manufacturers and their customers allows both partners tostreamline their work processes and ultimately benefit from a more accurate forecast, better markettransparency, greater stability, reduced inventory, and better communication.

With this vendor-driven replenishment scenario in place, manufacturers or vendors can achieveenhanced visibility to demand signals, fully automated replenishment processes, improved andautomated response to short-term demand variability and the ability to manage the logistical aspectsof promotion planning more efficiently.





2.12 Scenario: S47 Release ProcessingRelease Processing is a common business process in the automotive industry, through whichoriginal equipment manufacturers (OEMs) communicate material requirements to their suppliers.

Replenishment in the Release Processing scenario is triggered by the customer (here representedby the automotive OEM), who periodically transmits releases from scheduling agreements, whichare published in SAP ICH. The supplier ships the required products according to these schedulingagreement releases. Both business partners can monitor their activities in SAP ICH at any time.

Process Flow

An important prerequisite for the Release Processing scenario is that both business partners agreeon the delivery schedule for the products the manufacturer obtains from their supplier.

The SAP Inventory Collaboration Hub (SAP ICH) serves as a jointly used platform for all businesspartners involved in this process.

The Release Processing scenario contains the following steps:

• The customer regularly publishes new releases from delivery scheduling agreements in the

SAP ICH. The release specifies the quantities of the material required and the dates andtimes of delivery in one or several schedule lines.

• The SAP ICH system generates a release alert to notify the supplier in the Alert Monitor and

displays the release in the Release Overview.

• The supplier monitors the Release Overview and checks the schedule lines of the release.

• The supplier ships the required products, and creates an Advanced Shipping Notification

(ASN) from the delivery schedules in the release. He sends the ASN to the customer toinform them that the required quantity has been shipped and to confirm the delivery date.

• The customer receives an ASN and checks the inbound delivery upon ASN.

• The customer receives the shipment and posts the goods receipt for the inbound delivery.

If the customer wishes, they can send a message to inform the supplier that the goodsreceipt has been posted.

• After the customer has sent a proof of delivery or published a new schedule release, SAP

ICH changes the ASN status to Goods Receipt Complete.

• The customer can manually set the status of the ASN to close it, if necessary.

Key Points

Both business partners benefit from this type of cooperation.

Advantages for the manufacturer / customer:

Optimized, reliable and accurate stock management by the supplier

Increased attractiveness as a business partner (to its suppliers) due to transparency of requirement data

Advantages for the supplier:

Optimized short to mid-term planning due to customer's transparent requirement data





Cost-saving and user-friendly Internet application

2.13 Scenario: S48 Service Parts Order FulfillmentThe Order Fulfillment process is an elementary process in the Service Parts Execution. Thisscenario shows how service parts order is processed and sourced, which covers product / locationsubstitution function performed in Global ATP system.

Process Flow

• A customer or dealer calls the distributor/wholesaler to order parts. The sales administrative

assistant creates the sales order / Rush order in the system.

• During the order entry, the system automatically performs pricing determination and product

availability check at requested location.

• Rule-based ATP is performed for alternative products at requested location and then for

alternative locations. The fulfillment proposal is generated for ordered parts in the salesorder / Rush order.

• Backorder processing is performed to redistribute ATP quantities across sales orders based

on the priority of the customer.

• New stock of ordered or similar product is available upon further goods receipts.

• Rule-based ATP is performed for open sales orders again, upon the receipt of those parts

and then both the sales order & rush order are confirmed for the open quantities.

• Outbound deliveries are then created with reference to the sales order / rush

order. The picking and packing for delivery are executed as well.

• The goods issue is posted and an invoice is created.

Key Points

• Using the rules-based ATP check in APO, service parts can be supplied out of not only

alternate products but also alternate locations for higher service parts order fill rate.

• Service parts are supplied based on the customer priority for higher customer satisfaction,

with the help of Backorder Processing in APO.

2.14 Scenario: S49 Manufacture Planning for Assemblies

and Final AssemblyThis scenario describes one of most widely used make-to-order manufacturing processes. Finalassembly is the main value-added process and only executed upon the receipt of a sales order.Production or procurement of assemblies can be planned effectively on final assembly level bymeans of planned independent requirements. The production planning run conducted in APOgenerates the material requirement planning while the detailed scheduling for planned order iscarried out later in detailed scheduling planning board in order to solve the resource constrainproblem. Optimization run is called in DS planning board to optimize the setup time and cost basedon setup matrix. The assemblies are produced or procured before the arrival sales orders and thus





reduces the lead time for final assembly. The incoming sales order consumes the plannedindependent requirements, and this in turn reduces the planned order quantity for assemblies.

Process Flow

The business scenario process flow proceeds as follows:

• Planner does the forecast on final assembly level by means of planned independent

requirements. If the relationship between OEM and supplier is very close, the accurateforecast can be sent from OEM via outline scheduling agreement.

• Production planning run is carried out to plan the assemblies, semi-finished products and

components. Discrete production is carried out up to one level before the final assemblylevel, and the assemblies and components required for producing the final assembly areplaced in stock to await the incoming sales orders.

• Planner calls optimization run in detailed scheduling planning board to optimize the setup

time and cost for production of assemblies based on setup matrix.

• Scheduled planned orders are converted to a production orders. Planner conducts the

execution of production order, for example, final confirmation with goods issue and goodsreceipt.

• Incoming sales order consumes the planned independent requirements, and this in turn

reduced the planned order quantity for assemblies.

• Production planning run is called to plan the final assembly.

• Final assembling is executed in the mode of repetitive manufacturing. Goods receipt, goods

issue and activities are posted during the backflush.

• Delivery is created for sales order and goods issue is posted from sales order stock.

Key Points

• Planning is focused on final assembly level instead of various assembly levels.

• Keeping low stock for high value final assembly

• Reduced lead time of final assembly for sales order

• Demand is more accurate as actual sales data consumes the forecast planning.

• Flexible production planning run with various selection criteria and different heuristic

functionalities.

• Orders can be scheduled in an optimum sequence using detailed scheduling optimizer

• Rescheduling orders or operations manually with certain rules and certain scheduling constrains.

•The product ATP check and the check against forecast can be combined together by means of Global ATP checking instruction.





3 Functional Scope – Functions

3.1 Strategic Planning

3.1.1 Strategic Supply Chain Design

Strategic supply chain design includes the definition of all elements of the supply chain and thecorresponding monitoring. This is supported by flexible alert monitoring.

3.1.1.1 Supply Chain Definition

You can model every part of the supply chain (such as locations, transportation lanes, resources,products, and so on.) using the Supply Chain Engineer in SAP SCM. The Supply Chain Engineer allows you to place locations on a map and link them with the corresponding transportation lanesand product flows.

Furthermore, you can drill down to all elements belonging to the supply network, or requestinformation about single or combined elements in the network. For example, you have the ability tosee which products belong to a particular location. You can also add products to this location or modify the location’s master data. Master data can also be transferred from SAP R/3 using the CoreInterface (CIF).

Materials are limited in their validity and availability. This has to be taken into considerationthroughout the entire supply chain management solution. A central maintenance instance for interchangeability relations is offered that provides information for all planning applications. Thissecures consistent planning of discontinued material stock before using follow-up material stock.

3.1.1.2 Supply Chain Monitoring

The Supply Chain Cockpit (SCC) consists of a highly intuitive, graphical interface that acts as the topenterprise planning layer covering all planning areas such as manufacturing, demand, distribution,and transportation. All employees in the Plan -> Source -> Make -> Deliver cycle of supply chainmanagement can use it to their advantage.

As the gateway to SAP SCM, the SCC makes dealing with a vast supply chain easier and more

manageable. SCC allows you to:

1. Create individual work areas so several planners can work simultaneously on different partsof a supply chain.

2. View the supply chain from all angles, down to the smallest detail, to minimize thecomplexity of the relationships among supply chain components.

3. Measure supply chain performance with KPIs (key performance indicators) that are stored inSAP Business Intelligence (SAP BI).





4. Respond immediately and accurately to new developments by tracking alert situations.

The SCC can be configured to suit conditions within a wide variety of industries and businesssituations.

3.1.1.3 Alert Monitoring

The Alert Monitor is a stand-alone APO component that enables a unified approach to monitoringplanning situations. It notifies you of any critical situation that occurs in one of the SAP SCMapplications, such as Demand Planning, Supply Planning, Production Planning and DetailedScheduling, or Transportation Planning and Vehicle Scheduling. Alerts are displayed in variousways, either directly in the Supply Chain Cockpit, in the cockpit’s control panel, in the application, bye-mail, fax, pager, SMS, WAP pages, or the SAP Enterprise Portal inbox.

Using a series of event triggers and alarm conditions, the Alert Monitor can automatically identifyproblems in the supply chain. It can also monitor material, capacity, transportation, and storage

constraints. In addition, it can handle metrics such as delivery performance, cost flow, andthroughput. It reports exceptions, including orders that exceed forecasts or orders that fall short of forecast and therefore may lead to excess inventory if production is not adjusted accordingly. Basedon this monitoring process, you can readjust plans whenever needed.

3.2 Demand Planning

3.2.1 Forecasting & Lifecycle Planning

Forecasting is an essential part of the Demand Planning process. SAP SCM offers several basicstatistical methods to calculate a single forecast, while also allowing you to combine them.

Lifecycle planning is taken into consideration during the forecast calculation to model the differentdemand patterns during the life cycle.

3.2.1.1 Statistical Forecasting

Statistical or univariate forecasting predicts future demand based on historical data. Unlike causalforecasting, other factors are not taken into account. Univariate forecasting provides methods thatrecognize the basic time series patterns as a basis for the forecast:

1. Constant: demand varies very little from a stable mean value.

2. Trend: demand falls or rises constantly over a long period of time with only occasionaldeviations.

3. Seasonal: demand shows periodically recurring peaks that differ significantly from a stablemean value.





4. Seasonal-trend: demand shows periodically recurring peaks, but with a continual increase or decrease in the mean value.

5. Intermittent: demand occurs only in some periods.

The system can automatically identify the optimal method for any item to be forecasted. Differenterror measures are calculated by the system and alert planners if user-defined limits are exceeded.

3.2.1.2 Composite Forecasting

Different individual forecasts (statistical or causal forecasts) are combined, that is, each individualforecast is based on the same historical data but uses a different technique. You can average theforecasts giving weights to each forecast. The weights can be fixed or vary over time.

The underlying objective is to take advantage of the strengths of each method to create a single"one number" forecast. By combining the forecasts, the business analyst aims to develop the bestforecast possible. The composite forecasts of several methods have been proven to out-perform theindividual forecasts of any of those methods used to generate the composite.

However, the planner can also let the system automatically select the individual forecast thatdelivers the lowest statistical error.

3.2.2 Promotion Planning

In Demand Planning, you can plan promotions or other special events separately. You can usepromotion planning to record either one-off events such as the millennium, or repeated events suchas quarterly advertising campaigns. Other examples of promotions are trade fairs, trade discounts,dealer allowances, product displays, coupons, contests, free-standing inserts, as well as non-sales-related events such as competitors' activities, market intelligence, upward/downward economic

trends, strikes, and hurricanes.

3.2.2.1 Promotion Definition

Promotions can be defined on any level. Predefined levels can be used to separate them or toassign different disaggregation rules. Promotions can be defined in absolute quantities or percentages for any periodicity and horizon. Cannibalization groups can be used to model the effecton other products.

Promotion patterns can be identified and stored for future use in similar promotions. Promotions canalso be created in the Marketing Planner of SAP CRM. These promotions are transferred directly toSAP APO Promotion Planning using BAPI technology.

The created promotions are directly integrated in Demand Planning. However, you can specify howthey are combined with other information such as forecast or manual adjustments, by using macrocalculations.





3.2.3 Consensus Demand Planning

Consensus Demand Planning brings together all available information to enable a collaborativeplanning process that includes all partners. Forecasts and promotion plans are includedautomatically. Many types of calculation can be carried out to combine all the information or to check

for critical situations that are highlighted as alerts.

The result of consensus Demand Planning is a final demand plan that can be transferred to:

-Supply planning for further planning

-Execution (that is, SAP R/3) to trigger production and procurement, for example

-Business Intelligence (that is, SAP BI) for archiving, reporting, or integrating with other systems andsolutions

3.2.3.1 Data Handling

Demand Planning should include all available information about historical sales, budgets, strategiccompany plans, or sales targets. This data can come from different sources and can be transferredfrom any source to InfoCubes in SAP Business Intelligence (SAP BI). From there, the data can beread directly or transferred first to the liveCache to improve performance.

Furthermore, the data can be restructured and used to calculate existing characteristic combinationsto be planned on. For aggregated planning, the results often need to be disaggregated to lower levels of detail. For this, the historical data can be used to calculate the corresponding proportions of all details.

Planned data (for example, forecasts, or demand plan) is stored in the liveCache. From there it canbe extracted to InfoCubes for reporting, archiving, or integrating with other systems or solutions.

3.2.3.2 Collaborative Demand Planning

All Demand Planning data is available on the Web to include internal or external partners in theplanning process. This ensures that all partners agree on the defined quantities, horizons andconditions.

3.2.3.3 Macro Calculation

Macros enable any kind of calculation on the planning grid. Planners can define them using a simplemacro language in the macro builder, which has an easy-to-use interface. Macros can be executedduring background processing and on the planning grid. In particular, they are used to combinedifferent types of information, derive dependent measures, or calculate alerts based on any check.

More sophisticated macros can even add new planning logic. This increases the flexibility andstrength of the application.





3.2.3.4 Planning with Bills of Materials

As well as planning demand for a product, you can also forecast dependent demand at differentplanning levels by exploding bills of material. This is of importance in situations where you need toplan the demand for a bundle of products that is sold, in a promotion activity, for example.

For example, this can be used for a kit that consists of several finished products (that can also besold separately). Planning demand for the kit generates dependent demand that can be combinedwith the independent demand for the single products. The overall demand by product can then beused for supply, production, and procurement planning.

3.3 Supply Planning

3.3.1 Supply Network Planning & OutsourcingSAP SCM Supply Network Planning (SNP) integrates purchasing, manufacturing, distribution, andtransportation so that comprehensive tactical planning and sourcing decisions can be simulated andimplemented on the basis of a single, global consistent model.

Supply Network Planning offers three basic strategies to carry out the planning:

1. Heuristics and capacity planning

2. Optimization

3. Multilevel supply & demand matching

Starting from a demand plan, Supply Network Planning determines a permissible short- to medium-

term plan for fulfilling the estimated sales volumes. Each algorithm plans for all sources of supplyfrom the customer, through distribution centers to the plants. They distribute production over theplants, select production possibilities, explode the bills of material (BOMs) and organize theprocurement of semi-finished goods or raw materials. The algorithms differ in the way they makedecisions and the capacity constraints (for production, storage, transportation, and so on) that theyconsider. In Supply Network Planning, you are provided with standard planning books (and views)for each of the various types of planning available (that is, interactive SNP, capacity leveling,distribution resource planning (DRP), Transport Load Builder (TLB), Customer Collaboration,Customer Collaboration and scheduling agreement processing). You can, however, create your ownplanning books using standard planning books as templates.

3.3.1.1 Heuristic

The heuristic is used as part of a repair-based planning process consisting of the heuristic, capacityleveling, and deployment. The heuristic process considers each planning location sequentially anddetermines sourcing requirements. It sums up all requirements for a given material in the locationinto one requirement for the period. The heuristic determines the valid sources of supply andquantities based on pre-defined percentages for each source of supply (quota arrangements).

As the resulting plan is not necessarily feasible, the planner must use capacity leveling afterwards.





3.3.1.2 Optimization

The SNP optimizer offers cost-based planning. This means that it searches through all feasible plans

to try to find the most cost-effective one.

Total costs refer to the following:

1. Production, procurement, storage, and transportation costs.

2. Costs for increasing the production capacity, storage capacity, transportation capacity, andhandling capacity.

3. Costs for falling below the safety stock level.

4. Costs for delayed delivery.

5. Stockout (or shortfall quantity) costs.

In the optimizer view, a plan is feasible when it satisfies all the Supply Chain Model constraints thatyou activated in a special profile called SNP optimizer profile. The feasibility of a solution can involvedue date constraint violations, or safety stock constraint violations. Due dates and safety stocks aresoft constraints, or in other words, constraints to which you assign violation costs. The optimizer onlyproposes a plan that will violate soft constraints if, according to the costs specified in the system, it isthe most cost-effective plan.

As part of optimization-based planning, the optimizer makes sourcing decisions. This means thatcosts are used as a basis to decide:

1. Which products are to be produced, transported, procured, stored, and delivered (product mix)

and their quantities.

2. Which resources and which production process models (PPMs) are to be used (technology mix).

3. The dates on which products are to be produced, transported, procured, stored, and delivered.

4. The locations at which or to which products are to be produced, transported, procured, stored,and delivered.

5. Alternate resources

6. Demand violation penalty costs

7. Safety stock violation penalty costs

8. Procurement costs

9. Shelf life

10. Cost multipliers

11. Location-specific products





3.3.2 Distribution Planning

Distribution Planning consists of two basic parts:

a) The Deployment function determines how and when inventory should be deployed to distributioncenters, customers, and vendor-managed inventory accounts. It produces optimized distributionplans based on constraints (such as transportation capacities) and business rules (such as minimumcost approach, or replenishment strategies).

b) The Transport Load Builder (TLB) function maximizes the use of transport capacities byoptimizing load building.

By using the solution's deployment and Transport Load Builder functions, planners can plan,dynamically rebalance, and optimize the entire distribution network.

3.3.2.1 Deployment After production is complete, deployment determines which demand can be fulfilled by the existingsupply. If the produced quantities match actual quantities planned in SNP planning, the result of deployment is a confirmation of the supply network plan. If the available quantities are insufficient tofulfill the demand, or exceed the demand, the system makes adjustments accordingly, depending onwhether you are running the deployment heuristic or deployment optimization.

The deployment function determines the optimal inbound and outbound distribution of availablesupply, relative to customer orders, stock transport requirements, or safety stock requirements. Pushand pull deployment techniques can be supported, as well as prioritization of orders and fair-sharelogic when demand exceeds supply. The deployment run generates deployment stock transfers.

3.3.2.2 Transport Load Builder

The Transport Load Builder (TLB) uses the results of the deployment run to create transport ordersfor multiple products. It optimizes transport loads by grouping available products based on thedeployment recommendations. The TLB ensures that your transportation vehicles are filled to their maximum capacity and that no transportation vehicle is dispatched unless it is filled to at least itsminimum capacity. This minimizes your transportation costs.

Capacity can be defined by volume, weight, and number of packets. The system checks the plannedtransport orders against the minimum and maximum values that you have defined in the system. If the planned transport orders do not meet either the minimum or maximum requirements, the system

activates an alert and you can readjust the TLB plan.

Furthermore, the horizon considered for the filling of the vehicles can be extended by a so-calledpull-in horizon. This enables the TLB to deliver earlier in order to fill the vehicles in an optimal way.





3.3.3 Customer Collaboration

Collaborative Planning between manufacturers and their distributors allows both partners tostreamline their work processes and ultimately benefit from a more accurate forecast, better markettransparency, greater stability, reduced inventory, and better communication. Starting from one

forecast, all the partners collaborate to produce a final forecast, which becomes the basis for allfurther planning in the partner companies. With the process steps specified below, SAP SCMsupports several collaborative processes and two standard scenarios in particular:

a) The classic vendor-managed inventory (VMI) process, in which vendors plan replenishments for their customers.

b) The Collaborative Planning Forecasting and Replenishment (CPFR) process that is a cross-company and cross-industry scenario developed by the VICS association.

3.3.3.1 Exchange Data with Customers

The exchange of information such as demand, promotions, order forecast in a CPFR scenario or

stock levels and sales information in a VMI scenario is essential. This is enabled using EDItechnology or SAP Exchange Infrastructure (SAP XI).

3.3.3.2 Collaborative Planning & Forecasting

Planning is carried out in the vendor’s SAP SCM. All information can be accessed through a Web-based GUI, which only requires an Internet browser on the customer side.

This enables customers, retailers, or wholesalers to collaborate on sales forecasts, promotions, andorder forecasts, for example, in particular in a CPFR process.

3.3.3.3 Automatic Purchase Order Generation for VMIcustomers

In the framework of a VMI scenario, the vendor can trigger the automatic generation of purchaseorders on the customer side. This includes number range functionality dependent on ship-from, ship-to, and purchasing group information.

3.3.4 Supplier Collaboration

The SAP Inventory Collaboration Hub (SAP ICH) is the heart of mySAP SCM's collaborationcapabilities. With the release SAP SCM 4.0, SAP ICH provides inventory and demand visibility tosuppliers and supports supply-side replenishment processes, such as Supplier Collaboration.

Suppliers can see the status of their inventory at their customer locations and are alerted by e-mailwhen levels get too low. They can respond to these alerts by creating replenishment orders usingthe Web.





3.3.4.1 Data Transfer

The responsibility for inventory planning is shifted from the manufacturer to the suppliers. Therefore,a buyer periodically updates the SAP ICH with demand and stock balances per location-productcombination. This is supported by SAP Exchange Infrastructure (SAP XI).

3.3.4.2 Release Processing

Release processing supports a buyer-driven replenishment process using delivery schedules or scheduling agreements that are typically derived from buyer-side internal (MRP) planning runs.

Release processing gives the supplier complete visibility into a buyer’s “Releases”.

SAP ICH tracks all versions or updates of the delivery schedules. The supplier has visibility into thereleases and can download, print, and set an acknowledged flag for the release.

3.3.4.3 Inventory Visibility & Simulation

The supplier has complete visibility into the customer’s inventory situation. Alerts indicate criticalsituations that should be considered in more detail. Simulations enable an optimal scheduling of future deliveries.

3.3.4.4 Advanced Shipment Notification (ASN)

Suppliers have to maintain the stock levels at the manufacturer's locations according to contractualagreements. To do this, they create and send ASNs in SAP ICH and finally replenish the buyer’slocations.

The supplier can also create and send an ASN message against each schedule line in each releaseupdate.

As a result, SMI enhances demand and inventory visibility for the suppliers and helps to increase theresponsiveness of all supply chain parties in the supply chain.

3.4 Procurement

3.4.1 Purchase Order Processing

Fulfills direct procurement requirements through conversion from demands to purchaseorders, issuance, and confirmation of purchase orders. Dedicated processes for the purchasing of direct materials, indirect materials and services (for example, subcontracting for components,internet-based employee-centered approach for MROs).

3.4.1.1 Conversion of Demands to Purchase Orders

The requirements that have been created and released for procurement (for example, demands for spare parts coming from plant maintenance, demands for raw materials determined in a planningrun, or requests for office supplies entered by an employee) are transferred to purchasing as





purchasing requisitions. They are presented to the purchasing agent in worklists that support him or her in converting the requisitions into purchase orders. He or she can check the source of supplyand the price and conditions that have been assigned to a requisition, and start a request for quotation or bidding process if necessary. Release procedures are available to control criticalprocurement processes.

3.5 Manufacturing

3.5.1 Production Planning & Detailed Scheduling

Production Planning & Detailed Scheduling supports the process of assigning production orders toresources in a specific sequence and time-frame.

3.5.1.1 Production PlanningProduction planning enables the planner to create feasible production plans across the differentproduction locations (also with subcontractors) to fulfill the (customer) demand in time and to thestandard expected by the customer. For the long and medium-term time horizon, rough-cut planningis based on time buckets and determines requirements of resources (machines, humans, productionresource tools) and materials. Solvers, real-time data, and high supply chain visibility (KPIs, alerts)support the planner´s decision-making process.

3.5.1.2 Detailed Scheduling

Detailed scheduling delivers optimized order sequences that can be released for production. Solverssimultaneously take into account constraints and costs to schedule the optimized order sequence.Dynamic alerts and order pegging structures improve visibility. Due to the seamless integration withthe execution and inventory management system, material shortages or critical resource situationscan be seen immediately and the schedules can be manually or automatically adjusted accordingly.

Detailed Scheduling fulfills requirements from the process and discrete industries (tact-based and job scheduling for configurable and non-configurable products in an MTS and/or MTO environment;block planning, campaign planning, push production for process industries).

The SAP SCM Optimization Extension Workbench (APX) provides a new means of makingoptimization strategies more flexible. The primary purpose of the workbench is to extend thestandard planning tools in SAP SCM to include user-specific optimization components. These

individual optimizers are launched directly from SAP SCM. Together with the standard optimizersand heuristics, they form one planning system. This system provides the right degree of flexibility tobe adapted to the precise needs of the user.

In addition to the functional integration of the external optimizer in the standard SAP SCMcomponent environment, the optimizer is to be incorporated closely so that it can freely use the SAPSCM data stock (from the liveCache and the database server). The optimization results can then bereturned to the SAP SCM dataset.





3.5.1.3 Capacity Leveling

The Supply Network Planning run produces a plan that meets all the demand requirements (for

example, sales orders and dependent demand). However, the resulting plan is not necessarilyfeasible. Capacity leveling enables you to smooth your production schedule either manually or usingmethod-based approaches:

1. Heuristic-based scheduling

2. Optimization-based scheduling

3. Customer-specific scheduling logic

With capacity leveling, you have the opportunity to build up inventory or increase capacity to ensurethat you can meet demand without overstocking and to avoid periods of resource overload or underuse.

You can easily analyze alternatives and re-plan, even re-forecast, before putting the plan intoproduction. You can adjust the plan by modifying supply or consumption, or by changing the

production and transportation orders manually. You can modify supply by changing the resourcemaster data. You can modify consumption by leveling the capacity on the active resource or byusing an alternate resource (shift order from one resource to another manually). You can manuallyedit production and transportation orders.

3.5.1.4 Scheduling Agreements

Scheduling agreements define a fixed amount of quantity to be delivered from a supplier to amanufacturer over a longer period (for example, a year). The SNP heuristic can use this information(transferred from SAP R/3, for example) to plan the schedule lines and to create the releases. Usingcollaborative supply planning, the supplier can confirm these quantities before they are transferred tothe execution system (for example, SAP R/3).

3.5.1.5 Materials Requirements Planning

MRP is part of the production planning process and generates replenishment schedules for allmanufactured components, intermediates, purchased parts, and raw materials. MRP sets due datesfor production orders and purchase requisitions through lead-time scheduling, depending on buffers,operation times, lot-sizing rules and so on. The planning run is supported by optimization tools whenresource situations can be taken into account simultaneously.

3.6 Order Fulfillment

3.6.1 Sales Order Processing

Allows order entry, pricing, and scheduling order for fulfillment. mySAP SCM covers mainly the order ATP check. For further Information on the other elements, you can refer to the Solution Map of


http://smnavigate%28%2782087e7a8eb94e1f885c5a1f62c789fb%27%29/





mySAP ERP , Sales Order Management and Solution Map mySAP Customer RelationshipManagement - Enterprise , Quotation and Order Management.

3.6.1.1 Rules-based Available-to-Promise (ATP)Companies use predefined rules to automatically or manually optimize the decision-making processfor choosing between alternatives such as products, locations, or production process models.

3.6.1.2 Capable-to-Promise (CTP)

The solution lets companies call production during an ATP check when the requested product is notcompletely available, in order to produce the remaining quantity or to procure it externally.

3.6.1.3 Multilevel ATP Check

This is useful when a large part of the value-added activity arises at final assembly, because thecomponents needed to produce an end product are checked when a sales order is created.

3.6.1.4 Backorder Processing

Companies can redistribute confirmed or partly confirmed quantities according to priorities andhierarchies, and override or manually affect the results of the ATP check when necessary. This is animportant feature for companies that have large key customers making up the majority of overalldemand.



http://smnavigate%28%2767fc443718fc47a39fc90907e0b592ca%27%29/








3.7 Transportation

3.7.1 Transportation PlanningCreates an optimized, executable transportation plan.

3.7.1.1 Load Consolidation

mySAP SCM provides different possibilities to consolidate deliveries and orders to shipments. It ispossible to combine orders based on rules and strategies, based on optimization logic in SAP APO.This can also be done interactively and manually in SAP R/3, SAP SCM, and through collaborationover the Internet. If you decide to rely on your carrier's abilities to consolidate your orders toshipments, you can give it access to your deliveries over the Internet, where it can consolidate your shipments. During Load Consolidation, mySAP SCM will consider multi-dimensional capacity

constraints of the resources. This function is provided by SAP APO.

3.7.1.2 Mode and Route Optimization

Mode and route optimization is at the heart of transportation planning. The goal is to create a leastcost transportation plan while guaranteeing customer service. The system assigns inbound andoutbound orders to modes (truck, ship) and creates the needed shipments. The optimizationalgorithm used to do these assignments is controlled by cost profiles, delivery dates, and constraintsof the ship-to and ship-from sites.

3.7.1.3 Carrier Selection

After having created optimized routes (shipments), carriers need to be assigned to these routes.This may be done manually in the execution system (SAP R/3) or in SAP SCM. SAP SCM offersfour options to do so:

1) Priority: Certain carriers have different priorities on certain lanes.

2) Freight cost: The least-cost carrier for this shipment will be selected.

3) Business share: APO assigns shipments in order to ensure that specified carriers receive adefined volume of business.

4) Freight exchange: The shipment data is communicated to a freight exchange that ensures theassignment.

3.7.1.4 Collaborative Shipment Tendering

The assignment of a carrier to a shipment needs to be confirmed by the carrier (tendering).Tendering can be done via Internet dialog or communication via EDI or XML files. The carrier canaccept the tender, reject or accept with modifications. Tendering can be done in SAP R/3 or SAPSCM.





3.8 Visibility

3.8.1 Accuracy of Sales Planning

This program calculates the accuracy of sales planning with respect to the confirmed deliveryquantity.

3.8.2 Item Fulfillment Cycle Time

Use this program to calculate the average processing time of an order from document creation untilarrival at the customer.

3.8.3 Capacity Utilization

This program displays the capacity load utilization of a work center.

3.8.4 Fulfillment VisibilityFulfillment Visibility monitors the delivery process and provides active tracking of the delivery for thecustomer. Events are reported from within the company as well as by business partners. Duringinternal activities and outbound delivery to the customer, all parties concerned, including logisticsproviders and forwarding agents, ensure the flow of information by sending messages to inform SAPEM of both timely delivery and any unplanned events. With monitoring and visibility tools, the wholefulfillment process is made transparent at every stage for both customers and partners, which meansthey can monitor when events were planned to take place and when they actually take place.

3.8.4.1 Fulfillment Tracking & Monitoring

This describes the visibility along the fulfillment process from warehouse events through proof of delivery from the customer beginning with the creation of the sales order. Once the shipment iscreated, the customer can monitor the process status via the Internet. After picking, packing, andloading activities are complete, outbound delivery begins.

3.8.4.2 Alerts & Follow-Up for Fulfillment

Follow up activities are triggered in the form of emails to the customer in case there is a delay. Datais fed back to the application system.

3.8.4.3 Fulfillment Analytics

Provides input for analyzing the execution and reporting compliance of the carriers as well as thetransportation duration.

3.8.5 Transportation Visibility

Transportation visibility covers transportation and customs issues for inbound and outboundprocesses. Road transportation as well as International Sea Shipment are considered. Theseprocesses are independent from one another, but they can also be combined. While the road





shipment is based upon a single collective shipment, the sea shipment is represented by atransportation chain that consists of at least three legs.

3.8.5.1 Transportation Tracking & MonitoringTransportation visibility monitors and controls the transportation process from the creation of thedelivery to the delivery receipt at the customer site, including arrival, loading respectively unloadingand unloading events as well as customs related entries.

3.8.5.2 Alerts & Follow-Up for Transportation

Provides alerts to the business partners involved along the transportation process.

3.8.5.3 Transportation Analytics

Provides input for analyzing the adherence to the planned duration of the entire shipment, includingthe duration of customs processing and arrival of customs documentation.

3.8.6 Supply Chain Analytics

Define, select, and monitor key performance indicators (KPIs) to analyze your business processes.

3.8.6.1 Key Performance Indicators

Key Performance Indicators (KPIs) provide a means of judging the performance of businessprocesses internally by time period, collaboratively with others within your supply chain, andexternally by benchmarking against similar companies. mySAP SCM supports the metrics in theSupply Chain Operations Reference (SCOR) model created by the Supply Chain Council, andincludes more than 300 pre-configured supply chain key performance indicators (KPIs), such asDelivery Performance, Forecast Accuracy and Return on Assets. These measures can be used asthey are, or modified and enhanced to fit your specific situation.

Here are some examples:

1. Purchasing StatisticsDifferent standard analyses and reports monitor purchasing operations (e.g. how manygoods for purchase orders for the last month have been received) and facilitate the detailedanalysis of the purchasing activities and procurement processes taking place within your

enterprise (e.g. ranking your suppliers with regard to purchasing values).

2. Inventory ControllingDifferent standard analyses and reports display actual stock situation according to quantity-based and value-based criteria. Other reports are available for monitoring characteristics ona periodic basis.

3. Warehouse AnalyticsTo analyze warehouse activities information it is possible in the future releases to extractedand transfer to the SAP Business Information Warehouse (SAP BW) where it evaluates and





reduces the extensive information from Warehouse Management to a few essentialperformance measurements. Key performance indicators (KPIs) for WarehouseManagement support the analysis of the physical flow of quantities and workload in thewarehouse

3.8.6.2 Strategic Performance Management

On a strategic level, SCPM gives you the feedback needed for true closed-loop supply chainmanagement-- which is key to driving continuous improvement, delivering superior performance over time, and ensuring that your supply chain continues to be efficient and competitive. Here there aretwo areas of concentration:

1. Balanced Scorecard SEM-CPM (Corporate Performance Monitor) supports the definition,analysis, visualization and interpretation of key performance indicators and BalancedScorecards and thus increases the effectiveness of managerial strategy finding andimplementation. Elements of SEM-CPM are Value Driver Trees, Measure Catalogs and

Management Cockpit scenarios. SAP SEM with its component SEM-CPM offers innovativeconcepts for the interpretation and visualization of Key Performance Indicators (KPIs). Theconcept of the Balanced Scorecard, for example, includes non-financial measures in theenterprise performance management and thus goes beyond the scope of regular management reporting.

2. Sales and Operations Planning in SAP SCM. Allows monitoring of various plans from sales,marketing and manufacturing to keep in line with the overall business plan.

3.8.6.3 Operational Performance Management

On a day-to-day operational level, the solution provides constant surveillance of key performance

measurements, and automatically generates an alert when there is a deviation from plan, so that youcan keep processes working at maximum efficiency.

The Supply Chain Cockpit in SAP SCM allows constant surveillance of the entire supply chain. Andthe Alert Monitor and Broadcasting functions draw attention to bottlenecks and allow you to informusers of potential problems in their area.

3.8.6.4 Supply Chain Analytical Applications

Analytical Applications provide the basis for measuring and optimizing across the entire supplychain. It is more than just reporting; it is a closed-loop scenario that feeds information back into the

transactional systems. It includes the collection of data from various operational systems (includingnon-SAP) to create the basis for Analytical Applications. Data from Dunn & Bradstreet and Nielsencan be collected as well as data from the Web. Analytical Applications also include alerts, workflows,and what-if analyses.





3.8.6.5 Collaboration Performance Indicator

In an increasingly collaborative environment, it is important to measure the performance of theinteractions of every partner involved in the supply chain. This is exactly what CollaborationPerformance Indicators (CPIs) do.

A Collaboration Performance Indicator (CPI) is the measure of performance associated with theresponsiveness of all organizations involved in a process with cross-organizationalinterdependencies. The information provided by a CPI can be used to determine how anorganization's cooperation compares with an agreed-upon standard, and is therefore a keycomponent for this organization's joint move towards best practice.

Documents

SAP Best Practise for SCM