Business Case for EWM Implementation

8/10/2019 Business Case for EWM Implementation

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Building your business case for SAP

Gavin Klausom n c en er

STEVE RUGGIERO[ASUG INSTALLATION MEMBER

MEMBER SINCE: 2000

ED HUDAK[ASUG INSTALLATION MEMBER

MEMBER SINCE: 1998

SHERRYANNE MEYER [ ASUG INSTALLATION MEMBER

MEMBER SINCE: 1999



[ Agenda

InfoLogix Introductions

Introduction to WMS business case

Industry trends in WMS solutions and industryrequirements

Benefits of implementing SAP Extended Warehouse

anagemen epen on your ex s ngsystems

,leveraging your existing SAP investment

case and how to establish buy in from IT, operations andmana ement

Real Experience. Real Advantage.



[ Speaker Introductions

Gavin Klaus, SAP Business Development Manager ,

including logistics software, Gavin has experience in best

practice and process optimization in manufacturing and.industries such as Pharmaceuticals, Wholesale Distribution,and Retail. Gavin is an active participant within the SAP

Real Experience. Real Advantage. 3



[ Speaker Introductions

Dominic Venieri, Senior SAP Solution Consultant

Dominic has over 6 years of logistics and distributionexperience with SAP across multiple industries. Dominic

implementations of SAP, focusing in the WM space as wellas mobile data collection through SAPConsole and ITS.

Dominic has experience in best practice and processoptimization in manufacturing and distribution environments.

events and is an active participant in the SAP Services

Partner Program.




[ InfoLogix Enterprise Solutions

• Mobile Managed Services

o Customer Care Portalo Wireless Monitoring & Device Managemento Helpdesk Support

Manage

• SAP Supply Chain Managemento SAP WMo SAP EWMo SAP TMo SAP EM

• Mobility Enablement Tools

• Mobile Device Controller ™ RFID

Mobilize • Mobile Data Collection Solutions• SAP NetWeaver 7.1 Solutions• SAP Console & ITSMobile• Hardware Provisionin• 3rd Party Mobile Apps• Custom Application Development

Empower

• ncrease upp y a n e oc y c enc es• Increased Visibility into Assets & Data Streams• Increased Control of Entire Mobility Lifecycle• Change Management & Business Process


p m za on



[ WMS Introduction

Labor is the largest expense next to transportation

Space Utilization

Several key drivers for a WMS

Productivity Inventory and shipping

accuracy Throughput and cycle time

Customer service

Each industry and company CAN BE unique

“Cost containment is a dominant objective for supply chain organizations,

and the need to lower costs will force buyers to scrutinize the businesscases for all new su l chain mana ement SCM a lication investments

(especially WMS that are normally replacements of legacy systems) more

thoroughly in 2009. This strong inclination of users to focus on minimizing

SCM investment costs will make TCO a more important consideration


in new WMS purchases.”- Aberdeen Group, The Extended Warehouse Benchmark Report



[ WMS Industry Trends

Mature market Demand based or reactive enhancements

“Extended Warehouse Management” oc anagemen Yard management In-Transit Visibility

Multi-Warehouse Visibility Distributed Order Management Returns Management Asset Tracking

Further integration and expansion of offerings Technology modernization Point solutions




[ SAP WMS Terminology

ERP WM

“Traditional” SAP WM

Available since SAP R/2 with over

SAP R/3

,

Centralized or decentralized option SAPEnterprise

2.0

,high volume, automated DCs

Task and Resource Mana ement TRM “O tion”EWM

ERP EWM

Released with SAP ERP 4.7 as extension set 2.0

ECC

With ECC, rebranded ERP EWM

Key functionality of Cross Docking, Yard Management,


Dynamic Cycle Counting, and Value Added Services

8



[ SAP WMS Terminology

SCM EWM

Released in 2005

Whole new product meant to compete

Caterpillar Logistics

Project

Designed as a decentralized solution

Accommodates ERP functionality, plus:

Advanced functionality

SCM/EWM

Labor Management

Slotting a er a ow ys ems




[ Business Case Baseline

Difficult to generalize the Return on Investment for anyone company or n ustry

We have broken it down into the following categories:

CurrentlyCurrently CurrentlyCurrentlyRunnin :

unn ng:

SAP WM

unn ng:

SAP IM

unn ng:

3rd Party WMSHomegrown or“Legacy” WMS

SAP SCMEWM

SAP SCMEWM

SAP SCMEWM

toSAP SCMEWM




[ Implementing a new WMS or

onver ng rom o What to look for

Typically going to drive a significant ROI based onoperational improvements

,may be productivity improvements, space utilizationimprovements, cycle time, and throughput improvements

that can be achieved through a WMS. While your operation maintains seems efficient and is

accura e, can e same vo ume e one w ess e or

Is your accuracy because of double and triple checking and

better process and less effort?




[ Implementing a new WMS or

onver ng rom o What to expect

System guided strategies to optimize the routing in areassuch as putaway and pick paths

Multiple bin support to optimize warehouse space and

Better controls to reduce the possibility of lost product andwrite offs

RF directed work allows for real time transactions to match

the physical process and the system rec on prov es me y v s y o nven ory

status/quantity for allocation, purchasing, and customerservice




[ Converting from SAP ERP WM to SCM EWM

The benefits for converting from SAP ERP WM to SCMare aga n g y epen ent on t e a t ona

functionality that the solution offers. As your business,

robust WMS can offer you many opportunities to achieverocess im rovements.




[ Converting from SAP ERP WM to SCM EWM

Advanced functionality of SCM EWM

Advanced functionality providing for more efficientwarehouse processes

Wave planning

Kit to stock/order

Warehouse slotting to reduce travel time and materialhandling time

Labor management to improve the management of work

and improve overall productivity




[ Converting from 3rd Party to SAP SCM EWM

Often times, a company running a 3rd party WMS solutionas most t e unct ona ty to support t e us ness

requirements, assuming a current release of the product.,

from the following categories.

• Advanced/new functionality providing formore efficient warehouse processes

• Long term vendor viability – As youhave seen with scenarios of the

• Reduction in IT costs• Reduction in license

• Reduction in maintenance

acquired EXE and Provia (No Longeroffered) WMS solutions. RedPrairie

who acquired LIS Dispatcher,• Reduction in interface support• Reduced costs for enhancements and

upgrades – elimination of reliance on

McHugh, and Marc (No longeroffered).

• Enterprise visibility of inventory,


• Internal system support

, .



[ Converting from a Homegrown WMSo

Majority of the business case is often derived from riskavo ance an t e ene ts o a common p at orm ansupport group

n o er cases, e ome grown as reac e sbreaking point for adding more functionality without a

.

platform obsolescence, will drive the need for a newsolution.

• Advanced/new functionality providing for • Potential reduced costs for enhancements – (Typically outdated products)

• Potential reduction in IT costs• System sustainability

third parties/ less painful upgrades

• Long term vendor viability• Enterprise visibility of inventory, activities,


• e uct on n nter ace support an metr cs.



[ Customer Business Case Example (1)

Major Retailer replacing 3rd party WMS with SCM EWM

unn ng + years

Complex interfaces between SAP and 3rd party WMS that were

error- rone causin critical business sto a es High IT cost to fix and maintain

Operational and customer impact due to outages

us om za ons o e sys em rea e as mo ca ons y evendor complicating support

Limited available skillset for development and support

Benefits of SCM EWM

Standard interface Leverage in-house SAP expertise

“Enhancement” concept of SAP permits flexible customization





Major Pharma Manufacturer replacing 3rd Party WMS with SCM EWM

unn ng + years

3rd Party WMS version is over 10 years old

Hi hl customized no lon er su orted b Red Prairie

Limited available skillset for development and support

Not easy to adapt WMS to changes in business requirements

Functional gaps of existing WMS No capability for serialization or RFID to support ePedigree mandates

Leverage in-house SAP expertise

Standard support for serialization and RFID integration via SAP AII





Wholesale distributor replacing Homegrown WMS with SCM EWM

unn ng + years

Heavily customized WMS package with extensive modifications

No vendor su ort

Internal sustainability threatened with retirement and attrition ofknowledgeable resources

Any change in business process required custom code development

Benefits of SCM EWM

Leverage in-house SAP expertise

Standard technology platform allowing with broad resource market

Extensive configuration options for adapting business processesbased on “out of the box” functionality




[ Calculating the Savings

The basic steps for developing the Return on Investmentare:

1. Education – Review your potential system capabilities and

2. Requirements – Requirements and priorities need to beset and a reed u on

3. Establish Baseline and Collect Data – Collect currentmetrics and data to support the subsequent calculations.

n erstan t e re at ons p etween vo ume an cost.

4. Estimate savings – Calculate the hard and soft savings

system. Include benefits from business opportunitiesenabled by new system capabilities




[ Calculating the Savings Cont’d

5. Estimate costs – Calculate the full costs for themp emen a on an sys em ep oymen . nc u e n ernaand external resources.

– .payback based on your companies standard business casetemplate

7. Post implementation audit – While this is not always arequired exercise, it will provide you with an understanding

team for future projects.

The level of detail re uired differs between com anies

The KPI’s and priority vary between industries andcompanies




[ Tangible Savings

Partial list of key tangible savings factors

Labor

Efficient process Inventory Visibility

ra n ng amp p

Material Handling Equipment Inventory Loss

Customer Charge Backs Regulatory Non-Compliance

Transportation Savings

IT Cost Savin s Avoidance


[



[ Non-Tangible Savings (Soft)

Partial list of key non-tangible or soft savings factors

Employee Benefit

Customer Service

Cycle Time Improvements

Throughput Improvements

anagemen s y

Inventory Reduction (many times difficult to achieve buy in)

Does a WMS enable new business opportunities that




[



[ Calculating Savings

Calculate Labor Savings

Calculate detailed estimates to validate expectations

Picking two orders at one time will save 50% of travel which is –

Detail individual benefits and then aggregate results (Don’tdouble dip)

Industry benchmarks (WERC, APICS, etc.) Simulations

Function Current Cycle

Time per TaskMin

Number of Tasks

per Year

Annual Cost Expected

Savings

Annual Savings

Putaway 1.20 1,000 $104,000 5% $5,200

Replenishment 5.00 900 $390,000 15% $58,500


. , , ,

Total 6.50 $1,274,000 23% $297,700

[



[ Leverage LMS to justify SCM EWM

Labor Management Basics

e er sc e u ng an p ann ng

Reduction of hours (OT, VTO, staffing levels, temp)

The Mana ement Team can levera e the tool to drive hours out ofthe facility

Increased util ization of the workforce

’

Management is given visibility into the distribution operation at thetask level

Employees are measured against the SOP

Associate pace and skill improvement (setting the right

Improved processes (reduced steps)


[



[ Leverage LMS to justify SCM EWM

Labor Management program savings are significant

ua y o uperv s on

Good AveragePoor Level of Measurement

ua y o uperv s on

Good AveragePoor Level of Measurement

--30%30%--40%40%--60%60%Norms (no LaborNorms (no Labor MngMng..

System)System)--30%30%--40%40%--60%60%

Norms (no LaborNorms (no Labor MngMng..

System)System)

------LMS w/ ReasonableLMS w/ Reasonable

--20%20%--30%30%--40%40%LMS w/ Historical RatesLMS w/ Historical Rates

------LMS w/ ReasonableLMS w/ Reasonable

--20%20%--30%30%--40%40%LMS w/ Historical RatesLMS w/ Historical Rates

+5%+5%--5%5%--15%15%LMS w/ Engineered StandardsLMS w/ Engineered Standards

ExpectanciesExpectancies

+5%+5%--5%5%--15%15%LMS w/ Engineered StandardsLMS w/ Engineered Standards

ExpectanciesExpectancies


+25%+25%+10%+10%--10%10%LMS w/ ELS and Incent ivesLMS w/ ELS and Incentives +25%+25%+10%+10%--10%10%LMS w/ ELS and Incent ivesLMS w/ ELS and Incentives

[



[ Selling the business case

Management education

gn your us ness case w your compan es s ra eg c goa s

Cost savings

Traceability

Government or industry compliance

Customer compliance Customer service

x s ng pa n po n en ca on

Cooperation – business and IT

Sensitivity analysis

Buy in on assumptions before establishing return


Conservative and double conservative approach / Negotiating

[



[ Key Learnings

Understand the solution capabilities first or you won’tnow w at t e ene ts are

Understand your companies strategies and objectives andma e sure e pro ec an us ness case s n a gnmen

Don’t be afraid to do some math or do simulations to

Always work collaboratively between IT and Operations


[



[ .

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For ongoing education on this area of focus, visit the Year-

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SESSION CODE: 1610


Business Case for EWM Implementation

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