SCM Solution Scope en De

SAP SCM 5.0

November 2007

English

SAP Best Practices for SCM

SAP AGDietmar-Hopp-Allee 1669190 WalldorfGermany

Solution Scope

SAP Best Practices SAP Best Practices for SCM: Solution Scope

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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: S35 Make-to-Stock.............................................................................................8

2.3 Scenario: S37 Make-to-Order with Component Availability Check.....................................9

2.4 Scenario: S38 Make-to-Order with Capacity Check.........................................................10

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

2.6 Scenario: S40 Order Fulfillment.......................................................................................13

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

2.8 Scenario: S45 Fulfillment Visibility....................................................................................15

2.9 Scenario: S46 Responsive Replenishment......................................................................16

2.10 Scenario: S47 Release Processing..................................................................................17

2.11 Scenario: S48 Service Parts Order Fulfillment.................................................................18

2.12 Scenario: S51 Available-to-Promise with Product Allocation............................................18

2.13 Scenario: S52 Contract Manufacturing Procurement & Supply Network Inventory..........19

2.14 Scenario: S53 KANBAN Replenishment..........................................................................20

2.15 Scenario: S66 Service Part Supersession........................................................................22

2.16 Scenario: S68 Multi-Modal Shipment with Routing Guide................................................22

2.17 Scenario: S70 Multi-Drop Shipment Using Truck and Trailer...........................................23

2.18 Scenario: S72 Service Parts Backorder Processing.........................................................24

3 Functional Scope – Functions....................................................................................................25

3.1 Strategic Planning............................................................................................................25

3.1.1 Strategic Supply Chain Design.....................................................................................25

3.1.1.1 Supply Chain Definition.......................................................................................25

3.1.1.2 Supply Chain Monitoring......................................................................................25

3.1.1.3 Alert Monitoring...................................................................................................26

3.2 Demand Planning.............................................................................................................26

3.2.1 Forecasting & Lifecycle Planning.................................................................................26

3.2.1.1 Statistical Forecasting..........................................................................................26

3.2.1.2 Composite Forecasting........................................................................................27

3.2.2 Promotion Planning......................................................................................................27

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3.2.2.1 Promotion Definition............................................................................................27

3.2.3 Consensus Demand Planning......................................................................................28

3.2.3.1 Data Handling......................................................................................................28

3.2.3.2 Collaborative Demand Planning..........................................................................28

3.2.3.3 Macro Calculation................................................................................................28

3.2.3.4 Planning with Bills of Materials............................................................................29

3.2.4 Product Allocation........................................................................................................29

3.3 Supply Planning...............................................................................................................29

3.3.1 Supply Network Planning & Outsourcing......................................................................29

3.3.1.1 Heuristic...............................................................................................................30

3.3.1.2 Optimization.........................................................................................................30

3.3.2 Distribution Planning....................................................................................................31

3.3.2.1 Deployment.........................................................................................................31

3.3.2.2 Transport Load Builder........................................................................................31

3.3.3 Customer Collaboration................................................................................................32

3.3.3.1 Exchange Data with Customers..........................................................................32

3.3.3.2 Collaborative Planning & Forecasting..................................................................32

3.3.3.3 Automatic Purchase Order Generation for VMI customers..................................32

3.3.4 Supplier Collaboration..................................................................................................32

3.3.4.1 Data Transfer.......................................................................................................33

3.3.4.2 Contract Manufacturing Procurement..................................................................33

3.3.4.3 Release Processing.............................................................................................33

3.3.4.4 KANBAN Replenishment.....................................................................................33

3.3.4.5 Inventory Visibility & Simulation...........................................................................34

3.3.4.6 Supplier Network Inventory..................................................................................34

3.3.4.7 Advanced Shipment Notification (ASN)...............................................................34

3.4 Procurement..................................................................................................................... 34

3.4.1 Purchase Order Processing.........................................................................................34

3.4.1.1 Conversion of Demands to Purchase Orders......................................................34

3.5 Manufacturing................................................................................................................... 35

3.5.1 Production Planning & Detailed Scheduling.................................................................35

3.5.1.1 Production Planning.............................................................................................35

3.5.1.2 Detailed Scheduling.............................................................................................35

3.5.1.3 Capacity Leveling................................................................................................36

3.5.1.4 Scheduling Agreements.......................................................................................36

3.5.1.5 Materials Requirements Planning........................................................................36

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3.6 Order Fulfillment...............................................................................................................36

3.6.1 Sales Order Processing...............................................................................................36

3.6.1.1 Rules-based Available-to-Promise (ATP)............................................................37

3.6.1.2 Capable-to-Promise (CTP)..................................................................................37

3.6.1.3 Multilevel ATP Check...........................................................................................37

3.6.1.4 Backorder Processing..........................................................................................37

3.7 Transportation.................................................................................................................. 38

3.7.1 Transportation Planning...............................................................................................38

3.7.1.1 Load Consolidation..............................................................................................38

3.7.1.2 Mode and Route Optimization.............................................................................38

3.7.1.3 Carrier Selection..................................................................................................38

3.7.1.4 Collaborative Shipment Tendering......................................................................38

3.8 Visibility............................................................................................................................ 39

3.8.1 Accuracy of Sales Planning..........................................................................................39

3.8.2 Item Fulfillment Cycle Time..........................................................................................39

3.8.3 Capacity Utilization.......................................................................................................39

3.8.4 Fulfillment Visibility.......................................................................................................39

3.8.4.1 Fulfillment Tracking & Monitoring........................................................................39

3.8.4.2 Alerts & Follow-Up for Fulfillment........................................................................39

3.8.4.3 Fulfillment Analytics.............................................................................................39

3.8.5 Transportation Visibility................................................................................................39

3.8.5.1 Transportation Tracking & Monitoring..................................................................40

3.8.5.2 Alerts & Follow-Up for Transportation..................................................................40

3.8.5.3 Transportation Analytics......................................................................................40

3.8.6 Supply Chain Analytics.................................................................................................40

3.8.6.1 Key Performance Indicators................................................................................40

3.8.6.2 Strategic Performance Management...................................................................41

3.8.6.3 Operational Performance Management...............................................................41

3.8.6.4 Supply Chain Analytical Applications...................................................................41

3.8.6.5 Collaboration Performance Indicator...................................................................42

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1 SAP Best Practices for SCM: Solution Scope

1.1 PurposeThis Solution Scope provides an overview of the processes and functions covered by SAP Best Practices 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 arranged according 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 Business Scenarios

2.1 Scenario: S24 Vendor-Managed InventoryThe Vendor-Managed Inventory (VMI) scenario enables companies to work closely together with key customers. A manufacturer can offer a value-added service to a key customer by taking over the customer's inventory management. This allows both the customer and the manufacturer to reduce their safety stock levels. This scenario shows how to reach this goal using SAP Advanced Planning and Optimization (SAP APO) in combination with the existing SAP R/3 solution

Process FlowAn important prerequisite for the Vendor-Managed Inventory scenario is that the customer provides the 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.

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Key PointsBoth 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: 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 production planning. 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 FlowAll of the planning processes described in this scenario are performed in the SAP SCM system. The scenario 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 from neighboring departments such as sales and logistics is also taken into consideration to create a consensus-based demand plan.

The demand planner works together with key supply chain partners via the Internet, to reach a 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 volumes and to determine the product flow along the supply chain. The result is a plan that covers both the quantities that must be transported between two locations (for example, distribution center to customer or production plant to distribution center), and the quantities to be produced and procured.

The production planner carries out short-term production planning. This includes material requirements and capacity planning. The system creates receipt elements, planned orders and 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

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overload, and reduce lead times. Using the Alert Monitor, you can easily identify exceptional situations 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

2.3 Scenario: S37 Make-to-Order with Component Availability 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 scenario is 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 possible delivery date of the configurable product is determined.

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

Process FlowUsing the Multilevel ATP function in SAP Advanced Planning and Optimization (SAP APO) allows a fast and reliable availability check at component level during sales order entry. The following example 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 are required 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 specifies the 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 delivery date. If some components are missing, the system checks whether a component substitution can take place (Rules-based component availability check). If the components cannot be substituted, either, the system creates receipt elements and calculates the earliest possible delivery date, which is then communicated to the customer

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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...

2.4 Scenario: S38 Make-to-Order with Capacity CheckThe Make-to-Order with Capacity Check scenario supports manufacturers in providing accurate and more reliable delivery dates to their customers. If at the time of sales order entry, the requested product 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 the requested 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 the requirements of make-to-order manufacturers, which typically include the high tech industry as well as manufacturers of industrial machinery and components.

Process FlowThe bucket-oriented Capable-to-Promise (CTP) function within SAP Advanced Planning and Optimization (SAP APO) enables vendors to schedule production in the most efficient way to fulfill sales orders. The following example for the high tech industry provides an overview of the steps involved 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 by considering the available bucket capacity (daily basis). The system determines the earliest possible 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 accepts them, 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 delivery dates. The PP/DS component in SAP SCM is used for this purpose.

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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

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2.5 Scenario: S39 Advanced Repetitive ManufacturingThe scenario Advanced Repetitive Manufacturing is tailored to meet the requirements of automotive suppliers 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 dealing with 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 FlowAll of the planning processes described in this scenario are executed in SAP SCM. Production execution takes place in the backend system, which is usually an SAP R/3 system. This scenario can 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 production lines, 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

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2.6 Scenario: S40 Order FulfillmentThe Order Fulfillment scenario helps manufacturers to optimize their sales order processing to ensure 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 who consider 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 used to achieve this goal.

Process FlowThe 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 is fully 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 requested location (product substitution) or searches for the requested product in an alternative location (location substitution). As a result, the shipment to the customer may contain a part of 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 redistributes the 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 resources and 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 share among the eligible carriers.

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

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

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2.7 Scenario: S41 Supplier-Managed InventoryThe Supplier-Managed Inventory (SMI) scenario enables cooperation between manufacturers (customers) and their suppliers. The supplier is authorized to monitor the manufacturer's stock levels and 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 Advanced Planning and Optimization (SAP APO) and SAP Inventory Collaboration Hub (SAP ICH) in combination with the existing SAP R/3 solution.

Process FlowAn important prerequisite for the Supplier-Managed Inventory scenario is that both business partners agree 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 business partners 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 SAP ICH.

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 to these 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 the simulation are satisfactory, they can be used for the real delivery.

The supplier plans the delivery, posts a goods issue for the delivery and informs the customer with an advanced shipping notification about the exact delivery quantity and the expected 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 PointsBoth 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

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2.8 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 an enhancement to an existing R/3 solution, planned and unexpected events can be easily monitored and tracked. This results in increased transparency outside the suppliers' boundaries and increased customer satisfaction. The SAP Best Practices Fulfillment Visibility scenario focuses on the requirements of logistics and postal service providers.

Process FlowThe delivery process used in this scenario involves three different locations in the same country: The departure 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 the departure location, events from the arrival at the hub up to unloading, and proof of delivery at the destination location of the customer.

The supplier's warehouse staff confirms and reports the actual date and time of expected events using 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-up activities: 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 PointsStatus retrieval by sales order number, customer purchase order number, delivery number and status 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 company boundary by all parties across the supply network

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

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2.9 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 inventory replenishment needs. This scenario enables a manufacturer to proactively assume the responsibility of sense and respond driven replenishment for key customers, based on actual sales or inventory data existing at a retailer or point-of-sale stocking facility. Responsive Replenishment is enabled by SAP's Inventory Collaboration Hub (SAP ICH) solution.

Process FlowThe following steps illustrate the characteristic process flow of the Responsive Replenishment scenario:

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 to streamline their work processes and ultimately benefit from a more accurate forecast, better market transparency, greater stability, reduced inventory, and better communication.

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

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

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

Process FlowAn important prerequisite for the Release Processing scenario is that both business partners agree on 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 business partners 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 and times 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 to inform 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 goods receipt 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

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2.11 Scenario: S48 Service Parts Order FulfillmentThe Order Fulfillment process is an elementary process in the Service Parts Execution. This scenario shows how service parts order is processed and sourced, which covers product / location substitution 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 sales order / 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.

2.12 Scenario: S51 Available-to-Promise with Product Allocation

A precise planning and controlling mechanism is important for enabling competitive order processing with guaranteed efficient and timely delivery of the required order quantity to the customer.

Product allocation is a function intended to help your company avoid critical requirement and procurement situations. Product allocations can be created according to various criteria, for example for customers or for regions.

The system carries out an availability check against the ATP quantity during order entry. If the availability check determines that the ATP quantity can fully or partially cover the order requirement, then the confirmed quantity is the basis for the availability check against product allocation, which is carried out along with the ATP check.

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The confirmed quantity from the ATP check is checked against the relevant product allocation. This ensures that the product allocation for this period is not exceeded. Required quantities that cannot be confirmed because the product allocation for that period is used up, are postponed until the next period.

Process FlowThe scenario includes the following process steps:

Definition of quotations for customer or sales organization per period

Definition of production quantity per period

Sales order entry with check against product allocation quantity

Check of free allocation quantities

Key Points Clear commitment of customer prioritization and estimated production quantities available

online for all departments

Online check during order entry against ATP quantities and free allocation quantities on customer level

More reliable delivery dates for short supply products

2.13 Scenario: S52 Contract Manufacturing Procurement & Supply Network Inventory

Contract Manufacturing Procurement & Supply Network Inventory is a joint business scenario within SAP SCM that is designed to keep the subcontracting purchase order, specifically the components data, up to date between the time when the PO was placed and before the goods are received.

With these business processes, you are able to collaborate with your suppliers on subcontracting orders.

Your subcontractors get the capability of maintaining component consumption online and inform you in time. Both business partners benefit from a better visibility of the supply network inventory regardless of inventory management ownership.

Process FlowThe SAP Inventory Collaboration Hub (SAP ICH) serves as a jointly used platform for all business partners involved in this process.

The Contract Manufacturing Procurement & Supply Network Inventory scenario contains the following main characteristics:

My company (customer role) creates purchase orders for subcontracting the production of a specific product.

Some components to make the product are supplied to the vendor (subcontractor) by the company.

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Some components may also be supplied to the subcontractor via the drop shipment process from another supplier.

The subcontractor may manage its own inventory for some components from its own supplier.

Purchase order data and consumption of components are updated in real-time across My company and Subcontractors.

Both My company and the subcontractors (and their component suppliers) are able to see the inventory of critical components, regardless of storage location and ownership.

Key Points Both business partners benefit from this type of cooperation.

The process helps brand owners (OEM) manage critical components either fully or jointly with contract manufacturers.

It helps prevent delays caused by incorrect information on key component inventory at contract manufacturer, which often eliminates any chance of a quick response to upside opportunities.

Available information on component inventory levels at contract manufacturer can be used for planning and analysis (liability analysis).

Also benefits the contract manufacturer who gets insight into incoming shipments of components purchased by brand owner (OEM)

2.14 Scenario: S53 KANBAN Replenishment KANBAN Replenishment is a common business process in the automotive industry, through which original equipment manufacturers (OEMs) communicate material requirements to their suppliers by means of a KANBAN card. The card describes which material is required, the quantity of the material required and where the material is to be delivered.

Replenishment in the KANBAN scenario is triggered by My company (here represented by the automotive OEM), who regularly sends KANBAN requests from the back-end system, which are published in SAP ICH. The supplier ships the required products according to these KANBAN requests. Both business partners can monitor their activities in SAP ICH at any time.

Process FlowThe SAP Inventory Collaboration Hub (SAP ICH) serves as a jointly used platform for all business partners involved in this process.

The KANBAN Replenishment scenario contains the following steps:

My company regularly creates KANBAN requests in its back-end system and publishes them in the SAP ICH. The KANBAN request specifies the quantities of the material required and the dates and times of delivery plus where to be delivered. The status of KANBAN is set to EMPTY.

The SAP ICH system generates a KANBAN alert to notify the supplier in the Alert Monitor and displays the KANBAN request in the KANBAN Overview.

The supplier monitors the KANBAN Overview and checks KANBAN requests.

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The supplier ships the required products, and creates an Advanced Shipping Notification (ASN) for the KANBAN request. They send the ASN to My company to inform them that the required quantity has been shipped and to confirm the delivery date.

My company receives an ASN and checks the inbound delivery upon ASN.

My company receives the shipment and posts the goods receipt for the inbound delivery. If My company wishes, they can send a proof of delivery message to inform the supplier that the goods receipt has been posted.

After My company has sent a proof of delivery, SAP ICH changes the ASN status to 'Goods Receipt Complete', the KANBAN status to FULL.

My company can manually set the status of the ASN or KANBAN to close it, if necessary.

Key Points Both business partners benefit from this type of cooperation because

It replaces traditional communication methods, such as phone, fax and email, with real-time, Web-based communication for operational purchasing data using KANBANs

It increases synchronization between customer's ERP system and suppliers on requirement dates and quantities through real time, electronic updates using ASNs

Proactive alerts on supply chain exception situations increase accuracy and speed and focus on supply chain activities for both customer and supplier users

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2.15 Scenario: S66 Service Part SupersessionService Part Supersession is an essential functionality in spare parts logistics, especially in the automotive industry. This building block consists of the necessary settings in both SAP ECC and SAP SCM system to configure the interchangeability function in Global ATP, which enables you to use Service Part Supersession in Sales and Distribution.

Order Fulfillment is an elementary process in the service parts sales execution. This scenario shows how the service parts order is processed with part supersession activated during global ATP check.

Process Flow A customer or dealer calls the distributor/wholesaler to order service parts. The sales

administrative assistant creates the sales order in the SAP ECC system.

When a sales clerk enters an order, the system automatically determines the price and checks the product availability by calling the global ATP function in the SAP SCM system.

During the global ATP check, the service part supersession is carried out according to the interchangeability master data.

The sales order is then updated back in SAP ECC with the new availability result.

Key Points Service Part Supersession during global ATP check is enabled by interchangeability data in SAP

SCM. Service parts can be supplied with alternate products for higher service parts order fill rates.

Use-up date can be maintained for interchangeability data, which controls the consumption of spare parts by date.

2.16 Scenario: S68 Multi-Modal Shipment with Routing Guide

Multi-Modal Shipment with Routing Guide includes dynamic route determination. Whereas normally, shipment proposals are only created in TP/VS scheduling, dynamic route determination enables shipment proposals to be created already when the sales order is created.

When a sales order is entered in the SAP system (SAP ECC), the process is triggered and generates appropriate freight units and shipment proposals on a separate screen before the ATP check is performed.

The person responsible can then choose the appropriate shipment proposal according to certain business needs. Accepting a shipment proposal automatically creates shipments. Dynamic route determination is a business process scenario that is offered as part of SAP SCM TP/VS 5.0.

Process FlowThe shipment process used in this scenario involves different locations in different countries:

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Departure location

Hubs

Destination location

Means of transport:

Airplane

Truck

Scheduled ship

The scenario includes the following process steps:

The customer service representative creates a sales order in the ERP system. The dynamic route determination is triggered automatically in the Transportation Planning and Vehicle Scheduling component in the SCM system

Transportation route options with the relevant dates/times are proposed automatically by the system. The customer service representative makes his/her choice on the shipment proposal

The customer service representative triggers the Global Available-to-Promise Check in the results view for the sales order and makes his/her choice on the delivery proposal

After satisfying the result, he/she saves the sales order in the ERP system. The sales order is automatically transferred to SAP SCM. The shipments that were determined are saved in the Transportation Planning and Vehicle Scheduling component and are displayed in the planning view in SAP SCM.

Key PointsProvide interactive and powerful decision support order by order for transportation planning

Plan, propose and prepare complex shipment execution for orders, taking constraints into account.

2.17 Scenario: S70 Multi-Drop Shipment Using Truck and Trailer

The scenario Multi-Drop Shipment Using Truck and Trailer covers functions for truck and trailer planning in shipment optimization. If a distribution centre receives two orders from different customers, these functions allow both orders to be transported on a truck and trailer combination to the location of the first customer, where the trailer is uncoupled and left behind, while the truck delivers the other order to the second customer.

Process FlowThe shipment process used in this scenario involves two customers and one distribution center, one truck and one trailer. The location at one of the customer does not have a suitable loading ramp for the trailer. As a result, the customer location can only be reached by the truck only.

The scenario describes the following process steps:

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Creating sales orders for delivery from the distribution center to the customer

Creating shipments in the transportation planning by the optimizer, taking into account costs, time/deadlines and constraints like incompatibility and so on

Analyzing the planning result for truck and trailer and release the shipment

Key Points Make better use of individual transportation assets by avoiding downtime.

Increase the ability to plan, maintain and execute a private fleet.

2.18 Scenario: S72 Service Parts Backorder Processing Backorder Processing is a frequent business transaction in Sales and Distribution. This scenario shows how the system reacts instantly to "positive" changes in the stock/requirements situation by distributing the free quantity to backordered sales items waiting to be confirmed

Process Flow Sales department creates sales order in SAP ECC system according to sales requirements.

Global ATP check is triggered automatically in the SAP SCM system for the required products of the sales items.

If an item cannot be confirmed, the sales order is registered as backordered. If an Order Due List (ODL) is maintained for the material in the SAP SCM system, this backorder is listed in the ODL.

A goods receipt is made for the required material in the SAP ECC system, this automatically triggers the Event-Driven Quantity Assignement (EDQA) process in the SAP SCM system, which distributes the available quantity to the sales order according the ODL.

The sales orders are then updated also in SAP ECC system.

Key Points Increase of available quantity automatically triggers the EDQA processing, which distribute the

increased quantity according ODL.

Priority can be configured by criteria such as customer, material, and creation date.

Manual change of ODL (priority, quantity, etc.) is possible.

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3 Functional Scope – Functions

3.1 Strategic Planning

3.1.1 Strategic Supply Chain DesignStrategic supply chain design includes the definition of all elements of the supply chain and the corresponding monitoring. This is supported by flexible alert monitoring.

3.1.1.1 Supply Chain DefinitionYou 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 lanes and product flows.

Furthermore, you can drill down to all elements belonging to the supply network, or request information about single or combined elements in the network. For example, you have the ability to see 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 Core Interface (CIF).

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

3.1.1.2 Supply Chain MonitoringThe Supply Chain Cockpit (SCC) consists of a highly intuitive, graphical interface that acts as the top enterprise planning layer covering all planning areas such as manufacturing, demand, distribution, and transportation. All employees in the Plan -> Source -> Make -> Deliver cycle of supply chain management 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 parts of a supply chain.

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

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3. Measure supply chain performance with KPIs (key performance indicators) that are stored in SAP 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 business situations.

3.1.1.3 Alert MonitoringThe Alert Monitor is a stand-alone APO component that enables a unified approach to monitoring planning situations. It notifies you of any critical situation that occurs in one of the SAP SCM applications, such as Demand Planning, Supply Planning, Production Planning and Detailed Scheduling, or Transportation Planning and Vehicle Scheduling. Alerts are displayed in various ways, either directly in the Supply Chain Cockpit, in the cockpit’s control panel, in the application, by e-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 identify problems 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, and throughput. 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. Based on this monitoring process, you can readjust plans whenever needed.

3.2 Demand Planning

3.2.1 Forecasting & Lifecycle PlanningForecasting is an essential part of the Demand Planning process. SAP SCM offers several basic statistical 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 different demand patterns during the life cycle.

3.2.1.1 Statistical ForecastingStatistical or univariate forecasting predicts future demand based on historical data. Unlike causal forecasting, other factors are not taken into account. Univariate forecasting provides methods that recognize 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 occasional deviations.

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3. Seasonal: demand shows periodically recurring peaks that differ significantly from a stable mean 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. Different error measures are calculated by the system and alert planners if user-defined limits are exceeded.

3.2.1.2 Composite ForecastingDifferent individual forecasts (statistical or causal forecasts) are combined, that is, each individual forecast is based on the same historical data but uses a different technique. You can average the forecasts 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 best forecast possible. The composite forecasts of several methods have been proven to out-perform the individual forecasts of any of those methods used to generate the composite.

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

3.2.2 Promotion PlanningIn Demand Planning, you can plan promotions or other special events separately. You can use promotion planning to record either one-off events such as the millennium, or repeated events such as 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 DefinitionPromotions can be defined on any level. Predefined levels can be used to separate them or to assign 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 effect on other products.

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

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

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3.2.3 Consensus Demand PlanningConsensus Demand Planning brings together all available information to enable a collaborative planning process that includes all partners. Forecasts and promotion plans are included automatically. 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 and solutions

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

Furthermore, the data can be restructured and used to calculate existing characteristic combinations to 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 can be extracted to InfoCubes for reporting, archiving, or integrating with other systems or solutions.

3.2.3.2 Collaborative Demand PlanningAll Demand Planning data is available on the Web to include internal or external partners in the planning process. This ensures that all partners agree on the defined quantities, horizons and conditions.

3.2.3.3 Macro CalculationMacros enable any kind of calculation on the planning grid. Planners can define them using a simple macro language in the macro builder, which has an easy-to-use interface. Macros can be executed during background processing and on the planning grid. In particular, they are used to combine different 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 and strength of the application.

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3.2.3.4 Planning with Bills of MaterialsAs well as planning demand for a product, you can also forecast dependent demand at different planning levels by exploding bills of material. This is of importance in situations where you need to plan 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 be sold separately). Planning demand for the kit generates dependent demand that can be combined with the independent demand for the single products. The overall demand by product can then be used for supply, production, and procurement planning.

3.2.4 Product AllocationUnpredictable problems can lead to critical situations in order processing. Product allocations help companies address and control such problems early by providing visibility into which quantity of a product will be used for which purpose.

3.3 Supply Planning

3.3.1 Supply Network Planning & OutsourcingSAP SCM Supply Network Planning (SNP) integrates purchasing, manufacturing, distribution, and transportation so that comprehensive tactical planning and sourcing decisions can be simulated and implemented 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 supply from the customer, through distribution centers to the plants. They distribute production over the plants, select production possibilities, explode the bills of material (BOMs) and organize the procurement of semi-finished goods or raw materials. The algorithms differ in the way they make decisions and the capacity constraints (for production, storage, transportation, and so on) that they consider. 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 own planning books using standard planning books as templates.

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3.3.1.1 HeuristicThe heuristic is used as part of a repair-based planning process consisting of the heuristic, capacity leveling, and deployment. The heuristic process considers each planning location sequentially and determines sourcing requirements. It sums up all requirements for a given material in the location into one requirement for the period. The heuristic determines the valid sources of supply and quantities 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 OptimizationThe 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, and handling 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 that you activated in a special profile called SNP optimizer profile. The feasibility of a solution can involve due date constraint violations, or safety stock constraint violations. Due dates and safety stocks are soft constraints, or in other words, constraints to which you assign violation costs. The optimizer only proposes a plan that will violate soft constraints if, according to the costs specified in the system, it is the most cost-effective plan.

As part of optimization-based planning, the optimizer makes sourcing decisions. This means that costs 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

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7. Safety stock violation penalty costs

8. Procurement costs

9. Shelf life

10. Cost multipliers

11. Location-specific products

3.3.2 Distribution PlanningDistribution Planning consists of two basic parts:

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

b) The Transport Load Builder (TLB) function maximizes the use of transport capacities by optimizing 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 DeploymentAfter production is complete, deployment determines which demand can be fulfilled by the existing supply. 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 to fulfill the demand, or exceed the demand, the system makes adjustments accordingly, depending on whether you are running the deployment heuristic or deployment optimization.

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

3.3.2.2 Transport Load BuilderThe Transport Load Builder (TLB) uses the results of the deployment run to create transport orders for multiple products. It optimizes transport loads by grouping available products based on the deployment 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 its minimum capacity. This minimizes your transportation costs.

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Capacity can be defined by volume, weight, and number of packets. The system checks the planned transport 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-called pull-in horizon. This enables the TLB to deliver earlier in order to fill the vehicles in an optimal way.

3.3.3 Customer CollaborationCollaborative Planning between manufacturers and their distributors allows both partners to streamline their work processes and ultimately benefit from a more accurate forecast, better market transparency, 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 all further planning in the partner companies. With the process steps specified below, SAP SCM supports 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 CustomersThe 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 EDI technology or SAP Exchange Infrastructure (SAP XI).

3.3.3.2 Collaborative Planning & ForecastingPlanning 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, and order forecasts, for example, in particular in a CPFR process.

3.3.3.3 Automatic Purchase Order Generation for VMI customersIn the framework of a VMI scenario, the vendor can trigger the automatic generation of purchase orders on the customer side. This includes number range functionality dependent on ship-from, ship-to, and purchasing group information.

3.3.4 Supplier CollaborationThe SAP Inventory Collaboration Hub (SAP ICH) is the heart of SAP SCM's collaboration capabilities. As of release SAP SCM 4.0, SAP ICH provides inventory and demand visibility to

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suppliers 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-mail when levels get too low. They can respond to these alerts by creating replenishment orders using the Web.

3.3.4.1 Data TransferThe 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-product combination. This is supported by SAP Exchange Infrastructure (SAP XI).

3.3.4.2 Contract Manufacturing ProcurementContract Manufacturing Procurement allows for communication of Subcontracting Purchase Orders to the supplier using the web-based application SAP ICH.

This is an extension of the regular PO Process offered, and it allows the supplier to view, print or download the component list (BOM, components that make up the finished good) as part of the PO as well.

The supplier can request changes to both the finished goods quantity and date as well as the components and quantities. This is part of an approval process were the customer can approve or reject the request via the web.

Components can be added or deleted along with consumed quantities, all changes later update the customer's ERP system PO.

3.3.4.3 Release ProcessingRelease 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 the releases and can download, print, and set an acknowledged flag for the release.

3.3.4.4 KANBAN ReplenishmentKANBAN Replenishment allows the customer to send out KANBAN replenishment signals to the supplier using the web-based application SAP ICH.

The KANBAN signals are typically generated as part of the customer's MRP run, or are manually created by the customer.

The suppliers can view the KANBANs by status, control cycle ID, KANBAN ID, product number and print or download as well. The supplier has access to one main screen environment for KANBAN processing ("dashboard"), from which, at time of shipment, the supplier can create ASN messages that updates the customer's ERP system.

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3.3.4.5 Inventory Visibility & SimulationThe supplier has complete visibility into the customer’s inventory situation. Alerts indicate critical situations that should be considered in more detail. Simulations enable an optimal scheduling of future deliveries.

3.3.4.6 Supplier Network InventorySupply Network Inventory allows for visibility of stock at a supplier location as part of two main approaches, customer (OEM) owned and managed components and supplier (Contract Manufacturer) owned and managed components.

The first one allows for visibility of stock at both customer and supplier locations, for the benefit of both parties. The second one allows for visibility of stock at supplier locations.

In both cases the future stock, or projected stock, is calculated and displayed along with the planned replenishments (e.g. incoming PO's) and planned out takes (e.g. Production Orders) with min/max levels and associated alerts.

3.3.4.7 Advanced Shipment Notification (ASN)Suppliers have to maintain the stock levels at the manufacturer's locations according to contractual agreements. To do this, they create and send ASNs in SAP ICH and finally replenish the buyer’s locations.

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

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

3.4 Procurement

3.4.1 Purchase Order ProcessingFulfills direct procurement requirements through conversion from demands to purchase orders, 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 OrdersThe 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 planning run, 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 supply and the price and conditions that have been assigned to a requisition, and start a request for

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quotation or bidding process if necessary. Release procedures are available to control critical procurement processes.

3.5 Manufacturing

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

3.5.1.1 Production PlanningProduction planning enables the planner to create feasible production plans across the different production locations (also with subcontractors) to fulfill the (customer) demand in time and to the standard expected by the customer. For the long and medium-term time horizon, rough-cut planning is based on time buckets and determines requirements of resources (machines, humans, production resource 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 SchedulingDetailed scheduling delivers optimized order sequences that can be released for production. Solvers simultaneously 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 with the execution and inventory management system, material shortages or critical resource situations can 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 making optimization strategies more flexible. The primary purpose of the workbench is to extend the standard planning tools in SAP SCM to include user-specific optimization components. These individual optimizers are launched directly from SAP SCM. Together with the standard optimizers and heuristics, they form one planning system. This system provides the right degree of flexibility to be adapted to the precise needs of the user.

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

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3.5.1.3 Capacity LevelingThe 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 necessarily feasible. Capacity leveling enables you to smooth your production schedule either manually or using method-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 ensure that 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 into production. 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 resource master data. You can modify consumption by leveling the capacity on the active resource or by using an alternate resource (shift order from one resource to another manually). You can manually edit production and transportation orders.

3.5.1.4 Scheduling AgreementsScheduling agreements define a fixed amount of quantity to be delivered from a supplier to a manufacturer 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. Using collaborative supply planning, the supplier can confirm these quantities before they are transferred to the execution system (for example, SAP R/3).

3.5.1.5 Materials Requirements PlanningMRP is part of the production planning process and generates replenishment schedules for all manufactured components, intermediates, purchased parts, and raw materials. MRP sets due dates for 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 when resource situations can be taken into account simultaneously.

3.6 Order Fulfillment

3.6.1 Sales Order ProcessingAllows order entry, pricing, and scheduling order for fulfillment. SAP SCM covers mainly the order ATP check. For further Information on the other elements, you can refer to the Solution Map of SAP ERP , Sales Order Management and Solution Map SAP Customer Relationship Management - Enterprise , Quotation and Order Management.

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3.6.1.1 Rules-based Available-to-Promise (ATP)Companies use predefined rules to automatically or manually optimize the decision-making process for 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 not completely available, in order to produce the remaining quantity or to procure it externally.

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

3.6.1.4 Backorder ProcessingCompanies can redistribute confirmed or partly confirmed quantities according to priorities and hierarchies, and override or manually affect the results of the ATP check when necessary. This is an important feature for companies that have large key customers making up the majority of overall demand.

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3.7 Transportation

3.7.1 Transportation PlanningCreates an optimized executable transportation plan.

3.7.1.1 Load ConsolidationSAP SCM provides different possibilities to consolidate deliveries and orders to shipments. It is possible 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 collaboration over the Internet. If you decide to rely on your carrier's abilities to consolidate your orders to shipments, you can give it access to your deliveries over the Internet, where it can consolidate your shipments. During Load Consolidation, SAP SCM will consider multi-dimensional capacity constraints of the resources. This function is provided by SAP APO.

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

3.7.1.3 Carrier SelectionAfter 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 offers four 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 a defined volume of business.

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

3.7.1.4 Collaborative Shipment TenderingThe 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 can accept the tender, reject or accept with modifications. Tendering can be done in SAP R/3 or SAP SCM.

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3.8 Visibility

3.8.1 Accuracy of Sales PlanningThis program calculates the accuracy of sales planning with respect to the confirmed delivery quantity.

3.8.2 Item Fulfillment Cycle TimeUse this program to calculate the average processing time of an order from document creation until arrival at the customer.

3.8.3 Capacity UtilizationThis 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 the customer. Events are reported from within the company as well as by business partners. During internal activities and outbound delivery to the customer, all parties concerned, including logistics providers and forwarding agents, ensure the flow of information by sending messages to inform SAP EM of both timely delivery and any unplanned events. With monitoring and visibility tools, the whole fulfillment process is made transparent at every stage for both customers and partners, which means they can monitor when events were planned to take place and when they actually take place.

3.8.4.1 Fulfillment Tracking & MonitoringThis 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 is created, the customer can monitor the process status via the Internet. After picking, packing, and loading activities are complete, outbound delivery begins.

3.8.4.2 Alerts & Follow-Up for FulfillmentFollow up activities are triggered in the form of emails to the customer in case there is a delay. Data is fed back to the application system.

3.8.4.3 Fulfillment AnalyticsProvides input for analyzing the execution and reporting compliance of the carriers as well as the transportation duration.

3.8.5 Transportation VisibilityTransportation visibility covers transportation and customs issues for inbound and outbound processes. Road transportation as well as International Sea Shipment are considered. These

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processes 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 a transportation 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 the delivery to the delivery receipt at the customer site, including arrival, loading respectively unloading and unloading events as well as customs related entries.

3.8.5.2 Alerts & Follow-Up for TransportationProvides alerts to the business partners involved along the transportation process.

3.8.5.3 Transportation AnalyticsProvides input for analyzing the adherence to the planned duration of the entire shipment, including the duration of customs processing and arrival of customs documentation.

3.8.6 Supply Chain AnalyticsDefine, select, and monitor key performance indicators (KPIs) to analyze your business processes.

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

Here are some examples:

1. Purchasing Statistics Different standard analyses and reports monitor purchasing operations (e.g. how many goods for purchase orders for the last month have been received) and facilitate the detailed analysis of the purchasing activities and procurement processes taking place within your enterprise (e.g. ranking your suppliers with regard to purchasing values).

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

3. Warehouse Analytics To analyze warehouse activities information it is possible in the future releases to extracted

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and transfer to the SAP Business Information Warehouse (SAP BW) where it evaluates and reduces the extensive information from Warehouse Management to a few essential performance measurements. Key performance indicators (KPIs) for Warehouse Management support the analysis of the physical flow of quantities and workload in the warehouse

3.8.6.2 Strategic Performance ManagementOn a strategic level, SCPM gives you the feedback needed for true closed-loop supply chain management-- 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 are two areas of concentration:

1. Balanced Scorecard SEM-CPM (Corporate Performance Monitor) supports the definition, analysis, visualization and interpretation of key performance indicators and Balanced Scorecards and thus increases the effectiveness of managerial strategy finding and implementation. Elements of SEM-CPM are Value Driver Trees, Measure Catalogs and Management Cockpit scenarios. SAP SEM with its component SEM-CPM offers innovative concepts for the interpretation and visualization of Key Performance Indicators (KPIs). The concept of the Balanced Scorecard, for example, includes non-financial measures in the enterprise 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 ManagementOn 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 you can keep processes working at maximum efficiency.

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

3.8.6.4 Supply Chain Analytical ApplicationsAnalytical Applications provide the basis for measuring and optimizing across the entire supply chain. 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 (including non-SAP) to create the basis for Analytical Applications. Data from Dunn & Bradstreet and Nielsen can be collected as well as data from the Web. Analytical Applications also include alerts, workflows, and what-if analyses.

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3.8.6.5 Collaboration Performance IndicatorIn an increasingly collaborative environment, it is important to measure the performance of the interactions of every partner involved in the supply chain. This is exactly what Collaboration Performance Indicators (CPIs) do.

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

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