Special RepoRt Managing for the Downturn, positioning for ...€¦ · Efficiently Develop...

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Sponsored by SAP The inside edge for SAP customers worldwide The Inside Edge Chakib Bouhdary, Chief Value Officer, SAP AG Manufacturers Must Manage for the Downturn, But Position for the Upturn Q&A with SAP AG’s Peter Maier Implementing Your Perfect Plant Vision: The Business Process Perspective Effectively Manage Short-Term Manufacturing Challenges Without Compromising Long-Term Objectives A Supply Network That’s Responsive in Good Times and Bad Gain Quick Wins on the Way to Fulfilling Long-Term Business Goals Establish Your Product and Service Leadership How SAP Business Suite 7 Provides the Foundation to Efficiently Develop Innovative, Sustainable Products 2 3 7 12 16 SPECIAL REPORT Managing for the Downturn, Positioning for the Upturn As published in SAP Insider April n May n June 2009 Reproduced from the Apr n May n Jun 2009 issue of SAP Insider with the permission of the publisher, WIS | Sign up for your free subscription at www.SAPinsideronline.com

Transcript of Special RepoRt Managing for the Downturn, positioning for ...€¦ · Efficiently Develop...

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Sponsored by SAP The inside edge for SAP customers worldwide

The Inside EdgeChakib Bouhdary, Chief Value Officer, SAP AG

Manufacturers Must Manage for the Downturn, But Position for the UpturnQ&A with SAP AG’s Peter Maier

Implementing Your Perfect Plant Vision: The Business Process Perspective Effectively Manage Short-Term Manufacturing Challenges Without Compromising Long-Term Objectives

A Supply Network That’s Responsive in Good Times and Bad Gain Quick Wins on the Way to Fulfilling Long-Term Business Goals

Establish Your Product and Service Leadership How SAP Business Suite 7 Provides the Foundation to Efficiently Develop Innovative, Sustainable Products

237

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Special RepoRt

Managing for the Downturn, positioning for the UpturnAs published in SAP Insider April n May n June 2009

Reproduced from the Apr n May n Jun 2009 issue of SAP Insider with the permission of the publisher, WIS | Sign up for your free subscription at www.Sapinsideronline.com

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TheinsideEdgeT h e i n s i d e e d g e f o r S A P c u s t o m e r s w o r l d w i d e

Reproduced from the Apr n May n Jun 2009 issue of SAP Insider with the permission of the publisher, WISSign up for your free subscription at www.Sapinsideronline.com

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Why do some companies survive, and even thrive, during times of economic turmoil?

Successful companies can rapidly adapt their business

models to the economic times, so they can compete more

effectively. Any business model is made up of a collection of

end-to-end business processes. Companies with a high level

of agility and flexibility can quickly distinguish between

those processes that are core to their business and those

that are contextual. Core business processes, such as time-to-market or quote-to-cash,

are managed and controlled very tightly, while contextual processes might be out-

sourced or provided as a shared service.

One way to measure a corporate IT team’s ability to support business model agility

is to look at the number of business applications per billion dollars in sales. Bench-

marking results from SAP Value Engineering suggest that, for best-run IT departments,

this number is less than five. Simplifying the IT portfolio not only lowers IT costs, but

also supports leaner operations and forms a more agile platform that encourages

growth, innovation, real-time enterprise visibility, and the scalability to grow or shrink

in line with — and at pace with — the organization’s overall business needs.

Based on our benchmarking findings and customer experience, companies with an

integrated platform can achieve impressive results. They can:

Reduce overall operating costs by 25% to 40%

Increase productivity per employee by 20%

Achieve 23% higher cost savings and improve effectiveness by 32% in shared

services over those companies without an integrated platform

Increase average annual savings on indirect and direct materials by more than

40% by operating a single, integrated procurement system

Lower overall IT costs by as much as 25% to 50%

These are powerful numbers. A standardized platform enables a leaner and more

innovative company — simply put, a best-run business. This is why SAP’s new

SAP Business Suite 7 is a major milestone. SAP Business Suite 7 takes an end-to-end,

process-centric view of the business, spanning traditional functional boundaries and

reducing overall IT costs. Most importantly, SAP Business Suite 7 is designed around

value scenarios that enable those key processes that provide the most benefit for

your organization. I highly recommend that you evaluate SAP Business Suite 7 and its

ability to create value for your company, simplify your IT portfolio, and improve your

business model agility.

Today’s economic challenges will affect the performance of every company. Those

companies with business model agility and processes that are integrated on a single

platform won’t just survive — they will thrive.

Chakib BouhdaryChief Value Officer

SAP AG

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Manufacturers Must Manage for the Downturn, But position for the Upturn

ExEcutivE insights | Q&APeter Maier, SAP AG

Peter Maier Senior Vice president

industry and Suite Solution Marketing

Sap aG

Q: Manufacturers are now contending with a

long list of serious challenges. Which should

they address first?

A: Every manufacturer I speak with has its own

distinct set of business priorities. But common topics

clearly include ensuring cash and liquidity and under-

standing and minimizing risk — both on the supplier

side and the customer side. From an operational

perspective, companies are focused on adjusting

production capacities to demand fluctuations as a

way to free up capital that’s tied up in inventory,

production, and receivables.

However, this is only a short-term agenda. Many

manufacturers are already leveraging the current

changes in the market to get the fundamentals of

their business in order. They’re weeding out unprofit-

able products, strengthening relationships with their

most valuable suppliers and partners, retaining their

most profitable customers, safeguarding key players

in the workforce — and streamlining their IT systems

for efficiency so that they can flexibly embrace

unexpected business opportunities.

So the key question I hear from our customers is:

How do I manage my business effectively for the

downturn, but also position it for success in the

upturn? In other words, how do manufacturers

manage the short-term pain effectively, but also

position the business for long-term gain? This is

the essential challenge that companies need to

address.

Q: So how does a manufacturer “manage for the downturn, but position for the upturn?”

A: It’s a three-part prescription that focuses on

maximizing operating margins, which is what most

companies are being measured by right now. Manu-

facturers need to:

Conserve cash and cut costs by running lean

operations without compromising service-level

objectives. While overall assets need to be reduced,

1.

SAP Insider asked manufacturers to name their current causes for concern. Among the most cited were:

In this Q&A, Peter Maier, Senior Vice President of Industry and Suite Solution Marketing at

SAP AG, advises SAP customers on how best to prioritize and tackle these challenges, and how to

align their IT investments — limited though they may be — with both short-term and long-term

business objectives.

Managing cash and credit effectively

Finding additional revenue sources

Ensuring supplier viability

Fielding unprecedented shifts in customer

demand

Handling volatility and fluctuation in

energy costs

Managing production overcapacity and

plant closures

Lowering production costs

Ensuring quality and regulatory compliance

Quickly adjusting IT to support business

tactics

Having visibility and integration across

manufacturing, procurement, supply chain,

and customer-facing processes

Not knowing how long the recession

will last

how do manufacturers

manage the short-term

pain effectively, but

also position the

business for long-term

gain? This is the

essential challenge that

companies need to

address.

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companies also must get the most out of their

existing operating assets.

Minimize the possibilities of revenue leakage by

maintaining their focus on quality and compliance.

Especially for products that are still in demand,

companies must ensure that they can meet

mandated regulatory standards and customer

expectations.

Identify and capture new revenue opportunities

that result from shifting customer preferences or

demand. The thought leaders among our manu-

facturing customers are looking for opportunities

several steps further up and down their value

chains. They look at what drives the short-term

and long-term agendas of their customers’ cus-

tomers and their suppliers’ suppliers.

Devising strategies for each of these measures

requires deep insight into customer preferences,

external supply and demand dynamics, and internal

operations like design, production, and service.

Companies need visibility and actionable intelligence

across demand, production, inventory, sales, and

supplier activities throughout their extended busi-

ness network.

Once they gain that insight, they must also be

able to make swift decisions and take precise

actions that will positively impact both strategy and

execution. What makes it difficult is that each

measure outlined above requires insight and action

that both cross the traditional, functional domains

of internal lines of business and stretch across the

business network.

This is where IT can play a significant role. The

right IT infrastructure should aggregate across

traditionally siloed applications and add context

across multiple departments, functions, and business

partners to provide actionable intelligence to

line-of-business owners. This infrastructure should

also help the organization design and deploy flexible

and efficient business processes that span depart-

mental boundaries and ensure coordinated action

across the value chain.

The importance of IT in all this cannot be over-

stated. In this volatile economy, IT organizations

have to enable real-time insights, deploy cost-saving

processes, improve interdepartmental and cross-

company coordination, ensure the sustained integ-

rity of mission-critical core processes, and promote

rapid process innovation and propagation.

�.

�.

Q: Given this challenging set of priorities

and constrained IT resources, what strategies

and guidelines does SAP recommend for

customers?

A: We’re recommending a number of practices, many

of which are already yielding demonstrable cost sav-

ings and process efficiencies for manufacturers in the

SAP customer base. The key is both employing cost-

cutting measures and making targeted investments to

provide fast returns and focus on your mission-critical,

highest-value, or differentiating business processes.

To conserve cash and reduce IT costs, we recom-

mend that SAP customers:

Prioritize your key business processes. It’s typi-

cal for line-of-business owners to want to optimize

their specific areas, but this is a costly endeavor. To

effect meaningful cost savings, optimize margins,

and act on new opportunities or changes in the

marketplace, organizations need cross-application

continuity.

Moreover, right now there aren’t sufficient funds to

support competing IT requirements. To overcome

this problem, we recommend that lines of business

work together to collectively prioritize key projects

and engage IT to deliver the best business pro-

cesses possible, rather than having each line of

business focus exclusively on application-specific

IT support for their individual functional areas.

Standardize your portfolio. If your IT organization

works with different applications, and integration

doesn’t come naturally but rather has to be force

fit, it becomes very difficult and very costly to

execute on corporate strategies. You will achieve

better short-term and long-term gains by consoli-

dating your application platform. This consolida-

tion can be readily achieved with SAP Business

Suite 7 (see Figure 1). A large number of manufac-

turers standardize on SAP solutions for this reason

— our platform makes it easier and far less costly

to glean insights and formulate and execute strat-

egies. By contrast, manufacturers that maintain

applications that are built on multiple underlying

architectures find integration, testing, multiple

user interfaces, maintenance and support, and

data lifecycle management to be exponentially

more expensive.

What’s more, this fragmented approach lengthens

the time it takes to extract insights because your

Manufacturers should

employ cost-cutting

measures and make

targeted investments to

provide fast returns

and focus on their

mission-critical,

highest-value, or

differentiating

business processes.

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data environment is disjointed. In turn, this elon-

gates your time-to-action because process design

and execution hit so many roadblocks.

Selectively upgrade only what you need. Instead

of working on big-bang, large-scale upgrades,

upgrade only the parts of your portfolio that yield

the best ROI and that support the most valuable

business processes. SAP Business Suite offers

enhancement packages, which support our cus-

tomers’ need to innovate at their own pace in a

non-disruptive environment. This greatly reduces

the cycle time required to support new business

processes and make process improvements.

And to make IT investments that provide immediate

and compelling value for the business, we recom-

mend that companies:

What’s New with SAP Business Suite 7?Process excellence: Value scenarios and industry solutions

Value scenarios are preintegrated, end-to-end processes that support lines of business in optimizing key performance indicators (KPIs) that contribute to enterprise business strategies. Value scenarios span application and departmental boundaries and contribute to business insight, efficiency, and flexibility to help business leaders make the best possible decisions in a constrained environment.

Value scenarios support industry best practices for many lines of business:

For consumer products companies: Collaborative demand and supply planning and manufacturing network planning and execution

For chemical companies: Asset safety and compliance and developing high-performing organizations

For high-tech companies: Integrated product development and accelerating lead-to-cash

For the CFO: Gaining efficiency in finance and optimizing working capital

For the head of procurement: Integrating sourcing and procurement

With SAP Business Suite 7, SAP has defined additional scenarios supporting mission-critical and business-support processes for the lines of business in many industries. For a comprehensive list of value scenarios for lines of business, visit www.sap.com/usa/ solutions/executiveview/index.epx. And for industry-specific processes, visit www.sap.com/usa/industries/index.epx.

Cost containment: Enhancement and Best-Run Now packages

Enhancement packages help you make selective, modular system improvements that fit into your budget and project scope. You can upgrade key functionality to improve or design new process steps, or you can implement individual applications that are specific to a particular problem. These packages include functionality in:

Outsourced manufacturing: Support for PO management (price confirmation/reconfirmation), batch traceability, file upload/download centers, supplier self-service, product configuration, and batch classification

Component and task sourcing: Ability to design collaboration networks with sophisticated authorization concepts using new access control list (ACL) functionality to manage role-specific data access

Audit management, quality management, and quality notifications: Integration of quality inspection processes into the work in process (WIP) batch process, digital signatures, extended search via objects in the notification list, printouts via SAP Interactive Forms software by Adobe, mailing quality notifications via attachments, and archiving of assigned objects with notification archiving

Best-Run Now packages are designed to help customers solve immediate pain points by implementing selective process steps quickly and in a modular, easy-to-consume fashion. This ensures that customers get a jump-start on their path toward a long-term value scenario deployment. The Best-Run Now initiative combines software, financing, and services to bring customers a complete, cost-effective solution that delivers rapid ROI for today’s economic climate, while simultaneously providing leverage for the long term. Examples of Best-Run Now packages include:

Project and Portfolio Management in R&D and IT: Manage high-volume resource usage to increase responsiveness by aligning activities, resources, and budgets with business priorities

Manufacturing Visibility, Integration, and Intelligence: Enable shop-floor to top-floor visibility to ensure closed-loop production planning and execution

Inventory Optimization: Increase inventory turns and improve asset utilization by ensuring that the right parts, raw materials, intermediates, and finished goods are in the right place at the right quantity at the right time

Accelerated Savings in Procurement: Reduce costs and increase efficiency in the procurement process and quickly identify sustainable savings opportunities, optimize contract value, and drive informed supply decisions

FIGurE 1 q sAP Business suite 7 provides business and it organizations with tools to manage for the downturn, yet position for the upturn

Figure 1 continues on next page

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Focus on mission-critical and differentiating

business processes. Make targeted IT investments

that help you maintain or extend competitive

advantage through your mission-critical and differ-

entiating business processes. For example, if you’re

a company that maintains a competitive advan-

tage based on the performance of its supply net-

work, or its use of existing assets, or its product

and service innovation, you’ll want to target IT

investments on business processes that support

this advantage.

With SAP Business Suite 7, SAP delivers preinte-

grated business processes that are designed to

directly match your organization’s differentiating

feature, be it in driving operational excellence,

delivering superior customer value, demonstrat-

ing product and service leadership, or ensuring

responsive execution across the network. This

approach promotes a faster deployment cycle and

rapid value extraction.

Solve your most immediate pain first. You can

make investments in the business processes dis-

cussed above one step at a time. For example, if

you are interested in driving lean operations across

your network, you will first need visibility into pro-

duction. By prioritizing this manufacturing visibil-

ity as the first pain point you want to address, you

can make an incremental investment into the

larger end-to-end process around lean operations.

Facilitating that incremental process step to

ensure plant-to-enterprise visibility also delivers

significant cost savings, plugs revenue leaks, and

provides a better platform for innovating future

activities. SAP has designed several Best-Run Now

packages to help customers tackle their current

pain points immediately and achieve a quick ROI

now, but still preserve the value of their invest-

ment such that subsequent investments deliver

cumulative value (refer again to Figure 1).

Remember that times of crisis can also be times of

opportunity. This is an ideal time for manufacturers

to pause, retrench, and refocus. n

...from

The Procurement, Production,

and Inventory Optimization in a

Downturn Economy seminar (see

www.optimizationseminar.com for

event dates and locations)

“Warehouse and Inventory Management,”

an SAP Insider Multimedia Training CD

(www.SAPinsidermultimedia.com)

“Innovation Without Disruption: A Deep

Dive into SAP’s Enhancement Package

Strategy for SAP ERP,” an Under Develop-

ment column by Thomas Weiss and

Christian Oehler (SAP Insider, January-

March 2009, www.SAPinsideronline.com)

AdditionalResources...

What’s New with SAP Business Suite 7? (cont.)

Growth opportunities: Insight and flexibility

SAP Business Suite 7 helps you gain insight into your business and drive precise actions through flexible, efficient business processes. The applications are service-enabled — over 80 bundles with more than 2,000 enterprise services are already available — which gives you the flexibility to innovate and add functionality to the software as needed.

Examples of enterprise services include:

Supply chain management uService Parts Management Demand Planning u Customer Collaboration for the Supply ChainuGlobal Ability to Promise (ATP) Check u Supply Network and Product Planning ProcessesuSupplier Collaboration for the Supply Chain

Transportation and warehousinguInventory Lookup u Yard and Storage Management Process

Order to cashuCustomer Fact Sheet u Order to Cash Bank Relationship Management uElectronic Bill Presentment and Payment u External Cash DeskuCredit Management

FIGurE 1 q continued

Remember that times

of crisis can also be

times of opportunity.

this is an ideal time

for manufacturers to

pause, retrench, and

refocus.

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FEAtuRE ARticlE | ManufacturingVivek Bapat and Kara Glencross, SAP

implementing Your perfect plant Vision: the Business process perspectiveEffectively Manage Short-Term Manufacturing Challenges Without Compromising Long-Term Objectives

Vivek Bapat ([email protected]) is the Vice president of Suite Solutions Marketing for manufacturing, supply chain, and product lifecycle management solutions at Sap. He is the co-author of two books, the pursuit of the perfect plant (2008) and call center Modeling and Simulation (1997), and has contributed to eight globally recognized RFiD patents. Vivek holds a bachelor’s degree in mechanical engineering, a master’s degree in industrial engineering, and an MBa.

It’s no secret that the current economic downturn has

hit manufacturing particularly hard. Given increased

demand-side and supply-side volatility and height-

ened uncertainty about the near-term future, global

manufacturers are being forced to revisit fundamen-

tal questions about how they run their business, from

strategy through execution. Key issues include:

How should we execute across our vast network

of suppliers and partners to ensure speedy

responses to dramatic demand changes and

capacity declines?

Can we further drive down costs across internal

production operations without compromising

quality and efficiency?

How do we reduce, redeploy, and optimize our

assets? What short-term and long-term strategies

can we put in place now to ensure a competitive

advantage?

For manufacturers to alleviate the economy’s

severe impact, they can’t just optimize one of these

areas at the expense of the others. They must address

the entire process of manufacturing-related activity

in a way that delivers measurable business value.

Short-term process improvement efforts must not

only align with strategic initiatives, they must also

provide fast results.

Against this backdrop, responses to each of the

questions raised above hinge on two critical factors.

One, does the manufacturer have complete visibility

into what’s happening across its manufacturing oper-

ations? And two, can the manufacturer orchestrate

appropriate action through integrated business and

manufacturing processes to ensure that it is opti-

mally meeting customer demand, adhering to quality

standards and regulations, minimizing costs and

waste, and simultaneously not overlooking any

emerging market opportunities?

In the following pages, we’ll offer timely and

tactical advice for how manufacturers can wield their

existing SAP systems to navigate these issues while

preparing for success in the eventual economic

upturn. We’ll also highlight new manufacturing capa-

bilities, available with SAP Business Suite 7, that

support this effort. We’ll start by taking a fresh,

process-based look at the “perfect plant” framework.

We’ll then discuss three areas of process improve-

ment that, given the right focus, can not only provide

the best outcome for manufacturers in today’s

economic environment, but also deliver sustained

manufacturing excellence for decades to come.

A New Look at the Perfect PlantIn a previous SAP Insider article, we defined a frame-

work of the perfect plant, which helps organizations

transform their manufacturing operations strategy

to anticipate change, improve flexibility, optimize

assets, and operate in a high-intensity, demand-

driven environment without compromising service

or increasing costs.1 As part of this framework, we’ve

described core functional capabilities in planning,

execution, asset management, and visibility as main

drivers (see sidebar on next page).

Now, we will evolve the framework to integrate

these core capabilities into business processes that

will bring your perfect plant strategy to life. Expand-

ing the perfect plant framework to include a broader

process view provides two important benefits:

You can focus your efforts on only the business

processes that are most relevant to achieving

your corporate objectives.

You can prioritize your functional deployments

to support the objectives of those business processes.

� See “In Pursuit of the Perfect Plant,” a Business Process Excellence article in the January-March 2008 issue of SAP Insider (www.SAPinsideronline.com).

Kara Glencross ([email protected]) is the Director of Manufacturing Solutions Marketing at Sap. She is responsible for perfect plant marketing and coordinating global marketing plans to deliver focused thought leadership and demand generation. prior to working at Sap, Kara was the Vice president of Global Marketing at Visiprise. She earned a bachelor’s degree in business management at clemson University.

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Note that each process — three of which we’ll

highlight in the following sections — crosses over

different functional areas of the business, including

supply chain, design, and procurement. Processes

also use key functional capabilities in SAP Supply

Chain Management, SAP Manufacturing, and SAP

ERP as underpinnings. Using this process-focused

perspective, SAP customers can continue to get

more leverage from their existing implementations

in SAP solutions even as they deploy additional

SAP capabilities.

The Manufacturing Network Planning and Execution ProcessIn today’s complex networked manufacturing envi-

ronment, manufacturers must transform their expan-

sive network of internal and external plants, suppliers,

outsourcers, and trading partners to act as a single,

virtual, global plant floor. Companies need to be able

to continuously coordinate across their network yet

still include effective local planning and execution to

quickly adjust to demand and supply volatility.

To do so effectively, planning and execution must

extend beyond traditional boundaries and be fused

together with upstream and downstream value-

chain activities. To support manufacturers in this

endeavor, SAP offers integrated, end-to-end business

processes that provide complete visibility into

operational demand, supply, and production

dynamics and convert visibility into precise action

to continuously update network-wide production

planning and execution.

The preintegrated “manufacturing network plan-

ning and execution” process from SAP includes the

following process steps (see Figure 1):

Manufacturing network planning ensures a

single, detailed, actionable plan that combines

demand and supply activities across the supply

network to minimize lead times across internal

and external plants, products, and suppliers.

Production planning and execution supports the

detailed scheduling and on-demand execution of

the production plan across plants to reduce stock-

outs, overall work in process, and finished goods

or material inventory both within individual plans

and across the overall network.

Outsourced manufacturing ensures that providers

and the execution status of their work orders and

inventory are coordinated into production plans.

Pursuing the Perfect PlantTo meet today’s demanding paradigm of “design anywhere, manufacture

anywhere, and deliver anywhere,” manufacturers must drive production

performance to directly align with operational metrics and corporate strat-

egy. IT plays an important role as a key enabler in tightly integrating manu-

facturing execution with business workflows.

To achieve these objectives, what’s needed is a holistic transformation of

manufacturing operations. The transformation should be uniquely tailored

to supporting your end objectives, or your “perfect plant,” enabling you to

take a measured approach to improve key performance metrics around

customer delivery, quality, and costs (see figure below).

The perfect plant is an end goal — an idealistic vision that helps an organi-

zation keep its manufacturing strategy directly in line with its corporate

objectives. The pursuit of the perfect plant empowers plant personnel,

operations, and IT to collectively design, prioritize, and implement strategies

that impact core elements of production planning, intelligence, and integra-

tion. The perfect plant framework helps organizations drive manufacturing

to prioritize on the following metrics:

Optimizing return on assets: How do you measure overall equipment

effectiveness and ensure you are generating a sufficient rate of return?

Meeting customer delivery targets: How do you increase your visibility

into scheduling and capacity requirements? How do you improve cycle

times and guarantee supplier performance? And how do you compensate

if suppliers fail to perform?

Minimizing operating costs: How do you measure overall production per-

formance and create processes that can be continually improved?

Meeting quality and compliance standards: How do you minimize waste,

measure and hit quality targets, and have processes in place to ensure

that operations comply with regulatory standards?

p the perfect plant framework helps organizations drive their

manufacturing processes to improve key performance metrics

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Material supply and replenishment establishes

a continuous flow of raw materials to ensure pro-

duction execution across the value chain — specifi-

cally to ensure component inventory and

supplier-managed inventory optimization.

SAP Business Suite 7 offers new functionality to

help manufacturers better manage and coordinate

their network planning and execution. To improve

collaboration and communication with outsourced

suppliers and increase the effectiveness and effi-

ciency of end-to-end outsourced manufacturing

processes, the suite includes PO management, batch

traceability, supplier self-service, and product

configuration capabilities, among others.

The Plant-Specific Manufacturing Planning and Execution ProcessA key impediment of effective production execution

within internal plants is the widespread existence of

disconnected enterprise and plant-specific manufac-

turing systems, creating an inefficient environment

that is expensive to maintain and difficult to integrate.

System silos across plants and enterprise layers also

make it more challenging to have transparent manu-

facturing operations to drive optimal production.

To turn this challenge into a competitive advan-

tage, manufacturers must align core operational

business processes like enterprise planning and con-

trol with plant-specific production processes such as

scheduling and execution. SAP delivers an integrated

business process that spans enterprise and plant-

specific production planning and execution activities

to ensure that manufacturers can drive demand-

driven production without building up excess inven-

tory or violating quality and conformance issues.

Process steps for the “plant-specific manufactur-

ing planning and execution” process include (see

Figure � on next page):

Capacity planning and control ensures that rele-

vant information from the network-wide manufac-

turing plan is visible to local manufacturing facilities

in an actionable context. This includes key aspects

of finished goods planning and multi-plant capac-

ity plans, as well as tight integration into quality,

compliance, and traceability requirements.

Plant-level operations focuses on a localized plan

and schedule that ensures the most effective use of

local resources, assets, and materials to minimize

work in process and meet local delivery targets. In

lean environments, this step includes Kanban lot

sizing and demand leveling.

Plant-specific manufacturing execution focuses

on detailed production execution and effectively

integrates work instructions with machines and

automation systems to carry out the actual pro-

duction. This step also provides the most granular

information on production performance, status,

quality, and genealogy (see sidebar).

The wide range of new functionality in SAP Busi-

ness Suite 7 helps manufacturers achieve closed-loop

production and execution processes for efficient

operations. For example, enhanced production order

Deep Capability in Manufacturing ExecutionAcquired in 2008 from Visiprise, SAP Manufacturing Execution is a robust

business application that enables global manufacturers to manage and

control manufacturing and connect it to the rest of the enterprise. The

application is integrated with numerous SAP ERP processes via a powerful

SAP Manufacturing Integration and Intelligence (SAP MII) connector; these

integrated processes ensure tight connectivity between the manufacturing-

level and business systems, enabling real-time order and work in process

(WIP) tracking, full supply chain traceability, and closed-loop quality and

compliance processes. SAP Manufacturing Execution also works in non-SAP

environments and in situations where SAP ERP may be disconnected from

the shop floor for a period of time (such as during patch applications or

system upgrades).

SAP Manufacturing Execution ensures that products are built right the

first time; it collects data from multiple sources and integrates data systems

with shop-floor activities to create a single, comprehensive, as-built record.

The result is an aggregate record of the entire product history, stored and

available for timely and key decision making around containing costs and

meeting quality and compliance requirements.

FIGurE 1 q Manufacturing

network planning

and execution

connects processes

across departments

to enable a timely,

profitable response to

customer demand

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split functionality enables fair-cost split between

parent and child orders, allowing meaningful com-

parison of planned and actual costs.

The Asset Visibility and Performance ProcessFor most asset-intensive industries, improving asset

performance is often deemed a critical strategic

imperative to improve ROI and respond to customer

demand for improved quality and shorter lead times.

Especially relevant for today’s economic climate,

companies need to reduce capacity and assets to

save costs, yet ensure optimal performance out of

assets that are still operational. A marginal improve-

ment in asset yield can have a significant impact on

operating margins and productivity.

Companies can lower costs and increase asset uti-

lization and performance only through a proactive

asset management strategy and deep visibility into

asset usage. To achieve this, SAP delivers end-to-end

processes that offer a unified, synchronized approach

to integrating operations and maintenance processes

for assets across your organization.

The “asset visibility and performance” process

steps include (see Figure �):

Designing an asset management strategy and set-

ting up KPIs enables manufacturers to set up asset

management, maintenance strategies, and improve-

ment programs with defined goals and objectives.

Measuring operating performance includes set-

ting up performance and measurement tools to

view asset utilization, machine or line failures,

quality results, order status, and safety metrics in

line with defined objectives.

Optimizing asset performance enables companies

to proactively manage energy management, reli-

ability-centric maintenance execution, and optimal

overall equipment effectiveness (OEE).

Visibility: A Centerpiece for Successful Business Process ExecutionA manufacturing company can deploy all the right

processes and capabilities across planning, execu-

tion, and asset management, but without clear visi-

bility into operations, plant managers and line

operators could still be making decisions based on

faulty data and inconsistent information.

A Quick Start to Long-Term Value: Best-Run Now In the current economic environment, the right manufacturing solutions are

essential to help companies manage cash, drive efficiency, optimize assets,

and reduce costs. That’s why SAP is offering Best-Run Now solution packages,

modular installments of SAP Business Suite 7 functionality combined with special

financing and global SAP and partner services to support rapid deployment.

The SAP Manufacturing Integration and Intelligence package, for

example, provides organizations complete visibility into real-time, plant-

floor operations and enterprise supply and demand dynamics. This helps

manufacturers rapidly adjust production execution to match demand changes,

lower production costs by using assets more efficiently, and provide mission-

critical information to support lean, quality, and compliance requirements.

What’s more, the package serves as a key foundation for extending processes

as manufacturers improve in the long term, ensuring that investing in the

package is more than a short-term fix; it’s a strategic, long-term investment.

FIGurE 2 p Plant-specific

manufacturing planning

and execution provides

a continuous improve-

ment framework to

reduce manufacturing

costs, improve

quality, and ensure

timely delivery

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Some manufacturers have opted to implement

manual processes and various point solutions — such

as spreadsheets, databases, or niche vendor applica-

tions — to control, execute, and analyze their opera-

tions. These data silos are neither connected nor

readily available to the rest of the company’s busi-

ness solutions. Knitting these siloed solutions together

would be expensive and would require tremendous

maintenance. This lack of integration and absence of

real-time connection to the business results in clouded

visibility, causing operational inefficiencies and

decisions that are made based on theory, not facts.

What manufacturers need is a comprehensive

solution that can help them better control, execute,

and analyze operations to reduce costs and improve

quality. They also need the ability to quickly and cost-

effectively connect real-time operations, in a single

environment, for enterprise visibility into what’s

happening in manufacturing.

SAP solutions are equipped to provide manufac-

turers with complete visibility to help manage and

control operations and resources — from planning to

execution. With simplified and personalized access

to key information, manufacturing staff can make

decisions and take actions more quickly.

SAP Business Suite 7, for example, includes a new

manufacturing dashboard for production supervi-

sors. Within this dashboard, shop-floor managers can

see an overview of pending work orders, production

confirmations, the supply/demand situation, or any

delays, giving them fast, easy access to the relevant

information needed to make key business decisions.

ConclusionWith the vision of the perfect plant, SAP has defined

a framework though which manufacturers can trans-

form their operations strategy to anticipate change,

improve flexibility, optimize assets, and operate in a

high-intensity, demand-driven environment — with-

out compromising service or increasing costs.

Now, we’ve evolved the framework so that compa-

nies can integrate these perfect plant ideals into their

day-to-day business processes. By improving your

business across three process areas — network-wide

planning, plant-specific execution, and asset perfor-

mance — and then tying it all together with clear

visibility into operations, manufacturers can not only

weather the current economic storm, but sustain

excellence in the long term.

For more details, visit www.sap.com/solutions/

executiveview/manufacturing/index.epx. n

FIGurE 3 p Asset visibility

and performance

enables manufacturers

to set up plant dash-

boards and act on alerts,

conduct improvement

programs, and optimize

maintenance and plant

operations to maximize

profitability

...from “Establish Your Product and Service Leadership” by Thomas Ohnemus,

which describes a supporting value scenario — integrated product

development — that is also linked to the perfect plant framework

(SAP Insider, April-June 2009, www.SAPinsideronline.com)

“SAP Buys Into MES: What the Visiprise Acquisition Means for Manufacturing”

by Davin Wilfrid (ERP Expert, Volume 1, Number 2, www.erpexpertonline.com)

Discover Logistics with SAP ERP by Martin Murray (SAP PRESS,

www.sap-press.com)

AdditionalResources...

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Richard Howells ([email protected]) has worked in the ScM space for over 20 years and is responsible for driving the market direction of the Sap ScM solution set. prior to joining Sap, Richard spent 15 years with Marcam Solutions where he was Vice president of Marketing for the company’s process eRp solutions. Richard has also implemented eRp and ScM systems at companies like Nestlé, Gillette, colgate-palmolive, Rohm & Haas, Wyeth, Royal Worcester Spode, Whitbread Breweries, Bass Breweries, and Dairy crest.

FEAtuRE ARticlE | Responsive Supply NetworksRichard Howel ls and Dr. Kr ish Mantr ipragada, SAP

a Supply Network that’s Responsive in Good times and BadGain Quick Wins on the Way to Fulfilling Long-Term Business Goals

Dr. Krish Mantripragada ([email protected]) is the Vice president of Solution Management at Sap, responsible for the strategy, definition, and rollout of end-to-end solutions targeted toward the supply chain line of business. He has over 12 years of experience in ScM, plM, and manufacturing, and has held management and research positions in companies including i2 technologies, agile Software, and United technologies. He holds a ph.D. in mechanical engineering from Mit.

What a difference a year makes. In January 2008, the

Dow Jones Industrial Average stood at 12,735. Fifteen

months later, it reached lows of 6,600 — a drop of

almost 50%. The effects of these figures have trick-

led — or cascaded — down to companies, individuals,

and their financial situations. With poor holiday sea-

son figures, a drop in automotive sales, rising unem-

ployment numbers, and crashing housing prices,

2009’s early consumer confidence numbers were at

an all-time low.

In a tough and uncertain economy, corporate exec-

utives are challenged to strike the right balance

between reducing costs and making targeted invest-

ments to ensure future success. The natural reaction

is to focus on cost reduction, delaying or cancelling

all new initiatives and moving into “survival mode.”

But companies need to be much more strategic. They

need to invest in initiatives that will not only see

them through a rough economy, but help them thrive

after it passes.

As a supply chain executive, what can you do to

navigate your company through these trying times?

Despite economic volatility, you should stay your

strategic course and strive to transform traditional

supply chains into responsive supply networks.1

Why? Consider the following example. In January

2008, the price of a barrel of crude oil smashed

through the US$100 mark (rising to nearly US$150 at

its peak), significantly affecting companies’ trans-

portation management plans. As we write this

article, however, a barrel of oil costs US$46. How

has your company handled these fluctuations? Is it

able to react nimbly in either scenario? Perhaps

when oil prices increased, you began consolidating

� To learn more about responsive supply networks, see “Don’t Just Survive, But Thrive, in a Networked Economy: Transform Your Static Supply Chain into a Responsive Supply Network” by Richard Howells in the July-September 2008 issue of SAP Insider (www.SAPinsideronline.com).

your product shipments or adding an extra fee for

expedited delivery. Now that prices have dropped

again, how has this change affected your plans?

The key is having not just the ability to react,

but the responsiveness and efficiency to constantly

re-plan and re-align your activities based on current

business dynamics. After all, responsiveness enables

companies not only to recognize and take advantage

of great opportunities, but also to mitigate risks

when things take a turn for the worst.

End-to-End Processes: Supporting Today’s Needs, Enabling Tomorrow’s SuccessTo enable a responsive supply network, SAP is deliv-

ering several end-to-end business processes that we

believe are its key drivers. We also understand that in

a climate where every penny spent is scrutinized, the

ability to get a rapid return on your investment is

more critical than ever.

To this end, we have designed these business

processes to be deployed in implementable steps,

which are smaller technology components all

based on a stable, unified core. Each implementable

What Role Does the Supply Chain Play in Times of Economic Turmoil?“The supply chain, and the technologies that

support it, will play an important role over

the next five years in helping companies deal

and thrive in an economy that is going to

be quite unlike anything we’ve seen in the

post-war era.”

—“In an Ominous Economic Environment, Can You Trust Your Trading Partners?”

AMR Research (November 2008)

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step is designed to deliver value — which can be mea-

sured through key performance indicators (KPIs). In a

way, these end-to-end processes are deployment road-

maps toward a defined strategic goal (see Figure 1).

Determining Which Processes to Tackle First

To structure this discussion, we have divided these

processes into three categories:

Strategic — These scenarios support long-term,

high-level strategies, enabling the decisions that

take place over longer cycles. Historically, strate-

gic decisions would be revisited every two to three

years. These days, that cycle has been shortened

to as little as six to nine months (see Figure �).

Tactical — These scenarios support the planning

processes that take place in quarterly or monthly

cycles (see Figure �).

Executional — These scenarios support a compa-

ny’s response to events that are happening now

(see Figure � on next page).

Say that you have decided that manufacturing

network planning and execution is your company’s

most important core business process; you ulti-

mately want to ensure fast and cost-effective

responses to network demand changes, disruptions,

FIGurE 1 p sAP’s end-to-end business processes support a responsive supply network

Value scenario If your goal is to… This process enables you to…

Supply network strategy and design

Shorten strategic planning cycles

Design your supply network to be responsive to demand variability and flexible to changing conditions

Quickly reevaluate your supply and outsourcing strategy or the positioning of inventory across your network

Set supply chain business goals

Evaluate alternative strategies based on changing conditions

Design a responsive network that includes optimal facility placement, the right on/off-shoring mix, and the best push/pull strategy

Measure and monitor performance

FIGurE 2 p sAP’s value scenario to support strategic processes

FIGurE 3 p sAP’s value scenarios to support tactical processes

Value scenario If your goal is to… This process enables you to… SAP Business Suite 7 capabilities that support this scenario…

Collaborative demand and supply planning

Minimize inventory levels

More easily respond to changing customer demand, supplier delivery volatility, and operational disruptions across the entire network

Improve demand visibility and forecast accuracy

Establish an integrated, collaborative planning process to:

uDrive supply strategies

uSynchronize supply activities

uMitigate supply risks

Trade promotion planning to support exception-based planning and promotion totals

Enhanced mobile capabilities

Demand planning with increased forecast accuracy and new forecasting algorithms

Enhanced customer collaboration capabilities

Service parts planning and logistics

Boost after-sales profits

Increase service supply chain efficiency

Improve customer service

Integrate and synchronize parts planning, warehousing, and fulfillment processes

Gain real-time visibility into service parts inventory

Enhanced service parts warehousing capabilities with, for example, improved graphical layouts and warehouse monitors

Service parts planning that enables, for example, more efficient collaboration between planners and customers

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Value scenario If your goal is to… This process enables you to… SAP Business Suite 7 capabilities that support this scenario…

Customer demand response and execution

Continuously sense and respond to short-term demand signals and customer forecast changes

Use demand-driven forecast-ing that is highly responsive to customer volatility

Will be included in a future SAP Business Suite enhancement package

Manufacturing network planning and execution

Support demand-driven manufacturing with fast, cost-effective responses to network demand changes, disruptions, or unanticipated economic events

Mitigate risks associated with supply chain complexity

Closely integrate manufactur-ing planning to demand signals

Generate build plans across your manufacturing network

Schedule and execute production orders in internal plants, responding quickly to changes in demand and supply

Electronically collaborate with outsourced manufacturers and material suppliers

Capture status information to maintain up-to-date visibility across all internal and external manufacturing and supplier facilities

Tighter integration of outsourced manufacturing into engineering change management

Enhanced inbound shipment visibility

Enhanced tracking of manufac-turing batch and characteristics information

Tighter integration of outsourced manufacturing processes into your own supply network

Supplier dashboards and Quick Views

Supply chain performance management capabilities

Logistics and fulfillment management

Ensure integrated, end-to-end logistics and fulfillment processes to deliver the right product, in the right quantity, at the right time

Balance delivering the “perfect” order with reducing network-wide inventory and logistics costs, improving asset utilization, and improving customer service levels

Respond proactively to normal variability in material flow with visibility and tight integration

Manage and monitor import and export controls

Mitigate risk across logistics processes

Link the warehouse, transpor-tation, and sales departments

Transportation management with process enhancements, analytics, and workflow management

Extended warehouse management capabilities to increase visibility via graphical layouts and monitor-ing tools

Supply network traceability

Ensure product integrity, comply with regulations, and protect your brand, even after you’ve shipped a product

Comply with regulations around product pedigree from point of manufacture to point of consumption

Track conditions in perish-ables, food, and drug products for temperature, pressure, and humidity

Detect and respond to product compliance violations and execute recalls through reverse logistics with traceability of product components, suppliers, and manufacturing plants

Track and trace at the batch and lot level as well as at a more granular level

SAP Auto-ID Enterprise to enable:

uFull Electronic Product Code Information Services (EPCIS) compliance

uImproved SAP ERP integration

uSupport for new returns processes

uUser interface enhancements

uItem unique identification (IUID) support

FIGurE 4 p sAP’s value scenarios to support executional processes

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or unforeseen economic events. So then what? What

would your next step be?

Gaining Quick ROI

Your company needs a roadmap to achieving its busi-

ness process goals. With SAP’s help, you can determine

which implementable step you’d like to tackle first.

This modular deployment approach minimizes disrup-

tion, reduces project risk, and lowers IT project cost.

In an economy like this one, you’ll likely want to

first implement steps with quick ROI and rapid busi-

ness benefits, such as improved visibility, collabora-

tion, and responsiveness. In our manufacturing

network planning and execution example scenario,

you might start by implementing the outsourced

manufacturing step (see sidebar). In this case, you

could leverage SAP’s capabilities to automatically:

Create and publish work orders that integrate

with planning and execution processes

Create collaborative work order negotiations

between a brand owner and an outsourced

manufacturer

Increase visibility of an outsourcer’s work order

progress via automated electronic notifications

Generate shipping notifications upon project

completion

These steps quickly ensure visibility across a network,

resulting in shortened lead times without increased

costs — important business benefits with quick ROI.

Setting the Stage for the Future

Now, let’s say that the economy has finally picked

back up — your IT budget has grown again and line-

of-business managers are asking IT to help them with

more strategic initiatives. At this point, you can start

implementing other steps in the manufacturing

network planning and execution area, such as manu-

facturing network planning to determine and source

production requirements across a network of inter-

nal and external sites, production planning and

execution to manage your own manufacturing facili-

ties, and material supply and replenishment to

ensure material availability across your network.

No matter which steps you implement or when you

implement them, by working within a defined SAP

roadmap, you’ll always be moving toward a common

goal. In this case, the result will be a supply network

that supports an integrated manufacturing network

planning and execution process. This will, in turn,

lead to improved capacity utilization, comprehensive

lot tracking and genealogy, and increased on-time

customer shipments. From there, you can determine

which business processes to work on next.

Supporting responsive Supply NetworksThe economy has changed drastically over the last

year, highlighting the need for responsiveness within

your supply network processes. You must be able

to adapt and respond to change — in good times

and in bad.

A responsive supply network is the ideal model for

improving modern business relationships. A com-

pany that has prepared to participate in such a net-

work is better able to create win-win relationships

with partners and suppliers to provide better prod-

ucts and services to customers — and reap the subse-

quent rewards for all members of the network.

SAP solutions provide a stable core that delivers

the flexibility to rapidly build these innovative busi-

ness scenarios and to automate core processes that

ensure operational efficiency. As a result, customers

rely on SAP to help them compete effectively or even

thrive during the economic downturn while continu-

ally positioning them for growth during the inevitable

upswing. For more information, visit www.sap.com/

solutions/executiveview/supply-chain. n

...from “Don’t Just Survive, But Thrive, in a Networked Economy:

Transform Your Static Supply Chain into a Responsive Supply

Network” by Richard Howells (SAP Insider, July-September 2008,

www.SAPinsideronline.com)

The Procurement, Production, and Inventory Optimization in a

Downturn Economy seminar (see www.optimizationseminar.com for

event dates and locations)

“SAP Supply Chain Planning,” an SAP Insider Multimedia Training CD

(www.SAPinsidermultimedia.com)

AdditionalResources...

to better enable a

responsive supply

network, sAP Business

suite 7’s integrated

business process

capabilities allow it

to reallocate spend

on activities such as

strategy and innova-

tion, rather than

integration and

customization.

The Implementable Steps That Comprise the Manufacturing Network Planning and Execution Process

Manufacturing network planning

Production planning and

execution

Outsourced manufacturing

Material supply and

replenishment

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establish Your product and Service leadershipHow SAP Business Suite 7 Provides the Foundation to Efficiently Develop Innovative, Sustainable Products

FEAtuRE ARticlE | PLMThomas Ohnemus, SAP AG

Call it a silver lining, but I see the current economic

downturn as a great opportunity for companies that

produce goods and services. It’s a chance to clean

up the portfolio (ridding it of underperforming

goods that no longer meet customer demands) and

instill a new focus on innovative and differentiating

products. To seize this opportunity, product and

service providers must ask themselves:

Which products should we offer to meet our

organizational objectives and revenue targets?

Do we know how much it costs to develop and

maintain our products?

How can we get products to market faster without

sacrificing quality or increasing cost?

If you can’t answer these questions with confi-

dence, your organization may be sacrificing time-to-

market and market share, driving high development

costs, facing compliance issues, and experiencing

operational inefficiencies.

To overcome short-term challenges and still pre-

pare the organization for long-term growth (see side-

bar below), manufacturers must develop strengths in

three key areas:

Efficient development for cost control

1.

Manufacturing Challenges: Today and Tomorrow Whether the economy is thriving or tanking, two manufacturing priorities

remain constant: bottom-line cost reduction and top-line stabilization and

growth. In the short term, merely adapting to internal hiring freezes, limited

resources, cancelled projects, and staff reduction is not enough. Instead,

keeping a balance between cost and value — while also aiming to differenti-

ate through products and services — will determine how successfully compa-

nies will move forward despite shrinking budgets.

Innovation for differentiation and long-term

growth

Sustainability and compliance for risk reduction

In the following pages, I’ll explain the challenges

involved in mastering these three areas and how

new user-friendly SAP capabilities, available with the

release of SAP Business Suite 7, can help optimize

your product and service leadership efforts (see

sidebar on next page).

Efficient Development — and Lower Costs — Through Increased usabilityManufacturers are looking at how to design and

develop products efficiently using existing or fewer

resources. They’re keenly aware that, depending on

the industry cluster, 40% to 90% of new products fail

in the marketplace.1 So how can companies ensure

that they’re investing development dollars in the

right products? And how can they leverage resources,

such as outsourced partners and collaborators, in

the most efficient way while maintaining the balance

between cost and value?

The most effective way to decrease time-to-profit

is to bridge existing information gaps and IT silos and

establish decision-support dashboards, enabling com-

panies to holistically measure the critical combination

of products, processes, and financials. However, closing

the loop from actual manufacturing execution, field

operation, and financial performance to product devel-

opment has yet to become standard practice with prod-

uct lifecycle management. What’s more, with companies

continually striving to reduce cycle times, many are

finding it difficult to achieve further substantial improve-

ment, especially on new or breakthrough products.

� “Eager Sellers and Stony Buyers: Understanding the Psychology of New-Product Adoption,” John T. Gourville, Harvard Business Review (June 2006).

�.

�.

Thomas Ohnemus (thomas. [email protected]) is a Senior Director of Solution Marketing for Sap product lifecycle Management (Sap plM) and product and service leadership (pSl). He is responsible for Sap plM and pSl marketing strategy, market analyses, and long-term strategy at Sap aG. He has over 20 years of experience as a plM expert. thomas has spent most of his career in the plM software area, working primarily in implementation consulting, product management, and marketing. He holds a master’s degree in engineering.

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To understand how their portfolios influence time-

to-market, managers have two possible approaches

to explore. The first is a set of tools to analyze their

portfolio as it relates to risk and development capac-

ity. The second is a set of techniques especially suited

to improving the cycle time of new products. Both

approaches are recommended for a comprehensive

solution to greater competitiveness.

SAP’s solution offering for integrated product

development provides both tools and techniques to

help you tie together development, sourcing, manu-

facturing, and external partners, enabling collabora-

tive development, embedded sourcing for materials

and components, and integrated manufacturing for

smooth production ramp-up and market launches.

Portal and business intelligence technologies can

also help provide real-time insight into key processes

and performance indicators across your entire busi-

ness network.

Keeping It Simple

With the release of SAP Business Suite 7, one of SAP’s

main objectives to serve customer efficiency needs is

to promote usability and simplicity. To that end, a

new easy-to-deploy and easy-to-use user interface

provides information in an intelligent way to foster

efficiency and productivity for power and occasional

users. The user interface is based on the SAP

NetWeaver Business Client standard and includes

an enhanced product lifecycle management (PLM)

dashboard and analytics.

For example, the new user-friendly, Web-based

interface for a bill of materials (BOM) provides advanced

display options and an overview of all BOM items and

the details for one item together on one screen. Users

can directly access documents, an object preview, and

additional information about the materials. A new

viewer — SAP Product Visualization — provides design

and manufacturing process reviews, configuration con-

trol and management, visual routing, and quality

inspection and reporting capabilities (see Figure 1 on

next page). This intuitive and rich user interface is

embedded in SAP Business Suite, allowing users to

access the viewer through the SAP Product Lifecycle

Management (SAP PLM) space as well as through SAP

Customer Relationship Management (SAP CRM). An

engineer can look at a product from a functional

point of view, while manufacturing or service techni-

cians can see how the same product is assembled or

disassembled. The interface offers consistency and

Drive Product and Service Leadership with SAP Business Suite 7 World-class manufacturers must foster continuous innovation and deliver

the right products and services quickly, with superior quality, and at com-

petitive prices. Therefore, to become true product and service leaders,

manufacturers must ensure that their product-related processes — from the

first idea for a product to the good’s eventual phase-out — are coupled with

innovative enterprise business processes.

To help companies reach this product development pinnacle, SAP has

crafted a strategy called product and service leadership.* It’s a framework

designed to manage and align all of a company’s product-related processes

from end to end — and it’s enabled by SAP Business Suite, the only fully inte-

grated suite of enterprise applications that can manage all product-related

information from product conception through development, manufacturing,

distribution, and into the hands of the customer.

In February 2009, SAP released SAP Business Suite 7, bringing to market

more user-friendly features to increase efficiency and boost productivity.

The solution offers new capabilities to allow companies to maximize their

efforts in development, innovation, and sustainability and compliance. Using

the suite, organizations can deploy and execute business processes com-

bined with deep insight and analytic capabilities. The result is dramatically

improved transparency to mitigate business risk and support strategic,

tactical, and operational decision making, all while still ensuring a sound

long-term IT strategy.

Part of SAP Business Suite 7, SAP Product Lifecycle Management (SAP

PLM) — which I’ll highlight throughout this article — helps companies create

and deliver innovative and market-differentiating products and services

while providing companies with 360-degree support for all product-related

processes throughout the product’s life cycle.

* For more details about SAP’s product and service leadership strategy, see “Let Innovation, Not Technology, Drive Your Product Business: SAP’s Innovative Approach to Product and Service Leadership” in the January-March 2008 issue of SAP Insider (www.SAPinsideronline.com) and “7 Characteristics of a Winning Product Strategy: Introducing SAP’s Integrated Product Development Approach” in the July-September 2008 issue.

transparency between the users, promoting better

communication.

Product-centric view capabilities within SAP PLM

7.0 integrate product-related information and analyt-

ics directly into the business application, supporting

the user with a new level of quality when carrying out

product design decisions (see Figure � on next page).

Product information is aggregated from different

sources within SAP Business Suite 7 and embedded in

the user interface in a context-sensitive way. The con-

text is defined by the main application (SAP PLM in

the Figure 2 example).

Consider, for example, an engineer who is develop-

ing a new motherboard and needs information on a

component he wants to incorporate into the design.

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FIGurE 1 u Embedded

product visualization

capabilities enable

easier and more

efficient communica-

tion between users

FIGurE 2 q the product-

centric view (Pcv) in

sAP PlM 7.0 aggregates

the enterprise informa-

tion relevant to the

end user in one user-

friendly interface

sAP PlM object navigator Pcv side panel

stock information from your sAP scM application

Quality information from your sAP quality system application

Project information from your cProjects or project system application

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On one configurable screen, he can now access a

wealth of details about the component — for exam-

ple, he can check its in-stock availability, quality

record, compliance record, and pricing. With the right

enterprise information easily accessible, one user

can do more and make better decisions faster, driv-

ing efficiency and reducing cost (see sidebar).

Drive Innovation to Lay the Foundation for Long-Term GrowthEven in a bleak economy, companies have to lay the

foundation for innovative products and services to

stand apart from the competition. The business

media, analysts, and many CEOs still consider innova-

tion the key for long-term success.

But does innovation for the sake of innovation

really help companies in a turbulent environment

driven by globalization? Companies must understand

their portfolios and have a clear handle on which

products and services customers need and want. This

is particularly important in a downturn economy, as

customers’ buying behavior changes. Customers are

now looking more carefully at a product’s price,

quality, and personal value. Manufacturers need to

examine their innovation strategies to adapt their

processes to the change in consumer focus.

Keeping It Smart

Software and services within SAP Business Suite 7,

particularly SAP PLM, enable and support continuous

product and service innovation through a compre-

hensive approach that links strategy to execution.

Only through a combination of business insight

and business process integration can manufacturing

companies connect key functions — including plan-

ning, innovation management, complex project

execution, and product portfolio management — to

transform their ability to employ innovation as a

sustainable and profitable competitive advantage.

To drive new levels of performance, organizations

need to integrate innovation with closed-loop sup-

port across all stages — and within the context of

value-chain capabilities and strategic objectives.

Using SAP Business Suite solutions, companies can

achieve differentiation and growth by:

Improving responsiveness to new market and

customer opportunities. Becoming more responsive

requires comprehensive business intelligence and

an aggregation of relevant knowledge, including

product performance analytics, project pipeline,

operational metrics, competitive information, mar-

ket trends, and customer analysis. SAP provides rich

business intelligence and analytic tools to support

collaborative approaches to proactively identifying

strategic roadmap and innovation opportunities.

Leveraging the right talent, partners, and capa-

bilities in co-innovation processes. Enhancing your

company’s core innovation competencies requires

tools to support the critical front-end of the product

and service development process. The SAP Product

Definition application supports smart idea manage-

ment and integrated concept development to capital-

ize on the best ideas and translate them into

successful, innovative products.

Achieving speed and efficiency across complex

programs and projects. Realizing this goal requires

accessible information across project portfolios,

human resources, and financial systems. The SAP

Resource and Portfolio Management application pro-

vides comprehensive visibility and management

capabilities designed to improve the ongoing selec-

tion, scoring, monitoring, and review of projects and

associated resources.

Achieve Rapid Time-to-Value with Best-Run Now PackagesSAP recognizes that customers are operating in tough economic conditions

and need IT solutions to solve their pressing business challenges. In response,

SAP has created Best-Run Now, a global initiative aimed to help SAP customers

consume solutions quickly and achieve rapid time-to-value.

Best-Run Now solution packages, which are modular installments of

SAP Business Suite 7, are combined with global SAP and partner services to

support rapid deployment. These offerings are sound and timely IT invest-

ments that bring value by providing the kind of functionality or selected

mission-critical process steps that companies need to invest in to improve

efficiencies and achieve cost savings in the short term. More importantly,

Best-Run Now packages also serve as a key foundation for extending the

capability or process as business improves in the long term, ensuring that

today’s investment in the package is not just a temporary quick fix, but is

part of a strategic investment plan for the future.

I’ll highlight one Best-Run Now offering in particular, the Project and

Portfolio Management in R&D and IT package. The main component of this

package is SAP Resource and Portfolio Management, which allows compa-

nies to align activities, resources, and budgets with business priorities,

resulting in better use of limited resources, timely monitoring of performance,

improved resource forecasting, avoidance of bottlenecks, and more-informed

decision making. For more details on this application, please visit www.sap.

com/solutions/business-suite/plm/resource-and-portfolio-management-

software/index.epx.

With the release of sAP

Business suite 7, one of

sAP’s main objectives

is to promote usability

and simplicity.

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sustainability and

compliance must play

an integrated role

throughout the

innovation and

development process.

Measuring the strategic impact of innovation

investments against overall business performance

metrics. This is fundamental to understanding the

return on innovation initiatives and investments and

to guide ongoing strategy and planning processes.

SAP supports the development of product and

service performance dashboards based on actual

company-wide development, supply chain, manufac-

turing, support, and sales metrics that are required

to assess the strategic impact of initiatives and

investments and to provide the foundation for a

sustained and continuous approach to product and

service innovation.

Sustainability and Compliance Permeates Innovation and DevelopmentSustainability and compliance must play an inte-

grated role throughout the innovation and develop-

ment process. Once a product is manufactured, it’s

often too late to redesign it to address any over-

looked legal requirements — product changes can

be very costly. Yet, so can claims for damages if a

non-compliant product causes harm. Moreover, prod-

uct recalls can be excessively expensive and damag-

ing to your overall brand image and credibility.

The challenge, however, is how to adhere to sus-

tainability and compliance requirements without

compromising creativity and innovation — all while

staying one step ahead of the competition in all

process areas of the company.

Keeping It Safe

Embracing SAP’s approach to embedded product

compliance can help your company minimize non-

compliance risk — thereby protecting revenue and

brand — by developing compliant product specifica-

tions, manufacturing a compliant product, and keep-

ing the product compliant throughout its life cycle.

SAP enables these goals by supporting compliant

product development and design processes — for

example, substance/material database checks — and

providing compliance-focused visibility within a

single, comprehensive, global framework across the

entire life cycle of the product.

Product labeling is one example of SAP’s new

capabilities that enable global product compliance.

Labeling in SAP Recipe Management supports the

process of assembling and transforming formula

information into the final view of product technical

data for use on product packaging. Product definition

information developed and managed in SAP Recipe

Management is used to create the three main compo-

nents of food product labeling: nutrition, ingredient

statement, and dietary information. The benefits are

obvious: By automating the various steps required to

gather the necessary data for labeling, performing

calculations, and consolidating and rephrasing prod-

uct information into finalized product label data, you

can save a significant amount of time. And, compa-

nies can reduce the risk of product recalls caused by

improperly labeled products.

ConclusionIn a strained economy, manufacturers are looking for

quick ways to reduce product development costs

while avoiding any damage to long-term business

growth. To emerge from the short-term struggles on

top, product and service providers would be well-

served to adhere to three foundational strategies:

making development more efficient, continuing to

innovate and doing so smartly, and reducing risk

through comprehensive sustainability and compli-

ance efforts.

To help product and service leaders achieve these

goals, SAP Business Suite 7 comes at just the right

time. The solution’s integrated approach to product

and service development enables consistency and

flexibility at all stages of the process. And with SAP

Business Suite’s dramatic UI improvements, end users

can see and work with complex product-related data in

a way that’s easy to understand and easy to use. This

is great news for all enterprise users — not just the

engineer or the CAD specialist — who can now come

to their product and service decisions informed and

equipped to make the right choice for the business.

For more information, visit www.sap.com/plm or

the PLM Business Process Expert Community at

https://www.sdn.sap.com/irj/bpx/plm. n

...from “7 Characteristics of a Winning Product Strategy: Introducing SAP’s

Integrated Product Development Approach” by Thomas Ohnemus

(SAP Insider, July-September 2008, www.SAPinsideronline.com)

“Overcome Four Common Challenges of a Product Data Consolidation

Project” by Davin Wilfrid (ERP Expert, Volume 1, Number 1,

www.erpexpertonline.com)

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