Positioning for Success During the Downturn in the Ag Economy
Special RepoRt Managing for the Downturn, positioning for ...€¦ · Efficiently Develop...
Transcript of Special RepoRt Managing for the Downturn, positioning for ...€¦ · Efficiently Develop...
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
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Special RepoRt
Managing for the Downturn, positioning for the UpturnAs published in SAP Insider April n May n June 2009
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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
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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.
� 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
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.
�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
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.
� 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
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
10 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
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
11Reproduced 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
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...
1� 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
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)
1�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
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
1� 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
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
1�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
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
1� 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
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.
17Reproduced 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
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.
1� 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
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
1�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
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.
�0 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
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)
AdditionalResources...