Today’s companies are operating in a global economic environment that requires greater speed and productivity. The ability to efficiently plan and execute as well as respond to continuous business changes such as rising transportation costs and customer demands are quickly becoming the definitive factors of competitive advantage. As a result, companies are seeking ways to meet these demands and to form strategic supply chain partnerships in which collaboration and sharing information are critical success factors.

The SAP® Supply Chain Management (SAP SCM) application offers companies not only planning and execution solutions to manage operations but also helps boost visibility and collaboration to extend their operations beyond corporate boundaries. SAP SCM empowers companies to adapt their supply chain processes to an ever-changing competitive environment, transforming traditional supply chains from linear, sequential processes into an adaptive supply chain network in which communities of customer-centric, demand-driven companies share knowledge, intelligently adapt to market changes and proactively respond to shorter, less predictable life cycles.

Cornerstones of the Adaptive Supply Chain Network

SAP SCM provides three cornerstones that form the foundation of the adaptive supply chain network:

• Synchronize supply and demand. The deployment of front-end demand and back-end supply gateways support demand-driven manufacturing and fulfillment processes to keep goods flowing smoothly and profitably to the end customer.
• Sense and respond with an adaptive fulfillment network. Distribution, transportation and logistics processes are integrated with real-time planning. Additionally, sense-and-respond capabilities enabled by radio frequency identification (RFID) capabilities deployed in the warehouse and throughout the distribution and transportation network improve order tracking and elevate customer service.
• Network-wide visibility, collaboration and analytics. Event management capabilities enable companies to effectively monitor critical activities, resulting in greater transparency, while built-in analytics provide real-time performance management.

Business Benefits of SAP SCM

• Faster response to changes in supply and demand. With increased visibility into the extended supply chain, companies can sense and respond quickly to changes and capitalize rapidly on new opportunities.
• Increased customer satisfaction. The application provides a framework that supports communication and collaboration, enabling companies to adapt to and meet customer needs.
• Compliance with regulatory requirements. Companies can track and monitor compliance in areas such as environment and safety.
• Improved cash flow. Information transparency and real-time business intelligence lead to shorter cash-to-cash cycles.
• Lower inventories. Companies can optimize stock levels, reducing inventory levels and increasing inventory turns.
• Higher margins. Companies can lower operational expenses with timelier planning for procurement, manufacturing, and transportation.
• Greater synchronization with business partners. Tight connections with trading partners keep the supply chain continually aligned with business strategies and priorities.

Key Statistics for SAP SCM

• There are more than 14,500 SCM customers worldwide.
• According to Gartner Dataquest, in 2005 SAP expanded its position as the largest market share holder in the worldwide SCM market with a 25 percent year-over-year growth.
• According to AMR Research published in September 2006, SAP emerged as the top SCM vendor in terms of revenue, and outpaced the market with growth of 6 percent for the third straight year.

Key Capabilities of SAP SCM
SAP SCM delivers a comprehensive set of features and functions for building adaptive supply chain networks. The application enables a wide range of capabilities covering the areas of:

• Supply Chain Planning and Collaboration
• Supply Chain Execution
• Supply Chain Visibility Design and Analytics

Supply Chain Planning and Collaboration

With SAP SCM, companies can model their existing supply chain, set goals, and forecast, optimize, and schedule time, materials, and other resources. Supply chain planning functionality enables companies to maximize return on assets and ensure a profitable match of supply and demand.

Strategic, Tactical and Operational Planning
With SAP SCM, companies can optimize a full range of planning activities. Capabilities include:

• Demand planning and forecasting. Helps companies forecast and plan anticipated demand for products or product characteristics using state-of-the-art forecasting algorithms for product life-cycle planning and trade promotion planning. Duet™ software, the first jointly developed product by SAP and Microsoft, presents an intuitive interface, delivering improved user acceptance and productivity through simple and timely access to relevant business information.
• Safety stock planning. Enables users to assign optimal safety stock and target stock levels in all inventories in the supply network. Meet desired customer service levels while maintaining a minimum amount of safety stock.
• Supply network planning. Helps integrate purchasing, manufacturing, distribution and transportation plans into an overall supply picture to simulate and implement comprehensive tactical planning and sourcing decisions based on a single, globally consistent model.
• Distribution planning. Helps companies determine the best short-term strategy to allocate available supply to meet demand and to replenish stocking locations.

Supply Network Collaboration
SAP Supply Chain Network, a Web-based application available in SAP SCM, enhances cooperation, efficiency and knowledge sharing throughout the supply chain. It delivers a consistent view of critical supply information to manufacturers, suppliers and customers. Capabilities include:

• Supplier collaboration. Helps companies better collaborate with suppliers of all sizes, reducing transactional costs. It supports industry-standard replenishment processes such as supplier-managed inventory as well as other net-demand processes such as release processing and purchase order processing.
• Customer collaboration. Leverages the industry practice of vendor-managed inventory (VMI) to enable responsive replenishment. The vendor manages replenishment on the basis of demand and inventory information sent by customers to the vendors, increasing responsiveness to short-term fluctuation in the baseline and promotion business process.
• Outsourced manufacturing. Helps companies gain immediate and clearer visibility into and control of distributed supply networks when outsourcing critical operations. Achieve real-time business process connectivity with suppliers and improve visibility into partner inventory and manufacturing operational data.

Procurement
With SAP SCM, companies can track and monitor closed-loop and order-to-cash procurement from the creation of a purchase order and invoice to the transfer of event data to an analytical application. Capabilities include:

• Strategic sourcing. for identifying and evaluating vendors based on historical performance and other data and for creating long-term sourcing plans that align with financial and marketing strategies.
• Purchase order processing. for converting demand, such as purchase requisitions and e-shopping carts, into purchase orders or delivery schedules for a scheduling agreement.
• Invoicing. For the entire process of receiving, entering and checking vendor invoices for correctness in terms of content, price and computation.

Service Parts Planning
With SAP SCM, companies can also handle service parts planning activities. Capabilities include:

• Parts demand planning. To improve the accuracy of forecasts through better modeling of demand quantities, events, and their respective deviations. Companies can select sophisticated forecast models and optimize model parameters to improve forecasting for slow-moving parts or for parts with irregular demand patterns. Through aggregated forecast-parameter profile maintenance, companies can make data maintenance more efficient.
• Parts inventory planning. To reduce inventory levels and achieve retail service levels by providing more precise demand modeling. Companies can distribute inventory optimally within the multi-echelon supply chain to ensure high service levels while keeping inventory levels at a minimum.
• Parts supply planning. To reduce inventory in the supply chain by improving supplier alignment, increasing automation, and developing accurate supply plans. Companies can also reduce operational cost through efficient purchasing practices.
• Parts distribution planning. To set up stock transfers for parts within a service parts network to reduce stock-out situations and operational costs.
• Parts monitoring. To work with suppliers and customers to exchange information and handle alerts collaboratively.

Manufacturing
With SAP SCM, companies can create feasible, optimized production schedules that take real-time material and capacity constraints into account, ensuring a fast, flexible approach to engineering changes and customer requirements. Capabilities include:

• Production planning and detailed scheduling. To optimize schedules for machine, labor and overall capacity utilization, factoring in customer delivery dates, material availability and real-time manufacturing conditions.
• Manufacturing operations. To capture production information from the shop floor to support production control and costing processes.

Sales and Operations Planning
The SAP® xApp™ Sales and Operations Planning (SAP xSOP) composite application enables finance, sales, purchasing and production departments to collect, analyze and track all sales and operations planning data in a central location, reducing the time spent hunting down data and enhancing information visibility for decision makers. The application connects the relevant planning applications across the system landscape, bringing new levels of flexibility and simplicity to a complex process spanning multiple departments.

Supply Chain Execution
With SAP SCM, companies can sense and respond to demand through an adaptive supply chain network in which distribution, transportation and logistics are integrated into real-time planning processes.

Order Fulfillment
Companies can plan, evaluate, manage and monitor the entire fulfillment process, including order entry, pricing, scheduling and proof-of-delivery processes. This helps them fulfill orders based on best availability of goods and components in distribution centers, production sites, storage locations, and on transportation resources. Capabilities include:

• Sales order processing. To fulfill contract or purchase orders with a specific product configuration and quantity or a given service at a specific time.
• Billing. To handle the entire billing process, from the creation and cancellation of invoices through the transfer of billing information to the accounting department.
• Availability. To create greater visibility into how much inventory or projected inventory is available for order promising to customers. Advanced logic allows customers to reserve and protect critical capacities and future inventories for certain events and customers. Companies can sell what is available by allowing searches across multiple locations, materials or characteristic based on allowed substitutions; reduce handling and transportation spend by correlating multiple line items together through consolidation or best location searches; and drive better customer service by providing event driven re-evaluation of availability as the supply chain situation changes.

Transportation Management
Companies can consolidate orders and optimize shipments across the company to maximize the return on transportation spending. Companies can share information and combine orders directly with carriers and forwarders over the Internet, so they can integrate business partners into processes and maintain control of plans. Capabilities include:

• Transportation planning. To optimize shipments, assign carriers to shipments and tender shipments to assigned carriers.
• Transportation execution. To help select carriers, calculate freight costs, settle shipment costs and print documents. Use denied-party and embargo lists when shipping internationally.
• Freight costing. To calculate and settle freight costs based on actual shipments and current rates, and use this information to verify invoices.

Warehousing Management
SAP Extended Warehouse Management (SAP EWM) provides flexible automated support for processing goods movements and managing stock in the warehouse complex. It is designed to work in high-volume warehouses that require support for complex processes. The application brings planning and execution functions closer together enabling the warehouse to take advantage of planning functions as well as complex execution functions. Capabilities include:

• Yard management. To manage trucks and trailers in the yard, mapping movements with warehouse tasks and monitoring yard activities with the warehouse monitor.
• Cross docking. To lower costs by reducing product handling in the warehouse, transporting products directly from goods receipt to goods issue.
• Value Added Services (VAS). Companies can use VAS to manage special services for customers such as labeling, tagging and wrapping.
• Wave processing. Flexible wave processing allows control over outbound processes and allows the creation of manageable sets of warehouse activities across deliveries.
• Slotting. With slotting, a storage concept for a product can be created, ensuring that stock is stored in the most optimum location. Rearrangement helps implement the new slotting concept at a flexible pace.
• Resource management. Facilitate the management of work and resources using queues, resource qualifications and priorities.
• Labor management. Monitor and track work force efficiency using new tools to plan work for both direct and indirect tasks. Measure warehouse activities using engineered labor standards and comparing to actual execution times.
• Planning and monitoring. A central warehouse monitor gives complete and up-to-date visibility to all warehouse processes. The monitor can be used to view and execute work processes as well.
• RFID. Integrate to SAP Auto-ID Infrastructure for packing and warehouse task confirmation, including loading and unloading.

Supply Chain Visibility Design and Analytics
SAP SCM enables companies to gain visibility across their extended supply chain network to perform strategic as well as day-to-day planning. The application also enables collaboration and analytics so that companies can monitor and analyze the performance of the extended supply chain using predefined key performance indicators (KPIs). Capabilities include:

• Strategic supply chain design. Perform strategic and tactical business planning enabled by visibility across the entire supply chain network. Run test scenarios to determine how the supply chain network can address changes in the market, the business, or customer demand.
• Supply chain analytics. Define, select, and monitor KPIs to paint an integrated, comprehensive view of performance across the supply chain using predefined KPIs based on the supply chain operations reference (SCOR) model.

Additional information about SAP SCM can be found at:

http://www.sap.com/solutions/scm

SAP News

• SAP to Release Next-Generation Supply Chain Management Solution to Drive Transformation of Global Business Networks
  (February 26, 2008)
• Independent Research Firm States SAP as Worldwide Market Share Leader for CRM, ERP and SCM
  (September 26, 2007)

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