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Should you upgrade to SAP SCM 7.0?

An upgrade to SCM 7.0 can be tough to justify in this economy, but SAP enhancement packages and the better user interface are sweetening the deal.

Is it time to bite the bullet and upgrade to SAP SCM 7.0?

It's tough to justify an upgrade in the current economic conditions, but there are several benefits to upgrading to SAP SCM 7.0, including SAP's enhancement packages strategy, new functionality and a better user interface.

"With a global recession, the corporate appetite for replacing technology isn't there, but the decision to upgrade to 7.0 depends on what you have currently and what capability you need to become more competitive," said Simon Ellis, an analyst at Manufacturing Insights.

SAP SCM 7.0, introduced last year, includes SAP Advanced Planning and Optimization, SAP Extended Warehouse Management, SAP Supply Network Collaboration, SAP Auto-ID Infrastructure, and SAP Transportation Management. Each of these modules can be purchased separately or as part of a larger suite or industry scenarios. Customers can upgrade from versions of APO 4.1 and higher.

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SCM 7.0 support will follow the company's 7-2 maintenance strategy, which includes seven years of standard and two years of extended maintenance from its date of introduction, according to SAP.

Manufacturers with specific problems in their supply chains could benefit from the new functionality of SCM 7.0. In turn, manufacturers say the new release is a lot easier to work with and provides clearer benefits and better usability, Ellis said.

The capabilities in SCM 7.0 have grown to the point where there is no need to consider the complexity of a best-of-breed approach, according to Valerian Harris, vice president of enterprise solutions at consulting firm Patni Americas.

"With SCM 7.0, if you look at the whole suite, there is so much functionality, it goes beyond planning to procurement, event management, and collaboration for supply chain inventory," Harris said. "There is no single tool from other vendors that stands up compared to SAP. If a customer doesn't want SAP, he may choose to buy several such tools, but there is an integration challenge, so staying with SAP makes sense."

Furthermore, he said, SCM 7.0 is built around NetWeaver, which means that even non-SAP users can leverage its capabilities.

SCM 7.0 customers can also take advantage of integration with SAP BusinessObjects tools, according to Lora Cecere, a partner with Altimeter Group.

SAP BusinessObjects Xcelsius and Crystal Reports provide users with the ability to create a set of reports or dashboards to gain deeper insights on the various supply chain processes such as demand planning, supply planning and warehouse management.

In addition, customers can measure and monitor KPIs across their operations and set up a systematic framework to do so in a repeatable manner by deploying supply chain performance management (SCPM), which is a packaged analytical application integrated to SCM 7.0.

"Earlier versions of SCM were not as reliable as SCM 7.0, and this version offers many other advantages," Cecere said.

SAP's promise that this will be the last traditional upgrade is another driver. Customers on SCM 7.0 can leverage enhancement packages, which SAP says will allow them to download only the new functionality they want, simplifying testing and validation.

"We will offer new capabilities and innovation via enhancement packs every several years so customers can structure their deployment in bite-size pieces as opposed to doing major upgrades," said Krish Mantripragada, vice president, suite solutions management at SAP.

Building a business case for moving to SCM 7.0 may be a matter of connecting to specific pain points, according to Mantripragada.

For example, synchronizing demand and supply offers immediate benefits, especially in fast-moving industries like consumer products and high tech. The ability to better optimize inventory through SCM 7.0 is another driver, and the new version can also play a part in more efficiently managing working capital and cash flow, not only in the enterprise but even within a supplier community.

"Those things can provide an immediate ROI," Mantripragada said.

The same capabilities can also help to manage risk, especially when organizations have distributed supply chains and a high degree of outsourced manufacturing.

"We have seen deployments of collaboration solutions to increase visibility and make a tighter level of operational control between manufacturers and suppliers," he said.

For example, the Outsourced Manufacturing module within SAP Supply Network Collaboration enables companies to collaborate with outsourced manufacturers like contract manufacturers and get real-time visibility into their work in process. That also effectively enables manufacturers to synchronize their internal operations based on how trading partners are doing.

However, with the roller-coaster state of the economy right now, Mantripragada is realistic about the desire to upgrade. He sees many companies focusing instead on specific projects targeted to deliver immediate value.

But as the economy turns around, SCM 7.0 provides functionality that is tightly integrated into broad end-to-end processes, he said, so companies can have comfort that when they are ready to expand, the project will fit in.

For example, many companies will face volatility in demand and in the supply chain for several years. So they can start with a demand-planning project, an inventory-optimization project or a customer-collaboration project with the confidence that they all work together in an integrated collaborative demand-and-supply planning process, Mantripragada said.

"SCM 7.0 also ties SAP Advanced Planning and Optimization with SAP Supply Network Collaboration," he said, "which lets companies collaborate with suppliers so companies don't have to plan only within the confines of their operations but can also involve suppliers and trading partners in planning."

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