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Ten tips for improving the SAP supply chain

Many companies don't take advantage of all that SAP ERP offers. Here are 10 hidden tools that can help improve an SAP supply chain.

SAP supply chain best practices focus on using standard business processes, tools, features and functionality to...

minimize custom-developed, manual work, or the use of third-party products. And following best practices provides a greater return on investment (ROI) for an SAP implementation. Companies lamenting budget constraints that prevent them from implementing advanced SAP tools must first look inward to ensure that their existing SAP implementation is bringing them sufficient ROI. It is baffling to observe the paradox of companies expressing willingness to adapt their business processes to SAP supply chain best practices, yet they don't spend the time, effort or resources required to achieve greater ROI.

Although implementing SAP is often considered a one-time effort, continuous improvements are the secret to unleashing SAP's true potential. But optimizing SAP is possible only when companies refrain from using minimum functionality and instead use hidden tools available in their existing SAP systems. They also need to upgrade their systems with free enhancement packages offering a slew of new features that enable them to continue on the path of constant and consistent optimization of their SAP systems

Consider the case of the SAP ERP system, a backbone for companies opting for a business application platform. A conservative estimate reveals that companies don't effectively use up to 40% of the standard features, functionality and tools that SAP offers. This leads to lower ROI because companies have already paid for these features.

Let's look at 10 tools and features available in an SAP ERP system that typically aren't put to effective use to improve an SAP supply chain.

  1. Sales and operations planning (S&OP) -- What company doesn't go through the ritual of extensive S&OP? Yet few companies take advantage of the S&OP tools, which can not only save the time it takes to plan realistic sales or production figures, but provide greater confidence in the entire planning process. For complex planning needs, and flexible planning, a standard offering is available to help.
  2. Forecasting -- Planners often struggle to create a sales or production plan that not only reflects historical consumption values of materials, but also offers flexibility to choose a forecasting model that best fits business needs. Forecasting is a planning tool that helps predict future sales or consumption of materials based on historical data. It also helps significantly in preventing SAP supply chain disruptions.
  3. Material requirements planning (MRP) -- SAP supply chain operations are all about maintaining a tighter and more efficient link to materials handling -- from raw material procurement to in-house production or outsourcing and finally dispatching to customers. The fact that relatively few companies put MRP to work as a materials planning tool remains one of the greater disappointments of SAP supply chain management.
  4. Reports and analyses -- SAP offers thousands of standard reports that provide real-time information, as well as standard and flexible analyses to help in decision making, but most of these reports are hardly used. Instead, companies opt for custom-designed reports or jump to analytics tools and dashboards, such as SAP business intelligence (BI).
  5. Safety stock planning -- Few companies are aware that SAP offers help by suggesting safety stock of materials that can keep planners from facing materials shortages and having to scramble to coordinate with vendors for rush deliveries.
  6. Automation for efficient replenishment -- Companies that still manually enter SAP supply chain data in the system can do better by transitioning to barcode and radio frequency identification (RFID) technology that promises efficient replenishment and materials handling. SAP offers several interfacing options. Kanban is a viable yet underused replenishment choice. With the Kanban dashboard, it is easier and more efficient for a demand source to request a supply source for materials replenishment. Later on and as a step up, companies can adopt an Internet of Things (IoT) approach that integrates logistics and SAP supply chain processes to optimize business processes. IoT connects machines, operations and processes, and reduces human intervention or involvement.
  7. Weaving quality into the SAP supply chain -- Quality is not a process or a business function. It's an efficient SAP supply chain's lifeline. Integrating and weaving quality checks, quality gates and quality controls into important logistics and supply chain functions saves enormous costs. It also provides credibility to companies by ensuring no defective raw materials are consumed in production or no defective product leaves the warehouse. Integrating quality features, such as Statistics Process Control (SPC), adds enormous value to business functions by preventing procurement, production, logistics and supply chain disruptions through timely alerts of abnormal trends.
  8. Early Warning System (EWS) -- A hidden SAP treasure is EWS, which enables business users to set up user-defined prompts that signal potential disruptions to logistics and SAP supply chain operations.
  9. Classification and Document Management System (DMS) -- This cross-application component of SAP optimizes logistics and supply chain processes. Classification provides options to record diverse and user-defined data that is then available for search and reporting functions. SAP DMS is much more than a document repository. Its integration in the procurement, production and sales functions of the SAP supply chain provide an option to record additional information that does not generally fit in any specific SAP component, but is important for bringing greater efficiency to business processes.
  10. Engineering Change Management (ECM) -- SAP ECM offers effective controls to master the data creation process and thus minimize or eliminate redundant or incorrect master data entries in the system. Availability of complete, correct and consolidated master data helps business processes in the SAP supply chain to run smoothly.

Next Steps

Manage the supply chain on HANA

Get advice on procurement in SAP

Use SAP ERP for services procurement

This was last published in August 2015

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