With SAP’s Supply Chain Management (SCM) software, companies can now keep track not only of how much inventory they have, but also what the demand is for a certain product, and when to produce more of it.
But the SCM suite has been slow to gain momentum, according to Dwight Klappich, vice president of research at Gartner. SAP hasn’t sold as much because there are still so many customers using the old Warehouse Management System, and they like it. The software, which was packaged with the ERP software, allows companies to keep track of goods received in the warehouse, how to store them intelligently, and how to find them.
“Most don’t go outside of that,” Klappich said. “They don’t need it. It’s like a car. Most cars have four tires, an engine, that’s the core. Then what’s the difference between a Yugo and a Ferrari? Not everybody needs a Ferrari, nor would they exploit all that power. The vast majority of companies just need the basics. They want a car they can commute to work with.”
But there are benefits to be gained from upgrading, or looking at the other modules in SAP’s SCM suite.
SAP SCM software allows companies to work with real-time data and forecast how much inventory might be needed. The new suite lets companies interface with suppliers, allowing for greater collaboration. This is increasingly allowing paper documents to be phased out. Almost all of the supply chain can now be managed online, according to Valerian Harris, vice president of Patni Americas.
Right now, of that next-generation system, what most customers are using is its Advanced Planner and Optimizer -- which enables organizations to plan what they’re going to sell, what day of the week and what inventory is necessary to support it.
Companies implementing SAP APO Demand Planning will bring instant business benefit and see an improved quality in their forecasts, Harris said. They will also be able to aggregate demand by country, region, business unit or product line.
“For those customers who are using SAP SCM partially, implementing Supply Network Collaboration will bring instant benefits of better inventory management and lower lead time,” he said.
For SAP users considering upgrading WMS, the Extended Warehouse Management (EWM) application is to the point where it at least deserves to be put on the short list, Klappich said.
EWM has more functionality, and is far more flexible, Klappich said. It was specifically designed for the service parts business, and companies handling a lot of small orders.
“WMS was case/pallet items,” he said. “This has support for the item level. I just think architecturally, it’s a much more flexible application than the previous system.”
Manufacturing warehouses, in particular, can get more accomplished by switching to EWM, Klappich said. The service parts industry is one example, he said, along with the high-tech, automotive and retail industries.
“If I’m Proctor & Gamble and I’m selling to Wal-Mart, it’s pretty straightforward -- it’s all Tide in a truck,” he said. “But if I’m L.L. Bean and you’re placing a Christmas order, you might buy 10 different things that are all individual items.”
Upgrading to EWM is also a good option for big businesses that have moved into some sort of direct-to-consumer business.
SAP’s new Supply Chain Management software allows an organization to synchronize and orchestrate.
“It was difficult in the past because you might have systems from four different vendors, and you’re trying to get the systems to talk together, but the underlying processes are not aligned,” Klappich said. “SAP’s overall Supply Chain Management strategy is one of the strongest visions for how we can do this. SAP is actually saying, ‘We‘re going to map out and deliver that as a solution to a client.’”
For example, one of Patni Americas’ customers is a large toy manufacturer out of Rhode Island. Toys have a seasonal demand factor, with most of the sales happening during the holidays. What the company wasn’t getting before SAP SCM was proper demand information.
“The data from the retailer was always available, but it had to be looked at by the planner,” Harris said. “Now you just load it onto a CD and the information is done by SAP’s demand planning software. It streamlines. Instead of the human being the integrating point of sale data, you let SAP do it.”