Sap Supply Chain Execution Solutions

SAP Supply Chain Execution Solutions: IM, WM AND EWM Which Solution is Right for You? By Steven Grant Principal Consultant of U.S. SAP Practice, CIBER, Inc. Abstract: No matter the warehouse layout, materials, transaction volume, complexity or integration to automation, there comes a time when every warehouse manager has to make a decision about the best warehouse management solution (WMS) for their operation. SAP has provided inventory control functionality since the early 1980’s and has steadily increased the functionality in warehouse management - including native radio frequency (RF) barcoding and radio frequency identification (RFID). There are currently three options available for the SAP user who wants to optimize warehouse processes, including inventory management (IM), warehouse management (WM) and the latest development, extended warehouse management (EWM). This white paper describes those three options to help you determine which option best meets your organization needs.

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SAP Supply Chain Execution Solutions

Which solution is right

Option 1 Option 2 Option 3

?

for you solutions

Inventory Management – The Original Warehouse Management Solution

Warehouse Management – A Proven Solution in the Supply Chain Execution Arena

Extended Warehouse Management – A Direct Competitor to the “Best of Breed WMS”

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Option 1:

Inventory Management – The Original Warehouse Management Solution Inventory management (IM) is just that: an inventory management tool that records and tracks the on-hand quantities of stock and manages the financial values of goods being warehoused. Companies that are typically best served from the implementation of the IM solution are those having smaller warehouses where inventory can easily be managed. Picking instructions are executed on paper, while ship confirmation of picked orders is performed on a desktop computer. There is typically little or no radio frequency (RF) technology used within the warehouse. Some of the reasons why IM works in smaller warehouse environments but does not work in larger distribution centers include the following: 1. Since the lowest level at which stock can be managed is the Storage Location level, the system displays the inventory levels as summarized values and provides very limited information about individual pick slots, such as which materials are stored in specific storage bins. 2. Where and how stock is placed within the warehouse is random as placement strategies are nonexistent. 3. When there is a requirement for SAP transactions to be executed on a radio frequency device, Advanced Business Application Programming (ABAP) coding is required because SAPConsole does not provide standard out-of-the-box RF transactions for IM. (CIBER does have predeveloped solutions available if IM needs to be RF-enabled). 4. The ability to replenish dedicated picking areas is not available in IM. 5. Automation of pick logic and travel paths is not possible; picking is according to the sequence in which the order was entered/received and is not based on material and bin locations. 6. Performing cycle counts at the individual bin location is not possible because quantity is presented to the end user as a summarized

value. Operators cannot record the inventory at each bin; therefore, each bin quantity will have to be added up first to get a total, and then it can be entered into the system. For example, suppose the system says there is a total quantity of 200 gaskets in the rack. When it is time to do the cycle count, the 200 gaskets are spread throughout three locations in these quantities: 100, 50 and 50 respectively. IM does not allow you to enter the individual quantities at each of the bins. Instead, verification of physical inventory is limited to the confirmation that there are 200 gaskets in the rack. Where they are and how they are stored is not visible. 7. IM does not have the ability to determine space/bin utilization for a warehouse facility, and does not provide any space optimization business functions. IM is integrated with finance and updates the quantity and value of the inventory for relevant warehouse transactions. One of IM’s standard out-of-the-box functionalities is the ability to update connecting modules like Financial Accounting (FI), Sales and Distribution (SD), Materials Management (MM), and Production Planning (PP). As a component of the MM module, IM is fully integrated into the entire SAP logistics system. IM is directly linked with Material Requirements Planning (MRP), Purchasing and Invoice Verification. It provides MRP information for both physical and planned stock levels. These extremely powerful features of IM serve to make this module the base foundation for every supply chain execution solution connected to SAP’s back-end system. In an integrated landscape such as the above, which uses SAP as the back-end system, the IM module is a prerequisite and foundation for all of the other sophisticated warehouse management modules, such as Warehouse Management

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SAP Supply Chain Execution Solutions

(WM) and Extended Warehouse Management (EWM). So despite its limitations, the IM module is the backbone to the logistics system and under the appropriate business conditions, it can be a viable stand-alone warehouse management solution. However, for those warehouses whose needs go beyond those limits, a more sophisticated solution is often required.

Option 2:

Warehouse Management – A Proven Solution in the Supply Chain Execution Arena WM is an extension of IM and has been available since the early 1990’s. Lately, SAP has added more functionality and has fine-tuned WM into a very robust and versatile solution for a wide variety of industries. WM could easily be given the title “most common solution for warehousing” for mid-size distribution centers that run SAP as a backend system. WM provides the answers to the multiple bin and strategy limitations that IM presents. As a result, WM has been implemented in many warehouses in various industries. Companies that run WM have come to rely on its flexibility and capabilities in managing complex and time-sensitive shipping, receiving, and warehousing tasks. Stock Quantities: As mentioned before, one of the limitations present in the IM module is summarized stock levels and the inability to provide bin information. WM offers the capability to manage stock quantities at the storage bin level, resulting in the optimization of storage bins. Knowing exactly where a particular material is located in the warehouse at all times is a major asset to the warehouse manager, and the time saved from avoiding costly searches for “missing” inventory will quickly show impact on warehouse operating costs. Unit Management: WM can be configured for storage unit or handling unit management. This feature allows pallets/cartons of different configurations and shapes to be dynamically identified by a license plate (storage unit/handling unit) and then to be tracked throughout the warehouse. Another benefit that WM brings to the table which is very relevant to storage bins and warehouse capacity is bin utilization statistics. Through standard WM and business intelligence (BI) reports, warehouse statistics are available which identify how space is utilized within the warehouse. The physical inventory process under the WM module is substantially improved when compared to that offered by IM. The ability to count bin locations, as opposed to only

being able to establish totals for each material, coupled with advanced physical count methods such as zero bin counts, greatly increases the likelihood of early identification of inventory inaccuracies. Stock Additions: With WM, not only can stock be readily located, but it can also be directed to specific bin locations using standard putaway strategies. For example, the system can place stock into bins where that material already exists - a configuration setting known as “addition to stock.” This feature is useful when the same material is received on two different occasions. The system will direct the putaway for the second receipt to the location where the first material is stored, maximizing bin utilization. This is one of many standard putaway strategies that is included in the WM module which aid in the optimization of warehouse space. Stock Removals: In addition to stock placement strategies, there are also WM stock removal strategies. Through the use of these removal strategies, considerable improvements are made to the relocation, replenishment, and picking processes. An example of a commonly used removal strategy is fixed bin removal. Fixed bins, or “forward pick” areas, are extremely useful in the picking process as picking is directed to the same fixed location every time. Additionally, when automatic replenishment (another feature of WM) is turned on, stock is scheduled to be relocated to the fixed bin when quantities reach a certain threshold. Other frequently used removal strategies for WM are First In / First Out, Last In / First Out, and Expiration Date. RF Technology: A major benefit WM delivers is outof-the-box mobile RF technology. This feature brings many standard SAP WM transactions to mobile devices. Having the ability to execute transactions on the RF reduces the amount of paper used, and creates an environment for improved picking accuracy using instructions that are displayed and confirmed on the RF. Even though printing of pallet slips, move orders, delivery slips, and inventory documents is available for all relevant transactions, WM facilitates warehousing tasks that are virtually paperless. RF technology allows for real-time data entry to exist for the warehouse operator, and tracking of the employee’s performance can be measured by management. The extension of WM to RF devices has increased the ability of managers and workers to gather data and direct operations seamlessly and efficiently. WM supports the use of bar code scanners, basic automated storage and retrieval solutions (AS/RS), and automated forklift systems for all stock movements through Application Link Enabling (ALE) interfaces that connect warehouse controls.

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Archiving, process monitoring, delivery monitoring, and out-of-the-box reporting are other beneficial attributes that are available in WM. These features are sure to become some of the most utilized functions by the management team.

Option 3:

Extended Warehouse Management – A Direct Competitor to the “Best of Breed WMS” At one time the most used solutions supplied by SAP to address warehousing needs were Inventory Management and Warehouse Management, but now there is another option. SAP has introduced Extended Warehouse Management (EWM), and it is filled with the core functionality that has been the foundation of WM, plus many new exciting features. EWM is essentially WM with added enhanced functionality to allow for a typical 24x7 finished goods warehouse with very high volume. EWM is a very robust solution that is designed to support complex operations. With its new functionality, EWM competes and—at times—surpasses many of the best-of-breed systems available in today’s market. Some of EWM’s features include the following: •

Resource Management (a.k.a. Task and Resource Management TRM)

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Labor Management

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Dynamic Slotting/Rearrangement

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Expected Goods Receipt

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Yard Management

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Unloading of Trailers (Transport Unit Management)

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Deconsolidation

Resource Management / TRM: Resource Management (TRM) is functionality within EWM that is executed through the use of mobile technology. TRM maximizes the efficiency of warehouse processes by distributing warehouse orders via queues. Queues help optimize the selection of warehouse orders for warehouse personnel while the warehouse monitor aids in the monitoring and controlling of resources in an effective manner. Having resources assigned to queues ensures the optimal distribution of tasks throughout the warehouse. Work can be assigned automatically or manually to available resources while providing the resource the optimal tasks. These tasks are based on a range of factors that include node (location), latest start date, execution priorities, assigned queues, resource qualifications, and warehouse order status. A warehouse order represents the optimum executable work package a warehouse employee should perform at a specific time.

Warehouse orders consist of warehouse tasks that are assigned to warehouse workers via resource management functionality. This powerful tool helps manage workflow by directing or redirecting tasks from one employee to another. From the TRM monitor, managers can check to see who is logged on and which tasks are in-process; managers can also assign and prioritize tasks to individuals and equipment. Labor Management: Labor Management provides numerous functions that help plan labor times and resources in the warehouse more effectively, thereby making warehouse operations more productive. Having labor management fully integrated into the extended warehouse management module is a huge benefit to warehouse operations. In many instances, the ability to track performance based on labor standards has been done through customized reports or specialized software interfaced to SAP. However, now it is available to SAP customers in one solution. The functionality can be used to measure, plan, simulate, and visualize the activities in the warehouse. Dynamic Slotting and Rearrangement: Dynamic Slotting and Rearrangment is used to optimize storage of materials so that each product is stored in the optimum bin according to its size and frequency of use. Once slotting is performed and the results are deemed satisfactory, rearrangement of the warehouse begins. After the record is saved, the system automatically updates the material’s product master data for the following values: putaway strategy, maximum quantity in storage type, section indicator, and bin type. Expected Goods Receipt: Expected Goods Receipt is new functionality that gives visibility to future receipts

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SAP Supply Chain Execution Solutions

that will be shipped to the warehouse based on purchase orders. Typically in WM, inbound deliveries are created in the ERP system, which then starts the goods receipt process in the warehouse. Conversely, in EWM, the purchase order represents an expected goods receipt. This planned goods receipt can be used as the catalyst that begins the goods receipt process in the warehouse. In turn, this allows for the creation and verification of inbound deliveries based on the arrival of trailers. The Receiving Manager can check the workload for planned receipts and staff accordingly. These expected goods receipts can be from internal production orders, stock transports, or external suppliers. Yard Management: Yard Management is an enhanced feature in EWM that allows trucks and trailers to be yard managed. A vehicle’s movements can be mapped based on warehouse tasks, and its movements can be monitored through the warehouse monitor. Through warehouse configuration, the yard can be defined as part of the main warehouse or it can be set up to be utilized for multiple warehouses. Opportunities exist to execute the features of yard management on mobile devices. Unloading of Trailers: Unloading of Trailers (Transport Units) is functionality only available in EWM. It provides

visibility to activities that have been hard to measure, quantify, and set metrics for. With this feature, unloading tasks can now be captured by the system. Through the use of RF guns, the operator can verify the contents on the trailer by scanning the handling units and then moving them to their appropriate destination bin. These transactions are time- and date-stamped and recorded so they can be analyzed later to achieve key performance indicators (KPI). Deconsolidation: There is another new feature in EWM where specific handling units that meet specific rules and conditions are directed to a deconsolidation station to be disassembled. This is known as deconsolidation, and is relevant when two materials arrive on the same pallet, but—based on their putaway strategies—each one must be placed in a different area of the warehouse. Because of these differences, this pallet will go to deconsolidation. For the most part, configuration settings will determine when combined materials must go to a deconsolidation station, but it can also be directed manually. The following table lists each of the features described in the previous pages, and indicates which of the three options/ systems offers those particular features and benefits.

Functionality Comparison of Inventory Management, Warehouse Management, and Extended Warehouse Management

Functionality Ma Bin Management Placement Strategies Removal Strategies Pick Logic Replenishment Standard Mobile RF technology Handling / Storage Unit Management Yard Management Enhanced Configurable RF Technology Task and Resource Management Expected Goods Receipt Value Added Services Opportunistic Cross-Docking Dynamic Cycle Counting Unloading of Transport Units Deconsolidation Slotting Rearrangement Labor Management

IM

WM

EWM

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So Which of These Options is Right for My Organization? Given the functionality that the above three options offer, it is clear that EWM provides the most benefit. However, is it always the best choice for the warehouse manager? No. Each solution has its own place in the distribution arena; having a “one size fits all” mentality is not the best way to proceed. The solution that works for large facilities doesn’t always work best for smaller distribution centers. In instances where operations are simplistic in nature and automation is not in scope, there is a particular solution for that scenario. So when it is time to make the choice as to which supply chain execution option best fits your organization, take the necessary steps to hire a professional consulting firm to aid in the decision-making process. CIBER Inc. is an SAP Services Alliance Partner and an industry leader in Supply Chain Management. With CIBER’s extensive Supply Chain Practice and seasoned SAP technical and functional consultants, we can easily identify the correct solution for your business. CIBER has consistently ranked high in various industry listings and has won numerous awards for excellence from clients, industry groups, and partners. In June of 2007, CIBER was ranked 8th among Global IT Outsourcing Vendors and 12th among all Outsourcing Vendors by The Black Book on Outsourcing. CIBER is on five Gartner Magic Quadrants, including the North American and European ERP Service Provider Magic Quadrants. The notable Pinnacle Award from SAP was given to CIBER in June of 2006.

About the Author

Steven Grant Principal Consultant U.S. SAP Practice CIBER, Inc. Steven Grant is a Principal Consultant in the Supply Chain Practice of CIBER. Prior to joining CIBER, Mr. Grant worked as an SAP logistics consultant for Wyeth pharmaceuticals. During his tenure at Wyeth, Mr. Grant performed several leadership roles, managing supply chain improvement projects, designing warehouse processes and floor plans, and installing WM solutions for their manufacturing and distribution centers. His SAP experience is in the SCM area, with a strong focus on decentralized WM and Task and Resource Management. Mr. Grant graduated from Long Island University in Brooklyn, N.Y. and holds degrees in both Math and Business.

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CIBER, Inc. (NYSE: CBR) is a pure-play international system integration consultancy with superior value-priced services and reliable delivery for both private and government sector clients. CIBER’s services are offered globally on a project- or strategic-staffing basis, in both custom and enterprise resource planning (ERP) package environments, and across all technology platforms, operating systems and infrastructures. Founded in 1974 and headquartered in Greenwood Village, Colo., CIBER now serves client businesses from over 60 U.S. offices, 25 European offices and seven offices in Asia/Pacific. Operating in 18 countries, with more than 8,000 employees annual revenue over $1 billion, CIBER and its IT specialists continuously build and upgrade clients’ systems to “competitive advantage status.” CIBER is included in the Russell 2000 Index and the S&P Small Cap 600 Index.

www.ciber.com

CIBER, Inc. • 5251 DTC Parkway • Suite 1400 • Greenwood Village, CO 80111 • 800.242.3799 © 2008 CIBER, Inc. All rights reserved. CIBER and the CIBER logo are registered trademarks of CIBER, Inc. CIBER stock is publicly traded under the symbol “CBR” on the NYSE.