A professional blog by: Pete Boyer, Director, SAP SCM Solutions for Cogent Integrated Business Solutions, Inc.
SAP Event Management: OnStar® for Your Supply Chain
What are you planning tomorrow… shipments, deliveries, receipts, production of a certain high-demand product, truck breakdown, train derailment, warehouse equipment failure, a computer disaster that prevents delivery processing and stacks up carriers’ vehicles? … the former, most certainly; the latter, probably not.
In October, 2000, I had the opportunity to support SAP’s introduction of Supply Chain Event Management (SCEM) at Sapphire. Our demo scenario was a truck carrying a load of goods; we had a telephone connected to the SCEM system. The truck broke down and the demonstrator, playing the role of the truck driver, phoned the connection, advising that he would be delayed by two hours while the truck was repaired. The expected time of arrival of the delivery was updated by the delay time enabling the planners to adjust accordingly.
SCEM is essentially a “track and trace” application; a monitor of the completion of any task related to the procurement, production, transportation, and delivery of product. SAP EM (SAP’s implementation of SCEM) is one of the applications that SAP has developed to bridge the gap between planning and execution and, as such, ultimately to support customer service and cost containment.
Strictly speaking, SAP EM – as so many of the subject matter experts continually re-iterate – is not a work flow tool, but a monitoring tool for exceptions and status changes. As such, it will not automatically fix a critical situation, like firemen arriving to put out a fire. But it will help to locate the fire. It is the person who dials 911 to report the fire so that the responders can go into action.
It’s not the jack that you use to fix a flat tire – or even the spare tire itself; it’s more like a dashboard warning indicator that the tire is underinflated and going flat so that you can take steps to avoid a road side flat.
Planning business processes gives a road map that works backward from customer requirements through production and inventory planning to procurement and supplier management. The goal of planning is to balance demand and supply, to “have the right product in the right place at the right time,” throughout the supply chain, and to do so in minimums of time and cost. In today’s supply chain many of the partners are geographically located far outside our borders, but they still play a major part in the supply chain balancing act. Receiving information on the events that they perform is a critical part of the puzzle that enables full visibility into what’s happening in your dispersed supply chain.
Planning is, like a roadmap, static; a snapshot of circumstances at one point in time. Actually getting the product to the right place at the right time is the execution part of the process. What happens when – en route – there is a road block, a detour, a traffic jam, a flat tire, or any of a number of other hazards that is unexpectedly encountered? Now, for our personal vehicles, there are OnStar® and similar products for automatic notification and contact for emergency services, vehicle diagnostics, and directions. Some of these products can transmit speed and location alerts on vehicles while another family member is behind the wheel.
But, what can we do about our businesses?
SAP EM adds a new dimension to the concept of planning: planning for the un-planned or anticipating what can interrupt completion of the plan. Good planning takes historical performance into account; it includes, for example, in forecasting, the mean average deviation of past forecasts compared to the actual demand. But
- It is still a backward looking method taking past performance into account to plan the future. As we all know from the disclaimer: past performance is not indicative of future returns. And
- Best practices imply continuous improvement, so replenishment reliability should be constantly improving. Plan B – safety stock levels – should take this improvement trend into account, but will still always lag and will not be reflected in the near term.
The old adage, “failing to prepare is preparing to fail,” applies here. Not many businesses in this age of modern management theories and techniques fail to plan but, in my own personal experience, most businesses fail to prepare. Anticipation of obstacles, unreliability, undependability, and disappointment is typically not part of planning, and so it is a failure to prepare. And having a “Plan B” is not adequate preparation if we don’t know we need it until after the fact.
Besides, how much are companies prepared to invest in Plan B’s – especially in today’s environment of Lean Business Practices? With today’s systems technology, for example, a purchase order is scheduled to arrive not only on a particular date, but at a specific time of day – down to the second. It is scheduled to arrive then, but are we prepared to make a delivery promise to our customer based on the schedule information? If we can’t rely on it, then we’re essentially passing our uncertainty along to our customer.
SAP EM provides the ability to anticipate breakdowns in the supply chain, elevate them in near real time (if and when they occur), and act in time to recover from them.
The gaps between planning and execution include failures, breakdowns, and delays in
- Customer order volumes and processing,
- Production,
- Delivery schedules from suppliers,
- Shipping and transportation,
- Storage and material handling,
- Systems failures and integration points,
- Communication – loss or miss-handling of documents in processing.
Both ends of the supply chain – customer delivery and supplier delivery are affected by transportation delays. Every product today is highly transportation dependent.
And in every supply chain, links break. It’s inevitable. SAP EM can track expected completion of every task linking suppliers and customers, as well as internal tasks relating to production, material handling, storage, and data processing.
But wait – like they say in the TV infomercials – there’s more! SAP EM can continue to add value long after supply chain processes are completed. It is tightly integrated with Business Warehouse (BW, SAP’s information warehousing, intelligence, and reporting system). SAP EM can push data to BW so that tough questions can be asked and answered – questions like
- How well did our supply chain perform?
- Which partners are not performing at their agreed service levels?
- Where are breakdowns in our processes occurring?
- Did the change we made in our process last month have a positive – or any – effect?
- What’s our order processing cycle time?
- What percentage of orders went through without incident?
We all love it when a plan comes together, but – often – making a plan “come together” requires the ability to improvise, modify, adapt, and overcome when it begins to fall apart. And the ability to overcome depends on being alert to delays and breakdowns in a timely enough fashion to react and recover.
At Sapphire, 2000, I felt that SAP EM was cool; since then, I have come to feel that it’s something that no supply chain should be without.
And it’s still cool.
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