The benefits of SAP EM are dependent on the specific challenges an organization faces. This blog describes common challenges that we face today and the 2nd part of the blog will show how SAP EM can be leveraged to address this issues.
Current challenges in today’s environment could be described as follows:
Inflexible Business Model: In today’s environment, where supply chains are evolving into networks of entities, each performing their specialized tasks, having an inflexible business model leads to inefficiencies. Referring to Figure 1, a typical supply chain requires many entities to perform all the tasks required to move product from supplier to customer. New suppliers and logistics companies are always entering the marketplace as well as new entities, such as innovators and outsourcing partners. The challenge for today's company is to quickly on-board these entities, giving them visibility to your supply chain network and integrating them into their supply chain processes. Global pressure to reduce costs and increase service levels force companies to strive toward the most effective and efficient Supply Chains. Customers have a “I want it now” mentality and in order to remain competitive in this environment, companies need to whittle out every inefficiency in their supply chain. This is called “Collapsing the Supply Chain”.How can we quickly adapt to our changing supply chain needs?
Demand Driven Network out of sync from Supply: Supply Chain Networks are demand driven. As demand for goods and services increases, the supply chain must readjust by increasing supply at all points in the network.
How can we keep up with demand without overextending ourselves on supply?
Globalization complexity causes uncertainty ad chaos: In today’s economy where the customer base is worldwide, and supplier's locations are less relevant, it is imperative to know how well the global supply chain network is performing. In today's world a business must contend with different systems, different languages, different time zones, different political structures, different regulations, different currencies etc.... Many incongruities exist that must be kept in delicate balance at all times.
How do we keep it all on track?
Slow to innovate: Passion exists to reinvent and innovate. Curiosity seeks the answer to what it will take to drive the next revenue stream or capture the next cost reduction. As these new innovative thoughts become reality, they need to be introduced quickly into the supply chain for benefits to start being realized. If the innovation is a new product, then time-to-market is critical. To achieve a short turnaround time, the supply chain network must respond quickly.
How do we on-board a new idea quickly and get everyone in the chain working towards a common goal?
Limited Visibility to Process Status: When the supply chain network spans several organizations, there is limited visibility into each process’ status. In other words, it is difficult to see what is happening inside a supply chain process as it progresses from one entity to another. This lack of visibility leads to implementing manual process tracking and reporting capabilities as a solution, which can become very expensive. In addition, companies may decide to buffer their inventory to ensure delivery is achieved on time. Overstocked warehouses are inefficient and lead to a costlier inventory holding than is needed.
How is my process performing?
Long Cycle Times: There is an increasing need to collapse the supply chain - in other words, to reduce the period of time required to complete an operation. In order to achieve this reduction, minutes, even seconds, need to be shaved off of the time to action. Companies define 'The Plan' for a process. Any deviation from 'The Plan' is immediately reacted upon because an alert is sent to the appropriate individual, as opposed to having the bottleneck go unnoticed until it is too late.
How long does each process take?
Poor Customer Service: What happens when a customer calls inquiring about the status of their order? Without a complete picture of the supply chain process status, only a limited, outdated response can be offered, resulting in poor customer service. Good customer service leads to loyal customers. Keeping customers is a critical part of the business as it is more expensive to acquire a new customer than it is to retain an old one. Losing repeat customers will rapidly impact a company's bottom line negatively.
Where is my product? Why is it delayed? When can I expect it to be delivered?
Resource Wastage: When the supply chain experiences an unexpected turn of events causing a delay in the delivering of goods or services at a critical point, what is the best way to react? What if this event causes resources to waste time or material at a later part of the process? Product is scheduled to arrive at the warehouse by 3:00 PM. Warehouse workers will be onsite by that time to offload the material. If the goods are delayed, there will be a shift of warehouse workers twiddling their thumbs …
If an exception happens in my supply chain, can I automatically adjust the resource planning for future activities?
Risk mitigation: When products are shipped internationally in large containers, a high probability of contraband being included in the shipments exists. With thousands of containers being offloaded at ports around the world every day, government security agents are overwhelmed with the responsibility of monitoring who has had access to these Returnable Transport Items. Meeting government reporting requirements and insuring the safety of citizens in the destination countries are two of the tasks best accomplished by SAP EM. This system makes it easy for companies to show compliance at each leg of the supply chain network. SAP EM also makes it easy to record the exact location of the Returnable Transport Item, how long it was there and who was the responsible party.
Complex reporting needs: Reporting regulations are rigid and demanding in today's world. How can it be guaranteed that regulatory needs are being met by the reports? In addition, with a fast moving, demand driven, global process that is constantly changing, how can it be guaranteed all partners are performing? How is it possible to ensure that all bottlenecks are being addressed and load balancing is occurring? How often are target expectations missed? Do exceptions occur frequently?
- The first common element is the ability to respond - Companies cannot easily respond to these challenges when they have inflexible business models that hinder innovation. The bar for implementing efficient processes is high and hard to reach. For companies to stay competitive, i.e., to be able to react on a 24/7 basis, not 8/5, becomes increasing difficult as more economies around the world join the global marketplace.
- The second common element is efficiency - With the need to move new innovations to market quickly, efficiency is key. Additionally, achieving efficiency without sacrificing quality is essential.
Business ability to respond quickly / adapt….
How efficient can you make your process? => lower costs and time to deliver
- A third element is stability - If all the Supply Chain partners execute according to the plan, there are few unknowns in the process. If exceptions occur and we know that there is a process in place to effectively and efficiently deal with them, then we can still consider the process to be relatively stable. With a stable process in place we have the piece of mind to implement less “buffer” in to our process, thus collapsing the Supply Chain and leading to improved service levels.
Addressing these challenges....
Visibility: SAP EM provides maximum visibility across the supply chain network. This visibility allows for the detection of deviations in the demand and supply of goods and services. The various types of visibility addressed by SAP EM are:
- Process visibility
provides an end-to-end view of the status of the supply chain
operation. This view can be provided to all partners in the supply chain
arena, showing them relevant information, as and when it occurs.
How well are we doing now? Are there any immediate issues to address? Has an event occurred requiring rescheduling or re-resourcing?
- Asset and planning visibility gives details of asset location, availability, planning and scheduling for the process to and from each of the partners.
Where is our product? How much is going to arrive and when? Are we going to run into issues? Do we have sufficient capacity to complete the current process?
- Reporting visibility
recognizes the parameters defined in Service Level Agreements (SLA).
Business goals need to be defined and then measured. These values must
be visible to all parties associated with the operation, both inside and
outside the company.
How well are we doing overall? How is Vendor A performing? What percentage of orders will be delivered on time?
Ability to Respond: Through various integrated technologies, such as the SAP Alert Framework and SAP Business Workflow, SAP EM can inform the correct party of an action that needs to be taken when an exception occurs. The correct information is forwarded to the party for action. For example, SAP EM is tracking the task the machine performs, and the machine breaks down. When the machine fails to finish the task, the event is reported to SAP EM. A workflow is sent to the planner that also informs the planner that this machine is currently being used in two other processes, and will be used in three additional processes about to commence. The first two processes that are currently being worked on will be rescheduled and reassigned to another machine. The last three processes will be realigned with the new schedule.
The User Interface is a key to the success of any technical product. SAP EM provides a simple, easy-to-use web interface for reporting and capturing events. The alerts and workflows from these events can be sent to the user's company email inbox or remain in SAP, making the product one of the most user friendly in all of the SAP suite. With SAP EM 9.2 we have the ability to create your own user interface for SAP Fiori.
What value do we derive from SAP EM?
- Immediate value of SAP EM is high visibility of ongoing processes in the supply chain network.
- When the process fails to perform as planned, within SAP EM, an exception raises an alert to notify the proper individuals to take action. By promptly taking action, bottlenecks in the supply chain are resolved quickly. Customer service is improved.
- SAP EM minimizes exposure to regulatory requirements, and analyzes processes in detail via the built-in KPIs.
- Tight integration between events and their schedules leads to proactive monitoring and less reacting to emergency situations. When the processes are efficiently and effectively monitored, there is no need to buffer inventory for the 'just-in-case' scenario.
- Another valuable use of SAP EM is the tracking of outsourced, non-core events, being performed by third parties. Sending these message details through SAP EM are an effective way of monitoring these events, and thereby your outsourced partners.
Time to Action
Manage by Exception
- Most events are captured from a standard SAP transact based process: If no standard process exists, then SAP EM can fill that gap by directly capturing Events manually from within SAP EM itself.
- SAP EM performs status tracking: SAP EM uncovers process exceptions, adjusts the process status and initiates an exception handling process
- SAP EM provides visibility to vertically integrated supply chain processes. For example, the accounts payable employees have visibility to the status of a purchase order acknowledgment and the buyer will have visibility in to an invoice receipt status.
A real life look into the benefits of SAP EM for Order-to-Cash Visibility
The following section lists the benefits received from implementing SAP EM to monitor the Order-to-Cash process.
- Status Management
– At each stage in the business process, it is possible to view the
real-time status. The status of an order at the line item level is
updated, in real time, to reflect changes.
- Improved customer satisfaction through better informed partners (i.e., sales representatives, customers, suppliers, etc.) knowing the current status in real time.
- Improved customer satisfaction and more efficient customer interaction through the provision of a customer self service portal, by tapping into WIMO (Where is my order?) – single, simplified company interface to the status of an order throughout its life-cycle, delivered over various types of devices
- Reduced CSR (Customer Service Rep) average handling time due to greater efficiency in locating the status of an order (WIMO is the one stop shop for order status)
- Improved customer satisfaction through reducing uncertainties. A CSR can inform a customer when certain events are scheduled to occur.
- Fewer inbound customer phone calls to inquire on order status. Exposing the order status on the web or proactively via a text or email leads to happy informed customers who tend not to call in to the Service Center to inquire on an order status.
- Exception Management
– SAP EM stores 'The Plan' for the business process (when things are
supposed to happen, by whom and where) and measures 'The Plan' against
the ‘actual’ values. Exceptions to the plan are highlighted, in
real-time, and can be proactively resolved whether they are exception
events or delays in the expected process.
- Reduction in customer calls to answer concerns. Real time exception management with no lead time between when the system notices the exception to when it is delivered to the appropriate individual for resolution (reduced time to action) => reduction in total cycle time. Supplier notices the exception before the customer does...
- Improved customer satisfaction for timely, accurate communication. SAP EM has the ability to capture exceptions around the message of an event. For example, the PGI event at 10:00 PM says the PGI occurred at 2:00 PM ... the PGI event occurred on time, but the message reporting this was several hours late!!! SAP EM helps drive proactive behavior, especially in receiving timely accurate data from the organizations partners. This has a direct, positive impact with the customer.
- Reduced time to resolution through system automation of known issues. If exceptions are well categorized and the underlying data (master and transaction) is well formed, then automatic rescheduling and notification is possible => hands off automation to correct certain exceptions.
- Reduce CSR education effort by leveraging the tight integration between SAP Business Workflow and the SAP Alert Framework allowing easy use of the existing technologies to proactively work exceptions.
- Process Analytics
– SAP EM has tight integration with SAP NetWeaver BW where
comprehensive analytics can be performed showing performance of each
stage of the process. By deploying SAP EM on top of SAP HANA you could
leverage the power of SAP HANA analytics to display real-time process
processes by leveraging business intelligence derived from their actual
execution. Departments and individuals can be measured against 'The
Plan' and ultimately against their individual SLAs => bottlenecks can
be identified and process deficiencies addressed.
- Vendor scorecards can be enabled through SAP EM
- Cycle counts are possible for each stage of the business process.
- Process Cycle Count; Average Cycle Duration: 1.) Total Cycle, 2.) Order Create to Ready, 3.) Order Create to Delivery Create, 4.) Delivery PGI to Invoice Create;
- Percentage On-time vs. Early vs. Late: 1.) PO Goods Receipt, 2.) Delivery PGI, 3.) Invoice Create, and 4.) Order ready.
- Reduce uncertainty by knowing how the process is performing as opposed to guessing
- Improved processes by leveraging business intelligence derived from their actual execution. Departments and individuals can be measured against 'The Plan' and ultimately against their individual SLAs => bottlenecks can be identified and process deficiencies addressed.
- Visibility – All interested and authorized parties will have visibility to the status and attributes for their processes.
- Real Time Visibility to the status and exceptions occurring within the process => Better quality information regarding the process.
- Faster resolution of the root cause => if issues and exceptions are more visible, there is a more prevalent drive to reduce or eliminate them.
- Improved service levels => fewer surprises occur while the process is executing.
- Monitoring takes place through a standard SAP EM web interface.
- Notification takes place through the SAP Alert Framework (with email, pager, text or fax integration) or through a SAP Business Workflow notification.
- Adjusting the process takes place through SAP Business Workflow items, activities in SAP EM or kicking off actions in other systems.
- Analyzing measures the performance in a process, and this takes place in SAP NetWeaver BW or HANA Analytics where Key Performance Indicators (KPI) can be determined