Supply Chain Management in SAP Environment: An Overview

In SAP, Supply Chain process is categorized into three different sub-processes-

1. Supply Chain Planning
2. Supply Chain Execution
3. Supply Chain Collaboration

 These three sub-processes further cover the following areas in SAP:

 

Here is a brief description of all the three areas in SAP’s own language:

Supply Chain Planning:

 

 Supply Chain Execution:

 

 

Supply Chain Collaboration:

As I mentioned earlier Supply Chain process starts with the Supply Chain planning. SAP has two different applications for this purpose- SAP ECC (or SAP R/3) and SAP SCM- APO (Advanced Planner and Optimizer).

SAP ECC is meant to integrate all the functional areas within a company and thus consists of various functional modules such as Sales & Distribution (SD), Material Management (MM), Warehouse Management (WM), Finance & Controlling (FICO), Human Resources (HR) and so on. SAP ECC provides industry specific business solutions i.e. there is a different version of SAP ECC for different industries.

SAP APO, as the name suggests, is an advanced planning system. It consists of five modules- Demand Planning (DP), Supply Network Planning (SNP), Production Planning & Detailed Scheduling (PPDS), Global Available-To-Promise (GATP), Transportation Management (TM) which was formerly known as Transportation Planning and Vehicle Scheduling (TPVS).

Initially whole sales process from creating an Inquiry to receiving payment from the customer is run in SAP ECC system so all the closed and open sales orders sit in SAP ECC system. This means SAP ECC server contains all the historical data required for future sale forecasting and demand planning.

This planning data (Master Data) is transferred from SAP ECC system to SAP APO system through an interface called Core Interface (CIF). SAP APO system requires different types of data for different types of planning and CIF is perfectly capable of migrating any type of master data required by SAP APO system for planning purpose. Now SAP APO system processes the data and sends the recommendations back to SAP ECC system where those recommendations, with minor manual interventions, are put to execution to get the desired results.

This process can be explained by the following diagram:

 

The SAP SCM system is a planning tool that cannot be used in isolation. During planning, SAP SCM relies on data from SAP ECC (stocks or sales orders, for example), while dates and quantities planned in SAP SCM are executed in SAP ECC. The planning process in SAP SCM is therefore linked to a constant exchange of data between SAP SCM and SAP ECC.

Planned independent requirements in SAP SCM can result from Demand Planning in SAP SCM itself (release the forecast to SAP SCM Demand Planning, for example). However, these planned independent requirements can also be transferred to SAP ECC for further planning.

Sales orders and planned independent requirements form the starting point for Supply Network Planning (SNP) and Production Planning / Detailed Scheduling (PP/DS) in SAP SCM. Existing storage location stock is also included in planning. Sales orders are entered in the SAP ECC system and transferred from there to SAP SCM.

In Supply Network Planning (SNP) you plan the short or medium term horizon for the entire supply chain: You generate stock transport requisitions (for planning and stock transfer) between distribution centers and plants and can also use SAP SCM SNP to generate planned orders (for in-house production planning) and purchase requisitions (for external procurement planning) directly in the production plant for the longer term horizon. In Production Planning and Detailed Scheduling, however, you usually generate planned orders and purchase requisitions directly in the production plant for the short-term horizon. Transaction data generated in SAP SCM is transferred using the SAP ECC SCM interface (CIF: Core Interface) to the SAP ECC system for execution.

Following diagram helps to understand it better:

(reference: Business processes in supply chain planning and SAP SCM integrated modeling)

Here is a high level classification of data objects to be transferred via CIF:

Master Data:

Location (Plant, Customer, Vendor)

Products

Resources

PPM (Production Process Model)

Characteristics

Stocks:

Storage Location Stock

Stock in Transit

Special Stock

Project Stock

Transaction Data:

Purchase Requisitions/ Orders

Sales Orders

Production Orders

Planned Orders

Planned Independent Requirements

Planning Results:

Orders- Production Orders/ Procurement Orders

VMI Sales and Purchase Orders

ATP Results

In my next postings, I will show you how this process practically works in SAP environment.