What role does SAP play in Supply Chain Management?

Another buzz-term in many of today’s industries, supply chain management is often a department in its own right for larger companies. But small and medium sized enterprises (SMEs) are also now following the crowd by reviewing, renewing and revising their processes which result in supplying the end user with their product or service. Before we look at the role SAP has to play in these processes, let’s review some of the basics of supply chain management.

Supply chain management (SCM) is the management of a network of interconnected businesses involved in the provision of product and service packages required by the end customers in a supply chain. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.

[Source: Wikipedia]


Why is supply chain management such an important part of a business?

There are myriad reasons for improving your supply chain (see below) but it is widely acknowledged that a tighter integration between a principal wholesaler and its (global) distributors can only improve the overall success of an organisation which is reliant on excellent service to the consumer.


Main objectives of a robust supply chain management include;

  • Achieve optimum level of service to end-customers in global locations; offer the latest products with adequate information (standardised model numbers/data sheets/territory based price lists/etc.)

  • Improve available-to-promise information; stock on hand, stock in transit, etc.

  • Reduce warehousing needs and aged inventory; access to real-time information from distributors regarding stock on hand, incoming orders, and stock awaiting delivery.
    [Read post about warehouse management]

  • Insights into product demand in various territories – what is selling well & where

  • Optimise manufacturing and distribution; based on available-to-promise data

  • Reduce wastage at all levels of the business

  • Send required volumes to regional distribution centres (using larger craft at lower per unit transportation & handling costs) as well as from RDCs to trading entities
    [Read post about intercompany systems support]

  • More real-time consumption data to rapidly respond to changing consumer tastes & trends

  • Accurate and useful reports for ad-hoc and routine reporting (e.g. month-end reports)


How does SAP fit into the supply chain management?

A supply chain management system works well on a trusted ERP such as SAP Business One, particularly for distributor operations.

The biggest improvement can be seen when an organisation’s supply chain relies on information being exchanged between the principal and its distributors or different offices in various ways. Item master data and price lists can be pushed to distributors with the SAP integration tool – B1i. Subsequently, Crystal Reports and dashboards can be used to provide more intuitive reports across the business based on accurate and timely data.


How are processes within the supply chain supported by SAP?

Taking a simple sales process, this is how it would work:

Sales Quotation > Sales Order (Order Confirmation) > Information extracted from Sales Order sent to 3PL partner for order fulfilment > Fulfilment details sent back from 3PL > Generate AR Invoice

Processes typically undertaken by Third Party Logistics Partner/3PL (based on Service Level Agreement):

1. Order received with details of item(s) to be delivered to end-customer
2. Distributor arranges to collect the items from warehouse location
3. Warehouse coordinates the packing process and generates required labels as well as any additional documentation & delivery note
5. System receives alert to re-stock the sold items in the warehouse
6. Principal customer updates ERP for inventory & financials
7. Cycle counts performed and reports generated as agreed

This is achieved by a simple file export with the required data fields which is then sent to 3PL either manually, via ftp or other means. A more advanced option would also be to use B1i to facilitate the integration between an SAP Business One system & the 3PL’s system (SAP solution or other).

Need some more guidance on how SAP can support your supply chain management? Contact Blue Ocean Systems team of specialists today to learn more.

About Blue Ocean Systems

Arun Devan, Managing Director

I lead a team of Enterprise Resource Planning (ERP) experts to provide tailored SAP Business One solutions for a wide variety of industry sectors with specialised functions and accessibility tools.

My proven track record of zero defect implementations, leveraging 25 years of expertise in SAP R/2, R/3 and B1 deployments ensures each and every client benefits from an efficient implementation of their SAP Business One solution to enhance their operational capacity and growth immediately. Blue Ocean Systems Singapore implements and integrates customised SAP Business One Solutions to help our clients increase profitability and improve operational efficiencies.

Specialising in the implementation and support of SAP enterprise applications for small to medium sized enterprises (SMEs), we combine extensive experience and an unblemished history to deploy the right solution quickly for immediate improvements.

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