Next-Generation Logistics: The Use Cases
In the last months you have probably heard a lot about the impact of the digital transformation on almost every aspect in life, society and especially on the way we work. This is dramatically changing expectations and behavior of customers who rather search for solutions than products. In combination with a smartphone, which disrupted already thousands of businesses alone, customers today are using many channels to the vendor – they are omnichannel.
The result is that businesses regardless of industry find themselves in a business-to-business-to-consumer (B2B2C) market nowadays and in consumer-to-business (C2B) soon, even those have been acting in a classical B2B market for decades. Many discussions and business guidelines only focus on the customer facing side. Most forget that it will affect the entire value chain of a company down to the suppliers. This is why we need to talk about the logistics of companies, especially goods producing companies and connect the dots between front and back-end.
If you really want to be successful in an environment of segment of 1, or lot size 1 – than you need to make sure you tackle it end-to-end. And if you have no glue what this is about, the problem starts right there as your business people are discussing – rather scratching their heads – exactly about this. But happy to explain further if you want, let us know. Back to the use case…
Use Case 1: Material Requirements Planning (MRP)
Most businesses today still follow the standard approach when it comes to material requirements planning, and yes – we have talked about this before.And yes, we have brought speed to the MRP process by leveraging our in-memory capabilities with SAP HANA before, with great success. But it is time to think ahead.
A MRP run is typically processed over a couple of hours, where sales orders and bills of materials are analyzed. At large customers with complex multi-level BOMs (Bill of materials) and many product variants, we even talk 48h. Running it over the weekend, on Monday, production planners and MRP controllers access these lists, print it out and do their planning step by step for the upcoming week, based on the data from last Friday.
But with bringing the customer to the center of action (segment of 1), evolving customer expectations business won’t be able to keep up with the rapid pace of change in the market space. Even if the market force them to provide their customers services level, they are not able to do so, because their backend systems simply doesn´t scale any more.
Typical workaround: increase inventory, thus costly.
Many MRP controllers don’t have insights in real-time. This leads to low inventory accuracy and revenue loss due to stock-outs or increased stocks that eat companies´ profitability. On-time delivery performance is critical for most businesses but a prerequisite to avoid customer churn and provide a seamless, personalized experience. Your competition is just one online-store (aka click) away.
How can supply and demand be matched in real-time?
To cater growing consumer demands, product planners and MRP controllers need instant access and prioritized view on material flow issues. Real-time alerting drives the responsible person to the exception, while the daily business is running without frequent interaction required decision making and finding the right supplier to order the right material has to be supported by system-generated solution proposals. Changing demand or orders placed at short notice has to be addressed by proactive decision making (produce to a lot size of 1). This can only be applied when inventory can be monitored in real-time and the creation of procurement proposals is automated.
The MRP Cockpit as part of the next-generation business suite, SAP S/4HANA, addresses these challenges
The MRP cockpit does not only improve visibility and speed but also work patterns. It delivers immediate and complete visibility on all crucial material KPIs and flow. In contrast to the classical approach, MRP can be run sub-daily and as frequently as required, not on a weekly base or overnight. As a result, demand information is propagated faster through the supply chain.
Access to inventory stock availability, lot sizes, manufacturing scheduling and sales orders, all in real time, helps MRP controllers to be exception handling-oriented. Flexible tailoring of available capacities and receipts help product planners to meet required quantities. Shortages can be identified before they happen enabled by personalized filters and attributes to analyze each shortage situation with high precision. Impact analysis of the entire material flow as required, identifies disruptions in the material flow. Get proposals for a solution based on existing orders, all sources of supply or inventory. Simulate the effect of a proposal by clicking on a solution guard and simply choose the best solution ready for real-time execution and ensure continuous improvement with a dynamic watch list of flags of materials.
You lead from instant insight to action, anytime, anywhere and from any device. The new MRP Cockpit actively taking all information and data into account, providing on the fly simulation and additional decision support directly provided by the system.
For the technical view of the use case above – #S4HANA use case series: 1b – next generation logistics (tech view) and follow me via @SDenecken for latest news.