Driving Change – A Supply Chain Scenario
For certain types of products, we like to be able to choose our own options. That may be a computer – the size of the hard drive, the memory and the display. Or my favorite – a car – choosing a convertible or coupe, the color of the body (and the top, if it is a convertible), the engine size, the types of seats, and a myriad of other options.
The manufacturer then takes our custom order, and needs to produce the car according to our specifications.
Now imagine an automotive manufacturer that produces multiple car models, each with many different options. Some options are common to various models; some are very different. Also, the customer should only be presented with combinations that can actually be manufactured – for example, the customer should not be offered the option of the roof color if the car is not a convertible.
With so many options, let’s say there are an average of 3500 materials that go into the production of each single car. And if 500 cars are being produced daily, potentially with different combinations of options, there could be up to 10 million material and inventory postings in one day, to ensure that the right parts are ready for the production line.
In the past, any issues with the production line, and with any cost overruns, would not be visible immediately, so any actions to solve the situation could not be implemented until after reports had been run, which often occurred overnight. And for costing, those reports sometimes only ran at the end of a period.
Now, with SAP S/4HANA, and its solutions for the extended supply chain, it is not necessary to wait for overnight processes. For example, if there is a shortfall with a supplier, the system can actually run predictive scenarios and make a recommendation of how to solve the situation, be it a substitution of a critical part or the selection of a different supplier. The recommendation can be accepted by just one click, ensuring reducing any delays in manufacturing, and ensuring customer satisfaction. And any cost overruns can be analyzed immediately to see if a different supplier has a significantly higher cost associated with delivering parts with little lead time, which leads into the evaluation of any mitigating strategies to solve production issues.
Based on responses to our SAP Value Engineering surveys, using this hypothetical example, benefits can include:
- Increased material posting throughput: 5-25x
- Reduced manufacturing costs: 2-4%
- Reduced manufacturing cycle time: 6-8%
- Reduced scrap value: 22.5-28%
- Lower treasury and cash management FTEs: 56%
You may not be a car manufacturer – you may produce other types of make-to-stock or make-to-order goods, including consumer products. Or you may be in the process industry, such as oil and gas. But can you afford to not at least investigate the benefits of SAP S/4HANA extended supply chain solutions for your own organization?