The “New Normal” of the Extended Supply Chain as it relates to SAP S/4 HANA
Reflecting on the evolution of the modern day supply chain, both in my engagement with customers and through my own experience as a consumer, I am struck by the obvious. Virtually every dimension of the extended supply chain can be characterized by faster and faster business processes. This starts with research and development where a great majority of industries are now competing through more frequent product introductions, shorter product lifecycles and, in many cases, individualized products.
Once these new products are introduced into the supply chain — and our globally competitive markets — the ability to forecast and plan is becoming more difficult. Companies are reaching downstream to point-of-sale and/or network sentiment demand signals, and even so, forecast improvement is reaching diminishing returns. The result is that companies must plan and replan with ever increasing frequency to understand what to produce or procure. Demand-pull processes are a growing trend, even within classic make-to-stock industries, such as Fast Moving Consumer Goods (FMCG).
Fulfillment cycles are shorter, both in B2B where we are seeing a growing percentage of orders requiring same day or next day shipment, and in B2C, where we see the emergence of omnichannel fulfilment — with real-time sourcing decisions and fulfilment within hours. A prime example of this is Amazon Now’s offering of a mere one-hour delivery turnaround from order to fulfillment.
On the manufacturing side, we see the need for shorter (or no!) frozen periods, with frequent manufacturing rescheduling, shorter changeovers and smaller lot sizes. From an asset management perspective this drives the need for factories with continuous uptime, predictive diagnostics and proactive preventative maintenance.
In other words, every aspect of the modern supply chain is characterized by “the need for speed.” This represents an important ongoing paradigm shift in the extended supply chain requiring restructured processes, real-time architectures and fast innovation and deployment cycles for the enabling software across all of these domains.
In this context, we should see SAP’s recent innovations in extended supply chain management as a strategic foundation rather than a list of technical enhancements. This foundation consists of:
- HANA itself, a revolutionary memory-resident database enabling the rapid execution of business processes, with intrinsic analytics support to enable rapid decision making
- SAP S/4 HANA, a re-architected ERP platform with simplified data structures and clean, easily consumed user interfaces
- A supply and demand information platform to enable scalability and the ability to achieve real-time accurate inventory (eliminating background or batch back-flushing, for example) to enable fast, accurate re-planning and order confirmation
- The ability to embed advanced warehouse management and transportation management directly in the digital core thereby eliminating latency and allowing for fast planning and execution of pick/pack/ship processes
- Direct integration to the shop floor via SAP Connected Manufacturing to capture real-time status and quality information and to be able to re-plan and reschedule production assets with minimum “frozen” horizon
- The SAP Asset Intelligence Network enabling effective collaboration among manufacturers, service providers, asset operators and others on asset usage and performance
- A suite of new tools to simplify and accelerate the end-to-end processes of research and development: portfolio management, product data management, integrated authoring tools, and product visualization capabilities
- Embedded access to real-time data into all of the above processes through a comprehensive platform and integration to the myriad sources of data associated with the Internet of Things.
Prior to these innovations, the world of supply chain management was becoming progressively siloed, consisting of a suite of applications targeted to individual functions. This led towards high latency and sub-optimization. The results of each process were then passed to the next, and the whole insufficiently responsive to companies seeking fast decision-making.
What was needed was a new paradigm, with a real-time information foundation and applications able to interoperate with zero latency to drive decision-making and execution. SAP S/4HANA is such a paradigm, with SAP S/4HANA Enterprise Management as the digital core, and a set of HANA applications built on top, across all dimensions of the extended supply chain this enables businesses to make decisions both accurately and holistically.