JIT – Shaken, not stirred – Hybrid cloud for component manufacturing & Automotive subsidiaries

In this blog lets understand how the Hybrid cloud deployment model brings OEM and Automotive supplier together.

Just-In-Time Supply to Customer from Stock. This scenario is one of the most common scenarios you come across in the Component / Automotive industry.

As you may already understood on the Hybrid Deployment model which brings lot of benefit to the industries in a digital world, let us go in to the detail of the Supply Chain Eco system with respect to OEM and Automotive industries. In general, the Ecosystem is more complex as integrating each of the stakeholder in this ecosystem is a biggest challenge. Let us look in to other challenges this industry face:

Let me give some pointers on the currently challenges faced by the Automotive suppliers.

1.Inventory management is one of the challenges.Shortage/ Overstocking of inventory. Supplier must make sure that optimized inventory levels are maintained.

2.Visiblity of the demand plan. Because there is always fluctuation in the demand.

3.Forecast at upstream of Supply Chain not very accurate. This might result in building wrong inventory levels at supplier.

4.Automation required to manage the huge volume of transactional data along the Supply Chain network.

Automotive industry always surrounded by multi-tier of suppliers/Subcontractors/Dealers. From the Supply chain planning point of view, there is always expectation from the OEM, that the supplier should be able to supply the component at shorter lead time, right quantity, at the right sequence, to the right place. In short, they need to follow Just in Time and Just in Sequence methodology.

As a part of 1905 release new functionality of handling JIT calls is available which supports the collaboration of OEM and Suppliers.

The below High level architecture was already covered as 1905 release highlights, I list the same for continuity purpose here:

High level Architecture On-Premise to Cloud Hybrid deployment using middleware.

In this scenario we use Just-In-Time call (JIT Call). Which is nothing but the delivering goods on time and in quantity, based on a request named JIT call. The customer sends the JIT calls electronically through EDI standard messages to Supplier.

To adopt the JIT supply scenario. There must be long term contract between supplier and customer. In the system it is represented as outline agreements with target quantities per material for a contract period. There can be quantity agreements also.

Before proceeding with the scenario, you need to have completed the mandatory steps that are described as part of Set-Up Instructions guide for scope item 2EL Integration of Sales with External Buyers. This is a B2B integration with the corresponding Integration of SAP S/4HANA Cloud.

Preliminary Configuration OEM (On Premise).

1.ALE configurations like Defining the Logical System destination, Maintain ports and Condition records, from OEM system side.

2.To create JIT calls from customer use outbound Idoc type SEQJIT03-JIT: IDoc for sequenced/summarized JIT calls

Master Data Setup

Let me start with OEM/Customer system (S/4 HANA on Premise) side. Apart from the regular master data’s like Material master, Vendor,Purchasing Scheduling Agreement, Sales Scheduling Agreement and create customer material.

There are some KANBAN specific master data’s needs to be maintained. Here is the list of master data’s.

1. Create Supply Area
2. Create Control Cycle

Preliminary Configuration in Supplier (S/4 HANA Cloud)

Please refer the following APIs are used for this integration.

Cloud Side

• Assign the Sold to Party for EDI processing
• Convert the external number belonging to an EDI partner into an internal number.
• Assign a customer or a supplier to sales organization data for the Electronic Data Interchange (EDI) process.
• BRF+ settings are required for the Output Parameter Determination for the following business objects

1. 1. Outbound Delivery
   2. Picking List
   3. Advance Shipping Notification
   4. A communication arrangement is required for the Integration between SAP S/4HANA Cloud and the SAP Cloud Platform. Communication arrangement used for this SAP_COM_0168

Process Flow

Outbound from OEM system into Supplier system

• Production operator will use the Kanban board to change the status container status. In this case set the First set the Kanban container to empty. This is will trigger the external procurement in the form of new summarized JIT call assigned to your supplier in the OEM system.
• JIT Call contains the one or multiple items, Supplier details, Call component quantity, Schedule Agreement and Planned requirement date. There are different types of JIT calls are in use. Summarized JIT call,Sequenced JIT calls and Order-based JIT calls. JIT calls are created based on the control cycle reference. The control cycle will contains Replenishment strategy, number of Kanban’s and the quantity per kanban.

• In this scenario we use Summarized JIT call. In this It groups the material requirements into one call. You can group requirements according to plant or Vendor.
• You can transmit the JIT call to Supplier through the Outbound Idocs. This Idoc will go to CPI(Cloud Platform Integration) system.
• In the below example if you refer the external call number. The same number will be published in supplier system as well.

Inbound into Supplier system (S/4 HANA Cloud)

Create JIT Call

• JIT Call gets created at Supplier system based on the customer JIT call. It will have the external JIT call no (617). Which represents the customer JIT call no.
• There JIT specific apps (Manage Customer Just-In-Time Calls) are available to process the JIT calls

Create Outbound Delivery

• Shipping specialist will create the Outbound delivery from Summarized JIT call to ship the goods to customer. You can use Manage Customer Just-In-Time Calls app to create the outbound delivery or you can use background job.
• You can combine multiple JIT calls into single delivery item.You can also change the delivery quantity.
• Logs are also generated for every successful or unsuccessful or failed outbound delivery creations.After delivery creation the status of the JIT call status gets updated.

Picking and Post Goods Issue

• Shipping Specialist picks the goods from the storage location and do post goods issue of the material.
• After the PGI, there will be automatic Advance Shipping notification sent out to OEM system. Suppose if you would like to verify the confirmation has been sent out. Then check the Delivery document output status. It should be under completed status.

Billing

• Now the billing clerk will do the billing. An invoice is created and sent from the SAP S/4HANA system (supplier side) to the Buyer system.

Monitoring and Error Handling  

• Finally, we use AIF () monitoring Message Dashboard to verify or to do the Error Handling of the ASN/Billing notifications. The AIF enables you to monitor interfaces and their data messages and execute error handling in a single framework.

Stay tuned for further blogs in this series… and as always, keep your feedback flowing.

For more information on SAP S/4HANA Cloud, check out the following links:

• SAP S/4HANA Cloud release info: http://www.sap.com/s4-cloudrelease
• Best practices for SAP S/4HANA Cloud here
• SAP S/4HANA Cloud User Community: register here
• Feature Scope Description here
• What’s New here
• Help Portal Product Page here

Follow us via @SAP and #S4HANA, or myself via Srivatsan Santhanam | Srivatsan