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Point of View on Selected Topics for A&D Manufacturers

SAP and Siemens have recently announced a strategic partnership largely in recognition that both companies are philosophically aligned around the concept of leveraging a true “digital thread” to provide previously unachievable levels of innovation, efficiency, and accelerated industrial transformation to our joint customers. It’s been the dream of every manufacturer, product design team, and service lifecycle manager to have a single digital thread that integrates all the real-time information, feedback, performance, and data on a product from cradle to grave. The vision is that every downstream team will have in-the-moment access to what every other group is doing. Processes will go from reactive to predictive. SAP and Siemens have been pursuing a version of this vision independently up to now, and now we have aligned forces in the engineering and asset management domains, and our customers are understandably excited about the possibilities. However, at this point in time, SAP and Siemens have agreed to continue to provide customers a choice in the manufacturing domain (i.e., we do not have a joint, aligned strategy), and the two companies will consequently provide two different perspectives here. As a result of having different strategies and perspectives for data flows and solution architectures for manufacturing, each company will provide two different sets of attainable value, and it’s up to each of our customers to decide which value set is most important to them.

From SAP’s perspective, it is essential that manufacturing execution be as close as possible to supply chain business processes – planning, procurement, warehouse/inventory management, logistics – and embedded with other core ERP functions such as finance, project systems, and quality management. If you’re an A&D company, your corporate Executive Leadership Team describes in detail in its Annual Report the risks to company profitability, and they usually include such things as a preponderance of fixed price contracts and performance penalties, compliance with government defense accounting regulations, environmental compliance, quality issues, supplier performance, material availability, inaccurate cost estimates, cyber threats, improper cost allocations, and adverse findings from DCAA/DCMA audits.  Most A&D companies today largely mitigate these risks with the help of technology enablement from SAP, and it is therefore imperative from a business risk and profitability perspective to maintain a seamless and transparent flow of process and data  between manufacturing and the business in your production programs.

The Siemens-SAP agreement will only strengthen our existing capability of establishing and maintaining collaborative connectivity between design engineering data in PLM with core planning and production business processes in SAP. The SAP/Siemens partnership in engineering and at the junction of engineering and manufacturing is great news for our joint customers. With a jointly defined and supported interface between Siemens Teamcenter PLM core and SAP S/4HANA Manufacturing, companies can confidently rely on a streamlined, bidirectional flow of process and data between the applications. And when it comes to driving business processes and insights from manufacturing machine and shop floor data, SAP feels like we have the most robust and value-driven approach to Industry 4.0 and industrial IOT. I will use the rest of this blog to address some select topics that your company may be considering as it evaluates available options.

Concurrent Engineering

With Siemens bringing its world-class Teamcenter PLM application and SAP bringing its world-class S/4HANA Manufacturing system to the partnership, joint customers now rightly have high expectations on new levels of technology enablement for some of the core principals held dear by aerospace and defense manufacturers such as Concurrent Engineering. SAP absolutely believes in the concept of concurrent engineering as a key enabler of meeting customer requirements to cost and schedule targets and looks to extend it beyond where many PLM systems can go.  The Defense Acquisition University defines concurrent engineering as, “A systematic approach to the integrated, concurrent design of products and their related processes, including manufacture and support. Intended to cause developers, from the beginning, to consider all elements of the system life cycle from requirements development through disposal, including cost, schedule, and performance.” After the “organizing genius” of the  famed Skunk Works’ Kelly Johnson proved that advanced aircraft could be designed and built in record time during the 1960’s by co-locating different specialists of engineering and manufacturing in the same factory, many of these same concepts have been extended in the disciplines of what we know today as Systems Engineering, Integrated Product Teams and Digital Twin.

Concurrent Engineering is also known as “Design for X” or “Design for the ‘ilities”. The “‘ilities” are program specific, but typically include Design for Manufacturability, Assembly, Affordability, Reliability, Quality, Serviceability, Environmental Compliance, and others. Clearly, designing for these considerations cannot be met with a “throw it over the wall” mentality, and leading manufacturers are now using enabling technology, like software applications from SAP and Siemens, to foster collaborative, concurrent processes akin to what Kelly Johnson used to have in his small, self-contained Skunk Works but nowadays in much larger, geographically dispersed teams in a new form of virtual co-location.

With our integration, SAP can now help companies complete the Concurrent Engineering vision by bringing Program Management, Supply Chain Management, Purchasing, Quality Management, Aftermarket Sustainment, Finance and Accounting into the picture to ensure that products and their defining processes are truly optimized from an enterprise perspective for cost, quality and schedule. From SAP’s perspective, many aspects of Design for Manufacturability have been addressed well by the current generation of CAD/CAM systems, with 3D model-based definition having embedded geometric dimensioning and tolerancing, manufacturing machine programming instructions, etc. Our aim is to accelerate decision making, optimize productivity and improve quality by integrating the 3D visualization and product manufacturing information (PMI) from these models with the business data across the value chain. In addition, it allows the manufacturer to optimize their business operations simultaneously across multiple programs and sectors for new levels of enterprise profitability and shareholder value.

Comprehensive change impact analysis and quality assurance cannot be achieved unless MES is embedded with Supply Chain and Finance. As PMI is shared and manufacturing process instructions are defined inside of an SAP system, information can be tracked and shared down to the individual manufacturing station, even taking CAM programs generated in CAD/CAM systems (sometimes automatically generated on the 3D models) along with the routings that would be applied at the plant level. Combined with the 3D data-rich product model in SAP, the bi-directional collaboration enabled by the SAP Team Data Management Integration enables a truly enterprise engineering change process. Change Impact Analysis in the SAP Manufacturing system can now identify all engineering bills of material, manufacturing bills of material, planning bills of material, routings, production orders, and purchase orders impacted by engineering changes, which allows orchestration of change between individuals and departments using workflow.

This understanding of the variables that can impact actual manufacturing of a product, including the potential need to shift manufacturing not only to a new machine in a plant, but potentially to a new facility with different capabilities and options, where a Plant BOM needs to be derived that is unique to that plant and where appropriate routings for that plant need to be applied and supported, is key to providing a truly supported concurrent engineering platform.  Because the linkage between product definition and all the business information in the business system (ERP) is accessible to all the upstream and downstream operations, the business can now maximize profits through improved efficiencies and improved decision making throughout.

Exposure of this digital thread information to the right users at the right time is realized through the growing capabilities available for visual representations.  The SAP Visual Enterprise toolset recognizes that people are visual by nature.  SAP VE allows users both inside of engineering and throughout an organization to view and query the design with 3D viewing tools in their everyday workspaces on the devices of their choosing.  Like other tools on the market, this includes the ability to drive animations of parts and assemblies to visually communicate manufacturing or assembly work instructions to include in the digital thread for use on the shop floor or in the field.

However, SAP has gone way beyond traditional viewing tools by pervasively embedding 3D product visualization throughout the SAP application portfolio. SAP now enables a visual digital thread that empowers people with 2D, 3D and geo-enabled visualizations integrated throughout the enterprise with insights to improve key business decisions across the full product lifecycle. We can connect 2D & 3D CAD data with ERP and master data from design, procurement, supply chain, manufacturing, quality, asset operations and service to deliver a Model Based Enterprise. The 3D model is now a 3D visual index to enterprise data and analytics, providing access and visibility to reduce time for all stakeholders to make key business decisions. The unlocking of business data into this visual world, based on a common digital thread is unique to SAP and critical to making true Concurrent Engineering a reality.

Factory Simulation

There are many tools on the market for simulating factory layouts and production processes in 3D, and Siemens Technomatix and Dassault Systemes Delmia are prominent players. SAP does not have a similar tool set, and we co-exist with whatever simulation tools our customers are using. We consider these types of applications for factory design to be analogous to CAD tools for product design. They do not play a role in day-to-day development of MBOM, bill of process, routings, work instructions, etc. They are niche tools that are primarily deployed when setting up a new factory or new manufacturing process. We applaud their usage in these scenarios, but they should not impact a company’s strategy for a manufacturing engineering or production operations solution.

ISA-95 interpretation

The ISA-95 standard is developed with the objective to reduce the cost, risk and errors associated with implementing interfaces between enterprise and production control systems. Where such interfaces are required by our customers, the SAP Digital Manufacturing Suite fully supports the ISA-95 standard (SAP colleagues were founding members and authors of the standard). The standard does not dictate solution architectures or specify that IT systems much be modularized by “levels”. By providing a fully integrated shop-floor to top-floor solution stack, SAP has essentially minimized the need for our customers to worry about using the standard’s interoperability specifications, some of which can be quite heavyweight. On the other hand, we provide all the XSD schemas, and B2MML structures are fully supported. Any structure you can conceive in B2MML (standard or custom) is possible to generate and manage inside the SAP Digital Manufacturing Suite. And SAP also provides several additional powerful and flexible methods for integrating enterprise and production control systems, which is why you will find SAP as a common core in most industrial manufacturing architectures.

Although the standard is useful for its core objective, we also see the manufacturing industry changing fast with the advent of Industry 4.0 IOT and other intelligent technologies. The standard, initially developed two decades ago, needs to be reconsidered and expanded into the Industry 4.0 landscape and journey.  In SAP’s White Paper titled “SAP’s Strategy for Industry 4.0” we outline the challenges and the associated transformation that companies will have to pursue in order to meet the future demands on their manufacturing systems driven by customer needs.  This transformation includes the implementation of systems that follow the evolution of the traditional ISA-95 stack to a digital production platform that adheres the ISA-95 standard across all layers of the manufacturing systems pyramid.  For details please refer to section “Evolution of Production Software Stack” on page 13 of the white paper.

SAP is aware that there are those who believe in a modularized manufacturing application stack comprising separate applications broken out more or less according to the levels used in ISA-95 to define interoperability standards. SAP does not agree that there is any architecture specification dictated by ISA-95 nor that there is a need to necessarily separate applications if the architecture is properly designed and use cases are properly accounted for. In fact, a defense contractor could potentially create significant legal and financial liabilities by taking something as core as materials management and planning out of the core business system. SAP software may be an integral part of your company’s ability to not only operate its supply chain, manufacturing, sustainment and financial systems in the most efficient manner, but it also provides the capability to do so while addressing the Materials Management Accounting System (MMAS) compliance requirements inherent in US federal contracting. SAP strongly recommends a thorough review of DFARS Subpart 242.72 CONTRACTOR MATERIAL MANAGEMENT AND ACCOUNTING SYSTEM and Clause 252.242-7004 MATERIAL MANAGEMENT AND ACCOUNTING SYSTEM to avoid risks while considering new solution architectures.

In the event there are any residual concerns on how the SAP Digital Manufacturing Suite deals with architecture-related issues such as latency, availability and cybersecurity, we will address those in turn.

Latency and Availability

Questions around latency and availability are interlinked and are fully addressed by SAP. SAP and the large ecosystem of SAP partners have successfully addressed these issues for thousands of large manufacturing companies for many years.

The SAP Digital Manufacturing Suite provides solutions that are available fully on premise in your data center, on premise at the edge in your factory, in the cloud, or in a hybrid combination. For example, SAP’s solution for production engineering and complex assembly operations (SAP PEO) is typically run from a centralized server because these functions do not require millisecond processing response time. On the other hand, highly automated and machine connected manufacturing execution is typically managed with SAP ME/MII, which can be run in a remote data center or “at the edge” to service the manufacturing operations if latency and availability requirements are stringent.

The ultimate solution selection will depend on a company’s requirements around latency and availability, which is mostly driven by the performance of the underlying IT infrastructure (i.e., the infrastructure can be designed to spec).

In general, there are 3 aspects that need to be considered:

  1. Integration between automation systems (PLC’s, CNC, robots, IoT devices …) to the MES system
  2. ERP system availability
  3. MES System availability


  1. Integration between automation systems (PLC’s, CNC, robots …) and the MES system:

Integration between SAP Digital Manufacturing Suite solutions and automation devices will be orchestrated through SAP Plant Connectivity (PCo, a runtime component of SAP MII). For all manufacturing solutions we recommend implementing the device connector (SAP PCo) on the manufacturing floor network, often installed on the same server as the OPC-UA server, to eliminate latency issues or unnecessary network traffic outside of the manufacturing network.  SAP ME can be installed at the site level, regional level, on a central server or SAP Digital Manufacturing Cloud can be served from the cloud for execution. Other architecture solutions are possible and will depend on your IT infrastructure, latency requirements, and data volume, as well as security requirements. The bottom line is that the range of options that are possible with SAP can address latency concerns between automation systems and MES.

It is worth noting that there are some scenarios involving production control that are never orchestrated through an MES system. For example, if there is a 10ms response time requirement to stop a conveyor in case of a robotic arm failure, this scenario should be controlled through a PLC or some sort of IOT device that is directly tied to the robot’s IO system. Going through an MES system for any type of safety response requiring IO action (robot stops moving, conveyor stops moving etc.) is NOT the correct approach.

  1. ERP system availability:

Through robust HA/DR design and maintenance practices, many companies today operate ERP with 99.9% or better uptime availability. Furthermore, SAP manages thousands of companies’ ERP systems in the cloud, and in 2019 we had an average service level of 99.993%. We don’t feel like ERP availability is an issue at this point in time, and running SAP PEO embedded in ERP is low risk from an availability concern perspective.

It is also important to note that the executive leadership of the major A&D companies likewise do not believe this is an issue. In the early days of SAP PEO design, we consulted with the CIOs from Boeing, Lockheed Martin, Northrop Grumman, Textron, Safran, Newport News, etc. When presented with 2 choices – S/4HANA Manufacturing distributed or S/4HANA Manufacturing single instance – they overwhelmingly voted single instance.  They do not see S/4 downtime as an issue.

With that said, SAP ME is not dependent on ERP uptime and will continue to run even if the ERP system goes down for maintenance or otherwise.  Production orders and associated master data are downloaded into the ME system upon release to the shop floor for future execution.  In case of a disruption between ME and ERP, the ME system will continue to run the production floor based on the production order data that have been downloaded already.  Transactional data from the ME system to ERP will get buffered and executed once the connection has been reestablished. In short, we don’t have any major concerns in this area.

  1. MES system availability:

Depending on the uptime requirements, SAP ME can be installed following a HA and DR setup, allowing for automated failover. Upon review of the customer’s detailed requirements as well as infrastructure setup a recommendation can be provided.


A foundational principle of protection from cyber threats is to minimize the number of threat vectors that can be used by malicious actors, harden the assets you have and maintain proper failover redundancy. SAP’s perspective is that it is preferable to centralize where you can (i.e., where SAP PEO makes sense for the production use case) and distribute if necessary (to the edge when needed for highly automated, low latency situations). We are NOT a proponent of distributing IT applications for the sole purpose of providing “security buffers.”

SAP has extensive experience implementing highly secure approaches to securing industrial IOT networks in distributed environments, and a good summary of principals can be found here:

Practical Industrial IoT Security: SAP’s Digital Manufacturing Landscape

Practical Industrial IoT Security Part 2: SAP’s Latest Digital Manufacturing Landscape

We completely understand reluctance to adopt industrial IoT or Digital Manufacturing for security concerns, but SAP believes that security concerns should not be the main obstacle to embark on digital transformation in Manufacturing. The risk without question goes up, but we would argue this risk is controllable. We can make smart choices that limit the attack vector and avoid bad decisions that jeopardize the security of networks that we are currently reasonably comfortable with. A lot of security discussions in industrial IoT take place in the abstract, and can easily increase fear and doubt, rather than mitigate them. By instead looking at a real landscape and analyzing the actual data flows, we can have concrete discussions how to protect such environments and make progress.

As always, we recognize that this is an emerging field. Things move quickly and we will keep monitoring new developments. But we are increasingly convinced we have the tools and expertise to get this right. Now, it’s primarily a question of execution.

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