Illustrating SAP Product Footprint Management calculations with a simple, everyday example
Embedding sustainability as a key metric of success and enabling customers to assess, analyze and act on their sustainability targets has been high on the agenda for SAP. In a big step towards this goal, SAP recently introduced SAP Product Footprint Management. As described in this great deep dive from Nico Wottke, SAP Product Footprint Management is a cloud application running on the SAP Business Technology Platform, enabling the calculation of product footprints periodically and at scale across the entire product lifecycle.
In this blog post, we attempt to illustrate some of the product’s capabilities with a simple, everyday example and shed more light upon the different calculations being performed within the product. Sustainability is a key concern today for companies big and small, and in this blog post, we take the example of the smallest and the most common manufacturing facility there is – our home kitchens.
I, in this fictional example, cook (manufacture) great food in my kitchen (our plant) every day. To do so, I purchase grocery items (raw materials) a few times every month. Based on the time I have at hand, the number of items I need to purchase, and the prices and discounts offered, I get my grocery items from either a big online retailer I trust, a supermarket which is a short drive away, or a small vendor selling fresh produce near my house (my suppliers). I hope to soon consider sustainability as a key dimension as well when deciding on where to procure my groceries from.
At a glance, I can see that the first version of SAP Product Footprint Management can help me assess and analyze the total footprints (in kg CO2e) and footprints per unit (in kg CO2e per unit) of my purchased products. Both of these can be assessed at a plant-product-period and a plant-product-period-supplier granularity. And the calculations are based on the physical goods movements data already available in my SAP S/4HANA systems.
Considering our kitchen example, this means that the tool can analyze all material movements in and out of my kitchen and can offer me insights into the products I have stocked in my pantry (inventory). When I consider the footprints at a plant-product-period-supplier granularity, I can compare the footprints of the products procured from different suppliers and make more sustainably informed decisions in the future. For example, I can compare the carbon footprints of the rice I purchased last month from the online retailer to the rice I purchased from the supermarket – overall and per kg – and help it steer my decision-making the next time I am looking to restock. When I consider the footprints at a plant-product-period granularity, I have an overview of the sustainability impact of each product in my entire pantry. In our example, I shall have an overview of the carbon footprints – again, overall and per unit – for all the rice I have in my pantry (across suppliers), for all the wheat, for all the spices, and everything else. It is like having an additional (environmental) price tag I can see attached to each box I have in my pantry.
This is the power of what SAP Product Footprint Management already offers. As the logical next step, the product shall evolve to help assess the impact of manufactured products as well. That is, every time I cook in my kitchen, based on the ingredients I pick and their corresponding footprints we already have, the tool shall be able to derive the footprints for all of my amazing dishes. That will help me analyze the environmental impact of the dishes I cook and the ingredients I use to fine-tune how I cook my favourite dishes to optimize the overall impact of my actions.
Now – how are these calculations done and how are these footprints derived? With the derivation of footprints for purchased products based on physical goods movements, the calculations can be split into 4 major pieces.
The first piece is the derivation of footprints for ‘inflows from suppliers’. This calculates the footprints of my purchased products from my various suppliers. For this, the tool relies on the imported emission factors, which can be associated with different products at multiple levels of granularity via pre-shipped mapping templates. Depending on the specificity of the emission factors available, I can associate them with my products using a corresponding mapping template. In our example, let us assume that the online retailer I purchase my grocery items from is already publishing the carbon emissions for the products it sells on its platform. But a similar, specific emission factor is not available when I purchase from the small vendor near my house. In this case, I can map my product – the rice I purchase – to the specific emission factor available from the online retailer for my purchases from this supplier using the Product-Supplier mapping template. For my purchases from the other supplier, I can use a generic emission factor available from external lifecycle assessment (LCA) database providers like ecoinvent and map this generically to my product using the simple Commodity Code based mapping template. Once these mappings are maintained, the software automatically determines and picks the best or the most specific mapping available for my business data. So, for my purchases of rice from the online retailer, the maintained factor from the Product-Supplier template shall be considered, whereas, for my purchases of rice from the local vendor, the factor from the Commodity Code template shall be used in the calculations. With the emission factors available, the tool calculates the total and per unit footprints for the selected products, plants and periods for different suppliers, using the aggregated physical goods movements (specifically, inflows from suppliers) available from the connected SAP S/4HANA system.
The second piece of the calculation is the derivation of footprints for ‘inflows from other plants’. It may not be very common for our kitchen example (although I do need to borrow coffee sachets from my uncle next door more often than I’d like to admit), but inter-plant movements are a frequent activity for many customers. In this case, the tool does not re-calculate the footprints using emission factors but ‘carries’ the already calculated footprint for the product at stock from the source plant. Assuming my uncle was also running similar assessments for his purchases, I’d be able to carry the footprints for the coffee I borrowed from him. This shall consider the coffee he has available in stock from his different vendors. In the context of the tool, I will have to ensure that I include the source plant (my uncle’s kitchen) in addition to mine in the scope of my footprint calculations.
The third piece is the derivation of footprints for ‘outflows’. This includes all outflows from the stock I have in my inventory. It could be towards production (when I cook something), towards outflows to other plants (when I lend my uncle the broccoli I do not want to eat), or even towards scrappage (when I throw out expired products from my pantry). For all of the outflows, we again carry the associated footprints as in the case of ‘inflows from other plants’. The only difference here is that the footprints to be carried are from our current plant – as our kitchen is indeed the source plant in this case. But as you may have inferred, the same inter-plant movement is calculated as an ‘outflow’ at the source plant and an ‘inflow from another plant’ at the receiving plant. The footprint value associated with both is the same, like in a monetary transaction. One is a ‘debit’, while the other is a ‘credit’.
The fourth and final piece of this calculation is the derivation of the quantity and footprints at stock at the end of a particular period. That is, it tells me at the end of each month how much quantity of rice and other products is leftover in my pantry and what the associated footprints for the leftover items are. This derivation follows a basic formula of using the leftover inventory from the previous period, adding the inflows from suppliers as well as other plants during the current period, and subtracting the outflows during the current period. This is done for the quantities as well as the total footprints, and the final values for the two are used to then derive the footprint per unit of the product available at stock at the end of the period across different inflows and outflows. This is the environmental price tag in terms of carbon emissions that we mentioned earlier, being available for all our purchased products, which can then be carried forward. This means that this is the value that is used for the subsequent calculations of corresponding outflows from this stock. Note that since this calculation is done with a monthly periodicity, all movements during a period (a month) consider the latest available footprint per unit for the product at stock from the end of the previous period.
These four pieces of calculations are brought together into a single, pre-delivered calculation template for purchased products, available out-of-the-box for consumers. I only need to define the set of plants, products and periods I want to run the calculations for and configure the mappings as described earlier for these purchased products. Once these are defined, I can run the calculations for the entire period or choose to run delta calculations in subsequent periods. And, as a result, I can see the carbon footprints for my selected products.
And that’s all, folks!
We hope this blog helped you to better understand some of the capabilities of the first version of SAP Product Footprint Management and offered you some more transparency into the inner workings of this new product. Again, we would highly recommend you to go through Nico’s blog here for a deep dive into the product, if you haven’t already. There, you will also find details regarding upcoming product features and many additional resources.