Description
A vendor management system (VMS) is an Internet-enabled, often Web-based application that acts as a mechanism for business to manage and procure staffing services – temporary, and, in some cases, permanent placement services – as well as outside contract or contingent labor
SAP SCM SUMMIT
Best Practices for Supply Chain Optimization in SAP for Vendor Managed Services
Ken Kumar & Gautam Mandal SAP Supply Chain Summit, July 2011
SAP SCM SUMMIT
About Presenters
Ken Kumar, Director – IT Applications, Celgene
• Ken’s expertise is in Supply Chain and Business Applications in Life Sciences, & CPG/Retail. Ken has more than 17 years of SAP system expertise and over 20 full lifecycle SAP implementation experience. He has successfully architected several applications and led many large implementations.
Gautam Mandal, Sr. Manager – SAP, Cognizant
• Gautam has 15 years of SAP implementation experience in supply chain and customer solution area. Gautam has done over 10 full cycle SAP implementations in Life Sciences, Hi-Tech, Manufacturing, Energy & Utility, and Chemical industry sectors.
2
SAP SCM SUMMIT
Any views or opinions presented in this material are solely those of the authors and do not necessarily represent those of the company. The company accepts no liability for the content of this material, or for the consequences of any actions taken on the basis of the information provided.
3
SAP SCM SUMMIT
Agenda
About the Presenters SAP Project Drivers Approaches for ERP Roll-out Classic SAP Application Overview A typical SAP ERP Landscape Illustration Adapt SAP ASAP methodology to Validation Protocols Supply Chain Process using Vendor Managed Services
Demand / Supply Planning Contract Manufacturing Execution Product Distribution using 3PL Service
Conclusion
4
SAP SCM SUMMIT
SAP Project Drivers
Business Drivers can include the following
Consolidate legacy systems into one system for quicker access and better customer service Separation of business processes and system from prior divestiture Simplify and improving the current business process Foundation to build on future growth Reduce the amount of paper reports contributing to a greener environment Optimize Legacy Pricing structures
5
SAP SCM SUMMIT
Approaches for ERP Roll-out
Big- Bang
Big Bang with completed functionality High Risk and no real time evaluation of success until later
Multiple phased
Typical recommended strategy is multi-phase approach with manageable functionality and /or Location • Phase 1: Finance, Order to Cash, Chargeback, and Procurement • Phase 2: Manufacturing Operations – MM/PP/QM/WM • Phase 3: Supply chain Roll-out
6
SAP SCM SUMMIT
Classic SAP Application Overview
SAP integrates departments and processes across Company into one system, running of a single database, enabling various departments to share information and communicate with each other. The following SAP functions should be considered Finance & Controlling • AR, AP, GL, Asset Accounting • Cost Center, Cost Element, Profit Center Accounting, Internal Order and Product Costing Sales & Distribution • Order to Cash IP Vistex • Contract Management and Chargeback Processing Material Management • Procure to Pay BW SolMan • Subcontracting SD CRM FI • Stock transfer • Batch Management and Shelf life MM CO Warehouse Management PP AA Production Planning SAP ECC • Demand Management, MPS / MRP • PP-PI : Process Orders QM Quality Management • Quality Inspections WM Vistex • Quality Notifications
GRC RWD 7
SAP SCM SUMMIT
Classic SAP Application Overview (2)
In addition to the business utilizing the business functionality of SAP, SAP houses data elements that are key outputs for the business users for decision making: Sales Reporting: A daily sales revenue report Purchasing Approval status report Chargeback report Order Reconciliation report Shipment report Government reports – ASP, AMP, VA report Pick lists in warehouse Packing Slips Invoice Goods issue document Purchase orders
SolMan
BW
SD MM PP
CRM
FI CO AA
SAP ECC QM WM
Vistex GRC RWD 8
SAP SCM SUMMIT
A typical ERP Landscape Illustration with Vendor Managed Services
SAP ECC 6.0
EDI system (GIS)
Trading Partner
Chargeback Processing (IP Vistex)
Production Planning (PP) Quality Mgmt (QM) Warehouse Mgmt (WM) Material Mgmt (MM)
Finance & Controlling
General Ledger Bank Accounting Accounts Payable Accounts Receivable Fixed Assets Cost Center Accounting Profit Center Accounting Internal Orders & Product Costing Excel / Fax
Direct Customer
Order Processing (SD)
EDI
3PL WMS System
SAP GRC
SAP BI
SAP RWD
BPC
SAP Solution Manager
(Implementation, Support, documentation, Issue, defect tracking)
Contract Manufacturer System
9
SAP SCM SUMMIT
Adapt SAP ASAP methodology to Validation Protocols
ASAP Methodology coupled with GxP Validation Process and SOX compliance
Solution Manager Validation Master Plan
Release
PQ OQ
User Requirements
Acceptance Testing Integration/System Testing
Business Benefits • Deliver Consistent Validation •
documents Reduction of cost of validation
Business Process Models & Functional Specifications Design & Program Specifications
Installation Qualification (IQ)
Validates hardware and software installation of Quality and Production systems Validates integrated systems / processes. Generally performed by IT / users in Quality system . It is equivalent to Integration testing or UAT Validates critical processes in Production system . Typically performed by users in Production system (PRD)
Unit Testing
Operational Qualification (OQ)
HW/SW Installation
Installation Verification
IQ
Performance Qualification (PQ)
Configuration Customizing
10
SAP SCM SUMMIT
Agenda
About the Presenters SAP Project Drivers Approaches for ERP Roll-out Classic SAP Application Overview A typical SAP ERP Landscape Illustration Adapt SAP ASAP methodology to Validation Protocols Supply Chain Process using Vendor Managed Services
Demand / Supply Planning Contract Manufacturing Execution Product Distribution using 3PL Service
Conclusion
11
SAP SCM SUMMIT
Supply Chain Processes using Vendor Managed Services (1)
In the Context of Vendor Managed Services in Supply Chain operations, the following processes can be outsourced
Contract Manufacturing Finished Goods Distribution using 3PL
Contract Manufacturing
A company plans for in-house manufacturing and external procurement Some manufacturing operations are subcontracted to a Third Party Contractor
• Specialized operations managed by company and subcontract general services • Complete outsourcing of manufacturing operations • Contract manufacturing to meet additional demands
Finished Goods Quality assurance is performed by Contractor and Company
12
SAP SCM SUMMIT
Supply Chain Processes using Vendor Managed Services (2)
Finished Goods Distribution using 3PL
3PL manages the Finished goods warehouse 3PL ships the products to customer based on ship order notification from Company
Key Features :
Long / Medium term supply chain planning collaboration between Company and Contractor and demand/supply optimization Short term manufacturing schedule optimization e.g. sharing weekly production schedule for firm zone. Production plan amendment by Company or Contractor in collaboration if there is a resource constraint Contractor Manufacturing execution and process hand-off Collaborative Finished Goods Quality assurance Product cost calculation for Contract Manufacturing Distribution and Inventory optimization using 3PL
13
SAP SCM SUMMIT
Supply Chain with Contract Manufacturing Operations - Schematic Diagram
SAP ECC6.0 system
SAP ECC Demand Management
Contractor System
Demand / Supply Plan
Demand Planning
Demand / Supply Collaboration
SAP ECC MPS and MRP Material Management
Supply Planning
PP-PI
Material Management
PR for Raw Material procurement
Planned Orders for Semi-Finished
PP-PI
Subcontract PR for FG
Closed Loop Process
Process Order for Inhouse Mfg (Semi-Finished)
Subcontract PO & issue SemiFinished
Issue Components (Semi-finished Product)
Manufacturing of Finished Goods Quality Inspection
Finished Goods Inventory
Quality Inspection Usage Decision
Inspection Lot
Goods Receipt against Subcontract PO
Finished Goods
Delivery
Invoice Finished Goods Distribution
Vendor Invoice Processing
Payment
Customer Invoice Processing
14
SAP SCM SUMMIT
Agenda
About the Presenters SAP Project Drivers Approaches for ERP Roll-out Classic SAP Application Overview A typical SAP ERP Landscape Illustration Adapt SAP ASAP methodology to Validation Protocols Supply Chain Process using Vendor Managed Services
Demand / Supply Planning Contract Manufacturing Execution Product Distribution using 3PL Service
Conclusion
15
SAP SCM SUMMIT
Demand /Supply Planning : SAP ECC6.0 Demand Mgmt / MPS/ MRP based solution
Demand Plan using SAP ECC6.0
Demand is generated and managed using SAP Demand Management as Plan Independent requirement (PIR) Sharing Production plan data between Company and Contractor Contractor performs their Demand / Supply and Capacity Plan and high level agreement is made
Supply Plan using SAP ECC6.0 – MPS and MRP
Monthly MPS run to get all Finished Goods manufacturing plan Weekly MRP generates Planned Order for In-house manufacturing and Purchase Requisition for external procurement and subcontract products Capacity planning to review constraint resources Communicate Medium Term production schedule to Contractor and agreement is reached. Any changes are fed back to Planning cycle Share Final weekly production schedule for firm zone
16
SAP SCM SUMMIT
Demand / Supply Planning : Alternative Approach
Demand Planning using SAP-APO Demand Planner Supply Planning using SAP-APO SNP
Constraint base planning Cost and implementation complexity is much higher
17
SAP SCM SUMMIT
Agenda
About the Presenters SAP Project Drivers Approaches for ERP Roll-out Classic SAP Application Overview A typical SAP ERP Landscape Illustration Adapt SAP ASAP methodology to Validation Protocols Supply Chain Process using Vendor Managed Services
Demand / Supply Planning Contract Manufacturing Execution Product Distribution using 3PL Service
Conclusion
18
SAP SCM SUMMIT
Contract Manufacturing using PP-PI and MM Subcontract Purchase Order (1)
Semi Finished Product Manufacturing using PP-PI
Semi Finished Product is manufacturing using SAP ECC PP-PI Process Orders SAP WM Material Staging functionality can be used to stage Raw Materials at shop floor
MM-Subcontract Order for Contract Manufacturing
Semi Finished product is issued to Contractor against SAP ECC Subcontract Purchase Order Contractor completes Finished Goods Manufacturing and delivers FG and report Semi Fished Product consumption
Receipt of FG and consumption of Semi Finished goods in SAP against Subcontract Orders
19
SAP SCM SUMMIT
Contract Manufacturing using PP-PI and MM Subcontract Purchase Order (2)
Finish Goods Inspection and Release Inspection Lot is generated during Goods Receipt Final release of FG will be carried out by Company. FG is released based on QA inspection report from Contractor and Company Quality Notification functionality can be used for quality defect tracking and resolutions The Release FG is moved to 3rd Party Logistics provider for Warehousing & Distribution
20
SAP SCM SUMMIT
Contract Manufacturing using PP-PI and External Processing - Alternative Approach
External Processing of Operations
In this approach, Process Order operation steps using processed externally i.e. Contract Manufacturer. For example, Operation 20 is subcontracted to external Vendor and rest of the operations are managed in house.
SAP SCM SUMMIT
Product Cost Estimate – Subcontracting Vs. External Processing
External Processing Cost of Producing FG Material includes
• Raw Material, Labor, Machine time, Manufacturing Overheads and Quality Overheads Subcontracting Fee
Sub-Contracting Cost of Producing Semi-finished Material includes following inputs
• Raw Material, Labor, Machine time, Manufacturing Overheads and Quality Overheads
Cost of Producing FG Material includes
• Bulk Material Cost, and Subcontracting Fee
•
Raw Materials
Raw Materials
Bill of Material
Recipe
Product Cost for Semi Finished
Bill of Materia l
Product Cost for Finished Goods
Bill of Material
Product Cost for Finished Goods
Routing Subcontract ing Fees
Labor Machine Time Mfg Overheads QA Overheads
Labor Machine Time Mfg Overheads QA Overheads External Processing Fees
22
SAP SCM SUMMIT
SAP Configuration and Customization for Contract Manufacturing
Production Planning
Demand Management MPS MRP PP-PI: Process Order
Material Management Configure Subcontract Purchase Order
23
SAP SCM SUMMIT
Agenda
About the Presenters SAP Project Drivers Approaches for ERP Roll-out Classic SAP Application Overview A typical SAP ERP Landscape Illustration Adapt SAP ASAP methodology to Validation Protocols Supply Chain Process using Vendor Managed Services
Demand / Supply Planning Contract Manufacturing Execution Product Distribution using 3PL Service
Conclusion
24
SAP SCM SUMMIT
Product Distribution using 3rd Party Logistics Services – System design consideration
Arms-Length Relationship
Company and 3PL uses their own systems for internal operations OTC and Inventory processes are integrated using EDI / interfaces Provides Arm-length relationship with 3PL with independent infrastructure Extendable for other providers easily No SOX or Audit related issues Typically higher investment in process design and maintenance
3PL using company’s IT infrastructure
3PL service personnel log-in in companies ERP system and perform relevant shipping and inventory management transactions No investment in process or interface design Manage separation of 3PL using tight Authorization control
25
SAP SCM SUMMIT
3PL Arms-Length Relationship – Classic scenario for OTC and Stock Transfer
Stock Transfer to 3PL Location Order to Cash Processing
Customer Order Invoice Inventory Adjustment Transactions in SAP
Inventory Management
SAP System
Stock Transfer Order (STO)
Finished Goods
STO Delivery
Goods Receipt Confirmation
Delivery
PGI
Ship Order to 3PL
Advance Ship Notification (ASN)
3PL Warehouse
Goods Receipt at 3PL Warehouse
Physical Inventory Pick, Pack and Shipment Scrapping Reporting
Finished Goods
Inv. Adj interfaces
26
EDI / Interfaces
Advance Ship Notification (ASN)
Warehouse Receipt
SAP SCM SUMMIT
SAP Configuration and Customization for 3PL Arms Length Relationship
Materials Management Configure Stock Transfer Order (STO) with delivery SAP ALE/IDOC and EDI or custom interface with 3PL for • Shipment notification • Receipt confirmation • Inventory adjustment transactions Sales & Distribution Configure Order, Delivery and Billing functions SAP ALE/IDOC and EDI or custom interface with 3PL for • Ship order notification to 3PL • Shipment notification from 3PL
27
SAP SCM SUMMIT
Agenda
About the Presenters SAP Project Drivers Approaches for ERP Roll-out Classic SAP Application Overview A typical SAP ERP Landscape Illustration Adapt SAP ASAP methodology to Validation Protocols Supply Chain Process using Vendor Managed Services
Demand / Supply Planning Contract Manufacturing Execution Product Distribution using 3PL Service
Conclusion
28
SAP SCM SUMMIT
Conclusion
Organizations are moving more towards virtual entity and managed services are becoming part of organization processes Integration of ERP with third party systems for vendor managed services is a must have requirement for effective control and reporting Integration with vendor managed processes is a challenging task for IT team SAP ECC system & processes provides a great deal of flexibility in process design and implementing best practice as described in two typical processes in the presentation e.g.,
• Third Party Contractor manages contract Manufacturing • Finished Goods Warehousing & Shipment by 3PL Services
29
SAP SCM SUMMIT
Questions ?
Contact:
[email protected]
30
doc_432760656.pdf
A vendor management system (VMS) is an Internet-enabled, often Web-based application that acts as a mechanism for business to manage and procure staffing services – temporary, and, in some cases, permanent placement services – as well as outside contract or contingent labor
SAP SCM SUMMIT
Best Practices for Supply Chain Optimization in SAP for Vendor Managed Services
Ken Kumar & Gautam Mandal SAP Supply Chain Summit, July 2011
SAP SCM SUMMIT
About Presenters
Ken Kumar, Director – IT Applications, Celgene
• Ken’s expertise is in Supply Chain and Business Applications in Life Sciences, & CPG/Retail. Ken has more than 17 years of SAP system expertise and over 20 full lifecycle SAP implementation experience. He has successfully architected several applications and led many large implementations.
Gautam Mandal, Sr. Manager – SAP, Cognizant
• Gautam has 15 years of SAP implementation experience in supply chain and customer solution area. Gautam has done over 10 full cycle SAP implementations in Life Sciences, Hi-Tech, Manufacturing, Energy & Utility, and Chemical industry sectors.
2
SAP SCM SUMMIT
Any views or opinions presented in this material are solely those of the authors and do not necessarily represent those of the company. The company accepts no liability for the content of this material, or for the consequences of any actions taken on the basis of the information provided.
3
SAP SCM SUMMIT
Agenda
About the Presenters SAP Project Drivers Approaches for ERP Roll-out Classic SAP Application Overview A typical SAP ERP Landscape Illustration Adapt SAP ASAP methodology to Validation Protocols Supply Chain Process using Vendor Managed Services
Demand / Supply Planning Contract Manufacturing Execution Product Distribution using 3PL Service
Conclusion
4
SAP SCM SUMMIT
SAP Project Drivers
Business Drivers can include the following
Consolidate legacy systems into one system for quicker access and better customer service Separation of business processes and system from prior divestiture Simplify and improving the current business process Foundation to build on future growth Reduce the amount of paper reports contributing to a greener environment Optimize Legacy Pricing structures
5
SAP SCM SUMMIT
Approaches for ERP Roll-out
Big- Bang
Big Bang with completed functionality High Risk and no real time evaluation of success until later
Multiple phased
Typical recommended strategy is multi-phase approach with manageable functionality and /or Location • Phase 1: Finance, Order to Cash, Chargeback, and Procurement • Phase 2: Manufacturing Operations – MM/PP/QM/WM • Phase 3: Supply chain Roll-out
6
SAP SCM SUMMIT
Classic SAP Application Overview
SAP integrates departments and processes across Company into one system, running of a single database, enabling various departments to share information and communicate with each other. The following SAP functions should be considered Finance & Controlling • AR, AP, GL, Asset Accounting • Cost Center, Cost Element, Profit Center Accounting, Internal Order and Product Costing Sales & Distribution • Order to Cash IP Vistex • Contract Management and Chargeback Processing Material Management • Procure to Pay BW SolMan • Subcontracting SD CRM FI • Stock transfer • Batch Management and Shelf life MM CO Warehouse Management PP AA Production Planning SAP ECC • Demand Management, MPS / MRP • PP-PI : Process Orders QM Quality Management • Quality Inspections WM Vistex • Quality Notifications
GRC RWD 7
SAP SCM SUMMIT
Classic SAP Application Overview (2)
In addition to the business utilizing the business functionality of SAP, SAP houses data elements that are key outputs for the business users for decision making: Sales Reporting: A daily sales revenue report Purchasing Approval status report Chargeback report Order Reconciliation report Shipment report Government reports – ASP, AMP, VA report Pick lists in warehouse Packing Slips Invoice Goods issue document Purchase orders
SolMan
BW
SD MM PP
CRM
FI CO AA
SAP ECC QM WM
Vistex GRC RWD 8
SAP SCM SUMMIT
A typical ERP Landscape Illustration with Vendor Managed Services
SAP ECC 6.0
EDI system (GIS)
Trading Partner
Chargeback Processing (IP Vistex)
Production Planning (PP) Quality Mgmt (QM) Warehouse Mgmt (WM) Material Mgmt (MM)
Finance & Controlling
General Ledger Bank Accounting Accounts Payable Accounts Receivable Fixed Assets Cost Center Accounting Profit Center Accounting Internal Orders & Product Costing Excel / Fax
Direct Customer
Order Processing (SD)
EDI
3PL WMS System
SAP GRC
SAP BI
SAP RWD
BPC
SAP Solution Manager
(Implementation, Support, documentation, Issue, defect tracking)
Contract Manufacturer System
9
SAP SCM SUMMIT
Adapt SAP ASAP methodology to Validation Protocols
ASAP Methodology coupled with GxP Validation Process and SOX compliance
Solution Manager Validation Master Plan
Release
PQ OQ
User Requirements
Acceptance Testing Integration/System Testing
Business Benefits • Deliver Consistent Validation •
documents Reduction of cost of validation
Business Process Models & Functional Specifications Design & Program Specifications
Installation Qualification (IQ)
Validates hardware and software installation of Quality and Production systems Validates integrated systems / processes. Generally performed by IT / users in Quality system . It is equivalent to Integration testing or UAT Validates critical processes in Production system . Typically performed by users in Production system (PRD)
Unit Testing
Operational Qualification (OQ)
HW/SW Installation
Installation Verification
IQ
Performance Qualification (PQ)
Configuration Customizing
10
SAP SCM SUMMIT
Agenda
About the Presenters SAP Project Drivers Approaches for ERP Roll-out Classic SAP Application Overview A typical SAP ERP Landscape Illustration Adapt SAP ASAP methodology to Validation Protocols Supply Chain Process using Vendor Managed Services
Demand / Supply Planning Contract Manufacturing Execution Product Distribution using 3PL Service
Conclusion
11
SAP SCM SUMMIT
Supply Chain Processes using Vendor Managed Services (1)
In the Context of Vendor Managed Services in Supply Chain operations, the following processes can be outsourced
Contract Manufacturing Finished Goods Distribution using 3PL
Contract Manufacturing
A company plans for in-house manufacturing and external procurement Some manufacturing operations are subcontracted to a Third Party Contractor
• Specialized operations managed by company and subcontract general services • Complete outsourcing of manufacturing operations • Contract manufacturing to meet additional demands
Finished Goods Quality assurance is performed by Contractor and Company
12
SAP SCM SUMMIT
Supply Chain Processes using Vendor Managed Services (2)
Finished Goods Distribution using 3PL
3PL manages the Finished goods warehouse 3PL ships the products to customer based on ship order notification from Company
Key Features :
Long / Medium term supply chain planning collaboration between Company and Contractor and demand/supply optimization Short term manufacturing schedule optimization e.g. sharing weekly production schedule for firm zone. Production plan amendment by Company or Contractor in collaboration if there is a resource constraint Contractor Manufacturing execution and process hand-off Collaborative Finished Goods Quality assurance Product cost calculation for Contract Manufacturing Distribution and Inventory optimization using 3PL
13
SAP SCM SUMMIT
Supply Chain with Contract Manufacturing Operations - Schematic Diagram
SAP ECC6.0 system
SAP ECC Demand Management
Contractor System
Demand / Supply Plan
Demand Planning
Demand / Supply Collaboration
SAP ECC MPS and MRP Material Management
Supply Planning
PP-PI
Material Management
PR for Raw Material procurement
Planned Orders for Semi-Finished
PP-PI
Subcontract PR for FG
Closed Loop Process
Process Order for Inhouse Mfg (Semi-Finished)
Subcontract PO & issue SemiFinished
Issue Components (Semi-finished Product)
Manufacturing of Finished Goods Quality Inspection
Finished Goods Inventory
Quality Inspection Usage Decision
Inspection Lot
Goods Receipt against Subcontract PO
Finished Goods
Delivery
Invoice Finished Goods Distribution
Vendor Invoice Processing
Payment
Customer Invoice Processing
14
SAP SCM SUMMIT
Agenda
About the Presenters SAP Project Drivers Approaches for ERP Roll-out Classic SAP Application Overview A typical SAP ERP Landscape Illustration Adapt SAP ASAP methodology to Validation Protocols Supply Chain Process using Vendor Managed Services
Demand / Supply Planning Contract Manufacturing Execution Product Distribution using 3PL Service
Conclusion
15
SAP SCM SUMMIT
Demand /Supply Planning : SAP ECC6.0 Demand Mgmt / MPS/ MRP based solution
Demand Plan using SAP ECC6.0
Demand is generated and managed using SAP Demand Management as Plan Independent requirement (PIR) Sharing Production plan data between Company and Contractor Contractor performs their Demand / Supply and Capacity Plan and high level agreement is made
Supply Plan using SAP ECC6.0 – MPS and MRP
Monthly MPS run to get all Finished Goods manufacturing plan Weekly MRP generates Planned Order for In-house manufacturing and Purchase Requisition for external procurement and subcontract products Capacity planning to review constraint resources Communicate Medium Term production schedule to Contractor and agreement is reached. Any changes are fed back to Planning cycle Share Final weekly production schedule for firm zone
16
SAP SCM SUMMIT
Demand / Supply Planning : Alternative Approach
Demand Planning using SAP-APO Demand Planner Supply Planning using SAP-APO SNP
Constraint base planning Cost and implementation complexity is much higher
17
SAP SCM SUMMIT
Agenda
About the Presenters SAP Project Drivers Approaches for ERP Roll-out Classic SAP Application Overview A typical SAP ERP Landscape Illustration Adapt SAP ASAP methodology to Validation Protocols Supply Chain Process using Vendor Managed Services
Demand / Supply Planning Contract Manufacturing Execution Product Distribution using 3PL Service
Conclusion
18
SAP SCM SUMMIT
Contract Manufacturing using PP-PI and MM Subcontract Purchase Order (1)
Semi Finished Product Manufacturing using PP-PI
Semi Finished Product is manufacturing using SAP ECC PP-PI Process Orders SAP WM Material Staging functionality can be used to stage Raw Materials at shop floor
MM-Subcontract Order for Contract Manufacturing
Semi Finished product is issued to Contractor against SAP ECC Subcontract Purchase Order Contractor completes Finished Goods Manufacturing and delivers FG and report Semi Fished Product consumption
Receipt of FG and consumption of Semi Finished goods in SAP against Subcontract Orders
19
SAP SCM SUMMIT
Contract Manufacturing using PP-PI and MM Subcontract Purchase Order (2)
Finish Goods Inspection and Release Inspection Lot is generated during Goods Receipt Final release of FG will be carried out by Company. FG is released based on QA inspection report from Contractor and Company Quality Notification functionality can be used for quality defect tracking and resolutions The Release FG is moved to 3rd Party Logistics provider for Warehousing & Distribution
20
SAP SCM SUMMIT
Contract Manufacturing using PP-PI and External Processing - Alternative Approach
External Processing of Operations
In this approach, Process Order operation steps using processed externally i.e. Contract Manufacturer. For example, Operation 20 is subcontracted to external Vendor and rest of the operations are managed in house.
SAP SCM SUMMIT
Product Cost Estimate – Subcontracting Vs. External Processing
External Processing Cost of Producing FG Material includes
• Raw Material, Labor, Machine time, Manufacturing Overheads and Quality Overheads Subcontracting Fee
Sub-Contracting Cost of Producing Semi-finished Material includes following inputs
• Raw Material, Labor, Machine time, Manufacturing Overheads and Quality Overheads
Cost of Producing FG Material includes
• Bulk Material Cost, and Subcontracting Fee
•
Raw Materials
Raw Materials
Bill of Material
Recipe
Product Cost for Semi Finished
Bill of Materia l
Product Cost for Finished Goods
Bill of Material
Product Cost for Finished Goods
Routing Subcontract ing Fees
Labor Machine Time Mfg Overheads QA Overheads
Labor Machine Time Mfg Overheads QA Overheads External Processing Fees
22
SAP SCM SUMMIT
SAP Configuration and Customization for Contract Manufacturing
Production Planning
Demand Management MPS MRP PP-PI: Process Order
Material Management Configure Subcontract Purchase Order
23
SAP SCM SUMMIT
Agenda
About the Presenters SAP Project Drivers Approaches for ERP Roll-out Classic SAP Application Overview A typical SAP ERP Landscape Illustration Adapt SAP ASAP methodology to Validation Protocols Supply Chain Process using Vendor Managed Services
Demand / Supply Planning Contract Manufacturing Execution Product Distribution using 3PL Service
Conclusion
24
SAP SCM SUMMIT
Product Distribution using 3rd Party Logistics Services – System design consideration
Arms-Length Relationship
Company and 3PL uses their own systems for internal operations OTC and Inventory processes are integrated using EDI / interfaces Provides Arm-length relationship with 3PL with independent infrastructure Extendable for other providers easily No SOX or Audit related issues Typically higher investment in process design and maintenance
3PL using company’s IT infrastructure
3PL service personnel log-in in companies ERP system and perform relevant shipping and inventory management transactions No investment in process or interface design Manage separation of 3PL using tight Authorization control
25
SAP SCM SUMMIT
3PL Arms-Length Relationship – Classic scenario for OTC and Stock Transfer
Stock Transfer to 3PL Location Order to Cash Processing
Customer Order Invoice Inventory Adjustment Transactions in SAP
Inventory Management
SAP System
Stock Transfer Order (STO)
Finished Goods
STO Delivery
Goods Receipt Confirmation
Delivery
PGI
Ship Order to 3PL
Advance Ship Notification (ASN)
3PL Warehouse
Goods Receipt at 3PL Warehouse
Physical Inventory Pick, Pack and Shipment Scrapping Reporting
Finished Goods
Inv. Adj interfaces
26
EDI / Interfaces
Advance Ship Notification (ASN)
Warehouse Receipt
SAP SCM SUMMIT
SAP Configuration and Customization for 3PL Arms Length Relationship
Materials Management Configure Stock Transfer Order (STO) with delivery SAP ALE/IDOC and EDI or custom interface with 3PL for • Shipment notification • Receipt confirmation • Inventory adjustment transactions Sales & Distribution Configure Order, Delivery and Billing functions SAP ALE/IDOC and EDI or custom interface with 3PL for • Ship order notification to 3PL • Shipment notification from 3PL
27
SAP SCM SUMMIT
Agenda
About the Presenters SAP Project Drivers Approaches for ERP Roll-out Classic SAP Application Overview A typical SAP ERP Landscape Illustration Adapt SAP ASAP methodology to Validation Protocols Supply Chain Process using Vendor Managed Services
Demand / Supply Planning Contract Manufacturing Execution Product Distribution using 3PL Service
Conclusion
28
SAP SCM SUMMIT
Conclusion
Organizations are moving more towards virtual entity and managed services are becoming part of organization processes Integration of ERP with third party systems for vendor managed services is a must have requirement for effective control and reporting Integration with vendor managed processes is a challenging task for IT team SAP ECC system & processes provides a great deal of flexibility in process design and implementing best practice as described in two typical processes in the presentation e.g.,
• Third Party Contractor manages contract Manufacturing • Finished Goods Warehousing & Shipment by 3PL Services
29
SAP SCM SUMMIT
Questions ?
Contact:
[email protected]
30
doc_432760656.pdf