Are Companies Realising the Full Value of SAP?

Overview

SAP (ECC & S/4HANA) is the ERP of choice for large and medium sized companies. But how effective and efficient are their implementations? Are companies maximising the benefits of the business-critical information stored within SAP?

With the desire of organisations to move towards further digital transformation, this white paper analyses key Inbound Supply Chain and Logistics functions and questions whether the benefits of SAP could be more fully realised by using add-on applications.

It challenges users to critically review existing processes by carrying out internal reviews. The results could be eye opening.

Key Inbound Supply Chain and Logistics Activities

Master Data

Master data is core to the successful functioning of any companies’ operation. Invalid or incomplete master data can result in impaired and delayed decision making and even disrupt business operation.

For example, an incorrect base and/or alternative unit of measure for a material (e.g., packaging foil defined in centimetres rather than metres) could affect the quantity in the purchase order, cost calculations and the quantity picked. These errors are generally discovered but cause delay and waste time.

Although SAP master data is extremely comprehensive the outdated user interface is unstructured and confusing with the result that:

• Extra care needs to be taken when configuring the system
• Comprehensive SOPs (Standard Operating Procedures) need to be written and maintained in order to retain the know-how
• Professional training and support are required for new users

Missing and invalid field values, duplicate records, and materials not being applied to all organisational levels is commonplace. This problem is time consuming to validate and correct. Bulk update functionality is also very restrictive meaning that corrections can be very time consuming to perform.

Organisations should analyse whether there is scope for making the management process more productive and cost effective by asking themselves the following questions:

• How long does it take to add a new material?
• How much time is spent correcting errors and maintaining existing master data?
• Are materials being defined according to company standards?
• Is it easy to spot and resolve duplicates?
• How many records are missing required field values?
• Is there too great a reliance on undocumented operator knowledge?
• How long does it take to train new users?
• How much time is taken in supporting users?
• How often is the business disrupted due to invalid master data and what is the estimated cost of this?

There are highly productive turnkey add-on tools available in the marketplace so if these questions highlight productivity, financial and compliance concerns within their own organisations then it would be worth researching the options available.

Material Planning

SAP resource and capacity planning functionality is well proven, powerful, and comprehensive. However, the User Experience (UX) is confusing and non-intuitive; making it impossible for organisations to extract maximum benefit from applying it. The poor user interface (mainly list based) is ideal for identifying why an issue occurred but poor at highlighting potential issues in advance.

Functionality is spread across many transactions (menu options) and requires a trained logistics expert to use and interpret the plan created by SAP. This can be a big issue given the critical nature of the process and the fact that it is relevant to so many roles within the business.

Due to the complexities of SAP planning (S&OP and Demand Management), many companies prefer to use Excel and make manual entries in SAP based on their forecast requirements. This is a time-consuming process, negates the undoubted power of the SAP planning functionality and adds risks to the process.

A key requirement of some manufacturing industries (e.g., food & pharmaceutical) is to ensure that material is consumed before its expiry date (First Expiry First Out – FEFO). Failure to use it results in the material being discarded which can be extremely costly. Standard SAP does not highlight the impact of expired material in its plan. Likewise, it is not ideal for highlighting the cost impact of the plan.

In order to establish whether the material planning process can be improved the following questions should be considered:

• Is the planning activity restricted to highly skilled resources?
• Can the plan be interpreted by all stakeholders?
• Is Excel being used to produce the material plan? if so, how much time is spent manually entering the results into SAP?
• How effective is the planning process? Are mistakes being made and if so, how many and what is the cost?
• Has material been under/over stocked and has there been wastage due to material passing its expiry date? If so, what is the cost?

The ability to execute comprehensive data analytics is critical to an organisations ability to save money.

There are web and Fiori add-on applications that utilise the full functionality of SAP but display the results in a much more intuitive fashion (i.e., in the form of a time-based planning chart). All demand management functions can be performed within the applications including amending MRP master data and creating planned orders.

Purchase Document Release

With standard SAP the process of releasing a purchase document (purchase requisition, purchase order, contract etc.) requires users to access an option from the SAP desktop application that displays little additional information than the document itself.

Many user roles (e.g., production manager, warehouse manager etc.) must find time from their daily activities to review and release purchase documents. If they wish to investigate the business requirement for the purchase (e.g., current stock levels, the budget status, the vendor delivery history, and the price) then they need the time and sufficient SAP expertise to locate the information. This can cause a delay in the document release process with a potential negative impact on the business.

It is not surprising therefore that many purchase documents are released without sufficient investigation of the current business need and benefits. The purchase of raw materials without an understanding of delivery timescales, current stock levels and production requirements can be costly.

The SAP Fiori web application enhances the purchase release process although without costly customisation it does not provide all the background information required for users to confidently provide release approval.

A critical appraisal of an organisations SAP implementation should be made to help establish whether SAP needs augmenting for the purchase document release process by asking the following questions:

• Are purchases taking place before there is a business need?
• Are purchase documents properly reviewed for price, quantity, and budget etc. before being released?
• Is the current purchase lifecycle taking too long?
• How effective is the configured release strategy?
• Does sufficient research take place to find the supplier with the best price, quality, and delivery timescales?
• Is there a requirement to add release strategies to document types not currently supported by SAP (e.g., Reservations, Budget Documents, Billing, Request for Payment etc.)?

By scoping the answers to these questions, organisations will likely end up with a justification and a business case to improve the purchase release process.

Modern, easy to use add-on applications are available that enable users to research, review and approve from any web enabled device.

The Return on Investment (ROI) implementing these tools will be very fast and of low risk.

Purchase Document Status Tracking

Queries relating to the status of purchases occur daily. These might be from a user who is required to release a document, from production who need the items urgently or from the supplier who is waiting for the purchase order or payment. The range of queries are endless and take time to investigate.

Supervisors/managers time is disrupted in accessing an SAP terminal to determine the status of a purchase order, or more commonly the queries are escalated to the purchasing department who need to allocate staff time to respond to them. As a result, questions rarely get answered in real time and the process results in a reduction in productivity and in stakeholder frustration.

SAP contains all the information required to optimise the purchase lifecycle and identify bottlenecks but without customisation it is too time-consuming to access. Key performance indicators such as: average vendor delivery times, vendor price fluctuation, average time to release a purchase document etc. are critical for streamlining the process. But do companies have ready access to this information?

A rigorous process review in the application of SAP to purchase document tracking should be carried out by the organisation. In this review the following questions need to be asked:

• How much time do supervisors and managers spend checking on purchase status or on answering questions from stakeholders
• How disruptive is it to the purchase department responding to internal and vendor queries
• Are purchase documents taking too long to be released and can it be identified where the bottlenecks are?
• How long does it take to respond to a purchase query and is this causing stakeholder frustration?
• Is it easy to identify which vendors have the best/worst delivery performance?
• What would be the impact of enabling vendors to query purchase document status online (via a third-party database)?

Fully scoped answers to these questions will likely result in a business justification for an improvement to the current methodology.

There are SAP add-on applications that are specifically designed to provide full purchase tracking functionality from purchase requisition through to vendor invoice – with full KPI capability. There are also tools available to enable vendors to query purchase document status (including functionality to book delivery slots) using a web application.

These deliver massive improvements in user satisfaction and productivity.

Material Management

Whether SAP IM (Inventory Management) or WM (Warehouse Management) is being used the process of moving materials always takes place (i.e., goods receipt, internal movement, and goods issue).

If material movements are recorded directly at an SAP terminal, then there is a reliance on information being recorded in a timely fashion and correctly i.e., there is the risk of transcription errors. The operator recording the movement is unlikely to be the person who actually performed the action which can raise Good Practice concerns and traceability issues.

If material movements are recorded using handheld devices, then stock should be accurate in real-time. However, the confusing user interface in SAP can result in user error or even operators bypassing the electronic system altogether. Moving material outside the scope of SAP (e.g., from the warehouse to a staging area) raises traceability issues but can also result in inaccurate quantities being recorded at a batch/lot level. An additional issue arises with the use of handheld scanners in that SAP cannot be sure that the logged-on user actually performed the movement and there is no real evidence that the correct material was moved.

Inaccurate stock control impacts decision making for almost every role in a company from purchasing through to planning, production, sales, and finance so can be very costly to the business.

Organisations need to critically analyse the effectiveness of the existing material management process by asking the following questions:

• Can the stock records be relied upon?
• Is stock updated in real time?
• Have there been errors in material movement (e.g., wrong quantities or the movement wasn’t recorded)
• How much support is required to resolve issues?
• Is it difficult to identify the source of errors?
• Are training costs considered to be too high?
• Is the cost of ownership excessive (e.g., supporting the SAP server and proprietary handheld scanners)

Properly scoped answers to these questions will likely raise Productivity, Financial or Compliance concerns highlighting the need for improvement.

Modern web and Fiori fully integrated SAP applications are available on the market and support any mobile device (such as a smartphone) with support for electronic signatures and photographic evidence.

Implementing these will enable the elimination of the typical errors and avoidance strategies employed by existing SAP users resulting in significant cost savings.

Summary

SAP is a powerful ERP which, with configuration and customisation, can provide a robust framework for almost any business requirement. However, the old-fashioned user interface and complexity of use means that many functions are too difficult for users to apply with the result that SAPs rich functionality rarely gets fully used to enable the organisation to extract maximum value from the installation.

Each operational function needs to be analysed to determine whether SAP is providing the information required to run the business effectively.

Rigorous analysis would in many cases result in the conclusion that the organisation could be better served by using an add-on application.

Add-on applications provide benefits both to the business and to users. These include enhanced productivity, financial savings, focussed business insights, greater data integrity, good practice and compliance; with the result, maximum value is obtained from an organisations SAP implementation.

The Author

John Roberts is Technical Sales Director of Asaptek Ltd. He has been helping manufacturers worldwide improve their business processes, save costs, and maintain compliance for more than 25 years.

Asaptek Ltd

Asaptek are suppliers of SAP applications that are designed to improve personal productivity and provide senior management with a more flexible way to extract the information they need to make business-critical decisions

The product suite was launched in 2016 and is being used by hundreds of companies across North and South America and Europe.

https://www.asaptek.co.uk

Copyright Notice

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