How do the largest companies in the world monitor their supply chains?
The world’s largest companies rely on Enterprise Resource Planning (ERP) systems to run their supply chains.?So, which ERP is most utilized at enterprises with the largest supply chains in the world?
Beyond serving as the backbone of supply chains and operations, ERP systems facilitate collaboration among a company’s departments by offering a centralized database.
ERPs serve to incorporate operations across various business functions such as accounting, eCommerce, human resources, project management, procurement, and customer relationship management (CRM).
What can companies of all sizes learn from the "Walmarts of the world" about supply chain monitoring?
Put simply, the largest enterprises in North America generally run SAP S/4HANA .
As of February 2024, SAP reported that 85 of the world’s 100 largest companies were SAP S/4HANA customers. The largest companies also happen to have the largest supply chains.
SAP is the leading ERP run by Fortune 2000 companies in dozens of industries – most of which are built upon large, multinational, supply chains. Forbes Global 2000 companies are hardly different; 92% trust SAP to manage their supply chain operations.
However, since SAP is used extensively by a wide variety of professionals across 20+ industries, it shouldn’t come as a surprise that supply chain professionals have varied opinions on SAP:
"SAP has been a game-changer for our visibility and control over our supply chain. We can now track inventory in real-time, identify bottlenecks before they become problems, and react quickly to disruptions." - Supply Chain Manager, Fortune 500 manufacturer
"The integration of SAP with our other systems has streamlined our logistics and procurement processes. We've seen significant cost savings and improved customer satisfaction as a result." - Director of Supply Chain, mid-sized logistics company
"SAP's commitment to innovation gives me confidence that our supply chain will stay ahead of the curve. Their latest AI and machine learning tools are helping us optimize inventory levels and predict demand with greater accuracy." - Head of Supply Chain Operations, large retail chain
Even though the benefits of implementing S/4HANA (both on-prem and Cloud) are widely known , not all sentiments are... positive on SAP S/4HANA implementations:
"Implementing SAP was a monumental undertaking, and it took much longer and cost more than we initially anticipated. The learning curve for our team was steep." - Supply Chain Manager, food production enterprise
"We sometimes feel like we're just scratching the surface of what SAP can do. There's so much functionality, but it can be challenging to customize it to meet our specific needs." - Logistics Manager, mid-sized pharmaceutical company
"SAP can be rigid and unforgiving. It doesn't always adapt well to changes in our business or the market. We sometimes have to work around the system, which can be frustrating." - Director of Procurement, consumer goods company
Steep learning curves and customization difficulties are a couple of potential drawbacks associated with SAP's versatility, which can lead to implementation challenges. Predictably, implementation complexity, lack of integration with third-party applications, and budget are common concerns.
Beyond pain points: CIOs & Digital Transformation Leaders may be tasked with two difficult questions before implementation:
Tackling SAP implementation is like taming a wild beast, but amidst the chaos, it's easy to forget to give a little love to continuous system monitoring. Determining an average cost of downtime across enterprise supply chains is difficult; discrepancies in company size, industry and supply chain complexity further complicate this.
The severity of downtime can vary – a software glitch causing a very short delay is entirely different from a natural disaster shutting down a production facility. A single minute of downtime may be monetarily insignificant for smaller companies, while for larger enterprises, the same duration can trigger cascading effects with significant cost implications.
Decades of research suggests revenue lost to supply chain downtime can range from tens of thousands to millions of dollars per hour. Some estimates place the average cost of enterprise server downtime at $300,000 per hour, which likely underestimates losses for complex supply chain disruptions that occurred this decade.
Other studies like, ITIC's Global Server Hardware and Server OS Reliability Survey report in 2022 , indicated that 91% of respondents experience hourly downtime costs exceeding $301,000, with 44% of them indicating downtime losses greater than $1 million per hour.
To cite one industry example, a semiconductor production line disruption could cost millions per hour due to uncounted orders and potential chip shortages impacting other businesses. Meanwhile, a delayed container ship arrival at a major port might result in losses of only tens of thousands per hour due to storage fees and disruption of downstream logistical activities.
Of course, there are other factors that could influence the cost of downtime:
To embark on the perilous quest of uncovering the true financial dragon that is supply chain downtime, taking one or both of these paths may be of value:
Put simply, developing rapid response protocols can begin to reduce the impact and duration of downtime to ultimately minimize losses (who knew)?
To avoid supply chain downtime, how much budget should be allocated to monitoring SAP?
Thousands of organizations are tasked with answering this question each year – and finding an answer that fits their unique SAP-run supply chain landscape is easier said than done.
A quick Google search will likely reveal that supply chain monitoring expenditures can range from just a few thousand dollars for small businesses to millions of dollars annually for large enterprises. Specific solutions, for example, like GPS tracking for transportation fleets, may cost only $10 per vehicle per month, while advanced data platforms made for tracking multiple components of supply networks can amount to hundreds of thousands of dollars annually.
An invaluable supply chain monitoring solution can effectively mitigate and potentially predict disruptions; however, the average losses during disruptions must be considered – an organization with a multinational supply network that bleeds $100,000+ per minute of disruption likely has much to gain from making a sizeable investment in "next-generation" supply chain monitoring.
Beyond preventing outages, the return on investment (ROI) for proactive SAP monitoring can be significant. Going from reactive to proactive monitoring can mean supporting multiple monitoring KPIs associated with improved labor efficiency, reduced downtime risk, and improved customer experience – all associated with higher revenue.
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Buckle up: consider the heavyweights in supply chain monitoring
For basic tracking services, budgets may start around $5,000 – 10,000 per month for smaller, commercial businesses. On the other hand, advanced, real-time solutions with access to predictive and historic analytics may cost upwards of 10,000 per month for large enterprises with dozens of SAP systems to be monitored.
An additional budgetary challenge for supply chain professionals may be reviewing data platforms to ingest and monitor IoT data, which could hold the negative connotation of high upfront costs.
How do supply chain leaders (like Walmart, FedEx, or Home Depot) approach SAP monitoring budgets?
It might seem impossible to reach a realistic estimate of the annual budget that massive enterprises such as Home Depot spend on monitoring their SAP-run supply chains, due to two prominent factors:
With Home Depot's complex landscape encompassing a global network of suppliers, thousands of stores, fulfillment centers, delivery fleets, and diverse product lines, effective monitoring necessitates significant resources – where robust monitoring is likely a critical success factor.
Industry averages suggest that large enterprises (like Home Depot, Walmart, or Fedex) spend 0.5% to 2% of their total supply chain expenditures on visibility and traceability technologies. Considering that costs wrapped around Home Depot's supply chain likely reach $100 billion, the annual monitoring budget at similarly sized enterprises could amount to hundreds of millions of dollars.
Costs aside: how much time do enterprise organizations spend monitoring their SAP-run supply chains?
Determining the amount of time spent on manually monitoring supply chains is even more intricate than pinpointing the associated costs, due to wide variations in company size, industry, and complexity of supply networks.
While there's no clear industry "average” for time spent on SAP monitoring labor, recent studies suggest that dedicated supply chain professionals spend anywhere from 25% to 75% of their time on monitoring activities. This might translates to roughly 40 to 120 hours per month (480 to 1440 hours per year) for each full-time employee (FTE) tasked with monitoring a single region's operations.
To mitigate the labor-intensive nature of manual monitoring, some organizations now distribute supply chain monitoring responsibilities across multiple teams, while others leverage automated solutions to reduce the shared workload and time commitments.
Additional time commitments of monitoring SAP may include:
Which SAP monitoring tools are most utilized by enterprise organizations with large supply chains?
The preferred SAP monitoring tools at enterprise organizations vary greatly, but a few typical choices are:
While SAP’s beloved Solution Manager (SolMan) offers valuable functionalities that can support supply chain monitoring, like whispering sweet nothings into the ears of SAP systems to ensure everything runs smoothly, it's crucial to consider limitations before forgoing other monitoring solutions and relying on Solution Manager alone.
Believe it or not (some might not...), there can be significant costs associated with solely using Solution Manager for comprehensive supply chain monitoring:
Other drawbacks to SolMan may include limited visibility and flexibility, as:
Are there any drawbacks to third-party SAP monitoring solutions?
Third-party visibility solutions?may offer broader ecosystem coverage but could involve additional costs and integration complexities that interfere with existing SAP investments. Internal development of custom monitoring solutions?can be expensive and time-consuming, requiring expert technical resources to be consistently available.
SAP professionals may choose to evaluate specific needs and limitations before relying solely on Solution Manager to support broad monitoring efforts.
A hybrid approach to monitoring that combines SolMan with other SAP-certified tools may allow for broader visibility and deeper analytics. Some organizations have begun with weighing the pros and cons of third-party solutions to complement Solution Manager, based on technical expertise available, as well as desired level of customization.
Next-generation SAP monitoring: what is it?
Some of the Fortune 500 have entrusted the health of their supply chains with SAP-certified monitoring solutions that provide more robust "next-generation" monitoring than Solution Manager does alone, with features such as:
Even though each enterprise’s supply chain landscape is different, organizations of all sizes thoroughly evaluate their SAP landscapes before implementing any monitoring solution that claims to provides "comprehensive monitoring" or "SAP observability,” or "O11y," even if the solution is SAP-certified.
Ultimately, most enterprises simply want a solution that offers:
By utilizing a tiered approach to determine a "current state” of SAP monitoring and observability, SAP-run enterprises may get one step closer to finishing their monitoring list of "must haves" necessary to support years of scalable growth.
Further reading:
Lead Splunk Consultant - ITSI/Operations/Observability and SAP
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