infologix white paper sap scm ewm building a business case

7/28/2019 Infologix White Paper Sap Scm Ewm Building a Business Case

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INDUSTRY WHITEPAPER

SAP® SCM ExtEndEd

WArEhouSE MAnAgEMEnt:

BUIlDINg A BUSINESS CASE



SAP® SCM ExtEndEd WArEhouSE

MAnAgEMEnt: Building A

BuSinESS CASE

Executive Summary

Terminology

Industry Trends and Demands

Building Your Business Case

Calculating the Savings

Using Labor Management to Help Build Your Business Case

Migrating rom ERP WM to SCM EWM

Developing Realizable Savings

Conclusion

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Executive Summary

Sec aspa, ab s e aes cs a sppy ca. A we-ese Waese

Maaeme Sysem (WMS) ves y e s y ee mpve y pcvy,

cease p, a mpve vea csme sevce.

depe y sy a bsess evme, ee ae ee key ves

mpeme a WMS. Sme cmpaes may ee a WMS ep em mpve waese

space za. oes may ee mpve vey a spp accacy; mpve

e, vey vsby, a csme cmpace; ep maae eve-w ab

css. i s mpa be abe ey a qay e bees a ae ms mpa

y aza.

F a cmpay a s a SAP® ErP s, jsy a SAP WMS ca be a ease ask

w e mpve eepse vsby a s eabe w e eae s. i a,

ee ae may bees we a cmpay eveaes a es SAP spp aza a

ea esces.

ts cme pves y w e basee a bes pacces jsy a ew WMS

s. i as pves y w e ce saey jsy a SAP SCM EWM s.



Terminology

ERP WM – Wa s cey eee as aa SAP Waese Maaeme, ErP WM

s a pc a as bee avaabe sce e SAP r2. te pc as bee wey ape,

w me a 7,000 csmes wwe. i s a scaabe s a as bee epye vas bsess evmes a ses m smpe aw maeas waeses

cmpe, -vme, a amae sb aces. te appca ca be epye

as a ceaze eceaze s.

ERP EWM – W e eease SAP 4.7, SAP ce avace cay

accmmae css ck, ya maaeme, yamc cyce c a vae ae

sevces. W wa was cae a Ees Se, ae be eame ErP EWM. ts

cay eses w e ErP WM amewk.

SCM EWM – i 2005, SAP eease a ew Waese Maaeme s cae SCM

EWM. ts eese s accmmaes e ce cay ErP WM w aa

capabes a mac se avaabe m -pay, sae--e-a ss. te ms

sca cay avacemes ce ab maaeme, s a a s

cae Maea Fw Sysems, wc s ese aw e WMS ecy c ama

w e se wa s cmmy kw as a Waese C Sysem WCS.

Industry Trends and Demands

ove e pas e yeas, e WMS make as mae eay. Ms maj WMS ves w

e a se cay accmmae a ae cmpe a vese p sy

a bsess pcesses. Becase s, e key cs eseac a evepme as

bee a acece a ecy meza.

impve vsby a eve maaeme ave bee pcs e sppy ca sy,

wee w-cass azas ae k mpve ma fw w e

aza as we as e csmes a bsess paes. A y eae WMS

s s a ca way ee vsby pas e was e waese a pve

e--e vsby pmze e cs sc as pcas a pc. hep

aceve bee csme sevce, a ec vea cs s s.

Acc Abeee, “Fca ss ce be e aes bae eee

waese maaeme pemace. Cmpaes s ave e ea ey

ee bewee e maac, waes a aspa peas. t beak

w ese ss, Bes Cass cmpaes ae aep a mak se seve eab

eces as pa e cmpeesve eee waese maaeme pam:

dck Maaeme, Ya Maaeme, i-tas Vsby, M-Waese Vsby,

dsbe oe Maaeme, res Maaeme a lscs Asse tack.”

Ce ecmc cs a e mae spsca may cmpaes’ sppy cas

a sysems as e e make esabs a s a eazabe bsess case

mpemea a ew WMS s, ay swae s. ts meas a e

bsess case pcess s eve me mpa. gae ic., a ea sy eseac

p, cmmes, “Cs came s a ma bjecve sppy ca azas,

a e ee we css w ce byes scze e bsess cases a ew

sppy ca maaeme (SCM) appca vesmes (especay WMS a ae may



epacemes eacy sysems) me y 2009. ts s ca ses

cs mmz SCM vesme css w make a cs wesp a me mpa

csea ew WMS pcases.”1

Building Your Business Case

i s c eeaze e e vesme (roi) a ay e cmpay ca eaze

e mpemea SAP SCM EWM e e vas sa ps basees.

hweve, ee ae key caees a ecmpass e majy sceas eem

e bsess case, c:

Cey SAP iM SAP SCM EWM

Cey SAP ErP WM SAP SCM EWM

Cey a -pay WMS SAP SCM EWM

Cey a mew, “eacy,” WMS SAP SCM EWM

Benefts o Implementing a New WMS or Converting rom SAP IM to SAP

SCM EWM

te as m a sck maaeme a waese maaeme s ypcay

ves a sca roi base peaa mpvemes. il s e aske asss

e eema wee mae m SAP iM SAP WM. We y pea

may be pem sasacy, ee may be pcvy mpvemes, space za

mpvemes, a cyce me a p mpvemes a ca be aceve a

WMS. We y pea seems ece a s accae, ca e same vme be e

w ess e? is y accacy es becase be- a pe-ceck, a ca esame bee accacy be aceve a bee pcess a ess e?

The beneits o implementing a new WMS or converting rom SAP IM to SAP SCM

EWM include:

Sysem-e saees pmze aeas sc as paway a pck pas.

resce a mapwe maaeme.

Mpe b spp pmze waese space a pcvy.

Bee cs ece e pssby s pc a we-s.

rF-ece wk aws ea-me asacs mac e pysca pcess ae sysem.

rF ec pves mey vsby vey sas/qay aca, pcas

a csme sevce.

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Benefts o Converting rom SAP ERP WM to SAP SCM EWM

Js esabs e acs: SAP ErP WM s be ecmmsse. SAP as sevea

sa csmes s s pc a ee s se ae e pc ee. Base

saa SAP mees, e pc w be sppe e e e yeas a a mmm.te bees cve m SAP ErP WM SCM EWM ae y epee e

aa cay a e s es. As y bsess eqemes cae a

y vme ws, a me bs WMS ca e y may ppes aceve pcess

mpvemes. te bees cves SAP SCM EWM ce:

Avace cay pv me ece waese pcesses.

Waese s ece ave me a maea a me.

lab maaeme mpve e maaeme wk a mpve vea pcvy.

Benefts o Converting rom a Third-Party WMS to SAP SCM EWMi ms cases, a cmpay a -pay WMS s as, a ms, e cay

spp e bsess eqemes, assm ey ae a ce eease e

pc. i s specc scea, e bsess jsca cmes m:

Avace/ew cay pv me ece waese pcesses.

rec it css.

rec cese.

rec maeace.

rec eace spp.

rec css eacemes a paes – ema eace

paes/ess pa paes.

iea sysem spp.

l-em ve vaby, as y ave see w sceas e acqs SSA

by i, wc acqe ExE a Pva ( e ee), a re Pae, wc

acqe liS dspace, Mch a Mac ( e ee).

Eepse vsby vey, acves a mecs.

Benefts o Converting rom a Homegrown WMS to SAP SCM EWM

Smemes a cmpay’s mew s as b s sysem e majy e

cay spp e pcesses. i s case, e majy e bsess case s eve

m sk avace a e bees a cmm pam a spp p. oe mes,

e mew WMS as eace s beak p a me cay w a

maj ewe. ts, a w e acs sc as pam bsesce, w ve e ee

a ew s. te bees cve m a mew s ce:

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Avace/ew cay a pves me ece waese pcesses.

Pea ec it css.

Sysem ssaaby.rec eace spp.

Eepse vsby vey, acves, a mecs.

Calculating the Savings

The basic steps or developing the ROI are:

1. Education – revew y pea sysem capabes a w ce a e

peaa bjecves.

2. Establish the Baseline – revew e ce sysem capabes a pcesses.

3. Data – Cec ce mecs a aa spp e sbseqe cacas.

4. Assess the Opportunity– Fe evew e pcess eeme e pea ppes

a a ew sysem ca acae.

5. Estimate Savings – Cacae e a a s savs a ca be bae w e

mpvemes eabe by e sysem.

6. Estimate Costs – Cacae e css e mpemea a sysem epyme.

7. Calculate ROI – Cacae e e vesme payback base y cmpay’s

saa bsess case empae.

8. Conduct Post Implementation Audit – We s s aways a eqe eecse, s w

pve y w a esa e accacy e roi aayss a bee pepae

y eam e pjecs.

F e ppses s cme, we w cs w eeme e bees a savs,

wc ae ypcay bke a (abe) a s (-abe) savs. i a

ese savs, maj acs ay’s evme ae csme a eay maaes.

Cmm eampes s ce Wama rFid cmpace a e Pamaceca

ePeee maae.

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Major categories where savings can be quantiied:

lab Savs – lab savs ca be aceve y eac ec,

b as e ec veme a e bee za a ppe

maaeme empay sa.

ta – Cse a we y cacas. te se rF a a

easy--se sysem eea ca eay ece amp-p me ew empyees

a acae css a bee baace e wka.

Maeaha Eqpme Savs – As e eqeme wkes a specc aea

sc as paway s ece, e a eqpme eqe spp e pea s

as ece. Cs pe sck as we as maeace css ca be cacae

eeme e a savs eqpme.

ivey Savs – Bee spp a vey accacy pcess

mpvemes a sca ca ece e a am vey eqe eac

acy. ts s ypcay a c bee eaze becase e bee as be aeep a eaze pcas. Becase s, may mes s y e as

s savs a bsess case.

Bee ivey Vsby – Accae a ea me vsby ca as eabe a vea

ec vey eves w e sppy ca.

ivey lss Savs

rec we-s e bee vey c (ae ce, c, ec.)

maaeme.

Waese Space Savs

Csme Caeback Savs

reay n-Cmpace Avace

taspa Savs

it Cs Savs

Cmpeve Avaae – May mes av ea ee sysems ca se y apa

m y cmpe. A e smpes eve, be abe cs eecvey pve pc

bke case as we as paes ee mpe ypes sb caes

ves y a avaae. As, ake, eampe, e ppy cs eecvey a

ecey pve csmze pc y csmes. hav a sysem a awsy cmpay pve vae-ae sevces a maa mpve csme

sevce eves s a bee.

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In addition, the ollowing categories typically add signiicant value to your organization;

however, they are more diicult to quantiy:

Empyee Bees

Csme Sevce

Cyce tme impvemes

tp impvemes

Maaeme Vsby

te w sec pves eampes w mpvemes a specc ca aea

ca eve savs e me ese caees a pve sampe cacas

eeme e savs.

System Guided PutawayA WMS es may saees paway a paceme pc e mmze

ave me. We caca e ca bees, s ey a e mpvemes by

ca aea s a aeae savs ca be cacae. W ppe saees, e ave

me ca be ece paway, epesme a pck. Waese S w as

ave a ae mpac epesme a pck mes, w sme mpveme paway;

weve, s may mpac ecev a cs.

Function

Current Cycle

Time per

Task (Min)

Number

o Tasks

per Year

Annual

Cost

Expected

Savings

Annual

Savings

Putaway 1.20 1,000 $104,000 5% $5,200

Replenishment 5.00 900 $390,000 15% $58,500

Picking 0.30 30,000 $780,000 30% $234,000

Total 6.50 31,900 $1,274,000 23% $297,700

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Space Utilization

A WMS mpves space za by v ese sae. ts may be e by cmb

mpe bs e same maea by seec e -sze b base e qay

sae. i e cacae e savs, y ms cacae e vea sqae aeeqe pe ca, c e ppe aca ase space. i y ae cey s

a vefw -se acy, e e cs a acy, as we as e aspa css,

s be cacae. d’ e e cease cs mezzae space.

As e e w sec, cmpaes ypcay evep e bsess case acc

a ve-yea w z. We y may be space ay, wa ae y w

pjecs? W a WMS emae e ee se sae e ee mve a

ae acy?

Function

Current

Rack

Utilization

Future Rack

Utilization

Total Square

Foot

Savings

Cost per

Square Foot

Annual

Savings

Reserve 65% 85% 20,000 $10 $200,000

Forward –

Case45% 70% 5,000 $10 $50,000

Forward –

Each45% 70% 3,000 $10 $30,000

Total $280,000

Inventory Savings

tee ae sevea ppes mpve mss pc epe y bsess.

Mss vey, ms-spmes, a epe sck ca be easy qay. A WMS w rF

sca ca mpve b eve vey accacy a mpve spp accacy. Ppe

sck maaeme es WMS saees sc as FiFo a FEFo pve e s

maae vey a mmze e ss sck e epa.

Function Annual Cost Projected Savings Annual Savings

Inventory Write O

(Lost Product)$100,000 75% $75,000

Mis-Shipments $200,000 50% $100,000Expired Product $200,000 50% $100,000

Total $275,000



Using Labor Management to Help Build Your Business Case

May azas ave ape eeee saas easabe epecaces

my ee mecs saa waese asks. te aby ep a ack aws

maaeme esa sses w e pea a vas esa weee ppes ae a acae caes bes pacces a a. A lab Maaeme

s s ese pve s eve eae ack a ep. i a, ab

maaeme pves e aby accaey scee a baace ab.

levea a lMS w eeee saas ypcay ess a savs 30-40%

ab css a ec ea c, a ec veme a bee maaeme

empay sa. By s easabe epecaces, a ess-eae appac es

we a cs e pam ypcay ess a 10-20% savs. tese savs s

be appe a e savs cacae e bees aceve w e WMS

cay.

Bew s a eve eampe a savs caca a lMS.

FunctionFull Time

Equivalents

Hourly Rate

(Loaded)Annual Cost

Expected

Savings

Annual

Savings

Receiving 5 $20.00 $208,000 10% $20,800

Putaway 5 $20.00 $208,000 20% $41,600

Replenishment 5 $20.00 $208,000 25% $52,000

Picking 15 $20.00 $624,000 30% $187,200

Total 30 $1,248,000 24% $301,600

As y ca see, w e eampe a acy w 30 c ab wkes, a lMS ca a

sca savs.

Migrating rom ERP WM to SCM EWM

oe e ms eqe qess aske by csmes peas e pae pa m

ErP WM SCM EWM. tese ae w sepaae pcs ee by SAP; s mpa

esa a a cves m ErP WM SCM EWM s js a pae, b s as

a ew mpemea sce e w ss ave a ee ce base a abe sce.

i a cmpay s cey SAP WM a was cve SCM EWM, e bsess

case w be base e ae cay SCM EWM; eee, e aceve esavs, pcess caes ms be mpemee as we as e spp cay.

W a sa, s pssbe a “ecca cves” mpeme SCM EWM w e

same pcesses a es ErP WM.



Warehouse Structure

te waese sce ca SCM EWM s vey sma a ErP WM. te

ccep e Waese nmbe emas cae. te waese s s ve

ca a pysca aeas by Sae types, wc ae e sbve SaeSecs a, maey, Sae Bs. teee, s pssbe epcae eacy e

Waese/Sae type/Sae Sec/Sae B sce m ErP WM SCM EWM.

Handling Unit and Storage Unit Management

i e ErP sysem, w cceps es ea w pae a cae maaeme:

ha u (hu) Maaeme a Sae u (Su) Maaeme. hu Maaeme s a

css-appca cmpe a s eae w e MM, Sd, PP a QM mes

ey e eacca pack sce paes a caes. W WM, paes ae

ee s Sae us, a ccep a s y se e WM appca. i s pssbe

se Sae us w ha us WM; weve, s ha us as e

eqes e se Sae us e scks ae maae WM. te acva hau maaeme appes e Sae lca eve e ErP sysem. te acva

Sae u maaeme s mae a e Sae type eve.

i SCM EWM, SAP as emae e Su ccep a ape hu as e -wa s

pae a cae maaeme. hu maaeme es ee be acvae e

ErP MM me a ve sae ca, b e ha us ca s be eae

e Sd a QM mes eee. W EWM, s w pssbe cmbe b hu a

-hu scks w e same sae ype, a eve w e same b. Pevsy ErP

WM, e acva Su maaeme a e sae ype eve eqe a a scks w

e sae ype be pace a sae .

ts cae cay makes e hu s me febe, emaes sme asacaveea bes asscae w s hu’s MM-iM, a as aws me ps

maea a a sae e waese.



Bew s a smmay e smaes sce bewee SAP ErP WM a SAP SCM EWM:

ERP WM SCM EWM

Master Data

Maea Mase Pc Mase

Sae type Sae type

Sae Sec Sae Sec

Sae B Sae B

n/A Acvy Aea

ha u ha u

Sae u n/A – repace by ha u

Strategies

Pck a Paway Saees

use e C tecqe aws a

ese same s es, as we as es,

be ce.

Developing Realizable Savings

tee may be sevea mpvemes y pcess; sace, pck, e se rF

weess asacs ca emae -vae me ave e ce. Bac pck ca

eay ece ave, a a ab maaeme sysem ca mpve e vea za apcvy. i s case, ca be c cacae a a esmae pck ae a

savs.

We a e bees ave bee ee, s mpa “be p” e savs

a k a e vea savs aeae. F sace, a 5% savs rF ps a 5% ave

ps 10% savs w a lMS may eqa 25% savs. i e e cacas,

eac mpveme ms be acce base e e acs. i e pcess s aeay

mpve by 5%, e ae 10% savs w y eqae a e 14.5% savs base

e sbseqe caca. oe way pve e bees s by pem me ses

smas e mck p e pcess a esa e a pea aes.

We caca e eazabe savs lMS ay savs, s as mpa acc

“easc” savs. We e pcess may mpve by 15%, y 12% may be eaze as

ee ae cea cs a ca eve be emve. F eampe, we e epesme

pcess may be eay mpve, ee may aways be a e me maa b csa,

emeecy epesmes, bes, ec.



Authors

Gavin Klaus

SAP Bsess devepme

Maae

il, ic.

Tom Zosel Associates

Managing Editor

Jason Fradin Vce Pese Make

il, ic.

Sce s c ecas wa e eazabe savs w be, e eecse s a

Sesvy Aayss s a eecve way esa e vaace sesvy e cacae

savs. d s pcess y ca cacae savs base mpe savs esmaes

esabs a cm eve eazabe savs. i y ae ce a y w be abe

aceve 5% pck savs base e bees, 10% s easc a 15% may be a sec, e sceas eeme wc savs w pve a csevave am savs

we s acev e ae e vesme payback pe.

May cmpaes se sy becmaks a eseac eps eeaze e bees

a ca be aceve a eaze a WMS mpemea. depe y

aza, y may ee pve me jsca. ts may vve pem

smas w me saas bee esa e mpveme a ca be aceve.

As, e esa e pea bees a savs, s mpa kw e

capabes e sysem a e asscae cs mpemea a w ay eqe

mcas. d s pcess sme cmpaes w k a e va mpvemes

jsy a specc cae a e k a e mpemea as a we. Paes sc

as il a tm Zse Asscaes ca be cca e pcess ey e beesa caca e eazabe e vesme.

Conclusion

As y aza maes a e scy capa epee es, e bsess

case becmes eve me mpa. i s cca a e ppes a bees a a

ew sysem ca pve ae es a cmmcae s a a cmpeesve aayss

InoLogix Leads the Way or Supply ChainExecution and Mobility Solution Services.

il as a qe m SAP SCM Eec

a Eepse Mby epese a eve:

icease Sppy Ca Vecy & Ececes

icease Vsby Asses & daa Seams

icease C e Ee Mby lecyce

Cae Maaeme & Bsess Pcess opmza

We ep y pmze y mbe wkes by eve e

cca bsess aa eee ecy a e p ec-

s. o w cmba mbe cmp ec-

y a ecca bsess kwee eabes s

pave e way mbz y ee eepse.

o gba Sevces gp s cmpse epe SAP SCM

csas w ca sae a wea epeece a

kwee es a mpeme w cass SAP

SCM ss a sevces mee e eac emas

mpe ses. W s bsess bes pacces

kwee a acme, eam ca ep ve sppy

ca ececes y aza.

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About InoLogix, Inc.

il s a ea pve eepse mby ss e eacae a

cmmeca ses. il ses e sy’s ms avace eces cease

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appcas, mbe asce pcs, a saec cs sevces ve

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a pbcy-ae cmpay (nASdAQ: iFlg).

About Tom Zosel Associates

tZA s a ea sppy ca cs m eve maaeme cs, eee,

ecy a ma capa ss asss cmpaes acev w-cass csme

sevce a a eas–cs pea ps w e sppy ca. t me, pease

vs www.tzaconsulting.com

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