Building your business case for SAP

SCM EWM ]
Gavin Klaus
D i i V
Dominic Venieri
i i

[ ED HUDAK [ STEVE RUGGIERO

ASUG INSTALLATION MEMBER ASUG INSTALLATION MEMBER
MEMBER SINCE: 1998 MEMBER SINCE: 2000

[ SHERRYANNE MEYER
ASUG INSTALLATION MEMBER
MEMBER SINCE: 1999
[ Agenda
InfoLogix Introductions
Introduction to WMS business case
Industry trends in WMS solutions and industry
requirements
Benefits of implementing SAP Extended Warehouse
M
Management t (SAP EWM) depend
d d on your existing
i ti
systems
How to quantify the benefits of a single platform solution
solution,
leveraging your existing SAP investment
Review of the best practices for developing a business
case and how to establish buy in from IT, operations and
management
g

Real Experience. Real Advantage.

[ Speaker Introductions
Gavin Klaus, SAP Business Development Manager
With over 10 years logistics and distribution experience
experience,
including logistics software, Gavin has experience in best
practice and process optimization in manufacturing and
distribution environments
environments. His experience crosses many
industries such as Pharmaceuticals, Wholesale Distribution,
and Retail. Gavin is an active participant within the SAP
partner program and ASUG.

Real Experience. Real Advantage. 3

[ Speaker Introductions
Dominic Venieri, Senior SAP Solution Consultant
Dominic has over 6 years of logistics and distribution
experience with SAP across multiple industries. Dominic
has been involved in numerous full life cycle
implementations of SAP, focusing in the WM space as well
as mobile data collection through SAPConsole and ITS.
Dominic has experience in best practice and process
optimization in manufacturing and distribution environments.
Dominic has presented at past ASUG/Sapphire Conference
events and is an active participant in the SAP Services
Partner Program.

Real Experience. Real Advantage. 4

[ InfoLogix Enterprise Solutions
Mobile Managed Services
o Customer Care Portal
o Wireless Monitoring & Device Management
o Helpdesk Support
o End User Education & Training
Manage SAP Supply Chain Management
o SAP WM
o SAP EWM
o SAP TM
o SAP EM
Mobility Enablement Tools

(
Mobile Device Controller (RFID) )
Mobile Data Collection Solutions
Mobilize SAP NetWeaver 7.1 Solutions
SAP Console & ITSMobile
Hardware Provisioning g
3rd Party Mobile Apps
Custom Application Development

IIncreased
d Supply
S l Ch
Chaini VVelocity
l it & Effi
Efficiencies
i i
Increased Visibility into Assets & Data Streams
Empower Increased Control of Entire Mobility Lifecycle
Change Management & Business Process
O ti i ti
Optimization

Real Experience. Real Advantage.

[ WMS Introduction
Labor is the largest expense next to transportation
Several key drivers for a WMS
Productivity Space Utilization
Throughput and cycle time Inventory and shipping
Customer service accuracy
Each industry and company CAN
C BE unique

Cost containment is a dominant objective for supply chain organizations,

and the need to lower costs will force buyers to scrutinize the business
cases for all new supply
pp y chain management
g ((SCM)) application
pp investments
(especially WMS that are normally replacements of legacy systems) more
thoroughly in 2009. This strong inclination of users to focus on minimizing
SCM investment costs will make TCO a more important consideration
in new WMS purchases.
- Aberdeen Group, The Extended Warehouse Benchmark Report

Real Experience. Real Advantage. 6

[ WMS Industry Trends
Mature market
Significant functional parity between vendors
Demand based or reactive enhancements
Extended Warehouse Management
Dock
D kMManagementt
Yard management
In-Transit Visibility
Multi-Warehouse Visibility
Distributed Order Management
Returns Management
g
Asset Tracking
Further integration and expansion of offerings
Improved visibility and event management
Technology modernization
Point solutions

Real Experience. Real Advantage.

[ SAP WMS Terminology
ERP WM
Traditional SAP WM SAP R/3
Available since SAP R/2 with over
7 000 customers
7,000 2.0
Centralized or decentralized option SAP
Enterprise
Scalable solution
solution, simple MFG to
high volume, automated DCs
EWM
Task and Resource Management
g ((TRM)) Option
p
ECC
ERP EWM
Released with SAP ERP 4.7 as extension set 2.0
With ECC, rebranded ERP EWM
Key functionality of Cross Docking, Yard Management,
Dynamic Cycle Counting, and Value Added Services

Real Experience. Real Advantage. 8

[ SAP WMS Terminology
SCM EWM
Released in 2005 Caterpillar
Whole new product meant to compete Logistics
Project
head to head with 3rd Party Applications
Designed as a decentralized solution
but can be centralized
SCM/
Accommodates ERP functionality, plus: EWM
Advanced functionality
Labor Management
Slotting
M t i l Fl
Material Flow S
Systems
t

Real Experience. Real Advantage. 9

[ Business Case Baseline
Difficult to generalize the Return on Investment for any
one company or Industry
I d

We have broken it down into the following categories:

Currently
Currently Currently Currently
Running:
g
R
Running:
i R
Running:
i R
Running:
i
Homegrown or
SAP IM SAP WM 3rd Party WMS
Legacy
g y WMS
to to to
to
SAP SCM SAP SCM SAP SCM
SAP SCM
EWM EWM EWM
EWM

Real Experience. Real Advantage.

[ Implementing a new WMS or
C
Converting
ti ffrom SAP IM tto SCM EWM
What to look for
Typically going to drive a significant ROI based on
operational improvements
While your operation may be performing satisfactorily
satisfactorily, there
may be productivity improvements, space utilization
p
improvements, cycle
y time, and throughput
g p improvements
p
that can be achieved through a WMS.
While your operation maintains seems efficient and is
accurate,
t can the
th same volume l be
b done
d with
ith lless effort?
ff t?
Is your accuracy because of double and triple checking and
can the same or better accuracy be achieved through a
better process and less effort?

Real Experience. Real Advantage. 11

[ Implementing a new WMS or
C
Converting
ti ffrom SAP IM tto SCM EWM
What to expect
System guided strategies to optimize the routing in areas
such as putaway and pick paths
Resource and manpower management
Multiple bin support to optimize warehouse space and
productivity
Better controls to reduce the possibility of lost product and
write offs
RF directed work allows for real time transactions to match
the physical process and the system
RF direction
di ti providesid timely
ti l visibility
i ibilit tto iinventory
t
status/quantity for allocation, purchasing, and customer
service

Real Experience. Real Advantage. 12

[ Converting from SAP ERP WM to SCM EWM
The benefits for converting from SAP ERP WM to SCM
EWM are again i highly
hi hl dependent
d d on the
h additional
ddi i l
functionality that the solution offers. As your business
requirements change and your volumes grow grow, a more
robust WMS can offer you many opportunities to achieve
process improvements.
p p

Real Experience. Real Advantage.

[ Converting from SAP ERP WM to SCM EWM
Advanced functionality of SCM EWM
Advanced functionality providing for more efficient
warehouse processes
Route optimization
Wave planning
Kit to stock/order
Warehouse slotting to reduce travel time and material
handling time
Labor management to improve the management of work
and improve overall productivity
Integrated MHE/automation controller

Real Experience. Real Advantage. 14

[ Converting from 3rd Party to SAP SCM EWM
Often times, a company running a 3rd party WMS solution
h most the
has h ffunctionality
i li to support the
h bbusiness
i
requirements, assuming a current release of the product.
In this specific scenario,
scenario the business justification comes
from the following categories.

Advanced/new functionality providing for Long term vendor viability As you

more efficient warehouse processes
(Typically outdated products)
Reduction in IT costs
Reduction in license
Reduction in maintenance
Reduction in interface
f support
Reduced costs for enhancements and
upgrades elimination of reliance on
third parties/ less painful upgrades
Internal system support
have seen with scenarios of the
acquisition of SSA by Infor which
acquired EXE and Provia (No Longer
offered) WMS solutions. RedPrairie
who acquired LIS Dispatcher,
McHugh, and Marc (No ( longer
offered).
Enterprise visibility of inventory,
activities, and metrics.

Real Experience. Real Advantage. 15

[ Converting from a Homegrown WMS
t SAP SCM EWM
to
Majority of the business case is often derived from risk
avoidance
id andd the
h bbenefits
fi off a common platform
l f and
d
support group
In other cases,
cases the home grogrownn WMS has reached its
breaking point for adding more functionality without a
major rewrite
rewrite. This along with other factors such as
platform obsolescence, will drive the need for a new
solution.

Advanced/new functionality providing for Potential reduced costs for enhancements

more efficient warehouse processes
(Typically outdated products)
Potential reduction in IT costs
System sustainability
Reduction
R d ti iin iinterface
t f supportt
and upgrades elimination of reliance on
third parties/ less painful upgrades
Long term vendor viability
Enterprise visibility of inventory, activities,
andd metrics.
ti

Real Experience. Real Advantage. 16

[ Customer Business Case Example (1)
Major Retailer replacing 3rd party WMS with SCM EWM
Running
R i SAP ERP 10 10+ years
Complex interfaces between SAP and 3rd party WMS that were
error-prone
p causingg critical business stoppages
pp g
High IT cost to fix and maintain
Operational and customer impact due to outages
C
Customizations
t i ti to
t the
th systemt treated
t t d as modifications
difi ti bby th
the
vendor complicating support
Limited available skillset for development
p and support
pp
Benefits of SCM EWM
Standard interface
Leverage in-house SAP expertise
Enhancement concept of SAP permits flexible customization

Real Experience. Real Advantage. 17

[ Customer Business Case Example (2)
Major Pharma Manufacturer replacing 3rd Party WMS with SCM EWM
Running
R i SAP ERP 1515+ years
3rd Party WMS version is over 10 years old
Highly customized, no longer supported by Red Prairie
Limited available skillset for development and support
Not easy to adapt WMS to changes in business requirements
Functional gaps of existing WMS
No capability for serialization or RFID to support ePedigree mandates
Benefits of SCM EWM
Leverage in-house SAP expertise
Standard support for serialization and RFID integration via SAP
AII

Real Experience. Real Advantage. 18

[ Customer Business Case Example (3)
Wholesale distributor replacing Homegrown WMS with SCM EWM
Running
R i SAP ERP 10 10+ years
Heavily customized WMS package with extensive modifications
No vendor support
Internal sustainability threatened with retirement and attrition of
knowledgeable resources
Not easy to adapt WMS to changes in business requirements
Any change in business process required custom code development
Benefits of SCM EWM
Leverage in-house SAP expertise
Standard technology platform allowing with broad resource market
Extensive configuration options for adapting business processes
based on out of the box functionality

Real Experience. Real Advantage. 19

[ Calculating the Savings
The basic steps for developing the Return on Investment
are:
1. Education Review your potential system capabilities and
document the current and future operational objectives
2. Requirements Requirements and priorities need to be
g
set and agreed upon
p
3. Establish Baseline and Collect Data Collect current
metrics and data to support the subsequent calculations.
U d
Understand d the
h relationship
l i hi bbetween volume
l and
d cost.
4. Estimate savings Calculate the hard and soft savings
that can be obtained with the improvements enabled by the
system. Include benefits from business opportunities
enabled by new system capabilities

Real Experience. Real Advantage. 20

[ Calculating the Savings Contd
5. Estimate costs Calculate the full costs for the
i l
implementation
t ti and d system
t d
deployment.
l t IInclude
l d iinternal
t l
and external resources.
6 Calculate ROI Calculate the return on investment or
6.
payback based on your companies standard business case
template
7. Post implementation audit While this is not always a
required exercise, it will provide you with an understanding
of the accuracy of the ROI analysis and better prepare your
team for future projects.
The level of detail required
q differs between companies
p
The KPIs and priority vary between industries and
companies

Real Experience. Real Advantage.

[ Tangible Savings
Partial list of key tangible savings factors
Labor
Efficient process Inventory Visibility
Training
T i i / Ramp
R U
Up Inventory Reduction
Material Handling Equipment Inventory Loss
(and RF/Computer) Warehouse Space
Customer Charge Backs Transportation Savings
Regulatory
g y Non-Compliance
p g
IT Cost Savings
Avoidance

Real Experience. Real Advantage.

[ Non-Tangible Savings (Soft)
Partial list of key non-tangible or soft savings factors
Employee Benefit
Customer Service
Cycle Time Improvements
Throughput Improvements
M
Management t Visibility
Vi ibilit
Inventory Reduction (many times difficult to achieve buy in)

Does a WMS enable new business opportunities that

provide competitive advantage?

Real Experience. Real Advantage.

[ Single platform Benefits
Total cost of ownership
Leverage
L existing
i ti SAP supportt tteam
Leverage existing SAP implementation team
Existing skill sets for configuration and development
More easily cross train across modules of one system
Single vendor for license
Single platform
Reduced interface development
Reduced
R d d interface
i t f maintenance
i t

Companies
Companies still do not have the tight integration they need
between their manufacturing, warehousing, and
transportation operations.
operations.
Aberdeen Group, The Extended Warehouse Benchmark Report

Real Experience. Real Advantage.

[ Calculating Savings
Calculate Labor Savings
Calculate detailed estimates to validate expectations
Picking two orders at one time will save 50% of travel which is
60% of total pick time 30% total improvement
Detail individual benefits and then aggregate results (Dont
p)
double dip)
Industry benchmarks (WERC, APICS, etc.)
Simulations

Function Current Cycle Number of Tasks Annual Cost Expected Annual Savings
Time per Task per Year Savings
((Min))
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 $1,274,000 23% $297,700

Real Experience. Real Advantage.

[ Leverage LMS to justify SCM EWM
Labor Management Basics
Better
B tt scheduling
h d li andd planning
l i
Reduction of hours (OT, VTO, staffing levels, temp)
The Management
g Team can leverage g the tool to drive hours out of
the facility
Increased utilization of the workforce
Employees respond to the Management Team
Teams
s expectations
Management is given visibility into the distribution operation at the
task level
Employees are measured against the SOP
Associate pace and skill improvement (setting the right
expectation)
Improved processes (reduced steps)
Shortened learning curve for new associates

Real Experience. Real Advantage.

[ Leverage LMS to justify SCM EWM
Labor Management program savings are significant

Q lit off S
Quality Supervision
i i
Level of Measurement Poor Average Good
Norms (no Labor Mng.
-60% -40% -30%
System)
LMS w/ Historical Rates -40% -30% -20%
LMS w/ Reasonable
-30% -20% -10%
Expectancies
LMS w/ Engineered Standards -15% -5% +5%
LMS w/ ELS and Incentives -10% +10% +25%

Real Experience. Real Advantage.

[ Selling the business case
Management education
Align
Ali your b business
i case with
ith your companies
i strategic
t t i goals
l
Cost savings
Risk avoidance
Traceability
Government or industry compliance
Customer compliance
Customer service
Existing
E i ti pain i point
i t id
identification
tifi ti
Cooperation business and IT
Understand typical financial hurdles
Sensitivity analysis
Buy in on assumptions before establishing return
Conservative and double conservative approach / Negotiating

Real Experience. Real Advantage.

[ Key Learnings
Understand the solution capabilities first or you wont
k
know what
h the h bbenefits
fi are
Understand your companies strategies and objectives and
make ssure
re the project and b
business
siness case is in alignment
Dont be afraid to do some math or do simulations to
estimate your savings
Always work collaboratively between IT and Operations
Look to resources for best practices and benchmarks

Real Experience. Real Advantage. 29

[
Thank you for participating.
participating
Please remember to complete and return your
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For ongoing education on this area of focus, visit the Year-
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[ SESSION CODE: 1610

Real Experience. Real Advantage. 30