What is SAP SCM?

Overview: SAP SCM

SAP SCM (SAP Supply Chain Management) for SAP ECC is a software solution from SAP. The product is used for organizing and optimizing the supply chain. With the help of SAP SCM, companies achieve greater agility and transparency in the supply chain and improve collaboration with their suppliers.

What is Supply Chain Management in SAP SCM?

SAP SCM is a software solution from SAP SE for supply chain management in SAP ECC.

While "SAP Supply Chain Management" and "SAP SCM" were once often used interchangeably, today a distinction is made between:

• The standalone product SAP SCM for SAP ECC within the SAP portfolio in the area of supply chain management, and
• SAP Supply Chain Management in SAP S/4HANA as an umbrella term for all SAP solutions in the area of supply chain management.

Solutions like SAP SCM (or SAP Supply Chain Management) are necessary because the coordination effort within the logistics chain between suppliers, logistics companies, and recipients continues to increase.

This is because:

• Customer requirements are becoming more individualized.
• Logistics chains are becoming more complex due to the shift in production to low-cost countries.
• This leads to an increase in data volume, even with constant production.

The SAP ECC solution SAP SCM helps by providing transparency for the involved parties. Ideal processes can be calculated with algorithms. Information from logistics is made available to suppliers, service personnel, and recipients.

The advantage:

When warehouses, shipping departments, transport companies, and goods recipients receive data from the same database, there is no need for system integration between different systems.

Data preparation has no differing perspectives; the parties involved discuss the solution rather than interpretations of conflicting information.

SAP SCM is capable of calculating an optimized process for delivering a particular product. Companies can then compare this result with the currently existing procedure and assess the potential for improvement in terms of service quality and costs incurred.

Some features and benefits of SAP SCM:

• SAP SCM helps achieve faster, more efficient delivery after receiving an order.
• Inventory and storage can be optimized with SAP SCM, saving storage costs and allowing for better utilization of warehouse space.
• For customer service, it remains transparent where the ordered goods are in the delivery process. Financial transactions related to the delivered goods can also be viewed.
• With SAP SCM, the journey of a product can be traced – from the manufacturer, country importer, wholesaler, retailer, to the end customer (important, for example, in the luxury goods sector, such as high-end watches or precious metals in bar form, to largely exclude the possibility of counterfeiting).

What does Supply Chain Management mean?

The supply chain refers to the journey of goods within a company – from production planning to the customer.

Customers have online access to various suppliers and can choose where they want to buy. When goods are identical and prices are comparable, the experience with the supplier becomes increasingly important for the customer.

A key characteristic here is the ability to deliver, the speed of delivery, and the punctuality of delivery, such as direct delivery to the production line for further processing.

What processes and functions does SAP SCM have?

SAP SCM for SAP ECC is divided into two types of applications:

• One type includes planning capabilities and has a predictive nature.
• The other is used for the operational live business.

In planning, it is calculated how an order can be optimally fulfilled and executed up to the point of delivery. The applications that perform the functions of actual business operations, on the other hand, manage and track the status of goods to be delivered, including payment terms.

The data related to the delivery status of the ordered goods is not only accessible to employees within the company but can also be exchanged with suppliers and recipients.

This way, for example, inquiries in customer service are no longer necessary. Through close coordination between suppliers and customers, goods can be delivered on demand and also specifically sourced or produced for that use in advance.

What components make up SAP SCM?

SAP SCM can be grouped into three components:

• Planning
• Execution
• Coordination

This division follows the actual chronological process:

• In Supply Chain Planning, the best possible execution is calculated using algorithms.
• In Supply Chain Execution, the processes are implemented.
• In Supply Chain Coordination, the process can be observed and evaluated.

However, all three components share one common goal: each of these components includes the aim and the capability to further optimize the processes.

What is Supply Chain Planning in SAP SCM?

With the approach of Supply Chain Planning, companies move closer to an ideal business model: having in stock and being able to deliver exactly what their customers will immediately take off their hands – and as little more as possible.

A planning strategy that pursues this goal positively affects both warehouse space and the investment in purchased raw materials, semi-finished goods, or items.

With Supply Chain Planning, companies can create appropriate forecasts, ensuring that optimal quantities and delivery dates are calculated for procurement, storage, and delivery. The goal is to ensure supply capability while simultaneously optimizing warehouse space.

A key element is demand planning, as the buyer defines the market. Inventory control reports how much stock is currently available. From this, production planning for a specific period is derived.

What is Supply Chain Execution in SAP SCM?

Supply Chain Execution means goods in motion. "Execution" refers to the management of the processes.

Unlike planning, actual goods are physically moved. While a deviation from the ideal in planning might lead to fine-tuning, discrepancies in Supply Chain Execution could result in delayed delivery to the customer.

Here, the flow of goods from goods receipt to storage, shipping, and delivery to customers is visible and also controllable.

Synergy effects can be identified and utilized, and details in the logistics process can be improved. The processes of logistical movements within and outside the company are triggered and documented through Supply Chain Execution.

Customer service can provide information about the current status of shipments without needing access to external systems. The documentation of the origin of a delivery can be easily generated because comprehensive data is already stored in the system.

What is Supply Chain Coordination in SAP SCM?

Supply Chain Coordination consists of two parts:

• Supply Chain Event Management (SCEM)
• Supply Chain Performance Management (SCPM)

Supply Chain Event Management is event-oriented. Events within the supply chain can be viewed by different roles. A classic example is the notification to the package recipient: "Your package will arrive tomorrow between 11:00 AM and 1:00 PM."

In Supply Chain Performance Management, execution is measured. An interesting query could be: How fast did the package arrive, and with which delivery service?

In the event of unexpected occurrences, such as a delivery delay due to a strike, Supply Chain Coordination allows the customer to be informed about the expected delay.

An addition to SAP SCM is SAP EWM (Extended Warehouse Management). This module focuses on the management of warehouse processes themselves, especially in large logistics centers.

SAP APO (Advanced Planner & Optimizer) is also a specialized module that can capture demand in even greater detail, thus providing the underlying values for procurement and inventory management. In APO, only planning-relevant data is processed.

What are the benefits of SAP SCM?

• SAP SCM increases the efficiency of supply chain processes through automation and precise control of the entire supply chain.
• SAP SCM enables smooth collaboration among all participants for efficient and on-time delivery (transport management).
• With this solution, precise inventory planning is ensured, closely aligned with demand, enabling fast throughput times.
• SAP SCM ensures that goods movements are fully organized and monitored throughout all stages, providing high transparency and control over goods movements.
• Better demand forecasts enable accurate planning and the avoidance of overstocking or shortages.
• With SAP SCM, logistics processes can be optimized, and inventory reductions can lead to lower warehousing and transport costs.
• Through seamless integration of suppliers and partners into the entire value chain, collaboration with external partners is improved.

How does SAP Supply Chain Management differ from SAP SCM?

SAP SCM (for SAP ECC) is a standalone product from SAP designed to organize and optimize supply chains – from planning to distribution.

The term SAP Supply Chain Management is now used as an umbrella term for all SAP solutions in the field of supply chain management.

Supply Chain Management covers the planning, management, and optimization of all processes along the supply chain – from the procurement of raw materials, through production, to the delivery of the final product to the customer. The goal is to create a cost-effective, responsive, and efficient value chain.