SAP Supply Chain Monitoring Best Practises

A Supply Chain Executive’s  winning formula is:

1. Support the CEO’s vision and provide a Supply Chain vision
2. Maintain a strategic focus including:
   • Help create and support a Focused Business Plan
   • Define Key Initiatives & metrics
   • All of the above easily remembered and communicated
3. Create  an A+ team
4. Make sure accountability is in place
5. Simplify and keep on simplifying

Let’s first look at accountability and simplifying. In SAP there are two main tools to effectively monitor your Supply Chain. One is the transaction MD04 which goes by the terribly boring name of Stock Requirements List. I like to think of this transaction as your Supply Chain Monitor since it provides Supply Chain alerts to all your Planners and Buyers on:

1. Master data issues
2. Lead time alerts
3. Shortages
4. Overages
5. Cancelations
6. Stock coverage
7. And many more.

This Supply Chain Monitoring transaction (MD04) gives your planners and buyers the tools to make informed decisions (the best companies drive the decision making down to the lowest levels). You don’t want your executives to have to constantly make decisions on day to day problems or activities. However you DO want your entire Supply Chain team to execute based on priorities and with MD04 that should be:

1. Reviewing master data alerts
2. Placing orders within lead time (manufacturing or purchased)
3. Shortages
4. Overages
5. The rest (ex: safety stock alerts)

If your entire Supply Chain team is not executing alerts (exception messages) in a uniformed priority then your supply chain will always be out of sync. You also want to drive your alerts down to zero because this indicates a healthy and stable Supply Chain. Therefore it’s important that you monitor MD04 alerts and hold the team accountable to bring all Supply Chain messages to an established target (hopefully zero).  Hence Supply Chain accountability.

Once you have this in place and it is communicated in a simple manner and remembered by your team, Supply Chain monitoring becomes a much easier task. We have now touched on a critical Supply Chain tool that supports key initiatives, metrics and accountability.

The second tool that is crucial is the SAP standard reporting including the Logistics Information System (LIS). SAP has some incredibly powerful standard reports and I’m always amazed at how clients have over complicated their reporting. Here are a few examples of how SAP LIS reporting mines data.

• Sales (ex: Sales Performance)
• Purchasing (ex: Vendor evaluations)
• Inventory (ex: Inventory reduction performance)
• Production (ex: Manufacturing lead times)
• Plant Maintenance (ex: Maintenance costs)
• Quality (ex: rejection rates)

Why would you use these standard reports?

• Report from one truth
• Make KPI’s, key initiatives and SAP data metrics that are easily remembered and communicated.
• Avoid additional testing when upgrading service packs.
• Reduce costs for ABAP development time.
• Reduce Non – standard documentation.
• Use SAP enhancements (business add in)  instead of pure custom.

And to make things even simpler and address a major KPI use the ABC analysis to classify the importance of your materials (ex: A = most important. C = rivets, nuts and bolts). This will help you in your inventory cycle counts and make sure your inventory is accurate (A major KPI).  And ALL the SAP LIS reports have the standard ability to report by ABC analysis. Shouldn’t you report based on priority?

Another tool clients hardly use is the Early Warning System which proactively provides you the ability to perform threshold value analysis, trend analysis and plan VS actual comparison. But that’s another discussion.

Let’s recap. Companies want effective and simple supply chain tools to support key business initiatives. These tools should support the communication of key initiatives and metrics in a way that is easily remembered. By using one SAP transaction effectively (MDO4) as your Supply Chain Monitor and another (SAP LIS reporting) to simplify and standardize reports you will be supporting your CEO’s winning formula and should be in excellent Supply Chain shape for the future.

Terry Vermeylen is hell bent on rapidly transforming your business into a World Class Operation by major transformation or by eliminating one bad habit at a time.

Terry Vermeylen brings 30+ years of experience in SAP and Supply Chain Process improvement. As an SAP professional and Supply Chain Architect he has worked and consulted for some of the world’s largest and most successful manufacturing companies focusing primarily on the Aerospace and Pharmaceutical industries.

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