What is SAP SCM? (Supply Chain Management)

Before getting into the details of SAP’s SCM solution, let’s chat about what Supply Chain Management in general?

Supply Chain Management is the process of centrally managing the flow of goods from raw materials into finished products.

Let’s take a T-shirt manufacturing company as an example. On a high level, their supply chain would involve activities such as sourcing the cotton threads, buttons and labels from different vendors. Then combining those raw materials into making T-shirts in the factory and sending them to warehouses. From the warehouses, they are distributed to different wholesalers. The wholesalers then distribute them to retail shops before eventually reaching the end consumers. This is a simplistic example but supply chain processes of big organisations would be much more complicated than this. A software or a multiple set of software that helps an organisation manage these end to end supply chain processes in an efficient way is known as the supply chain software.

At SAP, SCM is not just one application but it is made up of a group of software applications that helps organisations perform operations such as supply chain networking, supply chain planning, supply chain coordination and supply chain execution.

Now let’s take a look at the different types of SAP applications that fall under the SCM umbrella.

• SAP PLM – Product Lifecycle Management. I have already written a blog about SAP PLM. Please check it out here. In a nutshell, SAP PLM is used by organisations around the world to manage development lifecycle of both physical and digital products. It has got capabilities to manage product development projects, product costing, product engineering, product development and much more.
• SAP IBP – IBP stands for Integrated Business Planning. It is a cloud-based solution which consists of functionalities such as sales & operations planning, forecasting and demand, response and supply, demand-driven replenishment and inventory planning. It incorporates technologies such as machine learning and artificial intelligence that enables capabilities such as what-if simulations, alerts and predictive planning.
• SAP Digital Manufacturing Cloud, SAP Manufacturing Execution and SAP S/4HANA Manufacturing – These bunch of applications are used for streamlining end to end manufacturing processes. They incorporate functionalities such as manufacturing operations management, comprehensive planning features, integrated scheduling, managing equipment effectiveness, etc.
• SAP WM and EWM – Warehouse Management and Extended Warehouse Management – These are used for warehouse management and contains functionalities such as logistics management, storage and operations, outbound logistics management, freight logistics collaboration, global track and trace and much more. The Extended Warehouse Management contains the same core functionalities of SAP Warehouse Management but with additional capabilities such as internal routing and labour management.
• SAP TM – Transport Management is used to manage the transportation aspects of goods between multiple locations. It contains functionalities such as strategic freight management, order management, transportation planning and transportation execution.
• SAP EAM – Enterprise Asset Management is used to maintain and manage the performance of an organisation’s physical assets. It contains functionalities such as asset information management, centralised asset data repository, automated equipment tracking, work order management and mobile asset management.

As you have seen, SAP’s SCM solution contains a variety of powerful applications that are more than capable of managing supply chain operations of any organisation. A lot of these applications contain predictive analytics and machine learning which helps organisations to predict consumer behaviour well in advance.

Walgreens, one of the biggest pharmaceutical company in the US, uses SAP’s SCM solution to manage their supply chain operations. It uses analytics to predict customer behaviour and works its way up to meet the expected demand. For example, they anticipate flu patterns based on location, which allows them to forecast the required inventory for over-the-counter flu medicines in certain locations during a certain time of the year. This process helps the company to reduce excess inventory and all the cost associated with transportation and storage in warehouses.

If you have any questions, please feel free to let me know in the comment section below.

P.S. Check out my course on Udemy – “Introduction to SAP – The Complete Package for Beginners“