As complex supply chains evolve, supply chain processes are becoming more integrated. Warehouse operations are an essential part of this integrated supply chain. Companies aim to increase efficiency and responsiveness. As a result, it is not uncommon to see 24x7 operations that require a reliable warehouse management system available at all times.

Although SAP Warehouse Management (SAP WM) has supported operational requirements for several years, you have another option. As of R/3 4.5, you can run SAP WM as an independent system, referred to as decentralized Warehouse Management (decentralized WMS). Decentralized WMS can accommodate these needs through faster processing, 24x7 operations, and compatibility with different ERP systems.

So, what does it mean to be an independent system? A separate server hosts decentralized WMS, unlike traditional centralized SAP WM, which runs on the same server as the ERP system. The decentralized WMS executes warehouse processes independently from ERP processes. These two systems have very distinct roles — ERP is the planning system and decentralized WMS is the execution system. The ERP system carries out functions such as material planning, inventory management, and sales and purchase orders processing, while the decentralized WMS performs the warehouse operations, including stock management, goods receipt, goods issue, planning, and monitoring. I’ll discuss several functional features available in the decentralized WMS and then provide helpful configuration advice.

Decentralized WMS Features

Before I explore some configuration tips, I think is important for you to understand the decentralized WMS.

It’s an independent system. As warehouses strive for better efficiencies and faster response times, the warehouse management system must be readily available in real time, even if other systems are not. You implement the decentralized WMS on its own server. After the decentralized WMS obtains the workload from ERP, it can process this work even if the ERP system is no longer available. When the work is complete, the decentralized WMS communicates statuses back to the ERP system. The decentralized WMS works 24x7, independently from ERP. Figure 1 distinguishes the various ERP and decentralized WMS processes that are connected through a BAPI.

Figure 1

ERP is the planning system and the decentralized WMS is the execution system for all processes

Perhaps you are wondering if you can use the decentralized WMS with older R/3 releases. I’ll review a scenario in which the central ERP system is an earlier R/3 release or another legacy system. Typically, businesses require a warehouse management system that is efficient, responsive, and adaptable to new logistics processes. Compared to Inventory Management (IM) and WM, the decentralized WMS provides advanced logistics processes such as Task and Resource Management (TRM). It also provides inbound and outbound delivery processing instead of direct transactions for purchase orders or stock transport orders.

You can run TRM in a centralized WMS but you cannot operate a centralized WMS independent of an ERP system. A decentralized WMS integrates easily with different releases of SAP ERP or non-SAP ERP systems. The strategy among many organizations is to upgrade their warehouse management systems before upgrading their ERP system, which is usually a longer, more complex undertaking.

It can integrate with multiple ERP systems. A decentralized WMS not only connects to non-SAP ERP systems, but it can also connect to multiple ERP systems. This option is especially valuable for global organizations that want to host all of their warehouses on one server and have these sites communicate with regional ERP systems.

For example, a global organization has two SAP ERP systems — one in the Americas and one in Europe. Such an organization can host all its warehouses in one instance of a decentralized WMS and still retain the capability to connect American warehouses with the Americas’ ERP system and European warehouses with Europe’s ERP system. In a centralized WMS scenario, however, users must implement American warehouses in Americas’ ERP system and European warehouses in Europe’s ERP system.

You can host multiple warehouses on one server. Typically, IT teams consider a standalone server as an additional investment. However, if your business has numerous warehouses and you want to host them on one infrastructure and application, a decentralized WMS allows you to implement several warehouses on one server.

Decentralized WMS Functionality

When it comes to the functionality available in a decentralized WMS, it is not very different from a centralized WMS. Inbound and outbound deliveries primarily drive all logistics processes in a decentralized WMS. Based on purchase orders or other source documents, the ERP system creates inbound deliveries and sends them to the decentralized WMS via standard interfaces, such as a BAPI (Figure 2). Similarly, the ERP system uses sales orders to create outbound deliveries which are then distributed to the decentralized WMS.

Figure 2

Communication between the ERP system and the decentralized WMS through inbound and outbound deliveries

The decentralized WMS provides stock placement strategies to perform goods receipt and putaway for inbound deliveries, and stock removal strategies to perform picking, packing, and goods issue activities for outbound deliveries. After the deliveries are processed and posted in the warehouse, the decentralized WMS sends the completed information back to the ERP system to update the source documents and post the actual goods receipt or goods issue in IM.

All new components of SAP Extension Set 1.0 and 2.0 also work with the decentralized WMS, such as Yard Management, Cross-Docking, Value-Added Services, and TRM. Many SCM experts recommend implementing a decentralized WMS with TRM instead of a centralized WMS to accommodate the needs of high-volume, complex warehouses.

A key functional benefit of the decentralized WMS is its storage management flexibility. Storage management includes additional storage bin-level visibility, multiple bin types based on material handling characteristics, complex stock placement and removal strategies, and batch management characteristics, for example. A decentralized WMS provides more ways to manage your complex warehouse layout.

With a standalone system, you can have more control over stock keeping unit and bin levels by using standard configuration options for warehouse structure and design. Furthermore, a decentralized WMS provides a real- time view with radio frequency (RF) capability that keeps inventory records accurate and up to date. Using the standard reports in a decentralized WMS, warehouse status and inventory is now transparent to everyone in the organization.

Steps to Configure a Decentralized WMS

Here are the five steps you must perform to configure a decentralized WMS for your warehouses successfully.

Step 1. Activate the decentralized WMS. Go to Logistics Execution>Decentralized WMS Integration>Central Processing>Application>Activate Decentralized WMS (Figure 3). Select your warehouse number (WM2, in my example), activate the External WMS option, and select Distribution Immediately at … from the drop- down menu. Save your configuration changes.

Figure 3

Activate the decentralized WMS in the IMG

Step 2. Connect the decentralized WMS to SAP ERP. With a decentralized WMS, you do not execute stock postings in IM. Instead, you create inbound or outbound deliveries in SAP ERP. As a result, you must reference the decentralized WMS movement types to the appropriate IM move­ment types. Follow menu path Logistics Execution>Decentralized WMS Integration>Central Processing>Application>Define Interface to Inventory Management and Delivery-Relevant Data to assign these relationships.

In the pop-up screen that appears, double-click on Assign WM movement type references to IM movement types. In the next screen that appears, define reference movement types for your warehouse that corresponds to standard IM movement types (Figure 4). For example, IM movement type 101 GR for asset is linked to Reference movemnt type WM 999 for SAP WM.

Figure 4

Assign reference movement types between SAP WM and IM

Step 3. Assign delivery-relevant parameters for reference movement types. Follow menu path Logistics Execution>Decentralized WMS Integration>Central Processing>Application>Define Interface to Inventory Management and Delivery-Relevant Data. In this step, you associate reference movement types assigned in the previous step with delivery types and SAP WM movement types (Figure 5).

Figure 5

Assign reference movement types to delivery types

In my example, I want to assign the goods receipt for the purchase order to movement type 101 in the warehouse. Warehouse 200 contains reference movement type 101 with a movement indicator B (goods movement for purchase order). Delivery type DIG (general inbound delivery) is mapped to warehouse movement type 101.

Step 4. Perform the prerequisites to generate the distribution model. One final key configuration activity to integrate the decentralized WMS with the host ERP system is to generate the distribution model. Follow the menu path Logistics Execution> Decentralized WMS Integration>Central Processing>Distribution>Generate Distribution Model. This activity sets up the communication between ERP and the decentralized WMS via IDocs and application link enabling (ALE). However, the prerequisites of this step include defining the logical system and assigning the SAP WM system client to the logical system.

Define the logical system: Follow IMG menu path Application Link Enabling (ALE) >Sending and Receiving Systems>Logical Systems>Define Logical System. For SAP ERP Central Component (SAP ECC), follow menu path IDOC Interface/ALE>Basic Settings>Logical Systems>Define Logical System. In the screen that appears, click on the New Entry button. Enter a name for the sending and receiving logical systems. I use LOG1 and LOG2 in my example (Figure 6). Save your configuration changes.

Figure 6

Specify the logical systems

Assign the Client to the Logical System: Follow IMG menu path Application Link Enabling (ALE)>Sending and Receiving Systems>Logical Systems>Assign Client to Logical System (Figure 7). For SAP ECC, follow menu path IDOC Interface/ALE>Basic Settings>Logical Systems>Assign Logical System to client. Ask your Basis team for the Client number (100 deCentral WM, in my example). Now enter the sending logical system in the Logical System field. Specify if the client is a Development or Test environment via the drop-down menu in the Client role field. All other options are defaulted in this screen. Check with your Basis team if you want to change any of these settings.

Figure 7

Assign the client to a logical system

Next, you need to set up Remote Function Call (RFC) destinations between the decentralized WMS and the ERP system. The Basis team usually performs these activities, so check with it to ensure it is ready to perform these steps.

Follow menu path Application Link Enabling (ALE)>Sending and Receiving Systems>Systems in Network>Define Target Systems for RFC Calls. In the screen that appears, enter an RFC destination name, define a Connection type (e.g., 3 ABAP), and provide a Description (Figure 8). Ask your Basis team to confirm the connection type. Click on the Technical settings tab and enter the ERP system’s IP address (123.456.789.123, for example) in the Target host field and then enter the system number (e.g., 01 logical system) in the System Number field. Select the IP Address setting. Save your configuration. In ECC, follow menu path SAP NetWeaver>Application Server> IDOC Interface/ALE>Communication>Create RFC Connections. You can create many types of connections in ECC. ABAP or TCP/IP connections are most commonly used to set up a link between the systems.

Figure 8

Set up an RFC destination

Ask your Basis team to define synchronous communication between the two systems by following the menu path Application Link Enabling (ALE)>Sending and Receiving Systems>Systems in Network>Synchronous Processing>Determine RFC destinations for Method Calls. It needs to set up the ERP system as a standard destination for BAPI calls in the decentralized WMS and set up the decentralized WMS as a standard BAPI destination in the ERP system.

Step 5. Generate the distribution model. Follow menu path Logistics Execution>Decentralized WMS Integration>Central Processing>Distribution. Some of the standard data exchange methods you can generate are:

• Send inbound and outbound deliveries from the ERP system to the decentralized WMS
• Send inbound and outbound delivery confirmations from the decentralized WMS to the ERP system
• Send material, vendor, and customer master distribution from ERP to the decentralized WMS

Ashish Saxena

Ashish Saxena is senior manager, supply chain execution, at Amazon. He was previously a senior director at Cognizant Technology Solutions and associate partner at IBM’s Supply Chain practice. He has more than 14 years of experience, including working in supply chain strategy, planning, execution, and technology in multiple industries.

An SAP SCM planning and execution subject matter expert, Ashish has been working with SAP for more than10 years, and has successfully delivered several large-scale global SAP projects. He has helped transform supply chains in wide range of industries, including automotive, retail, energy, consumer products, third-party logistics, and pharmaceutical sectors. His most recent focus is on supply chain digitization and analytics. 

In addition to advising and contributing to SCM Expert, Ashish is a regular speaker at the SAPinsider SCM conference. For information on other SAPinsider conferences, click here.

You may contact the author at ashish.saxena@us.ibm.com.

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