During an SAP implementation, I had a customer who needed help streamlining the sourcing of equipment used to manufacture commercial-grade solar panels. The model was to purchase the materials from the supplier and drop ship the materials to the end customer. All materials were shipped across international borders. At the customer location, a team of specialists installed these materials in a pre-readied facility. The process of installing the materials and getting the production to the agreed-upon performance level took 18 months. As the equipment arrived from the suppliers during the first six to nine months of the project, specialists installed the materials at the plant where the commercial-grade solar panels would be manufactured.

Since the company shipped sensitive technology to non-US based sites, the customer needed to use SAP BusinessObjects Global Trade Services for every shipment. Because of long lead times getting the part from the supplier to the customer, companies have to keep on top of new trade agreements or protectionism placed in different countries around the world. The ability to perform an automatic SAP BusinessObjects Global Trade Services check just before entering customs reduces the lead times getting the tool from supplier to customer.   

My objective was to provide a repeatable process for tracking project costs for each customer order. Tracking the costs would allow the company to determine the profitability of each sales order. Each sales order became a contract to install the equipment at the plant site of the end customer. Prior to the SAP implementation, the company lacked visibility to the planned versus actual costs, project progress, and accurate timetables of deliverables for project managers. As a result, they had little confidence in their carriers, especially when the company had to dynamically change the planned routing to meet the downstream timetables of the installations. Using Project System allows management to track costs on an on-going basis. This methodology provided feedback to sales on how profitable this new business venture was. It also gave the business a good baseline of how to negotiate the next contract and provide better predictability on profits.

The purpose of this article is to provide an example of how Supply Network Collaboration (SNC) and Supply Chain Event Manager (SCEM) software were used to improve the business practices for a new division of the company. In addition to the SAP SCM components, several SAP ERP Central Component (SAP ECC) software products contributed to the process and are mentioned only to round out the overall solution. The standard SAP ECC modules coupled with the SAP SCM products SNC and SCEM provided a powerful solution for accounting and asset tracking, put discipline into the business process, provided tools for externals users that were language and technology challenged, and gave a growth path to provide further traceability for the business unit’s projected growth.

Tracking and Collaboration in an Engineer-to-Order Environment  

The sales order created in SAP ECC initiates the logistics process. Figure 1 lists the SAP components and their responsibility for the process of shipping materials from the vendor to the international customer. The major components are SAP ECC, SAP BusinessObjects Global Trade Services, and SAP SCM. Under SAP SCM, we had three products running on this platform:  cFolders, SNC, and SCEM.  

Figure 1

Overview of the major components in this solution

Each sales order was assigned a project number for the customer implementation. Each project consisted of 12 different materials, which created the demand. After running transaction MD51 (Project Material Requirements Planning), the purchase orders in SAP ECC were created from planned orders and requisitions in SAP ECC to meet the demand from the projects. The purchase order strategy was used in SNC. Each purchase order carried the account assignment and the project number at the purchase order line item level. We assigned the purchase orders defined for SNC collaboration to a unique purchasing organization so the buyers could tell these purchase orders from the non-collaborative purchase orders that did not use SNC. This is one approach companies implementing SNC should consider to differentiate which materials are purchased with suppliers using the collaboration tool versus the suppliers that are not on board.

We then configured each material to-order and purchased them as a single line item on a purchase order. Configuration of that material varied from customer to customer because the layout of a material on the factory floor can vary from each manufacturing site and the options the customer selected for each material. It was critical that the correct configuration be communicated to the supplier. When the material arrived at the factory site, the material could be installed per engineering specifications. We were using release SNC 5.1, which does not support bill of material variants (configurable materials or KMATs). KMATs are supported in SNC 7.0, which is the current release of SNC. Our use of SNC 5.1 created the need to use cFolders in the collaboration process. This application addressed the requirement to provide a medium to support document collaboration with the suppliers. The use of cFolders with SAP ECC and SNC is standard functionality. I’ll discuss more about cFolders later.

When the purchase order saved in SAP ECC and the version activated, the purchase order was sent to SNC. Our SNC suppliers had two types of users for SNC: the service reps and the logistics department. The service reps confirmed the purchase orders and provided the dates and times the material was ready for pickup at the supplier location by our customer. The logistics team packaged the material into 20 or 30 crates. A material weighted about 15 tons was broken into subassemblies and placed into carefully labeled cartons so that when the installers arrived at the destination, they knew the order in which to pull the parts of the material and the order in which they needed to be installed. 

Once the purchase order was published in SNC, the supplier received the standard alert of a new purchase order through an email notification. The supplier could log into SNC using the URL provided in the email. Figures 2 and 3 show examples of the email notification and the SNC Alert Monitor view, respectively.

Figure 2

Email alert notification sent to supplier

Figure 3

Alert Monitor view

We did a small modification with the ReplenishOrderNotification XML in SNC, which sent the new purchase order. The project number and WBS element for the purchase order item were stored and displayed in the original purchase order, and original purchase order number fields were displayed in the purchase order details screen in SNC. Downstream, the packing labels had to be created for each material, and we were able to pull the data and print the project number and WBS element on the packing label for the material.   

Using SNC, the supplier confirmed the dates and quantities that would be communicated back to the customer when the material was ready for pickup from the supplier. Because our customer scheduled the third-party logistics providers, the shipping date and delivery date were the same in SNC and became the dates on which the material was ready for pickup from the supplier. 

Changes made to the purchase order either by the buyer or supplier were done in the Notes section of the purchase order (which is located at the header and item level of the purchase order). SNC also offers notes at the schedule line level. A purchase order change resulting from new notes added to the purchase order in SAP ECC does not generate a new note alert in SNC. The customer used purchase order versions to notify the supplier when a change was made. The buyers did not want to log into SNC to add a note on the purchase order. The new note alert was only used in cases in which the supplier added a new note and in turn created an alert to the buyers.

As mentioned earlier, when creating the purchase order in SAP ECC, buyers uploaded documents at the item level, which created a collaboration downstream in cFolders. The suppliers used cFolders to download the latest configuration of the material and the latest version of the purchase order from SAP ECC. SNC does not support purchase order versions, so using cFolders served as our workaround.

Once the material was ready for pickup, the customer’s logistics department used SCEM to schedule a pickup date and time with the third-party carrier. SCEM Web UI screens are configurable. This makes it easy for the customer to change the Web UI and tailor the application for their unique requirements.

SCEM created a booking number with one event handler. This first event handler planned the first leg of the trip. At that time, that the customer knew which storage locations the material would travel to on the first leg of the total journey. The first leg can be any one of the four scenarios shown in Figure 4. Assume the decision was made to move the material to Storage A (Figure 4, scenario 1). Event handlers were created for all purchase orders in SNC. The planned ship date (i.e., pickup date) and customer required date were planned events in the event handler. 

Figure 4

Summary of the possible generic routes that materials traveled from supplier to destination

Using SCEM with its Web UI, the customer’s logistics department selected the to and from destinations on the Web UI (Figure 5). SCEM picked up all the waiting materials and created bookings with the 3PL carriers. Each leg had an event handler. Using event handler sets, the customer could see the full end-to-end planned and actual time it took to get the material from the supplier to the end customer. Because SCEM was used in countries where employees spoke little to no English,special attention was made to make the screens and the flow of the business process intuitive and simple.

Figure 5

Mockup of a screen for SCEM

When the customer’s logistics department created the booking for the first leg, SCEM sent an email with the booking number to the third-party carrier. The booking number was used downstream to tie the freight charges of the material to the project so management had complete tracking of all costs to the project. The third-party carrier received notification of a booking via email from SCEM. The carrier updated the planned pickup date and time. This in turn updated the event handler in SCEM. The carrier can change the planned date several times. A benefit of using the booking number generated by SCEM was that it put discipline into the system. To be paid for a shipment, the 3PL carrier had to reference the booking number. Without a booking number, there was no payment. Previously, the carriers determined the mode of transportation. Sometimes they selected an expensive mode such as next-day even when the material did not have to arrive for six weeks.

When the supplier was ready to ship the material, the supplier’s logistics department created the advanced shipping notification in SNC for the material. When the third party picked up the material, the carrier had to post the actual date and time of this event. Using SCEM and the Web UI, the actual date and time were posted to the event handler for that leg. This event initiated the following transactions:

• Posted a goods receipt of the delivery note in SAP ECC, which transferred ownership of the material to the customer
• Created a stock transport order from a supplier to storage A
• Created an outbound delivery from the supplier to the customer location. This is used to transfer ownership from the customer to the end customer when the material arrives at its final destination. 

Because of constant rescheduling and fluctuating site readiness, the transportation route of the material could not be planned in advance and was replanned every time each material reached a major hub (Figure 4). By creating an event handler when it was time to move the material from one hub to the next using SCEM, it provided the company with the ability to track all materials in transit and at the various hubs located around the world.

Using SCEM in this manner filled several requirements. The materials were an expensive asset and when our client took ownership of the material, this had to be accounted for on the balance sheet. By using the stock transport order created in SAP ECC by SCEM, the accounting department could value the assets as the materials traveled from the supplier to the customer end location. In SAP ECC, we created plants A and B with storage locations (Figure 4). By using the address of the storage location with stock transfers and stock transport orders (STOs), SCEM was actually creating either STOs or stock transfers in SAP ECC when the material traveled. This complied with the accounting department requirements to track the material, its present location, and value.

When a material crossed an international border, the SAP BusinessObjects Global Trade Services checked for sanction parties that had to be initiated. SCEM triggers the SAP BusinessObjects Global Trade Services check. When an event handler was created for a shipment whose start and end destinations were at different plants, the rule set in event manager was configured to perform the SAP BusinessObjects Global Trade Services check.

An example of this is scenario 1, leg 2 in Figure 4. The movement between storage A and B is a plant-to-plant movement. If the SAP BusinessObjects Global Trade Services checked failed, the rule set in SCEM put the shipment on a Hold status due. The rule set generated an email notification to the customer’s logistics department. Once they received the email, the department could investigate why the SAP BusinessObjects Global Trade Services check failed and remedy the problem so the shipment could proceed.

 SCEM was also used for business process checks. Before a shipment was picked up, three checks were done prior to scheduling with the freight carrier:

• Did the customer make the necessary down payments for the project?
• Was the facility ready for the arrival of the material?
• Had the material passed the acceptance testing at the supplier site?

Once these checks passed, the material was prepared for shipment and scheduled for pickup. The packaging functionality in SNC was used to produce the label for the packing carton, create a handling unit for each carton, and create a detailed delivery note used by customs.

If you are an SNC user, you’re aware that the packaging functionality works well when packing many similar items into one carton and nesting the packaging. Because one material on a purchase order item had to be packed into many cartons, the workaround we used was to package 0.1 ea material into one carton. Defining a packing specification for the material allowed the user to pack a 20-ton material spread across 20 or 30 different types of packaging materials (cartons). Handling units were created for each carton, so when an advanced shipping notification was created in SNC, an inbound delivery note in SAP ECC created the handling units. When the user posted the goods receipt of the delivery note in SAP ECC, the handling units were already created. The future plan was to track the shipments not only at the purchase order item level but at the handling unit level using SCEM. Building out this functionality earlier in the process would allow the customer to expand the SCEM use in the future.          

For some deliveries, a third-party carrier had to pack the cartons containing one material into different shipping containers off site from the supplier. In these cases, the supplier would create a draft advanced shipping notification in SNC. To handle this process, two modifications were done to SNC. The first modification allowed the third-party carrier to see all shipments for all suppliers. Unlike the Supplier view, which restricts suppliers to see only their shipments, the carrier’s Supplier view allowed them to display all shipments for any supplier. Figure 6 details the steps of the logistics process in the order they are performed and also shows which role performs each step. Not all steps are addressed in this article.

Figure 6

Logistics flow with the processes performed by roleckup of a screen for SCEM

The second modification added a screen under the Delivery menu of the Supplier view in SNC. The carriers pulled up a draft advanced shipping notification that listed all the cartons for the packaged material on the left side of the screen. The carrier selected the cartons and assigned them to the shipping containers. This information was printed on the delivery note of the advanced shipping notification because customs requires it. When crossing an international border, part of the required documentation was a list of which labeled cartons were contained in each shipping container. This data had to be accurate on the delivery note. Otherwise, customs could reject the entire shipment of a 20- to 30-ton material. Figure 7 shows a partial sample of the delivery note printed in SNC.

Figure 7

Sample delivery note created in SNC for customs clearance across international borders

The cFolders were structured with the required security access, which allowed the supplier’s customer service department and logistics department to access documents pertaining to their responsibilities. Because our customer wanted to limit access to the purchase order pricing, the cFolders were structured by project number. Within each project number, logistics departments could access the documents for customs, shipping, and so on. Only the customer service department had access to the configuration and the latest purchase order version. I couldn’t use the cFolders Product button because the SNC 5.1 Business Add-In (BAdI) did not support the cFolders structure using project number as part of the collaboration structure.

The rule set within the event handler included the ability to incorporate the SAP BusinessObjects Global Trade Services checks for the sanction parties and credit checks.  Some of the functionality provided was as follows: Just before a shipment for a material was to cross customs, an SAP BusinessObjects Global Trade Services check was done for shipment. If the SAP BusinessObjects Global Trade Services check did not pass, the shipment was placed on hold until the necessary requirements were met. The shipment could also have been canceled if required. The check was initiated by the logistics department, which handled all bookings with third-party providers. Using SCEM, the logistics department booked all shipments. Before a shipment was picked up, the three business process checks (as mentioned above) were done prior to scheduling with the freight carrier.

The checks were performed by SCEM using the rule set in the event handler. Once the checks passed, the material could be prepared for shipment and scheduled for pickup.  If a notice came from the customer installation site that the arrival of the material had to be delayed while the material was already in transit, SCEM was capable of finding all shipments related to this customer order and placing those shipments on hold. This is triggered by posting an event using the sales order number as the tracking ID and posting this event. SCEM would then find all event handlers with this sales order as a tracking ID. The event was then processed using the rule set copied into the event handler for that shipment. Depending on the status and many other variables of that shipment, the shipment could be placed on hold status. This type of check, as well as checks with other applications such as SAP BusinessObjects Global Trade Services, ensured that there was tight collaboration among all related moving parts for the project. The project’s end purpose was to get the tools to the customer site on time and in proper sequence while providing all involved parties with up-to-date information.  

Some points to consider when implementing SNC and SCEM are:

• Make sure your buyers have a way to distinguish SNC purchase orders from non-SNC purchase orders. A company cannot on-board all their suppliers at once, so having a process makes the transition easier. 
• Determine data you need out of SAP ECC to support your downstream operations in SNC. Small modifications can be implemented to support and simplify processes in SNC. 
• When using SCEM, lay out all business processes in a Microsoft PowerPoint presentation. Considerable effort is involved in this process, but when properly planned business processes are laid out, the realization goes exactly as planned because the business is able to visualize what the Web UI will look like — and there are no surprises.
• The use of SCEM is limited by the implementer’s imagination. Use this opportunity to put discipline into the business process where it is warranted.
• Structure cFolders to meet your business requirements