Resilience and networked systems

SAP was not only a pioneer in the business management field of ERP, but also helped to revolutionize SCM, Supply Chain Management. At that time, Professor Hasso Plattner was still an active member of the SAP Executive Board when APO, legendary in the SAP community, was constructed. APO stands for Advanced Planner and Optimizer, and its task was to perfect and coordinate production and logistics. APO's birth was many decades ago, but even then the challenges were almost impossible to master, so the Advanced Planner and Optimizer was slow to produce usable results given the computer power of the time. Plattner had the saving idea: APO gets its own in-memory computing database - and SCM worked! This also clarifies who invented the complete provision of a database in the main memory of a computer and prepared SAP Hana.

In recent years, SCM has developed into a specialized IT science and the complex topic is being innovatively developed by SAP and partners. SAP partner Consilio hosted a congress in the Allianz Arena of FC Bayern, together with reference customers and SAP itself. Consilio is an independent, internationally active consulting company and offers solutions for business challenges, from strategy to functional and technical design to full implementation with pragmatic execution. The company supports the further development of business strategies and their digitalization using SAP standard software such as SCM and IBP, Integrated Business Planning for Supply Chain.

One of Consilio's reference customers is the traditional company Teekanne. As Head of Corporate Process Management for the Teekanne Group, Harald Liedtke is responsible for the group-wide standardization of planning processes with their interactions between sales, production, and purchasing, and the introduction of the cloud-based planning software SAP IBP required for this, in order to provide more transparency in the group-wide supply chain, see also the technical article "Supply Chain Planning" on the following pages. With the introduction of Integrated Business Planning, Teekanne wants to improve its processes and tap further strategic potential of digitalization. With IBP, Teekanne gains access to planning tools to ensure goals such as traceability, resilience, and networking of sales, production, warehouse, and logistics.

The introduction of IBP guarantees the tea manufacturer not only significantly increased transparency along the entire supply chain, but also greater flexibility in responding precisely to changing market situations. "Teekanne's implementation of SAP IBP gives it access to innovative IT planning tools for production, distribution and procurement that will enable it to successfully meet future challenges"explained Christoph Habla, Head of IBP and Senior SCM Solution Architect at Consilio.

Complex planning

What seems trivial and simple at first glance is a highly complex challenge in practice, but also in theory, because SAP customers cannot be satisfied with the wisdom of Bertolt Brecht's Threepenny Opera: Yes, make only one plan, be only a great light, and then make a second plan, neither of which will work.

For supply chain planning, transformation is a joint effort, as demonstrated by a solution for tank planning, for example. Until now, planning tanks as part of production in SAP systems has been complex and usually could only be mapped using specific customer solutions. SAP is now addressing this issue with the support of its partner Consilio and creating a basis for including storage and process tanks in planning. Companies in the process industry need support in planning their tank resources: "Until now, this has only been possible to a limited extent with SAP software, which is why many chemical and beverage groups have developed a workaround with their own solutions or have resorted to alternative software providers," explained Georg Klinger, Partner and industry manager for the process industry at Consilio.

The first milestones on the way to integrated tank planning in SAP Manufacturing for Planning and Scheduling have already been reached. The main challenge for Consilio's developers during implementation was to technically realize the complexity and dependencies of the requirements within the SAP system and to embed the enhancements seamlessly into the system.

Digital factories

According to a PwC study, industrial companies worldwide invest more than one trillion euros each year in building digital factories. This spirit of optimism was also evident at the event in the Allianz Arena. Despite high investments, more than half of the 700 companies surveyed by PwC are at a very early stage of implementing digital systems and technologies. This is according to the Digital Factory Transformation Survey 2022, which the auditing and consulting firm PwC published on the occasion of the Hannover Messe this year.

Where the focus used to be on cost reduction and efficiency, today the emphasis is on flexibility and resilience. On the occasion of the Hannover Messe, the digital association Bitkom surveyed that 65 percent of industrial companies with 100 or more employees use special applications for Industrie 4.0 including SCM, and another 25 percent are planning to use them.

For manufacturing companies, the current situation is characterized by ongoing crises: Disrupted supply chains, major fluctuations in demand and acute inflationary pressure are just some of the challenges facing businesses. As a result, almost all companies are being forced to make their production more flexible and to rely on a value chain model that focuses on resilience.

Cost reduction vs. resilience

Many existing SAP customers are therefore investing in their digital transformation - but a differentiated picture is emerging, to which SAP has only partially responded: PwC's global survey of 700 industrial companies shows that the number of companies using digital technologies to reduce costs has plummeted, while the number of companies investing to strengthen their flexibility and resilience has increased by 76 percent overall.

In a challenging market environment, SAP developed two strategies: cloud computing and close cooperation with selected partners, see the example of tank planning. Consilio received the Recognized Expertise award from SAP. This award allows SAP's existing customers to better assess the partner's core competencies. The SAP Recognized Expertise award is presented by SAP every year as part of the Partner Edge program. In an audit, the Walldorf-based company checks the status of partners every year, which is required for renewed certification.

Competitiveness

"Through consistent digitization, the industry can face two urgent challenges at the same time: Digitization makes companies more sustainable and more competitive"said Christina Raab, member of the Bitkom Executive Board.

The biggest obstacle to establishing Industrie 4.0 is a lack of financial resources, according to the companies' own statements to Bitkom. For 58 percent, the topic is too complex. Around half see a lack of skilled workers as an obstacle. Christina Raab: "According to their management, one in three companies simply does not have time to deal with digitization. In the future, industrial business will be close to 100 percent digital. Digitization belongs at the top of every manager's to-do list."

SAP Integrated Business Planning, IBP, is a very powerful planning tool and offers some users functionalities that they may not even need on the surface, see Bitkom survey. The Consilio SAP add-on Embedded Sales and Operations Planning (S&OP) offers an entry-level solution and a first step toward digital transformation and thus digital twins. It addresses the core processes for integrated corporate planning, enables a complete planning picture of the company, and includes the areas of corporate planning, sales and distribution planning, supply chain, and production. Sales and Operations Planning has freely definable planning levels such as sales regions, divisions or model series and offers direct access to all SAP data. This enables coordinated planning with financials, corporate planning, sales and marketing, details on the next pages.

Supply chains must be able to absorb, adapt to, and recover from disruptions whenever and wherever they occur. Improved dynamic insights, risk detection and mitigation solutions enable companies to deal with sudden changes in the supply chain.

Scenario planning and risk and opportunity analysis help to adapt to the development of supply and demand. Network modeling and simulation, stress testing, strategic buffer sizes, and multi-sourcing options enable companies to manage uncertainty. Supply chains must be customer-centric and flexible to adapt quickly and cost-effectively to changes in demand. Moving from centralized, linear delivery models to decentralized networks with on-demand production, and in some cases moving production closer to the point of sale, can help companies better meet customer expectations for order fulfillment.

Digital Twins

Resilience, networking and transformation are the challenges: A dual strategy became clear at the Consilio conference. Tools, such as SAP Integrated Business Planning, are used to respond to the current difficulties, but new organizational structures and processes are also planned for the long term. However, this can only be done with modern concepts such as Digital Twins. Harald Liedtke, as Head of Corporate Process Management for the Teekanne Group, outlined in his presentation that, together with Consilio, he not only wants to optimize the existing business and IT structures, but also examine new approaches - such as Digital Twins.

According to the Capgemini study "Digital Twins: Adding Intelligence to the Real
World", 60 percent of the companies surveyed are already using digital twins as catalysts for operational improvement. Bitkom surveyed that digital twins are used in every third company. "Digital twins are digital copies of real-world objects - from products and machines to entire factories. Thanks to them, production and maintenance processes can be massively accelerated and continuously optimized in use.", explained Christina Raab at the Hannover Messe.

Supply Chain Conclusion

Accenture published a study this year that says supply chains need to be reinvented to meet a paradigm shift. Supply chains were designed primarily to optimize costs. However, in today's world, they must also be resilient and flexible to respond to supply uncertainties. At the same time, they are becoming an important competitive advantage to enable future growth.