SAP for Chemicals Functionality

SAP for Chemicals Functionality

SAP AG (NYSE: SAP) is well-known for its enterprise applications software tailored to the chemicals industry. For a detailed tutorial on the chemicals industry, see So What's the Big Deal with Chemicals?. For a discussion of the SAP approach to packaged solutions, see SAP Industry Solutions for Mid-market Companies. And for a discussion directly concerned with SAP and the chemicals industry, see SAP for Chemicals: A Packaged Solution for Mid-market Companies.

Part Two of the series SAP for Chemicals: A Packaged Solution for Mid-market Companies.

SAP has been delivering on its chemicals industry strategy by expanding its capabilities for manufacturing and supply chain management (SCM), broadening its composite package applications in areas such as emissions management, pricing management, and manufacturing dashboards, and focusing on mid-market companies. In fact, the composite applications SAP xEM, SAP xPMM (Price and Margin Management), and SAP xMII (Manufacturing Intelligence and Integration) were all spearheaded by SAP's chemicals unit. In the chemicals industry, SAP is focusing on the mid-market (defined as companies with annual sales between $50 million [USD] and $1 billion [USD]), via SAP ERP Chemicals Packaged Solution's preconfigured templates for reducing implementation times and costs.

Looking at the functionality of this product, we found that it supports both batch and continuous operations, with such capabilities as continuous production for bulk ("rate routing"); discontinuous production for filling; special batch number assignment; batch classification; automatic batch number generation; first in, first out (FIFO) batch determination; batch derivation (from bulk to finished); extensible markup language (XML)-based process instruction (PI) sheet (paperless production); and SAP Open Connectivity (OPC) for data access (in other words, SAP ODA for alerts and events).

It apparently includes many chemicals industry-specific "fatal flaw" (or "show-stopping") functions. For more general information, see The Fatal Flaws for Process Manufacturers.

It's worth looking at some of the best scenario examples in the SAP Chemicals case:

• The selling of bulk materials or commodities via the tank trailer processing and drums handling capabilities
  
  
• The environment, health, and safety (EH&S) scenarios, including the dangerous goods management, product safety, industrial hygiene and safety, and waste management features. For instance, the dangerous goods management capability helps companies comply with national and international regulation dangerous goods. This process is used in addition to the regular sales and distribution (SAP SD) capabilities, which entail order processing, free goods, returns processing, returnables processing, tank trailer processing, third-party order processing, rebates handling, customer consignment processing, internet sales (only for the R/3 Edition), and drums handling.
  
  
• The product safety scenario helps companies comply with national and international regulations for product safety by providing material safety data sheets (MSDS).
  
  
• The active ingredient processing capability deals with necessary adjusting of quantities based on actual active ingredient content, as determined by testing.
  
  
• There is a vast subcontracting capability, using so-called toll manufacturers and exchanges.
  
  
• A blending scenario is included, to combine material batches of different quality to achieve "in specification" materials that meet customer requirements.
  
  
• The repackaging option enables changes when the business requires an alternative to current product packaging combinations.
  
  
• Recipe management is also included, for developing, perfecting, and protecting franchise products, their potential successors, and the failed prototypes that preceded them.

Inspecting the details of some of modules, we were pleased with the depth of functionality. For instance, the SAP Procurement suite supports a swath of procurement processes for materials (including those in the pipelines) and external services via sub-modules like Request for Quotation (RFQ)/Quotation Management, Purchase Requisitions, Purchase Order, Goods Receipt (with QM integration), Invoice Verification, Procurement of Stock Materials, Procurement via Import, and Procurement of External Services. The SAP Quality Management (SAP QM) module has many features, such as sample management, in-process-controls, automatic lot creation at process order release, post-process controls, QM notifications, quality certificates check at goods receipt, batch recall, inspection costs coverage, quality certificate at goods issue, batch derivation, results recording (including digital signatures), jump from PI sheet, returns handling, manual inspection lots, recurring inspections, model inspection at goods receipt, control chart, results copy, and so on.

More Notable Functionality

SAP has recently unveiled role-specific dashboards for use in chemicals manufacturing, such as those destined for plant managers, production supervisors, maintenance supervisors, and quality supervisors. SAP's role-based manufacturing intelligence dashboards are part of a larger strategy of adaptive manufacturing, which integrates manufacturing with enterprise and SCM processes. These dashboards provide plant personnel with role-specific and personalized information, alerts, and KPIs, to help them align their activities with company goals and real-time events in the supply and demand chain.

The P2B integration process is being driven by ISA-95, an international standard for defining the interface between business and manufacturing systems. The first part of ISA-95 consists of a dictionary of common IT terms for both business and manufacturing personnel. The second part adds details to illustrate these terms, and describes production by available personnel, materials used and produced, equipment used, and production for scheduling and costing. The third aspect of ISA-95, still under development, defines contextual models for the disparate activities between manufacturing and business systems. SAP launched an initiative in 2004 to drive adoption of ISA-95 among manufacturing solution providers by building requirements of the standard into its solutions, including its manufacturing intelligence dashboards. It then launched a program that leveraged SAP NetWeaver with shop floor partners and SAP's manufacturing solutions. In 2005, the Lighthammer acquisition resulted in the SAP xApps Manufacturing Integration & Intelligence (SAP xMII) product (see Has SAP Nailed Plant Level Leadership with Lighthammer?), which puts the giant in a more competitive, but also somewhat awkward position with respect to many partner-competitors in the industry, such as AspenTech, Invensys, IndX/Siemens, OSIsoft, Pavilion Technologies, Honeywell, Emerson, and so on.

To address supply chain issues in adaptive manufacturing, SAP is also intensifying its efforts in radio-frequency identification (RFID) with a joint effort with Intel to facilitate the RFID adoption by offering customers the choice of either integrating their RFID hardware directly into back-end systems and business processes, or using device management partners to manage their hardware environment. This approach focuses primarily on direct data exchange between reader hardware and business applications, to allow enough intelligence from Intel's readers to be fed directly into SAP. When developed, this approach will include RFID-enabled supply chain execution (SCE) with mySAP Supply Chain Management (mySAP SCM), including an integration of partner devices and partner-based device management, and a composite platform based on SAP NetWeaver that plugs into partners' device management, administration, and monitoring tools.

Expansion of RFID capabilities complements SAP's existing offerings for the supply chain, which for the chemicals industry includes RFID capabilities for tracking rail cars and materials, where it already has a handful of customers. For more on SAP RFID forays in other industries, see RFID—A New Technology Set to Explode?. Also pertinent to chemicals, SAP has upgraded its Inventory Collaboration Hub, a component of the mySAP SCM suite, to better optimize consignments or vendor-managed inventory (VMI), and is also working on improving functionality for collaborative planning, forecasting, and replenishment (CPFR).

Another SAP composite application for the chemicals industry is SAP Global Trade Services (SAP GTS), which was released in 2004 and upgraded in early 2005 (see GTM Solutions—Always Watch Out for SAP). This application helps companies establish a corporate-wide standard for trade processes across SAP and non-SAP systems, so as to ensure compliance with international trade regulations, such as embargo control, and Intrastat and Extrastat reporting. SAP GTS aims at fostering the use of shared data (replacing high-maintenance manual processes) and providing a global view of trade across an enterprise.

How Is All That Packaged?

As hinted earlier on, SAP Best Practices for Chemicals v1.500 has been updated and revised, based on SAP NetWeaver-compliant mySAP ERP 2004. All business scenarios of the previous release were revised, and six new scenarios (drums handling, Chemical Industry Data Exchange [CIDX], relabeling, storage tank management, VMI, and waste management) have been added, making a total of twenty-four preconfigured industry-specific scenarios, many of which were described above. Some of the scenarios were defined in conjunction with many of the eighteen partners, while some scenarios leverage components of the SAP BW (Business Warehouse), SAP RM (Recipe Management), and SAP EH&S (Environmental Health and Safety) modules.

Furthermore, all traditional computer-aided test tools (CATTs) have been replaced by extended CATTs (eCATTs) to better create and execute functional tests for software. The primary aim here was the automatic testing of SAP business processes, whereby each test generated a detailed log to document the test process and results. Automatic testing is enabled by eCATTs in both SAP Graphical User Interface (GUI) for Windows and SAP GUI for Java. SAP business configuration (BC) set-based eCATT technology provides a structured methodology and infrastructure for SAP and its partners to deliver preconfigured processes and product extensions that should reduce the risk of having to re-implement after an upgrade of the baseline mySAP ERP technology. Predefined eCATT procedures are used to personalize sample data in the prototyping system, and to speed up and personalize implementation in the development system. To that end, there is a new tool called SAP Best Practices Installation Assistant for all system activation and personalization tasks.

Detailed documentation on the SAP Best Practices Template for Chemicals settings and processes is delivered as a free-of-charge product complementing mySAP ERP. To order the entire SAP Best Practices CD set—including the documentation and the pre-configuration CD—users can contact their local SAP office, or order online from the software catalogue on the SAP Service Marketplace. To order only the documentation CD, one can simply go to the SAP Service Marketplace and order online from the knowledge catalogue.

The SAP ERP Chemicals Packaged Solution also includes a fixed price services offering, which centers on implementing the packaged solution with minimum deviation from its content. For this offering, SAP has developed a specific mid-market methodology which includes a clear, consistent, step-by-step implementation roadmap. The SAP Best Practices approach aims not only at cutting implementation costs (via faster implementation), but also at minimizing risks during implementation. Thus, early in the implementation process, a "Delta Requirements Workshop" determines if the user company can work within the application as provided as part of the packaged solution. Then, as in other industries, for a fixed price SAP or its service partners will provide basic or advanced project management, implementation, and other services. The reduced implementation effort here comes primarily from reducing the project duration by 30 to 50 percent, with the potential for a 15-week turnkey implementation in some cases (owing to a reduction in the business blueprint or the scoping fit-gap analysis and realization phases; the project preparation and go-live preparation phases remain largely unaffected).

Localized versions for Germany, US, India, China, Korea, and Japan are generally available. The key implementation and development partners for the SAP ERP Chemicals Packaged Solution have been Deloitte Consulting, Hitachi Consulting, Accenture, Bearing Point, Atos Origin, Ciber Novasoft, IBM, IDS Scheer, Plaut, iTelligence, OR Soft, and so on. SAP has espoused a strict eleven-step qualification process for its new prospective regional and mid-market partners to sell, implement, deploy, and support the packaged solutions. Again, it is a common ERP platform upon which SAP will deliver the core chemicals industry functionality, while its partners can create additional sustainable extensions. SAP also provides a dedicated industry sales and marketing team to complement partner resources.

About the Authors

Predrag Jakovljevic is a principal analyst with Technology Evaluation Centers (TEC), with a focus on the enterprise applications market. He has nearly twenty years of manufacturing industry experience, including several years as a power user of IT/ERP, as well as being a consultant/implementer and market analyst. He holds a bachelor's degree in mechanical engineering from the University of Belgrade (Yugoslavia), and he has also been certified in production and inventory management (CPIM) and in integrated resources management (CIRM) by APICS.

Olin Thompson is a principal of Process ERP Partners. He has over twenty-five years of experience as an executive in the software industry, and has been called the "father of process ERP." He is a frequent author and award-winning speaker on topics such as gaining value from ERP, SCP, e-commerce, and the impact of technology on industry. He can be reached at Olin@ProcessERP.com.