SAP NetWeaver Hooks Manufacturing into Supply Networks, But Isn't an Execution Platform

SAP’s Manufacturing Dashboard for Plant Managers and SAP NetWeaver for Manufacturing, unveiled at SAPPHIRE 2004, clearly position SAP’s role in infusing manufacturing visibility into supply network operations. Less clear are SAP’s claims of existing “manufacturing execution” capabilities in its core Enterprise Resource Planning (ERP) product.

The Bottom Line: SAP NetWeaver for Manufacturing provides a framework to incorporate production operations into supply networks, but it isn’t a manufacturing execution platform.

ERP is not a manufacturing execution platform

SAP customers that have deployed its ERP systems in manufacturing now understand the limitations of using ERP in production operations. Despite SAP’s use of the term “manufacturing execution” in the description of its ERP system, SAP’s invitation to production operations vendors and customers to participate in the development of standard integration scenarios acknowledges the need for third-party support for the real-time execution and control of production orders in manufacturing.

SAP targets supply network operations

SAP has sidestepped the barriers to ERP in production operations. By positioning SAP NetWeaver for Manufacturing as part of its broader Adaptive Supply Network and Adaptive Manufacturing architecture, SAP presents capabilities beyond the reach of most production operations vendors. Integrating manufacturing into a Demand-Driven Supply Network (DDSN) balances demand variability with supply and in-house/contract manufacturing constraints profitably. But it requires collaboration within the enterprise and with network partners, including the following:

• Quality management--DDSN manufacturers need to integrate test plans, analysis results, and corrective action workflows across supplier, internal, and customer quality processes.
• Dynamic scheduling--n responding to event-driven demand signals, manufacturing will need to rapidly reoptimize the trade-offs between inventory target compliance, overtime, and perfect order performance.
• Profit velocity analysis and supply network costing--Profitable-to-promise calculations for a near real-time schedule, as well as changes to product specifications, manufacturing sites, and logistics, require profit velocity analysis.
• Product data management/recipe management--Companies need to combine the definition of how to manufacture a product with the supply network that describes manufacturing and logistics capabilities, including associated costing models. Tracking product genealogy across supply networks and product lifecycles is now a necessity.
• New product development and launch--Integrated tools are required to aid trade-offs among time-to-market goals, development costs, launch readiness of products, and marketing campaigns while incorporating the capabilities and constraints of suppliers, logistics providers, and manufacturing.

Applications have evolved from production operations to supply network operations

SAP NetWeaver for Manufacturing shows that the application market is now starting to support supply network operations. Some of the indicators are as follows:

• Supply Chain Management (SCM) vendors are adding manufacturing fidelity and speed.
• ERP is becoming the data management hub for compliant manufacturing.
• Manufacturing Execution System (MES) applications are being constrained to site-specific execution.

Conclusion: SAP’s announcements are the clearest yet from any ERP vendor on how ERP will integrate manufacturing into supply networks. Customers should take up SAP’s invitation to work on its development roadmaps and agreement on standards to clarify the remaining confusion about manufacturing execution. Once scenarios such as “Produce to Demand” and “Right First Time” have been charted, SAP’s initiatives should unfreeze overdue investments in manufacturing systems.

AMR Research originally published this article on 4 June 2004.