Orange County Convention Center

Orlando, Florida | June 3-5, 2014

SAP IM vs. WM: How to Choose and Potentially

Migrate to WM
Kyle Sorensen
EY

LEARNING POINTS
Understanding the difference between WM and IM
Choosing between WM and IM
Optimizing and overcoming limitations with IM and
WM

R/3 INVENTORY MANAGEMENT (IM)

Key features/strengths
Inventory management by quantity
Visibility of on-hand quantity by storage location
Management of special stocks

Entry and documentation of all material movements

Real-time updates of inventory
Documentation of all receipts, issues and transfers

Physical inventory

Carry out physical inventory at the material level

Perform inventory adjustments

R/3 INVENTORY MANAGEMENT (IM)

(CONT.)
Inventory management by value
Postings update account assignments for cost
accounting
Updates G/L account for financial accounting

Key integration points

Integrates directly with MRP, purchasing and

invoice verification
Provides information for MRP, updates PO; used to
check conformity during invoice verification

Real-time updates

When transactions are entered, the results the

stock updates real time to reflect actual changes

ORGANIZATIONAL STRUCTURE AT THE IM

LEVEL
Client
Company

Company

Company
Plant

SLoc

SLoc

SLoc

CHALLENGES WITH INVENTORY

MANAGEMENT
Lack of detailed visibility to material flow
e.g. When the delivery pick list is generated, the deliverys
actual pick quantity is updated prior to actual picking
Requires manual updates when quantities differ

Inability to assign incoming materials to outbound

demand to avoid multiple material handling

CHALLENGES WITH IM (CONT.)

Immediate update of inventory receipts and issues
System inventory and status NOT representative of the
physical process

Limited visibility to locations of materials

Only possible to assign a single fixed bin location per

storage location
Bin location is text only; no strategies are available

R/3 WAREHOUSE MANAGEMENT

Initially released with R/2 as an Extension of IM
IM-WM integration is real-time and automatic
Enables granular traceability and control
Ability to synchronize the system and material flow
Simple-to-complex placement and removal strategies
Assignment of inbound orders to outbound deliveries
Allocation of storage bins
Processing of all stock movements valid for WM
Receipts, issues, transfers
Utilizes stock placement and removal strategies
e.g. Next empty bin, addition to stock, FIFO, LG/SM qtys.

R/3 WAREHOUSE MANAGEMENT

Infancy to maturity
Functionality considerably expanded with 4.6x and higher
Two-step picking, two-step confirmation, managing multiple
storage locations with a single warehouse
Extension set 2.0 for Enterprise includes Cross Docking,
Yard Management, Value Added Services
This still requires the SCM license

WM PICKS UP WHERE IM LEAVES OFF

Company
Plant 2

Plant 1

Stor. Type
1

Stor. Location
1

Stor. Location
2

Warehouse1

Warehouse 2

Stor. Type
2

Stor. Type
3

Stor. Type
1

Location
1

IM Level
WM
Level

Typical assignment is one storage location to one

warehouse
It is possible to have multiple storage locations
Quant Quant Quant Quant managed by a single warehouse
Bin 1

Bin 2

KEY WM FEATURES
Management of materials
Provides bin-level tracking
Inventory management functions
Various placement and removal strategies

Value-added services

e.g. Special handling requirements (labeling, packaging)

Powerful picking control

Two-step picking, wave picking

FIFO, LIFO, large/small quantity picking strategies

KEY WM FEATURES (CONT.)

Warehouse activity monitors
WAM, outbound delivery monitor, wave picking monitor

Cross-docking

Management of inbound and outbound movements

Yard Management

Appointment scheduling, check in and check out,

assignment of dock doors, loading/unloading activities

Task Resource Management

Enhances WM by breaking work down into distinct task

WM INTEGRATION WITH OTHER KEY SAP

MODULES
Fully Integrated with other
SAP Applications
Features:
Flexible Warehouse
Structures
Goods Movements
Control
Inventory

Source: SAP WM [LO530]

WM INTEGRATION WITH OTHER KEY SAP

MODULES (CONT.)
IM-WM
Processing of all material movements
Automated communication with configurable processing

SD-WM

Two-step picking with SD-WM integration

Wave picking opportunities
Processing individual deliveries

PP-WM

Production support with PP-WM integration

Supplying materials to the shop floor
Internal and external automated replenishment options

WM INTEGRATION WITH OTHER KEY SAP

MODULES (CONT.)
QM-WM
Handling of inventory samples
Inspection lot is maintained with the material data

Hand-held terminals-WM
Processing of transfer requirements
Processing of transfer orders
Bin and material inquiries

BENEFITS OF WM
Benefits
Better control of inventory
More accurate inventory
Able to maintain lower inventory levels

Better control of information

Visibility to picking and put away status

Reduced cycle time

Gartner: 16-25% Picking Productivity Improvement

Better manage work and workforce to gain efficiencies

11-25% Reduction in Customer Returns

BENEFITS OF WM (CONT.)
Measurable benefits

16-25% Picking Productivity Improvement

11-25% Reduction in Customer Returns
10-25% Savings in Material Handling Labor
10-40% Space Utilization Improvement
13-30% Reduction in Scrap
8-15% Reduction in Carrying Costs
Source: Gartner Report

LEARNING POINTS
Understanding the difference between WM and IM
Choosing between WM and IM
Optimizing and overcoming limitations with IM and
WM

WHEN IS INVENTORY MANAGEMENT THE

ANSWER?
IM is great when...

Small facility
Lower levels of inventory on hand
Simplistic material handling processes
Lower volume of activity
Outsourced warehouse operations
Only need storage location or bucket of inventory visibility

KEY ELEMENTS WITH IM

Required data for IM
Plant, valuation and storage location data

Relevant data for IM

Work scheduling, accounting, materials planning,

purchasing, classification, storage and quality
management

IM menu

Goods movements
Material documents
Reservations
Environment
Focused on reporting, lists and LIS

WHEN IS WAREHOUSE MANAGEMENT THE

ANSWER?
WM is great when

Larger facilities
Large number of materials on hand
Higher volume or flow through
Traceability and visibility is critical
Track material flow, status, inventory levels

Complex processes

Automated systems, wide spread site

KEY ELEMENTS WITH WM

Extend material master
Warehouse management view
No required data

Define warehouse structure

Minimize the number of storage types

Define based on similar and different rules for storing
materials
Mixed stock, Storage or Handling Unit Management

Define the WM Processes

Automatic, semi-automatic and manual processing

Transfer order creation, confirmation, posting
changes

EVALUATING IM VS. WM
1 Define business processes
2 Evaluate ROI of a WMS solution
3 Consider RF functionality
4 Training resources and schedule
5 Focus on optimization opportunities

STEP 1 DEFINE BUSINESS PROCESSES

Start with receiving, inventory and pick/ship first
Create and evaluate process flow charts
Look at process improvement opportunities
Score the level of complexity

Target areas for improvement

Reduce travel time
Inventory accuracy
Reduce material handling

Map improvements to IM and WM functionality

The level of functionality that customers need in a WMS is

completely dependent upon their environment. Customers have

to define their needs before they can realistically look for a
WMS.
Source: Integrated Solutions

STEP 2 - EVALUATE ROI OF A WMS

SOLUTION
Measure productivity and accuracy before and after
the WMS installation
Review and analyze picking operations
Key area of improvement
Review and analyze inventory accuracy
When supported with RF, accuracy can reach
>98%

There is no right time for paying back a WMS, but typical

paybacks are within six to 18 months, depending on the
inefficiencies of the current operation and how much safety
stock was needed to cover daily operations.
Source: Total Supply Chain

STEP 3 CONSIDER RF FUNCTIONALITY

RF supports improves warehouse bin accuracy
Bin accuracy >98% is possible

Reduces order fill process cycle time

RF projects often have a 1 year or less payback
period
Source: Intermec

Compare current receipt process to the time

saved when the task is aided by automatic data
collection (ADC)

STEP 3 - CONSIDER RF FUNCTIONALITY:

EXAMPLE
As-is
1,000 pallets at five minutes / pallet = 5,000 minutes

With two minutes saved per pallet

2 minutes * 1,000 pallets = 2,000 minutes
2,000 / 480 minutes worked by each receiver per day =
4.16 receivers saved from the pallet receiving process

Lesson
These workers can either be reassigned to other tasks
Increase overall productivity in your plant or their jobs
may be eliminated
Source: Total Supply Chain

STEP 4 TRAINING RESOURCES AND

SCHEDULE
Resources to evaluate, guide and support a WM solution
A full-time, dedicated WM resource is critical
This may or may not be the same IM resource

Training schedule
A WM solution will require a certain level of IM training
WM training will vary based on the degree of functionality

Support resources
Consider a single resource for IM and single resource for WM if
able

STEP 5 OPTIMIZATION OPPORTUNITIES

Picking operations and inventory accuracy

What are your baseline requirements

What is the volume of activity
Evaluate picking paths and demand
Look at your accuracy numbers over a period of time
Perhaps monthly, quarterly, annually

Material handling labor costs

Space utilization improvements
Packing tasks
Can you benefit from packing while picking?

WHAT IS THE BEST STOCK MANAGEMENT

SOLUTION?
1 - Inventory Management
2 - Lean Warehouse Management
3 - Full Warehouse Management
4 - Decentralized Warehouse Management
5 - SCM Extended Warehouse Management

OPTION 1 INVENTORY MANAGEMENT

Pros
Simplistic
Key receipt, issue or transfer in a single step transaction
Immediate update of inventory

Requires less training commitment

Fewer transactions to document and present

Trace-ability of all material postings into SAP R/3

Date, user, material, quantity, storage location

Real-time update of accounting information

OPTION 1 INVENTORY MANAGEMENT

(CONT.)
Cons
Does not handle complex warehouses operations well
Unable to monitor activities
Lacks tools to manage resources and tasks
Lacks functionality to optimize key processes (picking)

Inaccurate system inventory

Inventory updated before the physical movement

Requires additional work if there are discrepancies

Limited trace-ability

Only visibility is when the system posting took place

No visibility to the follow on physical activities

OPTION 2 LEAN WAREHOUSE

MANAGEMENT

Use of very small portion of WM capabilities

You do not process goods receipts or issues as a
subsequent process in WM,
No storage bins are managed in the WM application

Evolved from SD pick list

Put-away and pick from single fixed bin
Bin is hard assigned on material master
TOs are created for picks and put away, and pick list is
created from TOs

OPTION 2 LEAN WAREHOUSE

MANAGEMENT
Pros
Requires less configuration than full WM
Reduced number of steps in the process
Use of transfer orders as pick lists
Confirmation is not required

Additional processing options

Confirm put-away, picking, over-deliveries, shortages, batches

Print transfer orders
Integration to HR

Additional picking functionality

Wave picking is possible with Lean WM

OPTION 2 LEAN WAREHOUSE

MANAGEMENT
Cons
Must have a fixed bin assigned for all materials
Random storage is not possible

Inventory is still under IM functionality only

Inventory options are at the storage location
Stock differences can only be processed in MM-IM

Lacks additional optimization opportunities

Picking, packing, bin accuracy

No strategies are used

Lack of picking and put away strategies

OPTION 3 FULL WAREHOUSE MANAGEMENT

Pros
Optimization opportunities
Picking - Two step picking
Packing - Pick and pack in a single step
Cross-docking - Inbound, outbound, production materials

Monitoring and real time visibility to process status

Visual queues at the detailed steps
Open transfer orders, completed transfer orders

Additional inventory methods (annual, zero stock)

The module is FREE with the purchase of SAP

OPTION 3 FULL WAREHOUSE MANAGEMENT

Cons
Inventory counting interferes with operations without RF
Prior to 4.7 extension set 2.0

Initial overhead to set up depending on design

Master data
Capacity checking, control cycles

Configuration requirements
Designing the warehouse layout and set up

Potential for additional steps to support processing

Confirmations
Clearing differences
Processing posting changes

OPTION 4 DECENTRALIZED WM
Use of SAP as a standalone WMS
With SAP or other ERP/host as the core system
Core system and decentralized WM run on separate machines

Communication is through BAPIs for transactions and

IDOCs for master data

Goods movements done through delivery notes to the

stand-alone SAP WM system

OPTION 4 DECENTRALIZED WM
Pros
On a separate machine
Decreases criticality of down time
24x7 operation

Can leverage newer SAP R/3 releases

Even if core system is on an older release

Can add additional warehouses without impact to the

core system
Can communicate to multiple core ERP systems

OPTION 4 DECENTRALIZED WM
Cons
Core system is not 24x7 operation
IDOC and/or BAPI errors

IDOC failures

Human intervention is required to work the error queue

IDOC overhead

IDOCs do not offer all of the available field options that a

user may or may not use with the PC transaction
Must modify the IDOC

SAPConsole has to be set up in the decentralized system

and in the core system

OPTION 5 - SAP SCM EXTENDED WAREHOUSE

MANAGEMENT

Can operate as a standalone system

Decentralized in nature

Designed for complex, high-volume, high-parts facilities

Is integrated with the SAP Service Parts Planning (SPP)
Linked to the ERP storage location
New functionality, not limited to:

Slotting
Rearrangement
Kitting
Labor management
Advanced wave planning

Material flow system

Advanced interleaving
Shipping cockpit
Dock appointment
scheduling

OPTION 5 SAP SCM EXTENDED WAREHOUSE

MANAGEMENT
Pros
Multiple Deployment Options
On a separate machine
Decreases criticality of down time
24x7 operation
Possible to deploy on ERP as an Add-On
Can hook to older SAP ERP releases
4.6B and Earlier Custom IDOC Connection
4.6C to ECC 5.0 Standard SAP IDOC
ECC 6.0 and beyond Standard SAP qRFC
Can add additional warehouses without impact to the core system
Can communicate to multiple core ERP systems
More flexible naming structures
Handles more advanced operations
Future SAP development vector

OPTION 5 SAP SCM EXTENDED WAREHOUSE

MANAGEMENT
Cons
Core system is not 24x7 operation
IDOC and/or BAPI errors to older ERP systems

IDOC failures

Human intervention is required to work the error queue

IDOC overhead

IDOCs do not offer all of the available field options that a

user may or may not use with the PC transaction
Must modify the IDOC

NOTE: This is simplified with qRFC

Can be a little more challenging to configure and setup
depending on requirements needed by the customer
Look for a good partner that has expertise to implement EWM to
reduce project risk and complexity

SCALING THE SOLUTION

SCM EWM

Transaction Volume

Decentralized
WM

WM

IM Only

Lean WM

Operational Complexity

LEARNING POINTS

Understanding the difference between WM and

IM
Choosing between WM and IM
Optimizing and overcoming limitations with IM
and WM

OPTIMIZING AND OVERCOMING LIMITATIONS

WITH IM
AND WM

1 - Physical Inventory tips

2 - Enhance visibility of material flow and locations

3 - Automate picking and put-away
4 - Automatically replenish fixed bins
5 - Consolidate your picking activities
6 - Overcome bottlenecks with RF

1 PHYSICAL INVENTORY TIPS (IM)

Only possible if the storage location data has been
maintained
Solution: Activate automatic storage location for
movement types that receive material into the plant
Avoids the need to create storage data manually

For materials with multiple storage location reqmts.

Use the mass creation option for entering all valid storage
locations at one time into a single entry screen
Transaction code = MMSC

2 - ENHANCE VISIBILITY OF MATERIAL

FLOW AND LOCATIONS
Use fixed bin assignment to gain additional visibility
Material master storage location view

Two-step transfers vs. one-step movements

Storage location-to-storage location (movements 313, 315)
Plant-to-plant (movements 303, 305, 351, 352)

Outbound delivery monitor

Use to view outbound deliveries, shipments and loading

activities

Consider MFS with EWM

3 - AUTOMATE PICKING AND PUTAWAY

(WM)
Define a picking strategy per storage type
A - Partial quantity management
If picking results in partial quantities, pick from here first to
avoid breaking new pallets

M - Large/small quantities included

Use to facilitate larger quantity picks from bulk areas and

smaller quantity picks from rack areas

P - Fixed bin from material master

For fast moving items, assign a dedication location toward

the front of the warehouse
Use replenishment to maintain stock for demand

3 - AUTOMATE PICKING AND PUTAWAY

(WM) (CONT.)
Define a put away strategy per storage type
AVOID manual put away practices
C - Open storage
Use for large items that dont require a specific bin assignment

I - Addition to existing stock

Useful for consolidating receipts of the same material upon put-away

Caution: Since only one quant resides in a bin, all materials in the bin adopt the
same receipt date (unless batch or storage unit managed)

L - Next empty bin

Great fit for high rack storage; whereby a standard rack section can
hold 2-3 units of storage
Useful for storing pallets of material; one pallet per bin location

4 - AUTOMATICALLY REPLENISH FORWARD

PICK
LOCATIONS
Batch program(WM)
A scheduled job to read fixed bin data and generate
replenishment transfer orders
2 required programs
RLLNACH1
RLAUTA10

Upon transfer order confirmation option

Creates an automatic replenishment TO when a pick
confirmation drives the fixed bin location below the min. stock
level

5 CONSOLIDATE YOUR PICKING ACTIVITIES

(WM)
Two-step picking
Based on selection criteria, relevant deliveries are read and like
material requests are collected
This collection results in a single aggregated picking order and
task for each like material (first step)
TO splitting can be leveraged to distribute large picks

The second step is the re-allocation procedure

This is the process of re-assigning the specific materials and

quantities back to the original requirement

Reduces duplicate picking efforts

Cuts order fulfillment cycles

6 OVERCOMING WM PERFORMANCE
BOTTLENECKS WITH RF
Potential bottlenecks and solutions
More detailed operations require more transactional steps
Leverage RF to reduce the data entry requirements
Leverage RF to consolidate/combine transactions

Physical inventory blocking

Leverage RF to reduce the time a bin is blocked

In R/3 Enterprise, inventory can be processed if an open transfer
order exists

Pick and pack in a single step with RF

Incorporate RF to pick into a handling unit to avoid the need to

perform packing as a separate task

Consider using the RF Wizard Framework with EWM

KEY LEARNINGS
Evaluate your business processes to determine the BEST
inventory management tool
Inventory management strengths focuses on managing
stock at the quantity and value levels
Inventory management offers a single bin assignment per
material per storage location; no strategies
Lean WM offers transfer order functionality to support
receiving/put away and picking for deliveries

KEY LEARNINGS (CONT.)

Warehouse management offers additional areas of
functionality not available with IM
Cross docking, Inventory methods and more!

Decentralized WM offers functionality that will work with SAP

and other ERP solutions
Implement RF to increase accuracy, speed, real time inventory
and status updates with any solution
EWM is SAPs platform for the future for supply chain

FOLLOW US

THANK YOU
THANK YOU FOR PARTICIPATING

Please provide feedback on this session by completing

a short survey via the event mobile application.
SESSION CODE: 3101
For ongoing education on this area of focus,
visit www.ASUG.com