Supply Chain Management Software Requirements
and mySAP SCM 4.1

Version for participants of the questionnaire 
(company names and one publication from Gartner Research excluded)

A dissertation submitted in partial fulfilment of the requirements for the degree
of Master of Computing

UNITEC Institute of Technology
Auckland, New Zealand

August 2005

by

Andreas Christoph Weth

Abstract
Supply chain management (SCM) offers business benefits but is a difficult concept to master without the right software support. This dissertation is aimed at academic and IT professionals and SCM decision makers or consultants as it provides insights into SCM software and the leading concepts behind it. A qualitative approach was chosen for answering the research questions which focus on general SCM software principles but also enquire benefits, functionalities and the software architecture of SAP’s SCM 4.1 solution. In addition to trat, the differences between what decision makers request and what mySAP SCM 4.1 offers are addressed with the research questions. To answer these research questions, the structure of the dissertation contains a general introduction to SCM software and includes a SCM software market overview. After this parkt, one major part of the dissertation contains an analysis of the dominant SCM software solution mySAP SCM (Release 4.1). The examination of mySAP SCM 4.1 focuses first on technological aspects (software architecture, technological platform and programming language) before the business benefits and functionalities of this SCM software are examined. After that, the functionalities, business benefits and the architecture of mySAP SCM 4.1 are compared with the SCM software requirements obtained from ten SCM professionals from different industries (automotive, logistics, retail, consumer packaged goods, consulting and education). The analysis of the requirements from SCM decision makers (gathered using a questionnaire) shows that an increase in SCM transparency and a reduction of SCM costs were the main requirements articulated by decision makers. The comparison of the questionnaire with the functionalities, business benefits and the architecture of mySAP SCM 4.1 then illustrates that these requirements can be realised with SAP’s SCM 4.1. Concerning future research in the field of SCM software, it was found out that SCM software will be influenced by the following developments: increasing globalisation together with the internationalisation of SCM, the trend of services oriented architecture and the integration of corporate information systems.

Keywords:
Supply Chain Management (SCM), Supply Chain Management Software, mySAP SCM 4.1, Supply Chain Operations Reference (SCOR) Model, Enterprise Services Architecture (ESA), Netweaver

Acknowledgments

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Table of Contents

List of Figures ... 8
List of Tables  ... 9
Abbreviations - Acronyms ... 11
Abbreviations - Computing and Programming Names ... 14

1. Introduction ... 16
1.1 Problem Relevance ... 18
1.2 Problem Definition ... 19
1.3 Structure of the Dissertation ... 20

2. Literature Review
2.1 Literature in the Field of Supply Chain Management and Logistics  ... 22
2.2 Literature in the Field of Supply Chain Management Software ... 25
2.3 Literature in the Field of General Business and Management ... 31
2.4 Literature in the Field of Research Methodologies and Research Design ... 32
2.5 Literature Map ... 33

3. Research Questions ... 35

4. Research Methodology and Methods of Data Collection ... 37
4.1 Methodology ... 37
4.2 Questionnaire Design ... 37
4.3 Data Collection and Analysis  ... 39

5. Introduction to Supply Chain Management Software  ... 42
5.1 The Need for Supply Chain Management Software ... 42
5.2 The Business Benefits of Using Supply Chain Management Software  ... 43
5.3 Supply Chain Management Software Design ... 44
5.4 Market Overview over Supply Chain Management Software Solutions  ... 49

6. Analysis of the mySAP SCM 4.1 Software Solution ... 53
6.1 Company Profile SAP ... 53
6.2 Technological Aspects of mySAP SCM 4.1 ... 55
6.2.1 Software Architecture  ... 55
6.2.2 Enterprise Services Architecture ... 57
6.2 .3 Technological Platform SAP Netweaver ... 59
6.2.4 Programming Language behind mySAP SCM 4.1 ... 63
6.3 Functionalities and Business Benefits of mySAP SCM 4.1 ... 64
6.3.1 SCM Processes and Business Scenarios ... 67
6.3.2 SAP Advanced Planning and Optimization ... 71
6.3.3 SAP Inventory Collaboration Hub ... 73
6.3.4 SAP Event Management  ... 77
6.3.5 SAP Business Intelligence ... 78
6.3.6 SCM Basis  ... 80

7. Supply Chain Management Software Requests from Decision Makers  ... 82
7.1 General Information and Demographic Analysis  ... 82
7.2 Functionalities offered by mySAP SCM 4.1 and what Decision Makers request ... 86
7.2.1 The Use of Standard Supply Chain Management Models and the Acquaintance of Supply Chain Management Software Vendors  ... 86
7.2.2 Requirements for Supply Chain Functionalities and mySAP SCM 4.1 ... 89
7.2.3 Requests for Internet related Technology in Supply Chain Management Software and mySAP SCM 4.1 ... 94
7.3 Business Benefits of mySAP SCM 4.1 and what Decision Makers request ... 100
7.3.1 Areas of Business Benefits for Supply Chain Management Software and mySAP SCM 4.1 ... 100
7.3.2 Business Benefits of SCM software and mySAP SCM 4.1  ... 102
7.4 Requests for SCM Software Architecture and mySAP SCM 4.1  ... 105
7.4.1 The Requests and Impacts of Software Architecture on Supply Chain Management and mySAP SCM 4.1 ... 106
7.4.2 The Impacts of Enterprise Services Architecture on Supply Chain Management and mySAP SCM 4.1 ... 109

8. Discussion and Interpretation of Results  ... 112

9. Conclusion ... 120
9.1 Summary  ... 120
9.2 The Future of Supply Chain Management Software ... 120

Appendices  ... 122
Appendix A – Literature Review ... 122
Appendix B – Questionnaire  ... 134

References ...  143

List of Figures
Fig. 1: Sir Edmund Hillary and Tenzing Norgay  ... 5
Fig. 2.1: Supply Chain Operations Reference Model ... 25
Fig. 2.2: Architecture of SAP Netweaver ... 29
Fig. 4.1: Data Analysis Framework ... 39
Fig. 5.1: Supply Chain Management Software Vendor Performance 1H2003 vs. 1H2004 ... 49
Fig. 5.2: Revenues from the top 10 Supply Chain Software Vendors  ... 50
Fig. 6.1: Development of SAP and its Products ... 53
Fig. 6.2: Supply Chain Systems Architecture ... 55
Fig. 6.3: Enterprise Application Integration  ... 56
Fig. 6.4: Functionality and Architecture of SAP Netweaver ... 59
Fig. 6.5: Packaged Composite Architecture ... 61
Fig. 6.6: Solution Map mySAP SCM 4.1 Edition 2004 ... 64
Fig. 6.7: General System Architecture  ... 65
Fig. 6.8: Demand Planning Scenario Flow ... 68
Fig. 6.9: Flow Chart Supplier Managed Inventory Process ... 69
Fig. 6.10: Screenshot APO Detailed Scheduling Planning Board ... 71
Fig. 6.11: SAP System Architecture for Supplier Collaboration ... 73
Fig. 6.12: SAP Exchange Infrastructure with SAP ICH ... 74
Fig. 6.13: SAP Event Management  ... 76
Fig. 6.14: Screenshot Supply Chain Performance Measurement with mySAP SCM 4.1  ... 78
Fig.7.1: SCOR Model including the identified Areas of Business Benefits resulting from the Use of SCM software ... 100

List of Tables
Table 7.1 – Age Distribution of the Participants  ... 82
Table 7.2 – Higher Education of the Participants ... 83
Table 7.3 – Company Size Analysis  ... 84
Table 7.4 – Locations of Company Sites ... 84
Table 7.5 – The Use of Standard SCM Models in SCM Software  ... 86
Table 7.6 – Interest in particular SCM Software Vendors  ... 87
Table 7.7 – Reasons for selecting particular Software Vendors  ... 88
Table 7.8 – Requests for SCM functionalities from SCM Software ... 89
Table 7.9 – Requests for Forecasting Functionalities in SCM Software ... 91
Table 7.10 – Requests for Technology in SCM Software ... 95
Table 7.11 – Impacts of Technology on SCM ... 98
Table 7.12 – Requested SCM Software Benefits  ... 102
Table 7.13 – Benefits of Best Practice Processes in SCM Software ... 103
Table 7.14 – Impact of SCM Software Architecture ... 104
Table 7.15 – The Influence of the Programming Language of SCM Software ... 104
Table 7.16 – Knowledge of particular SCM Software Architectures  ... 105
Table 7.17 –Particular SCM Software Architectures ... 106
Table 7.18 – Impacts of SCM Software Architecture ... 108
Table 7.19 – Knowledge of Participants in the Field of Enterprise Services Architecture  ... 109
Table 7.20 – The Impacts of Enterprise Services Architecture  ... 110
Table 9.1 – Literature Map ... 121
Table 9.2 – SCM and Logistics- General SCM ... 123
Table 9.3 – SCM and Logistics – Strategic SCM ... 124
Table 9.4 – SCM and Logistics – SCM Concepts  ... 125
Table 9.5 – Supply Chain Management Software - General SCM Software ... 126
Table 9.6 – Supply Chain Management Software – Market Research SCM Software ... 127
Table 9.7 – Supply Chain Management Software – SCM Software Architecture  ... 128
Table 9.8 – Supply Chain Management Software – SCM Software Technology ... 128
Table 9.9 – Supply Chain Management Software – mySAP SCM ... 130
Table 9.10 – General Business and Management ... 131
Table 9.11 – Research Methods and Research Design ... 132

Abbreviations - Acronyms

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Abbreviations - Computing and Programming Names

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1. Introduction

Supply Chain Management (SCM) is still one of the most popular management trends since the end of the eighties. Potential for cost saving and service improvements resulting from improved supply chains are usually very high in most industries, even in heavily service oriented businesses. Hammer (2001) quantified benefits of systematically connecting supply chains in the chemical industry with a potential of inventory reduction of approximately 15%. Imagining the costs of capital resulting from a 15% excess in stock or inventory in a multi billion company, it becomes clear how much money could be saved by SCM optimisation just in the area of inventory management. However, one of the critical factors for successful SCM and SCM optimisation is the right software support. Refocusing on the example in the chemical industry, a 15% reduction in stock can certainly not be coordinated with loose spreadsheets and without SCM software support. For the purposes of SCM, there are different types of software solutions with different functionalities. Business information systems (BIS), decision support systems (DSS), Enterprise Resource Planning (ERP) software and especially SCM software helped executives to make the right decisions and streamline supply chains. As management guru Peter Drucker stated, the decision making process would be much more complex and executives would be far less effective without decision support systems (Drucker, 2004).

Because of that, it was not a great surprise that - together with the increasing importance of SCM management - the software market for supply chain management software solutions became more and more lucrative for software development companies to enter. In addition to that, another factor that has been leading to the growing interest about SCM software: the SCM software market had a significantly higher growth rate than the overall markets of BIS and ERP software.

After identifying that SCM software solutions were a suitable research topic, market research from Gartner identified mySAP SCM 4.1 as the SCM software solution with the highest market share (see figures 5.1 and 5.2 and section 5.4 for more information about the SCM software market). This was the reason why this dissertation focuses on mySAP SCM 4.1. However, it transpired that not much information was available which dealt with mySAP SCM 4.1 and other software solutions from an objective and academic point of view. Most information and analysis of mySAP SCM 4.1 was published through company white papers or white papers of SAP’s suppliers which means this source of information potentially was biased. Therefore further academic research in this area was of high importance.

As a first step for further academic research in the area of mySAP SCM 4.1, this dissertation provides information about SCM software solutions and focuses on the SCM software solution with the highest international market share in 2004 (mySAP SCM 4.1). To understand its functionalities, its architecture and its success, the most important SCM business concepts that lead to its development are illustrated together with information about the SCM software market. 

In the first chapter of the dissertation, general aspects and background information about the dissertation are further described. Section 1.1 shows the relevance of the topic and is a prerequisite for the actual problem definition stated in section 1.2. After that, the structure of the dissertation is explained in section 1.3.

1.1 Problem Relevance

Choosing the right SCM software solution for Fortune 500 companies is in most cases a decision linked to several billion US Dollars (including all impacts on customers, suppliers, business processes and the holistic supply chain) that can seal the fate of the company. The water-resistant fabric maker W.L. Gore and Associates sued its consulting company Deloitte Consulting, its software provider PeopleSoft and other companies due to difficulties which occurred during the implementation of a new system installation (Ayers, 2002). As long as there is a free market with different available SCM software solutions, there will always be a problem of choosing the right software solution. This shows the importance of the topic. The question is how do SCM executives obtain suitable information about SCM software solutions?

There are generally three different sources for information about SCM software:

· The Internet
· Consultants
· SCM software vendors

It seems unwise for decision makers thinking about choosing a particular SCM software solution to trust information gained from most articles available on the internet as they are in most cases questionable (except articles acknowledged by vendors) and often do not reveal their sources.

Another source of information for decision makers is provided by consultants or research companies. However, it should also be considered that most consultants or research companies charge a fee for providing information.

The last source decision makers are able to use is information provided by vendors of SCM solutions. In most cases this is subjective and usually does not include the basic concepts of SCM management and how they are implemented in these software solutions.

In addition to these three generic sources, this dissertation gives SCM and IT- Executives compressed and objective information about the SCM software market, the functionalities of the highly complex SCM software solution from the market leader and its background concepts.

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