Supply Chain Management Software Requirements and mySAP SCM

Table of Contents

List of Figures

List of Tables

Abbreviations - Acronyms

Abbreviations - Computing and Programming Names

1. Introduction
1.1 Problem Relevance
1.2 Problem Definition
1.3 Structure of the Dissertation

2.1 Literature in the Field of Supply Chain Management and Logistics
2.2 Literature in the Field of Supply Chain Management Software
2.3 Literature in the Field of General Business and Management
2.4 Literature in the Field of Research Methodologies and Research Design
2.5 Literature Map

3. Research Questions

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

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

6. Analysis of the mySAP SCM 4.1 Software Solution
6.1 Company Profile SAP
6.2 Technological Aspects of mySAP SCM 4.1
6.2.1 Software Architecture
6.2.2 Enterprise Services Architecture
6.2.3 Technological Platform SAP Netweaver
6.2.4 Programming Language behind mySAP SCM 4.1
6.3 Functionalities and Business Benefits of mySAP SCM 4.1
6.3.1 SCM Processes and Business Scenarios
6.3.2 SAP Advanced Planning and Optimization
6.3.3 SAP Inventory Collaboration Hub
6.3.4 SAP Event Management
6.3.5 SAP Business Intelligence
6.3.6 SCM Basis

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

8. Discussion and Interpretation of Results

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

Appendices
Appendix A – Literature Review
Appendix B – Questionnaire

References

List of Figures

Fig. 1: Sir Edmund Hillary and Tenzing Norgay

Fig. 2.1: Supply Chain Operations Reference Model

Fig. 2.2: Architecture of SAP Netweaver

Fig. 4.1: Data Analysis Framework

Fig. 5.1: Supply Chain Management Software Vendor Performance 1H2003 vs. 1H2004

Fig. 5.2: Revenues from the top 10 Supply Chain Software Vendors

Fig. 6.1: Development of SAP and its Products

Fig. 6.2: Supply Chain Systems Architecture

Fig. 6.3: Enterprise Application Integration

Fig. 6.4: Functionality and Architecture of SAP Netweaver

Fig. 6.5: Packaged Composite Architecture

Fig. 6.6: Solution Map mySAP SCM 4.1 Edition 2004

Fig. 6.7: General System Architecture

Fig. 6.8: Demand Planning Scenario Flow

Fig. 6.9: Flow Chart Supplier Managed Inventory Process

Fig. 6.10: Screenshot APO Detailed Scheduling Planning Board

Fig. 6.11: SAP System Architecture for Supplier Collaboration

Fig. 6.12: SAP Exchange Infrastructure with SAP ICH

Fig. 6.13: SAP Event Management

Fig. 6.14: Screenshot Supply Chain Performance Measurement with mySAP SCM 4.1

Fig.7.1: SCOR Model including the identified Areas of Business Benefits resulting from the Use of SCM software

List of Tables

Table 7.1 – Age Distribution of the Participants

Table 7.2 – Higher Education of the Participants

Table 7.3 – Company Size Analysis

Table 7.4 – Locations of Company Sites

Table 7.5 – The Use of Standard SCM Models in SCM Software

Table 7.6 – Interest in particular SCM Software Vendors

Table 7.7 – Reasons for selecting particular Software Vendors

Table 7.8 – Requests for SCM functionalities from SCM Software

Table 7.9 – Requests for Forecasting Functionalities in SCM Software

Table 7.10 – Requests for Technology in SCM Software

Table 7.11 – Impacts of Technology on SCM

Table 7.12 – Requested SCM Software Benefits

Table 7.13 – Benefits of Best Practice Processes in SCM Software

Table 7.14 – Impact of SCM Software Architecture

Table 7.15 – The Influence of the Programming Language of SCM Software

Table 7.16 – Knowledge of particular SCM Software Architectures

Table 7.17 –Particular SCM Software Architectures

Table 7.18 – Impacts of SCM Software Architecture

Table 7.19 – Knowledge of Participants in the Field of Enterprise Services Architecture

Table 7.20 – The Impacts of Enterprise Services Architecture

Table 9.1 – Literature Map

Table 9.2 – SCM and Logistics- General SCM

Table 9.3 – SCM and Logistics – Strategic SCM

Table 9.4 – SCM and Logistics – SCM Concepts

Table 9.5 – Supply Chain Management Software - General SCM Software

Table 9.6 – Supply Chain Management Software – Market Research SCM Software

Table 9.7 – Supply Chain Management Software – SCM Software Architecture

Table 9.8 – Supply Chain Management Software – SCM Software Technology

Table 9.9 – Supply Chain Management Software – mySAP SCM

Table 9.10 – General Business and Management

Table 9.11 – Research Methods and Research Design

Abbreviations - Acronyms

illustration not visible in this excerpt

Abbreviations - Computing and Programming Names

.net .net technology from Microsoft is an internet based platform and technology solution for a web based IT architecture

ABAP Advanced Business Application Programming. ABAP is a fourth-generation programming language - indicated by the four – and therefore offers power and flexibility to developers. It is an event driven language so applications can be executed by events occurring in the system or through user interaction. It was developed by SAP.

BAPI Business Application Programming Interface. BAPI is a standard for a software interface between software objects from SAP.

C++ A standard for an object oriented programming language defined in 1998.

HTTP Hypertext Transfer Protocol. HTTP is a protocol standard which is

popular on the internet and is used for the exchange of data.

IDoc Intermediate Document. IDoc is a protocol standard for exchanging information between systems from SAP and systems which are based on EDI (the Electronic Data Interchange protocol)

J2EE Java 2 Platform, Enterprise Edition. J2EE is a programming platform for modular software applications.

Java An object oriented programming language which was released in 1991 by Sun Microsystems.

Netweaver Netweaver is a software architecture developed by SAP. It can be used for managing, developing, testing, deploying web services and applications based on ABAP or Websphere.

PHP PHP is a standard script language which is embedded in HTML. It can be used for connecting web pages to back end databases and can be implemented with additional software solutions.

SOAP It is also protocol standard for creating messaging standards and is a variation of XML.

Visual Basic An event driven programming language from Microsoft which has its roots in Basic. Visual Basic for Applications is derived from Visual Basic and is used in most applications from Microsoft (in particular Microsoft Office)

Websphere Webshpere is a Java-based platform developed by IBM and is related to XML (see XML below). Websphere can be used for automated data transactions,

XML Extensible Markup Language is one of the most important standards for packaging data on the internet and in the SC industry (Taylor, 2004b). It is a Meta language which is based on tags and was developed for structured data presentation. By using XML, the presentation based on HTML is separated from data and can therefore be used for the readability of websites by machines, thus for instance automating order processing from a website.

XMLA XML for Analysis. It is derived from XML and can be seen as a particular version of XML.

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.

1.2 Problem Definition

Robert Rubin, the former U. S. secretary of the Treasury under Bill Clinton, argued that there is an increasing need of real time connection from European or US companies to low-wage environments, especially China or India, as off-shoring and outsourcing is becoming more and more popular (Rubin, 2004). Nevertheless, outsourcing and off-shoring also leads to a higher amount of coordination and management of these international supply chains. Therefore SCM software solutions are essential to manage supply chains (SC) spanning around the globe because it is no longer possible to manage multinational supply chains without IT support.

In addition to that, Poirier (2004) has reported that some international corporations have already gained competitive advantages by establishing a state of the art SCM and SCM system by using suitable SCM software. Among these companies are for instance Microsoft, Dell, Wal-Mart, Sony and Caterpillar. So assuming a company wants to achieve a competitive advantage and therefore implements a highly efficient SC managed by SCM software, how could this be realised?

Simchi-Levi, Kamnisky and Simchi-Levi (2004) stated that there are two extreme approaches for SCM software solutions: SCM software which is based on a standard SCM model or approach and SCM software which is based on a self developed SCM approach. These two approaches will be evaluated later in the dissertation.

In addition to that, different SCM software solutions have different functionalities and software architectures which need to fit to the client’s established business processes and information systems. Therefore there is no SCM software solution which is seen as the perfect software solution for managing the supply chains of all Fortune 500 companies. Nevertheless, there is a SCM software solution approach which was used in 2004 by many Fortune 500 companies and has gained a high reputation since 2000 (McBrea, 2004). mySAP SCM 4.1 from SAP AG was the leading SCM software solution based on revenues from software licenses in 2004 (see figures 5.1 and 5.2) and was in most cases implemented in a single vendor approach together with the ERP solution from SAP AG. The question is, even if mySAP SCM 4.1 was chosen by most Fortune 500 companies, did decision makers really think their requirements in the fields of functionalities, business benefits and software architecture were fulfilled?

1.3 Structure of the Dissertation

The first chapter of the dissertation includes the problem relevance, the problem definition and the structure of the dissertation. After that, chapter two analyses and describes relevant publications in a literature review. Chapters three and four state the research questions and the research methodology together with the methods of data collection. An introduction to SCM software is given in chapter five before mySAP SCM 4.1 is analysed in chapter six. Then, the outcome of the questionnaire is analysed and compared with mySAP SCM 4.1 in chapter seven. After that, the findings of the dissertation are discussed in chapter 8 and information about the future research in this area is stated in chapter 9 together with a conclusion. Finally all relevant attachments can be found in the appendices.

2. Literature Review

Literature from the following areas was considered to be relevant for the research project:

- Supply Chain Management and Logistics
- Supply Chain Management Software.
- General Business and Management Literature
- Research Methodologies and Research Design.

Most academic literature in the field of general introduction to supply chain management - in particular Coyle, Bardi and Langley (2003), Simchi-Levi, Kaminsky and Simchi-Levi (2004) and Wisner, Leong and Tan (2005) - also included relevant theories and findings concerning supply chain management software. Nevertheless, publications were placed in the given literature area where the major part of the publication was identified as being relevant.

In the following part of this dissertation, an overview of relevant literature in the two most important identified areas (‘Supply Chain Management and Logistics’ and ‘Supply Chain Management Software’) is given in sections 2.1 and 2.2 In addition to that, a literature map in the attachment shows the identified publications in each category and subcategory.

2.1 Literature in the Field of Supply Chain Management and Logistics

Literature in the field of supply chain management and logistics needs to be researched because SCM principles are included in SCM software solutions. SCM software benefits also depend on how these SCM principles are realised in SCM software solutions. The beginning of the definition of SCM can be traced back to the 1950s to the concept of physical distribution. Smerck, Wilson and Spychalski published in 1964 the first volume of Physical Distribution Management and indicated the benefits of a SCM system concept (Coyle et al, 2003). According to Gadde and Håkansson (2001), there are benefits to be gained from using an integrated systems approach over a stand-alone SCM solution. This idea induces strong business benefits because data can be shared between different IT systems. The concept of an integrated system is also the basis for the analysis of Enterprise Services Architecture in section 6.2.2 of the dissertation.

Coyle et al (2003) described a supply chain as an extended enterprise along boundaries of individual companies and define SCM as the integration of logistic activities of all companies involved in the supply chain (Coyle et al, 2003). This is a definition typically used by many researchers with an academic focus. However, Lambert (2004, p. 19) defined SCM as “the integration of key business processes from end user through original suppliers that provides products, services, and information that add value for customers and other stakeholders”. This definition includes practical aspects (adding value for customers and other stakeholders) as well as an academic research focus (integration of business processes from end users through original suppliers). Due to the practical aspects of the topic, the SCM definition from Lambert (2004) was chosen for this dissertation. It was already stated that supply chain management is closely related to the discipline of logistics. Nevertheless, for this research project a distinction will not be made between logistics and supply chain management as they include for the most part the same theories and findings.

Sakaguchi, Dibrell and Nicovich (2002) state that the right supply chain management implementation can lead to a competitive advantage. A competitive advantage is defined as a company’s benefit over rival companies, according to Porter (1985). Analysing in more depth the main business benefits for supply chain management relating to a competitive advantage, it can be said that these business benefits can be found in the following areas, according to Wisner, Leong, and Tan (2005): Complexity reduction, cost reduction, improved delivery services and increased visibility. In addition to this, Fisher (1997) stated that these benefits can only be realised with the right supply chain processes. These business benefits resulting from supply chain management are analysed in more detail in section 5.2.

The leading research journals concerning SCM and SCM software are the Supply Chain Management Review which has been published since 1997 by Reed Business Information and the Journal of Supply Chain Management – a publication from the Institute of Supply Management (ISM), founded in 1915. Nevertheless, articles concerning supply chain management and logistics are also published in the leading American business journals, in particular in the Harvard Business Review, MIT Sloan Management Review and California Management Review.

As it can be seen in the literature map for the field of ‘Supply Chain Management and Logistics’ in table 9.2, this field can be categorised into the subcategories of general SCM literature (table 9.2), strategic SCM (table 9.3) and SCM concepts (table 9.4). SCM textbooks were identified to be relevant for all three subcategories. The subcategory ‘General SCM Literature’ contains more publications (12 publications) compared with the two other subcategories (strategic SCM: 8 publications; SCM concepts: 7 publications) because the field of general SCM literature is heavily researched.

2.2 Literature in the Field of Supply Chain Management Software

SAP’s supply chain management software is based on the Supply Chain Operation Reference Model (SCOR). Research question three focuses on the question why this approach was chosen by SAP. This model includes a standardised definition of supply chain processes that was published first in 1997 (Ballou, 2004) and is the current international standard for supply chain processes. The following illustration (figure 2.1) was taken from a publication from Supply Chain Council (2004) and shows the SCOR model. As can be seen from the illustration (figure 2.1), the essential key processes which should be supported by a supply chain management software solution are: plan, source, make, deliver and return.

illustration not visible in this excerpt

Fig.2.1: Supply Chain Operations Reference Model

Koch (2002) focused on these key processes and stated that planning is a strategic activity to fulfil customer demands and monitoring SCM activities. Sourcing means choosing the right suppliers and developing processes for determining prices, deliveries and payments (Koch, 2002). Managing inventory and monitoring the activities are also key tasks of sourcing. Making is the actual manufacturing process. Together with testing and packaging, all activities are usually monitored concerning productivity and costs. Delivering is defined by Koch (2002) as the actual logistic task. Delivering the product to the customer also includes invoicing and choosing the right courier service. Returning means setting up processes for customers to return products with faults (Koch, 2002). Typically these activities include support and repair services. The last business process – return – is in most installations, but not fully included in mySAP SCM 4.1 because quality management can be realised with other modules in ERP solutions.

The SCOR model also serves as an introduction to basic SCM functionalities which are provided by SAP’s SCM solution. Hence, these findings are also relevant for identifying functionalities of mySAP SCM 4.1 (research question six) and the comparison of these functionalities with what decision makers expect (research questions seven and eight).

Besides the SCOR model, another major SCM standard was identified which is called Collaborative Planning, Forecasting and Replenishment (CPFR). This model is web-based and can be used for joint forecasts developed by suppliers, vendors and clients (Simchi-Levi et al, 2004). However, Simchi-Levi et al (2004) stated that the SCOR model is already used by most companies as a process benchmark and that the CPFR model will not gain a higher market share.

However, most SCM standards are based on the principle to separate planning and operational activities (New & Westbrook, 2004) on a business processes layer. This concept induced a transformation of the linear process of SCM into an adaptive network which integrates customers, manufacturers, retailers, suppliers and general business partners (SAP AG, 2004b). Generally, SCM activities can be divided into SC Collaboration, SC Planning, SC Coordination and SC Execution. SC Collaboration includes forecasting and replenishment agreements. SC Planning is used for simulating or optimising strategic issues and tactical or operational scenarios. Information exchange is realised via SC Coordination and finally simulation and planning results are converted into orders and order fulfilment with SC Execution (SAP AG, 2004b).

Several relevant conference publications and other articles were identified concerning the benefits and functionalities of supply chain management software. Patnayakuni and D’Arcy (2002) stated that there are strong business benefits resulting from a supply chain software implementation. However, they could not prove that short term company performance is directly related to the implementation of supply chain management software. Davenport, Harris, De Long and Jacobson (2001) found that analytic capabilities are critical for a company to execute business processes. Hence, analytic capabilities resulting from SCM software implementations are essential for the long term success of a company. Schary and Ashok (2004) placed in their publication a highlight on the selection of the right supply chain management software and IT infrastructure to realise the benefits of an integrated supply chain management system. Chorafas (2001) analysed these benefits with respect to interoperability with other software applications. Schlegel and Smith (2005) stated that technology is a major driver for the success of supply chain management systems.

Concerning mySAP SCM 4.1’s business benefits (research questions one and four), functionalities (research question six) and its software architecture (research question five), different articles and company white papers were identified and are critically analysed in the dissertation. Taylor (2004b) put a focus on the interoperability between supply chain software with other functional software solutions, in particular software for customer relationship management. Taylor (2004b) also underlined the use of web technology for supply chain management software which seems to be a strong benefit of mySAP SCM 4.1. Mentzner (2004) described the main problem many companies face when they implement SCM software solutions. The reason why SCM doesn’t work efficiently is in most cases not the lack of system support but often the designed processes (Coyle et al, 2003). Therefore as a first step, processes should be improved before being implemented. In most cases, the SCOR model is used as a process standard because it provides a standardised process framework which was developed as a benchmark for company’s supply chain processes (Supply Chain Council, 2004). This is another reason why the SCOR framework is used in this dissertation as a basic framework for the analysis of mySAP SCM 4.1’s functionalities and business targets.

Company white papers from SAP describe in detail the software architecture of mySAP SCM 4.1 which is called Netweaver. In addition, also detailed functionalities but only general business benefits are described in SAP’s company White Papers. The most relevant company white papers concerning mySAP SCM 4.1 were SAP AG (2003), SAP AG (2004a) and SAP AG (2004b). In addition to that, SAP AG (2004d) outlined general aspects of SAP’s software platform Netweaver and the main underlying programming language ABAP/4: ABAP/4 stands for Advanced Business Application Programming. It is a fourth-generation language - indicated by the four – and therefore offers power and flexibility to developers. It is an event driven language so applications can be executed by events occurring in the system or through user interaction. Other programming languages besides ABAP/4, which are often used in the SAP software environment, are Java, Visual Basic and C++. Java especially, can be used in combination with ABAP/4 to build applications which are not limited to certain platforms or operating systems (SAP Developer Network, 2004). Focusing on Netweaver, it can be said that it was developed with the underlying principle of services oriented architecture (ESA). The following illustration (figure 2.2) shows the architecture and components of Netweaver.

illustration not visible in this excerpt

Fig. 2.2: Architecture of SAP Netweaver

Netweaver is used for managing, developing, testing, deploying web services and applications based on ABAP or IBM Websphere including Java Platform 2, Enterprise Edition (J2EE) developed by Sun Microsystems (Arif, 2004). It serves as a Web services-based platform for the Enterprise Services Architecture and establishes a link between business processes, people and information across organisational and technical units (SAP AG, 2004b). These findings are analysed in more detail in sections 6.2.2 and 6.2.3 and are necessary for answering research question five (what is the software architecture of mySAP SCM 4.1).

The literature map for the category ‘Literature in the Field of Supply Chain Management Software’ contains more subcategories and publications (five subcategories and 42 publications) compared with ‘Literature in the Field of Supply Chain Management and Logistics’ (three subcategories and 27 publications). This is related to the importance of SCM software publications for this dissertation. As this dissertation focuses on SCM software and in particular on mySAP SCM 4.1, a focus was put in the literature review on literature in the following subcategories: ‘General SCM Software’ (table 9.5; 7 publications), ’Market Research SCM Software’ (table 9.6; 4 publications), ‘SCM Software Architecture’ (table 9.7; 4 publications), ‘SCM Software Technology’ (table 9.8; 8 publications) and ‘mySAP SCM 4.1’ (table 9.9; 19 publications). The subcategory ‘mySAP SCM 4.1’ contains the highest number of publications in the category of SCM software which is related to the complexity of mySAP SCM 4.1.

2.3 Literature in the Field of General Business and Management

Porter (1985)’s ideas were identified to be relevant for this dissertation. The main concepts he developed are in the field of corporate strategy and competitive advantages. The use of SCM software can lead to a competitive advantage therefore Porter’s theories are of high importance.

For analysing the market of SCM software solutions, publications from Hamel (2000) and Mankiw (2003) were identified. Hamel (2000) developed the concept of core competencies of a company and Mankiw’s publication is a general introduction to economics, including the concepts of network effects, economies of scope and economies of scale.

Table 9.10 in the appendix shows the literature map for the field of general business and management. 11 publications were identified to be relevant. The different content of these publications and the number of publications show that it was not reasonable to introduce subcategories in this literature field.

2.4 Literature in the Field of Research Methodologies and Research Design

Creswell’s (2003) and O’Brien’s (2005) work in the field of research methodologies and research design is relevant for this dissertation and is further discussed in sections 4.1, 4.2 and 4.3.

The two publications are listed in table 9.11 in the literature map in the appendix.

2.5 Literature Map

The literature map in the appendices illustrates how the identified literature can be classified. The numbers in brackets behind shows the cumulated number of identified publications in a certain field. It is not surprising that a high number of publications (27) were identified in the category of Supply Chain Management and Logistics. This field has been heavily researched during the last thirty years and is still the focus of many researches. However, an emphasis was put in this dissertation on literature which was related to SCM concepts applied in SCM software solutions. Concerning the subcategories of Supply Chain Management and Logistics, it can be said that all three subcategories ‘General SCM’, ‘Strategic SCM’ and ‘SCM concepts’ are significant for research question one (why does SCM software induce business benefits).

Focusing on the category of Supply Chain Management Software, four subcategories were identified with a total of 42 articles. However, the intensity of research will rise in this field in coming years as the number of SCM software implementations is becoming higher. The first chosen subcategory ‘General SCM software’ was the basis for research questions one to eight as general aspects of SCM software were identified. The subcategory ‘Market Research SCM Software’ comprises identified literature which focuses on competition and structure of the SCM software market. Therefore this subcategory is essential for answering research question two (why has mySAP SCM 4.1 the highest market share). In addition to that, the subcategory ‘SCM Software Architecture’ focuses on literature which is relevant for research questions five (what is the software architecture of mySAP SCM 4.1), seven (SCM software requests from SCM decision makers) and eight (differences between SCM software requests from decision makers and mySAP SCM 4.1). ‘SCM Software Technology’ is a subcategory with literature which is closely related to research questions four (business benefits of a mySAP SCM 4.1 implementation), six, seven and eight. Software Technology is the basis for most functionalities of SCM software and is especially important for the analysis of software architecture. Finally, the subcategory ‘mySAP SCM 4.1’ focuses on SAP’s SCM solution and is important for research questions two to eight.

‘General Business and Management Literature’ is a category which serves as a basis to understand business benefits of SCM (research question one) and SCM software, in particular mySAP SCM 4.1 (research questions two to eight). It also includes literature for answering research question two (why has mySAP SCM 4.1 the highest market share).

Finally ‘Research Methodologies and Research Design’ includes general literature which is vital for the whole concept of the dissertation. O’Brien’s (2005) method for the design of a questionnaire was used to develop the questionnaire. It is explained in more detail in section 4.2. In addition to that, Creswell’s (2003) six step method serves as a basis for the analysis of the collected primary data which is explained in section 4.3.

3. Research Questions

After giving an overview of the planned research, the focus is now on the research questions, the underlying sub questions and the scope of the research:

1. Why does SCM software induce business benefits?
2. Why has mySAP SCM 4.1 the highest market share on the market for SCM software solutions?
3. Why did SAP choose a specific SCM design approach for mySAP SCM 4.1?
4. What are the business benefits of a mySAP SCM 4.1 implementation?
5. What is the software architecture of mySAP SCM 4.1?
6. What are the functionalities which can be realised with an implementation of mySAP SCM 4.1?
7. What do consultants, decision makers and academic professionals in the area of IT and supply chain management require from a supply chain management software solution concerning its business benefits, architecture and functionalities?
8. Are there differences between what mySAP SCM 4.1 provides and what consultants and decision makers require in the areas of business benefits, architecture and functionalities?

4. Research Methodology and Methods of Data Collection

Research questions were answered on the one hand by analysing identified publications and on the other hand by examining and interpreting primary qualitative data obtained from the results of a questionnaire.

4.1 Methodology

For the comparison of SAP’s supply chain management software with the requirements of consultants and decision makers in the areas of business benefits, architecture and functionalities, qualitative research was the most appropriate research method. To analyse similarities and differences in the particular areas stated above, it was necessary to use qualitative research data because particular aspects of SCM software in the area of business benefits could not be quantified by decision makers. A questionnaire was used to gather the qualitative data. The design of the questionnaire is now explained in the next section.

4.2 Questionnaire Design

O’Brien (2005) developed a method for the design of a questionnaire and the use of it which was used as a basis for this questionnaire:

1. Define the Objectives of the survey
2. Determine the Sampling Group
3. Write the Questionnaire
4. Administer the Questionnaire
5. Interpret the Results

The sampling group for the questionnaire were decision makers, consultants and academic professionals in the field of Supply Chain Management and Supply Chain Management Software from the following industries:

- automotive
- retail
- logistics
- consumer packaged goods
- consulting
- and education

The questionnaire with 22 questions was divided into four sections:

- demographic data,
- questions in the field of business benefits and functionalities of Supply Chain Management Software,
- questions in the field of Supply Chain Management Software architecture
- and questions in the field of Supply Chain Management Software vendors.

Basic demographic data about the participants (age, education, field of higher education and industry) was collected at the beginning of the questionnaire to gain a basic understanding concerning the background of participants and the companies where these participants are employed. After that, the questions were clustered in the fields of business benefits and functionalities, software architecture and software vendors to make it on the one hand easier for participants to understand the whole questionnaire but on the other hand also for the analysis of the collected data and its usage in this dissertation.

4.3 Data Collection and Analysis

Data was collected by asking relevant companies by telephone or email to fill out the questionnaire and send it back either by fax, mail or email within two weeks.

The collected data was then analysed to find answers to the research questions. After that, the detailed analysis was focused on the outcome of the primary data collection by using Creswell’s (2003) six step method:

- Data organisation and preparation
- Developing an overall picture
- Data analysis
- Description and categorisation of the collected data
- Representation of the collected data
- Data interpretation.

Besides Creswell’s (2003) general data analysis structure, another framework for analysing data was used which can be seen in the following illustration (figure 4.1). This framework (figure 4.1) was partly based on McLaren, Head and Yuan (2004).

Fig. 4.1: Data Analysis Framework

illustration not visible in this excerpt

Capabilities and Impacts of SCM software

Internal Analysis

-Software Architecture
-Programming Language
-Enterprise Services Architecture
-Internet and Technology Functionalities
-Business Benefits of Internet and Technology Functionalities

External Analysis

-Evaluation of a Standard SCM Software Approach
-Identified Fields of Business Benefits for SCM Software
-Business benefits of SCM Software
-Functionalities of SCM Software

Illustration based on McLaren, Head and Yuan (2004)

McLaren, Head and Yuan (2004) used an internal and an external SCM analysis. In the dissertation, this framework was applied to the data obtained from dividing the field of qualitative research into the different subfields to analyse. The subfields in this dissertation are SCM software functionalities and business benefits, software architecture (internal analysis) and SCM software vendors (external analysis). Focusing on the area of SCM software functionalities and business benefits, it can be said that this field is vital for answering research questions one (why does SCM software induce business benefits), four (what are the business benefits of a mySAP SCM 4.1 implementation), six (what are the functionalities which can be realised with an implementation of mySAP SCM 4.1) and eight (differences between what mySAP SCM 4.1 provides and what is requested by decision makers). The area of SCM software functionalities and business benefits is based on the internal analysis (for instance functionalities linked to the software architecture) as well as on the external analysis (standard SCM approaches are the basis for SCM functionalities and business benefits).

5. Introduction to Supply Chain Management Software

Before SAP’s particular SCM solution is analysed, it is essential to discuss the general principles of SCM software which are outlined in this chapter of the dissertation. Sections 5.1 and 5.2 analyse the need for SCM software and business benefits of SCM software solutions. After that, SCM software design is explained in section 5.3. Finally, section 5.4 gives an overview of the current SCM software market and its underlying principles.

5.1 The Need for Supply Chain Management Software

As Lau (2005) illustrates, there is a need to react quickly to changes in the business environment and integrate these changes in the SC. Monitoring the SC and the changes in the environment is one of the main functionalities of SCM software. Lau describes this ability to integrate changes as agility which can be measured with four agility characteristics: cooperation to increase competitiveness, enriching the customer, master modifications and uncertainty and influencing the impact of people and information (Lau, 2005). Agility and a high performance SCM are difficult concepts to master but when they are implemented, they are a competitive advantage (White et al, 2003). Because of that, SCM software is one of the key drivers for success in SCM implementations as SCM complexity cannot be mastered without the right software support. Nevertheless, it must be determined, in which area of the supply chain software that support is needed because SCM software can be categorised into different segments: SCM software solutions supporting supply chain planning (SCP) including demand planning, forecasting, production scheduling and other long term planning activities and SCM software solutions for supply chain execution (SCE) including management of transportation, warehousing, inventory management and order management (Foster, 2002).

5.2 The Business Benefits of Using Supply Chain Management Software

Complexity reduction is one of the main business benefits of SCM software. Complexity can be defined as “how complicated a problem is” (Wikipedia, 2005). For the field of SCM it means to reduce SCM coordination efforts for employees. Complexity in the area of SCM induces increased costs because higher coordination efforts are necessary. Focusing on costs along the supply chain, it can be said that the main types of costs are the costs of transportation, costs of storing (inventory costs), costs of handling goods and costs of purchasing.

SCM cost reduction can be achieved through various means. Reducing stock by collaborating with buyers and suppliers is one possibility. Using SCM software to bundle purchases is another possibility. A third possibility of reducing SCM costs is to implement electronic transactions which can be realised via Electronic Data Interchange (EDI) or internet standards.

Improving delivery services – in particular delivery times and delivery reliability - can in most cases not exactly be quantified but can be improved dramatically by using SCM software solutions. Activities necessary for delivery can be coordinated by SCM software which is based on algorithms to fulfil the set delivery targets with minimal transportation costs.

According to Koch (2002), another main benefit of using SCM software is visibility. As Koch (2002) states: “The supply chain in most industries is like a big card game. The players don't want to show their cards because they don't trust anyone else with the information. But if they showed their hands they could all benefit. Suppliers wouldn't have to guess how much raw materials to order, and manufacturers wouldn't have to order more than they need from suppliers to make sure they have enough on hand if demand for their products unexpectedly goes up. And retailers would have fewer empty shelves if they shared the information they had about sales of a manufacturer's product in all their stores with the manufacturer.” (Koch, 2002, p. 1). A SCM software solution offers a system to share the necessary information so the above stated benefits can be realised if the participants in the SC use the implemented software solution.

In addition to the aims of using SCM systems which were stated above, Hugos (2003) states that there are five factors influencing the bullwhip effect which can cause increased costs for all SC participants. The bullwhip effect is feared by manufacturers because it can create product shortages or excess inventories (Hugos, 2003). It can be explained as a non linear shift in product demand along the SC which is caused by a change in customer demand at the end of the SC. The non linear shift in product demand is induced by customer’s panic or hoarding behaviour and finally leads to increased SC costs for all participants (Hugos, 2003). It is also modelled in the beer game which was developed in the 1960s by the Sloan School of Management at the Massachusetts Institute of Technology. According to Hugos (2003), bullwhip effect research has identified the following five main factors which therefore should be addressed with SCM software: Demand forecasting, order batching, product rationing, product pricing and performance incentives (Hugos, 2003).

5.3 Supply Chain Management Software Design

After analysing and describing business benefits of SCM software, this section focuses on the general design of SCM software. Mentzer (2004), states that:

“It is easy to become enamoured with the technology […] and companies often do. They become convinced that supply chain management is solely an information systems problem. However, no system or computer package exists today that can overcome poorly thought out processes. […]. Supply chain process design must begin with the process, lay the systems over the designed process, and always take into account the people involved (Mentzer, 2004, p. 183).

However, unlike Mentzner’s opinion, there are SCM software solutions which can overcome poorly designed processes. Particular where SCM software packages include defined best of practice business processes which can be used by the company where the SCM software solution is installed. The software provides a means to reengineer current supply processes by using process templates from the SCM software manufacturer. Nevertheless, this approach has the disadvantage that competitive advantages can no longer be achieved by particular business processes. In the case of copying business processes from a generic best practice solution, it is therefore highly unlikely to achieve a competitive advantage through the implemented business processes because these business processes are identical at different companies after a particular SCM software installation.

In case of customising SCM software to individual business processes, Metzner (2004) also states an opinion from the perspective of SCM software vendors:

‘’ If you can make your company and your supply chain run the way our software does, we have a solution for you.’’ (Metzner, 2004, p. 185). Metzner’s quotation is based on the fact that it is a complex and expensive process to customise SCM software. However, customising SCM software is not impossible and should be done when the benefits are higher than the efforts needed for customisation.

In addition to the design aspect of customising, it is also important to determine a suitable business model which can be realised with a particular SCM software solution (Taylor, 2004a). Just in time manufacturing business concepts - especially in the retail business – rely heavily on internet based systems. Dell computers, generating a major part of its sales via the internet, needs an internet based SCM system (currently Dell uses a customised i2 Technologies solution; for further details see Gattorna, 2004, p. 449). In contrast to Dell computers, luxury goods producers for instance do not necessarily sell many items over the internet and therefore use different sales channels. Therefore luxury good producers have other requests for SCM software compared with computer manufacturers. Because of that, determining a suitable business model together with the appropriate SCM software is a key issue for success with SCM.

In-house design or outsourcing of SCM software is also another design aspect of SCM software needing analysis. Creating a business unit for developing and programming a SCM software solution may fail due to lack of competencies, high costs and software quality issues. Therefore this dissertation only focuses on purchasing a suitable SCM software solution as this is the industry standard in most cases.

In addition to that, some general questions should be considered when a SCM software solution is chosen: How the system can serve as a communication platform; how the system should fit the problem and not the other way round and finally what can be done to ensure that a highly complex SCM software solution does not scare the user due to its complexity (Metzner, 2004).

However, Taylor (2004b) also gives an important guideline for developing SCM software and building a suitable SCM system:

‘’There’s a lot of software out there for supply chains, and assembling the best system for your chain is no small task. The most important decision you’ll make is the choice of design and planning systems, and acquiring the optimising capabilities of APS – either as part of an ERP package or separately – which should be high priority. Whether you need systems to manage warehouses and transportation systems depends entirely on your chain, but you should definitely look into the new visibility and event management packages. Be cautious about customer and supplier relationship systems however, as they take a rather provincial view of the supply chain, and they seem to be particularly prone to the implicit-model problem. Finally, make sure that any systems you buy are ready to operate over the Internet using as many of the advanced services as possible. Otherwise, you are likely to find your systems crawling rather than running against the competition.”(Taylor, 2004b, p. 127).

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