How to Enable Logistics and Manufacturing Execution with SAP Extended Warehouse Management Kanban Replenishment

  • by Sasa Mitrovic, Founder and Principal Consultant, Summit Global Associates, Ltd.
  • March 31, 2016
Learn how to execute multi-level manufacturing production orders through component replenishment driven by SAP Extended Warehouse Management (SAP EWM). Understand the overall concept, implementation best practices, and configuration steps involved.
Learning Objectives

After reading this article, you’ll learn how to:

  • View an example business process and a detailed functional flow of a common implementation scenario
  • Learn all Kanban replenishment implementation options offered by SAP and see how they apply to your manufacturing operation
  • Make yourself aware of common implementation pitfalls
Key Concept

SAP ERP Central Component (ECC) has provided Kanban functionality for many years. With this functionality, operators on factory floor’s manufacturing lines obtain component materials in bins that are set to either FULL or EMPTY status. This approach streamlines replenishment of component parts to shop floor operators by reducing interruptions caused by material shortages during assembly operations.

SAP SCM’s Extended Warehouse Management (EWM) offers multiple Kanban processes that natively integrate with SAP ERP Central Component’s (ECC’s) production planning (PP).

EWM-enabled Kanban replenishment is relatively unknown and rarely implemented because of its perceived complexity and risks it carries (more on risks in the conclusion of this article). However, this functionality is very valuable as it can drastically improve your raw and component material replenishment times through functionality available in EWM. This article is a direct result of my implementation experiences and the documentation of this process is available exclusively here.

Traditionally, problems with the Kanban approach using ECC have been directly linked to large quantities of inventory having to be readily available near a factory floor’s assembly lines. Specifically, companies would incur high inventory costs by storing large amounts of parts in staging areas close to manufacturing floors, or have trucks carrying component parts continuously circle the factory (just-in-time, i.e., a JIT approach).

SAP SCM’s EWM to ECC’s production planning (PP) native integration described in this article enables a company to supply Kanban-replenished component parts from a warehouse that runs EWM. The warehouse can be physically located near the factory building or at a more distant location. In the SAP system, the factory floor automatically sends signals to the warehouse to replenish its Kanban inventory. The warehouse, using advanced inventory management techniques (e.g., dynamic bin allocation), then quickly ships component parts that replenish factory Kanban inventory.

Kanban Implementation

Figure 1 outlines the process flow for a warehouse Kanban replenishment business process, with actions by both factory and warehouse personnel.

Figure 1
Process flow for a Kanban replenishment business process

Implementation Options

When replenishing shop floor materials using EWM Kanban, you can choose from four distinct options that SAP offers. Your selection depends on the nature of your manufacturing operation (i.e., the general availability of the part in question and the way you procure it).

  1. Replenish Kanban material with a stock transfer from a warehouse
  2. Replenish Kanban material by purchasing it from a vendor or purchasing it from another manufacturing plant that is owned by your enterprise
  3. Replenish Kanban material by requesting it to be manufactured by your plant
  4. Replenish Kanban material by any of above options, then consume material to a cost center (used for non-backflushed bulk materials, such as lubricants)

Sasa Mitrovic

Sasa Mitrovic is founder and principal consultant at Summit Global Associates, Ltd. Sasa (pronounced “Sa-sha”) is a supply chain and manufacturing executive with extensive global experience in all phases of the SAP implementation life cycle. With more than 10 years of dedicated project experience, he is seasoned in enabling clients to reach decisions and implement SAP solutions that fit their businesses. Sasa has consulted in aerospace, defense, heavy machinery, consumer product, and life science industries. Summit Global is based in the United States.

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