How to Set Up Master Data and Configuration for VMI Using SAP APO 7.0 and SAP ECC 6.0

  • by Manoj Ambardekar, Solution Architect
  • December 1, 2010
Learn how to easily set up the master data, configuration, and technical parameters for the Vendor-Managed Inventory (VMI) process.
Key Concept

Vendor-Managed Inventory (VMI) helps with collaboration between the vendor and the customer using SAP applications such as SAP ERP Central Component (SAP ECC) and SAP Advanced Planning & Optimization (SAP APO). However, to seamlessly execute the VMI process using SAP APO and SAP ECC, you must correctly set up master data and configuration.

Vendor-Managed Inventory (VMI) is a process in which a customer shares its inventory data with its vendors, who in turn replenish the needed inventory for the customer. However, this business process needs to be automated to make it efficient to operate and involves multiple software applications.

In my business scenario, a major retailer called MJA Corporation (the customer) uses a legacy ERP system to track inventory. MJA plans to execute the VMI process with ABC Limited (the vendor), a global company. ABC uses SAP SCM 7.0 for global planning and SAP ERP Central Component (SAP ECC) 6.0 for execution. I focus on the standard VMI process (not consignment VMI). 

MJA uses EDI 852 (i.e., product activity data) to send sales history and stock data from MJA to ABC. ABC has assigned plant number 1000 and a distribution center (DC) number 1100 in the supply chain network. (These numbers are externally chosen or internally generated. You can use whatever numbering you prefer.) You need to set up the material masters in plant 1000 and DC 1100 in SAP ECC so the sales orders can be created for replenishment. Additionally, you have to create the customer location—1000999 for MJA— in SAP Advanced Planning & Optimization (SAP APO) so the inventory data can be received by EDI 852 in SAP APO.

Manoj Ambardekar

Manoj Ambardekar has more than 20 years of IT and manufacturing experience with firms such as IBM, Infosys, PricewaterhouseCoopers, and Siemens Information in the CPG, brewing, and process industries. He has more than 14 years of experience with SAP APO and SAP ECC with specialization in logistics. He has played multiple roles as functional and technical lead as well as project manager. He has implemented SAP applications at more than 12 large- and medium-sized projects since 1998. Manoj is a chemical engineer certified in production and inventory management (CPIM) from APICS – USA, and holds a master’s of engineering (industrial) degree from B.I.T.S. in Pilani, India. Manoj works on both large and SME clients to implement SAP as both a configuration SME in APO/ECC PP-MM/Solution Manager and project manager/team lead. He specializes in supply chain management solutions using software such as SAP APO, SAP SCM, SAP ECC, SAP Solution Manager, and business intelligence for North American clients.

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