Map Your IM Storage Locations and WM Warehouses the Right Way Isaac Mazliach S.D.M. Israel

This Session Will Cover the Mapping of Warehouses and Storage Locations Deciding whether a specific storage place will be handled as a warehouse [Warehouse Management (WM)] or as a storage location [Inventory Management (IM)] is not enough! After the completion of that decision, optimize the relationships at all of the plant’s storage places This session will talk about the main differences between a warehouse and a storage location – and then recommend the best “mapping” of combined storage places – WM and IM together to optimize the SAP system

What We’ll Cover … The storage location as a storage facility The warehouse as a storage facility Combining storage locations and warehouses What is storage location and warehouse mapping? Wrap-up

Defining “Storage Location” Inventory Management is an essential component of Materials Management and is embedded in the whole logistics process By managing your warehouse stock using Inventory Management, you will be able to manage your material stocks in several storage locations in terms of quantity and value Warehouse Management also enables you to display your entire warehouse complex in the system in detail, including storage levels. This will be discussed later in this session.

Defining “Storage Location” (cont.) Material Requirement Planning External Procurement Purchasing Internal Procurement Production Inventory Management Goods Receipt Transfer Posting Goods Issue Logistics Execution Warehouse Management Shipping Transfer Invoice Verification Sales & Distribution Internal and External Accounting

Defining “Storage Location” (cont.) Storage location is part of SAP’s enterprise structure that holds the stock quantity Option: To maintain a single storage bin for every material in every storage location To simplify: To utilize a storage location as the “storage facility” means that the material’s actual bin location is not important, or that the material is located in a single bin throughout the storage

Defining “Storage Location” – Customizing IMG > Enterprise structure > Definition > Materials Management > Maintain storage location First, define to which plant the storage location is created Second, maintain the storage locations and their addresses

What is a Storage Location? Company Code Plant 2000 Plant 1000 Storage Location 0001 Storage Location 0001 Storage Location 0002

Decision Criteria to Determine the “Storage Facility” The storage location should be utilized as the storage facility if one or more of the following are met: The storage place is relatively small There are low levels of inventory on hand The material handling processes are simple (Goods Received, Goods Issue, Transfer Posting) Picking and packing processes should not be managed by SAP There is a lower volume of activity Outsourced warehouse operations

What We’ll Cover … The storage location as a storage facility The warehouse as a storage facility Combining storage locations and warehouses What is storage location and warehouse mapping? Wrap-up

What is a Warehouse? As of SAP R/3 4.5, Warehouse Management is part of Logistics Execution Warehouse Management allows you to implement all of the processes in Logistics Execution, whether sales orders have to be fulfilled or production needs to be supplied with components. Whether goods delivered from a vendor or finished products from in-house production have to be put away, Warehouse Management provides the necessary tools.

What is a Warehouse? (cont.) Warehouse is part of SAP’s enterprise structure that holds the stock bin location To simplify: When a warehouse (Warehouse Management) is utilized as a storage facility, a material’s actual bin location is of great importance Advantage: Track a material’s changing bin location Warehouse Management has greater applications for use in a storage facility Disadvantage: More complexity and usually requires more data entry

Defining a Warehouse – Customizing IMG > Enterprise structure > Definition > Logistics Execution > Define … Warehouse number Copy from standard Warehouse number 001

Defining a Warehouse – Customizing (cont.) IMG > Enterprise structure > Assignment > Logistics Execution > Assign Warehouse number to plant/ storage location It is possible to assign more than one storage location from different plants

Defining a Warehouse – Customizing (cont.) IMG > Logistics Execution > Warehouse Management > … When you copy Warehouse 001, most of the activities will have default data Now it is time to design your specific warehouse

What is a Warehouse? Company Code Plant 2000 Plant 1000 Storage Location 0001 Storage Location 0001 Storage Location 0002 Warehouse 100 Storage Type 001 Storage Type 002

Basic Functions of Warehouse Management Warehouse Management in SAP ECC contains the following five basic functions: Inventory Management exact to storage bin level Implementation and control of all goods movements Monitoring of the processing of these goods movements Connection to mobile data entry as part of the integrated Radio Frequency (RF) solution Connection to specialized external systems using an interface

Basic Functions of Warehouse Management (cont.) While Inventory Management, as part of Materials Management, can only provide information on the total quantity of material in stock, Warehouse Management enables a precise specification of the exact location of a particular quantity of material and informs you whether this quantity is currently in a storage bin or on the move

Using the Warehouse as a Storage Facility Use the warehouse as the storage place if one or more of the following are met: The storage place is relatively large Large number of materials on hand (e.g., a storage facility that holds 100,000 materials would mostly be handled as a warehouse) Number of transactions (movements) is high Traceability and visibility is critical Complex processes

What We’ll Cover … The storage location as a storage facility The warehouse as a storage facility Combining storage locations and warehouses What is storage location and warehouse mapping? Wrap-up

Recommendations Companies often select only one option: Inventory Management or Warehouse Management If a company is very small, Inventory Management is often the ideal choice In general, if you do not HAVE to implement Warehouse Management, stick to Inventory Management. Keep it simple! When Warehouse Management is implemented, it is recommended that storage locations be used according to processes

Recommendations (cont.) Goods Receipt from production (Goods Receipt to storage location, then Transfer Posting to Warehouse Management) Warehouse PP Order 915 Transfer Posting to warehouse 100 902 Storage Location 0001 Goods Receipt from production

Material Master MRP-2 Enter the Production storage location Here, enter a storage location NOT managed by warehouse After Goods Receipt from Production into this storage location, perform Transfer Posting (Txn MIGO) to the warehouse (Movement Type 311)

Goods Issue Using Backflushing Goods Issue using Backflushing (Transfer Posting from Warehouse Management to storage location, then auto Goods Issue to order) Storage Location 0001 Warehouse 912 Transfer Posting from warehouse 100 Goods Issue backflushed material 902 PP Order

Automatic Issue to Production Order This field defines the storage location from which the component will be automatically issued to the production order This parameter defines that this component is not issued manually to the production order, but rather backflushed automatically

Dispersed Warehouse Locations Small locations that reside in different physical location(s) than the warehouse Storage Location 0001 Warehouse 912 Storage Location 0002 Storage Location 0003 100 Storage Location 0004 902

Transfer Posting + BAPI (Interface) QM Integration If decentralized Warehouse Management is used with Quality Management (QM) integration, then QM stock must reside in a storage location different than the warehouse Purchase Order Decentralized Warehouse 912 Goods Receipt 100 Transfer Posting QM Stock 902 Unrestricted-Use Stock Transfer Posting + BAPI (Interface)

Special Circumstances Some special stocks cannot be implemented in Warehouse Management (e.g., customer stock as in Industry Solution – Aerospace & Defense) In that case – a storage location should be used Warehouse 912 Transfer Posting 100 Customer Stock 902 Customer Stock

What We’ll Cover … The storage location as a storage facility The warehouse as a storage facility Combining storage locations and warehouses What is storage location and warehouse mapping? Wrap-up

Everything You Need to Know About Mapping Mapping means the complete landscape of the combined warehouses and storage locations Mapping may change as an enterprise evolves Mapping may be created by adding all storage facilities as boxes on a paper with connecting lines between all facilities The complete mapping should include production facilities as well as vendors, customers, and other related systems

Goods Receipt (GR) from Purchase Order (PO) The connecting lines should introduce a specific business scenario and its implications, such as GR to PO Purchase Order Goods Receipt for materials with Quality Management Transaction MIGO Movement Type 101 Goods Receipt for materials without Quality Management Transaction MIGO Movement Type 101 Transfer Posting Transaction QA11 Movement Type 321 QM Stock Unrestricted-Use Stock Purchase Order

Typical Mapping Warehouse Warehouse Storage Location Storage Location Purchase Order Storage Location Purchase Order Storage Location Storage Location Storage Location Warehouse Sales Order Storage Location Storage Location Storage Location Storage Location

The Purposes of Mapping High-level definition of business processes Basis for authorizations Better understanding of “who does what” at a glance Minimizing material movement requirements Optimizing supply chain processes

Examples of Correct Mapping Try to have as many materials as possible reside in a single storage location (if that is not possible – design an easy process to move the materials from one storage location to another) Design material movements according to SAP’s available functionality Think of information transfer – not only of transactions, i.e., how would the warehouse know a material should be transferred from one location to another The information might transfer by creating a reservation, email, fax, phone, etc. The transaction would be MIGO Transfer Posting 311, for instance.

Examples of Correct Mapping – Crate Parts Different materials (crate parts, pick parts, etc.) behave differently – design the processes accordingly Crate Parts: The materials are stored in crates or other standard containers These parts are independent of PO and are issued as a full crate. In the standard system, you order crate parts manually. Goods Issue Transaction MIGO Movement Type 201 Goods Issue Transaction MIGO Movement Type 261 Unrestricted-Use Stock Cost Center Production Order  

Implementing Crate Parts in Warehouse Management Create a Control Cycle: SAP Menu > Logistics > Logistics Execution > Master Data > Warehouse > Control Cycle Production Supply > Create On the left, there are the Staging Indicator Values, for example, crate part NOTE: A Control Cycle without material means all materials EXCEPT those materials with specific Control Cycle

Examples of Correct Mapping – Bulk Material Bulk material: An item in a Bill of Material (BOM) that is stored loosely at the work center, ready for use Bulk materials are used in small quantities of low value and are not taken into account when costing an order Goods Issue Transaction MIGO Movement Type 201 Unrestricted-Use Stock  Cost Center Production Order X

Implementing Bulk Materials – Material Master/BOM Bulk material is defined in the Material Master NOTE: You may fine-tune and define the bulk materials in the Bill of Materials (BOM) Bulk material definition

Examples of Correct Mapping – Pick Parts Pick Parts: The pick parts are materials that are provided in the required quantities as specified in a production order These parts can be provided in a physical storage bin or in a dynamic storage bin, for example, with the name “Production Order” Goods Issue Transaction MIGO Movement Type 261 Unrestricted-Use Stock X Cost Center Production Order 

Examples of Incorrect Mapping Backflushed material is a material that is issued automatically to an order after the complete order or order step is approved (e.g., specific electronic parts assembled in an SMT machine) These parts should be issued from a storage location Warehouse 912 100 Backflushed material PP Order 902

What We’ll Cover … The storage location as a storage facility The warehouse as a storage facility Combining storage locations and warehouses What is storage location and warehouse mapping? Wrap-up

Product documentation: For customers and partners: Resources Product information: www.sap.com/erp Product documentation: http://help.sap.com For customers and partners: http://service.sap.com/qm * Information about courses: www.sap.com/education * Requires login credentials to the SAP Service Marketplace

Do not forget to think of your parts categories 7 Key Points to Take Home Correctly choose which storage facilities would be handled by Inventory Management and which by Warehouse Management Do not forget to think of your parts categories Create Master Data accordingly Map your entire organization landscape – this will help you find your wrong decisions Avoid incorrect mapping

7 Key Points to Take Home (cont.) SAP functionality may change your Inventory Management/Warehouse Management decisions Change the mapping as your organization changes Consult all modules (not only Materials Management) when designing the mapping

Your Turn! How to contact me: Isaac Mazliach ISAAC@SDM-C.COM