SAP Functions in Detail

SAP APPAREL AND FOOTWEAR

 Copyright 2007 SAP AG. All rights reserved.

No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed without prior notice. Some software products marketed by SAP AG and its distributors contain proprietary software components of other software vendors. Microsoft, Windows, Excel, Outlook, and PowerPoint are registered trademarks of Microsoft Corporation. IBM, DB2, DB2 Universal Database, OS/2, Parallel Sysplex, MVS/ESA, AIX, S/390, AS/400, OS/390, OS/400, iSeries, pSeries, xSeries, zSeries, System i, System i5, System p, System p5, System x, System z, System z9, z/OS, AFP, Intelligent Miner, WebSphere, Netfinity, Tivoli, Informix, i5/OS, POWER, POWER5, POWER5+, OpenPower and PowerPC are trademarks or registered trademarks of IBM Corporation. Adobe, the Adobe logo, Acrobat, PostScript, and Reader are either trademarks or registered trademarks of Adobe Systems Incorporated in the United States and/or other countries. Oracle is a registered trademark of Oracle Corporation. UNIX, X/Open, OSF/1, and Motif are registered trademarks of the Open Group. Citrix, ICA, Program Neighborhood, MetaFrame, WinFrame, VideoFrame, and MultiWin are trademarks or registered trademarks of Citrix Systems, Inc.

HTML, XML, XHTML and W3C are trademarks or registered trademarks of W3C, World Wide Web Consortium, Massachusetts Institute of Technology. Java is a registered trademark of Sun Microsystems, Inc. JavaScript is a registered trademark of Sun Microsystems, Inc., used under license for technology invented and implemented by Netscape. MaxDB is a trademark of MySQL AB, Sweden. SAP, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver, Duet, PartnerEdge, and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned are the trademarks of their respective companies. Data contained in this document serves informational purposes only. National product specifications may vary. These materials are subject to change without notice. These materials are provided by SAP AG and its affiliated companies (SAP Group) for informational purposes only, without representation or warranty of any kind, and SAP Group shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP Group products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty.

CONTENTS
Management Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Characteristics of the Apparel and Footwear Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Globalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Product Life Cycles and Seasonality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Pressure on Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Impact of Raw Material Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Pressure from Retailers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Increase in Customer Service Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Stronger Partnerships and Information Sharing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Reduced Cycle Times . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Increased Demand for Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Multiple Distribution Channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Information Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Key Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Style, Color, and Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Style, Color, and Size Master Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Seasonal Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Generic Key Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Integration of Logistics and Financial Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Fine-Tuning Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Multicompany, Multilingual, Multicurrency Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Foreign Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Triangle Processing, Intercompany Transactions, Tracking, and Tracing . . . . . . . . . . . . . . . . . . . . . 17 Verticalization in the Retail Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Order Management and Fulfillment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Sales Order Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Optimized Order Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 EDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Internet and Intranet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Using SAP CRM in the Apparel and Footwear Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Fast Order Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Credit Card Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Cross-Reference Functionalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Mass Order Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 Multistore Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Mark-For Feature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Rush Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Assortments and Prepacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Sales Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Availability Checking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Credit Limit Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Price Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Special Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Value-Added Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Bulk Order Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Order Scheduling and Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Order Scheduling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Allocation of Customer Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Allocation Preview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Allocation of Quantity Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Shipping and Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Delivery Creation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Shipping Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Shipping and Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Billing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Billing Functionalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Logistics Information System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Business Intelligence for the Apparel and Footwear Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SAP NetWeaver BI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Data Warehousing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Reporting and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Business Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Sourcing, Inventories, and Supplier Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Procurement Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Purchase Requisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Request for Quotation and Quotation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Purchase Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Multilevel Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Inventory Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Stock Transfer and Transfer Posting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Logistical Invoice Verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Special Business Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Subcontracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Vendor Collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Third-Party Order Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Procurement of Consignment Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Warehouse Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Production and Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Sales and Operations Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Demand and Supply Network Planning with SAP APO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Supply Network Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Production Demand Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Presizing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Materials Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 BOMs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Routing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 MRP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Parallel Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Automatic Planning Run . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Evaluation of Planning Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Capacity Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Production Order. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Apparel and Footwear Specifics in the Production Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Combined Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Product Controlling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Split Valuation with AFS Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Split Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Valuation of SKUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Grouping with Valuation Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Product Costing for AFS Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Product Costing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Costing of Valuation Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Product Characteristic-Dependent Quantity Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Cost Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Special Production Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Cost Object Controlling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Make-to-Stock Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Variance Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Customer Make-to-Order Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Profitability Analysis for AFS Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Apparel-and-Footwear-Specific Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Profitability Analysis at Product Characteristic Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Customer Service and Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Future Focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

MANAGEMENT SUMMARY
Originally developed in collaboration with renowned industry leaders, the SAP Apparel and Footwear application offers an e-business solution for companies in the apparel, footwear, and fashion lifestyle industry that need to manage products with multiple characteristics such as style, color, and size. The application focuses on illustrating industry-specific processes based on the SAP Business Suite family of business applications, a comprehensive, integrated suite of business applications that help companies run their businesses better. SAP Apparel and Footwear enables you to benefit from the latest SAP technology and infrastructure enhancements. It is the obvious choice for companies operating in the apparel and footwear, accessories, jewelry, and giftware sectors. To describe this further, this document consists of two parts: Characteristics of the apparel and footwear industry and a discussion of the issues facing executives in the entire logistical supply chain Key capabilities supported by SAP Apparel and Footwear

CHARACTERISTICS OF THE APPAREL AND FOOTWEAR INDUSTRY

Companies in the highly demanding apparel, footwear, and fashion lifestyle industry contend with constant challenges in a global business environment: there is relentless pressure on price, cost, and lead times. Fashions change quickly and without warning. Trends are created overnight, and the industry has to rapidly adjust. Contract domestic and offshore production combined with global procurement processes create complex value chains that can be inefficient and difficult to monitor. Companies must cope with seasonal fluctuation, global supply chains, and proliferation of design variations with scant information about volatile demand that results in forecast uncertainty, stock shortages, and costly markdowns. Increasingly, these companies are assuming the role of coordinator for both internal and intercompany processes as their core competencies shift away from production and toward planning, controlling, and monitoring textiles and other raw materials in the value chain. Multilevel divisions of labor and outsourcing have long been common practice in this industry. In the past, companies achieved their greatest cost-cutting potential by optimizing their production processes. However, the production of clothing and shoes can only be automated to a certain degree, causing the savings potential by these means to quickly reach its limit. The next step was to transfer production to low-wage countries, which in turn meant sacrificing high quality and transparency in the production process. Having production sites spread out across the globe has made supervision and monitoring of the production process more difficult, transport routes longer and more expensive, and meeting confirmed delivery dates a perpetual challenge. Management of product development, raw materials, and finished-goods requirements planning, production planning, coordination and control, transport optimization and monitoring, and quality assurance is taking on more and more importance and therefore tends to remain at headquarters. As a result, information flow and collaboration among partners in the apparel, footwear, and fashion lifestyle supply chain including logistics service providers, textile manufacturers, contractors, agents, consolidators, and so on are increasingly more critical to the success of apparel and footwear companies. Fundamental changes and restructuring are taking place in the apparel and footwear market.
Globalization

Domestic manufacturing, as well as foreign companyowned and contract manufacturing, has brought an increase in international trading; as a result, business is now transacted in many different countries with various cultures and currencies. This has given rise to software solutions and IT that support enterprises in their ability to move goods and information expediently and reliably across any distance. The increasing threat of cheap imports and tougher competition has forced companies to adopt a more flexible approach to their manufacturing capabilities. This includes the integration of global sourcing and contract manufacturing as part of a comprehensive sourcing strategy. This strategy has to support a variety of capabilities such as in-house production at domestic or foreign sites, contract manufacturing at domestic or foreign sites, or a combination thereof. As manufacturing does not often take place in the same country where the final customer is located, additional requirements regarding customs and quotas are involved and country of origin restrictions may arise. Sourcing entails both internal and external considerations. It becomes necessary to track production in order to plan or confirm exact product delivery dates and quantities. Improvements in logistics capabilities and the increasing demand for apparel, footwear, and fashion lifestyle products in lesstraditional apparel and footwear consumer markets such as China, the Far East, India, and Eastern Europe have led to a truly global marketplace. It is critical for companies that want to capture and service this demand to be able to operate in all corners of the world. Companies can best profit from this potentially huge market if they are able to transact business efficiently on an international scale, internally as well as externally. They also have to manage the vagaries of fluctuating exchange rates.

Purchase

Vendor Performance Tooling Amortization Production Complexity Production Capacity Factory Status Lowest Landed Costs Shortest Estimated Time of Delivery Lowest Free on Board Costs

Where

What

Vendor Product Price Quantity Delivery Date

Which Price

?
Purchasing

Enterprise Demand

Which Quality

?
Internal

Vendor

Vendor

Vendor

Vendor

Outsource

Figure 1: Decision Support for Global Sourcing

CONSTRUCTION TYPE
Running Basketball

STYLE
Style 4711 Style 4712

COLOR (WAY)
WHT/BLU/BLK WHT/RED/BLK WHT/RED/GRN

SIZE
wide-8 regular-8 narrow-8 wide-9 regular-9 narrow-9 ... ... ...

Figure 2: Product Structure: Structure SKU Style, Color, and Size

Product Life Cycles and Seasonality

Seasonality influences the entire product life cycle. It impacts planning styles, the procurement of raw materials, warehousing capacities, production, delivery, and the orchestration of selling and marketing activities. Product development cycles are shortening and overlapping as customers demand shorter time-tomarket cycles. The need to react flexibly and promptly to market trends and changing consumer demands has resulted in a proliferation of design variations. Variations of the same product such as different qualities or color grades, different market segments, or countries of origin can require additional stock segregation and valuation. These issues of style, color, size, and other product characteristics affect the entire supply chain. Only investment in new, advanced technologies can facilitate the handling of large numbers of styles and stock-keeping units (SKUs) and the storage of potentially large volumes of data. Continued investment in new technology is essential for staying ahead of competitors, especially when it comes to design capability. This includes investment in sophisticated computer-aided design (CAD) systems as well as technological innovations in the use of fabrics and fibers. With these tools a company can create products whose design sets them apart from cheaper imports. Apparel, footwear, and fashion lifestyle companies promote a variety of product groups. Each of these groups may reflect some of the following aspects: They can be restricted to certain sales channels. They can be offered through sales programs, deals, or promotions to encourage future business. They can provide opportunities for cross-selling. They can entail sales commissions, such as licensing or royalty charges due to a third party, celebrity, or sports team, or the retailer or the manufacturer.

Standard designs and carryovers remain in the production line from season to season with possible minor changes to color or detail. Fashion products are sold for a particular season and can have a very short lifetime, with new products entering the marketplace four or more times a year. Standard designs and fashion products can be merchandised as collections or assortments, packaged in different combinations, or sold separately. A fashion company may also supply store fixtures and point-of-sale (POS) materials. Special items might be produced solely for a specific customer. This can involve tailoring an existing product, creating totally new designs, or supplying private labels. Accessories such as hats, gloves, belts, and bags may each use unique size scales, which often differ from country to country, as well as varying stocking and ordering policies. The seasonality of the apparel and footwear business means that fashion items are highly perishable. Certain items must be available for corresponding seasons or events, with special buildups for high-volume product launches or with special needs to mark down or move inventory that will soon be out of season. Price lists, reports, inventory displays, and forecasting must be available by seasons or events rather than by the usual calendar periods.

10

Relating Product, Sizes, and Prices to Seasons

Region: United States Season: Spring Valid: March to May

Region: Australia Season: Spring Valid: October to January

Figure 3: Seasonality A Business Parameter

Flexible Manufacturing

Shared Information

Sophisticated Order Allocation

Transfer

Transfer

Transfer

Transfer

Vendor

Manufacturing

Distribution

Retail Outlet

Consumer

Sophisticated Planning and Forecasting

Systems Integration

Point of Sale, Vendor-Managed Inventory

More and More Demands

Figure 4: Enabling Core Business Processes and Meeting Customer Service Requirements

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Pressure on Costs

Increase in Customer Service Requirements

Increases in raw material and labor costs that go hand in hand with retailers demanding high-quality, low-priced goods, speed, and quality of service must be addressed as follows.
Impact of Raw Material Prices

Raw material prices became an issue in the mid-1990s when the price of cotton started to rise significantly, having been on a downward trend at the beginning of the decade. Larger apparel and footwear companies have the option of reducing costs for raw materials by putting pressure on textile manufacturers due to the size of their orders. The smaller companies, however, have to compensate by reducing labor costs. The highest labor costs are concentrated in assembly phases, especially in the sewing room. Traditionally, apparel manufacturers focused on minimizing direct labor costs by implementing the bundle system. The increase in inventory costs and risks has also made production throughput times more important. When assembly cycle times are reduced, the inventory levels available to meet the immediate replenishment demand decrease.
Pressure from Retailers

Customer service has become a very important issue due to complex and demanding customer requirements and diminishing customer loyalty. Consumers today are more educated and aware concerning their purchases so that their expectations are rising steadily. Apparel and footwear companies are therefore putting their efforts into creating strong brands and focusing on marketing. Many are also extending their businesses to retail with their own stores and outlets. Here are some of the particulars.
Stronger Partnerships and Information Sharing

Changing practices in the retail industry are shifting more responsibility to upstream manufacturers who, in turn, are seeking stronger partnerships with their suppliers. In order to meet customer service requirements both in order fulfillment and on-time delivery, companies need a high degree of shared information supported by advanced systems integration, flexible manufacturing strategies, and more efficient planning systems.
Reduced Cycle Times

In the past, with consumers looking for bargains, retailers were not inclined to accept increased costs. Retailers have also routinely penalized suppliers with financial chargebacks for late, early, or incomplete deliveries. Suppliers therefore had to explore other ways of maintaining margins. This led them to reconsider their business activities, pursue more cost-effective manufacturing and accurate delivery execution, and develop innovative product ideas, for example, cross-branding fashion and high-tech products.

Cycle times for satisfying customer orders can range from priority delivery within 24 hours to bulk and single delivery to vendormanaged inventory (VMI) with just-in-time replenishment to seasonal planning months in advance. In addition, apparel and footwear suppliers must invest in technology to package, label, route, and move the floor-ready merchandise rapidly from the production site directly to the retailer, providing direct shipments that are often packed for subsequent delivery to individual stores.
Increased Demand for Services

Retailers are demanding more and more services, including drop and cross-dock shipments, VMI, rapid replenishment, valueadded services (such as hanging, labeling, ticketing, and packing), and exchange of information on the current status of ordered products, boxing, and bar coding. Apparel and footwear suppliers are under pressure to fulfill retailers orders flexibly, rapidly, precisely, and efficiently. They are forced to keep more finished goods in stock, risk having surplus inventory, or develop new production processes to reduce that risk.

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Multiple Distribution Channels

Information Technology

There are multiple distribution channels that are typical for sales in the apparel, footwear, and fashion lifestyle industry, and each requires different processing. Different practices, methods of transportation, distribution systems, pricing conditions, and policies may apply to each of these channels. Distribution channels can include company-owned retail stores, retail franchises, and shopping malls and department stores (shop in-shop), but the most common channels of distribution include wholesale, retail stores, mass merchandisers, department stores, specialty retailers, distributors, and licensees. Consumers can purchase in a variety of ways such as by catalog, the Internet, electronic kiosks, direct mail, and telemarketing.

Information technology advancements significantly improve trade throughout the world by enabling the electronic processing of customer orders in real time, even over long distances. Companies, partners, and customers are using the Internet to a greater extent to conduct business-to-business processes such as sourcing, demand planning, replenishment, and collaborative design, marketing, and selling of products. Successful performance in the apparel, footwear, and fashion lifestyle industry includes quick response to retailer replenishment requests, achieving a high level of order completeness, short lead times for new products, and quick go-to-market strategies. However, this does not necessarily provide a direct

Consumer Internet Buying Consumer Demand Shop-in-Shop Catalog Direct Franchises

Decisions

Practices Policies Procedures

Pricing Conditions

Demand Planning

Customer Telesales Consumer Demand Wholesale EDI

Distribution System

Method of Transportation

Figure 5: Multiple Channels of Distribution

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financial return. Financial performance is not only affected by increases in labor and raw material costs, inefficient sourcing, punishment for late or incomplete deliveries, and a lack of transparency regarding contract manufacturers, but it is also affected by the risk of holding high inventories of finished goods or work-in-process inventories that go along with planning insecurities. The resulting greater need for markdowns and write-offs reduces profits. To thrive in this fiercely competitive environment and to address the continuing problem of effectiveness across the apparel and footwear supply chain, well-advised companies develop strong relationships with vendors, retailers, partners, and consumers. By collaborating with one another and exchanging real-time information, apparel and footwear companies are able to minimize competition while maximizing their opportunity for identifying and fulfilling customer needs. SAP Apparel and Footwear is the SAP e-business solution that helps you manage the transition from traditional enterprise-centric business processes to adaptive supply chain networks. With SAP Apparel and Footwear, suppliers, manufacturers, distributors, and customers all work together toward a common goal.

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KEY CAPABILITIES
SAP Apparel and Footwear is the best-of-breed solution for the apparel and footwear industry. It not only addresses the logistical needs of apparel and footwear companies worldwide (such as sales and distribution, materials management, and production planning and execution), but it also seamlessly integrates financials, controlling, and all supply chain elements to guarantee your management and staff up-to-date information at the push of a button anywhere, anytime. This document presents a detailed discussion of key capabilities supported by SAP Apparel and Footwear that concern the following: Style, color, size, and category Generic key capabilities Order management and fulfillment Sales order processing Sales capabilities Order scheduling and allocation Shipping and transportation Billing capabilities Logistics information system Sourcing, inventories, and supplier relations Overview Purchase requisition Request for quotation, quotation, and purchase order Multilevel contracts Inventory management Invoice verification Special business processes Warehouse management Production planning Production planning and control Sales and operations planning Production demand management Material requirements planning (MRP) Bill of materials (BOM) and routing Capacity planning Production orders and combined orders Product controlling Overview Split valuation with apparel and footwear materials Product costing of apparel and footwear materials Cost object controlling Profitability analysis for apparel and footwear materials
Style, Color, and Size
Style, Color, and Size Master Data

SAP Apparel and Footwear has enhanced standard SAP software data structures (available today in the SAP ERP application) to facilitate the handling of potentially huge volumes of data. These enhancements derive largely from the size and seasonal requirements of the industry and relate to the building of product levels based on style, color, and size as used throughout the logistical cycle. A grid has been developed to support these specific enhancements and safeguard high levels of performance. This tool ensures that as styles change from season to season, the enormous number of SKUs can still be maintained quickly and easily. Copy and referencing functions also support volume changes due to seasonal influences. The product characteristics are represented as standard characteristics with the characteristic group specific to apparel and footwear software (AFS) attached. For grids, the characteristic group attached is AFS characteristics for dimensions. An apparel and footwear grid is created by using these characteristics. One can use up to three different characteristics in the grid. These characteristics can be flagged as being relevant to certain applications in SAP Apparel and Footwearfor example, for MRP, seasons, or pricingand thereby increase the flexibility of grid processing. Characteristics can be individually defined for every customer and product.

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Inseam

ment, production, allocation, and inventory management, providing greater control over seasonal processing across the logistics cycle. This means you have full control over customer orders, articles, and time frames within order processing as well as the ability to plan, procure, and produce the right product for the right season. Pricing can be carried out depending on special events and seasons. For example, during an end-of-season sale, you can decrease the price for an article depending on how sales progress. Furthermore, you can define delivery programs for seasons, collections, and themes and assign a delivery date.
Generic Key Capabilities

Figure 6: Style, Color, and Size Master Data in Product Grid Format and Grid Processing

The key capabilities described above concern manufacturing and logistics processes in the apparel and footwear industry. The section below discusses how SAP Apparel and Footwear and other SAP software supports business processes in manufacturing as well as other businesses.
Integration of Logistics and Financial Applications

Categories

In addition to grid characteristics, you can further specify product characteristics by categories. Categories provide an additional layer of detail, allowing you to segregate levels of quality, customer segments, country of origin, and so on. In SAP Apparel and Footwear, the category structure is created by using standard characteristics, which are created using the characteristic group AFS characteristics for categories. These characteristics can be flagged as being relevant to certain applications in SAP Apparel and Footwear, such as for planned requirements consumption, BOM maintenance, or sales status. It is therefore no longer mandatory to maintain all the possible combinations of valid categories.
Seasonal Processing

Standard logistics and financial applications are integrated with SAP Apparel and Footwear. Logistical business processes automatically lead to corresponding real-time postings in accounting. For example, as a result of a direct shipment request from a customer in sales, a purchase requisition is handed to the purchasing department. Customer-relevant data is then transferred to the purchase order. Purchased products can then be shipped directly to the customer. As soon as an incoming vendor invoice is received, it is automatically visible to the accounts payable department.
Fine-Tuning Techniques

The apparel and footwear industry is a highly seasonal business that calls for tight control over product sales and delivery availability. SAP Apparel and Footwear has a season function to define and control seasonal delivery periods and handle specific order periods honoring season-related deadlines to achieve this efficiently. This function has been extended to planning, procure-

Customizing can be used to adapt the system to suit the individual operating needs of your company. By fine-tuning order types, for example, systems can be quickly matched to ever-changing business demands without affecting revenue figures. Constant change is the norm. With SAP Apparel and Footwear you can define new business processes and adapt existing ones as and when needed, not just during initial implementation.

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Multicompany, Multilingual, Multicurrency Processing

Triangle Processing, Intercompany Transactions, Tracking, and Tracing

Despite multicompany, multilingual, and multicurrency sales order processing, international business must still be able to place orders in only one language. The software lets you convert business transactions with partners in other countries automatically into other languages and currencies. Each partner is able to process transactions in the appropriate local language and local currency, thus simplifying cross-border trading and supporting a global market. The same applies to country-specific size scales.
Foreign Trade

The global nature of the apparel and footwear industry also involves continuous changes in foreign trade and customs regulations, which can be formidable obstacles for any organization operating internationally. These affect the entire supply chain from raw materials to finished goods, from inventory to financial accounting. SAP software lets you overcome such barriers and includes support for electronic data interchange (EDI) interfaces for foreign trade information, flexible management of export licenses, automatic declarations to authorities, and representation of preference agreements. SAP Apparel and Footwear, together with the SAP GRC Global Trade Services application, lets you manage all the complexities of international trade including full regulatory compliance, electronic communication with customs authorities, and risk mitigation, while importing and exporting on a global basis. SAP software ensures that international borders are not trade barriers.

Large international companies transact business with several different companies and in numerous countries. It is therefore important to introduce processes to support such transactions. In triangle processing, an order is taken by one country for a customer, owned by a second country, and delivered by a third. The second country invoices the customer and pays commission to the country in which the order was placed. Grid processing functionality in SAP Apparel and Footwear caters specifically to all of these requirements. To keep track of all these business transactions, the SAP Event Management application offers a role-based tool to monitor and manage any logistic event.
Verticalization in the Retail Business

More and more apparel and footwear customers are changing their sales model from pure wholesale to multiple sales channels with a strong focus on retail. This helps them get better POS data for faster reactions in their own supply chains. It also helps them keep their retail profit margin instead of giving it away. SAP for Retail solutions together with SAP Apparel and Footwear support this verticalization in the fashion business to help you cover virtually any business model.

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ORDER MANAGEMENT AND FULFILLMENT

Sales Order Processing
Optimized Order Entry Internet and Intranet

SAP Apparel and Footwear offers a variety of order entry methods and screens that have been developed together with SAP customers. All order screens in SAP Apparel and Footwear can be used to order nonsize as well as style, color, and size materials with categories (optional), regardless of whether orders are entered manually or received through EDI or over the Internet.

Payment

Internet and intranet application components provide apparel and footwear companies with a variety of ready-to-use and highly configurable business-to-business, consumer-to-business, and intranet applications. Such applications are specifically designed for business transactions and not just for information access. BAPI programming interfaces have been amended to satisfy style, color, and size requirements of SAP Apparel and Footwear. The ability to share and exchange information with suppliers and buyers in real time over the Internet allows companies to implement integrated global supply chain management.
Using SAP CRM in the Apparel and Footwear Industry

Sales Order Processing

Invoicing

Inventory Sourcing

Delivery

In response to ever-increasing profit pressures, companies have become more efficient in driving costs out of their operations. Furthermore, they have also focused on the quality of their products and services, such that quality is no longer as great a distinguishing factor among different companies. The result of these efforts is that price and quality have converged, shifting the focus of corporate efforts to the customer. Companies have recognized that they must therefore provide more value in different forms to their customers and set their key corporate goal to achieve customer value leadership. To accomplish this goal, companies must create a customer-centric e-business by making the customer the center of all their activities. The SAP Customer Relationship Management (SAP CRM) application connects customers to the knowledge, people, and processes of a companys entire value network, creating customer value leadership through the following: Superior customer relationships Innovative customer-focused products and services Excellent customer-centric processes

Figure 7: Sales Order Cycle

EDI

EDI plays a critical role in sales since business information must be transferred as quickly as possible. EDI accelerates and integrates sales operations, ensuring that data transmitted electronically is immediately available to SAP Apparel and Footwear users and applications. In particular, EDI translates customer information into system information, such as dimensions, and can even trigger a workflow process. For example, a workflow event could be automatically initiated for a sales order on the basis of an invalid article number, credit hold, or other user-defined criteria. An added benefit is that work activities can be prompted by the system should exception messages need to be processed, and users are otherwise free to concentrate on their regular activities.

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Order 1

Order 2

Order 3

Order 4

Order 5

Telesales

EDI Sales

Internet Sales

Mobile Sales

Faxed Sales

KEYED

AUTOMATIC

KEYED

Special Features: Fast and user friendly Customer product grids No repetition of style numbers Subtotals Hierarchical overview Copy quantities Customer service reason codes

SAP Apparel and Footwear

Figure 8: Multiple Methods of Order Entry

Multiple methods of order entry include fast, user-friendly functions and allow you to display customer product with subtotals, a hierarchical overview, copy quantities, customer service reason codes, and no repetition of style numbers. SAP CRM supports capabilities that are interwoven within the entire customer interaction cycle. These capabilities are discussed in detail below. SAP CRM facilitates interaction center operations, including inbound and outbound communications, mainly in the areas of telesales, telemarketing, and service. Apparel and footwear companies can utilize this functionality with SAP Apparel and Footwear. Interactions can be blended across all remote channels including telephone, Web, chat, and e-mail. Customer contacts are tracked, monitored, and enhanced for multichannel communication. Inbound calls from your customers (for example, retailers) enable you to automatically identify the customer through the calling phone number. All relevant customer information is available

for your call center agent at a glance. After identifying your customers needs, you can branch to any SAP Apparel and Footwear transaction without keying in redundant information, such as the customer number. Customer care and help desk functionality provides support for all types of questions, complaints, and returns, with escalation, workflow processing, and so on. With SAP CRM you can take advantage of SAPs solid expertise in customer relationship management. E-selling, e-services, and mobile sales functionalities are available for apparel and footwear companies creating new, strategic sales channels. E-selling software gives you comprehensive capabilities for selling apparel and footwear articles through the Internet, supporting data for color and size. It covers all phases of the sales cycle, sophisticated product selection, multimedia product catalogs, advanced personalization, convenient shopping-basket management, secure transactions, and complete order status checking, as well as supporting payment processing and fulfillment. Intelligent Web analyses and a flexible Web design based on state-of-the-art technology top off the solution.

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E-service offers your customers (retailers and consumers), prospects, and business partners access to specific information (such as product catalogs, content, and pricing) and self-service functions (such as order-entry and tracking requests) through the Internet. Furthermore, SAP CRM provides field sales support. That means you can deliver key customer and prospect information to your sales personnel in the field enabling sales order management down to the style, color, and size level. This facilitates the planning and maintenance of sales activities (such as appointments, visits, and calls) and provides activity reports. This also includes functionalities to create clearance sales and take orders. With SAP CRM, your field sales force will be supported using mostly autonomous mobile devices.
Fast Order Entry

Credit Card Processing

The software automates credit card processing by prompting for credit card details (such as number, expiration date, and so on) and autodialing for authorization. On receipt of authorization, it captures the details needed for later settlement.
Cross-Reference Functionalities

Cross-reference functionalities allow appropriate product numbers to be found by different criteria such as customer product numbers, Universal Product Code (UPC), and European Article Number (EAN) codes or by referencing a discontinued product to a new product.
Mass Order Management

Screens designed specifically for SAP Apparel and Footwear have helped speed up manual order entry. Status data such as Sales area and Customer ship-to are displayed on each screen. You are not restricted to using the SAP Apparel and Footwear fast-orderentry screens; you can create your own screens to suit your individual requirements. This can be particularly useful in a telesales environment.

The apparel and footwear industry deals with a large volume of orders. As a result, when your customer service department is compelled to make a general change affecting many orders, considerable time and effort is involved. Two tools are available with SAP Apparel and Footwear to promote productivity: The stock display/mass order display tool lets you perform a where-used inquiry on stock consumed or required by orders. The mass document change tool enables you to select many orders and change certain field values in a single process. For fast changes to schedule lines in sales orders, SAP Apparel and Footwear enables you to enter data and change entries for selected items or schedule lines.

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Mark-For Feature
Selection Screen Customer Req. del. date Material 1475
Execute selection

Change Screen Requested style

From: To:

1475 1476

Selection Found List Sel. E E E Order 543 556 610 851 Customer 1000 1131 4600 3299 PO No 47355 Material 1475 1475 1475 1475 Qty 10 18 12 50 Req. Del. 12/06/00 15/06/00 15/06/00 20/06/00

SAP Apparel and Footwear mark-for information helps direct deliveries to particular points within a customer organization. This feature is often used when a large retail chain requests an order to be shipped to a distribution center and marked for a store or department for cross-docking. Mark-for information such as department names and details can be automatically copied into the sales orders as a new partner function. Customer-run loadingpoints information may also be copied from the customer master record.
Rush Orders

4 1899
AB_12

Customer Orders

Execute change

Update Report

SAP Apparel and Footwear is equipped to handle rush orders if stock needs to be shipped immediately. Sales order entry, allocation, and delivery creation are all carried out at the same time, so that the order can be given to picking without delay.
Assortments and Prepacks

Figure 9: Mass Order Management

Multistore Orders

To service key accounts with multiple outlets or stores using the best possible method, SAP Apparel and Footwear features a new order type known as the multistore order. This method allows users to accept orders for multiple locations but treat them as single logistical components. Many customers transmit articles, delivery quantities, and dates for many stores simultaneously. Order maintenance and allocation can be carried out either for each individual store or the whole group of stores together. Delivery can be made directly to the stores or a customer distribution center. When delivery is made to a customer distribution center, articles can be labeled mark for onward delivery to a specific store to facilitate easy cross-docking for the distribution center. In stock shortage situations, the software can determine the quantities to be distributed to the individual stores by means of distribution rules. For example, using equal distribution functionality, the software assigns an equal quantity of pieces to all stores, whereas with first-in, first-out (FIFO) logic, the software takes the delivery priority into account and may disregard stores with a low priority.

Assortments and prepacks can be defined using the BOM structure in SAP Apparel and Footwear. Assortments are groups of finished goods for which pricing and processing is done not on a unit level, but at an individual component level. For example, an assortment could be a golfing outfit consisting of 10 golf balls, a golf shirt, and golf pants. The assortment can consist of nonsized and sized products. Sizes for the finished goods, if needed, are specified per item in the assortment during the order-taking process. The software can adjust the quantity of each component of the assortment in case of stock shortage so that assortments are always based on complete combinations. Prepacks are logical combinations of finished goods; however, the pricing and processing of prepacks are performed on a unit basis rather than on the basis of their individual components. Prepacks have a single size associated with them. For example, a golfing outfit medium consists of 10 golf balls, a golf shirt (medium), and golf pants (waist 32, length 33). If you want to combine colors and sizes of one article, such as shoes, in a particular quantity, you can use a quantity distribution profile instead of using an assortment or prepack. This way, the

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software automatically inserts the respective quantities for the grid values. Multiplying a single quantity by a certain factor allows you to increase the associated quantities accordingly. Once you have defined a quantity distribution profile, you can use it again for other products. Other functionality for sales order processing includes the following: Threshold dates for order cancellation Some apparel and footwear customers carry over unfulfilled sales order requirements into their next purchase order. In this case, a new cancellation date can be entered on a sales order to establish the last date on which an order can be delivered. If the scheduled delivery date is later than the cancellation date, the order can be canceled using the mass document change feature or rejected from allocation. Item independence The software enables you to treat each item in a sales order as a separate order. Cross-divisional sales Different product families such as shoes, apparel, and accessories can be handled within the same sales order. Customer service reason codes Customer sales representatives can enter a reason code if customers decide to change the terms of an order. Time, user, change, and reason are then recorded and always accessible.
Sales Capabilities
Availability Checking

By drawing the customers attention to the order cancellation date if exceeded, users can suggest that orders be put back to achieve a better fill rate. An indication of warning or error is displayed if an order no longer falls within a given season. This enables companies to make decisions during sales order processing based on real-time information about potential delivery bottlenecks. It helps to complete business processes on schedule and, at the same time, promotes greater customer satisfaction.
Material Scheduled Delivery Date Jan. 1 Jan. 15 Jan. 30 Scheduled Quantity Cumulative Day After Order Required Quantity Delivery Line % Complete Order % Complete

Date
1475 1475 1475 50 25 25 50 75 25 0 14 30 50% 75% 100% 33% 50% 67%

Figure 10: Example of Proposed User Fill-Rate Information

During an ATP check, the software can carry out substitution of plants, materials, requirement characteristics, and categories based on the required and available quantities. With back-order processing, SAP Apparel and Footwear also offers a report to list all sales orders that have only been partially delivered or not delivered at all. Using the rescheduling tool, you may execute the ATP check again upon goods receipt and have the software adjust the delivery dates.
Credit Limit Check

Available-to-promise (ATP) check is an optional feature in SAP Apparel and Footwear to determine whether or not the quantities and delivery dates requested by a customer can be met. When an order is entered, the check verifies whether sufficient stock is available to fulfill the order. If the order cannot be shipped right away, the availability check determines in real time when sufficient stock will be available and proposes a delivery date for the future. The software can be configured to perform a check based on physically available stock or against planned receipts. Replenishment lead times can also be taken into account.

SAP Apparel and Footwear includes a variety of flexible options for credit checking, such as credit rating data, planning level, open limit, and open items. You can set credit limit checks at any point in the sales cycle between order receipt and actual shipping. A total limit and (or) limits for specific credit control areas may be defined for a given customer. There are customizable options for system response when credit limits have been exceeded. SAP Apparel and Footwear also features an additional credit check at the time of order allocation.

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Price Flexibility

Bulk Order Processing

SAP Apparel and Footwear enables pricing flexibility and includes pricing functionality specifically designed for the needs of the apparel and footwear industry, as follows: Pricing at different levels by style, color, size, category, and so on Seasonal pricing by reference to the season tables Two-date pricing to motivate customers to keep to defined order and delivery windows Price maintenance optimization through the creation of grid value groups, which reduces the effort involved in maintaining pricing records Associated taxes by size when a material is priced by size (such as a tax exemption for childrens shoes) Royalty agreements built into pricing
Special Operations

SAP Apparel and Footwear allows entry of a customers promise to buy. The source of the promise to buy may be an internal order-generating system, such as a VMI system, where it is not immediately necessary to know the ship-to points or delivery quantities. At a future date, the customer sends actual orders and instructions with ship-to points and quantities. These quantities are offset against promise-to-buy quantities. It is therefore possible to compare the customers expected take-up with the actual take-up at any stage in the order process.
Order Scheduling and Allocation
Order Scheduling

SAP Apparel and Footwear allows items to be marked for special processing. For example, an article can be marked to indicate that a generic product such as a polo shirt or overalls is to be customized by the addition of embroidery, badging, cresting, or striping, thus making it exclusive to that customer.
Value-Added Services

Order scheduling is an optional process in which order lines are automatically grouped or split into deliveries that suit the customer and manufacturer. This guarantees optimal deliveries and the highest level of customer satisfaction. It takes specific customer and global business rules into account in order to calculate optimal delivery schedules. Order scheduling is parameter driven. Applicable rules and the sequence in which they are applied can be customized. The order scheduling architecture is designed to enable the addition of new user and customer rules. A typical example of order scheduling is this: all order lines that are scheduled to be shipped within a few days of each other are grouped on one shipping date to make an efficient delivery.

Many retailers require services, usually done in the distribution center, which change or improve the appearance of their goods before accepting delivery. Such services (including packing, ticketing, hanging, hemming, and so on) ensure that goods can be put on display immediately upon arrival. A new value-added service database has been developed for SAP Apparel and Footwear to record these requirements and incorporate them for the particular customer at the time of order entry or delivery. Alternatively, such requirements can be entered manually. If desired, these services can influence the sales price accordingly.

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WMS GI

ARun Functions AFS Functions Optional Process Warehouse Management System (external system) Goods Issue

Check

Back Orders

Selection

Grouping

Sorting

Allocation

Release

Order Scheduling

Allocation Preview

Order Entry

ATP Check

Save Order

Allocation Run

Delivery Creation

Delivery Changes/ Post GI

Invoice

Allocate Rush Order

Management Tool

WMS

Figure 11: Sales Order Process Flow

Allocation of Customer Orders

Tremendous improvements in customer service are achieved through the use of customer order allocation, also called allocation run (ARun). SAP Apparel and Footwear can be userconfigured to sequence certain customer orders so that they are given preference when stock is allocated. You can allocate stock or work in progress (WIP) or future receipts to sales orders. By allocating WIP or future receipts such as purchase orders or production orders to your most important sales orders, you can help guarantee stock availability and, importantly, track the latest delivery dates. The orders are then only released for shipping when the order meets customer or business rules on order fulfillment, delivery dates, and (or) available credit. This way, you only make deliveries you know the customer will accept and pay for and you can avoid potentially costly chargebacks.

You can specify checks to ensure the deliveries contain enough core (heart) sizes and not just fringe sizes. You can even release check delivery performance over groups of many sales orders, for example, if your retailer measures your delivery performance across all their stores. In the case of stock shortage, you can decide how you allocate stock to orders. For example, by filling orders up to their agreed minimum release quantities, you can increase the number of acceptable deliveries and therefore increase customer satisfaction and sales. You can also substitute products if the original product is not available, such as with a season closeout. Depending on your business requirements, you may give high priorities to the orders of important customers and distribute the remaining stock equally among the other customers rather than

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not fulfilling a sales order at all. The system may check a customers credit limit upon allocation and either exclude the customer from further allocation completely or exclude the sales order items that exceed the credit limit. With SAP Apparel and Footwear, your customer service department can concentrate on managing the exceptions for example, by calling customers and releasing agreed orders using the new allocation optimizer (ARun optimizer). This is a powerful online tool to find and manage exceptions. For example, it can help you determine if an allocation exception was caused by a particular store not getting enough stock or if it was related to a certain material, size, or color across all stores. If users have the right authorization, they can take stock from other sales orders and reallocate it to higher-priority sales orders to ensure you offer the best customer service. You can release-check the orders to ensure they meet the customers business rules. Alternatively, the order exceptions can automatically enter subsequent ARuns to accumulate more stock until the release rules are met (for example, if you are doing a stock buildup for
Order Release Planning Customer Sales Order Customer Parameters

a season start). By setting the ARun to reject or report orders that are close to or past the cancellation date, you further enhance delivery acceptance. The ARun can operate on your orders in simulation mode, and you can save the simulation results. Then you can examine the results to determine the optimum order-allocation settings, such as customer-allocation priority, thus maximizing customer satisfaction.
Allocation Preview

The ARun can also run in preview mode with future planned receipts instead of stock. The results are stored in a separate reporting database, which helps provide a snapshot of your future customer service over your entire order block. Because allocation preview functionality uses the same rules as the normal ARun (for example, order sequence, stock allocation methods, grouping, and release rules), it can be used for what-if scenarios and reporting based on the impact of the known purchase order or production order delivery date.

Order Release Priority

Price

Partial Shipment Fill Percentage

Prioritization

Product

Customer Type

Customer Order 5 Customer Order 3 Customer Order 2 Customer Order 1 Customer Order 4 Customer Deliveries

Quality

Core Sizes Order/Delivery Dates

Style/Color/Size

Improved Customer Responsiveness

Figure 12: ARun Process Flow

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Will a delivery Monday be soon enough for you?

Production, detailed scheduling, plant level

Forecast, distribution planning per market

Figure 13: Enhancement of Transportation Tracking and Real-Time ATP Check

Allocation of Quantity Contracts

Shipping and Transportation

Delivery Creation

The ARun may also take quantity contracts signed with customers into account. For allocated contracts, the software automatically assigns incoming goods receipts to open contract release orders to ensure smooth, on-time delivery. The benefit of allocation of contracts is that the allocated stock, and (or) stock from future receipts, can be reserved at the season start and then transferred to the actual customer orders when they arrive. After passing allocation-release checking, customer orders are fixed and released to the shipping department, which denotes the end of the order allocation process. You can perform an ARun in preview, simulation, and allocation online or in the background.

SAP Apparel and Footwear provides flexible options for creating delivery notes (for example, by mode of transport, carrier, date, route, and so on). This is the first step to triggering the actual picking of goods.
Shipping Capabilities

The software enhances shipping capabilities by integrating grid value settings, as well as introducing and transmitting valueadded services to a warehouse through a standardized interface.
Shipping and Transportation

Shipping and transportation management functionality in SAP Apparel and Footwear tightly integrates materials management and financial accounting. Consequently, up-to-date shipping information is always available. The shipping functionality

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provides comprehensive support for foreign trade processing, deadline monitoring of shipments in process, and flexible delivery processing. Picking, packing, loading, and flexible shipping output are also supported.
Billing
Billing Functionalities

Although the Internet has changed the way business is carried out today, interpreting information and translating it into action remains critical to the success of a company. With the SAP NetWeaver Business Intelligence (SAP NetWeaver BI) component, you have integrated, fully Web-enabled capabilities for enterprise performance management.
Business Intelligence for the Apparel and Footwear Industry
SAP NetWeaver BI

SAP Apparel and Footwear provides best-of-breed billing and pricing functionalities. The material grid structure is reflected in the billing document so that sizes and associated prices and taxes can also be displayed. The billing functionalities also enable you to do the following: Create automatic invoices using data from the sales order and delivery notes to accelerate processing Process invoices, credit and debit memos, and rebates Reference original invoice data in credit and debit memos, which saves time and simplifies communications Integrate billing with financial accounting in real time to ensure fast and accurate accounting records Integrate credit card authorization and billing Billing information is also transferred to the profitability accounting area for immediate analysis.
Logistics
Logistics Information System

Interpreting information is critical to the success of companies in the apparel and footwear industry. SAP NetWeaver BI combines data warehousing with comprehensive analyses delivered through an enterprise portal. With this software you can measure the effectiveness of business operations and take immediate corrective action when needed to ensure continuous improvement. SAP NetWeaver BI enables apparel and footwear companies to access the vast supply of information available in the Internet economy and rapidly turn it into real knowledge on which to base decisions and actions. It provides an innovative and sophisticated solution that helps apparel and footwear companies implement industry-leading measurement technologies. SAP NetWeaver BI offers apparel and footwear companies access to both internal and external information resources, including data from business partners. It also enables them to take advantage of leading industry-specific and cross-industry benchmarks, providing a framework for key performance metrics and optimizing operations. Analytical applications give you control over supply chains, customer relationships, and other enterprise activities. This lets you streamline operations, reduce costs, and promote a strong customer orientation. In fact, SAP NetWeaver BI promotes a closed-loop approach to managing corporate information. It comprises the most comprehensive set of solutions to gather information, turn that information into knowledge, and navigate the business successfully anywhere, anytime.

The logistics information system (LIS) in SAP Apparel and Footwear is a flexible tool for collecting, compressing, and evaluating data from other applications. The central elements form selfdefined information structures, which in turn can be filled with customer- specific data using various tools. The information structures have been enhanced to allow analysis and reporting right down to size level. As a consequence, other areas of your company can also access sales information at the required level. For example, a production planning and control department can break down planning requirement data to lower-level information, such as size.

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Data Warehousing

Data warehousing delivers a common view of enterprise data; enables analysis and interpretation of integrated, consistent information; and empowers organizations to turn insight into action. The tools and technologies used for designing and managing a data warehouse enable the extraction, integration, and transformation of data from multiple sources to support decision-making processes in the enterprise. The data warehouse

infrastructure serves both as a collector and provider of data and information, for example, by populating data marts and the operational data store (ODS). SAP NetWeaver BI comes with a preconfigured, extendable metadata repository to ensure integrated, consistent, and accurate data. It provides users with a better understanding of the information they are analyzing and enables the integration of different applications and tools within an enterprise.

Administration Workbench

Enterprise Portal
Business Explorer

Scheduling

Monitoring

Administration

Third-Party Tools

Web Reporting and Publishing

Multidimensional Analysis

XML

ODBC

API

SAP NetWeaver BI Server

OLAP Processor Metadata Repository Metadata Manager Data Manager

Master Data

Staging Engine

PSA

ODS

Interfaces

BAPI

FILE

XML

Feeding Services

Extraction Engine

Database Connect

ETL Tools (such as Ascential)

SAP Applications Data Source SAP NetWeaver BI File

Non-SAP Applications Data Provider

Extraction, Transformation, and Loading

Figure 14: Data Warehousing

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Reporting and Analysis

The software includes functionalities for reporting, analysis, querying, and multidimensional online analytical processing (OLAP) analyses for collaborative decision making. Users can access data on different levels (detailed or summarized), and share and analyze business information within their Web browser (PC or mobile). SAP NetWeaver BI contains tools for query design, Web application design, and data visualization. These tools allow users to create analytical applications, represent data graphically, visualize relationships between business and spatial information (geographical analyses), and easily build comprehensive information cockpits that users can access through an enterprise portal. SAP NetWeaver BI includes predefined templates for OLAP queries and formatted reports, while also enabling users to easily define new ones to identify the following: Winners and losers Sales per style, color, and size; product group; and so on Sales per country, region, sales representative, key account, and so on

Returns statistics Order fulfillment statistics ABC analysis Seasons, collections, and themes Sales, open requirements, and inventory situation for a particular season, collection, or theme Supplier loyalty Invoice verification Inventory management for material movements and material revaluation Stock statistics Material consumption statistics Target and actual comparisons for production quantities, delivery dates, scrap, and so on
Business Content

SAP NetWeaver BI is shipped with information models, and the entire data flow in business content is preconfigured. The models contain predefined templates for reports and analyses with

Customer-Specific Business Content

Industry-Specific Business Content such as Apparel and Footwear Software

General Business Content

Financial Accounting Controlling Logistics Human Resources

Accounts receivable accounting Accounts net asset value accounting Special ledger General ledger

Profitability accounting Cost accounting Overhead cost controlling Profit-center accounting

Sales and distribution Purchasing Inventory mgmt. Warehouse mgmt. Manufacturing

Personnel mgmt. Time mgmt. Payroll

Figure 15: Comprehensive Business Content

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corresponding technical definitions, such as extraction and transformation rules or data models such as queries, Web applications, or self-contained data sets known as information cubes, or InfoCubes. With data warehouse functionality in SAP NetWeaver BI, SAP delivers business content tailored to the needs and requirements of the apparel and footwear industry. The software includes extraction routines and information models that can transform data from software for materials management, sales and distri-

bution, production planning, and more into real information and knowledge. This content enables you to run analyses and reports right down to the SKU level (dimensions and categories). Therefore, SAP Apparel and Footwear has introduced the concept of elementary fields, which contain information about material characteristics such as color, size, or quality. These fields can be mapped with grid dimensions, category fields, and additional material master fields. The concept of grid conversion has been adopted in SAP NetWeaver BI so that the reports can cater to users across geographical locations.

SAP NetWeaver BI

Material T-Shirt 4711 T-Shirt 4711 Shoes 0815 Coat 666 ...

Size XL L 44 56 ...

Color BLK Red BLK BLK ...

Quality 1st 1st 2nd

Country DE DE US DE

Sales Value US$10.00 US$15.00 US$25.00 US$15.00 ...

...

...

What is the sales value of all materials in the color black?

Extraction

What is the sales value of all materials we manufactured in Germany?

SAP ERP

Material T-Shirt 4711 T-Shirt 4711 Shoes 0815 Coat 666 ...

Grid Value XL BLK L Red BLK 44 56 BLK ...

Category 1st DE 1st DE US narrow DE ...

Sales Value US$10.00 US$15.00 US$25.00 US$15.00 ...

Figure 16: The Elementary Field Concept

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SAP NetWeaver BI

InfoCube

InfoCube

InfoCube Information Objects for Elementary Field Color Size 3132 Quality 1st Country EU

Transfer Structure

BLK

BAPI

Data Source Replication

Data Source

Transfer Structure

BLK

3132

1st

EU

Elementary Fields

LIS

Mapping

BLK

31

32

1st

EU

Characteristics

Communication Structure

BLK3132

1st-EU

SKUs

SAP Apparel and Footwear

Color

Waist Grid Value

Length

Quality

Country

Category

Figure 17: Extraction of AFS-Specific Data into SAP NetWeaver BI

SAP NetWeaver BI includes a best practice set of elementary fields: size, color, country, stock quality, and required quality. The range of elementary fields can be easily extended to meet your specific requirements. SAP Apparel and Footwear content includes the following objects to gain information from SAP Business Suite applications: Data extraction AFS extractors, AFS data sources, AFS transfer rules, and all AFS data available for a given business event or type of business event (InfoSources) Data storage enrichment, and movement AFS update rules and self-contained AFS data sets that are accessible by reporting queries (InfoCubes)

Data retrieval and presentation AFS queries, AFS workbooks, and AFS roles The predefined data models can be extended very easily without modification. The apparel-and-footwear-specific content enables you to implement an information system out of the box. You can also very easily perform ad hoc querying by using drag-and-drop functionalities and key figures. Furthermore, you can integrate the business content into the SAP NetWeaver Portal component for convenient user access anytime, anywhere.

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SOURCING, INVENTORIES, AND SUPPLIER RELATIONS

Overview
Procurement Cycle

the software. In this way, time and effort as well as data entry errors are kept to a minimum. The integration of style, color, size, and category definitions to meet the requirements of the apparel and footwear industry has enhanced materials management processes and capabilities.
Purchase Requisition

SAP Apparel and Footwear supports industry-specific raw material and component procurement processes, sourcing of finished products, inventory management, subcontracting, and invoice verification. The SAP Apparel and Footwear procurement cycle is illustrated in the figure below. The great advantage of handling procurement using SAP Apparel and Footwear is that all routine jobs from purchase requisition creation through purchase order generation can take place automatically without any significant help from the purchasing department. It need only intervene in exceptional cases. Because departments for purchasing, warehousing, accounting, and others all have access to the same data, no additional effort is necessary for creating and processing purchase orders. You can generate all documents with reference to the data available in

The purchase requisition is a request to the purchasing department to procure a certain amount of materials or services by a particular date. Purchase requisitions are created manually by the department making the request, or generated automatically by MRP functionality. The processing of purchase requisitions has been extended to include dimensions and categories. You can distribute the purchase requisition quantity by percentage across dimensions. The distribution can be based on historical data or definable standard distributions.

8 Handling of Payments 7 Invoice Verification

1 Determination of Requirements Determine Source of Supply/ Source Allocation 2

Procurement
6 Goods Receipt 5 Purchase Order Monitoring 4 Order Processing Vendor Selection 3

Figure 18: Procurement Cycle with SAP Apparel and Footwear

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Request for Quotation and Quotation

Purchase Order

A request for quotation (RFQ) is sent to various vendors asking them to submit a quotation. The quotation contains a vendors prices and conditions for the materials needed. Data from the quotations received is maintained with the respective RFQ. The RFQ and quotation are therefore seen as one. In addition, the RFQ and quotation contain information at the dimension and category level. Quantities can be automatically distributed among dimensions and categories. Prices can be defined using condition technology in SAP software at the SKU level. Using a price comparison list, you can carry out a quotation comparison at the SKU level to establish the best quotation.

You can automatically generate purchase orders from the list of purchase requisitions that the buyer will process and that have been allocated a source of supply. Order quantity entry for various items in the purchase order can be created at dimension and category level. Distribution profile and rounding functions are also available in the purchase order. If certain dimensions of a material cannot be supplied or delivered by a particular vendor, the software allows you to define a purchase grid with the valid dimensions for this material-vendor relationship. These are automatically taken into consideration in the purchase order. Furthermore SAP Apparel and Footwear includes a function, Purchase Order Split and Change, that can help you optimize purchase order handling in a fast and efficient way, thereby increasing ease of use.
Vendor

Production Planning Procurement of Raw Material Rough Planning Detailed Planning

Manufacturing

Release Order Level 3 Material A-Size Quantity: Validity Period: 38L 1,500 pieces July 1August 1
Validity Period of

Level 3
Contract

Level 2 Level 1 Target Quantity: Material Group: Material A Material B Validity Period: 100,000 pieces T-Shirts Material A Quantity: Validity Period: Validity Period of Level 2 Contract

7,000 pieces July 1September 1

July 1December 1

Validity Period of Level 1 Contract

Creation Date December January April July October

Figure 19: Multilevel Contracts Logistic Background

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Multilevel Contracts

It is quite common in the apparel and footwear industry to draw up long-term purchase agreements with external vendors who deliver materials or supply services under certain conditions. SAP Apparel and Footwear can process these agreements without yet having to define precise information at the material or SKU level. In this way, the customer can issue a purchase agreement for an undefined quantity for a future date. With the approach of the scheduled delivery date, the contract takes on a more concrete form as a new scheduling agreement to the original contract. Additional information is determined, such as raw material color. Exact quantities and destination are confirmed when the delivery date is established. By using this software, your company has greater flexibility when planning the purchase of materials and can react more quickly to changes in the market.
Inventory Management

quantity and value updates and (at the same time) record the movement. All relevant features for inventory management (such as goods receipt to purchase order, reservations, goods issue, transfer posting, and stock transfer) have been enhanced to show data at the SKU level. The stock requirements list, all goods movement documents, and the most important evaluations include information at the SKU level.
Inventory

When balancing stock accounts, a company must carry out a physical inventory count of warehouse stock at least once every fiscal year. Various procedures can be used. SAP software supports the following inventory procedures: Periodic inventory check Continuous inventory check Cycle counting Inventory sampling procedure It is possible to include freely available stock, stock in quality inspection, and blocked stock. Inventory processing for warehouse stock and special stock is also supported. Functionality for inventory sampling has been enhanced: it can now be carried out at the dimension and category levels. Information at the SKU level is available in all relevant processes such as physical inventory document creation, creation of payment results in the system, and posting results.
Stock Transfer and Transfer Posting

Inventory management functionality in SAP Apparel and Footwear allows you to do the following: Manage on-hand stock based on quantity and value Plan all stock movements Process inventory movement In inventory management software, the exact physical stock is always displayed using real-time processing for all cases in which stock has changed and the resulting inventory has been updated. Users can view the current stock situation of a material anytime. Whenever there is a change to the stock, the data is immediately updated and made available to upstream and downstream departments. Stock value is also updated when a goods movement is posted, and value updates are triggered in other business applications, such as general ledger accounting. Single items are generated for any account assignment objects involved. The amounts posted are created automatically by the system based on data from the purchase order and material master record. Consequently, when creating a goods movement you only have to enter the quantity to be moved. During goods movement, documents are created that form the basis for the

In addition to posting goods receipts and goods issues, SAP Apparel and Footwear enables you to enter internal goods movements at the SKU level by using transfer posting and stock transfers as follows: With transfer postings, you change the material number, the stock type, or the batch of a material. In SAP Apparel and Footwear, you can also transfer post the grid values and category values of the output material to other SKU values of the receiving material. With stock transfers, you enter the physical goods movements between different production sites or company locations.

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The receiving production site makes a request for a product using a stock transport order while the issuing production site posts a goods issue with reference to the stock transport order. You can create the goods issue as a goods movement in inventory management software or through delivery note processing. The withdrawn quantity is recorded as stock in transit of the receiving production site.

Completing the procurement procedure from purchase requisition through purchasing to goods receipt Processing invoices that did not originate in procurement (for example, services, travel expenses, and seminar costs) Processing credit notes, either in the form of invoice cancellation or discounts

Receiving Plant A

Stock Transport Order

Issuing Plant B

B B A B C Unrestricted Use Stock Goods Receipt B Stock in Transit

B B A Goods Receipt C Unrestricted Use Stock

Figure 20: Stock Transfer

The receiving production site posts a goods receipt with reference to the stock transport order. This reduces the stock in transit and the open purchase order quantity. It is also possible to post the goods receipt in the receiving production site as one step. At the same time, the issuing production site posts a goods issue so there is a no-stock-in-transit situation. Even if the respective production sites belong to different company codes, you can still create a stock transfer as follows: Stock transfer from one production site to another using a one- or two-step procedure Stock transport order with or without a delivery note
Logistical Invoice Verification

Payment and evaluation of invoices are not part of the invoice verification process. Instead, information for these purposes is forwarded to the financial department. Invoice verification functionality establishes the connection between materials management and accounting (financial accounting, asset accounting, and cost accounting), and includes the following: Creation of incoming invoices and credit notes Checking of invoices resulting from account movements for content, price, and calculation accuracy Posting of account movements resulting from invoices Updating of data such as open items and material costs Retrospective processing of invoices that were blocked due to substantial variances in the ordering transaction Logistical invoice verification functionality has been enhanced in SAP Apparel and Footwear. To enable the software to check invoices for content, price, and calculation accuracy, the software has been enhanced to include dimension and category level. This information is now available, for example, at the time of invoice creation.

Logistical invoice verification is carried out with materials management software. At the end of the logistical chain after planning, purchasing, and inventory management, invoices must be checked for accuracy as regards content, price, and calculation. When an invoice is posted, all data from the invoice is stored in the system and updated in materials management software and other applications in real time. Logistical invoice verification includes the following:

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Special Business Processes

Special business processes characterize the apparel and footwear industry. Such processes include outsourcing of production, inhouse production in domestic or foreign plants, subcontracting, full-package sourcing, and purchasing of semifinished and finished products.
Subcontracting

Material procurement through subcontracting is processed in SAP Apparel and Footwear using subcontracting orders. The following functions are available: Order of material or service with a vendor Provision of material components for production or embellishment ATP check for components to be provided

Material withdrawal from companys own stock or delivery by a third-party vendor Monitoring of subcontracting stock at the SKU level Creation of delivery notes for components to be provided Posting of product as consumption using goods receipt posting and handling of consumption deviations Posting of finished product as goods receipt Outsourcing of certain operations of an in-house production process, which entails generation of a subcontracting order including the provided components Stock of provided materials stored at the subcontractor site is treated as special stock of the respective vendor. This is because it is neither available nor exists in the total stock of the production site, although it is your companys property.

Purchasing

Inventory Management

Invoice Verification

Purchasing

Storage Location

Storage Location

Invoice Verification

Provision of Components Purchasing Order Subcontract Item Components Transport

Goods Receipt for Finished Material Invoice Production Costs Component Consumption

Subcontracting Vendor

Subcontracting Vendor Production

Subcontracting Vendor

Figure 21: Subcontracting Overview

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Sales Order

Procurement

Allocation Run

Delivery Picking and Post Goods Issue

Invoice and Financial Accounting

ATP

Material Requirements Planning

Create Subcontract Order

Monitor Stock of Material

Ensure Provision of Components

Post Goods Receipt for Purchase Order

Invoice Receipt for Purchase Order

Figure 22: Subcontractor Process Flow

Vendor Collaboration

External vendors can be integrated into the purchasing process through the Internet even if they do not have an enterprise resource planning (ERP) system. Confirmation processes are defined and assigned to the purchase orders. Vendors can access their purchase orders through the Internet and can enter the confirmation steps. When the confirmation steps are saved, the information is transferred back to the purchase order in the backend system of the ordering party. This ensures direct and prompt feedback from your vendors and allows you to precisely plan further processing. You can use vendor collaboration functionality to monitor subcontracting, raw material procurement, and full-package sourcing.

Figure 23: Vendor Confirmation

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Third-Party Order Processing

Another important business process in the apparel and footwear industry is third-party order processing, also known as direct shipment. Here, your company does not carry out the delivery of products to the customer. Rather, the goods are commissioned to an external vendor who sends them directly to the customer and invoices you accordingly. You can choose how to handle certain items. For example, if a large quantity of a product you would normally deliver yourself is ordered, you can decide to handle it as a third-party item. Furthermore, you can determine that certain products, such as accessories procured from a private label manufacturer, are always handled through third-party order. This process is supported by the software at the SKU level. This means that all relevant information is available at the SKU level, from sales order creation to the automatic generation of a purchase

requisition and the conversion to a purchase order. In addition, the process is fully transparent in the purchasing and sales departments and in the planning department that handles MRP.
Procurement of Consignment Material

Consignment material is material that is stored at your production site but remains the property of the vendor. A binding material valuation using the predefined vendor price is not carried out until the material is withdrawn or transferred to your own stock. The price can be established at the SKU level and unused material can be returned. The settlement statement is sent to the vendor, for example, each month, quarter, and so on. All movements for consignment materials are firmly allocated to consignment stock at the time of posting by setting the special stock indicator.

Master Data

Consignment Information Record

Consignment Stock Record

Procurement Process

Vendor

Purchase Order Consignment Item

Goods Receipt

Invoice

Warehouse Companys Own Stock Vendor Consignment Stock Available for MRP Not valuated Belongs to vendor Goods Issue Production Site

Figure 24: Procurement of Consignment Material

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Warehouse Management

For the timely and efficient processing of logistic requirements, companies are dependent on computerized organization and management of their warehouses. Apparel and footwear companies in particular need to be able to manage highly complex warehouse structures and a multiplicity of warehousing facilities. For SAP Apparel and Footwear, standard warehouse management business software has been enhanced with definitions for style, color, and size, as well as the following: Material master maintenance You can choose whether the warehouse management view and relevant features are maintained at the material or the SKU level. This also includes general data such as volume, gross weight, and capacity consumption. Put-away strategy and picking strategy You can determine strategies at the SKU level (style, color, and size categories) by which the system establishes storage bins for stock to be put away or picked. With SAP Apparel and Footwear, you can make the best use of the available warehouse capacity and assign optimum storage locations to the stock received. Similarly, the software allocates the optimum picking location to picked stock. Storage section determination You can define which storage section each material or SKU should be stored in. For example, you might store common sizes in storage section 1, and less frequently ordered sizes in storage section 2. General storage strategy You can maintain general storage strategies (bulk storage indicator, special movement indicator, and two-step picking) at the SKU level. Palletization data You can maintain various quantities and pallet types, depending on the SKU. Palletization data is maintained at the SKU level.

Fixed space You can assign various storage locations, quantities, control, and replenishment quantities when a material is allocated to a fixed space. Selection screens You can enter the SKU as a selection criterion to display just one grid-value category per material, for example, or internal warehouse documents, depending on the selection. Inventory count result You can create count results right down to the SKU level, whether or not you are dealing with a material that was found or should be stored at a particular location. The count result is created for each location at the SKU level. Replenishment You can use transfer requirement functionality to replenish materials based on a released production order in the production supply area of the warehouse. The system creates the transfer requirement item at SKU level based on the demands of the production order. Decentralized warehouse management (WM) All processes necessary for warehouse activities are supported in SAP ERP, for example, inventory management. SAP software for warehouse management provides all the functionality needed for warehouse processes. BAPIs Communication between SAP ERP and WM software is processed through a BAPI. All important BAPIs, as well as master data in intermediate documents functionality (iDocs), are enhanced with SKU data. Radio frequency identification (RFID) Internal warehouse and combined processes are covered by RFID functionalities. The processes have been enhanced with SKU data. The software also displays all SKU information on a character-based RF device.

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PRODUCTION AND MANUFACTURING

Overview

Using SAP Business Suite, you can comprehensively plan your demand program (product type and quantity) and production. Production encompasses procurement, storage, and transport of materials and intermediate products, and MRP for all BOM levels. Production planning and control functionalities in SAP Apparel and Footwear have been designed for the special needs of the apparel and footwear industry. In particular, demand management, MRP, planned orders, and production orders include a product structure (style, color, and size), categories, and seasonality functions specific to this industry. The logistical cycle begins either with sales and operations planning and forecasting or with sales and production demand management. The sales department receives customer requirements from the market and demand management forecast sales. The resulting independent requirements (in particular, requirements for finished products and trading goods) trigger MRP.

Order quantities and delivery dates must be determined and the respective procurement activities must be launched to ensure requirement coverage. Ordering transactions or subcontracting is initiated for outsourced products. Appropriate vendors must be selected or outline agreements made. Quantities resulting from production or outsourced procurement are put on stock and administered with inventory management software. The following figure illustrates the logistical cycle between sales and procurement. The software comprehensively plans, monitors, and coordinates all functions. In addition, SAP Apparel and Footwear supports various procurement processes relevant to the apparel and footwear industry such as private label and make-to-order production (for example, custom-made products).

Forecast/Planned Requirements

MRP

Sales Order

Customer Requirements

PURCHASE Purchase REQUISITION Requisition

External

Internal

Planned Order/ PLANNED ORDER/ Secondary Secondary Requirements Requirement Purchase Order

Purchase Order

Figure 25: MRP

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Sales and Operations Planning

Demand and Supply Network Planning with SAP APO

The software includes a flexible forecasting and planning tool for sales and operations planning; it determines not only sales and production targets, but also targets from other areas throughout the logistical cycle. Forecasting and planning can be based on historical data, current data, and (or) estimated future figures. Capacities and resources imperative for reaching these targets can also be determined using the sales and operations planning tool. The tool provides a method to handle sales planning, production planning, and feasibility estimates. The tool builds on information structures statistical files containing operational data. This can either be planned future data or actual historical data, containing characteristics, key figures, and a time base. Information structures are used for evaluation, projection, and analysis of data in all logistical information systems. The tool is especially useful for long-term and mid-term planning. In the apparel and footwear industry, long-term and mid-term planning are generally carried out at the product group and style levels. You can save the underlying statistical historical online in SAP NetWeaver BI as well as in the logistical information system with each logistical transaction (for example, sales order, purchase order, and production order).
Sales and operations planning provides a method for: Sales planning Production planning Feasibility estimates

The SAP Supply Chain Management (SAP SCM) application enables companies in the apparel and footwear industry to anticipate consumer behavior (including the impact of promotions) and forecast demand more accurately. The SAP SCM application combines distribution and transportation functionalities to support demand-driven replenishment for maximum profitability. Retailers and carriers can be seamlessly integrated into the supply chain processes. The SAP Advanced Planning & Optimization (SAP APO) component is one of the key functional areas of SAP SCM. SAP APO enables supply chain partners to forecast and plan demand while considering historical buying and selling behavior, market intelligence, and sales objectives. Demand is optimally matched to supply so as to maximize the return on assets with consideration of operational constraints. SAP APO updates and synchronizes plans based on the dynamic exchange of information and allows you to derive total supply chain production requirements and make results available to all members of a supply chain. With SAP Apparel and Footwear you can execute demand planning in SAP APO and then transfer the demand plan as planned independent requirements to the demand management

Sales plan Production plan Capacity estimate Quantity

May

June

July

Time

Figure 26: Sales and Operations Planning

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area. Demand planning can thus be executed in three different ways: At the material level without additional dimension values (style, color, and size) At the material dimension level (style, color, and size or quality) Through performance of a flexible time-based aggregation of planning data based on season When the demand plan is transferred to demand management, the planned independent requirements are created. In the event that not all of the dimensions were considered in the first planning phase, the presizing profile is then used to distribute the planned independent requirements among all the material characteristics.
Supply Network Planning

improved customer service. Each SKU is represented as an individual product in SNP software. These products are mapped to subproducts of a product hierarchy where the header product is represented by the apparel and footwear material itself. Aggregated planning functionality in SNP software supports planning scenarios in which you carry out heuristic- or optimization-based planning at the header location product level of a location product hierarchy. You then disaggregate the planning result to the individual subproducts of this two-level hierarchy. This business scenario is used to model customer replenishment scenarios with a high degree of visibility within the extended supply chain and the ability to respond to short-term changes in demand. With responsive replenishment (RR), the traditional VMI scenario is taken to the next level of sophistication and adaptability within the extended supply chain. RR is a scenario within the adaptive supply chain concept. With the SAP Supply Network Collaboration application you can perform RR in light of the specific planning challenges that face the apparel and footwear industry. In the softwares standard RR solution, statistical forecasting runs for each location product separately (in long-term time buckets). The enhancement for apparel and footwear is designed to enable the statistical forecasting to run for the header products only, and to subsequently disaggregate the resulting forecast to the subproduct level.

Supply network planning (SNP) software integrates purchasing, manufacturing, distribution, and transportation so that comprehensive tactical planning and sourcing decisions can be simulated and implemented on the basis of a single, globally consistent model. It uses advanced optimization techniques based on constraints and penalties to plan product flow along the supply chain. The result is optimal purchasing, production, and distribution decisions; reduced order fulfillment times and inventory levels; and

SAP ERP with SAP Apparel and Footwear

Interface

SAP APO

Apparel and footwear materials with dimension, size, and color:

Mapping 1:n on dimension level

APO products:

T-shirt Size s Color Blue Red m l x xl

Aggregated product

T-shirt Hierarchy

T-shirt blue s Disaggregated product (SKU)

T-shirt blue l

T-shirt blue s

T-shirt ...

Figure 27: Responsive Replenishment with SAP Supply Network Collaboration

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Presizing
POS Data Sales inventory in-transit promotion POS Data Sales inventory in-transit promotion
Yes

POS Data Sales inventory in-transit promotion

Sales Aggregation AFS subproduct to header level, short-term to long-term time buckets

Statistical Forecast AFS header level, long-term time buckets

SAP Apparel and Footwear presizing distributes aggregate planned independent requirements to detailed planned figures at the SKU level using distribution profiles. Distribution to a more detailed period split is also possible, for example, from annually planned figures to weekly planned figures. Furthermore, seasonal influences can be taken into account in the distribution profiles, so that an annual planning value can be distributed to periods throughout the year. Planning values would then be increased for certain seasons (such as back to school, Christmas, and so on). You can calculate distribution profiles from statistical historical values stored in the logistical information system. SAP Apparel and Footwear presizing functionality enables you to do the following: Manually determine percentage distribution values per size or period Calculate percentage distribution values based on historical data from the logistical information system Calculate distribution profiles for new products with no historical data, based on the historical data of reference products Aggregate and disaggregate historical data that can be used to calculate distribution curves (for example, historical data per product group, per season, per a combination of a number of seasons, or for individually selected reference products) Simulate options based on user-defined criteria
Materials Requirements
BOMs

Forecast Disaggregation AFS header to subproduct level, long-term to short-term time buckets

Short-Term Forecast Subproduct level, short-term time buckets

Replenishment Planning Subproduct level, short-term time buckets

Figure 28: Flow Chart for Production Demand Management Production Demand Management

Production demand management determines requirement quantities and delivery dates for finished products. Demand management uses planned independent requirements and customer requirements, which are created in order processing, to create a demand program. The input from sales and operations planning can be copied to the planned independent requirements as default data. It is possible to break this data down to the level of style, color, and size (presizing).

BOMs and routings contain important data to ensure integrated materials management and production control. Pattern making, grading, and pattern engineering processes form the production structure of a new product waiting to be produced. The result is a number of sketches, a list of all necessary components and their size-specific consumption, and technical and product costing conversion the BOM and routing.

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Grid A 6 Jacket (Apparel and Footwear Material) BLK WHT RED Apparel and Footwear 8 10 12 14

Fabric (Apparel and Footwear Material)

Zipper (Apparel and Footwear Material)

Button (Standard Material)

Grid B BLK WHT RED BLK WHT RED

Grid C 44 46 48 50

Apparel and Footwear

Figure 29: Apparel and Footwear BOM

The BOM has been enhanced so that all size-specific dependencies on material consumption, selection of certain components, and cost accounting are included in one BOM. You can also maintain dependencies for other product characteristics in the BOM (such as color, shade, quality, customer-specific extras, and so on). It is possible to set up different locations for procurement of components, which are selected depending on the time interval for which the locations are defined. Often you must make changes to a large portion of the product range due to alterations in style or seasonal characteristics. You can easily achieve this in SAP Apparel and Footwear by using the mass change and referencing functions.
Routing

and each production operation. Routings are selected based on the different characteristics for lead-time scheduling and production order processing and taken into account during lead-time scheduling and capacity planning.
MRP

The main task of MRP is to ensure material availability, for example, to procure the necessary material requirements according to schedule for sales and manufacturing. This task includes monitoring stock and, in particular, making suggestions for procurement, purchasing, and production. MRP is triggered by independent requirements from sales and demand management forecasting (such as requirements for finished products and trading goods). MRP determines order quantities and delivery dates and the respective procurement documents created to ensure coverage, that is, planned orders for internally produced goods and purchase requisitions for outsourced production. Both documents are planned internally and can be changed, rescheduled, or deleted at any time.

A routing describes the operations (process steps) as well as the details about the work centers and production resources and tools required for producing a material. You can thus specify in the routing how various product characteristics affect lead times

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In addition, secondary requirements the quantity of material components (for example, leather, fabric, or lining) or assemblies (for example, shoe sole or bootleg) are determined for internally produced goods using BOM explosion. Secondary requirements are necessary for the production of the finished product or assembly. Planned orders and purchase requisitions are created at each BOM level if there is a material shortage. Once quantity planning and scheduling is completed in MRP, the planned documents are converted into fixed procurement documents (planned order to production order and purchase requisition to purchase order). Lot-sizing procedures and planning parameters are available to ensure an optimized calculation of the entire order quantity and each individual grid value in the order. Lot-sizing procedures enable planning results that show only certain size groups in one order, or that a particular relationship between size quantities is calculated for each order. It is also possible to distribute order quantities across the different sizes automatically using predefined distribution profiles. The most common lot-sizing procedures are supported by the software, but it is also possible to integrate individually customized ones. By using planning parameters for the SKU level you can define, for example, minimum order quantities, rounding values, and safety stock for each size or size group. MRP software enables you to plan in one time frame at size level for future periods and all requirements beyond that time frame at article level. This ensures that planning only occurs at the necessary level of detail. Products labeled AFS-specific are processed by MRP software in SAP Apparel and Footwear (such as products with more logistically relevant characteristics that might include size, color, shade, and quality).
Parallel Processing

SKU Level

Material Level

MRP Plans Requirements at SKU Level

MRP Software Groups Requirements Together at Material Level

Size-Level Horizon Current Data 30 Days

Beyond Size-Level Horizon

Figure 30: SKU-Level Horizon in SAP Apparel and Footwear

Server 01 MRP Dispatcher Material 01 Database Server Database Changes

Server 02 Material 02

Planning File Entry

Server 03 Material 03

Figure 31: Parallel Processing

Automatic Planning Run

The automatic planning run in MRP software determines material shortage and generates the respective procurement document. The software informs you of critical areas and exceptions, allowing you to modify planning results accordingly.
Evaluation of Planning Results

The total planning runtime is improved considerably by using parallel processing. It can run either on different servers or in different server modes to further speed up processing.

Planning results can be reviewed and evaluated by a series of different methods (for example, stock requirements list, MRP list, planning results per MRP controller, product group, order report, and so on). Evaluation functionalities allow your MRP controller to process planning results from an aggregated level

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to the most detailed SKU level, with the help of diverse selection criteria. SAP Apparel and Footwear points to critical areas without delay. All relevant features are accessible through one single, user-friendly, and easy-to-handle window, the AFS MRP cockpit.
Capacity Planning

Economic resource planning is present in various areas of a company. Capacity planning with SAP Apparel and Footwear supports all phases of planning: long-term estimated planning, mid-term planning, and short-term detailed planning. Capacity planning comprises components to handle these three areas: Capacity analysis Available capacities and capacity requirements are determined and illustrated in lists and graphics. Capacity leveling Optimum reservation of capacity and selection of appropriate resources. Planning boards in graphic and table form are available to illustrate the capacity situation and process capacity leveling. Capacity planning Capacity loading for AFS-specific products is based on routings that are selected according to the abovementioned criteria. The influence of different product characteristics in the individual production operations and lead times can be established in the routing for AFS-specific products. Routings for lead-time scheduling and production order processing are selected according to these criteria.
Production Order

Season selection A valid season is determined based on the order dates of the production order. Routing selection Routing operations and sequence are transferred to the production order. BOM explosion BOM items are transferred to the production order. Reservations generation Reservations are generated for BOM items in stock. Cost planning Planned costs are established for the production order. Capacity requirements generation Capacity requirements are generated for the work centers. Requisition generation Purchase requisitions are generated for nonstock components and externally processed operations.
Apparel and Footwear Specifics in the Production Process

The specific characteristics of the production process in the apparel and footwear industry have prompted SAP to make further developments for this step in the supply chain. For example, production in bundles is typical in the apparel industry. And in the footwear industry, shoes can be grouped according to size, for example, and shipped in large cartons. All specific information contained in BOMs and routings reappears in the production order. It is also possible to assign component batches to a production order to control different shadings or dye lots. Production orders in the apparel and footwear industry usually consist of several logistical subdivisions: Total quantity of the product to be produced Different sizes (SKUs) with varying quantities Groupings of products in smaller logical production lots, such as bundles Central transactions such as confirmations, monitoring production status, and goods receipt can also be processed for individual bundles or cartons, individual sizes, or a combination of these.

Production orders determine which product or assembly is produced, as well as the work center, activity, delivery date, and production costs. The production order also includes details of the resources (personnel, materials, production resources, tools, and so on) required to calculate the order cost. You can use the production order to monitor the order status for goods produced in-house. The order includes scheduling, capacity planning, and status management. The order process report has been enhanced by adding the operations. This enables you to monitor individual production steps within one single report. Cost accounting is carried out in the same way for each production order. When a production order is created, the following actions are carried out:

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In addition, you can integrate markers into the production order and planned order. The production order sizes resulting from a marker and the quantities derived from the fabric ply height form the rates for sizes and quantities received from MRP software. If necessary, planned quantities in the order are adapted accordingly.

Apparel and Footwear Planned Order Waist

Inseam 28 30 32

Selection of suitable rolls of fabric and leather for a production order based on criteria, such as shade and leather quality, plays an important role in production for the apparel and footwear industry. SAP Apparel and Footwear uses roll-selection features where the optimum choice of material input for a production order (for example, fabric or leather) is selected. You can freely define criteria by which the system sorts and selects data to efficiently allocate a quantity of input material for a production order or combined order.

External Marker Library 34 Marker 1: 32 x 30 32 x 32 34 x 32 Marker 2: 30 x 30 28 x 32 50 50 50 50 50 Production Order 10023 Routing 1 Combined Order Number 38

28 30 32 30 50 50 50 50

10023

10024

Total: 230 Pieces

Total: 250 Pieces

Production Order 10024 Routing 2

Cutting

Figure 32: Markers Quantity Adjustment

Embroidery

An ATP check for production orders displays all competing requirements for a particular component. It enables your MRP controller to decide in stock shortage situations, for example, whether a certain component needed for several production orders can be consumed by another time-critical production order.
Combined Orders

Sewing

Sewing

Quality Check

Quality Check

Figure 33: Combined Orders

In the apparel and footwear industry, production orders are often combined, especially in production phases such as cutting and pattern engineering. This might be the case, for example, when the same fabric is used for different products. By combining several production orders, cutting and use of fabric are rationalized. However, settlement, costs, and logistics of each production order remain separate for each finished product. In SAP Apparel and Footwear, several production orders can be logically grouped in a combined order. Transactions such as roll selection, confirmations, goods receipt, and goods issue can be processed either together for the combined orders, or separately for each individual production order.

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PRODUCT CONTROLLING
Overview Split Valuation with AFS Materials
Split Valuation

Special structures are available in SAP Apparel and Footwear to illustrate products or materials and their industry-specific characteristics. These special structures, known as grid values, dimensions, and categories, facilitate the processing of logistical business processes at levels below the material master. At the same time, these structures influence product controlling in SAP ERP and other SAP Business Suite applications. Additional industry-specific capabilities are supported in the areas of product and material valuation, product cost planning, cost object controlling, and profitability analysis to accommodate the characteristic levels listed above. Nearly all other accounting components in SAP Business Suite are supported at the SKU level (financial accounting, overhead costs controlling, and so on).

SKUs (grid values and categories) of a material or product generally do not all have the same purchase price or production cost. Procurement costs, raw material expenditure, and production costs can vary tremendously, making flexible material valuation of SKUs essential.

Material: Plant:

Jeans 0001

Valuation

Grid Value: 30/30 Category: Blue/ Stonewashed

Grid Value: 32/32 Category: Blue/ Stonewashed

Grid Value: 33/33 Category: Blue/ Stonewashed

Dimensions

Product Cost Planning

Figure 35: Split Valuation of Apparel and Footwear Materials

Valuation of SKUs
Cost Object Controlling

Categories

SAP Apparel and Footwear takes valuation differences at product characteristic level into account by managing SKUs separately. You can assign a separate valuation price to each SKU, which can either be a standard price or a moving average price.
Grouping with Valuation Types

Profitability Analysis 1 2 Quality 3

As costs for sizes, colors, or categories of a material do not always significantly differ, and to avoid numerous single valuations impairing performance unnecessarily, SAP Apparel and Footwear can combine separate grid and category material characteristics in what is known as a valuation type. By using valuation types, the common valuation of any number of SKUs for a particular material is simplified.

Figure 34: Product Controlling

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Product Costing for AFS Products

Product Costing

Cost Elements

In the apparel and footwear industry, material usage and production processes generally depend on information such as sizes, colors, and so on to be produced. Consequently, manufacturing costs of the produced SKU can differ enormously. With SAP Apparel and Footwear, it is possible to calculate the manufacturing costs of a product at the level of the produced SKU.
Costing of Valuation Types

The most important costing elements of a product are material and production costs. The software determines a products material costs based on the prices and quantities of the components used. At the same time, the software looks at grid- or categorydependent component prices and quantities over the entire cost roll up (and all production steps). Production costs are planned based on the respective routing and the operations defined therein. In addition, material and production costs can be debited with an overhead rate.
Special Production Scenarios

The stock valuation of products to be calculated is performed in the same manner as for raw materials or trading goods (by using split valuation for SKUs). You can create separate costings for valuation types of a product and use these for stock valuation and product cost controlling. The software carries out valuation type costings based on one determinable preference SKU for each valuation type.

Apparel and Footwear Valuation View Material: Plant: Grid 30/30 30/31 32/31 32/32 34/32 001 Jeans Preference Val. Type SKU Small Small Large Large Large Costing Small US$10

When determining the quantity structure, product costing software considers production scenarios typical to the apparel and footwear industry, such as cross-plant production or subcontracting of materials. In the case of subcontracting, the software automatically determines the relevant costing information from the purchasing information record of the subcontractor. In the case of externally procured materials, you can create raw material costings with a respective cost component split. You can refer to the conditions of the purchasing information record, for example. In this way, delivery costs such as freight or customs can be included in the material valuation.
Cost Object Controlling

Costing Large US$12

Cost object controlling software within SAP Business Suite facilitates the controlling of planned costs and actual costs with reference to cost objects. Depending on the production scenario, the software uses various objects for the collective cost.
Make-to-Stock Production

Figure 36: Costing of Valuation Type

Product Characteristic-Dependent Quantity Structure

The basis of product costing is the respective quantity structure (BOM and routing). A products quantity structure can be defined according to grid and category. Product costing in SAP Apparel and Footwear examines this grid or category-dependent determination. In the costing of a particular SKU, the system explodes the BOM according to the grid values and categories to be calculated and determines the relevant routing together with its operations.

The production order is at the center of product controlling during make-to-stock production. Cost object controlling software for production orders allows the target costs to be analyzed and compared with the actual costs of a production order. Cost object controlling functionality in the software takes the entire controlling process into consideration as well as target and actual characteristic-dependent material valuations and manufacturing costs.

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Variance Determination

Profitability Analysis for AFS Products

Following final delivery of an order, you can separately determine and settle the resulting costing variances (planned, target, and actual) according to variance categories (scrap variance, input variance, lot size variance, and so on).
Customer Make-to-Order Production

Profitability analysis functionality in SAP Business Suite enables you to evaluate market segments or strategic business units with respect to your companys profit or contribution margin. The market segments are classified according to products, customers, orders, or any combination of these, whereas business units include company codes, business areas, or profit centers. The main goal of profitability analysis is to provide the areas of sales, marketing, product management, and corporate planning with information to support internal accounting and decision making.
Apparel-and-Footwear-Specific Characteristics

In general, the sales order is the relevant controlling document in make-to-order production processes. Therefore, all sales order costs are collected across the entire production spectrum and updated in the controlling object, sales order, for evaluation. Target costs are planned costs of the finished product based on the lot size of the production order. However, the product costing planned costs are different: they are based on a (planned) costing lot size. Actual costs arise from the actual consumption of resources by the production order, for example, component withdrawal and material movements. At the same time, logistical make-to-order production can also be carried out without processing sales order controlling. In this case, cost object controlling results in a production order as in make-to-stock production.

Master data or basic structures can be freely defined for profitability analysis. You determine the analysis objects (characteristics) and the analysis value fields for your profitability analysis. The software creates a multidimensional analysis object from the combination of characteristics from which an analysis can be planned and identified by the comparison of costs and revenues.

Production Order Goods Issue Production Order Confirmed Operations Goods Receipt

Settlement

Profit and Loss Valuation at Dimension or Category Level

Target Costing

Figure 37: Production Order Processing

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In addition to the characteristics region, customer, and so on, you can also integrate other industry-specific information. In this way, you can establish the profit that is issued with certain seasonal products. You can also ascertain how a particular grid value or grid-value group contributed to or affected this profit.

Apparel and Footwear Characteristics Sales Region Product Product Group Customer Customer Group Season Valuation Type Category Grid Value

North Prod1 Snowboard Cust1 Wholesale Wi2001 L FD 164

Valuation Type

Value Fields Revenue Sales Deduction Planned Freight Costs Cost of Sales

980 100 150 550

Profitability Segment Revenue Sales Deduction Cost of Goods Sold

Figure 38: Profitability Analysis for Apparel and Footwear Products

Profitability Analysis at Product Characteristic Level

SAP Apparel and Footwear supports the value flows by creating revenues and sales deductions from sales orders or billing documents with their sales conditions. You can perform the costing valuation using software for the respective product or SKU plan costing, or with the help of defined conditions. SAP Apparel and Footwear takes valuations and conditions at the SKU level into consideration with regard to both the revenue and costs.

Se

as

on

Grid Value

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CUSTOMER SERVICE AND SUPPORT

A network of highly qualified experts has been set up throughout the world to provide an excellent standard of support for SAP Apparel and Footwear customers and partners. Our experts are on hand to assist with implementation problems and provide ongoing support. Together with SAP partners, SAP Consulting offers best-in-class experience and knowledge to ensure that all issues will be considered and integrated into a feasible implementation strategy. We will help you realize a significant increase on investment returns for your implementation project by reviewing critical decision requirements, determining high-risk elements in the program, and defining an implementation approach to maximize return and minimize risk. SAP Consulting encompasses training and support, presales events, detailed workshops, spot consulting and remote support, feasibility studies, and quality assurance reviews.

FUTURE FOCUS
SAP has been helping its customers create value since 1972, including profitability, ROI, productivity, time to market, and customer satisfaction. With the SAP NetWeaver platform, SAP is in a unique position to forge ahead of its competitors. Not only can SAP provide the solutions its customers need to increase their revenue and reduce costs, but SAP can also in our role as trusted advisor identify new business opportunities, specifically those suited to the needs and demands of e-business. SAP Apparel and Footwear is powered by the SAP NetWeaver platform. SAP NetWeaver unifies technology components into a single platform, allowing organizations to reduce IT complexity and obtain more business value from their IT investments. It provides the best way to integrate all systems running SAP or non-SAP software. SAP NetWeaver also helps organizations align IT with their business. With SAP NetWeaver, organizations can compose and enhance business applications rapidly using enterprise services. As the foundation for enterprise service-oriented architecture (enterprise SOA), SAP NetWeaver allows organizations to evolve their current IT landscapes into a strategic environment that drives business change. SAP continues to provide new or enhanced industry-specific features and functions to meet the specific business needs of its customers. SAP Apparel and Footwear and the SAP for Retail solution portfolio cover the entire fashion supply chain from suppliers and manufacturers to wholesalers and retailers to the consumer. SAP solutions for the apparel and footwear industry will continue to put SAP customers on the competitive edge, enabling collaboration across the entire fashion supply chain.

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GLOSSARY
A

AFS Apparel and footwear software ARun Allocation run

D

Company code Smallest organizational unit of financial accounting for which a complete self-contained set of accounts can be drawn up for purposes of external reporting. This includes recording of all relevant transactions and generating all supporting documents required for financial statements. Delivery program Method and particulars of product delivery defined by one of the following combinations: season; season and collection; or season, collection, and theme. You can specify dates so that the delivery program is delivered during a certain period. Dimensions Product characteristics usually referred to in the apparel and footwear industry as style, color, and size; a freely definable element of an AFS grid. An AFS grid is composed of up to three dimensions. Dimensions are, for example, length, color, size, or width. Each dimension is composed of dimension values that are all valid entries for a particular dimension.
E

ATP Available to promise

B

BAPI Programming interface BOM Bill of materials; a complete, structured list of the components that make up a product or assembly. The list contains the object number of each component, the quantity, and unit of measure. The components are known as BOM items. You can create the following BOM categories in SAP software: material BOM, document structure, equipment BOM, functional location BOM, and sales order BOM. Bundle Apparel industry term for all pattern pieces in a marker that will be sewn together to form a garment in a certain size, multiplied by the number of fabric plies in a stack. The information on bundles is maintained in planned orders and production orders.
C

EAN European Article Number EDI Electronic data interchange

G

CAD Computer-aided design; a data processing system for computer-aided design and drawing Category Characteristic of an AFS product that allows division into different qualities or countries of origin, for example.

Grid Important element of AFS basic data for mapping characteristic values of an AFS material. A grid permits combinations consisting of up to three dimensions, for example, color, size, and length. The use of master, purchase, and sales grids facilitate the valuation, procurement, and sale of AFS materials at SKU level.

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Heart grid value Description for the grid values of a material that you sell or purchase very frequently (heart size). When maintaining the grid control data for a material, you can flag these grid values as heart grid values.
I

ODS Operational data store; object used to store consolidated and cleaned-up transaction data at the document level (basic level). An ODS object describes a consolidated data set comprising one or more InfoSources. OLAP Online analytical processing; analytical, multidimensional reporting based on multidimensional data sources. OLAP reporting allows several dimensions to be analyzed simultaneously (such as time, place, product, and so on). The aim of OLAP reporting is to analyze key figures, for example, for an analysis of the sales figures for a certain product in a particular time period.
P

InfoCube Central object on which reports and analyses in the SAP NetWeaver Business Intelligence component are based. An InfoCube describes a self-contained data set (from the reporting view), for example, for a business-oriented area. InfoSource All available data for a business event, or type of business event, for example, cost center accounting. An InfoSource is a quantity of information that has been grouped together and can be said to belong together logically from a business point of view. It can contain either transaction data or master data (attributes, texts, and hierarchies).
M

Plant Place where materials are produced or goods and services are provided
R

Marker A marker shows optimal placement of pattern pieces to achieve the best fabric utilization for the cutting process. Unique markers are defined by the name and repetition of the size or dimension they contain. They can be plotted on paper or stored in a file that is used to drive a numerically controlled cutter. The SAP Apparel and Footwear application uses marker data to adjust quantities in a planned or production order or to identify unique bundle numbers. MRP Material requirements planning

RFQ Request for quotation; a request from a purchasing organization to a vendor (external supplier) to submit a quotation for the supply of materials or the performance of services
S

SAP Apparel and Footwear Application that offers an e-business solution for companies in the apparel, footwear, and fashion lifestyle industry that need to source products with multiple characteristics such as style, color, and size

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SAP Business Suite Comprehensive, integrated suite of business applications that help companies, institutions, and other organizations run their businesses better SAP for Retail Set of leading-edge solutions that meet the retailers need to grow sales, reduce the cost of goods, and cut expenses SAP NetWeaver platform Platform that helps companies align IT with business requirements. It allows companies to compose new business solutions rapidly while obtaining more business value from existing IT investments. As the foundation for enterprise service-oriented architecture (enterprise SOA), SAP NetWeaver helps organizations evolve their current IT landscapes into a strategic environment that drives business change. Seasons, collections, and themes In the apparel and footwear industry, several materials that share certain traits such as color or texture can be combined to form a theme. Themes can be part of a collection, which in turn can belong to a season. A combination of theme, collection, and season forms a delivery program. SKU Stock-keeping unit; the most detailed schedule line of an AFS product with its grid value (for example, 38/yellow) and category values (for example, quality A/country of origin D)
U

SKU horizon The period in which an application carries out planning at SKU level. Requirements outside of the SKU horizon are planned only at material level. Planning at material level and at SKU level in the SKU horizon is carried out separately. That means that requirements at material level cannot be satisfied by procurement at SKU level. SKU level The stage of AFS planning, procurement, or valuation at which applicable grid values or categories are specified. Presizing breaks requirements or procurement proposals down from the material level to SKU level, adding specific grid values and category data to quantities. SNP Supply network planning

UPC Universal Product Code

V

VMI Vendor-managed inventory

W

WM Warehouse management

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