Afs Functions in Detail

SAP ® APPAREL AND FOOTWEAR(SAP ® AFS)

SAP Functions in Detail

© Copyright 2002 SAP AG. All rights reserved.

No part of this publication may be reproduced or transmittedin any form or for any purpose without the express permissionof SAP AG. The information contained herein may be changedwithout prior notice.

Some software products marketed by SAP AG and itsdistributors contain proprietary software components of other software vendors.

Microsoft®, WINDOWS®, NT®, EXCEL®, Word®, PowerPoint®

and SQL Server® are registered trademarks of Microsoft Corpo-ration.

IBM®, DB2®, DB2 Universal Database, OS/2®, Parallel Sysplex®,MVS/ESA, AIX®, S/390®, AS/400®, OS/390®, OS/400®, iSeries,pSeries, xSeries, zSeries, z/OS, AFP, Intelligent Miner, Web-Sphere®, Netfinity®, Tivoli®, Informix and Informix® DynamicServerTM are trademarks of IBM Corporation in USA and/orother countries.

ORACLE® is a registered trademark of ORACLE Corporation.

UNIX®, X/Open®, OSF/1®, and Motif ® are registered trademarksof the Open Group.

Citrix®, the Citrix logo, ICA®, Program Neighborhood®,MetaFrame®, WinFrame®, VideoFrame®, MultiWin® and otherCitrix product names referenced herein are trademarks of Cit-rix Systems, Inc.

HTML, DHTML, XML, XHTML are trademarks or registeredtrademarks 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 imple-mented by Netscape.

MarketSet and Enterprise Buyer are jointly owned trademarksof SAP AG and Commerce One.

SAP, SAP Logo, R/2, R/3, mySAP.com, and other SAP productsand services mentioned herein as well as their respective logosare trademarks or registered trademarks of SAP AG in Ger-many and in several other countries all over the world. Allother product and service names mentioned are the trade-marks of their respective companies.

2

SAP® Apparel and Footwear (SAP® AFS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Characteristics of the Apparel and Footwear Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9– Globalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10– Product Life Cycles and Seasonality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11– Pressure on Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13– Increase in Customer Service Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13– Multiple Distribution Channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14– Information Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Key Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Style/Color/Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16– Style/Color/Size Master Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16– Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16– Seasonal Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Generic Key Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18– Integration of Logistics and Financial Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18– Fine-Tuning Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18– Multi-Company, Multilingual, Multicurrency Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18– Foreign Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18– Triangle Processing – Intercompany Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Order Management and Fulfillment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Sales Order Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19– Standard and AFS Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19– EDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19– Internet and Intranet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19– mySAPTM Customer Relationship Management for the Apparel and Footwear Industry . . . . . 19– Fast Order Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21– Credit Card Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21– Reference Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21– Mass Order Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21– Multi-Store Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22– “Mark For” Feature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22– Rush Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22– Assortments and Prepacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

3

CONTENTS

Sales Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23– Availability Checking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23– Credit Limit Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24– Price Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24– Special Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24– Value-Added Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24– Bulk Order Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Order Scheduling and Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24– Order Scheduling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24– Allocation of Customer Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25– Allocation Preview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26– Allocation against Quantity Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Shipping and Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27– Delivery Creation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27– Shipping Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27– Shipping and Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Billing Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28– Billing Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

SAP AFS Logistics Information System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28– Logistics Information System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

mySAP Business Intelligence for the Apparel and Footwear Industry . . . . . . . . . . . . . . . . . . . . . . 28mySAP Business Intelligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Data Warehousing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Reporting and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Business Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Sourcing, Inventories, and Supplier Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33– Procurement Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Purchase Requisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Source Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33– Political Restrictions and Quotas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34– Vendor Capacity Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

4

Request for Quotation (RFQ) and Quotation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Purchase Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35MultiLevel Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Inventory Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36– Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37– Stock Transfer and Transfer Posting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Logistical Invoice Verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Special Business Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38– Subcontracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38– Vendor Collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40– Third-Party Order Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40– Procurement of Consignment Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Warehouse Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Production and Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Sales and Operations Planning (SOP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Demand Planning with SAP® APO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45Production Demand Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45– Pre-sizing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Materials Requirements Planning (MRP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46– Bill of Materials (BOM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46– Routing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47– Material Requirements Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47– Parallel Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48– Automatic Planning Run . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48– Evaluation of Planning Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Capacity Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Production Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49– Apparel and Footwear Specifics in the Production Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49– Combined Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

5

Product Controlling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Split Valuation with AFS Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51– Split Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51– Valuation of SKUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51– Grouping with Valuation Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Product Costing for AFS Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52– Product Costing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52– Costing of Valuation Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52– Product Characteristic-Dependent Quantity Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52– Cost Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52– Special Production Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Cost Object Controlling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53– Make-to-Stock Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53– Variance Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53– Customer Make-to-Order Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Profitability Analysis for AFS Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53– Apparel and Footwear Specific Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54– Profitability Analysis at Product Characteristic Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Customer Service and Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55SAP AFS Quality Assurance Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Future Focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

6

SAP® Apparel and Footwear (SAP® AFS) is the SAP e-businesssolution for the apparel and footwear industry. SAP AFS wasdeveloped in collaboration with renowned industry leaders toaddress the particular requirements of the apparel and foot-wear industry. The development of the solution was mainlyfocused on illustrating industry-specific processes based on theSAP e-business platform mySAP.com®, a family of solutions andservices that empowers employees, customers, and businesspartners to collaborate successfully – anywhere, anytime.

SAP AFS enables you to benefit from the latest SAP technologyand infrastructure enhancements. It is the obvious choice forcompanies operating in the apparel and footwear sector.

This document consists of two parts:• Characteristics of the apparel and footwear industry and a

discussion of the issues facing executives in the entire logis-tical supply chain.

• Key capabilities of SAP AFS.

7

SAP® APPAREL AND FOOTWEAR (SAP® AFS)

The apparel and footwear business is highly demanding, forc-ing companies to contend with constant challenges in a globalbusiness environment: there is relentless pressure on price,cost, and lead times. Trends are created overnight, and theindustry has to rapidly adjust. Contract domestic and offshoreproduction combined with global procurement processes cre-ate complex value chains that can be inefficient and difficult tomonitor. Fashions often change quickly and without warning.In the apparel and footwear industry, companies must copewith seasonal fluctuation, proliferation of design variations,scant information about volatile demand that results in fore-cast uncertainty, stock shortages, and costly markdowns.

Apparel and footwear companies today are increasingly assum-ing the role of coordinator for both internal and intercompanyprocesses as their core competencies shift away from produc-tion and steadily move toward planning, controlling, andmonitoring textiles in the value chain.

Multilevel division of labor and outsourcing have long beencommon practice in this industry. In the past, companiesachieved their greatest cost-cutting potential by optimizingtheir production processes. However, the production of cloth-ing and shoes can only be automated to a certain degree, caus-ing the savings potential by these means to quickly reach itslimit. The next step was to transfer production to low-wagecountries, which in turn meant sacrificing high quality andtransparency in the production process. Having productionsites spread out around the globe has made supervision andmonitoring of the production process more difficult, thetransport routes longer and more expensive, and meetingconfirmed delivery dates a perpetual challenge.

Areas such as product development, raw material and finishedgoods requirements planning, production planning, coordina-tion and control, transport optimization and monitoring, andquality assurance are taking on more and more importanceand therefore tend to remain at headquarters. As a result, theinformation flow and collaboration among partners in the tex-tile supply chain (logistics service providers, textile manufac-turers, contractors, agents, and so on) are increasingly morecritical to the success of apparel and footwear companies. Fun-damental changes and restructuring are taking place in theapparel and footwear market.

9

CHARACTERISTICS OF THE APPAREL AND FOOTWEAR INDUSTRY

?

GlobalizationDomestic as well as foreign company-owned and contractmanufacturing have brought an increase in international trad-ing; as a result, business is now transacted in many differentcountries with various cultures and currencies. This has givenrise to software solutions and information technology thatsupport enterprises in their ability to move goods and informa-tion expediently and reliably across any distance.

The increasing threat of cheap imports and tougher com-petition have forced companies to adopt a more flexibleapproach to their manufacturing capabilities. This includes theintegration of global sourcing and contract manufacturing aspart of a comprehensive sourcing strategy. This strategy has tosupport a variety of capabilities such as in-house production atdomestic or foreign sites, contract manufacturing at domesticor foreign sites, or a combination thereof.

As manufacturing does not always take place in the same coun-try as the final customer, additional requirements regarding cus-toms and quotas are involved, and country of origin restrictionsmay arise. Sourcing entails both internal and external considera-tions. It becomes necessary to track production in order to planor confirm exact product delivery dates and quantities.

The improvement in logistics capability and the increasingdemand for textile products in the less traditional apparel andfootwear consumer markets (such as China, the Far East, India,and Eastern Europe) have led to a truly global marketplace. It iscritical for companies wanting to capture and service thisdemand to be able to operate in all corners of the world. Com-panies can best profit from this potentially huge market if theyare able to transact business efficiently on an internationalscale, internally as well as externally. They also have to managethe vagaries of fluctuating exchange rates.

10

Figure 1: Decision Support for Global Sourcing

Vendor Performance

WHICH QUALITY

Tooling Amortization

Production Complexity

Production Capacity Shortest ETD

Factory Status

PURCHASE ORDERVendorProductPriceQuantityDelivery Dateetc.

WHICH PRICE

WHERE

WHAT

PURCHASING

VENDOR VENDOR VENDOR VENDOR OUTSOURCE INTERNAL

Lowest FOB Costs

Lowest Landed Costs

Enterprise Demand

??

Product Life Cycles and SeasonalitySeasonality influences the entire product life cyle. It impactsplanning styles, the procurement of raw materials, warehous-ing capacities, production, delivery, and the orchestration ofselling and marketing activities. Product development cyclesare shortening and overlapping as customers demand shortertime-to-market cycles. The need for reacting flexibly andpromptly to market trends and changing consumer needs hasresulted in a proliferation of design variations. The issue ofstyle/color/size and other product characteristics affect theentire supply chain. Only investment in new, advanced tech-nologies can facilitate the handling of large numbers of stylesand stock keeping units (SKUs) and the storage of potentiallylarge volumes of data.

The product structure of apparel and footwear companiesvaries from one to several levels. Not only style, but also color,size and other dimensions need to be stored including theinformation relevant for the respective level. In addition, theseasonality of the products leads to short life cycles and multi-ple new styles on a regular basis. In some cases, variations of the same product such as different grades of quality orcountries of origin require additional stock segregation andvaluation. The number of stock keeping units (SKUs) thatneeds to be stored can therefore be very large.

Continued investment in new technology is essential for stay-ing ahead of competitors, especially when it comes to designcapability. This includes investment in sophisticated computer-aided-design (CAD) systems as well as technological innova-tions in the use of fabrics and fibers. In this way, a company canmanufacture products whose design sets them apart fromcheaper imports.

11

TYPE OF SHOE

STYLE

COLOR (WAY)

SIZE

Running

Style 4711

WHT/RED/GRNWHT/RED/BLK

W-8 R-8 N-8 W-9 R-9 N-9 ... ... ...

Basketball

Style 4712

WHT/BLU/BLK

Figure 2: Product Structure: SKU – Style/Color/Size

Apparel and footwear companies promote a variety of productgroups. Each of these groups may reflect some of the followingaspects:• 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 commission or licensing charges

due to a third party, the retailer, or the manufacturer.

Standard designs and carryovers remain in the production linefrom season to season with possible minor changes to color ordetail. Fashion products are sold for a particular season and canhave a very short lifetime with new products entering the mar-ketplace four or more times a year. Standard designs and fash-ion products can be merchandised as a collection or assort-

ment, packaged in different combinations, or sold separately.A fashion company may also supply store fixtures and point ofsale materials. Special items might be produced solely for a spe-cific customer. This can involve tailoring an existing product,creating totally new designs, or supplying private labels. Acces-sories such as hats, gloves, belts, and bags may each use uniquesize scales (often different from country to country), stockingand ordering policies.

The seasonality of the apparel and footwear business meansthat fashion items are highly perishable. Certain items must be available for corresponding seasons or events, with specialneeds to mark down or move inventory that will soon be outof season. Price lists, reports, and inventory displays must beavailable by seasons or events rather than the usual calendarperiods.

12

RELATES PRODUCT, SIZES, AND PRICES TO SEASONS

Region: North AmericaSeason:SpringValid: March to May

Region: AustraliaSeason:SpringValid: October to January

Figure 3: Seasonality – A Business Parameter

Pressure on CostsIncreases in raw material and labor costs that go hand in handwith retailers demanding high-quality, low-priced goods, speed,and quality of service must be addressed as follows: • Raw material prices became an issue in the mid-1990s when

the price of cotton started to rise significantly, having beenon a downward trend at the beginning of the decade. Largerapparel and footwear companies have the option of reducingcosts for raw materials by putting pressure on textile manu-facturers due to the size of their orders. The smaller com-panies, however, have to compensate by reducing labor costs.The highest labor costs are concentrated in assembly phases,especially in the sewing room. Traditionally, apparel manu-facturers focused on minimizing direct labor costs by imple-menting the bundle system. The increase in inventory costsand risks has also made production throughput times moreimportant. If assembly cycle times are reduced, the inventorylevel has to meet the immediate replenishment demanddecreases.

• With consumers looking for bargains, retailers were not, inthe past, inclined to accept increased costs. Suppliers there-fore had to explore other ways of maintaining margins. Thisled them to reconsider their business activities, pursue morecost-effective manufacturing, and develop innovative prod-uct ideas.

Increase in Customer Service RequirementsCustomer service has become a very important issue due tocomplex and demanding customer requirements and dimin-ishing customer loyalty. Consumers today are more educatedand conscious of what they buy so that their expectations arerising steadily. Apparel and footwear companies are thereforeputting their efforts into creating strong brands and focusingon marketing:• Changing practices in the retail industry are shifting more

responsibility to upstream manufacturers, who in turn areseeking stronger partnerships with their suppliers. In orderto meet customer service requirements both in terms oforder fulfillment and on-time delivery, a high degree ofshared information supported by advanced systems integra-tion, flexible manufacturing strategies, and more efficientplanning systems are necessary.

• Cycle times for satisfying customer orders can range frompriority delivery within 24 hours to bulk and single delivery,or vendor-managed inventory with just-in-time replenish-ment to seasonal planning months in advance. In addition,apparel and footwear suppliers must invest in technology topackage, label, route, and move the floor-ready merchandiserapidly from the production site directly to the retailer(direct shipments).

13

TransferTransferTransferTransfer

FlexibleManufacturing

SharedInformation

SophisticatedOrder

Allocation

SophisticatedPlanning andForecasting

Point of Sales,Vendor-Managed

Inventory

Vendor Manufacturing Distribution Retail Outlet Consumer

SystemsIntegration

More and MoreDemands

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

• Retailers are demanding more and more services includingdrop and cross-dock shipments, vendor managed inventory(VMI), rapid replenishment, exchanging information on thecurrent status of ordered products, boxing, and bar coding.Apparel and footwear suppliers are under pressure to fulfillretailers’ orders flexibly, rapidly, precisely, and efficiently.They are forced to keep more finished goods in stock, riskingover-inventories or to innovating production processes toreduce that risk.

Multiple Distribution ChannelsMultiple distribution channels exist that are typical for sales inthe apparel and footwear industry, which all require differentprocessing. Different practices, methods of transportation,distribution systems, pricing conditions, and policies may apply to each of these channels. Distribution channels can includecompany-owned retail stores, retail franchises, and shop-in-shop, but the most common channels of distribution includewholesale, retail stores, mass merchandisers, departmentstores, specialty retailers, distributors, and licensees. Con-sumers can purchase in a variety of ways such as by catalog, the Internet, electronic kiosks, direct mail, and telemarketing.

Information TechnologyInformation technology advancements significantly improvetrade throughout the world by enabling the electronic process-ing of customer orders in real time, even over long distances.

Companies, partners, and customers are using the Internet toa greater extent to conduct business-to-business processes suchas sourcing, demand planning, replenishment, and collabora-tive design, marketing, and selling products.

Successful performance in the apparel and footwear businessincludes quick response to retailer replenishment requests,achieving a high level of order completeness, short lead timesfor new products and a quick go-to market. However, this doesnot necessarily provide a direct financial return. Financialperformance is not only affected by increases in labor and rawmaterial costs, inefficient sourcing, punishment for late deliv-eries, and a lack of transparency regarding contract manufac-turers. It is also affected by the risk of holding high inventoriesof finished goods or work-in-process inventories that go alongwith planning insecurities. The resulting greater need formark-downs and write-offs reduces profits.

To thrive in this fiercely competitive environment and toaddress the continuing problem of effectiveness across theapparel and footwear supply chain, well-advised companiesdevelop strong relationships with vendors, retailers, partners,and consumers. By collaborating with one another andexchanging real-time information, apparel and footwear com-panies are able to minimize competition whilst maximizingtheir opportunity for identifying and fulfilling customer needs.

SAP AFS is the SAP e-business solution that helps you managethe transition from traditional enterprise-centric businessprocesses to adaptive supply chain networks. With SAP AFS,suppliers, manufacturers, distributors, and customers all worktogether towards a common goal.

14

15

Figure 5: Multiple Channels of Distribution

CONSUMER

CONSUMER DEMAND

CUSTOMER DEMAND

Internet buying

Shop-in-shop

Catalogue

Direct

Franchisees

DECISIONS

Practices,Policies, andProcedures

PricingConditions

DistributionSystem

Method ofTransportation

CUSTOMER

Telesales

Wholesale

EDI

DEMANDPLANNING

SAP Apparel and Footwear is the best-of-breed e-business solu-tion for the apparel and footwear industry. It not only address-es the logistical needs of apparel and footwear companiesworldwide (such as sales and distribution, materials manage-ment, and production planning and execution). It also seam-lessly integrates financials, controlling, and all supply chainelements to guarantee your management and staff up-to-dateinformation at the push of a button – anywhere, anytime.

This document presents in detail the following key capabilitiesspecific to SAP AFS:• Style/color/size• Generic key capabilities• Order management and fulfillment

– Sales order processing– Sales capabilities– Order scheduling and allocation– Shipping and transportation– Billing capabilities– SAP AFS Logistics Information System

• Sourcing, inventories, and supplier Relations – Overview– Purchase rrequisition– Source allocation– Request for quotation, quotation, and purchase order– Multi-level 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 AFS materials– Product costing of AFS products– Cost object controlling– Profitability analysis for AFS products

STYLE/COLOR/SIZE

Style/Color/Size Master Data SAP AFS has enhanced standard SAP® R/3® data structures tofacilitate the handling of potentially very large volumes of data.These enhancements derive largely from the size and seasonalrequirements of the industry and relate to the building of prod-uct levels based on style/color/size as used throughout thelogistical cycle.

A grid has been developed to support these specific enhance-ments and safeguard high levels of performance. This toolensures that as styles change from season to season, the enor-mous number of stock keeping units (SKUs) can still be main-tained quickly and easily. Copy and referencing functions alsosupport volume changes due to seasonal influences. The prod-uct characteristics are represented as AFS dimensions. Dimen-sions can be flagged as being relevant to certain applications inSAP AFS (for example, for material requirements planning,seasons, or pricing) and thereby increase the flexibility of gridprocessing. Dimensions are individually definable for everycustomer and product.

CategoriesIn addition to grid dimensions, you can further specify productcharacteristics by categories. Categories provide an additionallayer of detail, allowing you to segregate levels of quality, cus-tomer segments, country of origin, and so on. The SAP AFSmanagement of categories has been further enhanced so thatcategory fields can be flagged as being relevant to certain appli-cations in SAP AFS (for example, for planned requirementsconsumption, bill of material maintenance, or sales status). Itis therefore no longer mandatory to maintain all the possiblecombinations of valid categories.

16

KEY CAPABILITIES

17

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

Valid Sizes for Color BLACK

Dimension 1: Color

Dimension 2: Waist

Dimension 3: Inseam

Seasonal ProcessingThe apparel and footwear industry is a highly seasonal businessthat calls for tight control over product sales and delivery avail-ability. SAP AFS features a season function to define and con-trol seasonal delivery periods and handle specific order periodshonoring season-related deadlines. This means you have fullcontrol over customer orders, articles, and time frames withinorder processing. Pricing can be carried-out depending on spe-cial events and seasons. For example, during an end-of-seasonsale, you can decrease the price for an article depending onhow sales progress. Furthermore, you can define delivery pro-grams for seasons, collections, and themes and assign thedelivery program a delivery date.

GENERIC KEY CAPABILITIES

Integration of Logistics and Financial ApplicationsStandard logistics and financial applications are integrated withSAP AFS. Logistical business processes automatically lead tocorresponding real-time postings in accounting. For example,as a result of a direct shipment request from a customer insales, a purchase requisition is handed to the purchasing depart-ment. Customer-relevant data is then transferred to the pur-chase order. Purchased products can then be shipped directlyto the customer. As soon as an incoming vendor invoice isreceived, it is automatically visible in the accounts payabledepartment.

Fine-Tuning TechniquesCustomizing can be used to adapt the system to suit the indi-vidual operating needs of your company. By fine-tuning ordertypes for example, systems can be quickly matched to ever-changing business demands without affecting turnover figures.Constant change is the norm. With SAP AFS, you can definenew business processes and adapt existing ones as and whenneeded, and not just during initial implementation.

Multi-Company, Multilingual, Multicurrency ProcessingDespite multi-company, multilingual, and multicurrency salesorder processing, international business must still be able toplace orders in only one language. Business transactions withpartners in other countries can be converted automaticallyinto other languages and currencies. Each partner is able toprocess transactions in the appropriate local language andlocal currency, thus simplifying cross-border trading and sup-porting a global market. The same applies to country-specificsize scales.

Foreign TradeThe global nature of the apparel and footwear industry alsoinvolves continuous changes in foreign trade and customs reg-ulations, which can be formidable obstacles for any organiza-tion operating internationally. These affect the entire supplychain from raw materials to finished goods, from inventory tofinancial accounting. The foreign trade capabilities of SAPovercome such barriers and include support for EDI interfacesfor foreign trade information, flexible management of exportlicenses, automatic declarations to authorities, and representa-tion of preference agreements. SAP ensures that internationalborders are not trade barriers.

Triangle Processing – Intercompany TransactionsLarge international companies transact business with severaldifferent companies and in numerous countries. It is thereforeimportant to introduce processes to support such transactions.In triangle processing, an order is taken by one country for acustomer, owned by a second country, and delivered by a third.The second country invoices the customer and pays commis-sion to the country in which the order was placed. Grid pro-cessing in SAP AFS caters specially to all of these requirements.

18

SALES ORDER PROCESSING

Standard and AFS MaterialsSAP Apparel and Footwear offers a variety of order entry meth-ods and screens, which have been developed together with ourcustomers. All order screens in SAP AFS can be used to orderboth non-sized and style/color/size materials, regardless ofwhether orders are entered manually or received through EDIor the Internet.

Internet and IntranetInternet and intranet application components provide appareland footwear companies with a variety of ready-to-use andhighly configurable business-to-business, consumer-to-busi-ness, and intranet applications. Such applications are specifi-cally designed for business transactions and not just for infor-mation access. Standard Business Application ProgrammingInterfaces (BAPIs) have been amended to satisfy the SAP AFSstyle/color/size requirements. The ability to share and exchangeinformation with suppliers and buyers in real time throughthe Internet allows companies to implement integrated globalsupply chain management.

mySAPTM Customer Relationship Management for the Apparel and Footwear Industry In response to ever increasing profit pressures, organizationshave become more efficient, driving costs out of their opera-tions. Furthermore, they have also focused on the quality oftheir products and services, such that quality is no longer asgreat a distinguishing factor among different companies.

The result of these efforts is that price and quality have con-verged, shifting the focus of corporate efforts to the customer.Organizations have recognized that they must therefore pro-vide more value in different forms to their customers, and settheir key corporate goal to achieve “customer value leader-ship.” To accomplish this goal, organizations must create a cus-tomer-centric e-business by making the customer the center ofall their activities.

mySAPTM Customer Relations Management (mySAPTM CRM)connects customers to the knowledge, people, and processes ofa company's entire value network, creating customer valueleadership through:• Superior customer relationships• Innovative customer-focused products and services • Excellent customer-centric processes

19

ORDER MANAGEMENT AND FULFILLMENT

Figure 7: Sales Order Cycle

InventorySourcing

EDIElectronic data interchange (EDI) plays a critical role in sales,since business information must be transferred as quickly aspossible. EDI accelerates and integrates sales operations, ensur-ing that data transmitted electronically is immediately availableto SAP AFS users and applications. In particular, EDI translatescustomer information into AFS system information, such asdimensions, and can even trigger a workflow process. Forexample, a workflow event could be automatically initiated fora sales order on the basis of an invalid article number, credithold, or other user-defined criteria. An added benefit is thatwork activities can be prompted by the system, should excep-tion messages need to be processed, and users are otherwise freeto concentrate on their regular activities.

Sales OrderProcessing

Payment

Invoicing

Delivery

Tele-SalesOrder 1

EDISales

Order 2

InternetSales

Order 3

Mobile Sales

Order 4

FaxedSales

Order 5

mySAP CRM includes capabilities that are interwoven withinthe entire customer interaction cycle. These capabilities arediscussed in detail below.

The mySAP CRM Interaction Center facilitates inbound andoutbound communications mainly in the areas of telesales,telemarketing, and service. With SAP AFS 3.0, apparel andfootwear companies can utilize the mySAP CRM InteractionCenter. Interactions can be blended across all remote channelsincluding telephone, Web, chat, and e-mail. Customer con-tacts are tracked, monitored, and enhanced for multichannelcommunication.

Inbound calls from your customers (for example, retailers)enable you to automatically identify the customer through thecalling phone number. All relevant customer information isavailable for your call-center agent at a glance. After identifyingyour customer’s needs, you can branch to any SAP AFS trans-action without keying in redundant information, such as thecustomer number. With mySAP CRM for the Apparel and

Footwear Industry, you can take advantage of solid expertiseSAP has in customer relationship management.

The customer care and help desk supports all types of ques-tions, complaints, and returns, with escalation and workflowprocessing plus many other activities.

In the near future, e-selling, e-services, and mobile sales will beavailable for apparel and footwear companies. E-selling pro-vides comprehensive capabilities for selling apparel and footweararticles through the Internet, while creating a new, strategicsales channel. It covers all phases of the sales cycle, sophisticat-ed product selection, multimedia product catalogs, advancedpersonalization, convenient shopping-basket management,secure transactions, complete order status checking, as well assupporting payment processing and fulfillment. IntelligentWeb analyses and a flexible Web design based on state-of-the-art technology top off the solution. E-service offers your cus-tomers (retailer and end-consumers), prospects, and businesspartners access to specific information (such as product cata-logs, content, and pricing) and self-service functions (such asorder entry and tracking requests) through the Internet.

20

Telesales

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

EDISales

InternetSales

Mobile Sales

FaxedSales

SAP AFS

KEYED AUTOMATIC KEYED

Figure 8: Multiple Methods of Order Entry

Order 1 Order 2 Order 3 Order 4 Order 5

Furthermore, there are plans to support mySAP CRM FieldSales. That means you can deliver key customer and prospectinformation to your sales personnel in the field. This facilitatesthe planning and maintenance of sales activities (such asappointments, visits, and calls), and provides activity reports.This also includes capabilities to create clearance sales and takeorders. With mySAP CRM Mobile Sales, your field sales forcewill be supported using mostly autonomous mobile devices.

Fast Order EntryScreens designed specifically for SAP AFS have helped speed up manual order entry. Status data such as Sales area and Customer ship-to are displayed on each screen. You are notrestricted to using the SAP AFS fast order entry screens; youcan create your own screens to suit your individual require-ments. This can be particularly useful in a telesales environ-ment.

Credit Card ProcessingThe system automates credit card processing by prompting forcredit card details (such as number, expiration date, and so on)and auto-dialing for authorization. On receipt of authorization,it captures the details needed for later settlement.

Reference CapabilitiesCross-reference capabilities allow appropriate product num-bers to be found based on different criteria, such as customerproduct number, UPC/EAN codes (Universal Product Code/International Article Number), or by referencing a discontin-ued product to a new product. Appropriate products may alsobe determined from a list based on pack-code selection rules.For example, a customer may not want articles with couponsto be included in the packaging of any product. The appropri-ate pack codes can be filtered out of a selection list before thesystem performs the substitution.

Mass Order Management The apparel and footwear industry has many customers andtherefore a large volume of orders. As a result, when yourcustomer service department is compelled to make a generalchange affecting many orders, considerable time and effort isinvolved.

Two tools are available with SAP AFS to assist productivity:• Stock display/mass order display – a “where-used” inquiry on

stock consumed/required by orders• Mass document change – enables users to select many orders

and change certain agreed fields in a single process

For fast changes to schedule lines in sales orders, SAP AFSenables you to enter data and change entries for selected itemsor schedule lines.

21

Figure 9: Mass Order Management

Customer

Requesteddelivery dateMaterial

SELECTION SCREEN

1475

Requested styleFrom:To:

CHANGE SCREEN

14761475

Executeselection

Sel Order Customer PO No Material Qty Rq Dlv

SELECTION FOUND LIST

EE

E

543556610851

1000113146003299

47355

41899AB_12

1475147514751475

10181250

12/06/0015/06/0015/06/0020/06/00

Execute changeCUSTOMER

ORDERS

UPDATEREPORT

Multi-Store OrdersTo service key accounts with multiple outlets or stores usingthe best possible method, SAP AFS features a new order typeknown as the multi-store order. This method allows users toaccept orders for multiple locations but treat them as a singlelogistical component. Many stores transmit articles, deliveryquantities, and dates for many stores simultaneously. Ordermaintenance and allocation can be carried out either for eachindividual store or the whole group of stores together. Deliverycan be made directly to the stores or a customer distributioncenter. When delivery is made to a customer distribution cen-ter, articles can be labeled “mark for” onward delivery to a spe-cific store to facilitate easy cross-docking for the distributioncenter. The system proposes which stores delivery should bemade to on the basis of a predefined customer store hierarchy.A critical marker indicates stores with high delivery priority,due to store openings, fashion shows, or other reasons.

In stock shortage situations, the system can determine thequantities to be distributed to the individual stores by means of distribution rules. For instance, using equal distribution, thesystem assigns an equal quantity of pieces to all stores, whereaswith the first-in, first-out (FIFO) logic, the system takes thedelivery priority into account and may disregard stores with alow priority.

“Mark For” FeatureSAP AFS “mark for” information helps direct deliveries to par-ticular points within a customer organization. This feature isoften used when a large retail chain requests an order to beshipped to a distribution center and “marked for” a store ordepartment for cross-docking. “Mark for” information such asdepartment names and details can be automatically copiedinto the sales orders as a new partner function. Customer-runloading points information may also be copied from the cus-tomer master record.

Rush OrdersSAP AFS is equipped to handle rush orders if stock needs to beshipped immediately. Sales order entry, allocation, and deliverycreation are all carried out at the same time, so that the ordercan be given to picking without delay.

Assortments and PrepacksAssortments and prepacks can be defined using the SAP AFSbill of material (BOM) structure. Assortments are a group offinished goods, whose pricing and processing are done not as aunit, but at the level of the individual components. For exam-ple, an assortment could be a golfing outfit consisting of tengolf balls, a golf shirt, and golf pants. The assortment can con-sist of non-sized and sized products. Sizes for the finishedgoods, if needed, are specified per item in the assortment dur-ing the order-taking process. The system may adjust the quan-tities for each component of the assortments in case of stockshortage so that they are always based on complete combina-tions.

Prepacks are again logical combinations of finished goods;however the pricing and processing of prepacks are performedfor the unit and not on the basis of their individual compo-nents. Prepacks have a single size associated with them. Forinstance, a golfing outfit “medium” consists of ten golf balls,golf shirt (medium), and golf pants (waist 32, length 33).

If you want to combine colors and sizes of one article, such asshoes, in a particular quantity, you can use a quantity distribu-tion profile instead of using an assortment or prepack. Thisway, the system automatically inserts the respective quantitiesfor the grid values. Using a factor, you can also increase thesequantities accordingly. Once you have defined a quantity distri-bution profile, you can use it again for other products.

22

Other SAP AFS features in Sales Order Processing include thefollowing:• Threshold dates for order cancellation: Some apparel and

footwear customers carry over unfulfilled sales order require-ments into their next purchase order. In this case, a newcancellation date can be entered on a sales order to establishthe last date on which an order can be delivered. If thescheduled delivery date is later than the cancellation date,the order can be canceled using the mass document changefeature, or rejected from allocation.

• Item independence: SAP AFS enables you to treat each itemin a sales order as a separate order.

• Cross-divisional sales: Even different product families (forexample, divisions such as shoes, apparel, and accessories)can be handled within the same sales order.

• Customer service reason codes: Should customers decide tochange the terms of an order, customer sales representativescan enter a reason code. Time, user, change, and reason arethen recorded and always accessible.

SALES CAPABILITIES

Availability CheckingThe SAP AFS available-to-promise (ATP) check is an optionalfeature to determine whether or not the quantities and deliv-ery dates requested by a customer can be met. When an orderis entered, the check verifies whether sufficient stock is avail-able to fulfill the order. If the order cannot be shipped rightaway, the availability check determines in real time when suffi-cient stock will be available and proposes a delivery date for thefuture. The system can be configured to perform a check basedon physically available stock or against planned receipts.Replenishment lead times can also be taken into account.

To optimize procurement and production, ATP may only bechecked within the SKU-level horizon. Beyond this horizon amore global check is carried out at product/style level to see ifthere is enough time to specify exact size distribution in a laterstage of procurement.

The fill rate risplay enables order-taking staff to inform cus-tomers immediately of fill-rate options based on availabledelivery dates and quantities. By drawing the customer’s atten-tion to the order cancellation date if exceeded, staff can suggestthat orders be put back to achieve a better fill rate. A warningor error is displayed if an order no longer falls within a givenseason.

23

Figure 10: Example of Proposed User Fill-Rate Information

14751475

1475

Jan. 01Jan. 15

Jan. 30

5025

25

5075

25

014

30

150%175%

100%

33%50%

67%

Material ScheduledDeliveryDate

ScheduledQuantity

CumulativeOrderQuantity

Day afterRequiredDeliveryDate

Line %Complete

Order %Complete

This enables companies to make decisions during sales orderprocessing based on real-time information about potentialdelivery bottlenecks. It helps to complete business processes onschedule and, at the same time, promotes greater customer sat-isfaction.

With back order orocessing, SAP AFS also offers a report to list allsales orders that have only been partially delivered or not deliv-ered at all. Using the rescheduling tool, you may execute the ATPagain upon goods receipt and have the system adjust the deliv-ery dates.

Credit Limit CheckSAP AFS features a variety of flexible options for credit check-ing, such as credit rating data, planning level, open limit, andopen items. You can set credit limit checks at any point in thesales cycle between order receipt and actual shipping. A totallimit and/or limits for specific credit control areas may bedefined for a given customer. There are also customizableoptions for system response when credit limits have beenexceeded. SAP AFS also features an additional credit check atthe time of order allocation.

Price FlexibilitySAP AFS incorporates strengths such as pricing flexibility and apricing functionality specifically designed for the needs of theapparel and footwear industry: • 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 – by creating grid value

groups, which reduces the effort involved in maintainingpricing records

• Associated taxes by size where a material is priced by size(such as tax exemption for children’s shoes)

• Royalty agreements built into pricing

Special Operations SAP AFS allows items to be marked for special processing. Forexample, an article can be marked to indicate that a genericproduct such as a polo shirt or overalls is to be customized bythe addition of embroidery, badging, cresting, or striping, thusmaking it exclusive to that customer.

Value-Added ServicesMany retailers require services, usually done in the distributioncenter, which change or improve the appearance of their goodsbefore accepting delivery. Such services (such as packing, tick-eting, hanging, hemming, and so on) ensure that goods can beput on display immediately upon arrival. A new value-addedservice (VAS) database has been developed for SAP AFS, whichrecords these requirements and incorporates them for theparticular customer at the time of order entry or delivery.Alternatively, such requirements can be entered manually. Ifdesired, these services can influence the sales price accordingly.

Bulk Order ProcessingSAP AFS allows entry of a customer’s “promise-to-buy.” The source of the promise-to-buy may be an internal order-generating system, such as a vendor-managed inventory, whereit is not immediately necessary to know the ship-to points ordelivery quantities. At a future date, the customer sends actualorders and instructions with ship-to points and quantities.These quantities are offset against “promise to buy” quantities.It is therefore possible to compare the customer’s expectedtake-up with the actual take-up at any stage in the orderprocess.

ORDER SCHEDULING AND ALLOCATION

Order SchedulingOrder scheduling is an optional process in which order linesare automatically grouped or split into deliveries that suit thecustomer and manufacturer. This guarantees optimal deliv-eries and the highest of customer satisfaction. It takes specificcustomer and global business rules into account in order tocalculate 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 theaddition of new user and customer rules. A typical example of order scheduling is: all order lines that are scheduled to beshipped within a few days of each other are grouped on oneshipping date to make an efficient delivery.

24

Allocation of Customer OrdersTremendous improvements in customer service are achievedthrough the use of customer order allocation (allocation run).SAP AFS can be user-configured to sequence certain customerorders so that they are given preference when stock is allocat-ed. The orders are then only released for shipping when theorder meets customer or business rules on order fulfillmentand/or available credit. This way, you only make deliveries youknow the customer will accept and pay for and you can avoidpotentially costly charge backs. You can specify checks toensure the deliveries contain enough core sizes (“heart” sizes)and not just fringe sizes. In the case of stock shortage, you candecide how you allocate stock to orders. For example, by fillingorders up to their agreed minimum release quantities, you canincrease the number of acceptable deliveries, and thereforeincrease customer satisfaction.

Depending on your business requirements, you may give highpriorities to the orders of important customers and distributethe remaining stock equally among the other customers, ratherthan not being able to fulfill a sales order at all.

The system may check a customer’s credit limit upon alloca-tion and either exclude the customer from further allocationcompletely or exclude the sales order items that exceed thecredit limit.

With SAP AFS, your customer service department can concen-trate on managing the exceptions – for example, by callingcustomers and releasing agreed orders using the managementtool. Alternatively, the order exceptions can automaticallyenter subsequent allocation runs to accumulate more stock

25

Figure 11: Sales Order Process Flow

ARun FunctionsSAP AFSOptional Process

WMS Warehouse Management System(external system)

GI Goods Issue

OrderEntry InvoiceATP

CheckSaveOrder

AllocationRun

DeliveryCreation

DeliveryChanges/Post GI

AllocateRushOrder

ManagementTool WMS

OrderScheduling

AllocationPreview

Selection Grouping Sorting Allocation Release

Check Back-orders

until the release rules are met, or you can use the Manage-ment Tool to de-allocate the stock for allocation to otherorders. By setting the allocation run to reject or report ordersthat are close to or past the cancellation date, you furtherenhance delivery acceptance.

The allocation run can operate on your orders in simulationmode, and you can save the simulation results. Then, you canexamine the results to determine the optimum order alloca-tion settings (such as customer allocation priority), thus maxi-mizing customer satisfaction.

Allocation PreviewThe allocation run can also run in preview mode with futureplanned receipts instead of stock. Allocation preview deter-mines which orders can be delivered and when, should the

ATP (available to promise) situation change. It can also takeinto account which release rules and customer delivery priori-ties you would normally use in your allocation process. Forexample, the purchase order delivery date for sales orders takensix months in advance may change. The customer can beinformed of the shift in dates or the change in expected deliv-ery quantities. In preview mode, the results are saved in detailfor reporting. This means you can see from a complete orderperspective how purchase orders that are late or whose quan-tity has changed impact your orders. You can also see whichcustomer orders would therefore be late or have problems beingdelivered because, for example, their release rules cannot be met.

Concepts for fixed allocation against future goods receipts areunder review, and this functionality is to be included soon inthe SAP AFS Allocation Run.

26

CUSTOMERSALES ORDER #

Product

Price

Quality

Style/Color/Size

CUSTOMERPARAMETERS

Customer Type

Partial Shipment

Fill Percentage

Core Sizes

Order/Delivery Dates

ORDER RELEASEPRIORITY

Customer Order 5

Customer Order 3

Customer Order 2

Customer Order 1

Customer Order 4

PR

IOR

ITIZ

ATI

ON

Improved Customer Responsiveness

Order Release Planning

CUSTOMERDELIVERIES

Figure 12: Allocation Run Process Flow

Allocation against Quantity ContractsThe allocation run may also take quantity contracts signedwith customers into account. For allocated contracts, the sys-tem automatically assigns incoming goods receipts to opencontract release orders to ensure smooth and on-time delivery.The benefit of order allocation is that available stock is opti-mally distributed among customer orders. Customer ordersare fixed and released to the shipping department, whichdenotes the end of the order allocation process. You can runpreview, simulation, and allocation online or in the back-ground.

SHIPPING AND TRANSPORTATION

Delivery CreationSAP AFS provides flexible options for creating delivery notes(for example, by mode of transport, carrier, date, route, and soon). This is the first step to trigger the actual picking of thegoods.

Shipping CapabilitiesSAP AFS enhances shipping capabilities by integrating gridvalue settings, as well as introducing and transmitting value-added services (VAS) to a warehouse through standardizedinterface.

Shipping and TransportationShipping and transportation management in SAP AFS tightlyintegrates materials management and financial accounting.Consequently, up-to-date shipping information is always avail-able. The shipping module provides comprehensive supportfor foreign trade processing, deadline monitoring of shipmentsin process, and flexible delivery processing. Picking, packing,loading, and flexible shipping output are also supported.

27

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

“WILL A DELIVERY ON MONDAY BE SOON ENOUGH FOR YOU?”

FORECAST,DISTRIBUTIONPLANNING,PER MARKET

PRODUCTION,DETAILED SCHEDULING,PLANT LEVEL

BILLING CAPABILITIES

Billing FacilitiesSAP AFS provides best-of-breed billing and pricing capabilities.The material grid structure is reflected in the billing documentso that sizes and associated prices/taxes can also be displayed.

Other highlights of the billing capabilities include:• Automatic invoice creation using data from the sales order

and delivery notes to accelerate processing• A full set of billing services to process invoices, credit and

debit memos, and rebates• The ability to reference original invoice data in credit and

debit memos, which saves time and simplifies communica-tions

• The real-time integration of billing functions with financialaccounting to ensure fast and accurate accounting records

• Integrated credit card authorization and billing

Billing information is also transferred to profitability account-ing for immediate analysis.

SAP AFS LOGISTICS INFORMATION SYSTEM

Logistics Information SystemThe Logistics Information System is a flexible tool for collect-ing, compressing, and evaluating data (information) fromother applications. The central elements form self-definedinformation structures, which in turn can be filled with cus-tomer-specific data using various tools. The information sys-tems have been enhanced to allow analysis and reporting rightdown to size level. As a consequence, other areas of your com-pany can also access sales information at the required level. Forexample, production planning and control can break downplanning requirement data to a lower level, such as size.

Although the Internet has changed the way business is carriedout today, interpreting information and translating it intoaction remains critical to the success of a company. With mySAPTM Business Intelligence (mySAPTM BI), SAP offers inte-grated, fully Web-enabled capabilities for enterprise perform-ance management.

mySAP BUSINESS INTELLIGENCE FOR THE APPAREL

AND FOOTWEAR INDUSTRY

mySAP Business IntelligenceInterpreting information is critical to the success of companiesin the apparel and footwear industry. mySAP Business Intelli-gence (mySAP BI) combines data warehousing with compre-hensive analyses delivered through an enterprise portal. WithmySAP BI, you can measure the effectiveness of business opera-tions and take immediate corrective action when needed toensure continuous improvement.

mySAP BI enables apparel and footwear companies to accessthe vast supply of information available in the Internet econ-omy, and rapidly turn it into real knowledge on which to basedecisions and actions. SAP offers an innovative and sophisti-cated solution that helps apparel and footwear companiesimplement industry-leading measurement technologies.

mySAP BI offers apparel and footwear companies access to bothinternal and external information resources, including datafrom business partners. It also enables them to take advantageof leading industry-specific and cross-industry benchmarks,providing a framework for key performance metrics and opti-mizing operations. Analytical applications give you controlover supply chains, customer relationships, and other enter-prise activities. This lets you streamline operations, reducecosts, and promote a strong customer orientation. In fact,mySAP BI promotes a closed-loop approach to managing cor-porate information. It comprises the most comprehensive setof solutions to gather information, turn that information intoknowledge, and navigate the business successfully – anywhere,anytime.

Data WarehousingData warehousing delivers a common view of enterprise data,enables analysis and interpretation of integrated, consistentinformation, and empowers organizations to turn insight intoaction. The tools and technologies used for designing and man-aging a data warehouse enable the extraction, integration, and

28

transformation of data from multiple sources to support deci-sion-making processes in the enterprise. The data warehouseinfrastructure serves both as a collector and provider of dataand information (for instance, by populating data marts andthe Operational data store (ODS)). mySAP BI comes with a

pre-configured, extendable metadata repository to ensure inte-grated, consistent, and accurate data. It provides users with abetter understanding of the information they are analyzing,and enables the integration of different applications and toolswithin an enterprise.

29

Figure 14: Data Warehousing

XML ODBC

PSA ODSMaster Data

API

ENTERPRISE PORTAL

BUSINESS EXPLORER

Web Reporting and Publishing

Third-Party Tools

MultidimensionalAnalysis

ADMINISTRATOR WORKBENCH

SAP BW SERVER

MonitoringScheduling Administration

OLAP PROCESSOR

METADATA MANAGER DATA MANAGER

STAGING ENGINE

Metadata Repository

BAPI FILE XML

EXTRACTION, TRANSFORMATION, AND LOADING

Interfaces

Feeding Services Extraction Engine DB Connect ETL Tools

Data Source SAP Applications Non-SAP Applications

SAP BW File Data Provider

Reporting and AnalysisReporting and analysis provides decision-support tools such asquery, reporting, and multidimensional online analytical pro-cessing (OLAP) analyses for collaborative decision making.Users can access data on different levels (detailed or summa-rized), and share and analyze business information within theirWeb browser (PC or mobile). mySAP BI contains tools forquery design, Web application design, and data visualization.These tools allow users to create analytical applications, repre-sent data graphically, visualize relationships between businessinformation and spatial information (geographical analyses),and easily build comprehensive information cockpits that userscan access through an enterprise portal. mySAP BI includespredefined templates for OLAP queries, and formatted reportsenabling users to easily define new ones:• 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/themes• Supplier loyalty• Invoice verification• Inventory management (material movements, material

revaluation)• Stock statistics• Material consumption statistics• Target and actual comparisons: Production quantities,

delivery dates, scrap, and so on

Business Content mySAP BI is shipped with information models, and the entiredata flow in business content is pre-configured. The modelscontain predefined templates for reports and analyses withcorresponding technical definitions, such as extraction andtransformation rules or data models such as InfoCubes,queries, or Web applications.

30

Figure 15: Comprehensive Business Content

CUSTOMER-SPECIFICBUSINESS CONTENT

BEST PRACTICE MODELS

INDUSTRY-SPECIFIC BUSINESS CONTENT

(APPAREL AND FOOTWEAR-SPECIFIC CONTENT)

GENERAL BUSINESS CONTENT

Financial Accounting• Accounts receivable• Accounts payable• Special ledger• General ledger

Controlling• Profitability accounting• Cost accounting• Overhead cost controlling• Profit-center accounting

Logistics• Sales and distribution• Purchasing• Inventory management• Warehouse management• Manufacturing

Human Resources• Personnel management• Time management• Payroll

With mySAP BI's data warehousing component, SAP® BusinessInformation Warehouse (SAP BW 3.0B), SAP has, for the firsttime, delivered business content tailored to the needs andrequirements of the apparel and footwear industry. SAP BW3.0B includes extraction routines and information models thatcan transform data from materials management, sales and dis-tribution, production planning, and more into real informa-tion and knowledge. mySAP BI for the Apparel and Footwear

Industry delivers content enabling you to run analyses andreports right down to SKU level (dimensions and categories).Therefore, SAP AFS has introduced the concept of elementaryfields. Elementary fields contain information about materialcharacteristics such as color, size, or quality. These fields can bemapped with grid dimensions, category fields, and additionalmaterial master fields.

31

Figure 16: The Elementary Field Concept

SAP BUSINESS INFORMATION WAREHOUSE

MATERIAL SIZE COLOR QUALITY COUNTRY SALES VALUE

T-Shirt 4711 XL BLK 1st DE 10.00 USD

T-Shirt 4711 L Red 1st DE 15.00 USD

Shoes 0815 44 BLK 2nd US 25.00 USD

Coat 666 56 BLK DE 15.00 USD

. . . . . . . . . . . . . . . . . .

SAP R/3

MATERIAL SALES VALUE

T-Shirt 4711 10.00 USD

T-Shirt 4711 15.00 USD

Shoes 0815 25.00 USD

Coat 666 15.00 USD

. . .

GRID VALUE

XL BLK

L Red

BLK 44

56 BLK

. . .

CATEGORY

1st – DE

1st – DE

US – narrow

DE

. . . . . .

EXTRACTION

WHAT IS THE SALES VALUEOF ALL MATERIALSIN COLOR BLACK?

WHAT IS THE SALES VALUE OF ALLMATERIALS WE MANUFACTURED

IN GERMANY?

SAP delivers a best practice set of elementary fields: size, color,country, stock quality, and required quality. The range ofelementary fields can be easily extended to meet your specificrequirements. SAP AFS content includes the following objectsto gain information from other mySAP.com business applica-tions: • Data extraction: AFS extractors, AFS DataSources,

AFS transfer rules, and AFS InfoSources• Data storage and enrichment/movement: AFS update rules

and AFS InfoCubes

• Data retrieval and presentation: AFS queries, AFS work-books, and AFS Roles

The predefined data models can be extended very easily with-out modification. The apparel and footwear-specific contentenables you to implement an information system out-of-the-box. You can also very easily perform ad hoc querying by usingdrag-and-drop characteristics and key figures. Furthermore,you can integrate the business content into mySAPTM Enter-prise Portal for convenient user access anytime, anywhere.

32

Figure 17: Extraction of AFS-Specific Data into SAP BW

SAP BUSINESS INFORMATION WAREHOUSE

COLOR SIZE QUALITY COUNTRY

BLK 3132 1st EU

BLK 3132 1st EU

BLK 31 32 1st EU

BAPI

TRANSFER STRUCTURE

TRANSFER STRUCTURE

MAPPING

INFOCUBE INFOCUBE INFOCUBE

LIS

INFO-OBJECTS FORELEMENTARYFIELD

ELEMENTARYFIELDS

CHARACTER-ISTICS

DATASOURCE

BLK3132 1stEUCOMMUNICATION STRUCTURE SKUs

DATASOURCE

REPLICATION

Color Waist Length Quality Country

GRID VALUE CATEGORY

SAP AFS

OVERVIEW

Procurement CycleSAP AFS covers industry-specific raw material and componentprocurement processes, sourcing of finished products, inven-tory management, subcontracting, and invoice verification.The SAP AFS procurement cycle is illustrated in the diagrambelow.

The great advantage of procurement using SAP AFS is that allroutine jobs, from purchase requisition creation through pur-chase order generation, can take place automatically withoutany significant help from the purchasing department. Theyneed only intervene in exceptional cases.

Because purchasing, warehousing, accounting, and otherdepartments all have access to the same data, no additionaleffort is necessary for creating and processing purchase orders.You can generate all documents with reference to the dataavailable in the system. In this way, time and effort as well asdata entry errors are kept to a minimum.

The integration of style/color/size and category definitions tomeet the requirements of the apparel and footwear industryhas enhanced materials management processes and capabilities.

PURCHASE REQUISITION

The purchase requisition is a request to the purchasing depart-ment to procure a certain amount of materials or services by a particular date. Purchase requisitions are created manually bythe department making the request, or generated automati-cally by material requirements planning (MRP). The process-ing of purchase requisitions has been extended to includedimensions and categories. You can distribute the purchaserequisition quantity by percentage across dimensions. Thedistribution can be based on historical data or definable stan-dard distributions.

Using SAP AFS source allocation, you can find and assign themost suitable vendors for a requested material to the purchaserequisition. Once a supply source has been assigned, the pur-chase requisition can be marked for request for quotation(RFQ) processing.

SOURCE ALLOCATION

As a result of today’s trend towards globalization, the impor-tance of procurement has increased. A module for optimumvendor selection has been developed for SAP AFS. This is anoptimized tool you can use to evaluate the most effectivechannels for procurement. During a source allocation run,

33

SOURCING, INVENTORIES, AND SUPPLIER RELATIONS

Figure 18: SAP AFS Procurement Cycle

PROCUREMENT

Determination ofRequirements

Determine Sourceof Supply/

Source Allocation

VendorSelection

OrderProcessing

Purchase OrderMonitoring

GoodsReceipt

InvoiceVerification

Handling ofPayments

1

2

3

45

6

7

8

various suggestions for procurement are generated, proposingthe most suitable vendor. This can be either an internal pro-duction site or an external vendor. The source allocation setsfixed parameters to determine the ideal vendor, and facilitatesthe addition of company-specific parameters by the customer.The vendor determined is then assigned to the appropriatepurchase requisition.

Political Restrictions and QuotasPolitical restrictions on foreign trade play a special role in theapparel and footwear industry. During vendor selection, SAPAFS takes the import restrictions stipulated by the governmentor by your company’s policies into consideration. You canchoose to completely exclude certain countries and companiesfrom your possible vendors or regulate the delivery quantity ofcertain vendor countries by setting a quota arrangement. Ifyou restrict the import quantity of certain products or productgroups, vendors from the specified countries will no longer be

considered by the system if their delivery quantities surpassyour limit. In order that two production sites within one com-pany do not exhaust the quota at the same time, only a portionof the total quota for a particular product or product group isallocated to each site. The total quota and the portion con-sumed by the order are displayed in a list.

Vendor Capacity PlanningIn business practice, you may source the same product fromseveral vendors. You agree with each vendor on the quantitythat they are able to supply. Vendor capacities can be deter-mined in different ways, such as according to vendor andmaterial or material group. The capacity is defined as basiccapacity, overload capacity, and maximum capacity. If a vendorhas reached the maximum capacity for a particular material or material group, the user is informed accordingly. Thus theuser can optimize capacity distribution for internal and exter-nal production across all vendors.

34

Total Capacity 100,000 hoursOverload Capacity 10,000 hoursPer Period

VENDOR’STOTAL CAPACITY

ELEMENTARYFIELDS

LEVEL 0

LEVEL 1

LEVEL 2

LEVEL 3

VENDOR 1000

Tooling CapacityTooling Set A50,000 hours

Total CapacityTooling Set B80,000 hours

Model CapacityModel A

50,000 hours

Model CapacityModel B

20,000 hours

Material80 black

1 pair = 2 hours

Material70 white

1 pair = 5 hours

TOTAL CAPACITY• Overload Capacity• Consumed Capacity• Consumption

Overload Capacity

CAPACITYBY PRODUCT

Figure 19: Source Allocation Vendor Capacity

Further user-defined criteria for source allocation are:• Vendor rating: The user can specify and weight the main

criteria for evaluating a vendor. • Factory status: User-defined partner status for a vendor• Complexity factor: Evaluation criterion for the quality of

production that indicates how well the vendor is able to pro-duce a product with complex production phases.

• Amortization costs for tools: For equipment supported bythe company

• Smallest FOB (free on board): Costs excluding dispatch costs• Smallest landed costs: Costs including dispatch costs• Estimated time of arrival (ETA): Quickest possible delivery

REQUEST FOR QUOTATION (RFQ) AND QUOTATION

A request for quotation (RFQ) is sent to various vendors askingthem to submit a quotation. The quotation contains a vendor’sprices and conditions for the materials needed. Data from thequotations received is maintained with the respective requestfor quotation. The request for quotation and quotation aretherefore seen as one.

In addition, the request for quotation and quotation containinformation at dimension and category level. Quantities can be automatically distributed among dimensions and categories.Prices can be defined using the SAP condition technique atSKU level. Using a price comparison list, you can carry out aquotation comparison at the SKU level to establish the bestquotation.

PURCHASE ORDER

You can automatically generate purchase orders from the listof purchase requisitions to be processed by the buyer, and towhich a source of supply has been allocated. If the vendor for amaterial is already fixed, you can create the purchase ordersstraight away without first creating a purchase requisition.

Order quantity entry for various items in the purchase ordercan be created at dimension and category level. Distributionprofile features and rounding functions are also available in thepurchase order.

If certain dimensions of a material cannot be supplied or deliv-ered by a particular vendor, the system allows you to define a purchase grid with the valid dimensions for this material/vendor relationship. These are automatically taken into con-sideration in the purchase order.

MULTILEVEL CONTRACTS

It is quite common in the apparel and footwear industry todraw up long-term purchase agreements with external ven-dors, who deliver materials or supply services under certainconditions. SAP AFS can process these agreements without yethaving to define precise information at material or SKU level.Using these functions, the customer can issue a purchaseagreement for an undefined quantity for a future date. Withthe approach of the scheduled delivery date, the contract takeson a more concrete form as a new scheduling agreement tothe original contract. Additional information is determined,such as raw material color. Exact quantities and destination areconfirmed when the delivery date is established. By using thisfunction, your company has greater flexibility when planningthe purchase of materials and can react more quickly tochanges in the market.

35

INVENTORY MANAGEMENT

Inventory Management with SAP AFS offers you the following: • Management of on-hand stock based on quantity and value• Planning all stock movements• Inventory movement processing

In the inventory management system, the exact physical stockis always displayed using real-time processing for all cases inwhich stock has changed and the resulting inventory has beenupdated. Users can view the current stock situation of a mate-rial any time. Whenever there is a change to the stock, the datais immediately updated and made available to upstream anddownstream departments. Stock value is also updated when agoods movement is posted, and value updates are triggered in

other business applications, such as G/L accounting. Singleitems are generated for any account assignment objectsinvolved.

The amounts posted are created automatically by the systembased on data from the purchase order and material masterrecord. Consequently, when creating a goods movement youonly have to enter the quantity to be moved. During goodsmovement, documents are created that form the basis for thequantity and value updates and (at the same time) record themovement. All relevant features in inventory management(such as goods receipt to purchase order, reservations, goodsissue, transfer posting, and stock transfer) have been enhancedto show data at SKU level. The stock requirements list, allgoods movement documents, and the most important evalua-tions include information at SKU level.

36

Figure 20: Multilevel Contracts Logistic Background

December January April July October

PRODUCTION PLANNING VENDOR

ROUGHPLANNING

Target Quantity: 100,000 piecesMaterial Group: T-ShirtsMaterial AMaterial BValidity Period: July 1st – December 1st

LEVEL 1

Material AQuantity: 7,000 piecesValidity Period: July 1st –

September 1st

LEVEL 2

Material A-Size: 38 LQuantity: 1,500 piecesValidity Period: July 1st –

August 1st

LEVEL 3

DETAILEDPLANNING

MANUFACTURINGPROCUREMENT OFRAW MATERIAL

Validity Period ofLEVEL 3Contract

Validity Period ofLEVEL 2Contract

Validity Period ofLEVEL 1Contract

Release Order

CREATION DATE

InventoryWhen balancing stock accounts, a company must carry out a physical inventory count of warehouse stock at least onceevery fiscal year. Various procedures can be used. The SAP system supports the following inventory procedures:• Periodic inventory• Continuous inventory• Cycle counting• Inventory sampling procedure

It is possible to include freely available stock, stock in qualityinspection, and blocked stock. Inventory processing for ware-house stock and special stock is also supported.

SAP has extended the inventory sampling procedure; it cannow be carried out at the dimension and category levels. Infor-mation at SKU level is available in all relevant processes such asphysical inventory document creation, creation of paymentresults in the system, and posting results.

Stock Transfer and Transfer PostingIn addition to posting goods receipts and goods issues, SAP AFS enables you to enter internal goods movements at theSKU level by using transfer posting and stock transfers. • With transfer postings, you change the material number,

the stock type, or the batch of a material. In SAP AFS, youcan also transfer post the grid values and category values ofthe output material to other SKU values of the receivingmaterial.

• With stock transfers, you enter the physical goods move-ments between different production sites or company loca-tions.

The receiving production site makes a request for a productusing a stock transport order, whilst the issuing production siteposts a goods issue with reference to the stock transport order.You can create the goods issue as a goods movement in inven-tory management or using delivery note processing. The with-drawn quantity is recorded as stock in transit of the receivingproduction site.

37

Figure 21: Stock Transfer

UNRESTRICTED USE STOCK

ISSUING PLANT B

Goods IssueGoods Receipt

B

B B C

AUNRESTRICTED USE STOCK

B

B B C

A STOCK IN TRANSIT

RECEIVING PLANT AStock

TransportOrder

The receiving production site posts a goods receipt with refer-ence to the stock transport order. This reduces the stock intransit and the open purchase order quantity. It is also possibleto post the goods receipt in the receiving production site as onestep. At the same time, the issuing production site posts a goodsissue so there is a “no-stock-in-transit” situation.

Even if the respective production sites belong to differentcompany 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

Logistical invoice verification is part of materials management.At the end of the logistical chain after planning, purchasing,and inventory management, invoices must be checked foraccuracy as regards content, price, and calculation. When an invoice is posted, all data from the invoice is stored in thesystem and updated in materials management and otherapplications in real time.

Logistical invoice verification includes the following features:• 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 cancel-

lation or discount

The payment or evaluation of invoices is not part of invoiceverification. This information is forwarded to the financialdepartment. Invoice verification establishes the connectionbetween materials management and accounting (financialaccounting, asset accounting, and cost accounting), andincludes 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 has been enhanced in SAP AFS.To enable invoice verification to check invoices for content,price, and calculation accuracy, all information has beenenhanced to include dimension and category level. This infor-mation is now available, for example, at the time of invoicecreation.

SPECIAL BUSINESS PROCESSES

Special business processes characterize the apparel and footwearindustry. Such processes include outsourcing of production,in-house production in domestic or foreign plants, subcon-tracting, full-package sourcing, and purchasing of semifinishedand finished products.

SubcontractingMaterial procurement through subcontracting is processed inSAP AFS using subcontracting orders. The following functionsare available:• Order of material or service with a vendor• Provision of material components for production or embel-

lishment• Available-to-promise check for components to be provided• Material withdrawal from company’s own stock or delivery

by third-party vendor• Monitoring of subcontracting stock at SKU level• Creation of delivery notes for components to be provided• Post product as consumption using goods receipt posting

and handling of consumption deviations• Post finished product as goods receipt• Outsourcing certain operations of an in-house production

process. A subcontracting order is then generated includingthe provided components

38

39

Figure 22: Subcontracting Overview

Figure 23: Subcontracting Process Flow

PURCHASING INVENTORY MANAGEMENT INVOICE VERIFICATION

PURCHASING STORAGELOCATION

STORAGELOCATION

SUBCONTRACTINGVENDOR

SUBCONTRACTINGVENDOR PRODUCTION

SUBCONTRACTINGVENDOR

GOODS RECEIPTFOR FINISHED

MATERIAL

COMPONENTCONSUMPTION

PROVISION OFCOMPONENTS

TRANSPORT

Invoice andFinancial

Accounting

DeliveryPicking andPost Goods

Issue

AllocationRunProcurementSales Order

Post GoodsReceipt forPurchase

Order

InvoiceReceipt forPurchase

Order

Provision of

Components

MonitorStock ofMaterial

CreateSubcontract

Order

ATP

MRP

PURCHASE ORDER

SubcontractItem

Components

INVOICEVERIFI-CATION

INVOICEProduction

Costs

Stock of provided materials stored at the subcontractor site istreated as special stock of the respective vendor. This is becauseit is neither available nor does it exist in the total stock of theproduction site, although it is your company’s property.

Vendor CollaborationExternal vendors can be integrated into the purchasing processby Web Access, even if they do not have an ERP system. Con-firmation processes are defined and assigned to the purchaseorders. Vendors can access their purchase orders through theInternet and can enter the confirmation steps. When the con-firmation steps are saved, the information is transferred back to the purchase order in the backend system of the orderingparty. This ensures direct and prompt feedback from your ven-dors, and allows you to precisely plan further processing. Youcan use vendor collaboration to monitor subcontracting, rawmaterial procurement, and full-package sourcing.

Third-Party Order ProcessingAnother important business process in the apparel and foot-wear industry is third-party order processing, also known asdirect shipment. Here, your company does not carry out thedelivery of products to the customer. Rather, the goods arecommissioned to an external vendor, who sends them directlyto the customer and invoices you accordingly. You can choosehow to handle certain items. For example, if a large quantity ofa product you would normally deliver yourself is ordered, youcan decide to handle it as a third-party item. Furthermore youcan determine that certain products, such as accessories pro-cured from a private label manufacturer, are always handledthrough third-party order.

This process is supported throughout the system at the SKUlevel. This means that all relevant information is available atthe SKU level, from sales order creation to the automatic gen-eration of a purchase requisition and the conversion to a pur-chase order. In addition, the process is fully transparent in thepurchasing and sales departments, and in the planning depart-ment (MRP).

Procurement of Consignment MaterialConsignment material is a material that is stored at your pro-duction site but remains the property of the vendor. A bindingmaterial valuation using the predefined vendor price is notcarried out until the material is withdrawn or transferred toyour own stock. The price can be established at the SKU leveland unused material can be returned. The settlement state-ment is sent to the vendor, for example, each month, quarter,and so on.

All movements for consignment materials are firmly allocatedto consignment stock at the time of posting by setting thespecial stock indicator.

40

Figure 24: Vendor Collaboration

WAREHOUSE MANAGEMENT

For the timely and efficient processing of logistic requirements,companies are dependent on computerized organization andmanagement of their warehouses. Apparel and footwear com-panies in particular need to be able to manage highly complexwarehouse structures and a multiplicity of warehousing facili-ties.

For SAP AFS, standard warehouse management businessapplications have been enhanced by integrating style/color/sizedefinitions:• Material master maintenance: You can choose whether

the warehouse management view and relevant features aremaintained at the material or SKU level. This also includesgeneral data such as volume, gross weight, and capacity con-sumption.

• Put-away strategy/picking strategy: It is possible to deter-mine strategies at the SKU level (style/color/size/categories),by which the system establishes storage bins for stock to beput away or picked. With SAP AFS, you can make the bestuse of the available warehouse capacity and assign optimumstorage locations to the stock received. Similarly, SAP AFSallocates the optimum picking location to picked stock.

• Storage section determination: You can define in whichstorage section each material or SKU should be stored. Forexample, you might store common sizes in storage section 1,and less frequent sizes in storage section 2.

• General storage strategy: It is also possible to maintaingeneral storage strategies (bulk storage indicator, specialmovement indicator, and 2-step picking) at the SKU level.

• Palletization data: Palletization data is maintained at theSKU level. Various quantities and pallet types can be main-tained, depending on the SKU.

41

Figure 25: Procurement of Consignment Material

MASTER DATA

PROCUREMENT PROCESS

ConsignmentInfo Record

Company’s Own Stock

Vendor ConsignmentStock

• Available for MRP• Not valuated• Belongs to vendor

ProductionSite

ConsignmentStock Record

Warehouse

GoodsReceipt

GoodsIssue

Vendor

InvoicePurchase

OrderConsignment

Item

• Fixed space: Should a material be allocated to a fixed space,it is possible to assign various storage locations, quantities,control, and replenishment quantities.

• Selection screens: You can enter the SKU as a selectioncriterion to display just one grid value category per material,for example, or warehouse internal documents, dependingon the selection.

• Inventory count result: You can create count results rightdown to SKU level, irrespective of whether you are dealingwith a material which should be stored at that location orwas found there. The count result is created for each loca-tion at SKU level.

• Replenishment: With a transfer requirement, the produc-tion supply area in the warehouse is replenished based on areleased production order. The system creates the transferrequirement item at SKU level, based on the demands of theproduction order.

• Decentralized WM: In the ERP system, all partial processesare processed that are a preparation of the activities in thewarehouse. Inventory management, valuation, ATP, andcredit checks are processed in the ERP system, for example.In the Warehouse Management system (WM) all functionsare provided that serve the handling of warehouse processes.

• BAPIs: Communication between ERP and the WMS systemis processed through a BAPI. All BAPIs, as well as master dataIDocs, are enhanced with SKU Data.

• Radio Frequency (RF): Internal warehouse and combinedprocesses are covered by RF functions, which have beenenhanced with SKU Data. The necessary SAP Console alsodisplays all SKU information on a character-based RF device.

42

OVERVIEW

In mySAP.com, you can comprehensively plan your demandprogram (product type and quantity) and production. Pro-duction encompasses procurement, storage, and transport ofmaterials and intermediate products, and material require-ments planning (MRP) for all bill-of-material (BOM) levels.Production planning and control in SAP AFS has been designedfor the special needs of the apparel and footwear industry. Inparticular, demand management, material requirements plan-ning (MRP), planned orders and production orders include aproduct structure (style/color/size) and categories specific tothis industry sector.

The logistical cycle begins either with sales and operationsplanning (SOP) and forecasting, or with sales and productiondemand management. The sales department receives customerrequirements from the market and demand management fore-

casts sales. The resulting independent requirements (in partic-ular, requirements for finished products and trading goods)trigger material requirements planning. Order quantities anddelivery dates must be determined and the respective procure-ment activities must be launched to ensure requirement cover-age.

Ordering transactions or subcontracting are initiated for out-sourced products. Appropriate vendors must be selected oroutline agreements made. Quantities resulting from produc-tion or outsourced procurement are put on stock and admin-istered by inventory management.

The following diagram illustrates the logistical cycle betweensales and procurement. The system comprehensively plans,monitors, and coordinates all functions.

43

PRODUCTION AND MANUFACTURING

Figure 26: Materials Requirements Planning

External Internal

PLANT PRODUCTION

SITE

CUSTOMERREQUIREMENTS

Sales Order

FORECAST/PLANNEDREQUIREMENTS MRP

SALESORDER

PURCHASEORDER

PURCHASEREQUISITIONPURCHASE

REQUISITION

PURCHASEORDER

PRODUCTIONORDER

PRODUCTIONORDER

PLANNEDORDER/Secondary

Requirement

PLANNEDORDER/Secondary

Requirement

In addition, SAP AFS supports various procurement processesrelevant to the apparel and footwear industry such as privatelabel and make-to-order production (for example, custom-made products).

SALES AND OPERATIONS PLANNING (SOP)

Sales and operations planning (SOP) is a flexible forecastingand planning tool that determines not only sales and produc-tion targets, but targets from other areas throughout the logis-tical cycle. Forecasting and planning can be based on historicaldata, current data, and/or estimated future figures. Capacitiesand resources imperative for reaching these targets can also bedetermined using SOP.

SOP builds on information structures – a statistical file con-taining operational data. This can either be planned futuredata or actual historical data, containing characteristics, keyfigures and a time base. Information structures are used forevaluation, projection, and analysis of data in all logisticalinformation systems.

SOP is especially useful for long-term and mid-term planning.In the apparel and footwear industry, long-term and mid-termplanning are generally carried out at the product group andstyle levels. You can save the underlying statistical historicalonline in SAP BW as well as in the logistical information systemwith each logistical transaction (for example, sales order, pur-chase order, and production order).

44

Figure 27: Sales and Operations Planning

QU

AN

TITY

TIME

MAY

Sales plan

Production plan

Capacity estimate

JUNE JULY

SOP provides a method for:• Sales planning• Production planning• Feasibility estimates

DEMAND PLANNING WITH SAP® APO

mySAPTM Supply Chain Management (mySAPTM SCM) enablescompanies in the apparel and footwear industry to anticipateconsumer behavior (including the impact of promotions) andforecast demand more accurately. mySAP SCM combines dis-tribution and transportation capabilities to support demand-driven replenishment for maximum profitability. Retailers andcarriers can be seamlessly integrated into the supply chainprocesses.

The SAP® Advanced Planner and Optimizer (SAP® APO) is oneof the key functional areas of mySAP SCM. SAP APO enablessupply chain partners to forecast and plan demand while con-sidering historical buying and selling behavior, market intelli-gence, and sales objectives. The demand is optimally matchedto supply so as to maximize the return on assets with consider-ation of operational constraints. SAP APO updates and syn-chronizes plans based on the dynamic exchange of informationand allows you to derive total supply chain production require-ments and make results available to all members of a supplychain.

With SAP AFS 3.0B you can execute demand planning in SAPAPO and then transfer the demand plan as planned indepen-dent requirements to demand management. Demand plan-ning can thus be executed in two different ways:• At the material level without additional dimension values

(style/color/size).• At the material dimension level (style/color/size)

When the demand plan is transferred to demand management,the planned independent requirements are created. In the eventthat not all of the dimensions were considered in the first plan-ning phase, the pre-sizing profile is then used to distribute theplanned independent requirements among all the materialcharacteristics.

PRODUCTION DEMAND MANAGEMENT

Production demand management determines requirementquantities and delivery dates for finished products. Demandmanagement uses planned independent requirements andcustomer requirements, which are created in order processing,to create a demand program.

The input from SOP can be copied to the planned independentrequirements as default data. It is possible to break this datadown to the level of style/color/size (pre-sizing).

Pre-sizingSAP AFS pre-sizing distributes aggregate planned independentrequirements to detailed planned figures at the SKU level usingdistribution profiles. Distribution to a more detailed periodsplit is also possible, from annually planned figures to weeklyplanned figures, for example. Furthermore, seasonal influencescan be taken into account in the distribution profiles, forexample, so that an annual planning value can be distributedto periods throughout the year. Planning values would then beincreased for certain seasons (for example, back-to-school, Christmas, and so on).

45

You can calculate distribution profiles from statistical histori-cal values stored in the logistical information system.SAP AFS pre-sizing includes:• Manual determination of percentage distribution values per

size or period.• Calculation of percentage distribution values based on

historical data from the logistical information system.• Calculation of distribution profiles for new products with

no historical data based on the historical data of referenceproducts.

• Aggregation and disaggregation of historical data that can beused to calculate distribution curves (for example, historicaldata per product group, per season, per a combination of anumber of seasons, or for individually selected referenceproducts).

• Simulation option based on user-defined criteria.

MATERIALS REQUIREMENTS PLANNING (MRP)

Bill of Materials (BOM)Bills of materials (BOMs) and routings contain important datato ensure integrated materials management and productioncontrol. Pattern making, grading, and pattern engineeringform the production structure of a new product waiting to beproduced. The result is a number of sketches, a list of all nec-essary components and their size-specific consumption, andtechnical and product costing conversion – the BOM androuting.

The BOM has been enhanced so that all size-specific depen-dencies on material consumption, selection of certain compo-nents, and cost accounting are included in one BOM. You canalso maintain dependencies for other product characteristics inthe BOM (such as color, shade, quality, customer-specific

46

Figure 28: SAP AFS Bill of Materials

BLK WHT RED .

GRID B

44 46 48 50

GRID C

JACKET(SAP AFS Material)

BLUREDGRN

6 8 10 12 14

GRID A

BLKWHTRED

ZIPPER(SAP AFS Material)

BUTTON(Standard Material)

FABRIC(SAP AFS Material)

MRP

MRP

extras, and so on). It is possible to set up different locations forprocurement of components, which are selected depending onthe time interval for which the locations are defined.

Often, you must make changes to a large portion of the prod-uct range due to alterations in style or seasonal characteristics.You can easily achieve this in SAP AFS by using the masschange and referencing functions.

RoutingA routing describes the operations (process steps) as well as thedetails about the work centers and production resources andtools required for producing a material. You can thus specifyin the routing how various product characteristics affect leadtimes and each production operation. Routings are selectedbased on the different characteristics for lead-time schedulingand production order processing and then taken into accountduring lead-time scheduling and capacity planning.

Material Requirements Planning The main task of material requirements planning is to ensurematerial availability (for example, to procure the necessarymaterial requirements on schedule for sales and manufactur-ing). This task includes monitoring stock and, in particular,making suggestions for procurement, purchasing, and produc-tion.

MRP is triggered by independent requirements from sales anddemand management forecasting (such as requirements forfinished products and trading goods). MRP determines orderquantities and delivery dates and the respective procurementdocuments created to ensure coverage (planned orders forinternally produced goods, and purchase requisitions for out-sourced production). Both documents are planned internallyand can be changed, rescheduled, or deleted at any time.

In addition, secondary requirements, the quantity of materialcomponents (for example, leather, fabric, or lining) or assem-blies (for example, shoe sole or bootleg) are determined forinternally produced goods using BOM explosion. Secondaryrequirements are necessary for the production of the finishedproduct or assembly. Planned orders and purchase requisitionsare created at each BOM level if there is a material shortage.

Once MRP has completed quantity planning and scheduling,the planned documents are converted into fixed procurementdocuments (planned order to production order, purchaserequisition to purchase order).

Lot-sizing procedures and planning parameters are available toensure an optimized calculation of the entire order quantityand each individual grid value in the order. Lot-sizing pro-cedures enable planning results that show only certain sizegroups in one order, or that a particular relationship betweensize quantities are calculated for each order. It is also possible to distribute order quantities across the different sizes auto-matically using predefined distribution profiles. The mostcommon lot-sizing procedures are available, but it is also possi-ble to integrate individually customized ones.

By using planning parameters for the SKU level, you candefine, for example, minimum order quantities, roundingvalues, and safety stock for each size or size group.

The MRP enables you to plan in one time frame at size levelfor future periods and all requirements beyond that timeframe at article level. This ensures that planning only occurs at the necessary level of detail.

47

Products labeled as ”AFS-specific” are processed by SAP AFSMRP (such as products with more logistically relevant charac-teristics that might include size, color, shade, and quality).

Automatic Planning RunThe automatic planning run in MRP determines materialshortage and generates the respective procurement document.The system informs you of critical areas and exceptions, allow-ing you to modify planning results accordingly.

Evaluation of Planning ResultsPlanning results can be reviewed and evaluated by a series ofdifferent methods (for example, stock requirements list, MRPlist, planning results per MRP controller, product group, orderreport, and so on). Evaluation capabilities allow your MRPcontroller to process planning results from an aggregated levelto the most detailed SKU level, with the help of diverse selec-tion criteria. SAP AFS points to critical areas without delay. Allrelevant features are accessible through one single, user-friend-ly, and easy-to-handle window, the AFS MRP Cockpit.

CAPACITY PLANNING

Economic resource planning is present in various areas of acompany. Capacity planning with SAP AFS supports all phasesof planning: long-term estimated planning, mid-term plan-ning, and short-term detailed planning. Capacity planningcomprises three components:• Capacity analysis: Available capacities and capacity require-

ments are determined and illustrated in lists and graphics.• Capacity leveling: Optimum reservation of capacity and

selection of appropriate resources. Planning boards in graph-ic and table form are available to illustrate the capacity situa-tion and process capacity leveling.

• Capacity planning: Capacity loading for AFS-specific prod-ucts is based on routings that are selected according to theabove-mentioned criteria. The influence of different productcharacteristics in the individual production operations andlead times can be established in the routing for AFS-specificproducts. Routings for lead-time scheduling and productionorder processing are selected according to these criteria.

48

Parallel ProcessingThe total planning run time is improved considerably by usingparallel processing. It can run either on different servers or indifferent server modes to further speed up processing.

CurrentDate

30 Days

SKU LEVEL MATERIAL LEVEL

SIZE-LEVEL HORIZON BEYOND SIZE-LEVEL HORIZON

MRP PLANSREQUIREMENTS AT

SKU LEVEL

MRP GROUPSREQUIREMENTSTOGETHER AT

MATERIAL LEVEL

Figure 29: SKU Level Horizon in SAP AFS MRP

DB Changes

DB SERVER

Material 01

SERVER 01

Material 02

SERVER 02

Material 03

SERVER 03

MRPDISPATCHER

Figure 30: Paralell Processing

PlanningFile Entry

PRODUCTION ORDER

Production orders determine which product or assembly is pro-duced, as well as the work center, activity, delivery date, andproduction costs. The production order also includes details ofthe resources (personnel, materials, production resources andtools, and so on) required to calculate the order cost.

You can use the production order to monitor the order statusfor goods produced in-house. The order includes scheduling,capacity planning, and status management. The order processreport has been enhanced by adding the operations. Thisprocess enables you to monitor the individual production stepswithin one single report. Cost accounting is carried out in thesame way for each production order.

When a production order is created, the following actions arecarried out:• Routing selection: Routing operations and sequence are

transferred to the production order.• BOM explosion: BOM items are transferred to the pro-

duction order.• Reservations: Reservations are generated for BOM items

in stock.• Planned costs are established for the production order.• Capacity requirements are generated for the work centers.• Purchase requisitions are generated for non-stock compo-

nents and externally processed operations.

Apparel and Footwear Specifics in the Production ProcessThe specific characteristics of the production process in theapparel and footwear industry have prompted SAP to makefurther developments for this step in the supply chain. Forexample, production in bundles is typical in the apparel indus-try. In the footwear industry, shoes can be grouped accordingto size, for instance, and shipped in large cartons. All specificinformation contained in BOMs and routings reappears in the production order. It is also possible to assign componentbatches to a production order to control different shadings ordye lots.

Production orders in the apparel and footwear industry usuallyconsist of several logistical subdivisions:• Total quantity of the product to be produced• Different sizes (SKUs) with varying quantities• Grouping together of products in smaller logical production

lots, such as bundles

Central transactions such as confirmations, monitoring pro-duction status, and goods receipt can also be processed forindividual bundles/cartons, individual sizes, or a combinationof the two.

In addition, you can integrate markers into the productionorder and planned order. The production order sizes resultingfrom a marker and the quantities derived from the fabric plyheight form the rates for sizes and quantities received fromMRP. If necessary, planned quantities in the order are adaptedaccordingly.

49

Figure 31: Markers – Quantity Adjustment

28 30 32 34

SAP AFS PLANNEDORDER

WaistInseam283032

50 50

5030 50

EXTERNALMARKER LIBRARY

Marker 1: 32 x 30 5032 x 32 5034 x 32 50

Marker 2: 30 x 30 5028 x 32 50

TOTAL: 230 PIECES TOTAL: 250 PRIECES

BLU BLK

An available-to-promise check (ATP check) for productionorders displays all competing requirements for a particularcomponent. It enables your MRP controller to decide in stockshortage situations, for instance, whether a certain componentneeded for several production orders can be consumed byanother time-critical production order.

Combined OrdersIn the apparel and footwear industry, production orders areoften combined, especially in production phases such as cut-ting and pattern engineering. This might be the case, for exam-ple, when the same fabric is used for different products. Bycombining several production orders, cutting and use of fabricare rationalized. However, settlement, costs, and logistics ofeach production order remain separate for each finishedproduct.

In SAP AFS, several production orders can be logically groupedin a combined order. Transactions such as roll selection, con-firmations, goods receipt, and goods issue can either be processedtogether for the combined orders, or separately for each indi-vidual production order.

Selection of suitable rolls of fabric and leather for a productionorder based on criteria, such as shade and leather quality, playsan important role in production for the apparel and footwearindustry. SAP AFS uses roll-selection features where theoptimum choice of material input for a production order (forexample, fabric or leather) is selected. You can freely definecriteria by which the system sorts and selects data to efficientlyallocate a quantity of input material for a production order orcombined order.

50

Figure 32: Combined Orders

COMBINED ORDERNUMBER 38

10023 10024

Cutting

Embroidery

Sewing

Quality Check

Sewing

Quality Check

Productionorder10023

Routing 1

Productionorder10023

Routing 1

Productionorder10023

Routing 1

Productionorder10024

Routing 2

OVERVIEW

Special structures are available in SAP AFS to illustrate prod-ucts or materials and their industry-specific characteristics.These special structures, known as grid values, dimensions,and categories, facilitate the processing of logistical businessprocesses at the levels below the material master. At the sametime, these structures influence product controlling in SAPR/3 and mySAP.com. Additional industry-specific capabilitiesare available in the areas of product and material valuation,product cost planning, cost object controlling, and profitabili-ty analysis to accommodate the characteristic levels listedabove. Nearly all other mySAP.com accounting componentsare supported at the SKU level (financial accounting, overheadcosts controlling, and so on).

SPLIT VALUATION WITH AFS MATERIALS

Split ValuationStock keeping units (grid values and categories) of a materialor product generally do not have the same purchase price orproduction cost. Procurement costs, raw material expenditure,and production costs can vary tremendously, making flexiblematerial valuation of stock keeping units essential.

Valuation of SKUsSAP AFS takes valuation differences at product characteristiclevel into account by managing SKUs separately. You canassign a separate valuation price to each stock keeping unit,which can either be a standard price or a moving average price.

51

PRODUCT CONTROLLING

Figure 33: Product Controlling

PRODUCTCOST

PLANNING

VALUATION

DIMENSIONS

COST OBJECTCONTROLLING

PROFITABILITYANALYSIS

CATEGORIES

1 2 3

Figure 34: Split Valuation of SAP AFS materials

GRID VALUE:30/30

CATEGORY:BLUE/

STONEWASHED

GRID VALUE:32/32

CATEGORY:BLUE/

STONEWASHED

GRID VALUE:33/33

CATEGORY:BLUE/

STONEWASHED

Material:Plant:

Jeans

0001

Quality

Grouping with Valuation TypesAs costs for sizes, colors, or categories of a material do notalways significantly differ, and to avoid numerous single valua-tions impairing performance unnecessarily, SAP AFS can com-bine separate grid and category material characteristics in whatis known as a valuation type. By using valuation types thecommon valuation of any number of stock keeping units for aparticular material is simplified.

PRODUCT COSTING FOR AFS PRODUCTS

Product CostingIn the apparel and footwear industry, material usage and pro-duction processes generally depend on information such assizes, colors, and so on to be produced. Consequently, manu-facturing costs of the produced SKU can differ enormously.With SAP AFS, it is possible to calculate the manufacturingcosts of a product at the level of the produced SKU.

Costing of Valuation TypesThe stock valuation of products to be calculated is performedin the same manner as for raw materials or trading goods (byusing split valuation for stock keeping units). You can createseparate costings for valuation types of a product and use these

for stock valuation and product cost controlling. The systemcarries out valuation type costings based on one determinablepreference SKU for each valuation type.

Product Characteristic-Dependent Quantity StructureThe basis of product costing is the respective quantity struc-ture (bill of material and routing). A product’s quantity struc-ture can be defined according to grid and category. Productcosting in SAP AFS examines this grid or category-dependentdetermination. In the costing of a particular SKU, the systemexplodes the bill of material according to the grid values/cate-gories to be calculated, and determines the relevant routingtogether with its operations.

Cost ElementsThe most important costing elements of a product are mate-rial and production costs. The system determines a product’smaterial costs based on the prices and quantities of the com-ponents used. At the same time, the system looks at grid- orcategory-dependent component prices and quantities over theentire cost roll up (and all production steps). Production costsare planned based on the respective routing and the operationsdefined therein. In addition, material and production costs canbe debited with an overhead rate.

Special Production ScenariosWhen determining the quantity structure, product costingconsiders production scenarios typical to the apparel andfootwear industry, such as cross-plant production or subcon-tracting of materials. In the case of subcontracting, the systemautomatically determines the relevant costing informationfrom the purchasing info record of the subcontractor.

In the case of externally procured materials, you can createraw material costings with a respective cost component split.You can refer to the conditions of the purchasing info record,for example. In this way, delivery costs such as freight or cus-toms can be included in the material valuation.

52

Figure 35: Costing of Valuation Types

Plant:Material:

Grid Pref. SKU Val. Typ

AFS VALUATION VIEW

0001

Jeans

30/3030/3132/3132/32

SmallSmallLargeLarge

•

34/32 Large•

COSTINGSMALL

$10

COSTINGLARGE$12

COST OBJECT CONTROLLING

Cost object controlling within mySAP.com facilitates the con-trolling of planned costs and actual costs with reference to costobjects. Depending on the production scenario, the systemuses various objects for the collective cost.

Make-to-Stock ProductionThe production order is at the center of product controllingduring make-to-stock production. Cost object controlling forproduction orders allows the target costs to be analyzed andcompared with the actual costs of a production order. Costobject controlling in the system takes the entire controlling

Variance DeterminationFollowing final delivery of an order, you can separately deter-mine and settle the resulting costing variances (planned, tar-get, actual) according to variance categories (scrap variance,input variance, lot size variance, and so on).

Customer Make-to-Order ProductionIn general, the sales order is the relevant controlling documentin make-to-order production processes. Therefore, all salesorder costs are collected across the entire production spectrum,and updated in the controlling object Sales Order for evalu-ation.

53

Figure 36: Production Order Processing

GOODS ISSUE

Production Order

TARGET COSTING

GOODS RECEIPT

SETTLEMENT

CONFIRMED OPERATIONS

VALUATION AT DIMENSION OR CATEGORY LEVEL

P + L

process into consideration as well as target and actual charac-teristic-dependent material valuations and manufacturingcosts.

The target costs are the planned costs of the finished productbased on the lot size in the production order. However, the pro-duct costing planned costs are different – they are based on a(planned) costing lot size.

The actual costs arise from the actual consumption ofresources by the production order – for example, componentwithdrawal 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, the cost object controlling results in a productionorder as in make-to-stock production.

PROFITABILITY ANALYSIS FOR AFS PRODUCTS

Profitability analysis in mySAP.com enables you to evaluatemarket segments or strategic business units with respect toyour company’s profit or contribution margin. The market seg-ments are classified according to products, customers, orders, orany combination of these, whereas the business units includecompany codes, business areas, or profit centers.

Production Order

The main goal is to provide the areas of sales, marketing, prod-uct management, and corporate planning with information tosupport internal accounting and decision making.

Apparel and Footwear Specific CharacteristicsMaster data or basic structures can be freely defined for prof-itability analysis. You determine the analysis objects (character-istics) and the analysis value fields for your profitability analy-sis. The system creates a multidimensional analysis object fromthe combination of characteristics, from which an analysis can be planned and identified by the comparison of costs andrevenues.

In addition to the characteristics region, customer, and so on, youcan also integrate a series of other industry-specific informa-tion. In this way, you can establish the profit that is issued withcertain seasonal products. You can also ascertain how a partic-ular grid value or grid-value group contributed to or affected this profit.

Profitability Analysis at Product Characteristic LevelSAP AFS supports the value flows by creating revenues andsales deductions from sales orders or billing documents withtheir sales conditions. You can perform the costing valuationusing the respective product/SKU plan costing or with the help of defined conditions.

SAP AFS takes valuations and conditions at SKU level into con-sideration with regard to both the revenue and costs.

54

CHARACTERISTICS

Sales Region NorthProduct Prod1Product Group SnowboardCustomer Cust1Customer Group Wholesale

Season Wi2001Valuation Type LCategory FDGrid Value 164

SAP AFS

VALUE FIELDS

Revenue 980Sales Deduction 100Planned Freight Costs 150Cost of Sales 550

PROFITABILITYSEGMENT

RevenueSales DeductionCost of Goods Sold

Seaso

n

Valuation Type

Grid

Val

ue

RevenueSales DeductionCost of Goods Sold

Figure 37: Profitability Analysis for SAP AFS Products

55

A network of highly qualified experts has been set up through-out the world to provide an excellent standard of support forSAP AFS customers and partners. Our experts are on hand toassist with implementation problems and provide ongoing sup-port.

Together with SAP partners, SAP Apparel and Footwear Con-sulting offers best-in-class experience and knowledge to ensurethat all issues will be considered and integrated into a feasibleimplementation strategy. We will help you realize a significantincrease on investment returns for your implementation proj-ect by reviewing critical decision requirements, determininghigh-risk elements in the program, and defining an implemen-tation approach to maximize return and minimize risk.

SAP AFS Consulting encompasses training and support, pre-sales events, detailed workshops, spot consulting and remotesupport, feasibility studies, and QA reviews.

SAP AFS QUALITY ASSURANCE PROGRAM

The SAP Apparel and Footwear Quality Assurance Programhas been established to ensure a smooth and successful imple-mentation project for our SAP AFS customers. It consists ofseveral reviews before and throughout the project as well asservices after go live. Over the last few years, we have receivedvery positive feedback from our SAP AFS customers and pros-pects about the QA program, which confirms that it is an inte-gral part of a successful implementation. The SAP AFS QualityAssurance Program comprises the following: • Evaluation prior to signing the contract that verifies whether

SAP AFS is a good fit for the prospect's business require-ments.

• Project start-up check after kickoff to review the projectcharter and business scope.

• Business blueprint review upon completion of the blueprint phase to examine the customer’s intendedimplementation of the business processes in the system.

• Solution review prior to going live to verify the detail designsand possibly the system configuration.

CUSTOMER SERVICE AND SUPPORT

56

SAP has been helping its customers create value since 1972 –profitability, return on investment, productivity, time-to-mar-ket, and customer satisfaction. And having fully embraced theInternet with mySAP.com, SAP is in a unique position to forgeahead of its competitors and take today's economy by the horns.Not only will SAP provide the solutions its customers need toincrease their revenue and reduce costs but SAP will also – inour role as “trusted advisor” – identify new business opportu-nities, specifically those suited to the needs and demands of thewide world of e-business. This is due to the fact that the corevalues personified by SAP – productivity, customer satisfaction,and bottom-line results – are once again the top priorities forbusinesses worldwide.

The SAP AFS strategic direction is mySAP.com. The mySAP.come-business platform is a family of solutions and services thatempowers customers, partners, and employees to collaboratesuccessfully anywhere, anytime. The latest release of SAP AFSalready offers the first mySAP.com scenarios (including SAPBusiness Information Warehouse, collaboration with vendorsand contract manufacturers, Demand Planning with SAP APO,mySAP CRM Interaction Center, and so on).

Following this strategic direction, SAP AFS ensures the smoothtransition to the mySAP.com e-business platform for all its cus-tomers. This approach guarantees investment security and willhelp our customers to choose the right mySAP.com solutionand the right time to upgrade.

SAP continues to provide new or enhanced industry-specificfeatures and functions to meet the specific business needs of itscustomers. SAP AFS and mySAPTM Retail, the e-business solu-tion from SAP tailored to meet the requirements of the retailindustry, cover the entire fashion supply chain – from sup-pliers and manufacturers to wholesalers and retailers to theconsumer. The first integrated scenarios connecting SAPApparel and Footwear and mySAP Retail are available and willbe enhanced in the future to combine both solutions inmySAP.com.

The apparel and footwear-specific combination of themySAP.com solutions will put SAP customers on the com-petitive edge, enabling collaboration across the entire fashionsupply chain – from sheep to shop.

FUTURE FOCUS

57

A

ARun Allocation runATP Available-to-promise

B

BAPI Business Application Programming InterfaceBOM Bill of material

A complete, structured list of the componentsthat make up a product or assembly. The listcontains the object number of each component,the quantity, and unit of measure. The compo-nents are known as BOM items. You can createthe following BOM categories in the SAP System.Material BOM, Document structure, EquipmentBOM, Functional Location BOM, and Sales OrderBOM

Bundle Apparel industry term for all pattern pieces in amarker that will be sewn together to form a gar-ment in a certain size, multiplied by the numberof fabric plies in a stack. The information onbundles is maintained in the planned orders andproduction orders.

C

CAD A data processing system for computer-aideddesign and drawing.

Category Characteristic of an AFS product that allows adivision into different qualities or countries oforigin, for example.

CO Product ControllingCompany The smallest organizational unit of financialCode accounting for which a complete self-contained

set of accounts can be drawn up for purposes ofexternal reporting. This includes recording of allrelevant transactions and generating all support-ing documents required for financial statements.

D

Delivery A delivery program is defined by one of theProgram following combinations: Season; Season – Collec-

tion; Season – Collection – Theme. You specifydates so that the delivery program is deliveredduring a certain period.

Dimensions Product characteristics usually referred to in theapparel and footwear industry as style/color/size.A freely definable element of an AFS grid. AnAFS grid is composed of up to three dimensions.Dimensions are, for example, length, color, size,or width. Each dimension is composed of dimen-sion values that are all valid entries for a particu-lar dimension.

E

EAN International Article NumberEDI Electronic data exchangeETA Estimated time of arrival

F

FOB Free on board

G

Grid Important element of the AFS basic data thatmaps the characteristic values of an AFS materialin grid values and permits combinations consist-ing of up to three dimensions (for example color,size, length). The use of master, purchase, andsales grids facilitate the valuation, procurement,and sale of AFS materials at SKU level.

GLOSSARY

58

H

Heart Grid Description for the grid values of a materialValue 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 heartgrid values.

I

InfoCube A central object on which reports and analyses inSAP BW are based. An InfoCube describes a self-contained data set (from the reporting view), forexample, for a business-oriented area.

InfoSource An InfoSource describes a quantity of all availabledata for a business event, or type of businessevent (for example, Cost Center Accounting). AnInfoSource is a quantity of information that hasbeen grouped together and can be said to belongtogether logically from a business point of view.InfoSources can either contain transaction dataor master data (attributes, texts, and hierarchies).

L

LIS Logistics Information System

M

Marker The optimal placement of pattern pieces toachieve the best fabric utilization for the cuttingprocess. Unique markers are defined by the nameand repetition of the size or dimension they con-tain. They can be plotted on paper or stored in afile that is used to drive a numerically controlledcutter. SAP AFS uses marker data to:– Adjust quantities in a planned or production

order– Identify unique bundle numbers

Material Product/ArticleMM Materials ManagementMRP Material requirements planningmySAP.com SAP’s e-business platform.

A family of solutions and services that empoweremployees, customers, and business partners tocollaborate successfully – anywhere, anytime.

O

ODS Operational Data StoreObject used to store consolidated and cleaned-uptransaction data at document level (basic level).An ODS object describes a consolidated data setcomprising one or more InfoSources.

OLAP Online analytical processingAnalytical, multidimensional reporting based onmultidimensional data sources. OLAP reportingallows several dimensions to be analyzed simulta-neously (such as time, place, product, and so on).The aim of OLAP reporting is to analyze key fig-ures, such as for an analysis of the sales figuresfor a certain product in a particular time period.

59

P

Plant A place where materials are produced, or goodsand services are provided.

PP Production planning

R

RFQ Request for quotation A request from a purchasing organization to avendor (external supplier) to submit a quotationfor the supply of materials or the performance ofservices.

S

Seasons/ In the apparel and footwear industry, severalCollections/ materials that share certain traits such as colorThemes or texture can be combined to form a theme.

Themes can be part of a collection, which inturn can belong to a season. The combination of the theme, collection, and season forms adelivery program. You can define dates for thedelivery period for this delivery program.

SD Sales and DistributionSKU Stock keeping unit

The most detailed schedule line of an AFS prod-uct with its grid value (for example 38/yellow)and category values (for example quality A/country of origin D).

SKU Period in which the AFS MRP carries out plan-Level ning at SKU level. Requirements outside of theHorizon SKU horizon are planned only at material level.

Planning at material level and at SKU level in theSKU horizon is carried out separately. Thatmeans that requirements at material level cannotbe satisfied by procurement at SKU level.

SOP Sales and Operations Planning

U

UPC Universal Product Code

V

VAS Value-added-services. Services that improve the appearance, attractive-ness and processing of a product, for example,packing, ticketing and special service.

W

WM Warehouse Management

50 058 600 (02/11/13) Printed on environmentally friendly paper.

SAP AGNeurottstraße 1669190 WalldorfGermanyT +49/18 05 /34 34 24*F +49/18 05 /34 34 20** Subject to charge

www.sap.com