Monday, January 3, 2022

Getting Value and Results (4) out of an ERP System Part 4 (of 5): SAP Value Stream Mapping


Part 4 of the series addresses our ERP value stream mapping techniques. With it we go beyond traditional value stream mapping, in that we combine the material and information flows with specific settings we have to configure in the ERP system so that it can support the flow we intend to obtain. Since we often implement or optimize SAP ERP systems, I’d like to demonstrate SAP value stream mapping here.

Value stream mapping, also known as "material- and information-flow mapping", is a lean-management method for analyzing the current state and designing a future state for the series of events that take a product or service from the beginning of the specific process, until it reaches the customer. A value stream map is a visual tool, that displays all critical steps in a specific process, and easily quantifies the time and volume taken at each stage. Value stream maps show the flow of both materials and information, as they progress through the process. The difference between a value stream and a value chain, is that a value stream focuses only on areas of a firm, that add value to a product or service, whereas a value chain refers to all the activities within a company.

SAP value stream mapping follows the same principles and conventions that traditional value stream mapping does. Additionally, it adds SAP specific data and settings. On an SAP value stream map you can document lot sizing procedures and MRP type from the material master, work center category and capacity related information from work centers, identify production versions and routings to be used, define operation data from the routing with its cycle times, and much, much more. A finished SAP value stream map can serve as a complete documentation for a system architect, to set up all the functions, features and customizing settings, in order to run the value stream repetitively and effectively with SAP.

Additionally, to traditional value stream mapping, SAP value stream mapping adds pragmatism to the design process and allows for the immediate realization of the theoretical design.

First you design the inventory points. These also serve as de-coupling points as we will see later. An inventory point is defined in SAP as a material master record. Without a material master record, you cannot post a goods receipt of material into stock, and therefore, without a material master in SAP, there is no inventory in SAP. A stock or inventory point in a value stream map, is identified with a triangle and a capital I in it. Here we add two boxes with data to the triangle, to maintain SAP specific inventory and master data.

But inventory points must not be traditional stock alone. It can also be a supermarket, as used in lean projects. If the flow is set up as a self-organizing system, as in the case of Kanban or conwip, then we need a supermarket, from which an order can pull. Notice the icon for supermarket is a different one than the traditional stock point. However, the boxes below are the same. Except that here, you may maintain control cycle data additionally to the material master data.

Then we’ll design the material flow along work centers or machines. Notice that the flow happens between two inventory points. Eventually this flow will be described by a routing and then used in a production order. From upstream, the left side of the flow, raw materials or semi-finished product is issued and consumed to the order, and the downstream inventory point will receive the finished product from the order. Along the routing there are work centers and the activities, or operations which are executed on those work centers.

The work center box contains a description of the work center, and the work center’s SAP identification code. The blue box underneath the identification code contains performance data of the work center. Then there are the work center specific data settings like the work center category, standard value key, and the scheduling formulas, amongst other things, in the grey box. Lastly, you can identify what type of capacity may be used on that specific work center. Is it a labor capacity? A machine capacity? Or both. The capacity itself then, is also described by the respective data box.

Finally, we can also add the information flow to the map. All the planning, scheduling and monitoring activities are defined there.

These SAP value stream maps can become quite elaborate and detailed and therefore require a lot of effort to put together. We typically plot them on big posters, hang them up on the wall in the war room and go through various iterations as a team. The results are very rewarding in the long run, as you can readily pinpoint inefficiencies and device some strategies to improve all in one place.

Like mentioned before, if you put the work and focus into developing the SAP VSM, you’ll be compensated with a complete system documentation and a very solid basis for continuous improvements.

Getting Value and Results out of an ERP 1

Getting Value and Results out of an ERP 2

Getting Value and Results out of an ERP 3

Getting Value and Results out of an ERP 5

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