Warehouse Management Transformation: From Audit to SAP EWM Implementation

LeverX, in collaboration with SAP, executed a warehouse management transformation project for a leading global fishing tackle manufacturer. A comprehensive warehouse audit was a key stage in this transformation, the result of which was the subsequent implementation of a suitable solution and optimization delivering up to $3.5 million in Net Present Value over 5 years.

Client

Our client is a leading global company in the fishing tackle and consumer fishing products industry. The company aims to expand its market share geographically and demographically, and to monetize digital technologies to enhance consumer engagement. With its own manufacturing facilities, distribution networks, and customer base, the company required continuous operational improvement through cost optimization and process enhancements.

Challenge

A comprehensive audit of the client's warehouse operations revealed a number of significant challenges that directly impacted efficiency, costs, and customer satisfaction:

• Insufficient Intelligence in Current WMS: The audit showed that the existing in-house Warehouse Management System had limited functionality, including a lack of adequate task prioritization and route optimization. The absence of job order sequencing in picking routes and effective put-away and retrieval strategies was noted.
• Manual Processes and Low Productivity: During the audit, inadequate coordination for case and piece picking order consolidation at the staging area was observed, requiring supervisor intervention for order completion. The case pick per day metric excluded idle times, resulting in the omission of non-value-added time. It was found that pickers were expected to possess knowledge of product locations and characteristics, and receiving processes remained manual and paper-based.
• Disjointed Production and Warehouse: The audit revealed that the manufacturing site's fully automated finished goods production until dispatch, based on barcode and sensor technology, was not replicated in the warehouse, which relied on QR barcodes and manual processes, creating a gap in end-to-end automation.
• Ineffective Yard and Returns Management: It was discovered that the redelivery process was handled in the warehouse, with goods placed in a separate redelivery zone and then shipped out to the same customers the next day. Yard operations were not optimally planned or controlled.
• High IT Risks and Costs: The audit confirmed that the absence of a unified, consolidated WMS led to IT landscape complexity, high integration and support costs, and limited standardization opportunities.

Methodology: In-depth Audit and Solution Development

LeverX, in collaboration with SAP, applied a comprehensive approach to analysis and transformation of the client's warehouse operations, starting with a detailed audit.

• Phase 1: Comprehensive Audit and Analysis: A thorough analysis of the client's current warehouse operations was conducted. This phase involved:
  
  • Assessment of Current State (AS-IS Analysis):
    
    • Identification of Key Challenges:
      Detailed identification and documentation of critical issues across various aspects of warehouse operations. This included:
      
      • WMS management inefficiencies (insufficient intelligence, lack of task prioritization, sub-optimal route optimization, absence of job order sequencing, ineffective put-away and retrieval strategies).
      • Shop floor productivity bottlenecks (inadequate coordination for order consolidation, exclusion of idle times in metrics, reliance on manual product location knowledge).
      • Gaps in end-to-end supply chain integration (disconnect between automated manufacturing and manual warehouse processes, inefficient redelivery processes).
      • Sub-optimal yard logistics and management (lack of planned or controlled yard activities).
      • High IT risks and costs due to fragmented WMS landscape
  • Process Performance and Maturity Analysis: Evaluation of the client's current process maturity level and comparison against industry best practices.
• Phase 2: SAP Value Proposition Formation: Based on the needs identified during the audit, SAP developed a proposal aimed at optimizing, simplifying, and standardizing the supply chain through automation of receiving, picking, packing, and inventory tracking processes. The proposal included the implementation of a standardized digital solution with elements of AI and warehouse robotics.
• Phase 3: Solution Capability Detailing: Details on SAP Extended Warehouse Management (EWM) and SAP Yard Logistics (YL) as key components were presented. Their capabilities for inventory optimization, inbound/outbound flow management, batch management, cross-docking, temperature monitoring, labor management, and integration with manufacturing were described.
• Phase 4: Impact Scenario Development: LeverX conducted an additional on-site assessment at the Plano facility, confirming and detailing specific improvements identified during the audit, and developing detailed business impact scenarios. Specific measures proposed included automated pallet packing for Amazon, improved capacity planning, automation of PSA staging confirmation, and optimization of parcel delivery and inventory replenishment.
• Phase 5: Benefit Quantification and Economic Justification: Together with SAP, LeverX performed a detailed quantification of potential benefits, using benchmarks and client data. Expected annual recurring benefits and working capital improvements were calculated. A detailed financial model, including NPV, ROI, and payback period, was prepared.

Solution

The proposed solution involves the implementation of SAP EWM and SAP YL. This is a unified warehousing platform that provides innovation, flexibility, and scalability for the client, along with AI and warehouse robotics capabilities.

Key aspects of the SAP EWM/YL solution:

• Unified Warehouse Management Platform
  Creation of a single platform for all warehouse operations, including warehouse optimization, automation, labor management, cross-docking, and value-added services.
• Inventory Optimization
  SAP EWM provides real-time visibility into inventory levels, minimizing safety stock and ensuring just-in-time material availability. This is critically important for perishable goods and adherence to expiration dates.
• Advanced Inbound and Outbound Processing
  The solution optimizes goods receiving, quality control, put-away, picking, packing, and shipping processes with high accuracy and speed. It includes automation of pallet packing for Amazon and receiving using RF devices.
• Batch Management and Traceability
  Support for batch management to ensure traceability, which is crucial for compliance with industry regulations and effective product recall management.
• Intelligent Workflow Optimization:
  • Slotting and Pick Route Optimization
    Implementation of a slotting strategy with pick route optimization to enhance labor efficiency and reduce order fulfillment lead times.
  • Labor Management
    Functionality to optimize workforce utilization, track employee performance, and assign tasks based on skills and availability.
• Yard and Dock Management
  Optimal planning, execution, and monitoring of yard operations, including vehicle movements and efficient allocation of yard resources. Automation of dock appointment scheduling.
• Integration and Automation
  Seamless integration with SAP manufacturing modules and external MES systems, as well as support for automated warehouse technologies such as conveyor belts, AGVs, and robotics. This includes integration of batch information into SAP GBT and full integration of logistics processes.
• Real-time Visibility and Improved Reporting
  Ensuring superior warehouse and inventory operations performance with real-time reporting and high visibility into shipments and inventory.

Technology Stack

The solution is based on a comprehensive set of SAP solutions, ensuring deep integration and transformation of the client's logistics operations:

• SAP EWM
  The primary system for managing all warehouse operations, including optimization, automation, and labor management.
• SAP YL
  The solution for optimizing yard operations, providing visibility and control over vehicle movements and yard resources.
• SAP S/4HANA
  The central ERP system, ensuring seamless integration with EWM and other SAP modules (transportation planning, quality management, sales, and procurement).
• AI and Robotics
  Implementation of AI and warehouse robotics technologies for further automation and increased efficiency.
• Integrations
  Use of APIs for connecting with external systems and PLCs for material flow control. Support for SAP's new cloud-only operating model.

Results

The implementation of SAP EWM and SAP YL, based on the results of the conducted audit, fundamentally changed the client's operational efficiency, bringing significant quantitative and qualitative benefits that exceeded expectations.

Other Measurable Improvements and Economic Indicators

• 25% improvement in inventory days.
• 20% increase in warehouse labor productivity.
• 5% reduction in total logistics cost.
• Up to $3.5M NPV over 5 years with a 15-month payback period.

Overall Economic Impact:

The 5-year NPV is $3.5 million, with a payback period of 15 months and an ROI of 187%.