Part-2: How the Pharma Industry can optimize distribution performance with SAP EWM

By: Krypt Team - August 2nd, 2019

Authored by: Vijendra Kargudri & Rahul Muthyala

Last week, in the Part-1 of the two-part blog entitled on ‘How the pharma industry can optimize distribution performance with SAP EWM’, we explored the evolution of the pharma industry and the need to optimize distribution performance. In this Part-2 of the two-part blog, we shall dive deep into the ways the pharma industry can optimize distribution performance with SAP EWM.

Optimizing distribution performance of goods in stock

Before getting into the details lets see how SAP Solution helps map various pharma industry processes across the supply chain as depicted in Figure 1 and the typical warehouse process flow as depicted in Figure 2 below:

Following are the methods employed to optimize distribution performance in a warehouse:

Stock removal and allocation

For any business to be sustainable while being effective to meet the demands of the global market, it is essential to forecast the demands and optimize the performance of goods in stock. Unlike other industries, pharma industry products are essential & lifesaving, which necessitates optimization of stock accountability and the product shelf life. Based upon the company standards, the stock needs to be in and out of the warehouse either by FIFO (First In First Out) or LIFO (Last in First Out). FIFO method is picked for most businesses, while LIFO is preferred when the oldest items are held in stock and newer items are added later. One can use the stock removal strategy, where specific products are removed with preference from specific storage types/storage type groups. You can also regulate the sorting of stocks during stock removal. There are certain rules for stock removal known as “Stock Removal Rule”, which are stored in the storage type search sequence, and fixed for all storage types. If no rule is stored here, the system then takes the rule from the determined storage types.

As depicted in Figure 4, SAP EWM also provides a method called “Two-step Picking”. This process is used to carry out the warehouse task efficiently. For example, if we have “N” number of orders and the stock needs to be picked, then the operator can collect the total stock needed for the orders from the warehouse inventory and then split them up based upon the delivery received for the individual orders. This process can considerably increase the performance of delivery. SAP TM also needs to be considered for better optimization. Say the delivery, which needs to be delivered last, needs to be the first loaded in the Transportation Unit (TU) and vice-versa. Since the shorter routes are preferred while the determination of route for TU, the other factors also need to be accounted and analyzed as well, like the barricade’s in the route, delay due to regular ongoing traffic, etc. If such traffic can be avoided, then the best possible route available is selected for the movement of TU. In Pharma Industry there are stocks, where some of the product need to be in cold storages, while the other in normal storages. Determination of TU for the specific delivery order must consider the above criteria as well.

Batch Management in Warehouse

In EWM we have another concept called the ‘Batch Management’. Batch Management is used to track individual item in a supply chain at a batch level. It is functionality within SAP EWM and a part of the logistics area. Wherever individual batch traceability is required, batch management is used. This can be due to the differentiated quality or due to variable manufacturing output. For Pharmaceutical supply chains often employ batch functionality in their software, as to various process industries. Batch Determination is a criterion, where it can be used to search for specific batches that apply to such things as posting goods issue, or for combining suitable materials for production orders. With the configuration of SAP batch management, SD can see if the current or planning stock batches match the customer order, if not the production of the batch specification for the customer can be scheduled for production or ordered from a vendor. SAP EWM is fully integrated with batch management, wherein the batch number is a key field of all inventory records for batch-managed materials. Batches are recorded during all inventory transactions such as receiving, put-away, picking, goods issue and physical inventory. Batch determination is incorporated into EWM, which allows optimal selection of products during picking for outbound orders or replenishment as per the warehouse logic. Batches can either be passed from SAP ERP via inbound delivery or captured directly in EWM, offering you the maximum flexibility in your receiving process. during the batch creation, attributes such as country of origin, expiration date, shelf life expiration date, and production date can also be assigned to the batch master. When an Inbound delivery is created in the EWM system automatically batches are created. We can use the Customizing activity to configure batch management and the shelf life expiration date check, for each document category. Depending on the document category and the process behind it, the system decides which additional fields are ready for input. We can also configure batch management in the delivery based upon the status. if we want to create or change the batch in EWM. if there is a change or create in a batch in EWM then the system will call the ERP system Synchronously, Thereby the stocks are the same in both EWM and ERP system.

SAP Auto-ID Infrastructure (SAP AII) using RFID

As depicted in Figure 6, nowadays Warehouses use RFID, where the operator scans the ID using an RF device. An ID is an alphanumeric or binary code representing a unique physical object to be processed by SAP Auto-ID Infrastructure (SAP All). The SAP solution for using RFID with an enterprise solution or SAP ERP is called SAP Auto-ID (SAP AII). It is a middleware system that receives data from an RFID data capture source, which is usually an RFID reader, and then integrates the data from the RFID tag directly into the enterprise application. SAP Auto-ID is comprised of two main components.

Core Services – this includes the flexible definitions and ruleset environment.
Integration Services – Auto-ID interacts with three types of environments; the backend systems via SAP XI, the RFID devices, and the web user interface for control and user maintenance.

The ID is represented with one of several ID types; for example, the EPC code EPC_1.30.

The Electronic Product Code (EPC) is the most widespread form of ID in the RFID area. It is a schema with which physical objects are uniquely determined using an RFID tag. The basic structure of the EPC coding on an RFID tag consists of a bit string (binary representation) with a header followed by a series of numeric fields. Their entire length, structure, and position are determined by the header value. You can define your own IDs in a binary form or in a natural language, and you can define your own coding and decoding schemas for them.

EPCs can be used easily on RFID tags. When calling the RFID tag, the EPC data can be linked with other dynamic data such as the place of origin or date of manufacture. The ID type defines the structure of an ID as well as the length and position of your components. The coding type refers to the ID construction schema within an ID type. For example, there are the following coding types for the ID type EPC 1.30:

SGTIN-96
SSCC-96
SGLN-96

There are corresponding standard implementations for these three coding types in EWM.

When an RFID reader activates a tag, the information is captured and sent to the device controller. From there, the information is sent to the SAP Auto-ID system through Extensible Markup Language (XML) or Product Markup Language (PML). The SAP Auto-ID core services then verify the captured data against the defined rule definitions and will then pass the information to the SAP XI system via XML. SAP XI then converts the XML data into an IDOC which is received in SAP ERP.

SAP XI must translate the two formats so that the messages can be passed without error between SAP ERP and the execution system. A mapping process is undertaken to map the data from XML to the data required in the IDOC. When the IDOC is received by SAP ERP the data from the IDOC is verified and processed. For example, if the data from a tag is captured for a goods receipt then the information contained in the IDOC will be processed so that a goods receipt is generated automatically based on the rules defined in SAP Auto-ID.

SAP Auto-ID offers two user interfaces: a mobile user interface, which is used on handhelds and PDA’s, and a desktop user interface which allows users to enter the SAP AII settings. The standard SAP AII system contains a set of predefined rules and associated activities. Users can modify the rules or add new rules via the user interface.

SAP EWM can deliver an end-to-end solution for the highest requirements of warehouse automation to holistically map & address its functional scope and control complexity.

How can Krypt help?

As a preferred SAP Partner, Krypt has partnered in the success of global businesses by helping them implement SAP EWM. Any global pharma business into trading and a part of a large supply chain can benefit from Krypt’s products/services.

If you wish to know more about our products/services, please request a DEMO or do contact us.