Analyzing the Daimler sap system

1.0 Introduction about the cooperation The Daimler AG is a Germany automotive manufacturing company which belongs to the world 100 fortune company.

Daimler AG focuses on higher-priced cars — it is the world's No. 2 luxury carmaker. The total revenue for the cooperation is 151.6 billion and the total employees are around 271 thousand.

Daimler AG (formerly DaimlerChrysler) was founded in 1883 and it is a German manufacturer of automobiles, motor vehicles, and engines, which dates back more than a century.

Daimler AG has 14 brands which include Mercedes-Benz, smart, Mercedes-AMG, Maybach, Freightliner, Mitsubishi Fuso, Western Star, Detroit Diesel, Setra, Orion, and Thomas Built Buses. In addition, Daimler Financial Services is active in the fields of financing, leasing, insurance, and fleet management. The company distributes its products and services in almost every country of the world. With production locations on five continents and with some 7,300 sales outlets worldwide, the company is never far from its customers. Daimler sold 2.1 million vehicles in 2008.

2.0 Why Choose SAP The Daimler AG is a giant cooperation which has nearly 500 acres of facilities and warehouses in its main plant. As the result, countless parts are moved from warehouses to facilities where they are processed, resulting a constant shift in inventory levels.

Before Daimler AG introduces the SAP RFID (radio frequency identification) technology, it uses the manual kanban process to control the inventory levels. And it has proven to be effective over many years. But this method really makes it difficult for the production and logistics to determine the current inventory levels.

Today, the automotive industry is undergoing sweeping changes, in this competitive environment, the cooperation needs to react faster, more flexible and specifically to the customer demands. And in order to achieve these, to know the current inventory levels are a key factor to accomplish it. And all these pressures make the Daimler AG tries to introduce the SAP system.

With the help of the SAP system, they are able to post the movement of different materials in a automate mode and once the inventory levels falls below the required level, the SAP system will inform the supplier and order the replenishments at the first sense.

The SAP services organization also customize the software which is best suitable for the cooperation to run well, and they are doing the pilot project to ensure that the specific SAP can adapt to the RFID technology in the Daimler AG. Another reason that the Daimler AG applies the SAP is that they are scalable, future-proof standard software, because of the target support of SAP system, every cooperation can believe that the SAP is a long term software and it really provide the functions for the need of the cooperation.

In addition, the SAP has the ability to help Daimler AG to map different auto-ID-based business process and also the high potential for integration of the SAP system.

3.0 Investments & Challenges to go for SAP way Because of the Daimler AG was reluctant to present more details on the cost of introducing the SAP RFID technology so I can only do an estimation based on the information I found. The estimated cost for a fortune 500 like the Daimler AG, the cost which included the hardware, software and consulting can be around $100 million to $500 million. So it will take Daimler AG quite a long time to return the investment.

In order to go the SAP RFID technology way, the Daimler AG needs to totally change their current system which is called manual kanban process. In the new system, the technique of kanban system still exists, but they are using the RFID technology to replace the kanban card. As the result of using the manual kanban system for many years, the staffs and employees will feel difficult and need quite a long time to adapt to the new system and all these will reduce the efficiency at the beginning.

Also the links between the warehouses and facilities also need to be adjusted and the adjusting time can be depend on how the project being performed for replacing the manual kanban process. The supply chain management will require some changes and to make all these smooth can’t be done in a short time, and some problems will occur at the starting phase.

In addition, Daimler AG is the first automotive manufacture that is trying to combine the kanban with RFID technology with the help of SAP. Because of lacking of experience the risks for the project is increasing and nobody can ensure that this will be a success. If the project fails, the whole manufacturing system will be affected and the profitability will decrease based on that situation.

All these make the implementing the SAP way not that simple as this is a pilot project and Daimler AG is the first one to try it out.

4.0 Problems during SAP implementation The Problem in implementing the new SAP way is to make the kanban process automatically and able to record the current inventory levels at different warehouses.

Daimler AG solves the problem by introducing the SAP Auto-ID infrastructure to cope with the RFID technology. In the RFID technology, RFID gates are being set up to detect signals of the RFID tag, and an RFID tag is placed on the back of each kanban card, which is in turn attached to a container. The tags are read each time they pass through the gate between the supermarket and the assembly area. The data is transferred through the SAP Auto-ID infrastructure offering to the back-end software. These are the details of how Daimler AG solving this problem when it implements the new SAP way.

The way they solve the recording the current inventory levels is to apply the close RFID kanban cycle and using the SAP to automatically update the information. By doing so, calling up the information about the items at different locations will not be a problem anymore.

5.0 SAP implementation The diagram below is not exactly the Daimler AG’s sap implementation components, it is diagram which I take from one of the logistics company and I think the SAP components will be similar to Daimler AG except some points below.

Firstly, hardware the Daimler AG use is Sun and the operating system is Sun Solaris.

Secondly, the parts of other MIT systems will not be similar to the Daimler AG which I choose to analyze.

6.0 The Benefits by Using the SAP Firstly, SAP RFID minimizes the number of time consuming inventories in the supermarket and assembly line. Daimler AG achieves these by combining the kanban process with the RFID technology and with the help of SAP make the system become automotive, so informing the third party supplier to replenishment when the inventory is low becomes much faster and saves the time.

Secondly, it also improves quality through tracking as the errors making in the manual kanban process can be eliminated. By using the automotive system the errors which are made by the employees can be highly reduced so the quality of tracking can be improved respectively.

Thirdly, it maps inventory in the system to reflect the organizational and physical reality. Because of updating the information at the first sense, the inventories levels at the current time can be mastered more accurately.

Lastly, it reduces time required to perform identification and eliminates process weaknesses.

7.0 Recommendation for Future Improvement 7.1 Introducing the e-logistics From the case of the company of Daimler, they only feedback to the third party or supplier when the inventory level is below the minimum level they required.

And there is still a big chance to make errors if the supplier or third party can not update the real time information about the company’s current inventory.

Maybe the company doesn’t want the supplier knows about the inventory level, but we still need to consider that is it possible for the supplier to supply a large amount of components without giving them a period of time to prepare.

Is it possible to apply the e-logistics in the RFID system to make the flow of the information much better? By applying the e-logistics which consists of three parts namely, e-Flows, e-Product and e-Money. By building the e-logistics into the Daimler AG’s SAP RFID system can improve the real-time and proactive end to end process control.

By using the e-logistics it can create the virtual information exchanges which will make the flow of both sides more efficient and shorten the waiting time and queuing time between each other. And the RFID system is very suitable to work under the e-environment, so it will be much better to combine some e-components with RFID and not just with the SAP software.

7.2 Combing the RFID with Barcode systems As the RFID system has a limitation which is like it will be more likely prone to physical/electrical damages due to the environmental conditions, so is it possible to do some redundant procedures to make sure that the system still can function well if the whole RFID tags are damaged.

Is the SAP system can do something if the RFID suddenly stop working. Is there any way that the SAP system can cooperate with several scanning methods and still recording the inventory level and make sure the real time activities are still performing like under the normal condition.

And for the whole system to work better; is it possible to introduce the ASRS system which I think can be combined with both the RFID and barcode system as the parts can be scanned by using the automated storage and retrieval systems by the special sensor and scanner.

And by doing so, the worker among the logistics function can be reduced and the errors that may occur will be reduced to minimum.

7.3 The Decision phase of the SAP From the Daimler AG’s report, I discover that the SAP RFID system is not available to record the exact position when the materials goes into the warehouse, so it will spend a lot of time to searching different materials due to the automotive industry used the repetitive focused strategy. And for this industry, the material flow is very complicated, and knowing the exact positions for the materials is very important to improve the efficiency.

Another problem is that we don’t know whether we should use the pull or push strategy from the current software application. Is it possible for SAP to analyze something from the inventory level, the customer demands, and try to make a balance between the pull and push situation.

8.0 Conclusion This SAP mini assignment really helps me to know the wide use of SAP, how does this software benefit to the company and how does the SAP cooperate with other systems like the RFID to make the work more efficient.

In addition, from the research, we understand better about the components of the SAP implementation, what kind of components of SAP we should introduce to the company to achieve the maximum utilization of the software. We get more information about the advantages and disadvantages about the SAP. I think in the further life, I would appreciate more and will discover more about the SAP software and its applications.

9.0 Reference http://www.sla.org.sg/images_upload/Newsletter%20May-Jun%2006.pdf http://www.tutorialsweb.com/rfid/introduction-to-radio-frequency-identification.htm http://web.mit.edu/itag/eag-0.1/SAP.pdf http://www.sap.com/industries/automotive/index.epx