SAP Sapphire Dispatch 9: SAP Tackles Supply Risk (Part 1)

I had a heated but jovial email exchange with someone a few weeks back debating whether or not SAP had any capabilities in the area of supply risk. I took the side that they do not. It turns out that I was partially wrong and partially right. At Sapphire, I had the chance to demo a BI-based application, leveraging the Business Objects platform. It's a rather remarkable toolset considering that SAP rapidly prototyped and brought it to market in less than 90 days. Even though they do not yet have any references -- a point that is critical to me to declare that they in fact have a commercially viable solution -- it's an admirable first effort. Still, I would not yet call it a complete supply risk management solution. Rather I would say SAP has taken the first few steps they need to in order to address the broader issue of supply risk.

When you first approach the application, it looks and feels like Business Objects. The current version I saw had two key fields for evaluating supply risk: financial viability and operational/supplier performance. To SAP's credit, they're not just basing the capabilities of the toolset on data that resides within an organization. Even in its current initial state, SAP can include third party risk / credit information to highlight supplier financial viability. This third-party content is not yet dynamically updated (like D&B DNBi) but customers could set it to update on a periodic basis (e.g., monthly).

Where the application I saw really shines is in its ability to not just identify risk based on triggers (e.g., PPM rate increases, escapes, financial signs) but to begin looking at the impact of particular issues as they arise -- and to begin to model basic scenarios such as assessing inventory levels and analyzing margin/profitability impact of potential disruptions and/or supplier quality issues. SAP does not yet offer an optimizer-based scenario planning capability to evaluate supply alternatives based on user-defined constraints to see the full impact based on potential disruptions, mitigation steps and ultimate outcomes, but it's clear they want to move in this direction.

Stay tuned for my second post in this series when I compare the approach SAP has taken to supply risk compared with others in the market.

Jason Busch

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