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SCM Expert - Decentralized WMS Serves 24x7 Requirements

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SCM, Warehouse Management

Decentralized WMS Serves 24x7 Requirements

by Ashish Saxena, Managing Consultant, IBM Global Business Services May 15, 2008
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A Quick Guide to Successfully Migrating Data as Part

of an Acquisition or SAP Upgrade
Avoid Stockouts by Integrating SAP APO DP and SAP
CRM Trade Promotion Management
Use Shelf-Life Planning to Lower Stockouts For
Inventory With Expiration Dates

Identify the differences between centralized SAP Warehouse Management (SAP WM) and
decentralized WM. Examine key considerations for implementing a decentralized warehouse
management system for your company.

Key Concept
Traditionally, users implement SAP Warehouse Management (SAP WM) as part of SAP R/3 Release 4.5
and higher. The decentralized Warehouse Management system (decentralized WMS) provides the
option to implement SAP WM as a standalone system integrated with either an SAP ERP system or a
non-SAP ERP system.
As complex supply chains evolve, supply chain processes are becoming more integrated. Warehouse
operations are an essential part of this integrated supply chain. Companies aim to increase efficiency and
responsiveness. As a result, it is not uncommon to see 24x7 operations that require a reliable warehouse
management system available at all times.
Although SAP Warehouse Management (SAP WM) has supported operational requirements for several
years, you have another option. As of R/3 4.5, you can run SAP WM as an independent system, referred
to as decentralized Warehouse Management (decentralized WMS). Decentralized WMS can accommodate
these needs through faster processing, 24x7 operations, and compatibility with different ERP systems.
So, what does it mean to be an independent system? A separate server hosts decentralized WMS, unlike
traditional centralized SAP WM, which runs on the same server as the ERP system. The decentralized
WMS executes warehouse processes independently from ERP processes. These two systems have very
distinct roles ERP is the planning system and decentralized WMS is the execution system. The ERP
system carries out functions such as material planning, inventory management, and sales and purchase
orders processing, while the decentralized WMS performs the warehouse operations, including stock
management, goods receipt, goods issue, planning, and monitoring. Ill discuss several functional features
available in the decentralized WMS and then provide helpful configuration advice.

Decentralized WMS Features

Before I explore some configuration tips, I think is important for you to understand the decentralized
Its an independent system. As warehouses strive for better efficiencies and faster response times, the
warehouse management system must be readily available in real time, even if other systems are not. You
implement the decentralized WMS on its own server. After the decentralized WMS obtains the workload
from ERP, it can process this work even if the ERP system is no longer available. When the work is
complete, the decentralized WMS communicates statuses back to the ERP system. The decentralized WMS
works 24x7, independently from ERP. Figure 1 distinguishes the various ERP and decentralized WMS
processes that are connected through a BAPI.

Figure 1

ERP is the planning system and the decentralized WMS is the execution system for all

Perhaps you are wondering if you can use the decentralized WMS with older R/3 releases. Ill review a
scenario in which the central ERP system is an earlier R/3 release or another legacy system. Typically,
businesses require a warehouse management system that is efficient, responsive, and adaptable to new
logistics processes. Compared to Inventory Management (IM) and WM, the decentralized WMS provides
advanced logistics processes such as Task and Resource Management (TRM). It also provides inbound
and outbound delivery processing instead of direct transactions for purchase orders or stock transport
You can run TRM in a centralized WMS but you cannot operate a centralized WMS independent of an ERP
system. A decentralized WMS integrates easily with different releases of SAP ERP or non-SAP ERP[21/04/2011 3:18:21]

Share Resources by Consolidating Warehouse

Operations in a 3PL Model (Part 2)
Share Resources by Consolidating Warehouse
Operations in a 3PL Model (Part 1)
Improve Runs for Products with Recurring Time
Constraints Using SAP APO SNP
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PP/DS Exception-Based Setup Matrix
Capture the Variable Scheduling Time of Operations
in Process Order Scheduling
Better Inspect and Maintain Your Critical Equipment
with SAP PM and SAP QM
Quick Tip: Use SAP APO SNP to Improve Runs for
Products with Recurring Time Constraints

SCM Expert - Decentralized WMS Serves 24x7 Requirements

systems. The strategy among many organizations is to upgrade their warehouse management systems
before upgrading their ERP system, which is usually a longer, more complex undertaking.
It can integrate with multiple ERP systems. A decentralized WMS not only connects to non-SAP ERP
systems, but it can also connect to multiple ERP systems. This option is especially valuable for global
organizations that want to host all of their warehouses on one server and have these sites communicate
with regional ERP systems.
For example, a global organization has two SAP ERP systems one in the Americas and one in Europe.
Such an organization can host all its warehouses in one instance of a decentralized WMS and still retain
the capability to connect American warehouses with the Americas ERP system and European warehouses
with Europes ERP system. In a centralized WMS scenario, however, users must implement American
warehouses in Americas ERP system and European warehouses in Europes ERP system.

As a word of caution, two ERP systems cannot share a warehouse in a decentralized WMS. Logically
speaking, most organizations operate by continent or region, primarily due to regulatory, financial, and
operational requirements. For example, American laws might not be applicable in the European
warehouses. Therefore, an American ERP system and a European ERP system cannot control the same
warehouse. Instead, it is typically a one-to-one relationship between the ERP system and the
decentralized WMS.
You can host multiple warehouses on one server. Typically, IT teams consider a standalone server
as an additional investment. However, if your business has numerous warehouses and you want to host
them on one infrastructure and application, a decentralized WMS allows you to implement several
warehouses on one server.

Decentralized WMS Functionality

When it comes to the functionality available in a decentralized WMS, it is not very different from a
centralized WMS. Inbound and outbound deliveries primarily drive all logistics processes in a decentralized
WMS. Based on purchase orders or other source documents, the ERP system creates inbound deliveries
and sends them to the decentralized WMS via standard interfaces, such as a BAPI (Figure 2). Similarly,
the ERP system uses sales orders to create outbound deliveries which are then distributed to the
decentralized WMS.

Figure 2

Communication between the ERP system and the decentralized WMS through inbound and
outbound deliveries

The decentralized WMS provides stock placement strategies to perform goods receipt and putaway for
inbound deliveries, and stock removal strategies to perform picking, packing, and goods issue activities
for outbound deliveries. After the deliveries are processed and posted in the warehouse, the decentralized
WMS sends the completed information back to the ERP system to update the source documents and post
the actual goods receipt or goods issue in IM.
All new components of SAP Extension Set 1.0 and 2.0 also work with the decentralized WMS, such as
Yard Management, Cross-Docking, Value-Added Services, and TRM. Many SCM experts recommend
implementing a decentralized WMS with TRM instead of a centralized WMS to accommodate the needs of
high-volume, complex warehouses.
A key functional benefit of the decentralized WMS is its storage management flexibility. Storage
management includes additional storage bin-level visibility, multiple bin types based on material handling
characteristics, complex stock placement and removal strategies, and batch management characteristics,
for example. A decentralized WMS provides more ways to manage your complex warehouse layout.
With a standalone system, you can have more control over stock keeping unit and bin levels by using
standard configuration options for warehouse structure and design. Furthermore, a decentralized WMS
provides a real- time view with radio frequency (RF) capability that keeps inventory records accurate and
up to date. Using the standard reports in a decentralized WMS, warehouse status and inventory is now
transparent to everyone in the organization.

A decentralized WMS works well with SAPConsole for text- based radio frequency (RF) screens and with
ITSmobile for HTML-based RF screens. RF strategy for a decentralized WMS is beyond the scope of this
article. For more information, go to[21/04/2011 3:18:21]

SCM Expert - Decentralized WMS Serves 24x7 Requirements

Steps to Configure a Decentralized WMS

Here are the five steps you must perform to configure a decentralized WMS for your warehouses
Step 1. Activate the decentralized WMS. Go to Logistics Execution>Decentralized WMS
Integration>Central Processing>Application>Activate Decentralized WMS (Figure 3). Select your
warehouse number (WM2, in my example), activate the External WMS option, and select Distribution
Immediately at from the drop- down menu. Save your configuration changes.

Figure 3 Activate the decentralized WMS in the IMG

Step 2. Connect the decentralized WMS to SAP ERP. With a decentralized WMS, you do not execute
stock postings in IM. Instead, you create inbound or outbound deliveries in SAP ERP. As a result, you
must reference the decentralized WMS movement types to the appropriate IM movement types. Follow
menu path Logistics Execution>Decentralized WMS Integration>Central
Processing>Application>Define Interface to Inventory Management and Delivery-Relevant
Data to assign these relationships.
In the pop-up screen that appears, double-click on Assign WM movement type references to IM
movement types. In the next screen that appears, define reference movement types for your warehouse
that corresponds to standard IM movement types (Figure 4). For example, IM movement type 101 GR
for asset is linked to Reference movemnt type WM 999 for SAP WM.

Figure 4 Assign reference movement types between SAP WM and IM

Step 3. Assign delivery-relevant parameters for reference movement types. Follow menu path
Logistics Execution>Decentralized WMS Integration>Central Processing>Application>Define
Interface to Inventory Management and Delivery-Relevant Data. In this step, you associate
reference movement types assigned in the previous step with delivery types and SAP WM movement
types (Figure 5).

Figure 5 Assign reference movement types to delivery types

In my example, I want to assign the goods receipt for the purchase order to movement type 101 in the
warehouse. Warehouse 200 contains reference movement type 101 with a movement indicator B (goods
movement for purchase order). Delivery type DIG (general inbound delivery) is mapped to warehouse
movement type 101.
Step 4. Perform the prerequisites to generate the distribution model. One final key configuration
activity to integrate the decentralized WMS with the host ERP system is to generate the distribution
model. Follow the menu path Logistics Execution> Decentralized WMS Integration>Central
Processing>Distribution>Generate Distribution Model. This activity sets up the communication
between ERP and the decentralized WMS via IDocs and application link enabling (ALE). However, the
prerequisites of this step include defining the logical system and assigning the SAP WM system client to
the logical system.
Define the logical system: Follow IMG menu path Application Link Enabling (ALE) >Sending and
Receiving Systems>Logical Systems>Define Logical System. For SAP ERP Central Component (SAP
ECC), follow menu path IDOC Interface/ALE>Basic Settings>Logical Systems>Define Logical
System. In the screen that appears, click on the New Entry button. Enter a name for the sending and
receiving logical systems. I use LOG1 and LOG2 in my example (Figure 6). Save your configuration

Figure 6 Specify the logical systems

Assign the Client to the Logical System: Follow IMG menu path Application Link Enabling
(ALE)>Sending and Receiving Systems>Logical Systems>Assign Client to Logical System
(Figure 7). For SAP ECC, follow menu path IDOC Interface/ALE>Basic Settings>Logical
Systems>Assign Logical System to client. Ask your Basis team for the Client number (100
deCentral WM, in my example). Now enter the sending logical system in the Logical System field.
Specify if the client is a Development or Test environment via the drop-down menu in the Client role
field. All other options are defaulted in this screen. Check with your Basis team if you want to change any
of these settings.[21/04/2011 3:18:21]

SCM Expert - Decentralized WMS Serves 24x7 Requirements

Figure 7 Assign the client to a logical system

Next, you need to set up Remote Function Call (RFC) destinations between the decentralized WMS and
the ERP system. The Basis team usually performs these activities, so check with it to ensure it is ready to
perform these steps.
Follow menu path Application Link Enabling (ALE)>Sending and Receiving Systems>Systems in
Network>Define Target Systems for RFC Calls. In the screen that appears, enter an RFC
destination name, define a Connection type (e.g., 3 ABAP), and provide a Description (Figure 8).
Ask your Basis team to confirm the connection type. Click on the Technical settings tab and enter the
ERP systems IP address (123.456.789.123, for example) in the Target host field and then enter the
system number (e.g., 01 logical system) in the System Number field. Select the IP Address setting.
Save your configuration. In ECC, follow menu path SAP NetWeaver>Application Server> IDOC
Interface/ALE>Communication>Create RFC Connections. You can create many types of connections
in ECC. ABAP or TCP/IP connections are most commonly used to set up a link between the systems.

Figure 8 Set up an RFC destination

Ask your Basis team to define synchronous communication between the two systems by following the
menu path Application Link Enabling (ALE)>Sending and Receiving Systems>Systems in
Network>Synchronous Processing>Determine RFC destinations for Method Calls. It needs to set
up the ERP system as a standard destination for BAPI calls in the decentralized WMS and set up the
decentralized WMS as a standard BAPI destination in the ERP system.
Step 5. Generate the distribution model. Follow menu path Logistics Execution>Decentralized
WMS Integration>Central Processing>Distribution. Some of the standard data exchange methods
you can generate are:
Send inbound and outbound deliveries from the ERP system to the decentralized WMS
Send inbound and outbound delivery confirmations from the decentralized WMS to the ERP system
Send material, vendor, and customer master distribution from ERP to the decentralized WMS
I have provided the foundation to set up a decentralized WMS. My next article will provide some tips and
best practices for using decentralized WMS.

Ashish Saxena is a member of IBM Global Business Services in the Supply Chain Logistics practice with
extensive experience in implementing SAP Warehouse Management Systems (including Extension sets 1.0
and 2.0) and is a leading resource for the new SCM Extended Warehouse Management system. Ashish
has successfully managed and implemented several centralized and decentralized SAP WM projects,
delivering an efficient and productive distribution process. He is a part of the dynamic partnership
between SAP and IBM to work towards establishing world-class supply chain solutions. You may contact
Ashish via email at

20 Carematrix Drive, Dedham, MA 02026, USA.

Sales and Customer Service: 1.781.751.8799[21/04/2011 3:18:21]

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SCM Expert - Decentralized WMS Serves 24x7 Requirements

Copyright 2011 Wellesley Information Services.
All rights reserved.
SAP and the SAP logo are trademarks or registered
trademarks of SAP AG in Germany and several other
countries.[21/04/2011 3:18:21]


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