How to Enable Logistics and Manufacturing

Execution with SAP Extended Warehouse

Management Kanban Replenishment

by Sasa Mitrovic, Founder and Principal Consultant, Summit Global Associates, Ltd.

March 31, 2016

Learn how to execute multi-level manufacturing production orders through component
replenishment driven by SAP Extended Warehouse Management (SAP EWM). Understand the
overall concept, implementation best practices, and configuration steps involved.
Learning Objectives
After reading this article, youll learn how to:
View an example business process and a detailed functional flow of a common implementation
scenario
Learn all Kanban replenishment implementation options offered by SAP and see how they apply
to your manufacturing operation
Make yourself aware of common implementation pitfalls
Key Concept
SAP ERP Central Component (ECC) has provided Kanban functionality for many years. With this
functionality, operators on factory floors manufacturing lines obtain component materials in bins that are
set to either FULL or EMPTY status. This approach streamlines replenishment of component parts to
shop floor operators by reducing interruptions caused by material shortages during assembly operations.
SAP SCMs Extended Warehouse Management (EWM) offers multiple Kanban processes that natively
integrate with SAP ERP Central Components (ECCs) production planning (PP).
EWM-enabled Kanban replenishment is relatively unknown and rarely implemented because of its
perceived complexity and risks it carries (more on risks in the conclusion of this article). However, this
functionality is very valuable as it can drastically improve your raw and component material replenishment
times through functionality available in EWM. This article is a direct result of my implementation
experiences and the documentation of this process is available exclusively here.
Traditionally, problems with the Kanban approach using ECC have been directly linked to large quantities
of inventory having to be readily available near a factory floors assembly lines. Specifically, companies
would incur high inventory costs by storing large amounts of parts in staging areas close to manufacturing
floors, or have trucks carrying component parts continuously circle the factory (just-in-time, i.e., a JIT
approach).
SAP SCMs EWM to ECCs production planning (PP) native integration described in this article enables a
company to supply Kanban-replenished component parts from a warehouse that runs EWM. The
warehouse can be physically located near the factory building or at a more distant location. In the SAP

system, the factory floor automatically sends signals to the warehouse to replenish its Kanban inventory.
The warehouse, using advanced inventory management techniques (e.g., dynamic bin allocation), then
quickly ships component parts that replenish factory Kanban inventory.

Kanban Implementation
Figure 1 outlines the process flow for a warehouse Kanban replenishment business process, with actions
by both factory and warehouse personnel.

Figure 1
Process flow for a Kanban replenishment business process

Implementation Options
When replenishing shop floor materials using EWM Kanban, you can choose from four distinct options
that SAP offers. Your selection depends on the nature of your manufacturing operation (i.e., the general
availability of the part in question and the way you procure it).
1. Replenish Kanban material with a stock transfer from a warehouse
2. Replenish Kanban material by purchasing it from a vendor or purchasing it from another
manufacturing plant that is owned by your enterprise

3. Replenish Kanban material by requesting it to be manufactured by your plant

4. Replenish Kanban material by any of above options, then consume material to a cost center
(used for non-backflushed bulk materials, such as lubricants)