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This blog will elaborate on how Fashion Contract solves the demand management problem for fashion products manufacturer. To understand the SAP solution, we need to get a brief understanding of the fashion industry terminology and the demand flow process.

                                                                Illustration 1: Terminology & Demand Flow


The Readymade Garments brand owner places a speculative order to the manufacturer (Vendor for the brand owner) to help them book the main raw material (fabric) beforehand. It’s because of the high lead time of fabric manufacturing along with the seasonality of fashion (garments) products. The other most critical parameter where is launch date. The brand owners or retailers decide a specific launch date of new style based on market perception. This is a mandatory date to follow. Else, market perception will be adversely impacted and the retailers will have huge dead stock. SO, the availability of fabric is very crucial to allow the garments manufacturer to complete and ship the goods.

Furthermore, the manufacturer needs the confirm orders (Sales Orders) which are derivation of the main speculative order to start the manufacturing cycle and shipment. The other complexity is shade (color) of garments, which calls for numerous shades and types of fabric. This mix is very complex. So, the manufacturer faces a great amount of challenge to allocate fabric orders to the firm orders. Here we should keep in mind that Fashion Industry works in demand driven environment. So, it is imperative to connect all fabric procurements to the sales orders.

The below illustration helps us to understand the role-based process flow between the retailer and its vendor.





Illustration 2: Process Flow – Flow of Demands from Retailer & Manufacturer


Core Solution

There 2 challenges in the problem statement. The first one is to plan main raw material fabric based on a speculative order. The second one is after receiving the firm orders (Sales Orders), manual & time-consuming effort to assign & distribute fabric purchase requisitions / purchase orders to it.

There are specific solutions for these challenges in SAP S/4HANA with IS solution Fashion & Vertical Business (FVB). To understand why SAP S/4HANA came up with a solution, we must look into the gap we had in SAP ECC for challenges like this. The below illustration will elaborate the gaps in SAP ECC and current solution in SAP S/4HANA FVB.

                                                Illustration 3: Comparison of Solutions in ECC & S/4HANA

SAP S/4HANA with IS solution Fashion & Vertical Business solves the first challenge with Fashion Contract. Fashion contract is a sales contract with advance features in SAP S/4HANA Fashion & Vertical Business environment. The advance feature is that we can mark fashion contract relevant to MRP live through configuration. Thus, one can create a fashion article and it’s BOM to capture fabric consumption. Then create a fashion contract with the article and quantity to capture the speculative order. The next step MRP live will create a Purchase Requisition for fabric.

The solution for the automatic assignment of dependent requirement of Fabrics like Purchase Requestions or Purchase Orders from Fashion Contract to Sales Orders by Segmentation. Let us take an example that the retailer purchase order for speculative order is TBA-ORDER-01. This will be a fashion contract. Now, the retailer converts a part of this speculative order to sales order through a purchase order ITALY-ORDER-01. This will be a sales order in SAP. Now, the fabric purchase requisition by first MRP run will have segment TBA-ORDER-01. This will be auto assigned with distributed quantity to the sales order segment ITALY-ORDER-01.

To achieve the solution for the solution for second part, we must mention the segment values in SGTC in a fashion illustrated below. It shows the sales order segment must be linked to fashion contract segment.


Illustration 4: Fashion Contract to Sales Order Segment mapping


The step-by-step solution provided below. It indicates automated outcome of SAP to provide benefits to fashion clients.

                Illustration 5: Process Flow Diagram in SAP S/4HANA Fashion & Vertical Business

The transactional flow of this SAP solution provided below.

Step 1: Fashion Contract with a Garment Article FASHION_SHIRT with 10000 Pieces as quantity.

                                                                Illustration 6: Fashion Contract

Step 2: Stock/Requirement List of Article FASHION_SHIRT

                      Illustration 7: MD04 Transaction with Article

Step 3: MRP Live run-on Article FASHION_SHIRT – A planned order with 10000 pieces created

                                                                Illustration 8: T Code MD04P with Article

Step 4: Purchase Requisition created by MRP Live for Fabric. The quantity is 18000 M for 10000 pieces.

Illustration 9: PR of Fabric

Step 5: Sales Order created by copying fashion contract with quantity 8000 pieces. It means the fashion contract is still open with 2000 quantities.

                                                                Illustration 10: Sales Order with Segment

Step 6: MRP Live run-on Article FASHION_SHIRT. The previous planned deleted. 2 New planned orders created. First planned order with segment TBA-ORDER-01 for contract with 2000 pieces and other one is with segment ITALY-ORDER-01 for sales order with 8000 pieces.

                                                Illustration 11: Planned Orders for Article FASHION_SHIRT

Step 7: Assignment & Distribution of Fabric Purchase proposals. The Contract related requisitions decreased to 3600 M as the open quantity is 2000 pieces now.

                                                Illustration 12: Purchase Requisition of Fabric


Step 8: Assignment & Distribution of Fabric Purchase proposals. The Sales Order related requisition is created with quantity 14400 M BECAUSE Sales Order quantity is 8000 pieces. Please mark the connection and quantity distribution made by MRP live run.

                                                Illustration 13: Purchase Requisition of Fabric



SAP S/4HANA Fashion & Vertical Business is a industry specific solution. The role a Fashion Contract plays in MRP run is only available in this SAP Industry Solution only. This solution is a turnkey solution from SAP to provide solution to the multi-phased demand generation problem.

I would request all community members to read, follow and share feedback on this topic. I will write more blog posts on use of SAP Segmentation in other industries as well. Please follow my profile for more.

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To read other posts on the topic here