Wells Sap Insider 2006


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Wells Sap Insider 2006

  1. 1. Supporting Salesand OperationsPlanning withmySAP SCMArnold Mark Wells CPIMSAP America
  2. 2. Supporting Sales andOperations Planningwith mySAP SCMArnold Mark Wells CPIMSAP America
  3. 3. Sales & Operations Planning (S&OP) Adds ValueThought Leadership in S&OPAn Integrated Process Requires an Integrated FootprintAligning Business FunctionsHow It Should LookCustomer ExamplesHelpful EnhancementsConclusion
  4. 4. S&OP Adds Value S&OP Check-up  Have mergers & acquisition activities resulted in duplications and inefficiencies?  Are supply planning and demand planning isolated functions ? from each other . . . from sales, procurement, logistics or finance?  Do you optimize supply chain plans for profit?  Are inventory turns flat or decreasing?  Is inventory increasing as a percent of sales?  Are significant stocks sold off through deep discounts or written off at the end of the year?  Are capacity or material constraints are making it difficult to allocate and schedule supply?  Is your return on assets flat or trailing the industry leaders ? SAP AG 2006, 4
  5. 5. S&OP Adds Value (Best-in-Class) Class A B C D Customer Service 26% 18% 13% 8% Productivity 20% 13% 9% 5% Purchasing Costs 13% 9% 6% 4% Inventory Levels 30% 21% 13% 8%Source: Oliver Wight  SAP AG 2006, 5
  6. 6. Sales & Operations Planning (S&OP) Adds ValueThought Leadership in S&OPAn Integrated Process Requires an Integrated FootprintAligning Business FunctionsHow It Should LookCustomer ExamplesHelpful EnhancementsConclusion
  7. 7. Oliver Wight Recommends a Balanced Approach Requires focus, People alignment, and engagement throughout the company Class A Processes Technology SAP AG 2006, 9
  8. 8. Oliver Wight: S&OP is Integrated Business ManagementOverview of Steps In the Process Management Business Review Latest View & Recommendation Strategy Business Plan New Product/ Supply Performance Activities Review Review Demand Review SAP AG 2006, 11
  9. 9. Success Depends Upon a Closed Loop Process – Not Just PlanningWhereas in the past, this S&OP cycle would consist of an annual and quarterlyplanning process and a periodic — monthly and quarterly — review and performancereport, the volatility of the new marketplace demands a structural change in theprocess, based on:  Testing the validity of the plan assumptions themselves, as much as analyzing performance against the plan  Developing the frequency and level of granularity of the performance measurement based on decision importance — no fixed periodic review of everything — no “peanut butter” approach  Much greater emphasis on the “why” rather than just the “what” of what has happened — does this indicate a trend, a blip, an anomaly, etc — and what to do about it  Much more frequent and systematic testing of pilot initiatives with sharply focused interpretation of the results based on viral deployment strategies — the enterprise cannot afford to “bet the farm” on a single, all embracing thrust Source: Best Practices in S&OP June 2005  SAP AG 2006, 13
  10. 10. Analyst View – Bottom Line Impact S&OP practices are a prime determinant of business performance and competitiveness 100% 90% 80% Current % performance 70% Laggard 60% Industry norm 50% Best-in-class 40% 30% 20% 10% 0% Complete order % Gross margin % Customer fill rate retention Performance Metric Source:The Sales and Operations Planning Benchmark Report“Leveraging S&OP for Competitive Advantage”  SAP AG 2006, 15
  11. 11. Analyst View - S&OP Enables Demand Driven Supply Networks S&OP is a cornerstone of DDSN leaders’ initiatives Companies with immature processes question the effort. Companies in Stage I of the DDSN model capabilities questioned the benefit of the S&OP process on the bottom line. While they could see the potential of their future process, their S&OP processes were plagued with limited cross-functional support, poor attendance at the consensus meetings, and a lack of executive sponsorship. Companies with mature processes never question the effort. None of the companies with Stage III or Stage IV DDSN capabilities questioned the impact of the process improvement on the company’s bottom line, with five companies sharing that the process “paid for itself, and then some, every month.” Mature processes generate substantial business returns. Seven companies interviewed stated that the impact on the bottom line was within 6 months with a project payback of 9 to 12 months. Sales and Operations Planning: A Cornerstone of DDSN Leadership July 2005 Lora Cecere, Debra Hofman, and Guy Dunkerley SAP AG 2006, 17
  12. 12. Sales & Operations Planning (S&OP) Adds ValueThought Leadership in S&OPAn Integrated Process Requires an Integrated FootprintAligning Business FunctionsHow It Should LookCustomer ExamplesHelpful EnhancementsConclusion
  13. 13. SAP View: Fully Integrated, Closed-Loop Process All five steps of the process are integrated 1. Strategic Planning  Market Planning  New Product Planning 2. Demand Planning  Resource Planning  Quantitative Forecasting  Alignment to Corporate Goals  Sales, Marketing Input  Margin Management  What-if Analysis5. Management  Orders/Demand Balancing Evaluation & Analysis  Consensus  KPI Measurement  Plan vs. Actual  Forecast error  Root Cause Analysis 4. Supply/Demand Balancing 3. Supply Planning  Capacity Planning  Product Mix  Inventory Planning  Constraint Management  Procurement Planning  What-if Analysis  Logistics  Allocation of Demand to Supply  Consensus  SAP AG 2006, 19
  14. 14.  SAP AG 2006, 21  SAP AG 2006, 21
  15. 15. S&OP: Major Process Steps Supported by SAP Software 1. Strategic Planning  Strategic Enterprise Management (SEM)5. Management Evaluation & Analysis  Business Intelligence - Business  Supply Chain Analytics and Visibility (Supply Warehouse – Business Planning & Chain Performance Management – SCPM) Simulation (BW – BPS)  APO Demand Planning (DP)  BW – CRM Analytics  Event Management (SCEM)  Pricing and Margin Management (Vendavo®) 2. Demand Planning  APO Demand Planning (DP)  Supply Chain Event Management (SCEM) 4.Supply/Demand Balancing  APO Demand Planning (DP) 3. Supply Planning  APO Supply Network Planning  APO Supply Network Planning (SNP) (SNP)  Supply Chain Event Management (SCEM)  Supply Network Collaboration (Inventory Collaboration Hub – ICH)  SAP AG 2006, 22
  16. 16. Sales & Operations Planning (S&OP) Adds ValueThought Leadership in S&OPAn Integrated Process Requires an Integrated FootprintAligning Business FunctionsHow It Should LookCustomer ExamplesHelpful EnhancementsConclusion
  17. 17. The Same Data, But from Different Perspectives All departments can see the same data at the same time from their own perspective Customers and Channels Product Families and Brands Products and Sources Marketing Products and Sales Destinations Supplier Customer Products, Sources,Capacity & Destinations Revenues, Margins & Working Capital Manufacturing & Logistics Finance  SAP AG 2006, 29
  18. 18. S&OP: Start With Demand The evidence is clear that the areas most likely to generate the greatest improvement in total S&OP business performance occur when you tackle the demand component of the demand/supply alignment. This is . . . due to the . . . fact that no amount of added flexibility and adaptiveness invested on the supply side can offset an ineffective demand management capability. Source: Best Practices in S&OP June 2005 SAP AG 2006, 31
  19. 19. Sales & Operations Planning (S&OP) Adds ValueThought Leadership in S&OPAn Integrated Process Requires an Integrated FootprintAligning Business FunctionsHow It Should Look (Offline Demonstration)Customer ExamplesHelpful EnhancementsConclusion
  20. 20. We have already been through the demandplanning process of anticipating marketrequirements from all of the best perspectives(sales, marketing, customer, quantitative, etc.).Here we are looking at the supply picture andautomatically highlighting issues that need to baddressed, relative to various demand scenario(expected forecast, high side forecast andanother simulation forecast).
  21. 21. The data in APO can be directly read by BW to create information in other formats. SAP AG 2006, 34
  22. 22. Now we have moved into Demand Planningwhere we can see the margin impact of variousdemand outcomes. We will make a selection odata based on the relevant characteristics.
  23. 23. We can see the quantity forecast, revenue,contribution margin, earnings before interest andtaxes (EBIT), and even Economic Value Added(EVA) for three demand possibilities. TheSimulation Total FCST 1 allows us to makechanges to the forecast outcome and immediatelysee the impact. In this selection, we are viewingthe data for all countries, a particular saleschannel and a particular product group.
  24. 24. We need to have the ability to drill down andaggregate up to the appropriate, meaningful levelwithin each characteristic of dimension.
  25. 25. Sliding over, we can view the Brandcharacteristics of dimension.
  26. 26. . . . vew the drop-down . . .
  27. 27. And select the brand that we want to see. Forexample, if we are the brand manager for theLuxus brand, we would need to see the data as itimpacts the Luxus brand.
  28. 28. We can also bring our supply plan informationinto the same view . . .
  29. 29. And quickly view the contribution margin of the three demand scenarios. SAP AG 2006, 44
  30. 30. Or, the high level forecast by plant or any other selection of data that puts it in the terms of the relevant S&OP stakeholder. SAP AG 2006, 45
  31. 31. Here we have made a change to the selection ofdata so that we are viewing all brands. We have also simulated the impact of a significant demand spike in week 6.
  32. 32. And, quickly graphed the impact on contributionmargin.
  33. 33. Sales & Operations Planning (S&OP) Adds ValueThought Leadership in S&OPAn Integrated Process Requires an Integrated FootprintAligning Business FunctionsHow It Should LookCustomer ExamplesHelpful EnhancementsConclusion
  34. 34. Borealis CUSTOMER OBJECTIVES & PAIN POINTS  Must have high capacity utilization  Streamline planning & control process and move from fire-fighting to predictable operations  Demand planners spend 80% time on unplanned demand Borealis is a € 4 billion supplier of bulk polyethylene and  Excess inventory polypropylene plastic resins serving the auto, packaging, SAP SOLUTION pipe and appliances industry.  mySAP SCM APO integrated with R/3 and BW Borealis primary strategy is to create and deliver value  Partner with Camelot IDPro through a vertically integrated product chain from feed stocks BUSINESS BENEFITS straight through to end use  Integrated planning approach with sales, marketing, consumers. plant supply planners and demand managers  “One Source of the Truth” – APO  Standard business processes for long-term rough cut capacity plan, mid-term master production schedule and short- term grade mix SAP AG 2006, 49
  35. 35. Chemical Manufacturer: S&OP Process Enabled by APO Tool PLAN (18-month horizon; monthly/ quarterly time buckets) Statistical Forecast DP Sales Adjusted Forecast Statistical Forecast Final Sales Plan Plan Demand Trial Forecast Sales Adjustments to Stat ForecastSales Forecast Constrained Supply Final Sales Plan (FSP) Forecast Parameters SNP SNP Balance Set FSP (Gross) FSP (Gross) Supply & Inventory Inventory Targets Demand Supply/ Demand Targets Plan FSP (Net) Feedstock Plans Production & High-level Inventory Targets Planned Stock Prod’n Sched Supply Point Transfers Fill-rate TargetsSCHEDULE(4-6 mo horizon; daily time bucket) Operation SchedulesATP PP/DS • Production Available to Schedule • Replenishment SNP • Packaging Promise Planned Receipts Production & Replenishment • Tolling & Compounding R/3 PP • Raw Mat’l ProcurementMEASURE SAP BW Performance Measures(3 yrs historical data) Performance Analysis Diagnostics  SAP AG 2006, 51
  36. 36. Sales & Operations Planning (S&OP) Adds ValueThought Leadership in S&OPAn Integrated Process Requires an Integrated FootprintAligning Business FunctionsHow It Should LookCustomer ExamplesHelpful EnhancementsConclusion
  37. 37. Enhancements in SAP APO Demand Planning Major Enhancements  Offline Planning – File Upload  Demand Split in Release from Demand Planning  Seasonal Planning  Distinguish 0 and Nothing Continuous Improvements  Maintenance of Planning Areas Containing Data  Forecasting (Flexible Horizons & Composite Forecast)  Macro Performance Improvements SAP AG 2006, 54
  38. 38. Offline Planning Process1. Download data 2. Working on the file 3. Upload file data Challenge: File data could only be uploaded using Copy & PasteSolution: During download, source information is added for use in later upload. Upload launched from interactive planning, offers various options.  SAP AG 2006, 55
  39. 39. Offline Planning - File Upload DetailsA CSV file can be uploaded directly frominteractive planning.The existing download function has beenenhanced to include planningenvironment information.The user can set options for the upload:  Level change  Execution of default macros  Overwriting of fixed values  Treatment of empty cells  Update of objects on detailed or aggregated level  HorizonDuring the upload, several checks areapplied to ensure the correct entry in theplanning grid. A log is written.  SAP AG 2006, 56
  40. 40. Demand Split in Release from Demand PlanningChallenge:Dynamic splitting of a demandplan to a more detailed timegranularity (e.g. from monthsto weeks or from weeks todays) when releasing to SNP ormySAP ERP was previouslyonly possible using a BADI(user exit).Solution:A splitting profile has beenintroduced which containsdifferent distribution functionsfor different periodicities (i.e.year, quarter, month, week,day, accounting period).  SAP AG 2006, 57
  41. 41. Seasonal PlanningChallenge: The time granularity is defined for a Planning Area and applies to allplanning items and levels. This prevents seasonal planning with different perioddefinitions by product. 2003 2004 2005 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Product A SRING 03 SUMMER 03 FALL 03 HOLIDAY 03 SRING 04 SUMMER 04 FALL 04 HOLIDAY 04 (Apparel) Product B SRING 03 SUMMER 03 FALL 03 HOLIDAY 03 SRING 04 SUMMER 04 FALL 04 HOLIDAY 04 (Apparel) Product 1 SEASON C 02 SEASON A 03 SEASON B 03 SEASON C 03 SEASON A 04 SEASON B 04 (Footwear) Product 2 SEASON C 02 SEASON A 03 SEASON B 03 SEASON C 03 SEASON A 04 SEASON B 04 (Footwear) Apparel Planning Year Footwear Planning YearSolution: Freely definable seasons and planning years are introduced that canbe flexibly assigned to characteristic combinations.  SAP AG 2006, 58
  42. 42. Seasonal Planning – Seasonal Pattern Introduction of two additional aggregated planning levels:  Seasons as an aggregate of basic periods (e.g. months, weeks)  Season Years as aggregate of multiple seasons Seasonal patterns can be flexibly assigned at any characteristic combination level SAP AG 2006, 59
  43. 43. Interactive Seasonal Planning Supported processes:  Interactive planning  Macro execution Features:  Dynamic switch between Season year, Season, Time & Storage bucket profile, as extension of existing Period structure settings  Also part of user-specific setting  Also available without using Seasonal Planning  Prevention of time disaggregation in the past for current period that is partly history (key figure specific) SAP AG 2006, 60
  44. 44. Distinguish 0 and NothingChallenge: The system cannot distinguish between an empty cell and a cellwith a 0. This leads to unattractive workarounds.Solution: The system can now differentiate between an empty cell and a cellwith a 0 (time series specific). This required a redesign of the fixingfunctionality and corresponding macros.The 0 will be treated like any other number, with respect to all existingfunctions, like loading & copy of data, forecasts, realignment, proportionalfactors, background processing, etc.Also SNP is affected for the mass maintenance of key figures, or optimizerconstraints for e.g. procurement or stock levels.The development removes workarounds (with e.g. additional key figures, oruse of small numbers) and by this ease the use of the software.  SAP AG 2006, 61
  45. 45. Maintenance of Planning Areas Containing DataChallenge:A planning area could only be changed when it contained no data. Thereforedata had to be stored first (e.g. in an Info Cube) and uploaded again aftermaintenance.Solution:The maintenance of a planning area containing data is now enabled for:  Changing dis-/aggregation method and key figure for disaggregation  Adding key figures  Deleting key figures (if not used)  Changing between Info cube and liveCache key figure  Switching key figure type between fixing and non-fixing  Changing key figure accuracy  Flagging if negative values are allowed  Flagging if zeros are allowed/fixable  Flagging if history is changeableInconsistencies created during the change can be checked and repaired.Transport of the changes to other systems is enabled.  SAP AG 2006, 62
  46. 46. Forecasting: Flexible HorizonsChallenge:The definition of the historical & forecast horizon is possible using fromand to dates or number of periods and offset.The definition screens differ in the forecast profile and interactiveforecasting.Solution:Support of more flexible forecast and history horizon definitionallowing a mixture of dates and number of periods:  Start or end date with number of periods  Only start or end data and no number of periodsThe screens for maintenance of horizons are harmonized, i.e. ininteractive forecasting the screen of the forecast profile definitionis usedBADI (/SAPAPO/SDP_FCST3) offers possibilities to:  Enable limitation of horizons to maximum number of periods  Avoid errors if history and forecast horizons overlap SAP AG 2006, 63
  47. 47. Forecasting: Composite ForecastChallenge: The composite forecast view did not show the history keyfigure. The user could not overrule the system selection of the forecast Solution:  Historical data is visible on forecast screen  The user can interactively select any forecast of a single profile in the composite forecast profile to be used as composite forecast result  The composite ex-post forecast can be saved in a key figure SAP AG 2006, 64
  48. 48. Macro Performance ImprovementsChallenge:The performance of macros executed in interactive planning is sometimesnot as expected.Solution:Improved macro execution performance in interactive planning, especiallywhen:  Changing cell attributes (e.g. color, icon, read only)  Calculating quantitiesA new BADI (/SAPAPO/ADV) is offered that replaces the user exitAPODM005. The BADI enables not only the access to the data (like the userexit) but also the layout attributes of the planning grid.Furthermore performance improvements are offered for:  Starting the Macro Workbench  Changing & creating macros in the Macro Builder  Generating macros  SAP AG 2006, 65
  49. 49. Sales & Operations Planning (S&OP) Adds ValueThought Leadership in S&OPAn Integrated Process Requires an Integrated FootprintAligning Business FunctionsHow It Should LookCustomer ExamplesHelpful EnhancementsConclusion
  50. 50. Why SAP? Great S&OP with Lower Total Cost 1. Feasible Plans 2. Synchronized Plans • Make decisions that can be executed in the • Align production, procurement and real world logistics • Include new product introductions into plans • Align operations plans with sales and marketing • Consider financial constraints and implications • Synchronize regional plans into global plans Different views • Collaborate and Coordinate with partners of the same data (e.g. VMI) at the same time 3. Optimized Plans 4. Adaptable Plans • Make decisions that globally optimize KPI’s • Conduct fast, frequent S&OP cycles • Optimize customers and channels • Adjust plans and re-plan based on real- time exceptions • Optimize product mix • Make decisions that consider all of the • Optimize allocation of scarce resources (production and relevant perspectives and information, transportation) internally and externally • Continuously improveT0 Tn Shorten the planning cycle to < 1 month  SAP AG 2006, 67
  51. 51. 7 Key Points The quality of your S&OP process always has and always will impact the bottom line Your biggest hurdle in improving the timeliness and quality of supply chain decisions will be interdepartmental alignment Interdependent sets of supply chain decisions must be feasible, synchronized, optimal and adaptable You need multi-dimensional, integrated software to do perform fast, feasible, synchronized, optimal and adaptable S&OP SAP APO Demand Planning can give you a significant, step- function improvement in S&OP DuPont, Borealis, Brown-Forman and other leading companies use SAP APO to support S&OP New features such as improved upload and download functionality in SAP APO make S&OP even easier SAP AG 2006, 68
  52. 52. Resources http://www.sap.com/industries/inde x.aspx http://www.sap.com/solutions/busin ess-suite/scm/index.aspx mark.wells@sap.com AMR Research Aberdeen Group SAP AG 2006, 69
  53. 53. Questions? Arnold Mark Wells. CPIM SAP America mark.wells@sap.com SAP AG 2006, 70