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Driving uncertainty from your supply chain final

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A presentation given at the SCLG event in Dubai a while back but still relevant.

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Driving uncertainty from your supply chain final

  1. 2. Driving Uncertainty from Your Supply Chain Presented by: Lonnie Ayers, PMP, Industry Principle, Aerospace & Defense Contact: Lonn.Ayers@sap.com
  2. 3. <ul><li>Defining Uncertainty </li></ul><ul><ul><li>1.1. Financial Risk </li></ul></ul><ul><ul><li>1.2. Supply Chain Performance Risk </li></ul></ul><ul><li>Business Drivers </li></ul><ul><ul><li>2.1. Challenges </li></ul></ul><ul><ul><li>2.2. Performance Measurement </li></ul></ul><ul><li>Supply Chain Network Evolution </li></ul><ul><ul><li>3.1. Value Proposition </li></ul></ul><ul><li>Performance Management </li></ul><ul><ul><li>4.1. Need for Measurement </li></ul></ul><ul><ul><li>4.2. Performance Management </li></ul></ul>© SAP 2008 / Page Agenda
  3. 4. Uncertainty <ul><li>Uncertainty: The probability that what you expect to happen will not happen as expected. </li></ul><ul><ul><li>Examples Include: </li></ul></ul><ul><ul><ul><ul><li>Customer Demand </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Supplier Responsiveness </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Trade Finance=Currently the number one risk to the global flow of goods and services! </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Currently, were it not for government guaranteed loans, Delphi would not be able to continue producing and supplying parts to GM, as well as virtually all other automotive producers in American and Europe. Windie Wilson, Siemens SCM Practice Manager </li></ul></ul></ul></ul></ul>© SAP 2008 / Page
  4. 5. With the Global “De-Leveraging” Credit is More Scarce, Driving Orders Down & Uncertainty Up <ul><li>Deepening recession in developed economies </li></ul><ul><li>Rapidly decelerating growth in emerging economies </li></ul><ul><li>Increasing volatility and uncertainty in financial markets </li></ul><ul><li>Increasing downward pressure on prices </li></ul><ul><li>Declining top-line growth for most companies </li></ul>© SAP 2008 / Page A recent research report into Supply Chain Finance (SCF) compares the situation in the UK and Germany and reveals that 88% of UK firms and 55% of German companies have identified that key suppliers are unable to sustain further lengthening of payment periods.
  5. 6. The Average Company is Cutting Costs, Shrinking Assets & Hoping for Better Days <ul><li>Cutbacks in product and service offerings </li></ul><ul><li>Plant shutdowns (e.g. automotive) </li></ul><ul><li>Reduction in work force </li></ul><ul><li>Reduced R&D budgets </li></ul><ul><li>Across the board cost cutting </li></ul>© SAP 2008 / Page
  6. 7. Best Run Companies are Investing to Improve their Current & Future Market Positions “ Now is the best time to invest in technologies that yield greater transparency and control within the supply chain…navigating through the next several years will be a test of wills between partners, but also one of how well your supply chain is under control.” John Fontanella, AMR Research November, 2009 <ul><li>What to do……? </li></ul><ul><li>Strive for transparency in all your supply chain activities. </li></ul><ul><li>Prepare for the unexpected from your trading partners. </li></ul><ul><li>Measure your network’s performance against goals </li></ul><ul><li>Constantly assess your network’s fundamentals </li></ul>© SAP 2008 / Page
  7. 8. Agenda © SAP 2008 / Page <ul><li>Defining Uncertainty </li></ul><ul><ul><li>1.1. Financial Risk </li></ul></ul><ul><ul><li>1.2. Supply Chain Performance Risk </li></ul></ul><ul><li>Business Drivers </li></ul><ul><ul><li>2.1. Challenges </li></ul></ul><ul><ul><li>2.2. Best in Class Performance </li></ul></ul><ul><li>Supply Chain Network Evolution </li></ul><ul><ul><li>3.1. Value Proposition </li></ul></ul><ul><ul><li>3.2. Subdivider headline </li></ul></ul><ul><li>Performance Management </li></ul><ul><ul><li>4.1. Need for Measurement </li></ul></ul><ul><ul><li>4.2. Performance Management </li></ul></ul>
  8. 9. Business Drivers © SAP 2008 / Page © SAP 2008 / Page Business Driver Value Proposition SAP Differentiators Customer References Today, supply chains need to be driven by real-time demand and signal-based replenishment, Companies need the ability to balance supply and demand and to run their business based on actual versus forecasted demand Companies lack the visibility and adaptability to sense and profitably respond to unexpected economic and supply chain changes In today’s global supply chain, large and small companies alike have more opportunities to sell internationally and to source from low-cost countries. To respond to these new, complex conditions, companies require greater levels of supply network visibility and collaboration
  9. 10. Todays Supply Chain Challenges drive Company‘s Strategy © SAP 2008 / Page Lack of Visibility beyond the four walls Anticipating the next supply chain disruption is not possible due to lack of visibility . Poor Customer Service Inability to sense and respond to real time demand signals. Rising Costs & Regulations Have increased cost and challenges of compliance and transportation. Globalization & Outsourcing Have resulted in stretched supply chains and increased risk . Timely analysis, response, and resolution of supply chain issues is impossible due to lack of control.
  10. 11. Even Innovators Lack State-of-the-Art Supply Chain Management Systems © SAP 2008 / Page Source: AberdeenGroup „Supply Chain Cost-Cutting Strategies“ 2007 Overall % A&D High-tech CI Chem Oil&Gas Manual and spreadsheet intensive 12% 15% 15% 11% 15% Partially automated but use different systems across company 42% 46% 52% 42% 30% Partially automated and use a common system company-wide 21% 23% 11% 25% 30% Fully automated but use different systems across the company 16% 8% 15% 16% 15% Fully automated and use a common system company-wide 9% 8% 7% 5% 10%
  11. 12. Best in Class … © SAP 2008 / Page … much more likely to have invested in new applications as part of their improvement strategy Source: AberdeenGroup „Supply Chain Cost-Cutting Strategies“ 2007 New Applications Implemented as Part of Improvement Strategy Best in Class Industry Average Laggards Transportation management 60% 41% 25% Product/batch traceability 57% 52% 13% Inventory optimization 44% 29% 38% Warehouse/dock/yard mgmt 43% 17% 25% Strategic network design 40% 17% 25% Demand management 40% 30% 25% Manufacturing applications 36% 39% 13% Channel management (channel sales data visibility, prevent speculation/diversions, etc.) 29% 17% 13%
  12. 13. Agenda © SAP 2008 / Page <ul><li>Defining Uncertainty </li></ul><ul><ul><li>1.1. Financial Risk </li></ul></ul><ul><ul><li>1.2. Supply Chain Performance Risk </li></ul></ul><ul><li>Business Drivers </li></ul><ul><ul><li>2.1. Challenges </li></ul></ul><ul><ul><li>2.2. Performance Measurement </li></ul></ul><ul><li>Supply Chain Network Evolution </li></ul><ul><ul><li>3.1. Value Proposition </li></ul></ul><ul><ul><li>3.2. Subdivider headline </li></ul></ul><ul><li>Performance Management </li></ul><ul><ul><li>4.1. Need for Measurement </li></ul></ul><ul><ul><li>4.2. Performance Management </li></ul></ul>
  13. 14. The Supply Chain Network Evolution: Combining Efficiency and Responsiveness Improve visibility & collaboration Treat suppliers, customers and partners as an extension of your organization Streamline Logistics & Fulfillment Maximize energy efficiency and minimize transportation costs Manage risk & ensure compliance Analyze each events operational and financial impact to both cost and revenue Improve customer service Sense and respond to real time supply and demand signals Leverage real-time data from RFID, POS and sensor technologies © SAP 2008 / Page
  14. 15. Responsive Supply Networks: Shift focus from Applications to End-to-End Value Scenarios <ul><li>Allow companies with fluctuating demand and high supply uncertainty to sense and respond faster and smarter to demand and supply dynamics across a globally distributed environment </li></ul>Collaborative Demand and Supply Planning Logistics and Fulfillment Management Supply Network Strategy and Design Supply Network Traceability © SAP 2008 / Page SOURCE SUPPLY MAKE SELL MOVE SERVICE CUSTOMER Manufacturing Network Planning & Execution Collaborative Demand Response & Execution
  15. 16. Agenda © SAP 2008 / Page Value Proposition
  16. 17. Value Proposition © SAP 2008 / Page Value Proposition <ul><ul><li>Increase demand accuracy and order fulfillment satisfaction level </li></ul></ul><ul><ul><li>Reduce inventory levels and increase inventory turns across the network </li></ul></ul><ul><ul><li>Increase profitability and productivity </li></ul></ul><ul><ul><li>Lower costs through integrated distribution, logistics, and transportation driven by real-time planning </li></ul></ul><ul><ul><li>Improve order, production, and execution tracking with RFID-enabled sense and respond processes </li></ul></ul><ul><ul><li>Improve customer satisfaction with planning and execution integrated by design </li></ul></ul><ul><ul><li>Enable more efficient and better informed suppliers </li></ul></ul><ul><ul><li>Shorten cash-to-cash cycle times through network-wide information transparency </li></ul></ul><ul><ul><li>Increase customer satisfaction and service levels with an integrated, synchronized, and responsive supply network </li></ul></ul>SAP Differentiators Customer References Business Drivers <ul><ul><li>Real-time demand </li></ul></ul><ul><ul><li>Balance supply and demand </li></ul></ul><ul><ul><li>Visibility </li></ul></ul><ul><ul><li>Transparency </li></ul></ul><ul><ul><li>Sense and respond </li></ul></ul><ul><ul><li>Global source & supply </li></ul></ul><ul><ul><li>Collaboration </li></ul></ul>
  17. 18. Starting point: SCOR model and related KPI’s # Level Schematic Comments 1 2 3 4 Configuration Level (Process Categories) Process Element Level (Decompose Processes) Plan Deliver Make Source Implementation Level (Decompose Process Elements) Supply Chain Operations Reference model Top Level (Process Types) Description Balance Production Resources with Production Requirements Establish Detailed Production Plans Identify, Prioritize, and Aggregate Production Requirements Identify, Assess, and Aggregate Production Resources P3.1 P3.3 P3.4 P3.2 Return A company’s supply chain can be “configured-to- order” at Level 2 from approximately 17 core “process categories.” Companies implement their operations strategy through their unique supply chain configuration. <ul><li>Level 3 defines a company’s ability to compete successfully in its chosen markets and consists of: </li></ul><ul><ul><li>Process element definitions </li></ul></ul><ul><ul><li>Process element information inputs and outputs </li></ul></ul><ul><ul><li>Process performance metrics </li></ul></ul><ul><ul><li>Best practices, where applicable </li></ul></ul><ul><ul><li>System capabilities required to support best practices </li></ul></ul><ul><ul><li>Systems/tools by vendor </li></ul></ul><ul><li>Companies “fine tune” their Operations Strategy at Level 3 </li></ul>Companies implement specific supply-chain management practices at this level Level 4 defines practices to achieve competitive advantage and to adapt to changing business conditions Level 1 defines the scope and content for the Supply Chain Operations Reference-model Here basis of competition performance targets are set © SAP 2008 / Page
  18. 19. Linking SAP SCM and Business Value © SAP 2008 / Page VALUE Increase profitability Optimize use of invested capital Increase revenues Decrease costs Reduce Working capital Optimize use of fixed capital <ul><li>Improved customer reliability </li></ul><ul><ul><ul><li>Increased product availability </li></ul></ul></ul><ul><ul><ul><li>Reduced out-of-stocks </li></ul></ul></ul><ul><li>Improved customer responsiveness </li></ul><ul><ul><ul><li>Reduced lead-times </li></ul></ul></ul><ul><li>Reduce inventory carrying costs (storage, handling, obsolescence, scrap … ) </li></ul><ul><li>Reduce purchased material costs </li></ul><ul><li>Reduce manufacturing costs </li></ul><ul><li>Reduce distribution costs / fulfillment costs </li></ul><ul><li>Reduce invoice write-offs (disputes) </li></ul><ul><li>Reduce work-in-process </li></ul><ul><li>Decrease raw and FG inventory </li></ul><ul><li>Shorten ‘cash-to-cash’ cycles (reduce ship-to-invoice, reduce DSO and increase payable (terms)) </li></ul><ul><li>Optimize use of physical assets and increase capacity utilization (plants, warehouses, equipment, trucks) </li></ul><ul><li>Reduce physical asset base </li></ul>A value driver model with drivers related to the SCOR KPI’s helps get to a quantified financial measure of business value Drivers: SCOR–related Performance Attributes
  19. 20. SAP Differentiators © SAP 2008 / Page SAP Differentiators <ul><ul><li>Synchronize supply to demand by balancing push and pull network-planning processes and by replenishing and producing based on actual demand </li></ul></ul><ul><ul><li>Sense and respond through an adaptive fulfillment network in which distribution, transportation, and logistics are driven by and integrated with real-time planning processes </li></ul></ul><ul><ul><li>Enable network-wide visibility, collaboration, and analytics across the extended supply chain. </li></ul></ul><ul><ul><li>Align and synchronize operations with suppliers, partners, and customers to manage supply chain events and monitor performance, ensuring that every process in the adaptive supply chain network is efficient, effective, and operating as planned. </li></ul></ul>Business Drivers <ul><ul><li>Real-time demand </li></ul></ul><ul><ul><li>Balance supply and demand </li></ul></ul><ul><ul><li>Visibility </li></ul></ul><ul><ul><li>Transparency </li></ul></ul><ul><ul><li>Sense and respond </li></ul></ul>Value Proposition Customer References <ul><ul><li>Global source & supply </li></ul></ul><ul><ul><li>Collaboration </li></ul></ul>
  20. 21. Aligning stakeholders to Achieve Collaborative Demand and Supply Planning <ul><li>Effective Collaborative Demand and Supply Planning requires alignment between several stakeholders with differing objectives </li></ul>Collaborative Demand Management How do I increase revenue and profits without sacrificing customer service? How do I improve my demand visibility to keep the shelves stocked? How do I keep service levels up and the inventory low by accelerating my supply response? <ul><li>Revenue Growth </li></ul><ul><li>Operating margin </li></ul><ul><li>Customer Satisfaction </li></ul><ul><li>Revenue Objectives </li></ul><ul><li>Customer Satisfaction </li></ul><ul><li>Forecast Accuracy </li></ul><ul><li>Customer Service Levels </li></ul><ul><li>Inventory Levels </li></ul><ul><li>Supply Chain costs </li></ul>Coo Supply chain Sales Sales and Operations Planning How do I balance demand and supply to grow the business profitably? <ul><li>Total Revenue </li></ul><ul><li>Total Throughput </li></ul><ul><li>Total Profitability </li></ul>Operations COO Supply Planning © SAP 2008 / Page
  21. 22. Collaborative Demand and Supply Planning is an End-to-end, Cross-functional Process Operations: Procurement Operations: Manufacturing Supply chain Sales Supply Network Planning Procurement Planning Rough cut Production Planning VMI / Responsive Replenishment Demand Signal Capture Sales Forecast Collaboration Trade Promotion Planning Demand Planning Finance Supplier Collaboration Safety Stock Planning Distribution Planning Demand Analysis Supply Analysis Capacity Planning Finance & Budget Planning Demand & Supply Alignment Collaborative Demand Management COO Supply chain Sales Sales and Operations Planning Operations COO Supply Planning Performance Management Cross-Functional Supply Chain Performance Management Collaborative Demand and Supply Planning connects processes across departments to enable a timely, profitable response to customer demand © SAP 2008 / Page
  22. 23. Customers Drive Value with Collaborative Demand and Supply Planning <ul><li>Out-of-stocks declined up to 25% </li></ul><ul><li>On-shelf inventory improved by 20% </li></ul><ul><li>Replenishment cycles cut down from 15 to 6 days </li></ul><ul><li>Improved on-time and complete orders from 70% to 98% </li></ul><ul><li>Reduced inventory by 22% </li></ul><ul><li>Improved cycle times </li></ul><ul><li>Improved forecast accuracy by 10% </li></ul><ul><li>Reduced cycle time </li></ul><ul><li>Faster reaction to market changes </li></ul>© SAP 2008 / Page The most advanced demand-sensing companies have 15% less inventory, a 17% better perfect order performance, and a 35% shorter cash-to-cash cycle time. We have also found that DDSN leaders have 10% higher revenue and 5% to 7% better profit margins than competitors.” AMR The Handbook for Becoming Demand Driven “
  23. 24. Collaborative Demand Management Objectives, issues, capabilities and benefits <ul><li>Lack of visibility of demand creation activities and poor collaboration with customers and account teams </li></ul><ul><li>Customers providing data while raising their service level requirements </li></ul><ul><li>Forecasting based primarily on enterprise historical data </li></ul><ul><li>Include all sources of demand information and dynamics for better understanding and anticipation of customer demand </li></ul><ul><li>Collaborate directly with customers regarding demand and supply plans </li></ul><ul><li>True, real-time visibility of demand signals at the customer level </li></ul><ul><li>Ability to accurately predict customer requirements and take advantage of new market opportunities. </li></ul><ul><li>Better responsiveness and improved customer service </li></ul><ul><li>Improved forecast accuracy, fewer stock outs, reduced inventory </li></ul>Issues Key business capabilities Benefits Objective: Visibility to customer and consumer demand to achieve target in-stock rates Best practice solution: Collaborate across functional and enterprise boundaries to improve visibility and increase responsiveness by understanding real demand © SAP 2008 / Page
  24. 25. Collaborative Demand Management SAP Solution <ul><ul><li>SAP Differentiators </li></ul></ul>SAP Solution <ul><li>Support an end-to-end collaborative process by incorporating internal and external forecasts and plans </li></ul><ul><li>Harmonize external demand signals with enterprise data for more complete and accurate picture of demand </li></ul><ul><li>Integration of Demand Signal Repository into SAP SCM for responsive forecasting and replenishment </li></ul><ul><li>Exception-based solution allows planners to increase plan quality and leverage additional sales opportunities </li></ul>Integration: Include all relevant demand data such as POS data incl. data management and cleansing processes for multiple retailers, integration to Trade Promotion Management for promotional demand, and sales orders and VMI orders to monitor consumption at customers Scalability: Ability to manage the massive volumes of demand signal data that are provided by retailers or other external sources by retailers and translate into information that can drive the forecasting process Flexibility: Manage more frequent, granular demand signals giving intelligent demand segmentation to drive replenishment and logistics operations. Sales Forecast Collaboration Trade Promotion Planning Demand Signal Capture Demand Planning Customer Collaboration (VMI) © SAP 2008 / Page
  25. 26. Results Achieved by SAP’s SCM Solution © SAP 2008 / Page <ul><li>“ SAP Customers Run More Responsive and Cost-Efficient Supply Chains” </li></ul><ul><ul><li>40 percent lower inventory days of supply and 45 percent lower overall cash-to-cash cycle time. </li></ul></ul><ul><ul><li>Inventory carrying costs: those with the most mature practices have a 63 percent cost reduction or 1.7 percent revenue improvement to the bottom line </li></ul></ul><ul><ul><li>On-time delivery: 17 percent better performance to request date and a 7 percent better to commit date </li></ul></ul><ul><ul><li>&quot;PRTM / SAP Benchmarking Study 2002-2003: Supply Chain Planning” </li></ul></ul><ul><li>Demand Planning Case Study Data </li></ul><ul><li>SAP Customers who have implemented DP, have achieved on average: </li></ul><ul><ul><li>Increased Forecast Accuracy of 22% (Range 5% - 40%) </li></ul></ul><ul><ul><li>Reduced Inventory of 29% (Range 15% - 60%) </li></ul></ul><ul><ul><li>Reduction in Planning Cycle of 68% (Range 50% - 85%) </li></ul></ul><ul><ul><li>SAP SCM Case Studies available at www.sap.com/ </li></ul></ul>
  26. 27. Customers Drive Value with Collaborative Demand Management <ul><li>Reduced mean absolute forecast error by over 50% </li></ul><ul><li>Reduce time between forecast close and completion of schedules by 33% </li></ul><ul><li>Streamlined trade promotion planning; improved operations and demand planning </li></ul><ul><li>Using RR, streamlined VMI process and improved customer in-stock rate esp. for promotions </li></ul><ul><li>Improved forecast accuracy by 21% </li></ul><ul><li>Enabled data transparency in all phases of the planning process </li></ul><ul><li>Improved ability to make rapid changes to production schedule </li></ul>© SAP 2008 / Page We have achieved cross-functional alignment and increased forecast accuracy significantly right after go-live of our Collaborative Demand Management process .” Herbert Hockley Manager, Customer Planning “
  27. 28. Supply Planning Objectives, issues, capabilities and benefits <ul><li>Complete visibility and synchronization of demand and supply </li></ul><ul><li>Inventory visibility and optimized safety stock levels across the network </li></ul><ul><li>Optimized material planning and sourcing across the network </li></ul><ul><li>Improved product availability and delivery performance </li></ul><ul><li>Reduced inventory carrying costs, reduced obsolescence </li></ul><ul><li>Reduced total supply chain costs, enhanced profitability </li></ul>Objective: Fast Response Across the Supply Network Best practice solution: Supply planning across distribution, manufacturing and partners synchronizing delivery schedules both for finished products and materials. Issues Key business capabilities Benefits <ul><li>Increasing demand variability and volatility make it difficult to meet customer expectations </li></ul><ul><li>Supply disruptions increase the need for inventory buffers, missing inventory visibility prevents consolidation </li></ul><ul><li>Demand variability and supply uncertainty lead to operating inefficiencies </li></ul>© SAP 2008 / Page
  28. 29. Supply Planning SAP solution <ul><li>Integrating purchasing, manufacturing, distribution, and transportation plans of the internal and external network into an overall supply picture. </li></ul><ul><li>Simulate and implement comprehensive tactical planning and sourcing decisions based on a single, globally consistent model. </li></ul><ul><li>Determine the best short-term strategy to replenish stocking locations, whether leveraging existing supply or and triggering production and procurement </li></ul>SAP differentiators SAP solution NETWORK-WIDE VISIBILITY: Enables any user to be integrated into supply planning across external and internal organizations by collaboration, planning, execution, and coordination of the entire supply network FLEXIBILITY: Serve different requirements across the global supply network: From fast ramp-up of distribution channels and single location inventory management in emerging markets to handling multi-echelon distribution networks and complex retailer requirements in developed markets INTEGRATION: Tying together distribution, production and inventory planning seamlessly into a single supply plan that is responsive to demand and links to the sourcing and procurement process in a single solution sharing the same data © SAP 2008 / Page Supply Network Planning Procurement Planning Production & Capacity Planning Safety Stock Planning Distribution Planning Supplier Collaboration
  29. 30. Customers Drive Value with Supply Planning <ul><li>Reduced days in inventory by 7% </li></ul><ul><li>Improved store in-stock, forecast accuracy and case-fill metrics while improving productivity </li></ul><ul><li>Reduced expediting costs in transportation </li></ul><ul><li>Increased in-full and on-time delivery service level in the range of 97% and 100% </li></ul><ul><li>Reduced overall supply chain costs by 4% </li></ul><ul><li>Reduction of inventory by 50 – 70%Reduced procurement costs by 5% </li></ul><ul><li>Improve on-time delivery by 70% </li></ul>© SAP 2008 / Page “ With SAP SCM, Brown-Forman increased the number of combined item/locations offered in some regions while maintaining 12 inventory turns per year and 99%+ service levels. Brown-Forman met their long-term inventory targets within a few months of start-up.” Jim Hutchinson Senior Vice President of Supply Chain Management Brown-Forman Corporation “
  30. 31. Sales and Operations Planning Objectives, issues, capabilities and benefits Objective: Balanced and Profitable Demand and Supply Best practice solution: Support an end-to-end process that links strategic and tactical plans through interdepartmental collaboration Issues <ul><li>Difficult to meet customer expectations due to increasing demand variability and volatility esp. for new products and promotions </li></ul><ul><li>Limited ability to respond to new market opportunities due to supply disruptions, resource constraints and unbalanced utilization </li></ul><ul><li>Operating inefficiency due to demand variability and supply uncertainty </li></ul>Key business capabilities <ul><li>Capture demand input from all available sources (Sales, Marketing, Trading Partners) </li></ul><ul><li>Develop a synchronized supply plan that considers and balances demand across all network resources </li></ul><ul><li>Align company financial, marketing and operational goals in one consolidated plan </li></ul>Benefits <ul><li>Unified demand and supply plan to meet customer demand </li></ul><ul><li>Maximized throughput to satisfy market demand and customer service objectives </li></ul><ul><li>Synchronized demand and supply plan that are both feasible and in line with company financial goals </li></ul>© SAP 2008 / Page
  31. 32. Sales and Operations Planning SAP Solution SAP Differentiators SAP Solution <ul><li>Provide all relevant demand and supply information in a unified environment with complete visibility for all stakeholders incl. data from product development and finance </li></ul><ul><li>Provide stakeholders with their own view of the data to make financially and operationally sound decisions </li></ul><ul><li>Enable real-time access to data for timely decision-making </li></ul>Integration: Seamlessly integrate all relevant S&OP data and processes across functional boundaries on a single platform The right information: Flexible tool set for preparation and execution of S&OP meetings and processes including market leading business intelligence capabilities Always up-to-date: Real-time data availability without latency across the entire supply network Supply and Demand Alignment Demand Analysis and Update Supply Analysis Production Capacity Planning Finance and Budget Planning © SAP 2008 / Page
  32. 33. Customers Drive Value with Sales & Operations Planning “ Companies that solve the riddle of the speed-scope paradox in global sales and operations planning deliver superior economic returns; a new class of global S&OP leaders shows the way.” <ul><li>Adopted global S&OP process based on SAP SCM </li></ul><ul><li>Increased the number of products while maintaining 12 inventory turns per year and 99%+ service levels. </li></ul><ul><li>Maximized return on assets by allocating most profitable match of supply and demand </li></ul><ul><li>Achieved superior customer service with on-time delivery rate of 97.5% </li></ul>© SAP 2008 / Page SAP Supply Chain Management enables us to support true sales and operations planning to meet our business goals. It is a critical tool that helps us drive transparent customer, production, and inventory information throughout our supply chain and be a better partner for our customers.“ Tim Weidenhaft, Director of Demand Planning - General Mills Inc. “ S&OP is helping us meet our goal of better business decisions through an improved mutual understanding of demand, supply and financial information.” Dick Clark , Procter & Gamble “
  33. 34. SAP Supply Chain Management The Big Picture SAP ERP SAP PLM SAP APO Demand planning Supply network planning Production Planning & Scheduling Global Available To Promise Transport. Plg. & Vehicle Scheduling Extended Warehouse Management Transportation Management Supply Network Collaboration SAP SCM: Infrastructure Event Managem. Auto ID Infra-structure SAP SCM Basis SAP CRM SAP SRM SAP SCM © SAP 2008 / Page Co-innovation ecosystem Sample Partners Composites Duet demand planning Supply Chain Performance Management Product Tracking & Authentication Inventory Optimization Service Parts Optimization
  34. 35. Our Response to ‘Why SAP SCM?’ <ul><li>2. SPEED TO TANGIBLE VALUE </li></ul><ul><li>Reduce raw material costs 3% - 30% </li></ul><ul><li>Reduce inventory levels 25% - 60% </li></ul><ul><li>Increase aftermarket revenue 16% - 70% </li></ul><ul><ul><li>Reduce lead times 15% - 200% </li></ul></ul><ul><ul><li>Pre-configured and “pre-integrated” ERP solution can be live in as little as 16 weeks </li></ul></ul>1. ENABLE BUSINESS STRATEGY Four Reasons for you to Realize Strategic Goals Become globally cost competitive Meet global compliance requirements Increase customer satisfaction / loyalty Increase productivity & efficiencies Increase responsiveness & agility Increase sales revenues Speed innovation 4. LOWEST TCO 3. LOWEST RISK <ul><li>SAP viability and reputation </li></ul><ul><li>Proven – SAP has been providing mission critical solutions for over 30 years. </li></ul><ul><li>Appreciating asset - 8,800 developers & over $1B in annual R&D to enhance solution </li></ul><ul><li>Market leader – 60% global market share </li></ul><ul><li>Focus– not distracted by acquiring competitors & integrating their disparate systems </li></ul><ul><ul><li>Modular Flexibility - deploy all at once or by business processes as needed </li></ul></ul><ul><li>Eliminate 80-90% of interfaces (interfaces cost on average $35K to develop and $6K/yr to maintain) </li></ul><ul><li>Leverage current IT investments by using SAP NetWeaver technology for cost effective integration </li></ul><ul><li>Reduce IT costs by 30-50% by retiring disparate systems / applications </li></ul>© SAP 2008 / Page
  35. 36. A snapshot of SAP SCM customers © SAP 2008 / Page Demand Planning and Supply Planning Supply Network Collaboration Order Fulfillment & Transportation Management Production Planning & Detailed Scheduling
  36. 37. Customer References © SAP 2008 / Page Customer References <ul><ul><li>Increase demand accuracy </li></ul></ul><ul><ul><li>Dow Corning Corporation improved forecast accuracy by up to 25% </li></ul></ul><ul><ul><li>Reduce inventory and increase inventory turns </li></ul></ul><ul><ul><li>SI Corporation reduced finished goods inventory by 60% </li></ul></ul><ul><ul><li>Increase profitability and productivity </li></ul></ul><ul><ul><li>Bayer Material Science reduced planning time and effort by 33% </li></ul></ul><ul><ul><li>Lower costs </li></ul></ul><ul><ul><li>Beiersdorf-Lechia SA increased sales by 4%, and decreased safety stock by 42% </li></ul></ul><ul><ul><li>Improved customer satisfaction </li></ul></ul><ul><ul><li>Colgate-Palmolive Company improved on-time delivery and complete orders from 70% to 98% </li></ul></ul><ul><ul><li>More effective and better informed suppliers </li></ul></ul><ul><ul><li>SI Corporation reduced SKU’s from 34,000 to 5,300 </li></ul></ul><ul><ul><li>Shorter cash-to-cash cycle time </li></ul></ul><ul><ul><li>Palm decreased cash-to-cash cycle time by 39% </li></ul></ul><ul><ul><li>Increased customer satisfaction and service levels </li></ul></ul><ul><ul><li>NIBCO Inc. increased its perfect order rating from 29.5% to 87% </li></ul></ul>Business Drivers <ul><ul><li>Real-time demand </li></ul></ul><ul><ul><li>Balance supply and demand </li></ul></ul><ul><ul><li>Visibility </li></ul></ul><ul><ul><li>Transparency </li></ul></ul><ul><ul><li>Sense and respond </li></ul></ul><ul><ul><li>Global source & supply </li></ul></ul><ul><ul><li>Collabora-tion </li></ul></ul>
  37. 38. What do the analyst say….. <ul><li>SAP has taken and continues to take steps to improve the scope and capability of its SCM solutions and to close the gap with best of breeds. 1 </li></ul><ul><li>SAP is attracting increasing numbers of customers using APO in more demanding and complex SCP environments. 2 </li></ul><ul><li>It is the most installed SCP application in the market, and is used for planning the supply chains of some of the largest companies in the world. 2 </li></ul><ul><ul><li>1 &quot;SAP Outlines Updated SCM Strategies, Addressing Some Key End-User Challenges,&quot; by Tim Payne, Gartner , January 2008 </li></ul></ul><ul><ul><li>2 &quot;MarketScope for Supply Chain Planning: Process Automation, 2008,&quot; by Tim Payne, Andrew White, C. Dwight Klappich, Gartner , April 2008 </li></ul></ul>“ © SAP 2008 / Page
  38. 39. <ul><li>Defining Uncertainty </li></ul><ul><ul><li>1.1. Financial Risk </li></ul></ul><ul><ul><li>1.2. Supply Chain Performance Risk </li></ul></ul><ul><li>Business Drivers </li></ul><ul><ul><li>2.1. Challenges </li></ul></ul><ul><ul><li>2.2. Performance Measurement </li></ul></ul><ul><li>Supply Chain Network Evolution </li></ul><ul><ul><li>3.1. Value Proposition </li></ul></ul><ul><ul><li>3.2. Subdivider headline </li></ul></ul><ul><li>Performance Management </li></ul><ul><ul><li>4.1. Need for Measurement </li></ul></ul><ul><ul><li>4.2. Performance Management </li></ul></ul>© SAP 2008 / Page <ul><li>Defining Uncertainty </li></ul><ul><ul><li>1.1. Financial Risk </li></ul></ul><ul><ul><li>1.2. Supply Chain Performance Risk </li></ul></ul><ul><li>Business Drivers </li></ul><ul><ul><li>2.1. Challenges </li></ul></ul><ul><ul><li>2.2. Performance Measurement </li></ul></ul><ul><li>Supply Chain Network Evolution </li></ul><ul><ul><li>3.1. Value Proposition </li></ul></ul><ul><ul><li>3.2. Subdivider headline </li></ul></ul><ul><li>Performance Management </li></ul><ul><ul><li>4.1. Need for Measurement </li></ul></ul><ul><ul><li>4.2. Performance Management </li></ul></ul>Agenda
  39. 40. Supply chains are under pressure And climate is getting tougher Cost Volatility Risk Purchasing Manufacturing Index Supply Chain Digest, 2009, and McKinsey, 2008 Consumer Confidence Index Sample of Economic Measures What are your company's 2 main strategic goals for your supply chain? Reducing costs Improving customer service Getting new products/services to market faster Improving reliability of supply chain Improving product quality Reducing company’s carbon footprint Maintaining majority of employees in home region None of above McKinsey, 2008 How, if at all, has the amount of supply chain risk faced by your company changed in the past 5 years? Increased significantly Increased Slightly No change Decreased Slightly Decreased significantly 2007 2008 Change Dow Jones Industrial Average on Oct 9 14,279 8,579 -39.9% Crude Oil/bbl on Oct 9 $94.83 $76.77 -19.0% Institute of Supply Management – PMI for Manufacturing, Oct 50.9% 38.9% -23.6% $/Euro on Oct 9 .7093 .7320 +3.2% University of Michigan Consumer Sentiment Index- Oct 80.9 57.6 -28.1% Are my customers satisfied ? Am I managing my assets effectively? How much should I produce?
  40. 41. You cannot manage what you cannot measure Supply Chain Cost To what extent is your company meeting the strategic goals for its supply chain? Improving Product Quality, n = 48 Reducing Costs, n = 165 Getting New Products/Services to Market Faster, n = 88 Improving Reliability of Supply Chain, n = 78 Improving Product Quality, n = 119 Demand Forecast Perfect Order Rating    X X X
  41. 42. Case Study: CPG company Department-only metrics can hurt overall performance Finance <ul><ul><li>Defer payments to end of payment period-Killing suppliers! </li></ul></ul><ul><ul><li>Decrease budget for standard transportation cost </li></ul></ul>Sales <ul><li>Lack of focus, and alignment </li></ul><ul><li>No insight into supply chain performance </li></ul><ul><li>Don’t know how to optimize; when to take action </li></ul>Manufacturing <ul><ul><li>Rebates on selected products </li></ul></ul><ul><ul><li>Launch of customer loyalty programs </li></ul></ul><ul><ul><li>Switch to lowest cost component suppliers-But maintain quality levels </li></ul></ul><ul><ul><li>Increase production throughput </li></ul></ul>
  42. 43. Need for Performance Management Finance Sales Manufacturing How are we doing? What should we do? Why is this happening? Demand Perfect Order Cost
  43. 44. Supply Chain Performance Management Effectiveness, not only efficiencies Volatility Cost Risk <ul><ul><li>Accounts payable </li></ul></ul><ul><ul><li>Cash flow </li></ul></ul><ul><ul><li>Shipment cost </li></ul></ul><ul><ul><li>Number of returns </li></ul></ul><ul><ul><li>Customer satisfaction </li></ul></ul><ul><ul><li>Customer defection </li></ul></ul><ul><ul><li>Inventories </li></ul></ul><ul><ul><li>Product quality </li></ul></ul><ul><ul><li>Purchasing cost </li></ul></ul><ul><ul><li>Visibility </li></ul></ul><ul><ul><li>Effectiveness </li></ul></ul><ul><ul><li>Control </li></ul></ul>Demand Perfect Order Cost
  44. 45. Supply Chain Performance Management Effectiveness, not only efficiencies Supply Chain Effectiveness Order Management Cost Material Acquisition Cost Planning and Finance Cost Level 2 Metrics Finished Good Warehouse Cost Customer Service Cost Outbound Transportation Cost Level 3 Metrics Express Freight Fuel Cost Returns Invoices Outstanding Diagnostic Metrics - Strategic Goals Perfect Order Fulfillment Level 1 Metrics + Supply Chain Management Cost + -
  45. 46. SAP BusinessObjects Supply Chain Performance Management <ul><ul><li>Standards-based end-to-end process support </li></ul></ul><ul><li>At any time, know your operational and related financial performance </li></ul><ul><li>Utilize leading industry standards for performance management (e.g. SCOR) </li></ul><ul><li>Focus on end-to-end processes (e.g. order-to-cash), rather than reinforcing operational silos </li></ul><ul><li>Automated data collection </li></ul><ul><li>Timely insights, with tight operational application integration </li></ul><ul><li>Relevant information, derived from actual business processes </li></ul><ul><li>Complete information, with contextual guidance </li></ul><ul><ul><li>Proactive diagnostics </li></ul></ul><ul><li>Fully understand operational drivers affecting performance </li></ul><ul><li>Deliver alerts about deviations from performance targets </li></ul><ul><li>Better balance trade-off decisions, by highlighting operational dependencies </li></ul>Improving Supply Chain Effectiveness
  46. 47. Product demonstration SAP BusinessObjects Supply Chain Performance Management Demo
  47. 48. Standards-based end to end process support At any time, know your operational and related financial performance
  48. 49. Automated data collection Timely insights, with tight operational application integration
  49. 50. Proactive diagnostics Fully understand operational drivers affecting performance
  50. 51. Fast time to value, business agility Metrics management functionality
  51. 52. Analyst perspective <ul><ul><li>AMR, 11/07: “One of the most common patterns in the customer-facing metrics is the connection between demand forecast, perfect order, and inventory . Our research shows a strong correlation between demand forecast accuracy and the perfect order.” </li></ul></ul>“ “ “ “ “ “ <ul><ul><li>HBR, 9/07: “The most effective supply chains achieve the greatest possible availability of goods at optimal levels of inventory, transportation, and warehousing dollars. Specifying goals for improvement in these areas requires knowing where you stand now.” </li></ul></ul><ul><ul><li>HBR, 11/03: “Businesses that do not scrupulously uncover the fundamental drivers of their units’ performance face several potential problems. They often end up measuring too many things, trying to fill every perceived gap in the measurement system.” </li></ul></ul><ul><ul><li>AMR, 11/08: “Now is the best time to invest in technologies that yield greater transparency and control within the supply chain … navigating through the next several years will be a test of wills between partners, but also one of how well your supply chain is under control.” </li></ul></ul><ul><ul><li>AMR, 2/08: “No longer an afterthought, supply chain risk must be managed explicitly and profitably.” </li></ul></ul><ul><ul><li>Ventana, 1/09: “ Not every IT department or consulting organization has the skills to create a well-designed SCPM application.” </li></ul></ul>
  52. 53. Supply Chain Performance Management Tied into value scenarios within Responsive Supply Networks Inter-enterprise end-to-end processes Collaborative Demand and Supply Planning Logistics and Fulfillment management Manufacturing Network Planning & Execution Service Parts Management Collaborative Demand Response & Execution VP Supply Chain VP Manufacturing Supply Network Strategy and Design Supply Network Traceability Execution Tactical Strategic VP Logistics DESIGN SOURCE MAKE STORE MOVE SELL SERVICE CEO / CFO / CRO Demand Forecast Perfect Order Rating Supply Chain Cost Supply Chain Performance Management
  53. 54. SAP benchmarking services Know where you stand, and where to improve <ul><li>Services by SAP Value Engineering </li></ul><ul><li>Industry-leading benchmark program </li></ul><ul><li>Wide network of partnerships </li></ul>Mike Stoko, Assistant Director, SAP Global Operations and Value Capture, DuPont Since participating in the Benchmarking and Best Practices program we can compare apples to apples. We know what each business process costs and we can go after technical improvements to reduce the costs.” “
  54. 55. Solution detail – IT view Receive pro-active alerts about deviations for performance targets, and better balance trade-off decisions for improved supply chain performance Test and Improve Identify and Analyze At any time, know your operational and related financial performance, and understand operational drivers affecting performance Comply with leading industry standards from performance management (e.g. SCOR), focusing on metrics that matter Model and Understand Collect Collect and collate data directly from operational processes, such as order-to-cash, from SAP systems (e.g. ERP, SCM) or non-SAP systems
  55. 56. Moving towards risk-adjusted Supply chain performance management <ul><li>Enable risk-aware decision making </li></ul><ul><li>Balance cost and opportunities, against operational risk </li></ul><ul><li>Prioritize across strategic, financial, operational and compliance risks </li></ul><ul><li>Mitigate operational risk thru discovery, quantification, mitigation </li></ul>
  56. 57. The SAP advantage <ul><li>Clear Business User Focus </li></ul><ul><ul><ul><li>Turn-key performance management solutions </li></ul></ul></ul><ul><ul><ul><li>Using leading BI technology </li></ul></ul></ul><ul><ul><ul><li>Optimized for SAP, but fully running in non-SAP </li></ul></ul></ul><ul><li>Business Process Excellence </li></ul><ul><ul><ul><li>Standards-based process support </li></ul></ul></ul><ul><ul><ul><li>Automated data collection </li></ul></ul></ul><ul><ul><ul><li>Proactive diagnostics </li></ul></ul></ul><ul><li>Less Uncertainty ! </li></ul>© SAP 2009 / Page
  57. 58. © SAP 2008 / Page Thank you!
  58. 59. Copyright 2009 SAP AG All rights reserved <ul><li>No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed without prior notice. </li></ul><ul><li>Some software products marketed by SAP AG and its distributors contain proprietary software components of other software vendors. </li></ul><ul><li>SAP, R/3, xApps, xApp, SAP NetWeaver, Duet, SAP Business ByDesign, ByDesign, PartnerEdge and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. Business Objects and the Business Objects logo,  BusinessObjects, Crystal Reports, Crystal Decisions, Web Intelligence, Xcelsius and other Business Objects products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of Business Objects S.A. in the United States and in several other countries. Business Objects is an SAP Company. All other product and service names mentioned and associated logos displayed are the trademarks of their respective companies. Data contained in this document serves informational purposes only. National product specifications may vary. </li></ul><ul><li>The information in this document is proprietary to SAP. No part of this document may be reproduced, copied, or transmitted in any form or for any purpose without the express prior written permission of SAP AG. This document is a preliminary version and not subject to your license agreement or any other agreement with SAP. This document contains only intended strategies, developments, and functionalities of the SAP ® product and is not intended to be binding upon SAP to any particular course of business, product strategy, and/or development. Please note that this document is subject to change and may be changed by SAP at any time without notice. SAP assumes no responsibility for errors or omissions in this document. SAP does not warrant the accuracy or completeness of the information, text, graphics, links, or other items contained within this material. This document is provided without a warranty of any kind, either express or implied, including but not limited to the implied warranties of merchantability, fitness for a particular purpose, or non-infringement. </li></ul><ul><li>SAP shall have no liability for damages of any kind including without limitation direct, special, indirect, or consequential damages that may result from the use of these materials. This limitation shall not apply in cases of intent or gross negligence. </li></ul><ul><li>The statutory liability for personal injury and defective products is not affected. SAP has no control over the information that you may access through the use of hot links contained in these materials and does not endorse your use of third-party Web pages nor provide any warranty whatsoever relating to third-party Web pages. </li></ul>

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