Best Practices in the Supply Chain to Drive the Perfect...

Best Practices in the Supply Chain to Drive the Perfect Order

Kiran Garimella (Panel Moderator)VP, BPM Solutions, Software AG

Best Practices in the Supply Chain to Drive the Perfect Order |

Agenda

¬ Introduction ¬ Panel Discussion

¬ Measure First for Supply Chain Visibility – Richard North, Fonterra

¬ Supply Chain Integration at Woolworths – Walter DeWildt, Woolworths

¬ Driving Agility within Motorola’s Supply Chain – V. Dyke Millard, Motorola

¬ Industry Observations – Ellen Reilly, BearingPoint

¬ Audience Q & A


Measure First for Supply Chain Visibility

Richard North – Logistics Project Manager, Supply Chain Strategy, Fonterra


Key Facts

¬Co-operative structure owned by 16,800 farmers

¬ Assets approx USD 9B

¬ Revenue approx USD 10.5B

¬ Sells approx 2.5M metric tonnes per annum

¬ 20% of sales are sourced outside of NZ

¬ 95% of milk produced is exported from NZ

¬ Fonterra is approx 40% of global cross border trade

¬ 20% of NZ’s GDP

¬ 140 sales countries

¬ USD 350M per annum spent with 3PL vendors

Fonterra


12

1

Key:Current Fonterra PerformanceCurrent Fonterra Performance

Customer expectationCustomer expectation

ORIGIN DESTINATION

• TRANSACTION VISIBILITY

• LOGISTICS PROCESS DEFINITION

• VENDOR INTEGRATION

• IN HOUSE SUPPLY CHAIN EXPERTISE

• 3PL NUMBERS AND DEPENDENCY

• VOLUME OF MILESTONES

• LIKELY EXCEPTIONS

• UNPLANNED COSTS

NZD28M p.a non compliance costs

Business Challenges


¬ Develop tools and BAU processes that improve our visibility of our performance against customer expectations and allow us to focus on the critical areas for improvement

¬ Reduce the amount of cost and time spent at the interface between our customers and ourselves

VisibilitySupply Chain Transparency

TECHNOLOGY

(Software - track and trace / exception management / interactivity)

OPERATIONAL EXPERTISE

(logistics knowledge / control specific to location)

INTELLECTUAL CAPITAL

(Experience of the best way to drive the technology in a business context)

Fonterra Software AGContainers are tracked from the Pack Plants through departure ports, transship ports, to the destination port, and on through to either warehouse or customer delivery. All container tracking events are received via B2B.

Solution


¬ Business case approved on basis of conservative 18% IRR

¬ 10 month project

¬ Completion January 2008

¬ Will cover 80% of our logistics activity and key compliance areas

¬ Will directly affect 400 operational, tactical and strategic users

Primary focus is on the quality of the technical solution, user functionality and the quality of the data collected

Secondary focus will be on analytics, reporting and understanding a different view of the world

Only then will we look to make permanent change to our business

Results


DEGREE OF;

• END TO END VISIBILITY

• QUALITY DATA ANALYSIS

• MINDSET CHANGE

• PROCESS COMPLIANCE

• AUTOMATION

• INTEGRATION

• DEPENDENCY-

+

BEFORE TOOLSET• Silo reporting• limited data reach• Manual analysis• Afther the fact issue resolution• Some visibility development• Ocean freight portal

CURRENT PROJECT• system / vendor integration• Track and trace• Passive alerting• Dashboarding

TIME IN YEARS

-1 0 0.5 1.0 1.5 2.0 2.5

NEXT PHASE 1• Extend within current functionality• Geography extension• Vendor extensions• Process extension

NEXT PHASE 2• Workflow management• Partner access• Business models

CONSOLIDATION 1• Data quality• Vendor performance• Dashboard• Reporting• Benefit realisation

CONSOLIDATION 2• Business model changes• Vendor base changes

¬ Solution selection is key¬ Controlling the enthusiasm¬ Changed our view of service providers ¬ “Visibility” work does not have a finite end point

Challenges / Learnings


Supply Chain Integration at Woolworths Ltd

Walter DewildtIntegration Competency Center ManagerWoolworths


¬ Woolworths Limited is an Australian company, with its head office in Sydney.

¬ We operate almost 3,000 stores, petrol sites and hotels in Australia and New Zealand and are involved in a consumer electronics joint retail venture with the Tata Group in India.

¬ Woolworths employs around 175,000 people. Some 50,000 of our employees are in rural and regional areas.

¬ Woolworths Limited has annual sales of over $38 billion.


Business challengeTime to market for store facing initiatives

Existing Mainframe hub for store integration¬ MQ and XCOM standard for File transfer and Messaging Ok for transactions that start/end on Host but inflexible and expensive to develop and manage store initiatives that do not.

Mainframe

PetrolLiquor

Supermarket

MQ

XCOM Fabric

Retail OutletsCorporate Functions

wM ISwM IS

LMSwM ISwM IS

B2BTN

wM ISwM IS

WMSwM ISwM IS

TMS

¬ 100+ IS servers supporting corporate functions today

¬ 20+ corporate applications connected via Fabric


Fabric platform extended to retail outlets (2000+)

Integration Server in each retail outlet¬ Real time Messaging (Async)¬ Real time web Services (Sync)¬ Automated deployment and Configuration

Mainframe

Retail Outlets

Fabric

wM ISwM IS

Petrol

wM ISwM IS

Supermarket

wM ISwM IS

Liquor

wM ISwM IS

B2BTN

wM ISwM IS

WMSwM ISwM IS

TMS

wM ISwM IS

LMS

Corporate Functions

¬ 2000+ stores planned

¬ 200+ deployed today

¬ Smart routing

¬ File - Message WebService -JMS


¬Implementation speed/Cost¬ New messages/files are setup with a configuration change to a central repository that stores are configured against.

¬Support Visibility¬ Transactions are audited at each step and a central console can search and discover the status of individual messages.

¬Flexibility¬ Business has options for more real time transactions interfacing with non-host back office functions. E.G.

¬ Epay phone topups available from each register (POS)¬ Customer loyalty accrual and redemption services from each POS.

¬ Smart Routing of files through the enterprise. (FTA)

BenefitsConsistent platform across multiple retail outlets


Challenges and Lessons Learned

¬Broker Gateway – Document Sync & Routing¬ Getting documents flowing through the gateway and setting filters to provide

functionality to publish to all stores, or just selected stores was a challenge. We now have a solution that any store/back end server can publish to any other store, or region, or all stores.

¬Number of Integration Servers¬ With a rollout to all retail outlets we will be touching on up to 3000 integration servers

over time. Store releases are tightly managed and need to be automated. We worked to create an Autobuild and Auto configure capability on top of the webMethods installer and Tivoli S/W distribution platforms.

¬Support of 3000 Integration Servers¬ Woolworths ICC is not geared to cater for support on this scale. working with Store

Support teams we setup tools to allow store support personnel with limited webMethods training manage the day to day support of the environments. The Autobuild and Auto configure capabilities were crucial to this success.


Driving Agility within Motorola’s Supply Chain

V. Dyke MillardManager Business Process Management CoEMotorola


Everyone Knows Motorola

¬ Motorola is known around the world for innovation and leadership in wireless and broadband communications. Inspired by our vision ofseamless mobility, the people of Motorola are committed to helping you connect simply and seamlessly to the people, information, and entertainment that you want and need.

¬ We do this by designing and delivering "must have" products, "must do" experiences and powerful networks -- along with a full complement of support services. A Fortune 100 company with global presence and impact, Motorola had sales of US $42.9 billion in 2006.

¬ For more information about our company, our people and our innovations, please visit www.motorola.com

http://www.motorola.com/


Motorola has a huge, diverse Supply Chain

How do you maintain product diversity, reduce stock-outs and improve service levels all at the same time?

How do you design an agile, seamless logistics process for consumer, and enterprise product lines?

Build Supply Chain processes that are simple, common and global

In order to achieve this goal, Motorola has done the following:¬ Organized all Supply Chain processes into a single, global business

unit¬ Incorporated product differentiation through postponement¬ Established key partnerships to execute Manufacturing and Logistics

activities¬ Developed service-based and service-oriented technical solutions


External Manufacturing Suppliers (EMS‘s)

¬ One of the key Supply Chain initiatives implemented at Motorola is a new B2B interchange framework based on RossettaNet standards for our key Electronic Manufacturing Services (EMS) suppliers

¬ This framework was initially developed for a Motorola facility that was sold to an EMS partner

¬ Motorola needed a way to communicate demand signals to this partner and ensure that any gaps in the business process were quickly identified so they could be proactively addressed

¬ This solution is now our standard framework for all EMS partnerships


Process Flow for Business Activity MonitoringKPI / Alerts

- Date conflicts- Profile

validations- SLA Assurance

KPI / Alerts- ASN- Shipment

delays- Quantities- Discrepancies

KPI / Alerts- Delivery delays - Updated Dates- Proof of

Delivery

KPI / Alerts- Quantity +/-- Freight Terms- Packing Inst.- Hold Mgmt

KPI / Alert- WIP Status- Progress

against Order

KPI / Alert- Order

Cancellation Data


Supply Chain Monitoring Results

The results of this new framework include the following:¬ Increased agility in making sourcing decisions¬ Reduced transaction costs¬ Proactive monitoring of shipment delays¬ Increased visibility for day to day operations¬ Auto-generated alerts based on business-defined criteria¬ SLA management and tracking¬ Real-time capture and display of transactional metrics¬ Six Sigma error tracking¬ Cost Penalty avoidance

The primary value of Business Activity Monitoring is to the process owners within the business units – not to IT teams managing technology components


Challenges and Lessons Learned

1) Change Management – BAM is unlike traditional applications; process owners and project teams must help users understand and take advantage of this new type of capability

2) Scope of the Solution – BAM solutions cover more process scope than most business (and IT) teams are used to dealing with in detail;comprehensive solutions need to be well thought-out; process modeling benefits are significant

3) New technology stack – BAM solutions often increase technical complexity of the overall landscape; this must be balanced by driving simplification into the overall process from the user perspective; BAM alerts and process metrics should make the process easier to understand and control


Best Practices in Supply Chain to Drive the Perfect Order: Industry Perspective

Ellen ReillyManaging Director, Supply Chain, BearingPoint


Companies Face Common Challenges for the Supply Chain

executes to various global plans and

service levels

¬ Excessive inventory carrying costs and write-offs ¬ Difficulties shifting production and warehousing facilities to low cost

countries¬ Inability to consolidate operations following mergers & acquisitions¬ Metrics not aligned across various functions, departments and

players across supply chain¬ Disruptions resulting from cross border transactions

¬ Inability to respond to market driven price pressure on existingproducts

¬ Margin pressures resulting from shifts of volume to private labels (Retail and CPG)

¬ Portfolio quality pressure due to shorter product life cycles¬ Service and margin pressures driven by increasingly complex product

portfolios¬ Inconsistent performance due to “silo” structure and lack of global

learning mindset

¬ Lost sales due to missed orders or longer lead times¬ Lower customer service due to stock-outs¬ Excessive or insufficient capacity¬ High material and order expediting costs¬ Inability to meet differentiated customer needs in terms of product,

service and channel offerings

integrates across functions and geographies

decision support and governance for on-

going strategic decision process

Characteristics Common Challenges


Where Perfect Orders Fit in the Hierarchy

Supplier Quality

Supplier On-Time

Purchase Costs

Dir MtlCosts

RM Inv

Cost Detail

Production Schedule Variance

Plant Utilization

WIP + FG Inventory

Order Cycle Time

Perfect Order Detail

Correct

DiagnoseAP AR

Inventory Total

Cash-to-Cash

AssessDemand Forecast

SCM Cost

Perfect Order

Supplier Quality

Supplier On-Time

Purchase Costs

Dir MtlCosts

RM Inv

Cost Detail


Plant Utilization

WIP + FG Inventory

Order Cycle Time


Supplier Quality

Supplier On-Time

Purchase Costs

Dir MtlCosts

RM Inv

Cost Detail


Plant Utilization

WIP + FG Inventory

Order Cycle Time


Correct

DiagnoseAP AR

Inventory Total

Cash-to-Cash DiagnoseAP AR

Inventory Total

Cash-to-Cash

AssessDemand Forecast AssessDemand Forecast

SCM Cost

Perfect Order

Perfect Order: % of orders that are complete, accurate, on time and in perfect condition.

Source: AMR Benchmark Analytix


Inventory Management Industry Key Considerations

Industry Key Challenges Inventory Response

High Tech ¬ Difficult to predict market trend/customer demand¬ Shorter product lifecycles and complex process to bring a

product from concept to market

¬ Trend of outsourcing manufacturing and logistics extends the supply chain risks

¬ Manufacturing processes and bill of materials are becoming mo specific

¬ Flexibility in inventory policy dealing with market changes and pricing fluctuation

¬ Integrate product knowledge with inventory management

¬ Supplier collaboration to mitigate inventory risks¬ Evaluate supply chain partners and project potential inventory

issues

¬ Lean MRO driven

¬ Guaranteed hourly cost¬ Outsourcing management¬ Component MTBR (Mean time between repair)

¬ Repair cycle time

Retail/CPG ¬ Short product shelf life / rapid obsolescence¬ Customers demand high fill rate / on-shelf percentage

¬ Global sourcing with longer lead times and greater supply uncertainty

¬ Supply chain variability ("bullwhip effect")

¬ Efficient consumer response (ECR) / Quick response¬ Vendor inventory management / ownership

¬ Collaborative planning, forecasting and replenishment (CPFR) ¬ Supply chain visibility (including RFID)

¬ Synchronous demand networks (SDN) / demand-driven supply networks (DDSN)

¬ Inventory optimization / multi-echelon inventory planning

Aerospace ¬ Shared Inventory owned by OEM, Repair Supplier or Distributor

¬ Outsource inventory ownership

¬ Long term agreement (LTA) relationships¬ ”Ample supply” is giving way to JIT and lean Supply Chain

approach


Inventory Management Industry Key ConsiderationsIndustry Key Challenges Inventory Response

Oil and Gas ¬ MRO Driven – preventative maintenance

¬ Repair cycle time ¬ Up-time utilization as high as possible

¬ MRO requirements drive inventory proliferation¬ Capital projects drive unpredictable, unique

requirements¬ Implement simple, effective inventory controls for

compliance

¬ Changing industry regulations¬ Increasing demand and constrained supplies lead to

poor customer service levels¬ Increasing pressure to manage working capital

¬ High Asset Utilization Targets ¬ Long, expensive changeovers`

¬ Highest supply chain costs of any industry ¬ Contract Compliance Risks Ability to sell excess

capacity in lean times¬ Maximize profit through allocation when constrained

¬ Management of remote inventories (consigned or outsourced terminals)

Utilities ¬ Adopt leading practices from manufacturing companies, such as:¬ Sales & operations planning¬ Inventory Cycle Counting

¬ Warehouse Management Systems¬ Product Lifecycle Management

¬ Lean Manufacturing¬ Supplier collaboration

¬ Vendor Managed Inventories¬ Standardize, simplify processes¬ Adapt technologies such as bar-coding and RFID to simply

inventory controls

Chemical

¬ Preventative maintenance driving critical spare inventory

¬ Reduce obsolescence ¬ Centralized warehousing to reduce safety stock

¬ Strong Sales & Operations Planning processes, with emphasis on demand shaping and pricing optimization

¬ Efforts to streamline and automate processes (i.e., “touch-less”order fulfillment)

¬ Terminal management technologies

¬ Elimination of non-value added material handling steps¬ Continued outsourcing of logistics activities


• Web Portal• EDI• Paper• Phone• Fax

Order Channels

Fire

Wal

l BU-1

BU-3

Customer Service

BU-2

Service Hub

Illustr

ation

CustomersDistributors

Typical Order Management Processes


¬ Supply Chain costs can be reduced by:¬ Automating business processes that are currently manually intensive¬ Identifying unprofitable customers and products that require excessive manual

intervention¬ Focusing on analytical, proactive improvement of more significant costs such as

freight, expediting, etc.¬ Provides the ability to “unblock” messages between various IT Platforms and

automate previously manual process¬ Allow for time based savings through improved business processes¬ Allow for increased profitability and continuous information flow from

supplier to manufacturer to end users.

¬ Supply Chain costs can be reduced by:¬ Automating business processes that are currently manually intensive¬ Identifying unprofitable customers and products that require excessive manual

intervention¬ Focusing on analytical, proactive improvement of more significant costs such as

freight, expediting, etc.¬ Provides the ability to “unblock” messages between various IT Platforms and

automate previously manual process¬ Allow for time based savings through improved business processes¬ Allow for increased profitability and continuous information flow from

supplier to manufacturer to end users.

Perfect Order vision is to enable full automationof the Order-To- Cash process from initial order booking through auto load of material, accounts receivable, application, and settlement.

Industry Best Practices


Key Challenges: What prevents most companies from an efficient Order-To-Cash Process?

¬ Electronic orders are “blocked” in SAP

¬ Order information inaccurate¬ Inability to assign a delivery date due

to poor planning¬ Material availability issues (ATP)¬ Insufficient lead times¬ Multiple line item handling process¬ Freight consolidation issues

¬ Several steps during the execution of an order are done manually instead of automatic in the background

¬ Example are posting of goods issue document, creation of shipment cost document,…

¬ Orders are created manually in the system and therefore

¬ The time it takes from taking the order from the customer to entering the order in the system is not efficient

¬ The amount of errors created through the manual entering process is higher than when this is done automatically

¬ Orders are changed multiple times during the following stages

¬ Sales order¬ Delivery¬ Shipment¬ Post Goods Issues¬ Billing Document

¬ Customer Freight Doc¬ Shipment Cost Doc¬The underlying roots causes for these changes are…

http://www.compositemfg.com/156x100 factory module assembly iso2.jpg

http://www.contractlaboratory.com/www/images/objects/chemicals.gif


Best Practices: Continuous Improvement Process

Continuous Improvement Process:¬ Enabled by the data collected¬ Closed loop process to identify and improve

process efficiency

Phase Description ExamplesCorrective Identify gaps, missing and inaccurate data and

processes required to accurately process and schedule a sales order

Enable Enable processes that are currently manually intensive or subject to long cycle times

Flexible trading partners; consignment and remote inventory management; event-based exception handling

Baseline processes and performance metrics and benchmark this with similar companies to understand performance gaps and opportunities

Differentiate Identify, define, implement and improve processes which provide a competitive environment in the marketplace

Demand synchronization; market segment alignment; identification of success drivers and market differentiators

Identify and correct planning data, such as lead-times, lot assignment rules, bills of material, etc.; identify individuals for targeted training and improvements; SOX compliance

Improve Benchmark order cycle times; throughput and volume comparisons, Order Management FTE’s per billion revenue, etc.

Plan Do ReviewSustain the processes developed and seek to achieve new levels of

performance

Utilize appropriate weekly reports to monitor progress and implement corrective

action if necessary

Develop plan to achieve and maintain

operational performance goal

Feedback

In addition to a process framework, No Touch Order establishes the foundation for Continuous ImprovementIn addition to a process framework, No Touch Order establishes the foundation for Continuous Improvement


Audience Q&A

Thank You.

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