Driving uncertainty from your supply chain final

Driving Uncertainty from Your Supply Chain

Presented by: Lonnie Ayers, PMP, Industry Principle, Aerospace & Defense

Contact: [email protected]

© SAP 2009 / © SAP 2008 / Page 3

1. Defining Uncertainty1.1. Financial Risk1.2. Supply Chain Performance Risk

2. Business Drivers2.1. Challenges2.2. Performance Measurement

3. Supply Chain Network Evolution3.1. Value Proposition

4. Performance Management4.1. Need for Measurement4.2. Performance Management

Agenda

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Uncertainty

Uncertainty: The probability that what you expect to happen will not happen as expected.

Examples Include:

Customer Demand Supplier Responsiveness Trade Finance=Currently the number one risk to the global

flow of goods and services! 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

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With the Global “De-Leveraging” Credit is More Scarce, Driving Orders Down & Uncertainty Up

Deepening recession in developed economies

Rapidly decelerating growth in emerging economies

Increasing volatility and uncertainty in financial markets

Increasing downward pressure on prices

Declining top-line growth for most companies

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A recent research report into Supply A recent research report into Supply Chain Finance (SCF) compares the Chain Finance (SCF) compares the situation in the UK and Germany situation in the UK and Germany and reveals that 88% of UK firms and reveals that 88% of UK firms and 55% of Germanand 55% of Germancompanies have identified that key companies have identified that key suppliers are unable to sustain suppliers are unable to sustain further lengthening of payment further lengthening of payment periods.periods.

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The Average Company is Cutting Costs, Shrinking Assets & Hoping for Better Days

Cutbacks in product and service offerings

Plant shutdowns (e.g. automotive)

Reduction in work force

Reduced R&D budgets

Across the board cost cutting

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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

What to do……? Strive for transparency in all your supply chain activities.

Prepare for the unexpected from your trading partners.

Measure your network’s performance against goals

Constantly assess your network’s fundamentals

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Agenda


2. Business Drivers2.1. Challenges2.2. Best in Class Performance

3. Supply Chain Network Evolution3.1. Value Proposition3.2. Subdivider headline


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Business Drivers

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Business Driver Value PropositionSAP

DifferentiatorsCustomer

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

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Todays Supply Chain Challenges drive Company‘s Strategy

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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.

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Even Innovators Lack State-of-the-Art Supply Chain Management Systems

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Overall % A&D High-tech CI Chem Oil&Gas

Manual and spreadsheet intensive 12% 15% 15% 11% 15%

Partially automated but use differentsystems across company

42% 46% 52% 42% 30%

Partially automated and use a commonsystem company-wide

21% 23% 11% 25% 30%

Fully automated but use different systemsacross the company

16% 8% 15% 16% 15%

Fully automated and use a common systemcompany-wide

9% 8% 7% 5% 10%

Source: AberdeenGroup „Supply Chain Cost-Cutting Strategies“ 2007

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Best in Class …

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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%

… much more likely to have invested in new applications as part of their improvement strategy

Source: AberdeenGroup „Supply Chain Cost-Cutting Strategies“ 2007

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Agenda





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Improve visibility & collaborationTreat suppliers, customers and partners as an extension of your organization

Streamline Logistics & FulfillmentMaximize 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

The Supply Chain Network Evolution: Combining Efficiency and Responsiveness

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Responsive Supply Networks:Shift focus from Applications to End-to-End Value Scenarios

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

Collaborative Demand and Supply Planning Collaborative Demand and Supply Planning

SOURCE SUPPLY MAKE SELL MOVE SERVICE CUSTOMER

Logistics and Fulfillment Management

Logistics and Fulfillment Management

Manufacturing Network Planning & Execution


Collaborative DemandResponse & ExecutionCollaborative DemandResponse & Execution

Supply Network Strategy and DesignSupply Network Strategy and Design

Supply Network TraceabilitySupply Network Traceability

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Agenda

Value Proposition

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Value Proposition

Value Proposition

Increase demand accuracy and order fulfillment satisfaction level

Reduce inventory levels and increase inventory turns across the network

Increase profitability and productivity

Lower costs through integrated distribution, logistics, and transportation driven by real-time planning

Improve order, production, and execution tracking with RFID-enabled sense and respond processes

Improve customer satisfaction with planning and execution integrated by design

Enable more efficient and better informed suppliers Shorten cash-to-cash cycle times through network-wide

information transparency Increase customer satisfaction and service levels with

an integrated, synchronized, and responsive supply network

SAP Differentiators

Customer References

BusinessDrivers

Real-time demand

Balance supply and demand

Visibility Transparency Sense and

respond

Global source & supply

Collaboration

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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

DeliverMakeSource

Implementation Level

(DecomposeProcessElements)

Supply Chain Operations Reference model

Top Level

(Process Types)

Description

Balance Production Resources withProduction Requirements

Establish DetailedProduction Plans

Identify, Prioritize, and AggregateProduction Requirements

Identify, Assess, and AggregateProduction 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.

Level 3 defines a company’s ability to compete successfully in its chosen markets and consists of:

Process element definitions Process element information inputs and outputsProcess performance metrics Best practices, where applicable System capabilities required to support best

practices Systems/tools by vendor

Companies “fine tune” their Operations Strategy at Level 3

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

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Linking SAP SCM and Business Value

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VALUE

Increaseprofitability

Optimize use of invested

capital

Increaserevenues

Decreasecosts

ReduceWorkingcapital

Optimize useof fixedcapital

Improved customer reliability Increased product availability Reduced out-of-stocks

Improved customer responsiveness Reduced lead-times

Reduce inventory carrying costs (storage, handling, obsolescence, scrap … )

Reduce purchased material costs Reduce manufacturing costs Reduce distribution costs / fulfillment costs Reduce invoice write-offs (disputes)

Reduce work-in-process Decrease raw and FG inventory Shorten ‘cash-to-cash’ cycles (reduce ship-to-

invoice, reduce DSO and increase payable (terms))

Optimize use of physical assets and increase capacity utilization(plants, warehouses, equipment, trucks)

Reduce physical asset base

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

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SAP Differentiators

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SAP Differentiators

Synchronize supply to demand by balancing push and pull network-planning processes and by replenishing and producing based on actual demand

Sense and respond through an adaptive fulfillment network in which distribution, transportation, and logistics are driven by and integrated with real-time planning processes

Enable network-wide visibility, collaboration, and analytics across the extended supply chain.

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.

BusinessDrivers

Real-time demand



respond

Value PropositionCustomer

References


Collaboration

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Aligning stakeholders to Achieve Collaborative Demand and Supply Planning

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?

Revenue Growth Operating margin Customer Satisfaction

Revenue Objectives Customer Satisfaction Forecast Accuracy

Customer Service Levels Inventory Levels Supply Chain costs

Coo

Effective Collaborative Demand and Supply Planning requires alignment between several stakeholders with differing objectives

Supply chainSales

Sales andOperations Planning

How do I balance demand and supply to grow the business profitably?

Total Revenue Total Throughput Total Profitability

OperationsCOO

Supply Planning

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Operations: Procurement

Operations: Manufacturing

Supply chain

Sales

Supply NetworkPlanning

Procurement Planning

Rough cut Production Planning

VMI / Responsive

Replenishment

Collaborative Demand and Supply Planning is an End-to-end, Cross-functional Process

Demand Signal Capture

Sales Forecast

Collaboration

Trade Promotion Planning

Demand Planning

Finance

Supplier Collaboration

Safety Stock

Planning

DistributionPlanning

Demand Analysis

Supply Analysis

Capacity Planning

Finance & Budget Planning

Demand & Supply Alignment

Collaborative Demand Management

COO

Supply chainSales

Sales andOperations Planning

OperationsCOO

Supply Planning

PerformanceManagement

Cross-Functional Supply Chain Performance Management

Collaborative Demand and Supply Planning connects processes across departments to enable a timely, profitable response to customer demand

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Customers Drive Value with Collaborative Demand and Supply Planning

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.”

AMRThe Handbook for Becoming Demand Driven

“

Out-of-stocks declined up to 25% On-shelf inventory improved by

20% Replenishment cycles cut down

from 15 to 6 days

Improved on-time and complete orders from 70% to 98%

Reduced inventory by 22% Improved cycle times

Improved forecast accuracy by 10%

Reduced cycle time Faster reaction to market

changes

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Collaborative Demand ManagementObjectives, issues, capabilities and benefits

■ Lack of visibility of demand creation activities and poor collaboration with customers and account teams

■ Customers providing data while raising their service level requirements

■ Forecasting based primarily on enterprise historical data

■ Include all sources of demand information and dynamics for better understanding and anticipation of customer demand

■ Collaborate directly with customers regarding demand and supply plans

■ True, real-time visibility of demand signals at the customer level

■ Ability to accurately predict customer requirements and take advantage of new market opportunities.

■ Better responsiveness and improved customer service

■ Improved forecast accuracy, fewer stock outs, reduced inventory

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

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Collaborative Demand ManagementSAP Solution

SAP Differentiators

SAP Solution

■ Support an end-to-end collaborative process by incorporating internal and external forecasts and plans

■ Harmonize external demand signals with enterprise data for more complete and accurate picture of demand

■ Integration of Demand Signal Repository into SAP SCM for responsive forecasting and replenishment

■ Exception-based solution allows planners to increase plan quality and leverage additional sales opportunities

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 ForecastCollaboration

Trade PromotionPlanning

Demand Signal Capture

Demand Planning

Customer Collaboration (VMI)

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Results Achieved by SAP’s SCM Solution

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“SAP Customers Run More Responsive and Cost-Efficient Supply Chains”

40 percent lower inventory days of supply and 45 percent lower overall cash-to-cash cycle time.

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

On-time delivery: 17 percent better performance to request date and a 7 percent better to commit date

"PRTM / SAP Benchmarking Study 2002-2003: Supply Chain Planning”

Demand Planning Case Study Data

SAP Customers who have implemented DP, have achieved on average:

Increased Forecast Accuracy of 22% (Range 5% - 40%)

Reduced Inventory of 29% (Range 15% - 60%)

Reduction in Planning Cycle of 68% (Range 50% - 85%)

SAP SCM Case Studies available at www.sap.com/

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Customers Drive Value with Collaborative Demand Management

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

“

Reduced mean absolute forecast error by over 50%

Reduce time between forecast close and completion of schedules by 33%

Streamlined trade promotion planning; improved operations and demand planning

Using RR, streamlined VMI process and improved customer in-stock rate esp. for promotions

Improved forecast accuracy by 21%

Enabled data transparency in all phases of the planning process

Improved ability to make rapid changes to production schedule

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Supply PlanningObjectives, issues, capabilities and benefits

■ Complete visibility and synchronization of demand and supply

■ Inventory visibility and optimized safety stock levels across the network

■ Optimized material planning and sourcing across the network

■ Improved product availability and delivery performance

■ Reduced inventory carrying costs, reduced obsolescence

■ Reduced total supply chain costs, enhanced profitability

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

■ Increasing demand variability and volatility make it difficult to meet customer expectations

■ Supply disruptions increase the need for inventory buffers, missing inventory visibility prevents consolidation

■ Demand variability and supply uncertainty lead to operating inefficiencies

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Supply PlanningSAP solution

■ Integrating purchasing, manufacturing, distribution, and transportation plans of the internal and external network into an overall supply picture.

■ Simulate and implement comprehensive tactical planning and sourcing decisions based on a single, globally consistent model.

■ Determine the best short-term strategy to replenish stocking locations, whether leveraging existing supply or and triggering production and procurement

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

Supply Network Planning

Procurement Planning

Production & Capacity Planning

Safety Stock Planning

Distribution Planning

Supplier Collaboration

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Customers Drive Value with Supply Planning

“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 HutchinsonSenior Vice President of Supply Chain Management

Brown-Forman Corporation

“

Reduced days in inventory by 7% Improved store in-stock, forecast

accuracy and case-fill metrics while improving productivity

Reduced expediting costs in transportation

Increased in-full and on-time delivery service level in the range of 97% and 100%

Reduced overall supply chain costs by 4%

Reduction of inventory by 50 – 70%Reduced procurement costs by 5%

Improve on-time delivery by 70%

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Sales and Operations PlanningObjectives, 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

■ Difficult to meet customer expectations due to increasing demand variability and volatility esp. for new products and promotions

■ Limited ability to respond to new market opportunities due to supply disruptions, resource constraints and unbalanced utilization

■ Operating inefficiency due to demand variability and supply uncertainty

Key business capabilities

■ Capture demand input from all available sources (Sales, Marketing, Trading Partners)

■ Develop a synchronized supply plan that considers and balances demand across all network resources

■ Align company financial, marketing and operational goals in one consolidated plan

Benefits

■ Unified demand and supply plan to meet customer demand

■ Maximized throughput to satisfy market demand and customer service objectives

■ Synchronized demand and supply plan that are both feasible and in line with company financial goals

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Sales and Operations PlanningSAP Solution

SAP Differentiators

SAP Solution

■ Provide all relevant demand and supply information in a unified environment with complete visibility for all stakeholders incl. data from product development and finance

■ Provide stakeholders with their own view of the data to make financially and operationally sound decisions

■ Enable real-time access to data for timely decision-making

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 Analysisand Update

Supply Analysis

ProductionCapacity Planning

Finance andBudget Planning

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Customers Drive Value with Sales & Operations Planning

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

“

“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.”

Adopted global S&OP process based on SAP SCM

Increased the number of products while maintaining 12 inventory turns per year and 99%+ service levels.

Maximized return on assets by allocating most profitable match of supply and demand

Achieved superior customer service with on-time delivery rate of 97.5%

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SAP Supply Chain Management The Big Picture

SAP ERP

SAP ERP SAP

PLM

SAP PLM

SAP APODemand 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 CRM SAP

SRM

SAP SRM

Co-innovation ecosystem

Sample Partners

Composites

Duet demand planning

Supply Chain Performance Management

Product Tracking & Authentication

Inventory Optimization

Service Parts Optimization

SAP SCM

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Our Response to ‘Why SAP SCM?’

2. SPEED TO TANGIBLE VALUE

Reduce raw material costs 3% - 30%Reduce inventory levels 25% - 60%Increase aftermarket revenue 16% - 70% Reduce lead times 15% - 200% Pre-configured and “pre-integrated” ERP solution

can be live in as little as 16 weeks

1. ENABLE BUSINESS STRATEGY

Four Reasons for you to

Realize Strategic

Goals

Become globally cost competitiveMeet global compliance requirements

Increase customer satisfaction / loyaltyIncrease productivity & efficienciesIncrease responsiveness & agility

Increase sales revenuesSpeed innovation

4. LOWEST TCO3. LOWEST RISK

SAP viability and reputation

Proven – SAP has been providing mission critical solutions for over 30 years.

Appreciating asset - 8,800 developers & over $1B in annual R&D to enhance solution

Market leader – 60% global market share Focus– not distracted by acquiring competitors &

integrating their disparate systems

• Modular Flexibility - deploy all at once or by business processes as needed

• Eliminate 80-90% of interfaces (interfaces cost on average $35K to develop and $6K/yr to maintain)• Leverage current IT investments by using SAP

NetWeaver technology for cost effective integration

Reduce IT costs by 30-50% by retiring disparate systems / applications

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A snapshot of SAP SCM customers

Demand Planning andSupply Planning

Supply Network Collaboration

Order Fulfillment & Transportation Management

Production Planning &Detailed Scheduling

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Customer References

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Customer References

Increase demand accuracyDow Corning Corporation improved forecast accuracy by up to 25%

Reduce inventory and increase inventory turnsSI Corporation reduced finished goods inventory by 60%

Increase profitability and productivityBayer Material Science reduced planning time and effort by 33%

Lower costsBeiersdorf-Lechia SA increased sales by 4%, and decreased safety stock by 42%

Improved customer satisfactionColgate-Palmolive Company improved on-time delivery and complete orders from 70% to 98%

More effective and better informed suppliersSI Corporation reduced SKU’s from 34,000 to 5,300

Shorter cash-to-cash cycle timePalm decreased cash-to-cash cycle time by 39%

Increased customer satisfaction and service levelsNIBCO Inc. increased its perfect order rating from 29.5% to 87%

BusinessDrivers

Real-time demand



respond


Collabora-tion

© SAP 2009 /

What do the analyst say…..

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

SAP is attracting increasing numbers of customers using APO in more demanding and complex SCP environments. 2

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

1 "SAP Outlines Updated SCM Strategies, Addressing Some Key End-User Challenges," by Tim Payne, Gartner, January 2008 2 "MarketScope for Supply Chain Planning: Process Automation, 2008," by Tim Payne, Andrew White, C. Dwight Klappich, Gartner, April 2008

“

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Agenda

© SAP 2009 /

Cost

Supply chains are under pressureAnd climate is getting tougher

Volatility

Risk

Purchasing Manufacturing Index

Supply Chain Digest, 2009, and McKinsey, 2008

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

Consumer Confidence Index

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%

Sample of Economic Measures

Are my customers satisfied ?

Am I managing my assets

effectively?

How much should I

produce?

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Perfect Order Rating

XX

X

Supply Chain CostTo 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

You cannot manage what you cannot measure

Demand Forecast

© SAP 2009 /

Case Study: CPG companyDepartment-only metrics can hurt overall performance

Finance

Defer payments to end ofpayment period-Killing suppliers!

Decrease budget for standard transportation cost

Sales

Lack of focus, and alignment No insight into supply chain performance Don’t know how to optimize; when to take action

Lack of focus, and alignment No insight into supply chain performance Don’t know how to optimize; when to take action

Manufacturing

Rebates on selected products

Launch of customer loyalty programs

Switch to lowest cost component suppliers-But maintain quality levels

Increase production throughput

© SAP 2009 /

Need for Performance Management

Demand Perfect Order

Cost

Finance

Sales

Manufacturing

How arewe doing?

What should we do?

Why is this happening?

© SAP 2009 /

Volatility

Cost Risk

Supply Chain Performance ManagementEffectiveness, not only efficiencies

Demand Perfect Order

Cost

Accounts payable

Cash flow

Shipment cost

Number of returns

Customer satisfaction

Customer defection

Inventories

Product quality

Purchasing cost

Visibility

Effectiveness

Control

© SAP 2009 /

Supply Chain Performance ManagementEffectiveness, not only efficiencies

Order Management

Cost

Order Management

Cost

Material Acquisition

Cost

Material Acquisition

Cost

Planning and Finance CostPlanning and Finance CostLevel 2 Metrics

Finished Good Warehouse

Cost

Finished Good Warehouse

Cost

Customer Service Cost

Customer Service Cost

Outbound Transportation

Cost

Outbound Transportation

CostLevel 3 Metrics

Express Freight

Express FreightFuel CostFuel Cost ReturnsReturns Invoices

OutstandingInvoices

OutstandingDiagnostic Metrics

-

Strategic Goals

Perfect Order Fulfillment

Perfect Order Fulfillment

Level 1 Metrics

+

Supply Chain Management

Cost

Supply Chain Management

Cost

+

Supply Chain EffectivenessSupply Chain Effectiveness

-

© SAP 2009 /

Improving Supply Chain EffectivenessImproving Supply Chain Effectiveness

SAP BusinessObjectsSupply Chain Performance Management

Standards-based end-to-end process support At any time, know your operational and related financial performance

Utilize leading industry standards for performance management (e.g. SCOR)

Focus on end-to-end processes (e.g. order-to-cash), rather than reinforcing operational silos

Automated data collection Timely insights, with tight operational application integration

Relevant information, derived from actual business processes

Complete information, with contextual guidance

Proactive diagnostics Fully understand operational drivers affecting performance

Deliver alerts about deviations from performance targets

Better balance trade-off decisions, by highlighting operational dependencies

© SAP 2009 /

At any time, know your operational and related financial performanceAt any time, know your operational and related financial performance

Standards-based end to end process support

© SAP 2009 /

Timely insights, with tight operational application integrationTimely insights, with tight operational application integration

Automated data collection

© SAP 2009 /

Fully understand operational drivers affecting performanceFully understand operational drivers affecting performance

Proactive diagnostics

© SAP 2009 /

“

“

“

“

“

Analyst perspective

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.”

“ 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.”

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.”

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.”

AMR, 2/08: “No longer an afterthought, supply chain risk must be managed explicitly and profitably.”

Ventana, 1/09: “Not every IT department or consulting organization has the skills to create a well-designed SCPM application.”

© SAP 2009 /

Inter-enterpriseend-to-end processes

Collaborative Demand and Supply Planning Collaborative Demand and Supply Planning

Logistics and Fulfillment management

Logistics and Fulfillment management



Service Parts ManagementService Parts Management

Collaborative DemandResponse & ExecutionCollaborative DemandResponse & Execution

VP Supply Chain

VP Manufacturing

Supply Network Strategy and DesignSupply Network Strategy and Design

Supply Network TraceabilitySupply Network Traceability

Execution

Tactical

Strategic

VP Logistics

DESIGN SOURCE MAKE STORE MOVE SELL SERVICE

CEO / CFO / CRO

Demand ForecastDemand Forecast Perfect Order Rating

Perfect Order Rating

Supply Chain Cost

Supply Chain Cost

Supply ChainPerformanceManagement

Supply Chain Performance ManagementTied into value scenarios within Responsive Supply Networks

© SAP 2009 /

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.”

“

SAP benchmarking servicesKnow where you stand, and where to improve

Services by SAP Value Engineering Industry-leading benchmark program Wide network of partnerships

Services by SAP Value Engineering Industry-leading benchmark program Wide network of partnerships

Mike Stoko, Assistant Director, SAP Global Operations and Value Capture, DuPont

Mike Stoko, Assistant Director, SAP Global Operations and Value Capture, DuPont

© SAP 2009 /

Receive pro-active alerts about deviations for performance targets, and better balance trade-off decisions for improved supply chain performanceT

est

and

Im

pro

veId

enti

fy a

nd

A

nal

yze 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

Mo

del

an

d

Un

der

stan

d

Solution detail – IT viewC

oll

ect Collect and collate data directly from operational

processes, such as order-to-cash, from SAP systems (e.g. ERP, SCM) or non-SAP systems

© SAP 2009 /

Moving towards risk-adjusted Supply chain performance management

Enable risk-aware decision making

Balance cost and opportunities, against operational risk Prioritize across strategic, financial, operational and compliance risks Mitigate operational risk thru discovery, quantification, mitigation

Enable risk-aware decision making

Balance cost and opportunities, against operational risk Prioritize across strategic, financial, operational and compliance risks Mitigate operational risk thru discovery, quantification, mitigation

© SAP 2009 / © SAP 2009 / Page 57

The SAP advantage

Clear Business User Focus Turn-key performance management solutions Using leading BI technology Optimized for SAP, but fully running in non-SAP

Business Process Excellence Standards-based process support Automated data collection Proactive diagnostics

Less Uncertainty !

Driving uncertainty from your supply chain final

Business

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