Supply Network Collaboration – Extending the Supply Chain
Ray Adams Industries Business Unit Chemicals September 11th, 2007
Value of Collaboration Industry Industry Eyes Eyes Big Big Savings Savings from from Supply Supply Chain Chain Collaboration Collaboration By ByIan IanYoung YoungininBerlin Berlin
The TheEuropean Europeanchemical chemicalindustry industrycould couldachieve achieve annualized cost savings of up to €15 billion annualized cost savings of up to €15 billion($18 ($18 billion), billion),or or2% 2%of ofits itscombined combinedsales, sales,by by implementing a range of initiatives to implementing a range of initiatives tostrengthen strengthen its supply chain, according to the findings its supply chain, according to the findingsof offour four high-level industry working groups. The high-level industry working groups. The initiatives initiativesrequire requirean anunprecedented unprecedentedlevel levelof of collaboration collaborationamong amonglogistics logisticsservice serviceproviders providers (LSP) and chemical companies, and a new (LSP) and chemical companies, and a new approach approachto toways waysin inwhich whichthe theindustry industryhas has traditionally been operated, serviced, and traditionally been operated, serviced, and regulated. regulated. …Supply …Supplychain chainexcellence excellencebrings bringslower lowerunit unit costs, higher capital productivity, increased costs, higher capital productivity, increased customer customerretention, retention,and andbetter betterend-to-end end-to-endvalue value for customers…. for customers…. Chemical ChemicalWeek Week––November November2,2,2005 2005
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CEFIC/EPCA CEFIC/EPCA Study Study Collaborative CollaborativeMethods Methods Chemicals ChemicalsValue ValuePipeline Pipeline Collaboration Collaborationacross acrosssupply supply
chain chainwith with3PL’s, 3PL’s, suppliers, suppliers, and andcustomers customers Analytics Analyticsand andevent eventmgmt mgmtto to monitor monitor Contingency Contingencyplanning planningfor for unexpected events unexpected events
Vulnerability Map as Central Monitor Automated Feed
Central Monitor
Drill-Down and Trigger Response
Supplier Performance Delivery Performance SC Event Management
Evaluate mitigation options
Open Ratings
Adapt system behavior
Catastrophe Management
Define/execute contingency plan
Simulation
Simulate responses Source: Yossi Sheffi and James B. Rice Jr., MIT SLOAN MANAGEMENT REVIEW, 2005
Sense © SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 3
Respond
Integrated Planning (Collaboration) Scenario Strategic Planning
Management Evaluation & Analysis
Sales and Operations Planning
Demand/Supply Planning
Chem Company
Suppliers
Customers Supply Network Collaboration Toll Manufacturers
Event Tracking and Administration
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Supply Network Collaboration (SNC)
Simple SMI PO Collaborati on
Chem Company
Inventory, Stock, Consumption and Forecast Demand-based Replenishment
ASN & Invoicing
ATP Checks
Suppliers
Customers
Replenishment Order Creation Advanced SMI w/Replenishment Orders
Min/Max-based Replenishment Work Order Progress Mile Stone Progress
Real-Time Sensing
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Toll Manufacturers WIP Usage and Collaboration
Work Orders Finished Goods Update
All Suppliers Are Not Equal TOP STRATEGIC SUPPLIERS High spend, high-volume large suppliers
Automated, optimized communication (B2B, EDI) with typical business pain points as Expensive connectivity efforts Poor visibility of mid/long term forecasts, inventory and capacity Low supplier performance accuracy
NON-STRATEGIC SUPPLIERS
Low spend, low-volume small suppliers
© SAP Labs, LLC., 2007. Supplier Collaboration with SAP SNC 5.1
Unstructured, not optimized communication (Phone, Fax) with typical business pain points as Unsynchronized supply and demand situation Long order cycle times Disruptions from last minute changes Immense maintenance efforts of data High supply risk and costs
Evolution of Supplier Interactions Present
Future
100%
100%
PHONE, FAX DOC. & E-MAIL EXCHANGE
SUPPLIER PORTAL
PROCESS COLLAB.
PHONE, FAX DOC. & E-MAIL EXCHANGE
SUPPLIER PORTAL
PROCESS COLLAB.
Phone and fax remain primary medium for interaction
Phone not primary, but still relevant for many interactions
Document exchange through EDI (expensive)
XML gains industry extensions, compliments EDI
Supplier extranets showing strong adoption and growth
Extranets become more functionally rich
Pilot collaboration with selected suppliers
Collaboration often mandated by trading partners
© SAP Labs, LLC., 2007. Supplier Collaboration with SAP SNC 5.1
SAP SNC – Supplier Collaboration
Mid Volume – Web & File Up/Down Loads High Volume – B2B Integrated
SUPPLIERS
Low Volume – Web Browser Only
Link ANY type of suppliers through different channels
CUSTOMER
Web Web Browser Browser
SAP NetWeaver
Up/Down Up/Down Load Load Files Files
SAP XI
SAP SNC
Network Network Hub Hub Provider Provider
Browser XML Backend Backend System System
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File Up/Down Load
eJIT - Release Processing
Inventory & Mfg Requirements
Notify on Exceptions New/Changed Call-Offs
1
3 Create/Change ASN
5
4
Create/Adjust Replenishment Plan
Novartis
Supplier
Scheduling Agreement Releases
2
!
Publish
Shipping Details Carry Out Shipment
Automatically close ASN & Update Stock
ASN Shipping Details Scenario eJIT
Description Just In Time Deliveries
Benefits for Suppliers Elimination of Waste in the
Ordering Process Suppliers hold inventory at their site and deliver based on scheduling agreement call-offs released by Novartis. Goods delivered directly to production and paid at goods receipt time according to agreed payment terms.
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Increased Demand Visibility and Transparency Limited Production and Inventory Optimization
Benefits for Novartis Inventory Reduction in Volume and Value Elimination of Waste in the Purchasing and Invoicing Process (e.g. Mail, Phone, Fax)
eSMI - Suplier Managed Inventory
Notify on Exceptions
Inventory & Mfg Requirements
Publish Manufacturing Requirements and Stock Balance
2
!
1
3 Create/Change ASN
5
4
Create/Adjust Replenishment Plan
Novartis
Supplier
New/Changed Inventory And Requirement Situation
Shipping Details Carry Out Shipment
Automatically close ASN & Update Stock
ASN Shipping Details Scenario eSMI
Description Supplier Managed Inventory
Benefits for Suppliers Elimination of Waste in the
Ordering Process Suppliers schedule / plan replenishments to Novartis based on daily updated demand and on the agreed min/max quantities.
Increased Demand Visibility and Transparency
Goods paid at goods receipt time according to agreed payment terms.
Production, Inventory and Delivery Optimization
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Benefits for Novartis Inventory Reduction in Volume and Value Elimination of Waste in the Purchasing and Invoicing Process Shifting Planning and Replenishment Tasks to the Suppliers
eSMOI - Suplier Managed & Owned Inventory
Notify on Exceptions
Inventory & Mfg Requirements
Publish
6
2
!
Manufacturing Requirements and Stock Balance
1
Novartis
Supplier
New/Changed Inventory And Requirement Situation
Periodic Settlement
3
Issue Credit Note
4
Create/Adjust Replenishment Plan Create/Change ASN
Shipping Details Carry Out Shipment
5 Automatically close ASN & Update Stock
ASN Shipping Details Scenario eSMOI
Description Supplier Managed & Owned Inventory
Benefits for Suppliers Elimination of Waste in the
Ordering Process Suppliers schedule / plan replenishments to Novartis based on daily updated demand and on the agreed min/max quantities. Goods booked into consignment and only paid at the end of the consumption period according to agreed payment terms.
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Increased Demand Visibility and Transparency Production, Inventory and Delivery Optimization
Benefits for Novartis Inventory Reduction mainly in Value without risks for Production Interruption Elimination of Waste in Purchasing and Invoicing Shifting Planning and Replenishment Tasks to the Suppliers
Web-based User Interface of SAP SNC
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SNC: Toll Manufacturing Purchasing Process Real-time, synchronized, collaboration on subcontracting PO’s enable more accurate execution between a customer and a toll manufacturer
Collaboration Process Flow: CMP
Customer can change or cancel PO’s and items Approval process based on rules such as quantity and date deviations can be done via web UI, includes collaboration on quantities used Customer’s ERP system gets periodic updates of WIP consumption at the toll manufacturer’s location Includes supplier invoice creation based on shipments, or ERS handling of invoices, and payment status updates Legend: Business Partner Business Process Step/Action Business Object © SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 13
Toll Mfg‘er
Customer Toll PO
Create/Change Toll PO Toll PO Confirmation Update WIP Inventory Update
Receive PO Toll PO Confirmation Inventory Updates
PO Confirmation WIP Inventory Update
Receive ASN
ASN
Create ASN
Goods Receipt
POD
ASN Update
Receive Invoice
Invoice
Create Invoice
Payment status update
Payment Status
Invoice Update
SNC: Work Order Process Real-time, synchronized, collaborative Work Orders enable more accurate execution between a customer and a toll manufacturer Work Orders exist as a collaborative object and facilitator of manufacturing status data between a customer and a toll manufacturer Advanced on-screen collaboration on Work Order initiation, changes and updates based on statuses Collaborate on order BOMs up front, before production starts Project finished goods end date and quantity using production phase updates Capture consumption periodically and update ERP accordingly Legend: Business Partner Business Process Step/Action Business Object © SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 14
Collaboration Process Flow: WO
Toll Mfg:er
Customer Work Order
Create/Change WO WO Update/ Change/ Approve WIP Inventory Update
Receive WO WO Changes (with Changes)
Inventory Updates
Change/Send/ Approve WO WIP Inventory Update
Receive ASN
ASN
Create ASN
Goods Receipt
POD
ASN Update
Receive Invoice
Invoice
Create Invoice
Payment status update
Payment Status
Invoice Update
Work Order Display w/ Proposed Quantity
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Toller View – Respond To Proposal
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SCM: Supply Network Inventory Process Supply Network Inventory is a cross-partner supply, demand and inventory monitoring and visibility process Customers, Suppliers, Contract Manufacturer’s and 3PL’s can all update their individual supply, demand and inventory positions Configurable visibility concept as to which partner and user has access to another partners data Proactive monitoring using min/max thresholds on calculated future inventories Allows for aggregation of data across multiple plants belonging to different partners Legend: Business Partner Business Process Step/Action Business Object © SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 17
Collaboration Process Flow: SNI
Toll Mfg:er
3PL
Customer
Supplier
Gross Demand
Send Demand
Send Demand Net Demand
Send Supply
Send Supply Inventory
Send Inventory Compare Supply & Demand Exception Management
Projected Stock Deviation
Alert Generation
Send Inventory Compare Supply & Demand Exception Management
Key Take Aways… Increases the Accuracy and Velocity of the Supply Chain Provides global visibility of inventory and demand Enables several collaboration processes like SMI, Release, Purchase Order Process and Dynamic Replenishment Improves customer service & increase revenue while reducing inventory levels on both customer and supplier side
Reduces Time to Value & Realizes Faster ROI Simple, stand-alone decoupled solution Easy to install, implement and configure Bring your suppliers on board fast and easy
Connects People & Processes Together Integrates with any backend system (non-SAP) Open XML message integration & infrastructure Suppliers can integrate via web browser or XML © SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 18
Supply Chain Collaboration Benefits
Customer Benefits Reduced RM & FG inventory Buyer benefits • • • •
Real time automated planning updates Reduced RM & FG inventory Reduced supply risk Reduced supply risk Improved customer service levels Reduced downtime & overtime Reduced expediting costs Reduced expediting costs Improved order fill rates • Improved order fill rates
Improved ROI
Supplier Benefits
Faster order to cash cycle Increased inventory turns Increased order fill rates Better capacity utilization Increased forecast & order accuracy
© SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 19
Increased revenue Lowered costs Improved asset utilization Reduced total inventory
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