Supply Network Collaboration Extending the Supply Chain

Supply Network Collaboration – Extending the Supply Chain Ray Adams Industries Business Unit Chemicals September 11th, 2007 Value of Collaboration ...
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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

© SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 2

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

ƒ Supplier Performance ƒ Delivery Performance ƒ SC Event Management

ƒ Evaluate mitigation options

ƒ Open Ratings

ƒ Adapt system behavior

ƒ Catastrophe Management

ƒ Define/execute contingency plan

ƒ Simulation

ƒ 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

© SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 4

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

© SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 5

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

© SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 8

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.

© SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 9

„ 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

© SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 10

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.

© SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 11

„ 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

© SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 12

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

© SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 15

Toller View – Respond To Proposal

© SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 16

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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