does apo really work? - an apo case study

40
Air Products and Chemicals, Inc. Stephen P. Crane, CSCP Director Supply Chain Does SAP APO Really Work? Air Products Polymers APO Case Study Supply Chain World NA Philadelphia, PA March 20, 2007 Integrating Demand Planning and Supply Planning With Production Scheduling

Upload: president-stephen-crane-consulting-llc

Post on 16-Apr-2017

12.522 views

Category:

Technology


4 download

TRANSCRIPT

Page 1: Does APO Really Work? - An APO Case Study

Air Products and Chemicals, Inc.

Stephen P. Crane, CSCPDirector Supply Chain

Does SAP APO Really Work? Air Products Polymers APO Case Study

Supply Chain World NAPhiladelphia, PA

March 20, 2007

Integrating Demand Planning and Supply Planning With Production Scheduling

Page 2: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 2

“Air Products Polymers APO Case Study”

Content

Air Products in Brief

Business Situation

Process, People, & Tools

Critical Success Factors

The Benefits

Lessons Learned

Page 3: Does APO Really Work? - An APO Case Study

Who is Air Products?

3

Page 4: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 4

“Air Products Polymers APO Case Study”

Air Products in Brief

Global supplier of gases, chemicals, equipment, and health care services

FY06 revenue ~$8.9 billion Serving customers in technology,

energy, industrial and healthcare markets

One of the safest large-scale chemical companies

Operations in more than 40 countries

Page 5: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 5

“Air Products Polymers APO Case Study”

Content

Air Products in Brief

Business Situation

Process, People, & Tools

Critical Success Factors

The Benefits

Lessons Learned

Page 6: Does APO Really Work? - An APO Case Study

6

Air Products Polymers, LPWorldwide Leader in Co-Polymer Dispersion Technology, Serving Adhesives, Nonwovens, Coatings, and Pressure Sensitive Adhesives markets

Page 7: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 7

“Air Products Polymers APO Case Study”

Air Products Polymers, LP Dimensions

$570 million global business

Multi regional (NA, Europe, Asia)

6 Plants (4 NA, 1 Europe, 1 Asia)

230 Products

1,800 Ship-to Customer Locations

3,500 Planning Combinations (Material-Ship-to-Primary Source Plant)

Page 8: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 8

“Air Products Polymers APO Case Study”

Where We Started in 2003

Just went live on SAP, master data issues

New processes, roles, tools, and data sources

Planning processes loosely integrated

Poor visibility of demand/supply balance

Numerous service issues, late deliveries, renegotiated orders

Communication gaps among the business, finance, and supply chain

No linkage between volume forecasts and financial forecast

Page 9: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 9

“Air Products Polymers APO Case Study”

APO v3.0 Objectives(Advanced Planner & Optimizer) Utilize APO to enable a robust & effective S&OP process Establish cost-based optimization approach to supply

planning vs MRP Increase forecast accuracy to improve supply chain

effectiveness Align production scheduling with monthly supply plan to

reduce inventory levels and reduce order lead time Establish rules for order commitment process to improve

order fulfillment and customer satisfaction Align demand plan with financial forecast to improve

financial forecasting accuracy

Page 10: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 10

“Air Products Polymers APO Case Study”

Content

Air Products in Brief

Business Situation

Process, People, & Tools

Critical Success Factors

The Benefits

Lessons Learned

Page 11: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 11

“Air Products Polymers APO Case Study”

Process, People, Tools

Business process improvement and success rely on proper blending of Process, People, and Tools/Technology

Overemphasis on any one leads to an imbalance that can defeat the intended purpose of a project

Our focus was on the process first, then the people, and lastly the tool

Page 12: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 12

“Air Products Polymers APO Case Study”

Process, People, Tools

Process– Process provides standardization and defines what

needs be done to meet effectiveness, efficiency, and responsiveness goals

– S&OP process is a flow of activities with the goal of meeting customer requirements

– Includes all internal functions, sales, customer service, marketing, planning, manufacturing, sourcing, logistics, finance, and R&D

– Includes external companies, from delivering orders to customers to receiving materials and parts from suppliers

Page 13: Does APO Really Work? - An APO Case Study

Air ProductsGlobal Work Processes

Page 14: Does APO Really Work? - An APO Case Study

14

“Air Products Polymers APO Case Study” APCI 2004, The Future of Demand Planning, S. P. Crane

S&OP ProcessP1.1A – Identify, Prioritize, & Aggregate SC Requirements DAY 0 - 8 P1.4 – Establish &

Communicate SC Plans DAY 13-15

P1.3A – Balance Supply ChainRequirements with SC Resources DAY 9 – 12

P1.2A – Identify, Prioritize, & Aggregate SC Resources DAY 0 - 8

Review Historical Sales

Data

Review Demand Metrics

Apply Historical Sales Data

Adjustments

Apply Future Demand Change

Notifications

Run Forecast Model

Agree & Communicate

Approved Plans

Communicate Implications to

Financial & Sales Plans

Review Supply Plan & Cost Projections

Develop/Modify Supply Chain

PlansReview Supply

Planning Measures

Adjust Supply Planning

Constraints

Load & Review Unconstrained Demand Plan

Submit Supply Plan with

Documented Options

Approve & Publish Supply

Plan

Approve & Publish

Unconstrained Demand Plan

Gather Data [DAY0]

Gather Data [DAY 0]

Define Supply Capability [DAY 1 – 8]

Develop Supply Plan Proposals

[DAY 9]

Finalize & Approve

Supply Plan [DAY 10 -12]

Aggregate All Sources of

Supply

Initiate Req Master Data

Changes

Review Inventory Available

Review Supply Capability

Create Demand Change

Summary

B

A

Partnership Meeting[DAY 13]

Executive S&OP

[DAY 15]

Summarize

Supply Chain Plans

Gather Collaborative

Input(Future Function)

Create Unconstrained Demand Plan [DAY 1 -8]

Develop Unconstrained

Revenue Projection

Apply New Characteristic

Combos

Adjust Statistical

Parameters (if needed)

Review and Validate

Unconstrained Forecast

Input Source, Make, Deliver

Product & Capacity Plans

Create Supply Change

Summary

Develop Supply Plan Proposal (Optimization)

Review Alerts

Assess Impact & Develop

Options

Review Excess Capacity, Supply Options, Demand

Exceptions

Issue Resolution

Agree to Supply Plan

Initiate any Master Data

MOC

Review Supply Chain Plans

Review Revenue ProjectionsA

B

C

C

BI

Page 15: Does APO Really Work? - An APO Case Study

15

“Air Products Polymers APO Case Study” APCI 2004, The Future of Demand Planning, S. P. Crane

Process, People, Tools

People

– People make organizations, are important to business and supply chain success

– They need to understand how their function fits into the supply chain and how to make it better

– People success is also a function of corporate culture. Organizational silos can short-circuit a supply chain process by sub-optimizing the overall process

Page 16: Does APO Really Work? - An APO Case Study

16

“Air Products Polymers APO Case Study” APCI 2004, The Future of Demand Planning, S. P. Crane

PeopleAssigned Full Time Supply Chain Roles

Demand Manager Overall forecast accuracy

Demand Planner APO statistical forecasting

Supply Planner APO supply planning

Supply Chain Manager Monthly S&OP process

Sourcing Manager Raw material supply

Transportation Planner Order delivery execution

MRP Data Administrator Data accuracy, audit process

Master Data Technician BOMs, recipes

Master Scheduler Executing plant supply plan

Profit Center Planner Financial forecasting

Page 17: Does APO Really Work? - An APO Case Study

17

“Air Products Polymers APO Case Study” APCI 2004, The Future of Demand Planning, S. P. Crane

S&OP Best Practices

22 S&OP Best Practices

S&OP Assessment Shows Gaps

Not doing - Poor

Fair – Very Good

Excellent Identify key issues Develop actions to drive

process improvements

Not Doing -> Poor 0 -> 1Fair -> Very Good 2 -> 3

Excellent 4

North America Q1 Q2 Q3 Q4

Overall % Implemented_____ 74% 83% 88% 90%SALES AND OPERATIONS PLANNINGThe sales and operations planning process focuses on customer requirements, supports the annual business plans, and aligns the entire organization in support of the business strategy. The S&OP process is action-oriented, where management aggressively resolves problems to maintain balance between market demands and available resources.

1 There is a concise written sales and operations planning policy that covers the process, purpose, activities, participants, and expected results. Additionally, there is a well documented procedure that details the pre-S&OP, S&OP, and post-S&OP activities. Specific roles and responsibilities are assigned, understood, and accepted.

3 3 3 4

2 Sales and operations planning is truly a process, not just a monthly meeting. The process has a clear focus on intermediate to longer-term periods; detailed product and customer issues consume little time. The process views the future on a rolling horizon basis. There is not a fixation on points such as year-end where the process becomes short sighted. One of the final steps in the process is the executive approval meeting.

3 4 4 4

3 Defined activity dates are set well ahead to avoid schedule conflicts. In case the sales and operations planning regular participant is unable to attend the monthly meeting, he or she is represented by someone who is empowered to speak for the function. This also applies to emergency meetings.

3 4 4 4

4 A formal sales and operations planning packet is circulated at least 24 hours prior to the meeting. This packet includes the agenda, objectives, past performance, assumptions, product family reviews, major program updates, and minutes from last meeting.

3 3 4 4

5 For each product family, plans are reviewed in the units of measure that communicate to all functions most effectively.

4 4 4 4

6 New product development as well as major program and project schedules are reviewed during the sales and operations planning process. These reviews concentrate on all major initiatives' impact on resources, revenues, and costs. Changes in launch dates, promotions, etc. are also discussed.

3 4 4 4

7 All participants come prepared to the sales and operations planning meeting. There are pre-meeting activities by function that need to take place: sales and marketing to prepare a demand (sales) plan, research and development (engineers) to prepare a new product plan, operations (manufacturing) to prepare a revenue and cost plan. Corrective action plans must be developed to rebalance available resources with changes in market demand when needed.

3 3 3 3

8 The presentation of information includes a review of both past performances (minimum of 3 months) and further plans (typically 18 to 24 months) for: sales, production, inventory, backlog, shipments, and new product activity.

3 3 3 3

9 Inventory (finished goods) and/or delivery lead time (backlog) strategies are reviewed each month as part of the process.

3 3 4 4

10 There is a process of reviewing and documenting assumptions about the business, and reviewing the alignment in support of the business strategy. This is done to enhance the understanding of the business and represents the basis for future projections.

3 3 3 3

11 Sales and operations planning is an action process. Conflicts are resolved and decisions are made, Consensus is reached on a single, current operating plan.

3 3 3 3

12 Any large and/or unanticipated changes are communicated to all functions prior to the sales and operations planning meeting. Disclosing surprises in the meeting without communicating to others is considered unacceptable behavior.

3 4 4 4

S&OP Assessment for Performance Polymers Current Status

General Objective

FY05

Page 18: Does APO Really Work? - An APO Case Study

18

“Air Products Polymers APO Case Study” APCI 2004, The Future of Demand Planning, S. P. Crane

S&OP Assessment Trend

93%

97% 97% 98%

90%88%

83%

74%

60%

70%

80%

90%

100%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2005 2006

Date

S&O

P Pr

oces

s Im

plem

ente

d

Improved performance from 74% to 98%

Page 19: Does APO Really Work? - An APO Case Study

19

“Air Products Polymers APO Case Study” APCI 2004, The Future of Demand Planning, S. P. Crane

Process, People, Tools

Tools– Supply chain management is sometimes

incorrectly defined in terms of technology

– Software is sometimes “sold” as the answer to supply chain issues

– Software does not solve problems. Processes and people solve problems

– APO should never be considered an IT project. It should be a business process improvement project

APO GLOBAL INTEGRATED

PLANNING

DPSNPATP

AIR PRODUCTS POLYMERSAIR PRODUCTS POLYMERS

Page 20: Does APO Really Work? - An APO Case Study

20

“Air Products Polymers APO Case Study” APCI 2004, The Future of Demand Planning, S. P. Crane

Air Products Basic Beliefs

Business strategy should drive planning strategy

Planning should simulate integration of all business functions, is necessary to properly manage the demand chain, supply chain, and financial plan

Improved planning drives improved execution

– Difficult without an integrated process

Key metrics are necessary to measure effectiveness of executing the plans

S&OP is the key to reconciling the various plans

APO GLOBAL INTEGRATED

PLANNING

DPSNPATP

AIR PRODUCTS POLYMERSAIR PRODUCTS POLYMERS

Page 21: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 21

“Air Products Polymers APO Case Study”

Why APO?SAP APO is Market Leader for SCP

Source: AMR Research, 2005

Page 22: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 22

“Air Products Polymers APO Case Study”

Why APO?

Integration with R3 and APO Decision support with what-if simulations Advanced statistical forecasting tools Aggregation to simplify demand/supply planning Exception management for forecast/supply alerts Integration of supply planning with production

scheduling Product Lifecycle Management suite BW provides standardized management reporting

Page 23: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 23

“Air Products Polymers APO Case Study”

Overview of APO SCP Modules

Demand Planning• Forecasting• Simulation• Collaboration• Monitoring

DP

Supply Network Planning• Network modeling• Cost optimization• Deployment• Load builder• VMI

SNP

Production Planning/Detailed Scheduling• Planning• Scheduling• Monitoring

PP/DS

Global Available to Promise• Capable to promise• Allocation• Substitution• Multilevel check

GATP

Transportation Planning/Vehicle Scheduling• Route optimization• Consolidation• Carrier selection• Tendering

TP/VS

SAP APO

Source: SAP, 2005

Page 24: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 24

“Air Products Polymers APO Case Study”

APO Project Implementation

Blueprinting Phase for APO v3.0 Enterprise Design – August 2002

Integration Testing – February 2003 Final QA Testing – March 2003 User Acceptance Testing – March 2003 APO Go Live – August 2003 APO Stabilization – November 2003 SCM 4.1 Technical Upgrade – March 2006 SCM 4.1 Improvements – October 2006

Page 25: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 25

“Air Products Polymers APO Case Study”

DP/SNP Planning Book Examples APO

GLOBAL INTEGRATED PLANNING

DPSNPATP

AIR PRODUCTS POLYMERSAIR PRODUCTS POLYMERS

DP Consensus Forecast

DP Sales History

SNP Capacity

SNP ProductionPlanning

Page 26: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 26

“Air Products Polymers APO Case Study”

Content

Air Products in Brief

Business Situation

Process, People, & Tools

Critical Success Factors

The Benefits

Lessons Learned

Page 27: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 27

“Air Products Polymers APO Case Study”

APO Critical Success Factors

Migrating sales history from legacy systems is very complex. R3 data must be correct.

Automate data transfer from R3. Only plan what you need. Minimizes complexity and

data maintenance requirements Be patient. Full realization may take 2-3 years Allocate dedicated business resources early in project Consulting support – consultant quality varies, use

highly experienced consultants with personal references

Expect consulting support for 2 years after go-live Need R3 stabilization before building APO

Page 28: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 28

“Air Products Polymers APO Case Study”

Content

Air Products in Brief

Business Situation

Process, People, & Tools

Critical Success Factors

The Benefits

Lessons Learned

Page 29: Does APO Really Work? - An APO Case Study

29

“Air Products Polymers APO Case Study” APCI 2004, The Future of Demand Planning, S. P. Crane

So Where Are We Today?

Improved visibility of demand and supply Improved service, On-Time Delivery now 97% S&OP meetings are boring… a sign of success Aligned communications among business, finance,

and supply chain Sales and volume forecasting for outlooks/budgets;

easier and more accurate; drives supply chain plans Demand plan aligned with financial plan Business plans validated against supply chain

capabilities on a monthly basis

Page 30: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 30

“Air Products Polymers APO Case Study”

The Benefits

Reduced instability in inventory levels due to improved forecast accuracy

Improved supply planning accuracy due to integration with production scheduling

Improved order fulfillment and customer service Improved raw material forecasting for suppliers More accurate capacity plans developed based on real

world constraints and variability Optimized safety stock levels based on service level

and profit objectives

Page 31: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 31

“Air Products Polymers APO Case Study”

S&OP Process KPIs

Forecast Accuracy (%)

Production Plan Adherence (%)

Inventory Days of Supply

Financial Forecast Accuracy (%)

Page 32: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 32

“Air Products Polymers APO Case Study”

Forecast AccuracyIncludes Use of BI Process

40

50

60

70

80

90

100

% F

orec

ast A

ccur

acy

World Class Performance

2003 2007

50% Improvement

Page 33: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 33

“Air Products Polymers APO Case Study”

55

60

65

70

75

80

85

Oct

-04

Nov

-04

Dec

-04

Jan-

05

Feb-

05

Mar

-05

Apr

-05

May

-05

Jun-

05

Jul-0

5

Aug

-05

Sep-

05

Oct

-05 27

30

33

36

39

42

45Demand Forecast Accuracy (%) Inventory Days of Supply

Target

Target

Forecast Accuracy vs Inventory DOS

20% Improvement

2004 2005

Page 34: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 34

“Air Products Polymers APO Case Study”

Production Plan Adherence(Supply Planning Accuracy)

50

60

70

80

90

100

Prod

uctio

n Pl

an A

dher

ence

(%)

38% Improvement

2004 2007

Page 35: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 35

“Air Products Polymers APO Case Study”

Financial Forecast Accuracy

30

40

50

60

70

80

90

100

Dire

ct P

rofit

Acc

urac

y (%

)

21% Improvement

2004 2007

Page 36: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 36

“Air Products Polymers APO Case Study”

Content

Air Products in Brief

Business Situation

Process, People, & Tools

Critical Success Factors

The Benefits

Lessons Learned

Page 37: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 37

“Air Products Polymers APO Case Study”

Success requires making the right choices

Page 38: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 38

“Air Products Polymers APO Case Study”

APO ImplementationLessons Learned

Current ERP data quality is not usually acceptable for integration with APO. Requirements for planning master data are very different than transactional master data

Important to have right mix of business and technical expertise, and the need to dedicate resources full time to project

Don’t underestimate impact of moving from a manual scheduling process to a common integrated supply chain planning system

Implementation needs to be led by Supply Chain, not the IT organization. It’s not an IT project.

APO implementations require simultaneous business process transformation, are hard to implement, but can significantly reduce inventory levels and improve supply chain performance

Page 39: Does APO Really Work? - An APO Case Study

APCI 2006, The Value of Business Intelligence to Forecast Accuracy, S. P. Crane 39

“Air Products Polymers APO Case Study”

APO Provides . . .

Total Visibility

Real Time

Exception Based

Integrated

Page 40: Does APO Really Work? - An APO Case Study

Thank you for participating!

Stephen P. Crane, CSCPDirector Supply ChainAir Products Polymers

[email protected]