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2011 IBM Corporation
This report is solely for the use of Client personnel. No part of it may be circulated,
quoted, or reproduced for distribution outside the Client organization without priorwritten approval from IBM. This material was used by IBM during an oralpresentation; it is not a complete record of the discussion.
March 07, 2011
Air ProductsPlan/Product Supply Strategic DesignS&OP Transformation
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Agenda
Introductions1
Why S&OP?2
S&OP Leading Practices3
Common S&OP Challenges4
Customer Experiences- Leading Consumer Electronics OEM- Leading Pharmanutritional Manufacturer
5
Q&A6
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Efficient Sales & Operations Planning enables integrated supply chainplanning
Sales &Operations
Planning
Demand Management MT Supply Planning ST Supply Planning SCM Execution (out of scope)
2. Demand Planning
6. InventoryDeployment
Short Term (days/weeks)
DeploymentRequirements
1. Marketing and Sales Planning
3. Network Planning
Planned stocktransfers for allmaterial types
InventoryPlanning
DistributionPlanning
All stocked materials Multiple replenishment
methods
All plants, storagelocations
Constraints included
Medium Term (weeks/months)
All materials included(FG, Raw, etc)
Produced and procured
MaterialPlanning
CapacityPlanning
C o l l a b o r a t i o n C
ol l a b or a t i on
CustomerOrders
Sales Forecast Sales Forecast
Production Capabilities
Packing Schedules
Distribution Capabilities Replenishment
Orders Supply
Limitations
Mtl Purchase
Orders
Order History
Sales Forecast LT Business plans, promotions schedules, pricing, POS, etc.
Supply Limitations
FG Purchase Orders
Suppliers Suppliers Customers Procure Manufacture Deliver Source
Strategic Planning
Business Unit Plans and Budgets
Short Term (days/weeks)
Production/MaterialSchedules
4. Factory Planning5. Factory Scheduling
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A cohesive S&OP process increases enterprise performance byimpacting key business drivers
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OperatingCosts
Revenue
Revenue
Capital Employed
Capital Employed
Asset Utilization
Asset Utilization
Reduce cost of goods sold Reduce distribution costs
Reduce cost of goods sold
Reduce distribution costs
Shorten cash to cash cycle times Reduce inventory levels
Shorten cash to cash cycle times Reduce inventory levels
Increase in Return on CapitalEmployed (ROCE)
Impact on Business Drivers
Increase fill rates / consistency
Increase fill rates / consistency
Improve sales and product planning
Net Income
Net Income
WorkingCapital
WorkingCapital
CapitalExpenditures
CapitalExpenditures
CapitalExpenditures
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IBM has identified several keys to success from our experience inhelping clients develop and implement S&OP
Make S&OP the decision process that participants do notwant to miss through executive sponsorship across theorganization.
Strike a balance between lead times and plan accuracy,allowing for realistic and timely issue resolution.
Have S&OP participants spending the majority of theirtime in analysis and not laboring to extract data intospreadsheets.
Focus S&OP on forward-looking issue identification andresolution, not simple performance reporting and reflection
Ensure the established S&OP process is achieving itsobjectives through KPIs and continuous improvement.
Comprehensive adoption of new processes, systems,and roles & responsibilities
ActionOriented
ActionOriented
ExecutiveEngagement
World ClassS&OP
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Most companies usually share same common challenges whenimplementing S&OP
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Lack of collaboration between suppliers, customers, and any 3PLsInability to provide accurate forecastsInability to integrate financial data into the S&OP processInability to determine capacity plansLack of cross functional representation in the processS&OP meeting not focused on decision makingPlanning groups not based on common resource requirementsNo standardized reporting format, decreasing the ability to comprehend and analyze theinformationNo bottom-up issue identification and recommendation developmentLack of communication on issues, alternatives, and recommendations prior to the S&OPmeetingsExisting business plans not aligned with recommendationsLack of understanding on financial implications and service trade-offs for allrecommendationsInability to measure the effectiveness of past actions takenInability to identify and commit to actions required to meet resource requirements
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Many of these S&OP challenges are similar to the ones that AirProducts currently faces
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Common S&OP ChallengesLack of collaboration between suppliers, customers, andany 3PLsInability to provide accurate forecasts
Inability to integrate financial data into the S&OP process
Inability to determine capacity plans
Existing business plans not aligned with recommendations
S&OP meeting not focused on decision making
Planning groups not based on common resource requirementsNo standardized reporting format, decreasing the ability tocomprehend and analyze the informationLack of cross functional representation in the process
No bottom-up issue identification and recommendationdevelopmentLack of communication on issues, alternatives, andrecommendations prior to the S&OP meetingsLack of understanding on financial implications andservice trade-offs for all recommendationsInability to measure the effectiveness of past actions taken
Inability to identify and commit to actions required to
meet resource requirements
Air Products S&OP ChallengesLack of a collaboration platform (with suppliers,customers, and internally)Inability to provide accurate forecasts
Inability to reconcile the financial plan with the S&OP plan
Inability to account for all supply capabilityconstraints/capacity plans in the supply planning process
No global intelligence gathering method or tool
Current S&OP process is only informational, not adecision making processProcess does not require the provision of BI information
Inability to manage S&OP processes by exception
Lack of communication between S&OP team and
Sales/MarketingLack of guidance provided to sales as to what BI isrequired/value addedLack of a consistent business intelligence process acrossbusiness groupsLack of sufficient simulation/modeling capabilities to aidedecision makingLimited flexibility in statistical forecasting capabilities
Lack of a structured process to identify and resolve gapsin S&OP plans
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This report is solely for the use of Client personnel. No part of it may be circulated,
quoted, or reproduced for distribution outside the Client organization without priorwritten approval from IBM. This material was used by IBM during an oralpresentation; it is not a complete record of the discussion.
Leading Consumer Electronics OEM S&OPProcess Transformation Case Study
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Case Study Background: North American Consumer Electronics OEM
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Consumer ElectronicsPlasma & LCD TVs
Digital Still Cameras
Digital Camcorders
DVD players
Telephones
Business ProductsLaptops
Copiers
Fax machines
Printers
Industrial ComponentsSemiconductors
Optical drives
Appliance motors
Telecom components
This North American Consumer Electronics manufacturer is a subsidiary of one of the worldslargest electronics companies ($80 billion in annual sales). It contributes over $8 billion inannual sales and is a leader in the North American electronics market. Likewise, it competesin several segments of the electronics space, including consumer electronics, businessproducts, and industrial components.
A sampling of NA Consumer Electronics OEM current product offerings:
Source: Hoovers
http://images.google.com/imgres?imgurl=http://www.internettvsdirect.co.uk/images/panasonic-tx26lxd50-lcd-tv.jpg&imgrefurl=http://www.internettvsdirect.co.uk/&h=150&w=150&sz=4&tbnid=3wdamT5BjR0J:&tbnh=90&tbnw=90&hl=en&start=11&prev=/images%3Fq%3DPlasma%2BTVs%2BPanasonic%26svnum%3D10%26hl%3Den%26lr%3D -
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A sample of some of the issues that the aforementioned NAConsumer Electronics OEM addressed across S&OP are
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Customer/ChannelPartners
Company viewed as an unreliable supplier by the retail channelsRetail channels seeking more flexibility in a very competitive environment; noforecast locks and instant upside/downside ordersHigh inventory levels in the channels, market share and cash flow resulting fromfew fast moving productsUnreliable ATP performance to customers
S&OPProcess/Meetings
Company lacked a formalized/streamlined S&OP process--missing formalmeeting structures/cadence, no clear meeting output, and no well defined rolesand responsibilitiesCompany had no formal equivalent to the to-be Monthly/Quarterly ExecutiveS&OP Meeting, the weekly S&OP meeting, or the weekly SCM demand andsupply meetingsExisting S&OP meetings were not focused on developing strategic operationalplans and countermeasures
Enabling Processes
No periodic review of operational performance to the annual business plantargetsLack of defined supply and demand thresholds to dictate issues to escalate toS&OP team (exception management)No formal or standardized reportingCompany did not utilize statistical forecastingInability to determine financial implications for what-if scenarios on the fly
No collaboration process with key channel partners
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Implemented collaborative Sales and Operations Planning (S&OP) process thatsupported VMI, CPFR, and non-VMI, non-CPFR fulfillment processes.
Developed a new organizational structure
Defined operational metrics and event management (exception management)
Improved factory reliability and upside flexibility to become a reliable supplier
Developed forecasting competency (statistical forecasting, promotions, demandshaping, etc.)
Provided an integrated set of SCM tools to support process and organizationalchanges
Enhanced channel partner/customer segmentation and product categorizationstrategy
The client built a wide range of supply chain tools and capabilitieswhich supported a more integrated and efficient S&OP process
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S&OP meetings play a distinct role in synchronizing processes toensure that operations are in line to achieve business plan targets
Monthly S&OPWeekly S&OP
Key Activities
Horizon
Scope & Timing
Participation
Review demand and supplyexceptions and issues
Evaluate execution and
effectiveness ofcountermeasures
13-week forecast
Product category Weekly
PCM Demand Analyst Supply Analyst
Align Operational Plan toBusiness Plan
Identify key countermeasures
to close gap betweenOperational & Business Plans
13-week forecast
Product category Monthly
PCM National Marketing Mgr Demand Analyst Supply Analyst
Evaluate operationalperformance vs. Business Plan
Approve countermeasures
from the Monthly S&OPMeeting
13-week forecast 3-month macro forecast
All product categories
Monthly, after MonthlyS&OP Meeting
Management: Sales, P&M,SCM, Business Management
Finance (quarterly) PCMs (as needed)
Sales and Operations Planning Meetings
K e y
M e e
t i n g
A t t r i
b u
t e s
Monthly / QuarterlyExecutive S&OP
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A process transformation was required to deliver a leading S&OPsolution
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CPFR Tool
PCEC
Channel Partner
Load POS datainto CPFR tool
Extract PCEC ATP from CPFRtool and load intoback-end system
Create SalesForecast
and load intoCPFR tool
Sales repreviews POSand creates
sales forecast inCPFR tool
Process newdata loads
and preparefor weekly
collaboration
Conduct weeklycollaboration call
Enter collaboratedsales forecast into
CPFR tool
Extractcollaborated
sales forecast
Createpurchase
forecast andload it intoCPFR tool
Extract partnerpurchase forecast
and load it intoplanning systems
Conduct internalreview of partner
purchase forecast
Process partnerpurchase plan for
internal reviewProcess factory
ATP and createdestination
breakdown byplant
Create ATP andload it into CPFRtool for partner to
extract
Repeat cycle
Monday ThursdayWednesdayTuesday Friday Monday
Prior CPFR Process
G1 Lack of statisticalforecasting
G3No collaboration onsell-in/purchaseforecast
G4Lack of best-in-class metrics
G2No collaboration onevents and promotions
CPFR Tool
PCEC
Channel Partner
Load POS datainto CPFR tool
Extract PCEC ATP from CPFRtool and load intoback-end system
Create sell-through, sell-in/purchase,
inventory, andpromotions
forecasts andload into
CPFR tool
Review POSdata, inventory
levels, andPCEC
promotion data
Process newdata loads andprepare for sell-
throughcollaboration
Conduct weeklysell-through
forecastcollaboration call
Identify and handleexceptions
Agree on sell-through forecast,
promotions,inventory levels
Enter collaboratedsell-through
forecast into CPFRtool
Create s-i/purchase forecastbased on agreedupon s-t FC andload it into CPFR
tool
Extract partnerpurchase forecast
and load it intoplanning systems
Placereplenishmentorder based on
agreed uponpurchase forecast
Execute againstchannel partners
replenishmentorder
Create ATPagainst purchaseforecast, based
on domainproduct plan
Repeat cycle
Monday ThursdayWednesdayTuesday Friday
New Weekly CPFR Process
Generatestatistical sell-
through and sell-in forecasts andload into CPFR
tool
Conduct weeklysell-in/purchase
forecastcollaboration call
Identify and handleexceptions
Agree on sell-in/purchase forecast
Enter collaboratedpurchase forecast
into CPFR tool
Processes Defined/Redesigned: CPFR S&OP Goal Setting Demand Planning Supply Planning
Allocation and Order Processing
Process GapsIdentified
ProcessesRedesigned
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The solution architecture integrated and supported the end-to-endsupply chain management system seamlessly
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Order Entry
Collaboration
Order Promising Replenishment Forecasting Promotions
DP*
Stat Forecast
Collaborative Forecast
Finalized Forecast
Replenishment Plan
Publish Forecast
Allocations
Planned
Material Movements
Purchase Order
Sales Order w/ ATP
Purchase Order
Sales Order w/ ATP
CRM*
BW*
SNP* ATP*
ERP ICH*
Publish Plan
Promotion Information
BW = Business Information Warehouse CRM = Customer Relationship Management ICH = Inventory Collaboration Hub
= within our scope of implementation
DP = Demand Planning SNP = Supply Network Planning ATP = Available to Promise ERP = Enterprise Resource Planning and Execution
= outside of our scope of implementation
Web Access
*
Existing SAP Functionality
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Key solutions were developed and significant benefits were realized
Capabilities BuiltImplemented collaboration tools to support full CPFR processBuilt custom logic for demand prioritizationEnabled capability for use of POS data in demand managementDeveloped robust reports to support the S&OP processEnabled CTM for constrained based procurement and allocation planning
Enabled allocation check for both "monthly" and "weekly" modelsBuilt capability for allocation check in a poolDeveloped ability for release of unconsumed allocation to pool
Benefits AchievedInventory reduction: $36M over 3 years
Operational cost savings: $5M over 3 years
Improved forecasting consistency and accuracy
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VICS Award 2008 Qualitative Customer Service PartneringVICS CPFR Implementation ExcellenceBest Buy Company, Inc. and Best Buy Sourcing Office Asia
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This report is solely for the use of Client personnel. No part of it may be circulated,
quoted, or reproduced for distribution outside the Client organization without priorwritten approval from IBM. This material was used by IBM during an oralpresentation; it is not a complete record of the discussion.
Leading Pharma-Nutritional Manufacturer S&OP Financial Integration & TechnologyEnablement Case Study
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A global leader in infant and children's nutrition with strong global presence. The company wasfounded more than 100 years ago and has been committed from its very beginning toearning the trust of parents and health care professionals by offering scientific evidence of thebenefits of their products.
Case Study Background: Leading Pharmanutritional Manufacturer
Annual Turnover USD 2 Billion
World wide locations 229 Globally
Manufacturing sites 10 PlantsTotal SKUs 1500, world wide
Employees 6000
SAP Applications Scope
SAP GTS 7.2,GRC 5.0
SAP SRM 7.0
SAP SCM 5.0:
DP, SNP,PP/DS,SNC 5.0
SAP PI 7.0
SAP BI 7.0
SAP SUS SAP CC5.3
SAP Portal 7.0
Vistex(Partner
Applications)
Vertex(Partner
Applications)SAP ECC 6.0:
FI,CO,SD,MM,PM,PP-PI,
QM,LE,FSCM,WM
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This Leading Pharmanutritional Manufacturer faced a number ofS&OP related issues
High cost, fluctuating price, and limited shelf life a of key raw materialingredient - Driving sporadic surges in the production volumes, and henceincreased inventory holding
Inflexible system infrastructure not able to adapt to the demands of a changingmarket
Limited technical and process integration Functional silos working from their own set of numbers Limited visibility into end-to-end planning process Disjoint planning between Demand, Supply and Finance
Lengthy cycle for S&OP meetings preparation - 2 Weeks for executingplanning cycle, updating the KPIs, and operational reports Non-standard, manual reporting based on data extracted from multiple source systems
Manual process for unit to dollar conversion
Limited capability to execute integrated what -if planning scenarios
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S&OP. 2
S&OP SupplyReview
Sales and Operat ions Plann ing
Statistical Forecast
Sales Forecast
Marketing Forecast
Meeting Minutes
S&OP. 5
Global S&OP(Quarterly)
Forecast Accuracy
Forecast Bias
Forecast Stability
S&OP Inputs (From APO)
S&OP. 1
S&OP DemandReview
S&OP. 3
Pre-S&OPMeeting
S&OP. 4
ExecutiveS&OP Meeting
S&OP Inputs (From BI)
Capacity Utilization
Planned Orders / PRs
Final Demand Plan
DIOH vs. Target
Resource Utilization
Projected Stock Outs
Final Demand Plan
Supply > Demand
Supply < Demand
Dashboard Report
DP/SNP reports (asappropriate)
S&OP Plan
Team Issues
Recommendations
Executive DashboardReport
DP/SNP Reports
S&OP Plan
X-Category Issues
Recommendations
Global S&OPDashboard Report
Financial Plan
Changes to demandplan in APO
Final Demand Plan
Projected Sales Unit to$ conversion (BPC)
Changes to Supply planin APO
What if Analysis
Proj. Inventory Unit to $conversion (BPC)
Meeting Minutes
Changes to:
Demand in APO/DP
Supply Plan in APO
Meeting Minutes
Executives Decisions
Team Action Items
Change to Demand/Supply
I n p u t s
O u t p u t s
Executives Decisions
Financial Impacts
Supply Plan in APO
Change to Demand/Supply
Non System ActivityS&OP Outputs (to APO)
The client designed an S&OP process enabled by SAP
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S & O P F i n a n c
i a l
I n t e g r a
t i o n
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The solution architecture integrated the planning, reporting, andfinance areas for complete S&OP financial integration
R e p o r t i n
g
E x e c u
t i o n
P l a n n
i n g
F i n a n c e
Business Intelligence (BI)
Business Objects (BOBJ)
Advance Planning & Optimizer (APO)
ECC 6.0
ConsensusForecast
Demand Planning (DP)Supply Network Planning(SNP)
Reports
-S&OP (Volumes)-KPI-Operational
Material Requirement Planning (MRP)
Core Interface
Master & Transaction Data
Constrained Production Plan
PlanningData
Actuals
Deployment
Sales OrderHistory
Business Planning &
Consolidation
ECC Report
ConsolidationFinancial Planning / BudgetFinancial Supply Chain
Management
Demand and Supply Data
FSCM Reports (Dollarized)
ECC
R e p o r t i n
g
E x e c u
t i o n
P l a n n
i n g
F i n a n c e
Business Intelligence (BI)
Business Objects (BOBJ)
Advance Planning & Optimizer (APO)
ECC 6.0
ConsensusForecast
Demand Planning (DP)Supply Network Planning(SNP)
Reports
-S&OP (Volumes)-KPI-Operational
Material Requirement Planning (MRP)
Core Interface
Master & Transaction Data
Constrained Production Plan
PlanningData
Actuals
Deployment
Sales OrderHistory
Business Planning &
Consolidation
ECC Report
ConsolidationFinancial Planning / BudgetFinancial Supply Chain
Management
Demand and Supply Data
FSCM Reports (Dollarized)
ECC
R e p o r t i n
g
E x e c u
t i o n
P l a n n
i n g
F i n a n c e
Business Intelligence (BI)
Business Objects (BOBJ)
Advance Planning & Optimizer (APO)
ECC 6.0
ConsensusForecast
Demand Planning (DP)Supply Network Planning(SNP)
Reports
-S&OP (Volumes)-KPI-Operational
Material Requirement Planning (MRP)
Core Interface
Master & Transaction Data
Constrained Production Plan
PlanningData
Actuals
Deployment
Sales OrderHistory
Business Planning &
Consolidation
ECC Report
ConsolidationFinancial Planning / BudgetFinancial Supply Chain
Management
Demand and Supply Data
FSCM Reports (Dollarized)
ECC
Business Intelligence (BI)
Business Objects (BOBJ)
Advance Planning & Optimizer (APO)
ECC 6.0
ConsensusForecast
Demand Planning (DP)Supply Network Planning(SNP)
Reports
-S&OP (Volumes)-KPI-Operational
Material Requirement Planning (MRP)
Core Interface
Master & Transaction Data
Constrained Production Plan
PlanningData
Actuals
Deployment
Sales OrderHistory
Business Planning &
Consolidation
ECC Report
ConsolidationFinancial Planning / BudgetFinancial Supply Chain
Management
Demand and Supply Data
FSCM Reports (Dollarized)
ECC
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SCM BPC
Order/Shipment HistoryProduction Actuals
Price/Cost
Price/Cost DataOther financial
Data
SCM BPC
Sales Data
SCM BPC
Generate Demand& Supply Plan
Generate InitialFinancial Plan
SCM BPC
Use Unit plans toValidate / adjust the
financial Plan (dollarizethe plans)
SCM BPC
BI / BOBJ
ERP
BI / BOBJ
ERP
BI / BOBJ
ERP
BI / BOBJ
ERP
BI / BOBJ
ERP
Financial PlanDemand &
Supply Plan Actuals
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The solution architecture enabled a process synchronize the operationaand financial plans
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