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S&OP@ BASF SE Thilo Lindner, MBA CPIM, CSCP Global Information Services & Supply Chain Management GSS/PO - Sales & Operations Planning University of Würzburg June, 20st, 2013
2 BASF SE, GSS/PO, Thilo Lindner
Thilo Lindner, MBA Curriculum
1989 – 1992 High School Diploma
1992 – 1999 Economics Degree at the University of Hamburg
1999 – 2000 Master Degree at Oregon State University
2000 – 2002 Event Manager at Munich
2002 – 2004 MBA in cooperation with BASF at Steinbeis University
2004 – 2007 Business Expert Planning Processes at BASF
2007 – 2009 Supply Chain Manager at BASF
2009 – today Global Senior Expert for Planning Processes
Agenda
BASF at a glance
Global Supply Chain Governance at BASF
6 men and the elephant
The concept of Sales and Operations Planning to minimize risks and uncertainty
Demand Planning as starting point for Sales and Operations Planning
Supply Network Planning and Supply Review
Profitability Management within the S&OP Process
Planning process example
Planning systems
Conclusions and Wrap up
Backup
BASF SE, GSS/PO, Thilo Lindner 3
BASF – The Chemical Company
BASF chemicals are used in almost all industries
Sales 2012: €72,129 million
EBIT 2012: €6,742 million
Employees (as of December 31, 2012): 110,782
In 2012, BASF filed for around 1,170 new patents worldwide
6 Verbund sites and around 380 production sites
4 BASF SE, GSS/PO, Thilo Lindner
BASF segments as of January 1, 2013
Crop Protection
Performance Products
Dispersions & Pigments Care Chemicals
Functional Materials & Solutions
Agricultural Solutions
Performance Chemicals
Nutrition & Health Paper Chemicals
Oil & Gas
Oil & Gas
Chemicals
Monomers
Intermediates
Petrochemicals
Functional Materials & Solutions
Construction Chemicals
Coatings
Catalysts
Performance Materials
5 BASF SE, GSS/PO, Thilo Lindner
Agenda
BASF SE, GSS/PO, Thilo Lindner 6
BASF at a glance
Global Supply Chain Governance at BASF
6 men and the elephant
The concept of Sales and Operations Planning to minimize risks and uncertainty
Demand Planning as starting point for Sales and Operations Planning
Supply Network Planning and Supply Review
Profitability Management within the S&OP Process
Planning process example
Planning systems
Conclusions and Wrap up
Backup
…
Procurement Production Distribution Customer/Distributor Supplier
…
Operations
Planning & Order Man.
Reg. Platform EU
Business Unit 1
Global Supply Chain Governance .
Import Internal Transport Warehousing Transport M.
Import Warehousing Transport M.
Import Warehousing Transport M.
Import Warehousing Transport M.
.
Procurement - Detailed Scheduling - Rough Planning - Order Management - S&OP
Export M.
Export M.
Export M.
Export M.
Rough Planning - Order Management
Order Management
Rough Planning - Order Management - S&OP
Supply Chain Management in BASF is a global process with several interfaces across functions
Internal Transport
Reg. Platform NA
Reg. Platform SA
Reg. Platform AP
Business Unit 2 Business Unit 3 Business Unit … Business Unit .n
Purchase to Pay
Make to Inventory
Order to Cash
Transportation Management
Integrated Non-Conformance-
Management
Planning
Process
7 BASF SE, GSS/PO, Thilo Lindner
The global Supply Chain Governance is represented in all regions, covering three fully separate responsibility areas
Global Supply Chain Governance ensures further development of Supply Chain strategies and methodologies and ensures that they are consistently executed in our operations.
Global Cross-functional Business Process Optimization ensures sustainable and continuous process and IS improvements.
Process and System Enablement provides change management and training to BASF projects aiming at process optimization and harmonization.
8 BASF SE, GSS/PO, Thilo Lindner
Agenda
BASF SE, GSS/PO, Thilo Lindner 9
BASF at a glance
Global Supply Chain Governance at BASF
6 men and the elephant
The concept of Sales and Operations Planning to minimize risks and uncertainty
Demand Planning as starting point for Sales and Operations Planning
Supply Network Planning and Supply Review
Profitability Management within the S&OP Process
Planning process example
Planning systems
Conclusions and Wrap up
Backup
6 men and the elephant
BASF SE, GSS/PO, Thilo Lindner 10
Once upon a time, there lived six blind men in a village. One day the villagers told them, "Hey, there is an elephant in the village today." They had no idea what an elephant is. They decided, "Even though we would not be able to see it, let us go and feel it anyway." All of them went where the elephant was. Everyone of them touched the elephant. "Hey, the elephant is a pillar" said the first man who touched his leg. "Oh, no! it is like a rope" said the second man who touched the tail. "Oh, no! it is like a thick branch of a tree" said the third man who touched the trunk of the elephant. "It is like a big hand fan" said the fourth man who touched the ear of the elephant.
"It is like a huge wall" said the fifth man who touched the belly of the elephant. "It is like a solid pipe" Said the sixth man who touched the tusk of the elephant. They began to argue about the elephant and everyone of them insisted that he was right. It looked like they were getting agitated. A wise man was passing by and he saw this. He stopped and asked them, "What is the matter?" They said, "We cannot agree to what the elephant is like." Each one of them told what he thought the elephant was like. The wise man calmly explained to them, "All of you are right. The reason every one of you is telling it differently because each one of you touched the different part of the elephant. So, actually the elephant has all those features what you all said.„ "Oh!" everyone said. There was no more fight. They felt happy that they were all right.
Source: www.wikipedia.org
Agenda
BASF SE, GSS/PO, Thilo Lindner 11
BASF at a glance
Global Supply Chain Governance at BASF
6 men and the elephant
The concept of Sales and Operations Planning to minimize risks and uncertainty
Demand Planning as starting point for Sales and Operations Planning
Supply Network Planning and Supply Review
Profitability Management within the S&OP Process
Planning process example
Planning systems
Conclusions and Wrap up
Backup
Let’s eavesdrop on an executive staff meeting …. This shortage situation is terrible. When will we ever get our act together? Whenever business gets good, we run out of product and our customer service is lousy !
I’ll tell you when ….When we start to get some decent forecasts from Sales & Marketing.
Wait a minute. We forecasted this upturn.
Yeah, but not in time to do anything about it. We got the revised forecast four days after the start of the month. By then it was too late.
I could have told you months ago. All you had to do was ask.
I’d like to be on those conversations. We’ve been burned more than once by building inventories for a business upturn that doesn’t happen. Then we get stuck with tons of inventory and run out of cash.
What we have here is a failure to align and communicate. We just have to do a better job of keeping each other up to date
President
VP Operations
VP Sales & Mktg
VP Finance 12 BASF SE, GSS/PO, Thilo Lindner
1. … ensures that the entire company is “playing off the same sheet of music”
2. … balances customer demand with constraints in order to achieve customer
service, margin and working capital targets
3. … aligns company resources to a single set of supply and sales plans
4. … integrates operational and financial planning
5. … coordinates actions to fill projected gaps between supply and demand
6. … reduces surprises and enhances proactive decision-making
13 BASF SE, GSS/PO, Thilo Lindner
BASF uses Sales and Operations Planning to ensure collaboration and to minimize risks and uncertainty, because it …
14 BASF SE, GSS/PO, Thilo Lindner
Sales and Operations planning (S&OP) is a structured monthly decision-making process
Establish and Sustain S&OP
Structure
Collect demand and derive
consensus forecast
Create feasible supply plan
Develop scenarios to close gaps
Take final decision to ensure optimal
profitability
Strategy
The foundation for successful S&OP
A best-in-class Sales and Operations planning requires five enabling elements, that are well defined and fully integrated
Process Organization
Metrics & Incentives
Data & Systems
BASF SE, GSS/PO, Thilo Lindner 15
Process Organization
Data & Systems Reports
The elements of world-class S&OP at BASF
L4 process steps
L5 tasks
S&OP Meeting Calendar
S&OP Meeting Participants
KPI definitions, calculations, and
owners
S&OP Dashboard design (Key PIs
and PIs)
Roles & Responbilities
S&OP Planning Board design
(‘S&OP’ plans)
Supply Chain Mapping (‘Node
Analysis’)
Decision Support Tree
Scenario Analysis (demand side)
What-if analysis (supply side)
Profitability Analysis (CM1,
CM2)
SAP APO DP
SAP APO SNP
S&OP Tool (3rd party solution)
SAP BW
Other
Incentive schedule
Job descriptions (S&OP element)
S&OP Manager (for process
execution and improvement)
BASF SE, GSS/PO, Thilo Lindner
Establish and Sustain S&OP
Structure
16
The Sales and Operations Planning process focuses on the mid to long term
Order level 0-4 week focus Daily buckets Performed daily or hourly Managed in ERP or MES system
Product / Order level 0-3-month focus Daily / Weekly buckets Performed daily Managed in ERP system
Product Family or Product level 3-24 month focus Monthly / quarterly buckets Performed monthly Managed in ERP or APS system
Strategic Planning
Business Planning
Sales and Operations Planning (Volume and Financials)
Sales Plan Operations Plan
Dem
and Planning
Supply Planning Master Scheduling
Production Scheduling, MRP and Materials Planning
(Execution)
Strategic Planning
Scheduling
Execution
Tactical Planning (S&OP)
Business Unit level 1-5 year focus Annual buckets Performed annually
BASF SE, GSS/PO, Thilo Lindner 17
Process
S&OP ensures alignment of plans on tactical level
Plan Source Make Deliver Develop
From business strategy to cross-functionally aligned plans
Strategy
Each functional department translates its strategy into tactical plans; actionable plans for the next 1-2 years Tactical Planning
Procurement plan
Manufacturing plan
Sales & Marketing
plan
R&D, Innovation
plan
The ‘Plan’ process drives all the other processes: It starts with the Business or Corporate
Strategy for the next 3-5 years... Strategic Planning
Procurement strategy
Manufacturing strategy
Sales & Marketing strategy
R&D, Innovation strategy
Financial strategy
Business / Corporate strategy
HR strategy
IT strategy
Sales & Operations Planning ensures the alignment of those different plans
...which is then translated by the functional departments into functional strategies
These functional strategies drive the design and execution of the processes ‘Develop’, ‘Source’, etc.
Financial plan
Sales & Operations Planning Establish and Sustain S&OP
Structure
Establish and
Sustain S&OP
Structure
18 BASF SE, GSS/PO, Thilo Lindner
Process
These aligned tactical functional plans drive operational planning, execution, and control Translation of tractical plans into operational plans
Strategy Strategic Planning
The tactical plans drive the operational or short-term planning and execution of the ‘Develop’, ‘Source’, ‘Make’, and ‘Deliver’ processes
Tactical Planning
Procurement plan
Manufacturing plan
Sales & Marketing
plan
R&D, Innovation
plan
Sales & Operations Planning
Technology People / Organization
Performance Management
Operational Planning, Execution, and Control
Source Make Market, Sell & Deliver Plan
Plan Source Make Deliver Develop
All the processes are supported by the right people and organization, technology, and performance management methods
Establish and Sustain S&OP
Structure
Financial plan
19 BASF SE, GSS/PO, Thilo Lindner
S&OP ensures the proper execution of the business strategy
Reports
People & Organization
Process
Systems & Data
Business Management Process & Culture Vision
Enlarge S&OP planning horizon
Consistent Planning Hierarchy
One common SNP for demand from other
regions / OD’s
Simple, transparent and reliable IT
systems
Improved Data accuracy and reliability
Year +2 ... Year +1 Year 0: Establish / refresh S&OP
Establish ‘S&OP culture’
Transparent Product and Customer
groupings Common and consistent reports /
templates
S&OP ownership
RM availability checks
S&OP roles & responsibilities
Refine master data management
Margin analysis at cCM1 & cCM2 level
Rules, escalation procedures for shared
assets, toll mfg,
Reduce time and effort to create Reports and KPI’s
Align functional strategies
Advanced S&OP scenario analytics
Measure and communicate
S&OP benefits
Demand sensing capabilities
S&OP Predefined BI reports
S&OP Scenario tools
Customer collaboration
(CPFR)
Reduce decision making forums
S&OP incentives
KPI dashboard functionality
VMI capabilities
KPI & continous
improvements
Organisation silo
breakdown
Align Strategy and Business Plan with
S&OP Plan
Establish S&OP meeting structure
Standardized KPIs
20 BASF SE, GSS/PO, Thilo Lindner
The S&OP process requires input from different layers within the organization
Prepare Regional DR
meeting
Prepare Regional SR
meeting
Prepare Country DR
meeting
Execute Country DR
meeting
Execute Regional SR
meeting
Prepare Pre-S&OP
Execute Pre-S&OP
Execute Regional DR
meeting
Prepare Exec. S&OP
Execute Exec. S&OP
Prepare Global S&OP
Execute Global S&OP
$
Organization Process
Reports Data & Systems
Global
Region
Country
Leadership
Functional Managers
Operations
Leadership
Functional Managers
Operations
Leadership
Functional Managers
Operations
UK GE IT ES
EU AP
21 BASF SE, GSS/PO, Thilo Lindner
The environment in which BASF operates is characterized by complexity and volatility
Macro environment volatility Has potential effects across the entire supply chain
Economic
€ $ ₤ ¥
Geopolitical Hazards
! Regulatory
Functional drivers of (internal) volatility Exist among enabling functions that support supply chain processes
Finance Human Resources Legal Information Technology $$$
Volatility in extended value chain Originates in upstream and downstream supply chain partners
Operational volatility
Relate to internal processes
Develop Plan Source Make
Deliver/Return
Tier N
End Users
Supply Demand
Environmental/Social Responsibility
Tier 1
Distributors
3rd Party Services
Security Infrastructure / Resources
22 BASF SE, GSS/PO, Thilo Lindner
It is critical to identify and understand the different drivers of volatility
Volatility in Demand and Supply (volume, mix, frequency, order quantity) is driven by multiple factors
• Price changes / promotions • Process reliability / yield • Product quality • Capacity reductions • Product availability • Portfolio rationalization • Shift market focus • Redesign mfg. footprint • NPIs, product phase outs • New / discontinued suppliers • Mergers & acquisitions • Transportation reliability
• Personal preferences, social media
• Consumer confidence (CCI) • Brand loyalty • Price sensitivity (discounts)
• Product substitution (raw, sf) • NPIs, product phase outs • Price changes / promotions • Change in Business Strategy • (Pro)active de-stocking • Shortage gaming • Hedging • Plant shutdowns • Revised production plans • Move production facilities / outsourcing • Financial health (risk on bankruptcy) • New / lost customers • Buying consortia • Mergers & acquisitions • Confidence in economy (PMI)
• Price changes / promotions / volume discounts
• Process reliability / yield* • Product / service quality • Portfolio rationalization • Shift market / channel focus • Redesign mfg. footprint • Product availability • NPIs, product phase outs
Competitor
• Price changes / promotions • New product introduction • New distribution channels • New markets • New competitors • Hedging
Macro environment • Weather, natural disasters • Exchange rates • Oil prices, commodity prices • Political developments
• General economical developments • Governmental regulations (taxes,
subsidies)
Supplier(s) BASF Customer Consumer
Note: *availability of people, machines, raw materials, and intermediates
23 BASF SE, GSS/PO, Thilo Lindner
24
Examples for internal and external business environment factors that lead to S&OP process requirements
Products Channels
Strategic preferences
ABC Segments
Key Accounts
Service Level
Internal vs. external
customer
Allocation Strategy
Distribution Network
S&OP process
Channel Strategy
Profitability
Demand volatility
Market Geography
Capacity Constrains
Bottlenecks
Complexity
Complexity
Flexibility
Multi vs. single Source
New Product Introduction
Resources and Assets
Groupings
Profitability
Inventory Strategy
Profitability
Shelf Life Limitations
Product Strategy
Product Families
OMP vs. Merchandize
Value Chain
Integration Constrains
Critical RM
RM Strategy
BASF SE, GSS/PO, Thilo Lindner
Production Markets / Customers
Raw Materials
OMP = Own Manufactured Products
Agenda
BASF SE, GSS/PO, Thilo Lindner 25
BASF at a glance
Global Supply Chain Governance at BASF
6 men and the elephant
The concept of Sales and Operations Planning to minimize risks and uncertainty
Demand Planning as starting point for Sales and Operations Planning
Supply Network Planning and Supply Review
Profitability Management within the S&OP Process
Planning process example
Planning systems
Conclusions and Wrap up
Backup
26 BASF SE, GSS/PO, Thilo Lindner
> 90% of the value chain at BASF are managed based on forecast and require a solid planning process to minimize risks and costs
Forecast Customer
Orders
Time
Qua
ntity
/ Va
lue
Transport Production Internal Sourcing
Internal Supplier
Raw Material Supplier
Distribution
Planning
27 BASF SE, GSS/PO, Thilo Lindner
Some words on definitions …
Forecasting is concerned with what the future will look like.
Planning is concerned with what it should look like. The planning process produces a plan that is, along with information about the situation, an input to the forecasting process.
Demand describes the entity of requirements based on specific criteria, e.g. total demand vs. accessible demand, external vs. internal demand etc.
Demand Management defines all activities in support of a companies products in their marketplace, such as stimulating the demand, estimating its volume, and planning the production accordingly.
Supply Management defines all activities to fulfill the demand in the marketplace, such as own production, toll manufacturing, merchandize sales etc.
28 BASF SE, GSS/PO, Thilo Lindner
Demand Supply
Purchase
Production
Inventory
Forecast
Customer Orders
Internal Demand
Uncertainty
Forecast Error
Order Lead Times
Promotions
Sales Volumes
Packaging Variety
Capability
Capacities
Complex Supply Network
Cost to Serve
Product Mix
Availability of Transportation
Risks excess inventory excess capacity
extended lead time Low Service Level
The balancing act of demand and supply
$
29 BASF SE, GSS/PO, Thilo Lindner
Benefits of an proper demand planning process
the right product
with the right quality and quantity
at the right time
at the right customer location
with the best price
minimizes uncertainties and risks
facilitates management by objectives
facilitates internal co-ordination
facilitates controlling.
helps in achieving profitability.
provides competitive edge.
improves employee’s moral.
encourages innovations.
Internal Benefits External Benefits
But how is BASF achieving these objectives?
Agenda
BASF SE, GSS/PO, Thilo Lindner 30
BASF at a glance
Global Supply Chain Governance at BASF
6 men and the elephant
The concept of Sales and Operations Planning to minimize risks and uncertainty
Demand Planning as starting point for Sales and Operations Planning
Supply Network Planning and Supply Review
Profitability Management within the S&OP Process
Planning process example
Planning systems
Conclusions and Wrap up
Backup
Is a transparent and easy to handle process which allows the creation of a feasible rough-cut production, procurement and distribution plan
Answers the question if the sales plan is feasible
Supports the communication and translation of requirements from demand planning to fine planning
Serves as early indicator for bottlenecks, shortage or excess situations
Supports the solving of bottlenecks, shortage or excess situations and the creation of feasible plans
Supply Network Planning
Country Warehouses
Regional Distribution Centers
Production Sites
Supp
ly
Dem
and
Supply Network Planning Overview
31 BASF SE, GSS/PO, Thilo Lindner
Perform Rough Cut Planning
Covers the topics of mid term unconstrained and constraint planning, including distribution, production, procurement & internal demands within the supply network
Review Supply Process and Performance Covers reports and KPIs for
different areas as planning, management and controlling/finance
Calculate Stock Parameters Manage Supply Planning Master Data
Covers the hand over of the distribution plan to execution in feasible sizes and deals with demand and supply mismatches in the distribution in the short term horizon
Plan Deployment (short-term)
Core Processes
Supporting Processes
Covers the generation of stock parameters as safety stock, maximal stock levels
Covers the process of creation, changing, deletion of master data as well as keeping master data consistent
Supply Network Planning Elements
32 BASF SE, GSS/PO, Thilo Lindner
Agenda
BASF SE, GSS/PO, Thilo Lindner 33
BASF at a glance
Global Supply Chain Governance at BASF
6 men and the elephant
The concept of Sales and Operations Planning to minimize risks and uncertainty
Demand Planning as starting point for Sales and Operations Planning
Supply Network Planning and Supply Review
Profitability Management within the S&OP Process
Example of an BASF planning process
Structure of planning systems at BASF
Conclusions and Wrap up
Backup
Different dimensions and levels of aggregation allow effective business management
* There might be more dimensions to consider, e.g. supplier, (raw) materials, logistics / warehousing dimension
Dimensions
Product Group
Brand
Product
Trade Product
Packed Product
Finished Product Dimension Sales Dimension Production
Dimension
Sales Channel
Sales Region
Ship-To Customer
Account Type / Market Segment
Buying Group
Parent Customer
Sold-To Customer
Production Unit / Storage Location
Supply Region
Country
Plant / Warehouse
Production Line / Disposition Area
Division
Business Unit
Profit Center / Cost Center
Strategy Business Unit
Country
Sales / Production Organization
Financial Dimension
Levels of aggregation
Levels of aggregation
Levels of aggregation
34 BASF SE, GSS/PO, Thilo Lindner
Ebit after cost of capital
Ebit
Contribution margin 1
Fixed cost
Variable cost
Sales
Cost of capital
Capital cost percentage
Operating assets
Fixed assets
Current assets
-
- -
+
Planning Accuracy
Inventories
Selling costs
Receivables
Distribution costs
Raw material costs
Product mix
Customer satisfaction
Sales Volume
Sales Price
Asset utilization
The planning quality directly effects the profit and loss statement (P&L) of the company
35 BASF SE, GSS/PO, Thilo Lindner
Planning value can be created by:
increasing Profit and/or
reducing capital employed (e.g., inventories, receivables) Reducing
capital employed
Profit
Improved planning reduces the cost of buffers including inventory and increases profitability.
36 BASF SE, GSS/PO, Thilo Lindner
There are multiple options available to anticipate mismatches between demand and supply
Issue Mechanisms Options
Under capacity
Increase Supply
Decrease demand
Decrease supply
Increase Demand
Over capacity
Options for balancing
Demand and Supply
Overtime
Debottlenecking
Re-allocate to other lines/plants Outsource (3P)
Optimal sequencing of operations
Reschedule orders
Reduce / cap promotions Order freeze
Cut back inventory
Reduce shifts (long term)
Reschedule maintenance and overhauls
Expedite orders
Increase use of promotions
Expedite new products
Build ahead stock
Customer priority based stock allocation Offer alternative SKU
Increase sales distribution
Improve value / decrease prices
Optimize use of 3P suppliers
Cut overtime
Production for other BASF BU / OD
Push stock to selected customers
Reschedule overhauls, cut non-productive time
Increase imports (other BASF BU/OD)
Increase prices
Increase shifts
Build stock
Consume stock
Focus sales efforts on products with high stock
Determine effect on space and cost of capital
Reschedule NPI
Delist products
Reduce set-up times
Ensure availability of raw material & intermediates
Prioritize customers
Temporary shutdown
Commission NPI
Inventory evaluation
Evaluate safety stock levels
Evaluate cycle stock
Evaluate and differentiate service level per SKU Optimise safety stock
Optimize production sequence and batch sizes
Move CODP (Postponement) Sell with discounted rates Divest, scrap low-demand /
obsolete inventory Reduce excess
stocks
Focus on high-value / high-potential customers
Focus on most profitable products and services
Emphasis on account / relationship development
Reduce time-to-market
Improve product / service quality
Focus on most promising products
Rationalize and/or refocus product portfolio
Consolidate / relocate stock points
Increase emphasis on Make-to-Order
Increase use of VMI EOQ optimization
Reduce variance in (production) lead-time
37 BASF SE, GSS/PO, Thilo Lindner
Different measures can be considered for revenue growth and profit optimization
Level 3 Level 1 Level 2
Introduce new products & services
Increase sales volume
Strengthen price
Maximize growth &
profitability
Control price exposure
Increase product offering
Improve customer loyalty
Enter new markets
Assortment/ Effectiveness of NPI
Manage Pay-for-performance
Innovation JV / Partner to gain access to new profit pools
Develop offers that target current non-consumption
Existing geographic footprint
Enter new export markets
Understand voice of Customer
Optimize sales channels
Secure Sales-Force Effectiveness
Manage route –to-market
Target new customer types
Add value to product, improve quality
Reduce cost to serve
Reduce finance costs
Reduce logistical costs
Control customer profitability
Reduce order -processing costs
Control product profitability
Improve payment terms
Rationalize delivery services
Control SKU which are most profitable
Manage slow-movers
Understand costs of special packaging
Manage customers with high cost – to serve
Understand costs of providing special services
Manage customer orders Managing % of manual orders
Managing % of payment deductions
Managing customer activity plans
Monitor adherence to payment terms
Optimize distribution network
Re engineer products to take out cost
Contract out non core products
Reduce production costs
Reduce inventories, move to Make-to-Order
Reduce working capital tied up in stocks
Improve capacity utilization (divest, debottleneck)
Differentiate delivery services, service levels
Prioritzie customers / sales channels
Optimize production sequence and batch sizes
Rationalize product portfolio Prioritze products based on life cycle
Optimize production capacity allocation
Reduce time-to-market
Shift transportation mode Reduce storage capacity, outsource
Differentiate pricing
Outsource non-core production activities
Improve process reliability, yield
Optimize product allocation: where to produce
Hedge raw materials
Improve product and service quaiity
Anticipate currency fluctuations
38 BASF SE, GSS/PO, Thilo Lindner
Agenda
BASF SE, GSS/PO, Thilo Lindner 39
BASF at a glance
Global Supply Chain Governance at BASF
6 men and the elephant
The concept of Sales and Operations Planning to minimize risks and uncertainty
Demand Planning as starting point for Sales and Operations Planning
Supply Network Planning and Supply Review
Profitability Management within the S&OP Process
Planning process example
Planning systems
Conclusions and Wrap up
Backup
Statistical Forecast & System Update
S&OP Process
Feedback of Quotas to Sales
Demand Review
Supply Planning
Internal demand transfer & feedback
Material Aggregation
level
Product per location
Country level Sales FC
Planning strategy setup
–1 CD 1-2 CD 3-7 CD 8-13 CD 14-22rd CD 23-26th CD 27-31st CD
CD: Calendar Day FC: Forecast
Regional Level
Example of an planning process
Production Planner Marketing Manager Sales
Consensus Demand
Final Supply Plan
Product per location
BASF Internal Supplier
Final S&OP Plan
Product Family level
40 BASF SE, GSS/PO, Thilo Lindner
Interaction between planning and other processes
Logistics
Finance
Sales
Planning
Procurement
Production
Manufacture
Plan Detailed Production
Plan Supply
Plan Production
Prepare S&OP
Plan Demand
Negotiate
Inquire Supplier
ATP
Set Credit
Prepare Order
Create & Update Order
Outbound Delivery
Plan Transport
Marketing
Price
Receive Good
Inbound Outbound Product Inventory
Supplier Customer
Raw Mat. Inv.
Price, etc
Price Credit line
Payment Receivable
Forecast
Order
Execute Transport Transport
Warehouse
Purchase Request
Purchase Order
Purchase Plan
Contracts
Profit & Loss
41 BASF SE, GSS/PO, Thilo Lindner
Agenda
BASF SE, GSS/PO, Thilo Lindner 42
BASF at a glance
Global Supply Chain Governance at BASF
6 men and the elephant
The concept of Sales and Operations Planning to minimize risks and uncertainty
Demand Planning as starting point for Sales and Operations Planning
Supply Network Planning and Supply Review
Profitability Management within the S&OP Process
Planning process example
Planning systems
Conclusions and Wrap up
Backup
BASF Group has a System Strategy for Planning Systems
Simple MRP logic, production overview in BASF-Order-Cockpit, simple graphical and tabular visualization of available capacity and capacity utilization, simple „drag & drop“ of plan and process orders on single level
Available To Promise
Multi-level planning with order dependencies, flexible heuristics, stock-alerts, setup- and sequence- optimization, planning board with colors, undo functionality and planning interval definitions. Costs (product, transport, stock), delay/ non-delivery (penalty variables) based on order optimization capabilities
Specific requirements in the scope of complex optimization models
SAP R/3 – Modules
Mathematical optimization
Demand Planning
Supply Network Planning
Production Planning & Detailed Scheduling
Production Planning for Process Industries
APO – Modules
43 BASF SE, GSS/PO, Thilo Lindner
Demand Review Meeting
Demand – Supply Balancing Meeting
Sales and Operations Planning as decision process
Gross Demand Net demand by location rough cut capacity requirements
Demand Planning (DP) and Supply Network Planning (SNP) provide the Foundation for a Successful Sales and Operation Planning Process
Supply Network Planning
Inventory Planning
Demand Planning
Detailed Scheduling
Master Production Scheduling
Integrated Planning Process
44 BASF SE, GSS/PO, Thilo Lindner
Agenda
BASF SE, GSS/PO, Thilo Lindner 45
BASF at a glance
Global Supply Chain Governance at BASF
6 men and the elephant
The concept of Sales and Operations Planning to minimize risks and uncertainty
Demand Planning as starting point for Sales and Operations Planning
Supply Network Planning and Supply Review
Profitability Management within the S&OP Process
Planning process example
Planning systems
Conclusions and Wrap up
Backup
46 BASF SE, GSS/PO, Thilo Lindner
Conclusions
Make sure, that the 6 men envision the same elephant
Understand the capabilities of your own organization
Understand the needs of your internal and exernal customers
Make Planning a Top-Management Priority
Define the Sales and Operations Process according to your business requirements
Understand the trade-off between demand, supply and profitability
Monitor closely and and establish a constant improvement process
Choose the optimal technology to support your planning processes
Agenda
BASF SE, GSS/PO, Thilo Lindner 51
BASF at a glance
Global Supply Chain Governance at BASF
6 men and the elephant
The concept of Sales and Operations Planning to minimize risks and uncertainty
Demand Planning as starting point for Sales and Operations Planning
Supply Network Planning and Supply Review
Profitability Management within the S&OP Process
Example of an BASF planning process
Structure of planning systems at BASF
Conclusions and Wrap up
Backup
Exercise: Place these Demand Planning Process steps in the correct order
Define DP Strategy
3
Calculate Statistical Forecast
3
Collect Demand Input
3
Validate Demand input
3
Balance Demand & Supply
3
Manage DP Performance
3
Manage DP Performance
52 BASF SE, GSS/PO, Thilo Lindner
This is the correct order!
Balance Demand & Supply
Validate Demand input
Collect Demand Input
Calculate Statistical Forecast
Define DP Strategy
Manage DP Performance
3 3 3 3 3 3
Solution to Exercise: Place these Demand Planning Process steps in the correct order
Define DP Strategy
3
Calculate Statistical Forecast
3
Collect Demand Input
3 Balance Demand & Supply
3
Validate Demand input
3
Manage DP Performance
3
53 BASF SE, GSS/PO, Thilo Lindner