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Flawless Supply Chain Execution Chicago March 8, 2011

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Page 1: Best Run Supply Chain Practices

Flawless Supply Chain ExecutionChicagoMarch 8, 2011

Page 2: Best Run Supply Chain Practices

Supply Chain ExecutionOverview

March 2011

Page 3: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 3

Business Realities“The only constant is change itself”

1 Billion New Capitalists and Consumers

TATA Motors

launches $2500

Car “Nano”

1 Billionth Phone SoldMay 2007

New Container

Shipped: Every

0.1 Second

Oil crosses $100 / Barrel

Increasing

Numbers of

Product Recalls

2008

Dow Jones drops 40% in 2008

Dow Jones Industrial Average 2008

7000

8000

9000

10000

11000

12000

13000

14000

Global Bail Out

67,000 factories in

China closed

2008 auto sales drop by 3 million

EU calls for global

carbon trading

system to fight

climate change

2009 2010

Page 4: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 4

What did 2010 bring?

2010

Increased risk across the supply network

Globalization and resulting complexity is here to stay….

Increasing focus on Sustainability / Green Supply Chains

Retailers See Holiday Sales

Rebound From 2008

Jan 2010

Shoots of recovery are appearing….

Jan 2010

China surpasses Germany as world's top exporter

THE ASSOCIATED PRESS

China auto sales more than double to 1.3 million units in

January

Feb 2010

2009 Infant Product Recalls Set Record High

15.2m cars recalled in

2009!

15.2 million car recalls in

2009

670,000 small companies have

closed in China due

to the global crisis

Supply Chain Risk: It's Time to Measure It

Feb 2010Feb 2010

Global companies become serious

about green supply chain strategies

Page 5: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 5

Economic Turmoil Economic Turmoil Economic Turmoil Economic Turmoil Economic Turmoil Economic Turmoil

Complex Global Networks

Complex Global Networks SustainabilitySustainabilityIncreased RiskIncreased Risk

Manage Fluctuating Demand & Supply

Poor demand visibility and responsiveness

Demand and supply not aligned

Escalating costs and inefficient operations

Leverage Network Wide Collaboration Lack of visibility

across distributed network

Ineffective capacity and asset utilization

Delayed response to customer demand

Improve Visibility Across Logistics

Increased inventory and warehousing costs

Fluctuating transportation costs

Increased complexity & risk across the network

Decrease Inventory and Increase

Service Increasing products

and supply chain complexity

Escalating inventory targets across the supply chain

Buffer stocks , increased write-offs and discounts

Safe & Sustainable Supply Chains

Government and Retailer regulations

Consumer trust and Brand value impacted

Need to manage safety, quality, and traceability at no additional cost

Global Trends and their Impact on Supply Chain…are you ready for the upturn?

Economic Turmoil Economic Turmoil

Economic Turmoil Economic Turmoil

Page 6: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 6

Is your Supply Network ready for the upturn?

Long Term Forces

Short Term Realities

The “New” Normal

“CEO and senior executive top priorities are changing — with revenue growth becoming more important than cost cutting for most in 2010.”

Source: 2010 Gartner CEO and Business Executive Survey

Page 7: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 7

Optimize Inventory

Manage through downturn, Position for upturnFive Tenants of a Responsive Supply Network

Synchronize

Supply to

Demand

Visibility &

Collaborati

on

Supply Chain

Sustainability

Excellence

in

Execution

Page 8: Best Run Supply Chain Practices

Supply Chain ExecutionEWMTMSNCSCPM

March 2011

Page 9: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 9

Excellence in Execution paysDid you know …

…you can increase on-time delivery to customer 10-30% by automating warehouse processes?

…you can lower your carrier contracts by 10% when complying with your routing guide?

…overall shipment volumes are down by 18-20% this year impacting capacity, cost and service?

… you can reduce your transportation spend by 10-20% by automating transportation processes?

…you can increase inventory turns by 30% when more accurately allocating inventory based on current and future demand?

…you can increase employee productivity by 20% when streamlining operations and reducing exceptions and expedites?

Source: CAT Logistics

Source: ARC

Source: ARC

Source: Empresas Polar

Source: Gartner

Source: SC Digest

Page 10: Best Run Supply Chain Practices

Logistics and Fulfillment Management is an end-to-end, cross-functional process

VP of Supply Chain

Cross-Dept Supply Chain Mgt

Sales

LogisticsDistribution

Effective Logistics and Fulfillment Management requires alignment between several stakeholders with differing objectives

Inbound Freight Management

Logistics

Outbound Freight

Management

Logistics

Storage and Fulfillment

Storage and Fulfillment

Distribution

Customer Commitment

Customer Service

Logistics

Risk / Compliance

Finance

Procurement

Customer Invoice

ProcessingAR Processes

Delivery CommitmentOrder Capture

Outbound Delivery Creation

Supplier Invoice

Processing

Supplier Invoice

ProcessingAP ProcessesAP Processes

PO Management

PO Management

ASN / Inbound Delivery Creation

ASN / Inbound Delivery Creation

Freight Settlement

Freight Settlement

Transportation Execution

Transportation Execution

Inbound Trans. Planning /

Optimization

Inbound Trans. Planning /

Optimization

Freight Settlement

Freight Settlement

Transportation Execution

Transportation Execution

Outbound Trans. Planning /

Optimization

Outbound Trans. Planning /

Optimization

Import Management

Export Management

Inventory Management

Inventory Management

Order Fulfillment

Order Fulfillment

Sourcing and Supply

Commitment

Global Supply Chain Visibility, Event Management, Alerting, Reporting, Traceability, RFID / Auto-IDGlobal Supply Chain Visibility, Event Management, Alerting, Reporting, Traceability, RFID / Auto-ID

Global Trade Management

Logistics

Page 11: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 12

SAP Extended Warehouse ManagementSolution Overview

Inbound Processing Storage and OperationsStorage and Operations Outbound Processing

Co

re W

areh

ou

se O

per

atio

ns

and

In

ven

tory

Man

agem

ent

Receive ASN data

ASN Validation & Correction

Transporation Unit Arrival

Manage Transportation Unit

Goods Receipt

Putaway Bin determination

Unload Transportation Unit

Internal Routing

Slotting

Deconsolidation

Putaway

Returns / Reverse Logistics

Rearrangement Order deployment

Inventory Counts / Record Accuracy

Replenishment

Freight Order Management

Route Determination

Wave Management

Picking Bin Determination

Warehouse Order Creation

Work Assignment

Picking

Packing

Staging

Loading & Goods Issue

Kit-to order

Transportation Cross Docking

Picking fr. Inb./ Push Deployment

Yard Management

Packaging Specification

GTS Integration

EH&S Integration

Integration to QIE

RF support for all exec.processes

Batch Management

Material Flow System

Serial Numbers

Cro

ssP

roce

sses

Su

pp

ort

ing

Fu

nct

ion

s

SAP SCM-EWM 5.0.

Goods Receipt - Optimization

Kit-to stock

Manual outbound deliveries

RFID Enablement

Warehouse Cockpit

eSOA enablement

Catch Weight

Labour Management

SAP SCM-EWM 5.1.

Production Supply

Opportunistic Cross Docking

Merchandise Distr. X-Docking

Task Interleaving

Execution Constraint

Semi-System-Guided work

Graphical Warehouse Layout

SAP SCM-EWM 7.0.

Page 12: Best Run Supply Chain Practices

SAP EWM has closed the gap with Best of Breeds and is the way to go for SAP customers

“From this retail customer's perspective [Indigo Books], SAP has narrowed (closed?) the functionality gap with best-of-breed WMS solutions. This milestone is reflected in the hockey-stick growth in EWM implementations SAP experienced in 2009 compared to previous years.”

“Case Studies from SAP Insider: Indigo Books and Newell Rubbermaid” by Adrian Gonzalez, ARC in Logistics Viewpoints Blog, 03/2010

“Some of these [SAP EWM] customers claim that the functionality is on par or exceeds that of well known best of breed solutions. They [SAP] are poised for very fast growth as they penetrate their installed base.”

“Warehouse Management Systems Worldwide Outlook” by Steve Banker, ARC Advisory Group , 07/2010

“For SAP users considering upgrading WMS, the Extended Warehouse Management (EWM) application is to the point where it at least deserves to be put on the short list. EWM has more functionality, and is far more flexible.”

Dwight Klappich, Gartner quoted in article “SAP shops holding onto SAP WMS, but there are benefits to upgrading” by Marc Fortier, Search SAP 07/15/2010

“The offering was designed to provide functionality for complex warehouses and increasingly broad capabilities, such as yard management, slotting, material flow solutions and engineered labor standards.”

“Magic Quadrant for Warehouse Management Systems” by Dwight Klappich, Gartner, 07/29/2010

Page 13: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 14

SAP Extended Warehouse Management Selected implementing Customers

Page 14: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 15

Coverage: Comprehensive transportation mgmt.

- For core operations- For shipper industries &

foundation for freight forwarders

Focus:- Usability & configurability- Performance & process

simplification- Customer & SAP TCO

Coverage: Integrated transportation planning & execution

- Stand-alone solution- Inbound & outbound transp.- Central transportation charge

engine

Limitations: - TCO- Restricted availability

SAP Transportation Mgmt. combines a long history of transportation business, process and IT expertise

SAP Transportation Solution History Strong, Continued Investment to Deliver

Coverage: Shipping planning & optimization- Order-based planning- Integrated with

ERP LE-TRA

Limitations:- No combined in-/outbound

movements ….

Coverage: Shipment execution Limitations:- No shipments combining

in/outbound movements- Delivery-based only- No transportation capacity

planning

Transportation Management (TM 8.0)

Transportation Management (TM 6.0 & 7.0)

APO – Transport. Planning/ Vehicle Scheduling (TP/VS)

ERP - Logistics Exec. Transportation (LE-TRA)

Page 15: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 16

Analytics & Reporting

Overview SAP Transportation Management Solution Coverage

OrderManagement

Freight Planning &Tendering

Freight Execution &Monitoring

Freight Settlement

Event Management

Import / Export, Dangerous Goods & Compliance

Document & Output Management

Integration & Connectivity

TransportationCharge Clerk

Transportation Planner

TransportationDispatcher

Specialist(i.e.Tendering)

SAP Transportation Management

Page 16: Best Run Supply Chain Practices
Page 17: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 18

ChemicalsConsumer Products Consumer Products

Company: Chemicals company specializing in silicone-based materials

Implementation:SAP TM 7.0 ca. 50 sites with 300 shipping points

Goal: Efficient, accurate transportation settlement and invoicing

Implementation Scope:Transportation charge management, with extensive charge calculation, invoice creation and verification 

Shipment creation in SAP ERP. Charge calculation with carrier verification & freight settlement in TM. Automated invoicing in SAP ERP.

Company: Consumer packaging for beverage, personal care, healthcare, food

Implementation:SAP TM 6.0

Goal: Complete automation of thetendering process (subcontracting)

Implementation Scope:Transportation optimization - freight unit building, truck planning, carrier selection.

Sales order processing in SAP ERP.Transportation planning in SAP TM. Logistics execution in SAP LES(ERP-Logistic Execution System).

Company: World leading company for food and beverages, health & performance nutrition

Implementation:SAP TM 8.0

Goal: A common transportation mgmt. system to eliminate legacy TM systems. Transportation spend reduction & operational efficiency increase.

Implementation Scope:Full TM implementation across freight order mgmt., transportation planning & carrier selection, tendering, subcontracting and freight settlement.

Selected Transportation Management ProjectsSAP Transportation Management 6.0, 7.0 & 8.0

Page 18: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 19

Supply Network Collaboration

Suppliers

Contract Manufacturers

Customers

My Company

Central hub to share real-time supply / demand data across the holistic supply networkCentral hub to share real-time supply / demand data across the holistic supply network

Flextronics: One strategic SNC system services 13 countries, 14 ERP systems (non-SAP) and transacts with 12 000 suppliers, 16 000 users, 300K transactions/week

Philips: One central SNC instance manages collaboration for several divisions to have a single Philip’s interface to the outside world, including multiple tiers of suppliers.

Johnson & Johnson: A single corporate SNC platform for internal collaboration between different regions and line of businesses (Consumer, Pharma, Medical Devices, etc)

Flextronics: One strategic SNC system services 13 countries, 14 ERP systems (non-SAP) and transacts with 12 000 suppliers, 16 000 users, 300K transactions/week

Philips: One central SNC instance manages collaboration for several divisions to have a single Philip’s interface to the outside world, including multiple tiers of suppliers.

Johnson & Johnson: A single corporate SNC platform for internal collaboration between different regions and line of businesses (Consumer, Pharma, Medical Devices, etc)

Enterprise-Wide Strategic Platform for All Supply Chain Collaboration Needs

Supplier Collaboration

Supplier Collaboration

Outsourced ManufacturingOutsourced

Manufacturing

Customer CollaborationCustomer

Collaboration

SNC

Typical collaboration flows: VMI Forecasting Order sharing/acknowledgement (POs,

Releases, Kanban) Shipping Invoicing Quality reporting Work order tracking Multi-tier supply and demand visibility

Typical collaboration flows: VMI Forecasting Order sharing/acknowledgement (POs,

Releases, Kanban) Shipping Invoicing Quality reporting Work order tracking Multi-tier supply and demand visibility

Page 19: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 20

SNC is really a “3-in-1 Solution” Supplier Collaboration, Outsourced Manufacturing, Customer Collaboration

Traditional Users Questions Answered

Supplier Collaboration Procurement Operations Warehousing

“How can I enable suppliers to see changes in my forecasts and POs quickly and automatically?”

“How can I get visibility to in-transit material?”

Outsourced Manufacturing Manufacturing Procurement Quality

“How can I get real-time insight to production progress and projection of end dates and quantities at my contract manufacturer’s site?”

“How can I reduce the number of expedited shipments to customers?” How can I improve product safety and traceability?

Customer Collaboration Sales\Sales Ops Operations Customer Service

“How can I prevent stock-outs, especially during promotions?” “How can I reduce finished goods inventory while still maintaining service

levels?”

“3-in-1 Solution” allows for flexible deployment with ability to growOne Platform for Many Needs Equals Lowered TCO

Suppliers

Contract mfg.

Customers

My companySupplier Collaboration Supply chain efficiencies for raw materials and components

Outsourced Manufacturing Visibility to production progress

Customer Collaboration Automated replenishment of finished goods

SNC

Page 20: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 21

Customers Benefit from SNC

Reduced inventory by 50 – 70%Improved on-time delivery by 70%

Live in 4 Months10-15% stock reduction in the chain using supplier managed inventory

50% FTE reduction at GR processing

66% reduction in early shipments 100% improvement in errors associated with direct material invoice

discrepancies

Acknowledgement rate increased from 40 – 80 %Inbound decreasing for Stock/JIT : - 30 %

Purchase order processing productivity gains 3–5 times Reduction in nonqualified returns 20%

Page 21: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 22

Inter-enterpriseend-to-end processes

DESIGN SOURCE MAKE STORE MOVE SELL SERVICE

Collaborative Demand and Supply Planning

Logistics and Fulfillment management

Manufacturing Network Planning & Execution

Execution

Tactical

Strategic

Supply Chain Costs

ReduceWorking Capital

Supply ChainReliability

Supply Chain Performance ManagementPulling it all Together

financial impactstrategic impact compliance impact

Supply ChainPerformanceManagement

Logistics Manager

SC Analyst

CEO / CFO

VP Supply Chain

© SAP 2010 / Page 22

Page 22: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 23

Excellence in ExecutionPerformance Management

Gain visibility and control across network– Measure, monitor and control KPIs across

trading partners to proactively manage risk and performance

– Gain insights and control, by focusing on metrics that matter (based on best practices such as SCOR, or company specific metrics)

– Powerful visualization and Drill-down via cascading metrics hierarchies

Align stakeholders– Measure and visualize impact between

metrics, across supply chain network

– Metric management functionality provides flexibility to define department-specific metrics, and assign accountability

Automate data collection & analysis– Timely insights, with tight operational

application integration

Page 23: Best Run Supply Chain Practices

© 2011 SAP AG. All rights reserved. 24

7 Key Points to Take Home

1.Logistics and Fulfillment are key drivers of today's supply chain

2.It is critical to streamline internal organizations and processes to maximize assets (labor, inventory, etc.) while minimizing costs

3.It is critical to align the enterprise with your trading partners and share information seamlessly, allowing for more effective and cost conscious decisions to be made and executed

4.SAP has the key business processes on a single platform to deliver an integrated supply chain from the point of origin to the point of consumption

5.SAP’s customers are leveraging these solutions to execute an integrated supply chain with successful results

6.Your supply network can have significant impact on providing the ultimate customer experience

7.Companies can either use their supply chain as a differentiator from the competition or not – it’s up to you!