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Demand ,S&OP and

Inventory Optimization

using Oracle

Felix Ribalov

www.Vplanning.com

Sense, shape, and respond to demand and supply real time

Agenda

• Demand forecasting – accommodate to vast

portfolio.

• Automate Consensus Planning – Integrated S&OP

Process.

• Proactive promotion management – align

promotions with value.

• New Products introductions – Must for product

and customer segmentation.

• Inventory Optimization for service level.

Leverage best-in-class Statistical Engine

• Improved forecasting provides a

more accurate baseline bottoms up

forecast to the consensus process

• Automatic model selection provides

improved accuracy over “best fit”

approaches

• Includes multiple factors such as

causal factors, seasonality, trend, as

well as decomposing the affects of

promotional events

• Automatic forecasting level selection

on the forecasting tree

• Nodal based definitions

Causal Analysis

Outlier Detection

Promotion Events

Seasonality

Cyclical Patterns

Trend

Historical

data Bayesian

Estimator

Forecast

Multiple

causal

factors

Combined

model

Bayesian

Optimizer

Start with a better prediction of demand

Automate Consensus Planning Inclusive Consensus Process Improves Plan Quality and Acceptance

• Create consensus plan through continuous collaboration across sales, marketing, finance, supply chain and customers

• Each participant gets tailored view – Configurable worksheets

• Calculate accuracy for each participants forecast input

• Combine top down business planning with precise bottom up forecasts

• Automate process with workflow – Send reminders

– Task notifications in dashboard

Sales

Mgrs

Sales

Forecast

Sales: Plan by Product Line

Plant

Mgrs

Operations

Forecast

Manufacturing: Plan by Plant

Sales Reps

Marketing

Forecast

Marketing: Plan by Region

Asia Americas

Finance

Forecast

Finance: Budget in Dollars

Review statistical forecast and add sales

dem

Automate Process using Workflow Focus by segment– Different process for different segments

• Seeded workflows to

automate the sales

and operations

planning process

• Focus on the Value

added segments

• Easily configurable

Analyze promotion effectively

• Baseline versus incremental volume – Provides decomposition of incremental volume from

advertising, promotions, or sales incentives

• Granular lift analytics – Incremental volume lift coefficients maintained at

lowest level

– Localized promotion analysis

– Allows shipments/replenishments to be adjusted by

ship-to location

• Cross product and customer effects – Determines cross-product cannibalization impact

– Adjusts forecasts for product and customer

cannibalization Baseline

Incremental

Typical

Competitive

switching

Long term

growth

Pre and Post

promotion

effect

Cross product

cannibalization

Oracle

Demantra

Baseline

Enable segmented promotions without killing demand forecast accuracy

New Product Introduction

Derive forecast for new product and adjust forecast based on actual demand

Automatically detect outliers

Demand of comparable products based on characteristics

Accurately forecast demand for new products based on existing data

Improve Planner Productivity

• Task oriented dashboards

• Excel like worksheets – Context sensitive

– User configurable workspaces

– Copy and paste multiple cells and rows

– Shared and private worksheets

– View in any unit or currency

• View data at multiple levels in hierarchy of

choice

• Simultaneous update and view multiple

worksheets and perform side-by-side

comparisons

• Color coding based on exceptions

• Flexible formulaic expressions

• Online notes with audit trail

• Off-line mode with automatic sync and MS

Excel integration

Configurable user interface replaces need for individual

spreadsheets while ensuring enterprise database access and

security

Oracle Inventory Optimization

• Make better inventory

investment decisions by

including variability

– Demand variability

– Supply variability

– Lead time variability

Account for supply chain variability in your hedging strategy

Least Risk

Inventory

Investment

Strategy

Demand Variability

Supply Variability

Lead Time

Variability

Service levels

and Budgets

Time phased safety stock at each node

in the supply chain network

Variability • Demand and demand variability

• Supply lead time variability (supplier,

production, transportation)

Supply Chain Data

• Multi-echelon network

structure

• Alternates, sourcing

rules

• Costs (carrying,

production,

procurement,

transportation)

How It Works

Objectives

• Goals

– Maximize profit

– Minimize cost

• Desired service level

• Budget constraints

• Trade off customer service level

with total cost

• Choose the best service level

strategy based on

– Inventory carrying cost

– Production cost

– Procurement cost

– Transportation cost

– Revenue

– Profit

• Compare alternative business

scenarios

Invest in the most profitable scenario Determine the most profitable channels, products, and customers

Enforce service levels

• Establish target service levels by

– Product

– Customer

– Channel

• Extensive defaulting to start

quickly

– Assign by plan, category, or specific

item or customer

• Manage commitments to key

customers

• Manage product portfolio

– Vary service level by margin or stage

of life-cycle

Vary service levels by product, customer, or channel

Oracle Inventory Optimization Why it is different

• Multi-echelon

• Optimal postponement

• Buffer inventory pooled

• Multi period

• Enhanced modeling

– Lead time variability, fulfillment time

• Business realities considered

– Capacity constraints and alternates

• Single-echelon

• Ad-hoc postponement

• Little or no pooling

• Single period

• Limited modeling

– No lead time variability, fulfillment time

• Business realities ignored

– Capacity constraints and alternates

Higher inventory, lower service Lower inventory, higher service

The Momentum Continues…

Medical

Media & Entertainment

Consumer Packaged Goods

Retail/Wholesale

Consumer Durables

High Tech/Industrial

We predict the impact of today’s business decisions on

tomorrow’s business performance

Aircraft Engines

Service and Spare parts

Agriculture

Q U E S T I O N S

A N S W E R S

Provide insight to key decision makers

Advanced Planning Command Center • Compare alternative

business scenarios

– Planners execute

scenarios

– Automatically translate

detailed planning

information to corporate

metrics

– Track assumptions and

attach supporting

documents

• Approve and drive into

execution

– Choose your baseline plan

– Drive tactical and

execution decisions

• Monitor

– Continuously monitor

performance and get real-

time visibility to deviations

Demantra DM ASCP / SNO IO

Business

scenarios

Assigned

activities

Planners execute assigned activities

Suggested

alternatives

for evaluation

Combine necessary decision making information for decision makers

Single versus Multi Echelon Planning Reduce safety stock (SS) – SS proportional to square root of lead time

Regional DC

Transfer LT = 4d Transfer LT = 4d

Processing LT = 4 d

Transfer LT = 4d

Customers Plant Supplier Central DC

Single echelon: SQRT(4) = 2 units ; total SS = 8 units

Regional DC

Transfer LT = 4d Transfer LT = 4d

Processing LT = 4 d

Transfer LT = 4d

Customers Plant Supplier Central DC

Multi echelon: SQRT(16) = 4 units = total SS

• Hold SS at nodes with lower inventory cost

– Without degrading service level

– Typically upper echelons, prior to value being added to the product Ex. Hold at Central DC versus Regional DC

Ex. Hold raw materials versus finished goods at the plant

– Increases flexibility – use shared buffer inventory at common nodes

• Inventory Optimization approach with postponement

– Total safety stock (in equivalent finished good units) is unchanged in absence of sharing / pooling – no service level degradation. Safety Stock value is reduced.

– Sharing/pooling reduces total safety stock even further

Postponement

Per unit inventory value increases closer to the point of consumption

$0.25 $0.50 $0.75 $1.00

Regional DC

Transfer LT = 4d Transfer LT = 4d

Processing LT = 4 d

Transfer LT = 4d

Customers Plant Supplier Central DC

Postponement Reduces inventory value

Regional DC

Transfer LT = 4d Transfer LT = 4d

Processing LT = 4 d

Transfer LT = 4d

Customers Plant Supplier Central DC

$0.25 $0.50 $0.75 $1.00

Regional DC

Transfer LT = 4d Transfer LT = 4d

Processing LT = 4 d

Transfer LT = 4d

Customers Plant Supplier Central DC

Optimal Postponement: Total SS = 4 units = $3.25

$0.25 $0.50 $0.75 $1.00

No Postponement: Total SS = 4 units = $4.00

Provide insight to key decision makers

Advanced Planning Command Center • Compare alternative

business scenarios

– Planners execute

scenarios

– Automatically translate

detailed planning

information to corporate

metrics

– Track assumptions and

attach supporting

documents

• Approve and drive into

execution

– Choose your baseline plan

– Drive tactical and

execution decisions

• Monitor

– Continuously monitor

performance and get real-

time visibility to deviations

Demantra DM ASCP / SNO IO

Business

scenarios

Assigned

activities

Planners execute assigned activities

Suggested

alternatives

for evaluation

Correlate information from different sources in Adv Planning Command Center

22

Compare scenarios – 360 degree visibility Analyze across key demand, supply, capacity, finance, and exception metrics

Integration with Advanced Planning

Command Center provides

pre-built self-service dashboards for

comprehensive S&OP and Risk analysis

Supports real-time sales and operations planning process

Integrated strategic and tactical decision making

Start quickly through seeded templates

Integrated performance management

Why Oracle !