advanced planning

109.08.2006Logistics Management

An Advanced Planning Success Story in ThailandAn Advanced Planning Success Story in ThailandCase study : Nestle ThailandCase study : Nestle Thailand


Introduction Nestle Supply Chain ManagementIntroduction Nestle Supply Chain ManagementOverview of SAP APOOverview of SAP APO

SAP APO SAP APO Demand PlanningDemand PlanningSAP APO SAP APO Supply Network PlanningSupply Network PlanningSAP APO SAP APO Production Planning and Details schedulingProduction Planning and Details schedulingSAP APO SAP APO Global Available to Promise Global Available to Promise SAP APO SAP APO Integration and Architecture Integration and Architecture

DSP KPIDSP KPIBenefit of implementationBenefit of implementationLimitationLimitationKey success factorsKey success factorsSummarySummary


DistributorOperator

SupplyPlanning

Procurement

Distribution

Sales &Marketing

Suppliers Consumer

Manufacturing

D = Distribution / Customer Service C = Channel SupportP = Procurement M = Manufacturing S = Demand & Supply Planning

P M S D C

The Nestle Supply Chain ModelThe Nestle Supply Chain Model

Overview ofAPO

KPIIntroduction Benefit &Limitation

Key Successfactors

Summary


To To remain competitive as the No.1 food company in the worldremain competitive as the No.1 food company in the world, , GLOBEGLOBE aims to unlock Nestlaims to unlock Nestl's potential's potential by :by :

Using the size of Nestl as a strength in a rapidly changing environment

Unifying and aligning Nestl on the inside to be more globally competitive on the outside

Unlocking potential benefits by the power of the "e" world with a focus on customer/channels and consumers

1. Implementation of harmonized

Nestl Business Excellence Best

Practices

2.Implementation of Data standards and Data

Management - "Managing Data as a Corporate

Asset"

3. Implementation of standardized

information systems and technology

WHAT does GLOBE aim

to do

HOW

Nestle Globe (Global Business Excellence)

Unlock Nestl's Potential

Overview ofAPO


Key Successfactors

Summary


The mission of the Demand & SupplyPlanning is to ensure that stock of finished goods is available at correct stock location to meet customer demand while optimisingthe resource utilisation. Demand & Supply Planning is a key

enabler for Nestl's operating companies to :reduce the working capital improve the customer service levelincrease the ability to react to changes in market

Demand & Supply PlanningDemand & Supply Planning

Overview ofAPO


Key Successfactors

Summary


Demand & Supply PlanningDemand & Supply Planning

Overview ofAPO


Key Successfactors

Summary


Overview of APOOverview of APO

Forecast

Planned Order

Recommended Stock Transport

Requisition

Firmed StockTransportation

Requisition

Stock Transport Order

Demand Planning

Supply NetworkPlanning

Production Planning / Detailed Scheduling

Deployment

Transport Load Builder

Planning Horizon

33

44

55

22

11

Overview ofAPO


Key Successfactors

Summary


Demand PlanningDemand Planning

Demand Planning



Deployment


Planning Horizon

Demand Planning



Deployment


Planning Horizon

Overview ofAPO


Key Successfactors

Summary


Consensus Demand Planning Process objectiveConsensus Demand Planning Process objective

To create the best estimate of future demand, the number uponwhich all operational activities will be based

DemandPlanning

Demand &SupplyReview

SupplyPlanning

GeneratingDemand

Customers

BusinessStrategy

Overview ofAPO


Key Successfactors

Summary


Demand Planning ProcessDemand Planning Process

* Training Course

SNP

Adminis-tration

Define Forecast

Methodology

Forecast and

Evaluate Events

Achieve Consensus

Demand Plan

Monitor Demand

Plan Process

Gather HistoricalElements

Create Base

Demand Plan

Store and ReleaseDemand

Plan

Statistical Methods and Techniques*

Clean and Commenton Hist.

DataBW

Setting Up the Demand Plan *

CRM FICO(OPL vol.)

05

101520253035404550

W1 w3 W5

W7

W9

W11

W13

W15

W17

W19

W21

W23

W25

W27

W29

W31

Overview ofAPO


Key Successfactors

Summary


CRM

APO

GDGD

EPEPBaseline Baseline VolumeVolume

Uplift Uplift

VolumeVolume

Consensus Consensus

Demand PlanDemand PlanMonthly Monthly Forecast Forecast ReviewReview

CRM CRM IntegrationIntegration

FICOFICO

Consumer Consumer Communication & Trade Communication & Trade

Activities PlanningActivities Planning

Commercial Commercial Planning BudgetPlanning Budget

Business PlanningBusiness Planning

Profitability Analysis Profitability Analysis

One Number One Number PrinciplePrinciple

Consensus Consensus Demand PlanDemand Plan

= OPL Volume = OPL Volume

Overview ofAPO


Key Successfactors

Summary


Demand Planning Key PrinciplesDemand Planning Key Principles

One number philosophy Unconstrained Consensus Demand Plan Collaboration essential between:

Generating Demand Demand Planner

Weekly (shelf stable) or daily (chilled) processes

Base line

Base line

Base line

Base line

Base line

Base line

Base line

ase line

ase line

Base line

Base line

Base line

Base line

Base line

Base line

Base line

ase line

ase lineUpliftUpliftUpliftUplift

Consensus Demand Plan = Consensus Demand Plan = Baseline + UpliftBaseline + Uplift

DSP Planner provide Base lineBase line

Generating Demand provide UpliftUplift

Overview ofAPO


Key Successfactors

Summary


APO support Demand PlanningAPO support Demand PlanningAPO support Demand Planning process Gather historical data element Clean and comment on historical data Generate base line via statistical forecast tools. Consolidate consensus demand plan Perform collaborative forecast Mange product life cycle Plan promotion Plane new product Release Final consensus demand plan to supply

APO Demand Planning is a set of functionalities around Demand Management, Statistical Forecasting, Promotion and Life-cycle Planning processes. It is an integral part of any organizations Sales & Operations Planning Process.

Overview ofAPO


Key Successfactors

Summary


* Training Course

APO support Demand PlanningAPO support Demand Planning

Base line from Statistical forecast

Uplift from CRM

Final consensus demand

Stat model

Overview ofAPO


Key Successfactors

Summary


Supply Network PlanningSupply Network Planningoror

Distribution Requirement PlanningDistribution Requirement Planning

Demand Planning



Deployment


Planning Horizon

Demand Planning



Deployment


Planning Horizon

Overview ofAPO


Key Successfactors

Summary


DRP ProcessDRP Process

Demand Planning

Run DRP

Prepare MPS

Prepare DPS Production

Material Requirements

Planning

Sales History

Receive Collaborative

Data

D

P

S

N

P

P

P

D

S

S

N

P

R/3

Create Dispatch Plan

Send Dispatch Plan

Build Load Create ShipmentsSend Load

Plan

BW

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Overview ofAPO


Key Successfactors

Summary


Market Boundaries

Source (production site)

Destination (distribution center)

The Supply Network StructureThe Supply Network Structure

Receiver Market

Destination 3

Producer MarketOrigin A

Supp

ly Lin

k (IM

SP)

Supply Lin

k (domest

ic)

Destination 1Destination 2

Origin B

Supply Network planningare cover bothDomestic and IMSP

Once the link is required, new network structure need to be set up.

Overview ofAPO


Key Successfactors

Summary


Receiver Market

Destination 3


Supp

ly Lin

k (IM

SP)

Supply Lin

k (domes

tic)


Origin B

Receiver Market

Destination 3


Supp

ly Lin

k (IM

SP)

Supply Lin

k (domes

tic)


Origin B

By input of Initial stock Demand Stock policy

At destination , Distribution requirement (NRR)are generated base on stock policy target which corresponds to Dispatch requirement (NDR) at source. These dispatch requirement are input to the production planning process.The calculated distribution requirement are not constrained (e.g. by factory production capacity

Distribution RequirementDistribution Requirement

Overview ofAPO


Key Successfactors

Summary


Receiver Market

Destination 3


Supp

ly Lin

k (IM

SP)

Supply Lin

k (domes

tic)


Origin B

Receiver Market

Destination 3


Supp

ly Lin

k (IM

SP)

Supply Lin

k (domes

tic)


Origin B

At factory, Dispatch requirement are input of Production Planning.

After production planning is completed and the system knows what will actually be produced, the deployment run generates firmed stock transport orders (dispatch plan).

DeploymentDeployment

Overview ofAPO


Key Successfactors

Summary


A variety of deployment strategies are used depending on the current situation - fair share, push deployment, pull-push deployment, and minimum cost flow optimization

If demand exceeds supply, use a fair share allocation

If demand is less than supply or excess inventory exists, use a push strategy to be able to transfer stock as early as possible.

When excess inventory exists, surplus stock can be distributed according to push logic

DC2

DC1

Plant


Overview ofAPO


Key Successfactors

Summary


Load PlanningLoad Planning Load Plans consolidate current and short term deployment stock

transfers into loads : Vehicle loads Mixed product loads

Confirm how many transport units are required to move planned goods taking transport constraints into account (pallet/weight/volume)

Enable internal supply chain partners to view short term stock evolution in detail

Are used to create outbound deliveries (input to materials handling) Are not used in case of "push dispatch" process (transport loads

directly built by materials handling)

Min Max

Overview ofAPO


Key Successfactors

Summary


Distribution Requirements Planning Key PrinciplesDistribution Requirements Planning Key Principles

Management by exception to focus mostly on areas requiring attention rather than on all areas

Internal collaboration with other Nestl companies planning of cross-border supplies according to IMS principles

Provide end-to-end visibility of demand and supply plans Demand and Supply Review process to align demand and supply

mutually and to business objectives Uses Nestle common rounded calendar Provides available to deploy/sell stock cover according to the type of

location (factory/distribution center)

Overview ofAPO


Key Successfactors

Summary


APO support DRP APO support DRP

APO support Distribution Requirement Planning process Calculate Distribution Requirement/Dispatch requirement

both domestic and IMSP Calculate Despatch Plan Calculate Load Plan Provide Supply Planning visibilities Provide DRP alert monitor for stock exception

management

Overview ofAPO


Key Successfactors

Summary


Demand release from DP module

Distribution requirement

Dispatch plan

Load Plan

APO support DRP APO support DRP

Overview ofAPO


Key Successfactors

Summary


Key successfactors

InterMarket Supply Planning (Nestle Affiliate)

The Producer is responsible for maintaining the level of stock in the Receiving markets within agreed limits

Receivers provide good Sales Forecasts on a timely basis

The Producer is responsible for maintaining the level of stock in the Receiving markets within agreed limits

Receivers provide good Sales Forecasts on a timely basis

RECEIVERRECEIVER

PRODUCERPRODUCER

Supply Plans

Supply Plans

Sales ForecastsStocksSales

Sales ForecastsStocksSales

Weekly Cycle

Weekly Cycle

Rolling Horizon (4W + 14M)

Rolling Horizon (4W + 14M)

EDI

EDI

Overview ofAPO


Key Successfactors

Summary


Production Planning and Details schedulingProduction Planning and Details scheduling

Demand Planning



Deployment


Planning Horizon

Demand Planning



Deployment


Planning Horizon

Overview ofAPO


Key Successfactors

Summary


Production Planning Key PrinciplesProduction Planning Key Principles

Planning in Weekly or Daily buckets Utilizing capacity and resource Plans Optimized Detailed Production Schedule that fulfils Net Dispatch

requirements Taken into account:

production constraints (e.g., setup times) labor constraints material availabilities inter-factory requirements

Customer

Resource 1

Resource 3

Resource 2

30

10

20

Planner

Resource 1 Resource 2 Resource 3

Customer

Resource 1

Resource 3

Resource 2

30

10

20

Planner

Resource 1Resource 1 Resource 2Resource 2 Resource 3Resource 3

NDR +

Overview ofAPO


Key Successfactors

Summary


Master Production Scheduling Key PrinciplesMaster Production Scheduling Key Principles

Snapshot planning Rough cut machine and labor constraints Detailed Master Data Sequencing possible Material availability checked Weekly / daily for shelf stable On SKU level On individual machine basis

Overview ofAPO


Key Successfactors

Summary


Detailed Production Scheduling Key Principles (1 of 2)Detailed Production Scheduling Key Principles (1 of 2)

Maintains the schedule as often as is necessary, if possible continuously, taking all constraints into account

Minimizes non-production time (e.g. changeover, cleaning) by optimizing production sequence

Reviews with Manufacturing as often as necessary in order to have the most accurate status of production and maximize the schedulestability. Includes the information related to plan maintenance

Maximizes master schedule attainment

Overview ofAPO


Key Successfactors

Summary


Detailed Production Scheduling Key Principles (2 of 2)Detailed Production Scheduling Key Principles (2 of 2)

Synchronizes with Master Production Schedule on a continuous basis

Synchronize and works seamlessly with Material Requirements Planning

In repetitive high-volume and non-complex factories Detailed Production Scheduling may be able to be skipped and the factory run from the Master Production Schedule

Very detailed scheduling may be done at shop floor level by the operator DPS will not schedule everything

Overview ofAPO


Key Successfactors

Summary


APO support PPDSAPO support PPDS

APO support Production Planning and Details scheduling process

Calculate Master Production Plan Calculate Details Production scheduling

Overview ofAPO


Key Successfactors

Summary


Machine capacity and utilization

MPS/DPS Plan order

APO support PPDSAPO support PPDS

Overview ofAPO


Key Successfactors

Summary


Global Available to promiseGlobal Available to promise

Overview ofAPO


Key Successfactors

Summary


Global Available to promiseGlobal Available to promise

Overview ofAPO


Key Successfactors

Summary

The Global Available-to-Promise (GATP) component uses a rules-basedstrategy to ensure you can deliver what you promise to your customers.Global ATP performs multilevel component and capacity checks in real timeand in simulation mode to ensure that you can match supply and demand.You can also perform these ATP checks against aggregated, memory-resident data for even better performance Global ATP maintainssimultaneous, immediate access to product availability along the supply chain,so you can be confident that you can meet your delivery commitments

Product substitution: If a finished product or component is not available,the system automatically selects a substitute using rules-based selectioncriteria.Selection of alternative locations: As with product substitution, Global ATP can source materials from alternative locations. You can also integrate this logic with the product substitution rules.Allocation: You can allocate products or components that are in short supply to customers, markets, orders, and so on. The ATP calculation and response take these allocations into consideration.

*Source : SAP Advance Planning and optimizer www.sap.com


Integration and ArchitectureIntegration and Architecture

Overview ofAPO


Key Successfactors

Summary


Main IT support in Nestle includes

SAP R/3 is the transactional ERP (Enterprise Resource Planning) system, and it consists of multiple modules covering numerous business processes. (Customer service and distribution, production, procurement, finance and etc.)

SAP APO (Advanced Planner and Optimizer) is the planning system integrated with SAP R/3. Four APO modules are used in the Nestle DSP process: DP (Demand Planning) for forecasting demands. SNP (Supply Network Planning) for managing distribution

requirements planning covering both domestic and international stock replenishment.

PP/DS (Production Planning/Detailed Scheduling) for envisaging production plan.

GATP (Global Available to Promise) for checking supply availability against demands.

CRM : Customer Relationship management is integrated with APO for Trade spend , PMFE budget planning.

BW (Business Information Warehouse) is used as a reporting tool.

IT and Supply Chain

Case studyNestle

Key successfactors

The IntegratedSupply Chain

Overview ofAPO


Key Successfactors

Summary


OverviewOverview NestleNestless systemsystem

Global Global ClusterCluster

Zone ClusterZone Cluster

Commercial ClusterCommercial Cluster

Supply ClusterSupply Cluster

APO EBP BWCRM

Master Data(Master DataRepository)

Master Data(Supplemetary

Data Repository)HR E-Recruiting QA Audit

GlobalReportingPayroll

R3 core

Reporting EBP Restitution(EUR only)

Finance

SOS

GATPSNP

PP/DS

3rd PartySEM

1:3

1:many

COSDP CRM SEM

1:many

Overview ofAPO


Key Successfactors

Summary


SAP R/3SAP R/3 APOSupply Chain Cockpit

APOSupply Chain Cockpit

GATPGATP


BW

HistoricalData

KeyPerform.

Indicators

Externaldata

BW

HistoricalData

KeyPerform.

Indicators

Externaldata

Advanced Forecasting and Demand PlanningAdvanced Forecasting and Demand PlanningCustomer

order

Manufacturingexecution

InventoryManagement

ProductionPlanning andScheduling Supply

NetworkPlanning

SupplyNetworkPlanning


Planning

Overview ofAPO


Key Successfactors

Summary


R/3 APOOrderProductionProcurementReplenishment

liveCachelive

Cache

Location ProductResourceProduction Process model

Plant, customer,...Material masterCapacityRouting andBill of material

Sales orderPlanned orderProduction orderPurchase order

...

CIF

CIFReal-time

All transfer handle via CIF integration model.

Any inconsistencies of master data between 2 systems will block in CIF queue

APO Application ArchitectureAPO Application ArchitectureTransactional and master data will interface between R/3 to APO Transactional and master data will interface between R/3 to APO via CIFvia CIF(Core interface)(Core interface)

Overview ofAPO


Key Successfactors

Summary


DSP KPIDSP KPI

Overview ofAPO


Key Successfactors

Summary


DSP KPIDSP KPI

Demand Plan Accuracy Stock cover report Customer Service level Master Scheduling Attainment Detail Scheduling Attainment Despatch Plan Attainment Freshness on inventory Freshness on shipment

Overview ofAPO


Key Successfactors

Summary


Benefit of implementationBenefit of implementation

Overview ofAPO


Key Successfactors

Summary


Benefit of implementationBenefit of implementationWith real-time information , the sharing of demand & supply planning Information across network help

Improve demand plan accuracy with time lag Improve customer service level Reduce working capital Manage as exception, DSP planner have more time in analysis.

Overview ofAPO


Key Successfactors

Summary


LimitationLimitation

Overview ofAPO


Key Successfactors

Summary


LimitationLimitation

However, with real-time information sometime may cause planning discrepancy if

Not discipline well for past due management Require the 100% correctness of master data and modeling.Require a lot of training for end user and take time for learning. With real time integration with execution, require closely monitoring on CIF management.

Overview ofAPO


Key Successfactors

Summary


Key success factorsKey success factors

Overview ofAPO


Key Successfactors

Summary


Key success factors

Benefit and costs must be clarified Buy-in and follow-up from top managementAgreed and aligned business processExcellent master dataCooperative environment and communicationProactive change managementTraining

Overview ofAPO


Key Successfactors

Summary


SummarySummary

Overview ofAPO


Key Successfactors

Summary


Vendors Inbound Manufacturing Transportation Distribution Delivery Customer Consumer

Logistics

Logistics and Distribution Sales & Customer Service

Information technology is a key driver to manage and synchronize activities throughout the supply chain network

R/3 : Finance and Accounting / HR

APO DP

R/3 : Execution System (Procurement/ Production/Distribution/Sales)

SNP /GATP

PPDS/GATP

APO: Supply-Chain Planning

BW : Reporting

Overview ofAPO


Key Successfactors

Summary


Summary of key points (1 of 3)Summary of key points (1 of 3)Demand Planning

Run DRP

Prepare MPS



Planning

Sales History


Data

D

P

S

N

P

P

P

D

S

S

N

P

R/3


Send Dispatch Plan


Plan

BW

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Demand Planning

Run DRP

Prepare MPS



Planning

Sales History


Data

D

P

S

N

P

P

P

D

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P

R/3


Send Dispatch Plan


Plan

BW

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Vendors Inbound Manufacturing Transportation Distribution Delivery Customer Consumer

Logistics

Logistics and Distribution Sales & Customer Service

APO is the support tools to provideplanning information which used to synchronize the activities within Supply Chain Network

APO/DRP APO/PPDS APO/DRPAPO/DP

Overview ofAPO


Key Successfactors

Summary


Summary of key points (2 of 3)Summary of key points (2 of 3)

Demand and Supply Planning (DSP) ensures the availability of finished goods to optimize customer service at the lowest total supply chain cost

DSP is an integrated Process DSP is supported by APO application Consensus Demand Plan (CDP)

a consensus between DSP, Marketing, Sales and Finance one number principle no Supply constraint

Overview ofAPO


Key Successfactors

Summary


Summary of key points (3 of 3)Summary of key points (3 of 3)

Distribution Requirements Planning (DRP) determines the stock requirements in locations (warehouses) to meet objectives based on stock policies and CDP

Master Production Scheduling (MPS) provides feasible Production Plans at weekly level per location

Detailed Production Scheduling (DPS) generates a feasible factory schedule for all process and packaging lines

Overview ofAPO


Key Successfactors

Summary


Thank You Very MuchThank You Very Much

advanced planning

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