supply network collaboration – extending the supply … · supply network collaboration –...

Supply Network Collaboration –Extending the Supply Chain

Ray Adams

Industries Business Unit Chemicals

September 11th, 2007

© SAP AG 2007, Industry Thought Leadership, IBU Chemicals / 2

Value of Collaboration

Industry Eyes Big Savings from Supply Chain CollaborationBy Ian Young in Berlin

The European chemical industry could achieve annualized cost savings of up to €15 billion ($18 billion), or 2% of its combined sales, by implementing a range of initiatives to strengthen its supply chain, according to the findings of four high-level industry working groups. The initiatives require an unprecedented level of collaboration among logistics service providers (LSP) and chemical companies, and a new approach to ways in which the industry has traditionally been operated, serviced, and regulated.

…Supply chain excellence brings lower unit costs, higher capital productivity, increased customer retention, and better end-to-end value for customers….

Chemical Week – November 2, 2005

Industry Eyes Big Savings from Supply Chain CollaborationBy Ian Young in Berlin

The European chemical industry could achieve annualized cost savings of up to €15 billion ($18 billion), or 2% of its combined sales, by implementing a range of initiatives to strengthen its supply chain, according to the findings of four high-level industry working groups. The initiatives require an unprecedented level of collaboration among logistics service providers (LSP) and chemical companies, and a new approach to ways in which the industry has traditionally been operated, serviced, and regulated.

…Supply chain excellence brings lower unit costs, higher capital productivity, increased customer retention, and better end-to-end value for customers….

Chemical Week – November 2, 2005

CEFIC/EPCA StudyCollaborative MethodsChemicals Value PipelineCollaboration across supply chain with 3PL’s, suppliers, and customersAnalytics and event mgmt to monitorContingency planning for unexpected events

CEFIC/EPCA StudyCollaborative MethodsChemicals Value PipelineCollaboration across supply chain with 3PL’s, suppliers, and customersAnalytics and event mgmt to monitorContingency planning for unexpected events

http://www.chemweek.com/inc/articles/t/2005/11/02/019.html


Vulnerability Map as Central Monitor

Automated Feed Central Monitor Drill-Down and Trigger Response

Evaluate mitigation options

Adapt system behavior

Define/execute contingency plan

Simulate responses

Supplier Performance

Delivery Performance

SC Event Management

Open Ratings

Catastrophe Management

Simulation

Source: Yossi Sheffi and James B. Rice Jr., MIT SLOAN MANAGEMENT REVIEW, 2005

RespondSense


Integrated Planning (Collaboration) Scenario

ChemCompany

Management Evaluation &

AnalysisDemand/Supply

Planning

Strategic Planning

Event Tracking and Administration

Customers

TollManufacturers

Suppliers

Sales and Operations Planning

Supply Network

Collaboration


Supply Network Collaboration (SNC)

Customers

Toll Manufacturers

Suppliers

ChemCompany

Work Order Progress

Mile Stone Progress

WIP Usage and

Collaboration

Finished Goods Update

Work Orders

Inventory, Stock, Consumption and Forecast

Min/Max-based Replenishment

ATP Checks

Replenishment Order Creation

Demand-based Replenishment

Advanced SMI w/Replenishment Orders

PO Collaborati

on

Simple SMI

ASN & Invoicing

Real-Time Sensing

© SAP Labs, LLC., 2007. Supplier Collaboration with SAP SNC 5.1

All Suppliers Are Not Equal

TOP STRATEGIC SUPPLIERSAutomated, optimized communication (B2B, EDI) with typical business pain points as

Expensive connectivity effortsPoor visibility of mid/long term forecasts, inventory and capacityLow supplier performance accuracy

NON-STRATEGIC SUPPLIERSUnstructured, not optimized communication (Phone, Fax) with typical business pain points as

Unsynchronized supply and demand situationLong order cycle timesDisruptions from last minute changesImmense maintenance efforts of data High supply risk and costs

High spend, high-volume large suppliers

Low spend, low-volumesmall suppliers

© SAP Labs, LLC., 2007. Supplier Collaboration with SAP SNC 5.1

Evolution of Supplier Interactions

Phone and fax remain primary medium for interactionDocument exchange through EDI (expensive)Supplier extranets showing strong adoption and growthPilot collaboration with selected suppliers

PHONE, FAX & E-MAIL

PROCESS COLLAB.

SUPPLIER PORTAL

DOC. EXCHANGE

100%

Phone not primary, but still relevant for many interactionsXML gains industry extensions, compliments EDIExtranets become more functionally richCollaboration often mandated by trading partners

PHONE, FAX & E-MAIL

PROCESS COLLAB.

SUPPLIER PORTAL

DOC. EXCHANGE

100%

FuturePresent


CUSTOMER

Link ANY type of suppliers through different channels

SAP SNC – Supplier Collaboration

Web Browser

Web Browser

SAP NetWeaver

Low

Vol

ume

–W

eb B

row

ser O

nly

SAP XI

Hig

h Vo

lum

e –

B2B

Inte

grat

ed

Backend System

Backend System

SAPSNC

Up/Down Load FilesUp/Down

Load FilesMid

Vol

ume

–W

eb &

File

Up/

Dow

n Lo

ads

SUPP

LIER

S

Browser

XML

File Up/Down Load

Network Hub

Provider

Network Hub

Provider


eJIT - Release Processing

!

Notify on ExceptionsNew/Changed Call-Offs

2

Shipping Details

ASNCarry Out Shipment

4Create/AdjustReplenishment Plan

Create/Change ASN

3 5

Automatically closeASN & Update Stock

Inventory & Mfg Requirements

1

PublishScheduling Agreement Releases

NovartisSu

pplie

r

Shipping DetailsScenario Description

eJIT Just In Time Deliveries

Suppliers hold inventory at their site and deliver based on scheduling agreement call-offs released by Novartis.

Goods delivered directly to production and paid at goods receipt time according to agreed payment terms.

Benefits for Suppliers Benefits for Novartis

Elimination of Waste in the Ordering Process

Increased Demand Visibility and Transparency

Limited Production and Inventory Optimization

Inventory Reduction in Volume and Value

Elimination of Waste in the Purchasing and Invoicing Process (e.g. Mail, Phone, Fax)


eSMI - Suplier Managed Inventory

!

Notify on ExceptionsNew/Changed Inventory

And Requirement Situation

2

Shipping Details



Create/Change ASN

3 5



1

PublishManufacturing Requirements

and Stock Balance

NovartisSu

pplie

r

Shipping Details

Scenario Description

eSMI Supplier Managed Inventory

Suppliers schedule / plan replenishments to Novartis based on daily updated demand and on the agreed min/max quantities.

Goods paid at goods receipt time according to agreed payment terms.




Production, Inventory and Delivery Optimization

Inventory Reduction in Volume and Value

Elimination of Waste in the Purchasing and Invoicing Process

Shifting Planning and Replenishment Tasks to the Suppliers


eSMOI - Suplier Managed & Owned Inventory

!

Notify on ExceptionsNew/Changed Inventory

And Requirement Situation

2

Shipping Details



Create/Change ASN

3 5



1

PublishManufacturing Requirements

and Stock Balance

NovartisSu

pplie

r 6

Periodic SettlementIssue Credit Note

Scenario Description

eSMOI Supplier Managed & Owned Inventory

Suppliers schedule / plan replenishments to Novartis based on daily updated demand and on the agreed min/max quantities.

Goods booked into consignment and only paid at the end of the consumption period according to agreed payment terms.

Shipping Details




Production, Inventory and Delivery Optimization

Inventory Reduction mainly in Value without risks for Production Interruption

Elimination of Waste in Purchasing and Invoicing

Shifting Planning and Replenishment Tasks to the Suppliers


Web-based User Interface of SAP SNC


SNC: Toll Manufacturing Purchasing Process

Customer TollMfg‘er

Collaboration Process Flow: CMPReal-time, synchronized, collaboration on subcontracting PO’s enable more accurate execution between a customer and a toll manufacturer

Customer can change or cancel PO’s and itemsApproval process based on rules such as quantity and date deviations can be done via web UI, includes collaboration on quantities used Customer’s ERP system gets periodic updates of WIP consumption at the toll manufacturer’s locationIncludes supplier invoice creation based on shipments, or ERS handling of invoices, and payment status updates

Create/ChangeToll PO

ReceivePO

Toll PO

Toll PO Confirmation

Receive ASN Create ASN

ReceiveInvoice Create Invoice

ASN

Invoice

PaymentStatus

POConfirmation

Toll POConfirmation

Update

Paymentstatus update

InvoiceUpdate

Goods Receipt ASN UpdatePOD

WIPInventory

Update

WIPInventory

Update

Inventory Updates

Legend:

Business Partner

Business Process Step/Action

Business Object


SNC: Work Order Process

Real-time, synchronized, collaborative Work Orders enable more accurate execution between a customer and a toll manufacturer

Work Orders exist as a collaborative object and facilitator of manufacturing status data between a customer and a toll manufacturerAdvanced on-screen collaboration on Work Order initiation, changes and updates based on statusesCollaborate on order BOMs up front, before production startsProject finished goods end date and quantity using production phase updatesCapture consumption periodically and update ERP accordingly

Customer TollMfg:er

Collaboration Process Flow: WO

Create/ChangeWO

ReceiveWO

Work Order

WO Changes(with Changes)

Receive ASN Create ASN

ReceiveInvoice Create Invoice

ASN

Invoice

PaymentStatus

Change/Send/Approve WO

WO Update/Change/Approve

Paymentstatus update

InvoiceUpdate

Goods Receipt ASN UpdatePOD

WIPInventory

Update

WIPInventory

Update

Inventory Updates

Legend:

Business Partner


Business Object


Work Order Display w/ Proposed Quantity


Toller View – Respond To Proposal


SCM: Supply Network Inventory Process

Customer

Collaboration Process Flow: SNISupply Network Inventory is a cross-partner supply, demand and inventory monitoring and visibility process

Customers, Suppliers, Contract Manufacturer’s and 3PL’s can all update their individual supply, demand and inventory positionsConfigurable visibility concept as to which partner and user has access to another partners dataProactive monitoring using min/max thresholds on calculated future inventoriesAllows for aggregation of data across multiple plants belonging to different partners

Send Demand Send Demand

Gross Demand

Net Demand

SendInventory

SendInventory

CompareSupply &Demand

CompareSupply &Demand

Inventory

Projected Stock Deviation

Alert Generation

Send SupplySend Supply

ExceptionManagement

ExceptionManagement

3PLToll

Mfg:erSupplier

Legend:

Business Partner


Business Object


Key Take Aways…

Increases the Accuracy and Velocity of the Supply ChainProvides global visibility of inventory and demandEnables several collaboration processes like SMI, Release, Purchase Order Process and Dynamic ReplenishmentImproves customer service & increase revenue while reducing inventory levels on both customer and supplier side

Reduces Time to Value & Realizes Faster ROISimple, stand-alone decoupled solutionEasy to install, implement and configureBring your suppliers on board fast and easy

Connects People & Processes TogetherIntegrates with any backend system (non-SAP)Open XML message integration & infrastructureSuppliers can integrate via web browser or XML


Supply Chain Collaboration Benefits

Buyer benefits• Reduced RM & FG inventory• Reduced supply risk• Reduced downtime & overtime• Reduced expediting costs• Improved order fill rates

Customer BenefitsReduced RM & FG inventoryReal time automated planning updatesReduced supply riskImproved customer service levelsReduced expediting costsImproved order fill rates Improved ROI

Increased revenueLowered costsImproved asset utilizationReduced total inventory

Supplier BenefitsFaster order to cash cycleIncreased inventory turnsIncreased order fill ratesBetter capacity utilizationIncreased forecast & order accuracy


Copyright 2007 SAP AG. All Rights Reserved

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supply network collaboration – extending the supply … · supply network collaboration –...

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