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UNIVERSITE LIBRE DE BRUXELLES Solvay Business School SEMINAIRE DE TECHNOLOGIES DE L’INFORMATION ET DE LA COMMUNICATION GEST 116 Supply chain management Pascale Vande Velde Content of eBusiness course Technologies de l’information et de La communication Introduction – Part I Introduction – Part II Payments & security Supply chain management V.1.1 Solvay Business School 2 Agenda Technologies de l’information et de La communication Introduction SCM Case study : eprocurement Case study : esynchronization Case study : eplanning V.1.1 Solvay Business School 3 Technologies de l’information et de La communication Supply Chain functionality by segment Supply Chain Planning Consumers Suppliers and Vendors Design Procurement and sourcing Buy Manufacturing Strategy & Operations Inventory Management Make Sell Distribution & transportation Mgmt Hold Move Customers Synchronization and Execution – Fulfillment process V.1.1 Solvay Business School 4 Agenda Technologies de l’information et de La communication Introduction SCM Case study : eprocurement Case study : esynchronization Case study : eplanning V.1.1 Solvay Business School 5 eprocurement Technologies de l’information et de La communication Supply Chain Planning Consumers Suppliers and Vendors Design Procurement and sourcing Buy Manufacturing Strategy & Operations Inventory Management Make Sell Distribution & transportation Mgmt Hold Move Customers Synchronization and Execution – Fulfillment process V.1.1 Solvay Business School 6 Procurement Value Drivers Technologies de l’information et de La communication Purchasing determines an important part of the competitive position of most firms. • Purchasing is an area where large cost reduction can be made • An organisations spend makes up on average of 60% of revenue • Procurement cost savings go straight to the bottom line • Purchasing and Supplier collaboration can reduce the need for large inventories and quickly introduce goods and services to accommodate new product designs and changes in existing designs • Streamlining of processes allows organisations to acquire good more quickly. It is well recognized by most organizations that procurement cost savings are particularly attractive because they go straight to the bottom line —Impact of Indirect Procurement Cost Savings on Profit — — Before — Revenue $1,000M Revenue ILLUSTRATIVE $1,000M - COGS 400M - COGS 400M Gross Margin 600M Gross Margin 600M - Labor 200M - Labor 200M - Indirect Purchases 300M - Indirect Purchases 270M Net Income (before taxes) V.1.1 — After — $100M Net Income (before taxes) Solvay Business School $130M (10% reduction) (30% increase) 7 Technologies de l’information et de La communication The Re-Emergence of Strategic Sourcing The need for Strategic Sourcing, both online and off, has become increasingly evident….everything is refocusing on the relationships between buyers and suppliers. eSynchronised Supply Chain eCollaboration eSettlement eFulfillment eIntelligence eAuctioning Outsourced eProcurement Services Marketplaces Integrated ERP Procurement Card eRequisitioning Strategic Sourcing V.1.1 Solvay Business School 8 Technologies de l’information et de La communication The Re-Emergence of Strategic Sourcing Strategic Sourcing is not a new concept but companies are increasingly realising the importance of doing it and, just as important, doing it well….. • New focus on revenue and competitive advantage rather than cost and efficiency • Companies have not involved Procurement early enough in discussions about demand and specifications and significant sourcing opportunities have been lost • Traditional Strategic Sourcing has been a time-consuming, paper-based and manual process. Older methods have: – Limited the number of potential suppliers with which a buyer can negotiate – Forced many organisations to make decisions with sub-optimal information – Extended the overall length and cost of the sourcing cycle • New tools are enabling a sophisticated and rounded eSourcing Strategy • Recognition that whilst eProcurement is a key to sustain savings, the true value is achieved through Strategic Sourcing “When the goal is boosting profits by dramatically lowering costs, a business should look first to what it buys.” - Fortune V.1.1 Solvay Business School 9 Technologies de l’information et de La communication Delivering and Maintaining Savings Neither eProcurement nor Strategic Sourcing on their own is enough to realise and maintain all potential benefits Savings Performance Organisation Performance and process focus supported by eSourcing tools Right People in the Right place Cross-Skilled, motivated teams Strategic Sourcing: Consolidated Suppliers Total Cost of Ownership Strong Supplier Relations eProcurement Increased compliance Some process savings Better Information Procurement initiatives fade Supplier base expands Time V.1.1 Solvay Business School 10 eSourcing Tools: The Future? Technologies de l’information et de La communication A new breed of eSourcing solutions is focused on enabling, embedding and speeding up the Strategic Sourcing process Strategic Higher eSourcing • Direct / Indirect products / services • Deliver lowest total cost • Buyer / Supplier partnership eMarkets / Auctions • Direct / Indirect products / services • Reduce price • Does not leverage existing contracts Type of Process Buyer Power eProcurement Applications • Indirect products / services • Automate processes • Leverage existing contracts Tactical Lower Low V.1.1 Value of Goods Traded Solvay Business School High 11 Technologies de l’information et de La communication eSourcing Tools: The Future? Web enabled tools drive consistency, efficiency and best practice into the strategic sourcing process New Priorities • Strategic sourcing value opportunities have sometimes been missed due to lengthy and complex analytical processes • Non-value added work needs to be reduced to allow procurement professionals to concentrate on more strategic and higher value tasks New Opportunities • Tools are emerging to enable global & enterprise-wide sourcing strategies – paving the way for true eCommerce and new ways of working • New leading edge web application solutions can improve business processes and empower procurement professionals • Deeper functionality is coming available as technology matures • eAuctions are already producing proven results. They do though need to be integrated within overall Strategic Sourcing process for maximum efficiencies and benefits V.1.1 Solvay Business School 12 eSourcing Tools: Solution Landscape Technologies de l’information et de La communication Applying new technological solutions to the purchasing cycle • eIntelligence from multiple buying tools • Online analysis • 3rd party service capability: spend analysis supported by strategic sourcing services Research • Manage demand • Analyse spend, identify opportunities • Analyse market • Online process tools based on best practices • Analysis templates V.1.1 Develop Sourcing Strategy • Develop commodity specific strategies • Industry-specific supplier directories & marketplaces • Newsfeeds, online market intelligence, online corporate information • eRFI creation • Online auction - multiple formats, languages & currencies - 3rd party services: event setup, training & facilitation • Online sealed bid • Online negotiation RFP/Tender • Source & qualify suppliers Negotiate • Negotiate contract • Create & issue RFQ/ITT • eRFP/Q creation: - multi-line, multi-parameter - automatic weighting of responses to speed up the assessment & elimination of suppliers • Collaborative tool / template creation allows group-wide re-use Solvay Business School Implement • Award & finalise contract • Industry-specific marketplaces • Buyer-led online ‘communities’ Manage & Develop Suppliers • Manage supplier relationship • Weighting of bids to reflect total cost of commodity ownership & supplier track record • Online confirmation of contracts 13 Technologies de l’information et de La communication eIntelligence Tools to Support the Strategic Sourcing Process eIntelligence •Spend Analysis •Buyer Portal •Capability Analysis •Benchmarks •Procurement •Total Cost Focus Knowledge Base •SS On-line •X-fn. teams 1 2 Research 3 Project Direction •Strategy Analysis (e.g. eProcurement) Develop Sourcing Strategy •eRFP •eTender 4 RFP/ Tender Seven Step Process 7 Manage & Develop Suppliers 5 6 •Partnership Scorecard •Procurement Knowledge Base V.1.1 Negotiate Implement •eCommunication •eContracting •Process Standards Solvay Business School •Team Negotiation •eAuction •Tenders •eMarketplaces 14 Technologies de l’information et de La communication eIntelligence & Portal Overview ‘eIntelligence’ is internet-based information which can add value to the Strategic Sourcing process. It helps procurement professionals to analyse the marketplace, select suppliers and award contracts. Key Tools: • Proactive delivery mechanisms, pushing tailored internal and external information to the desktop • Newsfeeds & free e-mails to subscription-based news services • Knowledge Management & internal search capabilities • Community features & discussion databases 2 • Industry Vertical providers inc. B2B eMarkets • Applicable within the research and strategy steps of the 7 step strategic sourcing process Research 3 1 Project Direction Develop Sourcing Strategy 4 7 Manage & Develop Suppliers RFP/ Tender 5 Negotiate 6 Implement Arms procurement with detailed information to support ‘Total Cost of Ownership (TCO) based negotiation’ with suppliers. V.1.1 Solvay Business School 15 Technologies de l’information et de La communication From searching the internet to personalised portals and beyond……. Value Internet Searches VISION: Internal and external sources combine to deliver powerful information solution Industry Newsfeeds Category Newsfeeds eSynchronised Integrated Solutions ERP Information Integration Personalised Portal Enterprise B2B Portal eMarkets eRequisitioning Communities Knowledge Management Complexity V.1.1 Solvay Business School 16 Technologies de l’information et de La communication A procurement portal draws on many information sources internet www pages Procurement Portal Business Partners intranet Newsfeeds B2B 2Market B2B Central Vendor Database View & access Shared Applications Project Application Personal Applications eProcurement Application Market Application Outlook 2000 -Mail -Calendar ERP Legacy Corporate Portal Collaboration e.g. Discussion Forum Personal Folders V.1.1 Solvay Business School 17 eRFx Overview Technologies de l’information et de La communication eRFx is the process of: Posting an RFI/P online utilising a secure web site Collecting Bringing supplier responses qualifying suppliers through to RFQ Negotiating the contract either via sealed bid or Reverse Auction Project Direction • Integration of best practice • Strategic Sourcing Methodology ‘7 Step Methodology’ V.1.1 Solvay Business School 18 eSourcing Value Proposition Technologies de l’information et de La communication Tools & Knowledge = Efficiency & Leverage = Savings Lowered Total Cost of Ownership More Effective Negotiation Through eIntelligence Reduced Cost of Purchase Strategic Sourcing Online tool enables effective strategic focus Full (12–17%) Spend Analysis tools (OLAP) to aggregate and optimise spend Provides facts fast for fact based negotiation Focus on attributes beyond price Reduce Leverages Identifies wider spectrum of suppliers to take part part proliferation use of new internet information sources internal knowledge and contacts Identifies Reverse auctions deliver value eTendering supports: significant industry trends Cost Effective Solutions Online Process Overall Reduces integration with online auction/sealed bid capability can bring as much as a 25% cost reduction Fast solutions reduce risks and integration costs V.1.1 cycles ROI Hosted average sourcing Compliance and Consistency eRequisition Online tendering on its own can reduce this time by as much as 30% Drives reusability by bringing the process online Solvay Business School and eRFQ reduce maverick buying Online methodology drives and guides process Online RFI/P/Q ensure standard documentation and easier comparison 19 Technologies de l’information et de La communication V.1.1 Case study : MRO in the steel industry (“MRO Steel”) Consortium based marketplace On June 22, 2000 the four consortium partners, who are leading steel producers, signed a Memorandum Of Understanding to study Trading Exchange The four founding companies agreed to work towards forming a leading-edge eProcurement marketplace for metals. The marketplace is focused on MRO (Maintenance, Repair and Operations), and vertically oriented. Solvay Business School 20 What is a Marketplace/ Exchange ? Technologies de l’information et de La communication Marketplaces are trading platforms that bring together multiple buyers and sellers on an Internet site to do individually business with each other Many Many Exchange Individual Buyers V.1.1 Many-to-Many relationship Individual Sellers Solvay Business School Vertical Marketplaces Provide specialized products and services which are tailored to specific industries 21 Power of an Exchange - traditional model Technologies de l’information et de La communication Supplier EDI, custom, ... Evolution towards an Exchange Supplier Buyer - Buyers wanted to connect electronically to their suppliers Supplier - Every buyer established a customized link to their suppliers Buyer Supplier EDI, custom, ... - Eventually, a patchwork of customized links existed Supplier Buyer Supplier EDI, custom, ... Supplier V.1.1 Solvay Business School 22 Power of an Exchange – MRO Steel Technologies de l’information et de La communication SUPPLIER SUPPLIER Partner steel producer Partner steel producer Partner steel producer SUPPLIER A standard and uniform platform MRO Steel SUPPLIER SUPPLIER SUPPLIER SUPPLIER SUPPLIER Partner steel producer V.1.1 SUPPLIER SUPPLIER SUPPLIER Solvay Business School 23 Initiatives in the Metal Spectrum Technologies de l’information et de La communication Metalmaker MaterialNet Metalexplorer Independent Steelscreen iSteelAsia Sell-side GSX E-Steel Industry Consortia Procurement Metalsite Metalspectrum Operational Quadrem Steel24-7 MRO Steel Covisint Alliance/ acquisition Ferrousexchange Individual initiatives Bethlehem Steel Announced Kouzai.com Steel-N.com Suppliers Metals producers Customers Position in value chain V.1.1 Solvay Business School 24 Technologies de l’information et de La communication Liquidity Liquidity provided directly by shareholders is MRO Steel’s true differentiating factor Process efficiency provides incentive to commit spend volume V.1.1 What differentiates MRO Steel ? Low transaction fee Ensure that MRO Steel has a competitive pricing level and compelling value proposition Economies of scale reached quickly due to shareholders’ liquidity Speed-to-market and partnership Launch in short timeframe with fast ramp-up Signing up the right buyers, suppliers and other marketplaces Strive for global reach Solvay Business School Value added services MRO Steel will constantly innovate by introducing value added services Effectively translate internal needs into tangible services Deeper integration of the supply chain between participants 25 Pilot: Scope overview Technologies de l’information et de La communication The pilot will support the following eRequisitioning process MRO Steel 2 1 EBP Buying Tool 3 4 Catalogue 5 9 7 SAP ERP 12 Business Connector 11 10 8 Order Mgt System 6 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. V.1.1 User logs into EBP From EBP, the user will “Punch-in” to MRO Steel to browse the hosted catalogue Catalogue view will be restricted based on the user’s company/profile Once items have been selected they are brought back to EBP (“Punch-out”), and added to the shopping basket The shopping basket is sent from EBP to R/3 using standard interface and converted into a Purchase Requisition Approval processes and the creation of the Purchase Order is done in R/3 Once the PO is created, it is sent under in Idoc format to the Business Connector The BC translates the iDoc into an XML format The PO is then sent to MRO Steel where it will be displayed in the Order Management System A purchase order acknowledgment is sent from BFM and processed by R/3, (steps 10 to 12) Alternative scenario: shopping basket creation with selection of material, or based on free text Solvay Business School 26 Pilot: Three phased approach Technologies de l’information et de La communication Phase III EBP – MRO Steel Integration MRO Steel Catalogue browsing Status information Requisition EBP Buying Tool Catalogue Selected items Purchase order BFM format XML Purchase order SAP format Business Connector SAP ERP Receipt Confirmation BFM XML format Receipt Confirmation SAP format Phase I EBP – SAP integration V.1.1 Order Mgt System Phase II SAP – MRO Steel integration Solvay Business School 27 Target situation Technologies de l’information et de La communication MRO Steel EBP Buying Tool Catalogue SAP Steel producer 1 SAP Steel producer 2 SAP Steel producer 3 SAP Steel producer 4 V.1.1 Business Connector Order Mgt System Common platform hosted at one of the steel producers Solvay Business School 28 E-requisitioning technical architecture Technologies de l’information et de La communication 64kbit/s Browser Steel producer 2 Browser Steel producer 3 2 x 256 kbit/s Steel producer 2 Corporate Browser Telefonica ITS Production Internet BC Production ITS Test/development BC Test/development 1 Mbit/s W-gate W-gate W-gate ITS server ITS server ITS server Infonet (Frame Relay Network) 1 Mbit/s SAP BC SAP BC SAP BC 64kbit/s 1 Mbit/s DMZ TA-segment at Steel producer 1 FW 256 kbit/s Route r browser Steel producer 1 Browser SwB 10 Mbit/s Steel producer 1 Lan ITS Test/development ITS Production W-gate W-gate W-gate SAP R/3 production Aristos PSI ITS 1 ITS 2 A-gate(s) A-gate(s) SAP R/3 acceptation Aristos ASI SAP R/3 development Aristos DSI SAP EBP production (PED) SAP EBP test/ development (DEB) ITS test/development svism001 A-gate(s) V.1.1 Solvay Business School 29 Demo: Creation of Shopping baskets Technologies de l’information et de La communication EBP – MRO Steel Integration MRO Steel Catalogue browsing SAP ERP EBP – SAP integration V.1.1 Catalogue Selected items Status information Requisition EBP Buying Tool Business Connector Order Mgt System Alternatives for catalogue browsing: • Selection of material in shopping basket • Free text entry • Usage of templates Solvay Business School 30 Technologies de l’information et de La communication V.1.1 Solvay Business School 31 Demo: Back-end system activities Technologies de l’information et de La communication MRO Steel EBP Buying Tool Status information Requisition Catalogue SAP ERP EBP – SAP integration V.1.1 Business Connector Order Mgt System • Release Procedure Purchase requisition • Creation of purchase order • Send purchase order Solvay Business School 32 Demo: Reformatting of purchase order Technologies de l’information et de La communication MRO Steel Status information Requisition EBP Buying Tool SAP ERP EBP – SAP integration V.1.1 Catalogue Purchase order BFM format XML Purchase order SAP format Business Connector Order Mgt System SAP – MRO Steel integration Solvay Business School 33 Demo: Treatment by BFM Technologies de l’information et de La communication MRO Steel Status information Requisition EBP Buying Tool Catalogue Purchase order BFM format XML Purchase order SAP format Business Connector SAP ERP Receipt Confirmation BFM XML format Receipt Confirmation SAP format EBP – SAP integration V.1.1 Order Mgt System SAP – MRO Steel integration Solvay Business School 34 Demo: Status update process Technologies de l’information et de La communication History update after • Purchase order creation • Goods receipt • Invoice verification •… Status information Requisition EBP Buying Tool Catalogue Purchase order BFM format XML Purchase order SAP format Business Connector SAP ERP V.1.1 Order Mgt System Receipt Confirmation BFM XML format Receipt Confirmation SAP format EBP – SAP integration MRO Steel SAP – MRO Steel integration Solvay Business School 35 Technologies de l’information et de La communication V.1.1 Solvay Business School 36 Agenda Technologies de l’information et de La communication Introduction SCM Case study : eprocurement Case study : esynchronization Case study : eplanning V.1.1 Solvay Business School 37 efulfillment Technologies de l’information et de La communication Supply Chain Planning Consumers Suppliers and Vendors Design Procurement and sourcing Buy Manufacturing Strategy & Operations Inventory Management Make Sell Distribution & transportation Mgmt Hold Move Customers Synchronization and Execution – Fulfillment process V.1.1 Solvay Business School 38 Technologies de l’information et de La communication Current business architecture of the value chain Barriers Inventory levels Push V.1.1 Inventory Long freeze periods Infrequent communication Inaccurate information transfer Variability causes most silos to be working on the wrong stuff Solvay Business School 39 Technologies de l’information et de La communication Current business systems architecture for the division SCM E-procurement Storefront CRM Design V.1.1 Solvay Business School 40 Technologies de l’information et de La communication V.1.1 Current business systems architecture for the enterprise Solvay Business School 41 Technologies de l’information et de La communication How Do You Solve This Problem? V.1.1 Solvay Business School 42 Technologies de l’information et de La communication What do you need to do to improve? Reduce complexity Rationalize suppliers Rationalize items Generate better contracts Increase visibility. Break down walls Between divisions Throughout processes Between value chain partners Between systems Increase velocity Key weapon against variability V.1.1 Solvay Business School 43 Technologies de l’information et de La communication Introducing dynamic value chain management Dynamic value chain management (DVCM) is a business approach to continuously increase efficiency in the value chain by concurrently reducing complexity, increasing visibility and increasing velocity. V.1.1 Solvay Business School 44 DVCM methodology: First key principle Technologies de l’information et de La communication V.1.1 How well you continuously improve the value chain efficiency depends on the speed and quality of the following cycle Solvay Business School 45 DVCM: Second key principle Technologies de l’information et de La communication V.1.1 Value chain configuration Value chain planning Value chain execution Reduce complexity Increase visibility Increase velocity Solvay Business School 46 Technologies de l’information et de La communication DVCM methodology Step 1: Configure your value chain Rationalize your Bill Of Material’s and components Rationalize your suppliers Rationalize carrier contracts Optimize supply network Create contracts and business processes Create collaborative response buffers Continuously monitor, decide and act V.1.1 Solvay Business School 47 Technologies de l’information et de La communication V.1.1 DVCM methodology Step 2: Plan collaboratively Collaboratively forecast demand and plan supply Influence demand and supply Match supply with demand across multiple enterprises Plan allocations Create Available Through Promise across the value chain Continuously monitor, decide and act Solvay Business School 48 Technologies de l’information et de La communication DVCM methodology Step 3: Execute collaboratively, implement a pull-based process Promise and create the “perfect order” Schedule the order at the factory Immediately broker orders across value chain Schedule fulfillment across multiple fulfillment organizations and systems Replenishment signals generated automatically for collaborative response buffers Settlement done automatically on receipt of goods Continuously monitor, decide and act V.1.1 Solvay Business School 49 Technologies de l’information et de La communication An ideal rapid response value chain: Planning happens in days, execution happens in hours Lower inventory levels Retailer Pull Huge benefits for those who practice DVCM, despite limited participation from others Component suppliers Contract manufacturer V.1.1 Applied DVCM methodology OEM Solvay Business School 50 Consumer electronics industry potential value improvements with DVCM Technologies de l’information et de La communication Inventory levels Suppliers EMS Manufacturer Inventory 4-6 wks 4-6 wks 2-3 wks 2-3 wks Info flow 7 days 7 days 7 days Physical lead time 40 days 14 days 3 days Sales/Distribution Retailers/ Channels Consumers 2-3 wks 2-3 wks 100 days 7 days 7 days 7 days 50 days 14 days 2 days 3 days 70 days Response buffers Potential $50B one-time – $10B continuing annual cash flow/profit benefit. $10B in revenue improvements. V.1.1 Solvay Business School 51 Technologies de l’information et de La communication V.1.1 Collaborative Planning, Forecasting & Replenishment Shared plans developed jointly for Manufacturer and Retailer POS + Promotions + Marketing Activities Proactive Planning focus Adds Sales and Marketing view Goal is revenue growth Category management Efficient promotions, product introductions and replenishment Solvay Business School 52 Technologies de l’information et de La communication Internal and External Collaboration • Demand Plan See Exchange Maintain • Supply Plan • Production Plan Internal • Market Activities Collaboration Compare External Collaboration V.1.1 Solvay Business School 53 Architecture Example Technologies de l’information et de La communication Third Party Data NET Open Application Integration Manugistics Database V.1.1 NetWORKS Database Solvay Business School • Intranet • Extranet • Internet 54 Technologies de l’information et de La communication Local Supply - Illustration of Collaborate V.1.1 Solvay Business School The Materials Manager identifies (by exception lists) the planning Items on which he needs additional information 55 Technologies de l’information et de La communication Local Supply - Illustration of Collaborate V.1.1 Solvay Business School The Materials Manager marks these planning Items... 56 Local Supply - Illustration of Collaborate Technologies de l’information et de La communication V.1.1 Solvay Business School … and attach an explicative note 57 Local Supply - Illustration of Collaborate Technologies de l’information et de La communication V.1.1 Solvay Business School The supply Planner is informed via Email about the planning items to be reviewed... 58 Agenda Technologies de l’information et de La communication Introduction SCM Case study : eprocurement Case study : efulfillment Case study : eplanning V.1.1 Solvay Business School 59 eplanning Technologies de l’information et de La communication Supply Chain Planning Consumers Suppliers and Vendors Design Procurement and sourcing Buy Manufacturing Strategy & Operations Inventory Management Make Sell Distribution & transportation Mgmt Hold Move Customers Synchronization and Execution – Fulfillment process V.1.1 Solvay Business School 60 Technologies de l’information et de La communication Case study : supply chain planning implementation at a chemical company To develop synergies between Chemical company XX and acquired company YY, and to reduce operational cost, several initiatives were implemented, impacting XX Supply Chain Operations Asset consolidation Warehouses (Europe: from 40 to 10) Closure of local manufacturing plants (capacity reduction from 197.000 to 98.000 tons) Need to increase production capacity utilization Change in product offerings, Brand rationalization Constraints on working capital Context changes as a consequence of the acquisition Non integrated operations Multiples, non integrated ERP systems … Significant changes in the Supply Chain Model were required to operate in this new environment to achieve the business objectives of the YY company integration … V.1.1 Solvay Business School 61 Project Overview Technologies de l’information et de La communication Objectives: Move from country-based to European-wide Supply Chain Planning Processes and Organization Build an integrated supply chain planning platform using Manugistics In order to achieve: 10% inventory reduction Increased customer service Implementation overview: V.1.1 Project covers Europe and Asia operations 12 month implementation project Solvay Business School 62 Technologies de l’information et de La communication Solution Overview (1)Implement new integrated supply chain planning processes (2)Move from Country to European-wide supply planning organization (3)Implement an integrated supply chain planning platform using Manugistics New SCP Model Previous SCP Model V.1.1 • Disconnect between demand plan and supply plan (inventory / production plan) • Tight integration across planning process balancing demand and supply to meet inventory target and service level • Local warehouse ordering leading to sub-inventory optimization • Central replenishment of local warehouses optimizing the complete supply network • Multiple, non integrated ERP system with no complete inventory visibility • Integrated supply chain planning tools allowing information visibility Solvay Business School 63 (1) Implement new integrated planning processes Technologies de l’information et de La communication Integrated planning processes linking Demand and Supply side Implement common processes across Europe and Asia Develop Key Performance Metrics and Balance Scorecards to support new processes YEARS Sales & Operations Planning S C QUARTERS U MONTHS P P WEEKS L Materials Planning Materials Planning Inventory Target Setting Production Planning Distribution Requirement Planning I DAYS E Procurement Detailed Production Scheduling R HOURS BUY MAKE U Demand Planning T O Order Allocation Deployment Load Planning MOVE S Available to Promise M E R SELL In Scope Process V.1.1 Solvay Business School 64 (2) Technologies de l’information et de La communication Move from Country to European wide Supply Planning organization Implement a new central planning organization: Manage Inventory centrally for the whole region Setting inventory planning targets and parameters Generate inventory replenishment plan to each Distribution Center and Warehouse (daily / weekly) Generate production plan at each Manufacturing Plant (weekly / monthly) Supply Chain Planning process ownership Demand and supply alignment through Sales & Operations Planning process Redefine roles & responsiblities of sales and marketing in the planning process: Forecast ownership per Market Unit Network of Demand Planning Coordinators Exceptional demand input based on statistical forecast V.1.1 Solvay Business School 65 (3) Implement an integrated Supply Chain Planning platform using Manugistics Technologies de l’information et de La communication Supply Chain Planning Manugistics Selected Transactional Data required for Planning Purpose Transactions to be executed based on Planning decision Project Scope Supply Chain Data Warehouse Detailed Transactional Data required for business information analysis Messaging Systems Various, non integrated ERP systems SAP R3 U.S. MOS Asia • 2 Plants • 5 Warehouses • 2 Main DCs • 15 Warehouses V.1.1 CDS2 SAP R3 SAP R3 SAP R3 SAP R3 SAP R3 Italy Europe Germany Spain Portugal UK • 1 Plants • 1 Main DC • 12 Warehouses • 1 Plant • 1 Main DC • 1 Warehouse • 1 Warehouse • 1 Warehouse • 1 Warehouse Solvay Business School 66 (3) Implement an integrated Supply Chain Planning platform using Manugistics Technologies de l’information et de La communication Demand Planning Inventory Planning Define Inventory Targets Forecast Demand Net Forecast Distribution Requirements Planning Inventory Deployment Transportation Planning Apply Constraints to Requirements Plan Generate Requirements Plan Generate Transportation Plan Restock Order Net Requirements Manufacturing Planning Messaging Systems Various, non integrated ERP systems SAP R3 U.S. MOS Asia • 2 Plants • 5 Warehouses • 2 Main DCs • 15 Warehouses V.1.1 CDS2 SAP R3 SAP R3 SAP R3 SAP R3 SAP R3 Italy Europe Germany Spain Portugal UK • 1 Plants • 1 Main DC • 12 Warehouses • 1 Plant • 1 Main DC • 1 Warehouse • 1 Warehouse • 1 Warehouse • 1 Warehouse Solvay Business School 67 Technologies de l’information et de La communication (3) Implement an integrated Supply Chain Planning platform using Manugistics (con’t) Supply Chain Planning Optimization - Integrated Planning across Plant, Main DC, Warehouses - Central and common Planning system linking the various ERPs - Visibility across complete supply chain - Decision support system: - Sales forecasting - Replenishment Planning: what, when to replenish - Production Requirements Planning: what, when to produce Supply Chain Planning Manugistics Supply Chain Data Warehouse Supply Chain Information Warehouse - Centralized data across non integrated ERP systems Detailed operational and business analysis Key Performance indicators Sales & Operations reporting ERP systems Transactional Execution Systems - Order Management V.1.1 Shipping / Invoicing Inventory replenishment plan to warehouse execution Manufacturing plan execution … Solvay Business School 68 Technologies de l’information et de La communication Value to the client Business case: 10% reduction in finished goods inventory Increased in customer service/shipping performance Project payback of 1 Year Results to date V.1.1 New central planning organization in place Common planning process implemented across Europe and Asia operations. Integrated planning solution balancing demand and supply plan across the supply chain network Business Case realization to be monitored as of February ’02 Solvay Business School 69 Technologies de l’information et de La communication V.1.1 Lessons Learned Focus on process and organization design prior to software implementation Use of iterative and prototype approach to clarify requirements and gain solution buy-in Strong and visible Top Management support was key in project success Involve key business planners at start of the project. Planners will require extensive training, coaching, and expertise prior to be able to operate a Supply Chain Planning solution (e.g. Manugistics) Master Data and transactional Data quality and availability is the critical success factor in any Supply Chain Planning implementation Integration with multiple and non integrated ERP systems will increase Supply Chain Planning project complexity and risk. Solvay Business School 70