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Product Profitability
Management and Analysis
On-Ramp to SAP PLM
Overview
• Introduction to Samsung
• PLM at Samsung
• Product Profitability Management&Analysis and SAP
• Case Study
• Demo
• Summary
World-class products are core to Samsung
•$28B revenues in FY 2000
Electronics •Introduced 250 products last year
•32 award winning products
•Average 14 month concept to obsolescence lifecycles
•6 month concept-to-shelf lifecycle
•Display devices
Electro-Mechanics •Liquid crystal displays
•Cathode ray tubes
•Ship building
•Aerospace
Heavy Industries •Defense
•Optical and semi-conductor equipment
•Petro-chemicals
•Fine chemicals
Chemicals •Defense
•Optical and semi-conductor equipment
Strategic PLM Initiative at SDSA
(Samsung Data Systems America)
• Introduceand support PLM initiatives through out
Samsung and its subsidiaries to keep Samsung corporation
competitive
• Make best practices and lessons learnt from our
experience with Samsung to our customers in discrete
manufacturing vertical
• Partner with the leading PLM Vendors and provide
domain knowledge (CAD Data Management, Visualization
and Integration) that enhances their PLM offering
Critical Enterprise Data that have a Lifecycle
• Customer Relationships
•Solution: SAP R/3 SD module, CRM application
•Projects
•Solution: SAP R/3 Project Systems module
•Product Profitability Planning / New Product Introductions
/ Engineering Change Analytics/Adapting to Market
Demand
• ???
Why SAP was not being considered to be the PLM
Solution
•Product data originates in Design PDM systems
•(PTC, SDRC, Cadence)
•No easy mechanism to expose it to the SAP R/3 based
systems in a controlled manner
Conditions in Manufacturing
Product Profitability
Many products do not meet
projected profitability targets
Time to Market
Time delays common in most
new product introductions
Cost of Quality
Cost of quality cutting into
profits
The Industry is under pressure to perform
The Challenges to achieving these goals
Product Demand Investment Industry specific
Profitability forecast model Cost models models SG & A
Time to Design Launch Testing Corrective action
Market Lead time Lead time Lead time lead time Response
Cost of Design Component Continuous Cost of
Quality Issues Failure improvement Obsolescence Inventory
The Existing Approach to Measuring ROI
Revenues
COGs
SGA
Data Warehouse P&L Statement
Investments
Service
What is the Silver Bullet?
1. Start with the “end-game” : Margins
2. Work backwards from this desired result
3. Focus is on “How do I get to this result” Vs
“Lets analyze this result”
If you do not start with your destination in mind, any path can get you there
(or get you nowhere)
Our Approach
Product Profitability Management&Analysis PPMA
1. Start with the “end-game” : Margins
2. Work backwards from this desired result
3. Leverage data in existing systems
What can Product Companies do to
Impact P&L increase Profitability
Ability to
CAD ERP / MRP Service
PPMA Management
Apps
PLM
Concept & Execution Service
Definition
Enterprise Investments Ignore Area of Greatest Impact!
THE INVERTED P&L STATEMENT FLOW
Product
Profitability
Demand
forecast
Investment
model Cost models
Industry specific
models SG & A Revenues
Time to
Design Launch Testing Corrective action
Market Lead time Lead time Lead time lead time Response
Cost of Design Component Continuous Cost of COGs
Quality Issues Failure improvement Obsolescence Inventory
SGA
P&L Statement
Investments
Service
PPMA DEMO
Part – 1 PLANNING PROFITABILTY
Part – 2 MANAGING PROFITABILTY
Part – 3 ADAPTING PROFITABILTY
Background
Company: PDA Company
Description: Maker of Handhelds
Part I - PLANNING PROFITABILITY
Problem Description
– PDA Company is evaluating different design
options
– Basic PDA
– Basic PDA with cell phone
– Basic PDA with cell phone and camera
What product has the highest profit
potential?
Part I - PLANNING PROFITABILITY
CHALLENGES
What is the profit potential of each PDA design
option?
– Investment
– Service Costs
– Transformation Costs
– Material Costs
What is the best warranty contract to offer with
this product that maximizes PDA Company’s
profitability
Are there any other tradeoffs that I can make?
Part II - MANAGING PROFITABILITY
Problem Description
– The chosen PDA is being manufactured and an
Engineering Change for the LCD panel is being
considered in response to a competitive
situation
What is the impact of this change and
when is the right time to introduce this
change
Part II - MANAGING PROFITABILITY
CHALLENGES
What is the impact of this ECO
Response to the Change across multiple locations
P&L Impact
Alternatives / Options / What if …
Part III - ADAPTING PROFITABILITY
Problem Description
– Revenues do not match expectations
– Lower ASP
– Higher Competition
What remedial action shoud be taken to
protect profitability
Part III - ADAPTING PROFITABILITY
CHALLENGES
1. Reduce price to increase total revenue?
2. Switch to higher quality components ?
3. Phase out product and liquidate inventory?
4. Use excess inventory components for next PDA?
5. Delay the launch date of the next PDA?
6. What if ?
7. …
SUMMARY
•Redefining PLM in Financial Terms allows SAP to take
control
•Provides an ON-RAMP to SAP PLM functionality
•SAP R/3 continues to be the master repository and the
system of reference
•Increases the usability and ROI of the investment in SAP
R/3
For a copy of this presentation and screenshots
Hiren Shah
Hiren@zesati-samsung.com
650 954 7047
Thank you for attending!
Please remember to complete
and return your evaluation form
following this session.
Session Code: [3702]
Hiren@zesati-samsung.com
650 954 7047
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