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									      Supply Chain Management




                      “Our company is augmenting its SAP R/3 ERP solution with
                       SAP APO supply chain planning software. The logistics
                       planning capabilities in the solution are vital to the efficiency
                       of our supply chain.”
                       Jeff Morgan, Vice President of Information Technology,
                       Motts (Cadbury Schweppes)




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                                                                         CHAPTER 5




        Chapter 5
                 Chapter 5 Supply Chain Management I Colgate-Palmolive
                                                     Microsoft
                                                     HP



“Our primary objectives were to improve customer service,
 increase inventory turnover, and streamline production.
 Thanks to SAP APO, we achieved all this in a short time
 and at a low cost.”
 Richardo Benitez, supply chain manager, Hylsa




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      Supply Chain Management

                                "The global deployment of mySAP SCM throughout HP is
                                 helping us to operate more efficiently in increasingly
                                 complex and competitive environments. We expect to see
                                 significantly lower manufacturing cycles and costs, as
                                 well as improved on-time customer delivery early on in
                                 the deployment of mySAP SCM."
                                Craig Flower, vice-president and CIO, Hewlett-Packard Co.




              Chapter 5 Supply Chain Management
                                 Supply chains have become a key element in company competitiveness and profitability.
                                 The effectiveness and efficiency of your supply chain can be what makes the difference
                                 between you and the competition.

                                 This means supply chains need to be faster, more precise and more adaptable. You need to
                                 be able to customise your supply chain to your needs and change it rapidly according to
                                 market and economic conditions.

                                 Innovative and successful companies are moving beyond the traditional, linear supply
                                 chain. Instead, they are creating communities of networked supply chains in which
                                 suppliers, manufacturers, distributors and customers all collaborate.




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A NEW ERA IN SUPPLY CHAIN MANAGEMENT
By Dwight Klappich of Meta Group

When Bob Dylan sang, ‘The times, they are a-changin’,’ he may have unwittingly created the
theme tune for the modern supply chain. Never before have we seen so much change come so
fast and with such far-reaching implications.
While much of the focus over recent years has been on evolutionary change, leading-edge
companies have been pursuing revolutionary transformations. For example, companies like
Cisco, Dell, and WalMart have redefined supply chain excellence. Four strategic imperatives are
driving the revolutionary changes taking place in supply chain management over the next few
years. We’ll call these the four Vs of supply chain management: velocity, visibility, virtual supply
chain, and value.


Velocity
Today’s marketplace is about speed – speed to market, speed through the supply chain. The
speed customers, the ‘now generation’ with a click mentality, expect their needs to be fulfilled
immediately. The Internet is both the solution to and the cause of this increased velocity.
Companies will need to arm themselves with the tools and technologies needed to operate at
warp speed.
The velocity of change is unprecedented. In the late 70s when IBM released the 4300 computer,
delivery dates were as long as a year after ordering. Today, during the same time, a PC could go
through five or six evolutions. Companies are managing larger product portfolios, and they are
being forced to dramatically compress the time from idea to market. We see significant growth
in new technologies that help facilitate new product introduction. Technologies like
collaborative product design, strategic sourcing technologies, and process automation for
introducing new products are helping early adopters push more through their pipeline faster
and with better overall results.




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                                In addition to the speed of change, products are moving faster through the supply chain.
                                Several years ago it was common for inventory to sit for months. Today, leading-edge
                                companies manage inventory in motion, striving to never see it sit idle. Real-time planning was
                                once considered an oxymoron. Now, it is critical that sophisticated planning techniques (such as
                                optimised available to promise, dynamic sourcing, or reroute in-transit) be brought into the
                                transaction process.


                                Visibility
                                As velocity accelerates, the need for network-wide visibility increases because you can ’t manage
                                what you can ’t see. Today, products and orders move through numerous information black
                                holes as they navigate the supply chain. Companies need complete order and product visibility,
                                and they are looking to extend this visibility to their customers, partners, and suppliers.
                                The challenge with providing supply chain visibility is that information resides and travels
                                across multiple systems both inside and outside a company. Visibility is principally about
                                connectivity. Flexible integration technologies that provide both data and process integration
                                with alert engines that can push information to the right place are making this cross-
                                application and cross-company visibility a reality. Web-based portals layer on top of the
                                integration technologies to provide user-customisable information.


                                Virtual supply chain
                                The modern supply chain has no boundaries, existing as much in cyberspace as in the physical
                                world. Leading-edge companies are rewriting their definitions of customers, suppliers, partners,
                                and even competitors. Outsourcing is on the rise, and rivals are becoming partners. The virtual
                                supply chain is all about flexibility and agility. By managing the supply chain in cyberspace,
                                companies will be able to reconfigure their networks on the fly as market conditions change.




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Today, few supply chains are self-contained. Organisations trade resources, resulting in a
network of separate, but electronically interconnected businesses. Increasingly, competition
is as much between supply chains as it is between companies. In this environment, the supply
chain takes on the attributes of an independent organization forcing management across
organizations to communicate and share goals, objectives, and information.
The Internet provides a wealth of new technologies that support the virtual supply chain.
Collaborative planning, forecasting, and replenishment allow companies to cooperate over
the Web in the planning process, reducing uncertainty in supply and demand. The growth
in electronic marketplaces is a testament to the potential value in organisations building
coalitions of trading partners. Inter-enterprise integration technologies allow organisations
to move from just passing data (as with EDI) to sharing information and synchronising
processes across organisations.


Value
The modern supply chain requires a shift in thinking from a volume-based perspective to a
value-based perspective. Moving forward, supply chain effectiveness will be measured on
how well it adds value to customers, trading partners, and shareholders. This shift in focus will
require a cross-functional and cross-organisational understanding of all supply chain dynamics
so a balance can be reached between all constituencies. Companies will move away from
departmentally oriented metrics (fill rate, asset utilisation, periods of supply, and the like)
to supply chain wide metrics (such as total cycle time, total customer satisfaction, and return
on all assets).
Companies will use value-based metrics to build their virtual supply chain networks. The need
for agility demands frequent reconfiguration of the network. This means network planning
technologies will evolve from infrequently run strategic planning tools to run-on-demand
tools used to assess both strategic and tactical supply chain decisions.




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      Supply Chain Management




                                Customers are increasingly demanding while less loyal. The Internet has facilitated a further
                                shift in power to customers by providing a wealth of buying information that is just a few clicks
                                away. With no desire to compete solely on price, leading-edge companies are using the Internet
                                to strengthen relationships with their clients. They realize the importance of adding value by
                                forming lasting win-win relationships with their customers.
                                Arguably, business is primarily about the bottom line. Shareholders expect to see returns, and
                                they want to see the value of the business improve. They scrutinise revenue growth and
                                profitability, two areas where effective supply chain management can have a significant effect.
                                The growth in technologies like advanced planning and scheduling and collaborative planning
                                is driven by these value improvement objectives.
                                It isn’t often a new technology like the Internet comes along and presents such a wonderful
                                opportunity to revolutionise the way we do business. Innovative companies will leverage the
                                power of the Internet and the four Vs to gain competitive advantage and to redefine supply
                                chain excellence.
                                Though many executives struggle to get their arms around these sweeping changes a quote
                                from another time-honoured philosopher, Winston Churchill, seems appropriate: ‘There is
                                                               ’
                                nothing to fear but fear itself.


                                mySAP Supply Chain Management

                                The challenge of the new, New economy
                                Today, supply chains are becoming a key competitive weapon, and that means that they face a
                                mounting array of challenges. They must move with ever-increasing speed; supply customised,
                                individually configured products; promise and deliver with precision and adapt quickly to shifts
                                in demand, customer tastes, and economic conditions. To succeed, you have to find answers to
                                some fundamental supply chain questions:
                                      • How can we respond to changes in demand without carrying lots
                                        of inventory?
                                      • How can we work with suppliers to change plans quickly?



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     • How can we maintain service while squeezing more out of
       inventory, fixed capital, and transportation assets?
     • How can we bring new products to market more quickly and
       support high demand?
     • How can we shift to Internet-based selling and go direct to the end
       consumer when our supply chain is focused on full, truck load
       systems?
     • How can we drive superior supply chain performance to provide
       rich selection with fast and dependable delivery to stand out from
       the competition?
     • How can we meet demand if our preferred supplier can’t deliver?
To answer those questions, you need to move beyond the traditional supply chain. Handing
information from partner to partner in a sequential, linear fashion just isn’t good enough in the
new, New Economy. It’s too slow, too inaccurate, too costly – and it makes your company
vulnerable to competitors that do have responsive supply chains.
Instead, you need to create collaborative communities of networked supply chains in which
suppliers, manufacturers, distributors and customers share information dynamically up and
down the supply chain and work together seamlessly toward a common goal.

Building the collaborative supply chain
mySAP Supply Chain Management (mySAP SCM) is a powerful, integrated solution that gives you
the tools you need to manage your entire supply chain, from design to material sourcing, from
demand planning to distribution. With mySAP SCM, you and your partners can capture customer
demand and share that information throughout the chain. See a shortage before it occurs and
integrate a new supplier to avoid delay. Synchronise planning and execution. In short, you can
reach across organisational boundaries to build a truly collaborative supply chain. And that can
lead to reduced inventories, increased return on assets, improved quality, and the kind of speed and
responsiveness your company needs to thrive.




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      Supply Chain Management




                                Integrated to give you the big picture
                                Unlike piecemeal competitive offerings, mySAP Supply Chain Management is an integrated,
                                holistic solution that helps drive consistency and efficiency throughout the supply chain. And it
                                helps you avoid the extensive up-front integration costs and ongoing maintenance and upgrade
                                expenses typically associated with pieced-together solutions.
                                In addition to a complete range of supply chain functions, mySAP Supply Chain Management
                                provides seamless integration with the other mySAP.com e-business solutions, making it easy to
                                link supply chain information with financial, customer relationship management, business
                                intelligence, and product life-cycle management systems.
                                You can easily take advantage of mySAP Workplace, SAP’s role-based enterprise portal, which
                                gives users inside and outside the company the content they need to collaborate. And SAP’s
                                mobile solutions that let you tie plant managers, warehouse workers, and sales people into your
                                supply chain.
                                And because mySAP SCM is based on an open, standards-based architecture, it can integrate
                                both SAP and non-SAP solutions – giving you the flexibility and scalability you need to
                                collaborate with partners throughout the supply chain and keep pace with change.

                                Supply chain exchanges: creating collaborative communities
                                Today, supply chain management is beginning to tap into the power of online marketplaces to
                                create supply chain exchanges, or private exchanges, that support collaborative commerce
                                communities. A supply chain exchange uses an e-marketplace infrastructure to link an
                                enterprise and its supply chain partners into a network. Unlike a public e-marketplace or
                                exchange, the supply chain exchange is designed to be owned, operated, and managed by an
                                enterprise, which brings its suppliers, partners, and customers into a managed environment
                                that protects confidential data and guarantees that information is shared among partners.




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A supply chain exchange can give you and your supply chain partners a way to collaborate
on design, procurement, demand and supply management, and a host of other supply chain
activities. With an effective collaboration environment in place, you’ll see improvements
across a range of supply chain activities. Synchronisation of execution and logistical efforts is
improved, meaning less downtime for assets. Supply chain partners can work with common
forecasts. Planning and optimisation are more efficient. And information-sharing friction is
reduced both internally and externally.




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      Supply Chain Management




          Colgate-Palmolive
                                SAP Customer Success Story




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SAP Customer Success Story

Colgate supports its worldwide brands with mySAP Supply Chain Management
Colgate-Palmolive Company does things globally, and it does things right. The company
manages all its brands globally, and in November of 1999, it kicked off the Colgate Global Supply
Chain initiative to do the same for its supply chain. Colgate wanted to leverage the investment
in its core SAP R/3 solution to further enhance supply-chain performance worldwide. The business            ‘The capabilities of
goal: improve service to retail and internal customers, reduce inventory, and improve margins.
                                                                                                            mySAP SCM are critical
Colgate selected mySAP Supply Chain Management (mySAP SCM) to power its supply chain
management initiative. Using SAP Advanced Planner and Optimiser (SAP APO), Colgate got                      to enabling Colgate to
the metrics it was looking for. It improved on-time and complete orders from 70%to 98% for
                                                                                                            take the next logical
vendor-managed inventory (VMI) replenishment. It increased compliance levels for intra-
company replenishment. And it improved customer order fulfilment to 95%. Colgate also                        steps in enhancing
lowered inventory by 10% and reduced overall order cycle times.
                                                                                                            global supply-chain
mySAP SCM uses the power of the Internet to extend supply-chain technology beyond the
enterprise. It provides companies like Colgate and their partners and customers with complete
                                                                                                            performance.’
visibility into business-critical data. This includes instant, real-time access to information about
orders, forecasts, production plans, and such key performance indicator as inventory levels and
fulfilment rates. This enables companies to improve their competitive position by increasing
service quality and reducing their investment in inventory. ‘The capabilities of mySAP SCM are
critical to enabling Colgate to take the next logical steps in enhancing global supply-chain
performance, says Esat Sezer, Colgate’s director of global information technology. ‘mySAP SCM
              ’
delivers solutions on three key fronts. It enables Colgate to gain visibility into global logistics data.
It allows us to optimise our operations through the use of advanced mathematical planning
functions. And it provides a platform for collaboration with our customer and partners.
By leveraging mySAP SCM, we are truly progressing toward excellence in supply-chain planning
across our worldwide operations.   ’




                                                                                      Case study by SAP                                 129
      Supply Chain Management




                                A consumer products leader
                                Colgate-Palmolive Company is a U.S. $9.4-billion global consumer products powerhouse
                                headquartered in New York. Colgate manufactures and markets a wide variety of products in
                                the United States and around the world, including toothpaste, soaps, laundry detergents, and
                                pet foods. The company operates in more than 200 countries, with approximately 70% of sales
                                coming from international operations. Some 80% of Colgate’s employees are located outside
                                the United States.
                                The company built its mySAP SCM initiative on the foundation of the SAP enterprise solution.
                                Colgate began rolling out the SAP core solution in 1995 to improve operations through
                                consistent, global support for financial analysis, logistics planning, and other business processes.
                                The SAP implementation was also an enabler for a standardisation drive across Colgate that
                                encompassed all general naming conventions, formulas, raw materials, manufacturing data
                                and processes, and financial information.
                                These initiatives contributed to large gains in efficiency across Colgate worldwide. For example,
                                in the operations arena, the SAP enterprise solution helped consolidate manufacturing
                                facilities. But consumer packaged goods is a fiercely competitive global marketplace. Although
                                Colgate had achieved significant improvements through its SAP enterprise infrastructure, there
                                was still work to be done. For example, Colgate had improved on-time and complete-order
                                fulfilment rates to around 90% with the implementation of SAP R/3, but it wanted to move
                                these numbers higher with more visibility into demand and capacity constraints. Through SAP,
                                Colgate had also reduced order cycle times from nine days to five days in North America, but
                                these cycle times still represented unacceptably high internal costs.




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Focus on the supply chain
The Colgate Global Supply Chain initiative was the answer. Within the initiative, Colgate
identified three major supply-chain strategies. The first was to roll out a VMI program with key
accounts to significantly reduce channel inventory and cycle times. Colgate also wanted to
implement a cross-border sourcing programme, moving it from a regional to a global sourcing
model. This transition would improve forecasts, reduce safety stock, consolidate assets, and
leverage economies of scale worldwide. Finally, Colgate wanted to implement collaborative
planning processes with its downstream subsidiaries to manage promotional demand and to
synchronise activities across the supply chain.
Within Colgate, VMI is a pull process by which the company replenishes customer distribution
centres based on a daily transmission of inventory and demand information. The current VMI
focus is North America, where 40% of cases shipped from five plants is managed using VMI.
The implementation includes 40 distribution centres at 12 customers covering all categories of
Colgate products (about 1,000 SKUs). Because mySAP SCM enables Colgate to more precisely
match supply and demand, the result is lower finished-goods inventories, higher rates for
on-time and complete orders, and reduced replenishment cycle times.
The VMI business process is supported by mySAP SCM’s supply network planning capabilities.
Daily inventory levels and demand from customer distribution centre are transmitted to mySAP
SCM, which then calculates the replenishment orders. mySAP SCM incorporates plant capacity
information to determine the production requirements and any supply constraints. The replen-
ishment orders are then transmitted back to the customers via EDI for acknowledgement and
for handling customer information-processing requirements. The benefits Colgate has realised
through VMI – including 98% on-time and complete-order compliance and a one-day
replenishment order cycle – will be multiplied as the implementation expands across North
America and other geographic regions.




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                                Truly global sourcing
                                Colgate’s Cross-Border Sourcing (CBS) initiative incorporates demand and global sourcing
                                information to create a pull process and move from monthly forecasting to weekly
                                replenishment. Colgate got results quickly: an increase in shipments, higher case fill rates,
                                a reduction in replenishment-order cycle times, and an 8% inventory reduction. In the new
                                business model, supply plants assume responsibility for replenishing the Colgate distribution
                                centres. (Previously, Colgate sales subsidiaries developed monthly, often inaccurate demand
                                forecasts to determine the replenishment requirements from offshore manufacturing sites.)
                                The new weekly replenishment is driven by visibility into customer orders flowing through
                                in-country Colgate distribution centre and then to the supplying plants. Replenishment
                                requirements are also calculated from demand information provided by Colgate sales
                                subsidiaries, such as increased demand from promotions.
                                The CBS business process is also supported by mySAP SCM, which calculates replenishment
                                orders based on daily demand signals and inventory levels. This matches demand and supply
                                more exactly, and coupled with specific order pegging, reduces the impact of forecast
                                inaccuracies. The result is lower finished-goods inventory levels, reduced replenishment cycle
                                times, and greater rates of on-time and complete orders for both internal replenishment and
                                customer orders. Colgate has also improved case fill rates and asset utilisation by using finite-
                                capacity replenishment planning techniques. The more flexible, more responsive
                                replenishment system has resulted in more frequent shipments to the distribution centres, but
                                there has been no significant impact on transportation costs because of better overall planning.




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Demand planning
Colgate U.S. uses mySAP.com’s demand planning capabilities and the mySAP SCM collaborative
engine to provide a tool for communicating demand information to supplier and synchronising
planning across the supply-chain network. mySAP SCM statistically computes the base demand
to drive repeatable replenishment processes and incorporates changes resulting from
promotions. Promotional demand management – independent of base demand – represents
crucial information for driving manufacturing, product finishing, and distribution. The
collaboration engine supports the collaborative process for promotional demand by enabling
the exchange of up-to-date planning information, exception-based management, and tracking
of performance measures like forecast accuracy.


Realising benefits
The three major components of Colgate’s supply-chain strategies are supported by
mySAP.com’s real-time integration model, where changes in stock, sales orders, and other
relevant parameters are updated in real time between customer and internal ERP systems and
mySAP SCM. This ensures that modifications to the plan can be enacted rapidly, which is
especially important for planning promotions. Colgate expects to multiply the impact of
the current implementations significantly as its VMI, CBS, and collaborative engine
implementations are rolled out to all brands and plants. Improved visibility throughout
the supply chain means accurate, up-to-date, consistent data will be available to support
management decisions concerning tactical and strategic plans. Colgate will also use
mySAP Business Intelligence (mySAP BI) for quick access to even more consolidated and
finer-grained information to support decision making throughout its organisation.
Through its supply-chain initiative, Colgate is now better positioned to contend with the forces
driving the consumer products industry today, including price competition, expanding global
trade, and the use of promotional campaigns. These business drivers are motivating Colgate to
pursue continued cost reductions through all aspects of its business and to leverage
collaborative tools that improve links with its global customers. Colgate is also working to
leverage e-business tools that strengthen both internal integration as well as links with partners
and customers.



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      Supply Chain Management




                                Continuous improvement
                                Even with its successes to date, Colgate continues to pursue supply-chain improvements that
                                will enhance its competitive position. In addition to extending the use of VMI, CBS, and the
                                collaborative engine globally, Colgate is working with SAP to develop repetitive manufacturing
                                functionality in mySAP SCM’s production planning and detailed scheduling capabilities. This
                                will enable repeated production runs using a single bill of material (BOM), back flushed
                                material requirements, production alterations arising from short-term changes in demand, and
                                the ability to distinguish making versus finishing as separable manufacturing processes in
                                Colgate’s promotion-driven environment. Colgate is also supporting development of a mySAP
                                SCM -related wave algorithm to optimise repetitive manufacturing amid potential sudden
                                peaks and valleys in requirements and finite-capacity constraints.
                                Because supply requirements vary in a promotions-driven environment, third-party
                                manufacturing contractors are becoming increasingly important to Colgate’s business. Colgate
                                expects to leverage mySAP SCM-enabled collaborative planning link with these contractor as
                                well. Colgate is also planning to use mySAP SCM’s transportation planning and scheduling
                                capabilities to optimise its transportation network and to realise additional cost savings. Colgate
                                will also pursue various forms of collaboration with customers and partners by participating in
                                consumer goods industry marketplaces that provide exchanges for collaborative demand,
                                procurement, and logistics planning.
                                While moving quickly to achieve these and other goals, Colgate has already realised its many
                                objectives through mySAP Supply Chain Management: supply-chain visibility, increased
                                planning-cycle speeds, efficient asset utilisation through global sourcing, reduced costs, and
                                better customer service.




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Business in brief
Colgate is continually improving its operations to maintain and extend its leadership position
in worldwide consumer packaged goods. Focusing on the supply chain, Colgate wanted to
upgrade performance by replacing a regional sourcing model with a fully globalised supply
chain to improve service to retail and internal customers and to reduce inventory and total
delivered costs.


Solution differentiators
Colgate chose mySAP Supply Chain Management for its tight integration with the core SAP
enterprise solution. The SAP Advanced Planner and Optimiser (SAP APO) element of mySAP
Supply Chain Management also provided functions that open a window onto global logistics
information; advanced mathematical planning functions to optimise worldwide operations;
and a global platform for customer and partner collaboration.




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      Supply Chain Management




          Microsoft
                                SAP Customer Success Story




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SAP Customer Success Story

Microsoft APO implementation

Project objectives
Microsoft has identified Supply Chain Optimisation as a strategic initiative for their global
business operations. More specifically, their objective is: ‘To deliver a forecasting and planning
system infrastructure that supports business processes that enable Microsoft to achieve a
competitive advantage in costs and responsiveness.’
The company selected SAP APO (Advanced Planning and Optimisation) as their global Supply
Chain optimisation provider. APO 2.0 was chosen for a combination of reasons including
functionality, integration, and strategic direction.
Microsoft selected Deloitte Consulting and SAP to assist in the implementation of the first wave
of transformation. This focused on optimisation of business processes, replacing their legacy
planning software for Worldwide Hardware and the North America Software businesses and
integration with back-end R/3.


Project scope
Microsoft set target implementation dates of April 2001 for worldwide hardware and May 2001
for the North America software businesses. This allowed just nine months to pilot the project,
set functional and technical definitions and implement Demand Planning, Supply Network
Planning and the Core Interface Modules.
Deloitte Consulting’s personnel were able to efficiently integrate with Microsoft employees at
all levels across the geographies. The 20 Microsoft employees who made up over the majority of
the core team ensured global buy-in, provided local business process input and ensured solid
capability transfer.




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      Supply Chain Management




                                Approach
                                Demand Planning is used for forecasting and collaboration. It allows users to generate a
                                statistical forecast and potentially override it before it is released to Supply Network Planning.
                                Product, distribution centre, and customer define the planning hierarchy. Key functionality
                                includes aggregation, disaggregation, modeling, and univariate forecasting.
                                Supply Network Planning utilises the optimiser to build and plan loads. Business processes
                                includes flexible capacity limits, discrete optimisation, with time decomposition.
                                Core Interfaces include integration of APO R/3. Purchase requisitions which are transferred
                                 in batch mode on a weekly basis. Sales orders and purchase orders are integrated in
                                ‘real-time’.
                                The APO production system runs on 5 servers (Compaq): 1 DB server, 2 Application Servers,
                                1 Optimiser Server and 1 Live Cache Server.
                                The Live Cache server runs on Windows NT 4.0 Advanced Server, all 4 other server run on
                                Windows 2000 Advanced Server. The RDBMS used is Microsoft SQL Server 7.0.


                                Business benefits
                                The implementation resulted in forecasting and reporting enhancements as well as system
                                business process compression. It also achieved strategic capacity management; build
                                optimisation and optimised load planning.
                                The solution is providing Microsoft with a real time understanding of their value chain metrics
                                across the enterprise enabling them to plan, commit, produce, and fulfil with an increased
                                degree of certainty.
                                Some of the benefits include demand collaboration, optimisation of resources and costs,
                                modelling capability, component modelling, integration with R/3, archival of supply chain
                                performance, and increased reporting capability.
                                Microsoft is planning an upgrade to SAP APO 3.0 in the near future.




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      Supply Chain Management




           HP
                                SAP Customer Success Story




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SAP Customer Success Story

A promising forecast for HP’s consumer and commercial business in Europe
Printers and their supplies are among HP’s most successful products, with millions of units
shipped each month. For business of this size, good forecasting tools are essential. HP Imaging
and Printing Systems (IPS-Commercial/CBO-Supplies) has implemented a completely new
forecasting system following recent HP reorganisation, which involved the devolution of
planning responsibilities to the regions. HP IPS-Commercial/CBO-Supplies has Europe-wide
responsibility for distributing HP printers and printer supplies.
Having chosen SAP Advanced Planner and Optimiser (APO) for its functionality and
best-in-class forecasting techniques, HP IPS-Commercial/CBO-Supplies worked with HP
Consulting and SAP to implement the system.
To make this project and the later use of the new process successful, the project team consisted
of business representatives and future users out of the departments that would be mostly
significantly affected: Marketing and Distribution.
‘In the past, our centrally driven supplies forecasting system was based on assumptions that
applied to the US but not necessarily to Europe, explained Isabell Härle, project leader for the
                                                 ’
implementation within CBO-Supplies. ‘Our quarterly forecasts were not accurate enough,
so demand often outstripped supply.  ’


Consistent decision-making
It needed a tool that would produce monthly forecast and support a cross-functional
collaborative forecasting and decision-making process. In the past, different functions (e.g.
Sales/Marketing/Distribution) had used different forecasting systems and processes, leading
to non-connected business decisions and several forecast versions for the same business.
Therefore the availability of all planning-related data in a single system is key to improved
accuracy and ensures effective collaboration internally.




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      Supply Chain Management




                                ‘With such a large business, an improvement of even a few percentage points in forecasting accuracy
                                represents a great deal of money because supply is more closely matched to demand. APO has
                                rapidly become business-critical, and we expect it to be adopted by other regions and HP businesses
                                in the near future. Isabell Härle, supplies project leader, HP Supplies Distribution Europe.
                                                  ’


                                Hitting the target
                                HP IPS-Commercial/CBO-Supplies has to supply customers with the products they want, when
                                they want them. Product availability as well as customer satisfaction are the main drivers in the
                                market HP IPS-Commercial/CBO-Supplies is doing business. Therefore improved forecast
                                accuracy is also a major benefit of implementing this system.
                                ‘More accurate forecasts mean improved product availability for the customer, commented
                                                                                                            ’
                                commercial project leader Bernhard Kühne. ‘We expect to improve customer loyalty and boost
                                                ’
                                our market share.
  ‘More accurate
                                After the implementation, forecast accuracy improved by 2 to 5% and will do even further after
  forecasts mean                getting used to new processes and systems. Other benefits include a reduction in inventory.
                                Also, automated forecasting with SAP APO is faster and less susceptible to human error.
  improved product
                                Forecasting cycle time has been cut by three days. Taken together, these improvements lead
  availability for the          not only to improved customer service but also to substantial financial savings.
  customer’                     ‘With such large business, an improvement of even a few percentage points in forecasting accuracy
                                represents a great deal of money because supply is more closely matched to demand. APO has
                                rapidly become business-critical, and we expect it to be adopted by other regions and HP businesses
                                in the near future, said Härle.
                                                  ’

                                The wealth of knowledge and experience gained by HP during this major project is now being
                                leveraged by HP Consulting, which is currently engaged in several customer implementations
                                of APO.




142                              Case study by HP
                                                                                                    CHAPTER 5




HOW WILL YOUR ORGANISATION BENEFIT FROM mySAP SCM?
The mySAP SCM Value Calculator is a new, easy-to-use, self-service tool. It enables you to assess
the strength of your e-business and predict how much value your organisation may realize by
implementing mySAP SCM and improving your e-business infrastructure.
Based on simple information that you provide, the mySAP SCM Value Calculator quickly
evaluates a company’s e-business maturity, rating it against four ‘Stages of Excellence.’ These
stages represent different levels in a company’s evolution from a collection of disconnected
systems to a fully collaborative e-business.
All businesses fall somewhere on this spectrum and all can realise tangible results by moving
closer to full collaboration. The mySAP SCM Value Calculator tells you what range of financial
benefit you may gain by using mySAP SCM. Results are based on benchmarks from Pitiglio
Rabin Todd and McGrath (PRTM), a respected management consulting firm.
The mySAP SCMValue Calculator is a powerful resource that can help you make a strong
business case for investment in SAP’s supply chain management solutions.
The Value Calculator is is live on the SAP website, so please visit www.SAP.com/scm to find
out the benefits of mySAP SCM for your own organisation.




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