2012 10 SL ManufacturingDay 003

SAP Advanced Planning and Optimization

Adam Adamczyk/SAP PolandOctober.2012 Confidential

© 2011 SAP AG. All rights reserved. 2Confidential

Continuous Innovation Around a Stable Core

Stable core defined to be SAP ERP 6.0 today, extended to core applications of SAP Business Suite in 2008

Leverage proven functionality

Continuous innovation delivery via enhancement packages, selectively adoptable

Continuous service enablement

Uniform availability of industry best practices

Stable Core

(SAP enhancement package 1 for)SAP NetWeaver 7.0(as foundation for SAP Business Suite)

SAP Business Suite

ERP 6.0

CRM7.0

PLM7.0

SCM7.0

SRM7.0

Industries

SAP Enhancement Packages for Applications


Agenda

SAP APO overview

SAP APO/PPDS - functionalities overview

DEMO

Typical Bussines Case

SAP APO overview


Manufacturing

Using legacy and PC-based apps and spreadsheets to plan and execute basic manufacturing processes

Correct Production Master dataCorrect stock levels in systems

Integrate MES and ERPEquipment capacity planningPeople Capacity Planning

Constraint-based schedulingExecution monitoringCondition monitoringCharacteristic base optimalisation

Manufacturing analytics usingreal-time data, including decision support based on simulations and what-if scenarios

Order and cost mgmt.Increased control of mfg. processes

Manufacturing visibilityImprove on-time deliveryOptimize production

Rapid customer responseRegulatory complianceAsset utilization

Align mfg. with corporate objectives – Perfect plantAdvanced decision support 5

4

3

2

1

Technology PlatformEnterprise Core Component

MM, PP, QM, EH&S, PM, CO, MI, Lean

MII, SAP ME, Plant Dashboards

NRX ACAPO gATP Corp D’boards SCPM

Note:APO: Advanced Planner and OptimizergATP: Global ATP


Customer

Production

Supplier/SubContractor

Operational Tactical Strategic

Logistics

Time Period

Industry Solutions: Spare Parts Planning, F&R

SAP Supply Chain Management SolutionOverview – Solution Components


Synchronize supply with demand in your global supply chain by balancing push and pull network-planning processes and by handling replenishment and production based on actual demand.

APO DP: Improves the forecast quality and planning accuracy

APO SNP: Improves visibility across your global supply chain and lowers inventory

APO PP/DS: Supports you in creating optimized production plans

APO gATP: Allows state-of-the-art sales order confirmation planning processes

Transportation Management: Optimizes transportation loads and minimizes transportation costs

APO Alert Monitor: Powerful exception message system integrated in all APO planning modules

Global Available-to-Promise

Demand Planning

Supply Network Planning

Production Planning & Detailed Scheduling

Advanced Planning & Optimization

Alert M

onitorTransportation Management

How SAP APO is structured


High-Level Business Process

Planning horizon

Demand Planning

Supply Network Planning

PP/DS

Deployment

Transportation Planning

Rough Cut Planned Orders

Planned Stock Transfers

Confirmed Stock Transfers

Planned Orders

Forecast


APO - Demand PlanningCalculate and determine future demand to improve demand quality and accuracy

Comprehensive forecasting tool-set Statistical forecasting with causal and time-series methodsSelection of best-fit modelAutomatic outlier detection availableHighly configurable planning books with macro functionalitySupporting aggregation / disaggregation logicLifecycle planning Plan promotions separately from the rest of your forecastTrack & monitor forecast accuracySeasonal planning Collaborative demand planning

Improved forecast qualityOne tool for power and business userConsolidated demand plan (different regions, countries, departments, …)

Key BenefitsFeatures


VMI

APO

Integrate purchasing, manufacturing, distribution, and transportationConsider constraints and penalties to plan the product flow along the supply chain Advanced safety stock methods considering multilevel supply chain networks and demand variability Supports system wide inventory modeling and planningEnable planning on different levels of detail (aggregated planning)Choice of heuristic-, rule- or optimization-based algorithm

Increased visibility over the overall supply chainOptimized sourcing and capacity utilizationReduced inventory levels Improved customer service

APO SNP (Supply Network Planning)Calculates optimal stock levels to match customer demand and service levels



APO PP/DS: Production PlanningDelivers a short term production plan that matches overall supply to demand

Multi-level production planningCapable-to-PromiseUse existing or own developed heuristicsSupports lot quantity calculations and sourcingSupport the following Models:

Make to StockMake to OrderMake to Order with Order BOMEngineer to OrderProject ManufacturingFlow Manufacturing

Order PeggingIntegrated with the APO Alert Monitor

Determines how, when, and where resources and materials should be deployed to accomplish the production goalsMaster planning for materials and capacity (resource loads)Realistic delivery date confirmations…



APO PP/DS: Detailed SchedulingDetermines optimal production sequence for execution

Scheduling OptimizerOptimal SequencingFlexible & Graphical Activity SchedulingBacklog Resolution PlanningWhat-if Analysis & SimulationForward & Backward SchedulingConfigurable Exception Alert MonitorPlan MonitorProduction Order ReleaseIntegrated with the APO Alert Monitor…

Optimal production sequence that is feasible and can be executedAllows simulation of various planning scenarios to determine optimal scheduleOptimization based on actual constraints ensures reliable delivery due date promises



Industry specific planning processes in PP/DSEnables special planning processes tailored to industry-needs.

Mill Industries:Block planning: Planning with characteristics, pre-assignment of production capacitiesChemical/Pharmaceutical Industries:Production campaign planning and optimizationFood Industries:Planning with shelf-Life…

Automotive Industries:Sequencing and model-mix planning on production lines, determination and optimal distribution and sequence of ordersIndustrial Machinery & Construction:Project-oriented ManufacturingAerospace & Defense:Customization with Order Bill of Material…

Discrete IndustriesProcess Industries


APO gATP (global Available-to-Promise)Online information allows order promising that will meet customers’ expectation

Rule-based ATP (alternative locations, alternative products)Multilevel ATP (check on components)Backorder processingIntegrated with PP/DS (checks against actual production plan and considers capacity constraints)Integration with Demand Planning (product allocation)Fast response through liveCache* use for ATP check

Meet the demand communicated throughout the supply chainBest sourcing for the available inventories in the supply chainSell what you can actually sellIncrease customer satisfaction through reliable delivery datesHigher Requirements Visibility


SAP APO PP/DSfunctionalities overview


Typical Planning Cycle

Sense &

Respond

Interactive Scheduling to reduce late orders and capacity overload

Productions Planning- and Optimization Run1) Weekly program and2) To-the-day change-over and sequence optimization

Monitor Alerts for Orders and main assemblys

Simulate and compare alternative solutions, execute decision

Backlog free planning and restriction based optimization

Manufacturing & Procurement Execution – Changes, Exceptions

1 2

3

45

6


© SAP 2007 / PP/DS Overview 17

Screenshots: Alert Monitor (Exception Based Planning)

First task of the day for a planner: Check the existing alerts

Drill-down from the alert monitor to the application to solve the issue.


Screenshots: Product Planning Table (PP/DS)

Navigation on products / lines / workcenters

Selection of charts

Periodic display of capacity load

Product Overview for selected products

Display relevant alerts


Screenshots: Product Planning Table (II)

New selection of charts


Screenshots: Detailed Scheduling Planning Board

Save your own simulation

Resource View

Product View


Screenshots: Order context (table view)

Demand

Which orders cover the demand…


Screenshots: Order context (graphical view)

Demand

Connected planned orders?


Feature: PP/DS Optimization in Scheduling

B ACSetup Setup

Customer orders C BA A

A

Setup times in paint shopProd. A B C

A 0 10 20B 30 0 10C 40 30 0

Setup time in minutes

Product A: white colorProduct B: orange colorProduct C: blue color

time20 30 30

10 10

Set-up B ACA SetupSet-

up

10 10 40Optimal plan for setup and due dates

Setup

Optimal plan for setup

Set-up BA CA Set-

up

In real-life environments sometimes up to several 100.000 operations have to be scheduled.


Feature: Multi-level problem solving with order pegging

10

30

30

50

50

80 70

50

50

50

50

50

20 10 40 60

100

100

30 20 50

305020

30

10 20 10 40 50

(+20)

(-10)

Excess coverage

Shortage

Delay

Level Code 1

Level Code 2

Level Code 3

Level Code 4

Benefits


The right product, at the right location, at the right time has significant cost implications across supply chain functions

Reduced Inventory Increased Warehouse Productivity

Reduced Transportation Costs

Reduced Days in Inventory

Reduced Obsolescence/Write Offs

Improved network distribution planning

Increase Supply Chain Planning Efficiency and Productivity

Improved Forecast Accuracy

Company will benefit from more accurate forecasting and planning leading to costs reductions across the supply value chain while ensuring high product

availability

Streamlined inbound and outbound operations

Optimized internal routings and movements

Improved and optimized transport across

distribution network


Top 5 value drivers identified for the supply chain planning organization

Value Driver BaselineImprovement %

estimated based on SAP experience

SAP Benchmark

for Improvement

Benefit

Reduce Days In Inventory (DII) - One Time Benefit(KPI: Days In Inventory (DII))

136M current

inventory (2011 annual

report)

6.83% - 10.25%

Consumer Product Companies realize

between 10 to 15% inventory

reduction

9M - 14M

Reduce Days In Inventory (DII) - Recurring(KPI: Days In Inventory (in days))

18M (Cost of

Capital 13%)6.83% - 10.24% As above 1M - 2M

Reduce Inventory Obsolescence(KPI: Inventory Obsolescence Cost (% of Revenue))

6M (assumed) 11.16% - 14.88%

Across industries 20 to 40% reduction

0.7M – 0.9M

Reduce Total Transportation Spend(KPI: Transportation Spend as a Percent of Revenue)

29M (2011 annual

report)1.48% - 2.95%

General SAP Customer

experience0.5M – 0.9M

Reduce Inventory Carrying Cost(KPI: Inventory Carrying Cost (% of Revenue))

19M (assumed) 1.38% - 2.30%

Retail and Wholesale Distributors

witness 10 to 30% improvement

0.3M – 0.4M


Between 3 and 5M in recurring benefits and over 10M in one-time inventory optimization opportunities highlight the value proposition

Conservative Estimate

Likely Scenario

One-time benefit

0.8M0.5MOthers

13.9M9.3MReduce Days In Inventory (DII) - One Time Benefit

Reduce Days In Inventory (DII) -Recurring

1.0M0.7MReduce Inventory Obsolescence

0.9M0.4MReduce Total Transportation Spend

0.4M0.3MReduce Inventory Carrying Cost

4.8M3.1MSupply Chain Management

3.1M 4.9MPotential Annual Benefits:

Potential One-time Benefits: 9.3M 13.9M

1.8M1.2M


Detailed description of value drivers and baseline figures show potential benefit areas

* One-Time Benefit

0.2M - 0.3M0.294%Reduce Inventory Write-offs (primarily due to damages/ shrinkage)(KPI: Inventory Write-offs as a Percent of Revenue)

0.7M - 1.0M0.625%Reduce Inventory Obsolescence(KPI: Inventory Obsolescence Cost (% of Revenue))

0.3M - 0.4M1.9%Reduce Inventory Carrying Cost(KPI: Inventory Carrying Cost (% of Revenue))

Value Source Baseline Benefit

Reduce Days In Inventory (DII) - One Time Benefit(KPI: Days In Inventory (DII))* 65.0 days 9.3M - 13.9M

Reduce Revenue Loss due to Stock-Outs(KPI: Revenue Loss due to Stock-Outs as a Percent of Total Revenue)

0.978% Marginal

Reduce Warehouse Management Cost(KPI: Warehouse Management Cost as a Percent of Revenue)

2.0% 0.3M - 0.4M

Reduce Total Transportation Spend(KPI: Transportation Spend as a Percent of Revenue) 2.8% 0.4M - 0.9M

3.1M – 4.9MTotal Annual Impact

Reduce Days In Inventory (DII) - Recurring(KPI: Days In Inventory (in days))* 65.0 days 1.2M - 1.8M

Total One Time Impact 9.3M - 13.9M

Inventory Reduction

Warehousing

Transport

Function


Overall business case provides compelling economics (most likely scenario) –

Benefit AssumptionsLearning Curve estimates full annual benefits attained in Year 3 post implementationCost of Capital estimated at 13%One time inventory benefits distributed over Year 2 - 4Scope limited to Supply Chain Planning, does not include Production Planning

5-Year Project Economics

NPV EUR18M

IRR 180%

Payback 14 Months

3 Month Cost of Delay EUR0.448M

After Tax Cash Flows (PLNMillions)

Thank You!

Contact information:

Adam AdamczykBussines Solution [email protected]


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2012 10 SL ManufacturingDay 003