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KP LokeDirector, Supply Chain SolutionsOracle CorporationAustralia / New Zealand
Creating Sustainable Competitive Advantage outside your Four WallsCreating Sustainable Competitive Advantage outside your Four Walls
2
Influences Outside the 4 Walls
Creating Sustainable Competitive Advantage outside your Four WallsCreating Sustainable Competitive Advantage outside your Four Walls
Local & Global Economics
Technology
Trading Partners
Business Philosophies
Politics & LegislationThe FMCG Company
Business Techniques
Longer Supply Chains
Choice
3
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“The leaders in the industry are winning because they are building competitive capabilities from the “outside in”: for example, joint
value creation with retailers, demand sensing and translation, eliminating stock-outs, perfect product launches, understanding consumer behaviors
and using insights to shape demand.”
“This approach contrasts isolated “inside-out” thinking, which strives for operations excellence in functional silos across the business without
improving overall performance of the end-to-end value network.”
AMR ResearchTech Trends 2007, March 2007
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Creating Sustainable Competitive Advantage outside your Four WallsCreating Sustainable Competitive Advantage outside your Four Walls
Local & Global Economics
Technology
Trading Partners
Business Philosophies
Politics & Legislation
The Demand Chain
The FMCG Company
The Delivery Chain
The Design Chain
Business Techniques
Longer Supply Chains
Choice
Influences Outside the 4 Walls
5
Creating Sustainable Competitive Advantage outside your Four WallsCreating Sustainable Competitive Advantage outside your Four Walls
What are the Major Enablers ?
More Competitive
More Profitable
6
3 Key Enablers3 Key Enablers
• Mass Collaboration
•Optimisation Techniques and Leading Edge Processes
•Data Avalanche
7
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News Article 27-Dec-2007
A combination of the Internet, cheap computing, Web-based software, open-source projects such as Linux and new ways of thinking about management are mixing together to dramatically drop the transaction costs of doing business outside a company's walls
The "company," as we've known it for almost a century, is about to go the way of vinyl albums, floppy disks and perked coffee
Mass Collaboration could change ways companies operate
8
Service Oriented Architecture (SOA) is Enabling Mass Collaboration
1970s - 1980sComputerProgram B
ComputerProgram A
EDI
1990s - 200X
200X & Beyond
Service Oriented Architecture (SOA)
Fine Grain Collaboration
9
3 Key Enablers3 Key Enablers
• Mass Collaboration
•Optimisation Techniques and Leading Edge Processes
•Data Avalanche
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Data Avalanche
Radio Frequency Identifier (RFID), GPS,
Satellite Tracking
Mobile Devices/
Wireless Broadband
“Near Realtime Data”
11
Data Avalanche• State and Store Level Raw Data
Via the web.• Regional Data or store clusters.• Control / Test Store level
analysis.
Spatial/ Global Positioning Data
Granular Timely Market Data
12
GDSN provides a single point of truth for product information
Data Avalanche
Syndicated Data - Example 1
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The ACOM has been designed to provide a national central repository for information on all prescription and non-prescription medicines, including complementary healthcare products, currently marketed in Australia. This includes details on the medicine’s active and equivalent ingredients, medication form, container type, unit of measure, poison schedule, plant part and plant preparation. Each medicine is also grouped into a virtual medicine, based on the product’s active ingredient, form and strength
Australian Catalogue of Medicines (ACOM)
Data Avalanche
Syndicated Data - Example 2
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Data Avalanche - Management and Control
Examples of Master Data Outside the 4 Walls
ACOM
Master Data Management (MDM)Inside the 4 Walls
Site HubSite Hub
Prod. Hub
Prod. Hub
Cust. Hub
Cust. Hub
Single Source of Truth
SOA / Middleware Technologies
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Ret
ail
DC
/ D
istr
ibu
tor
Dat
a•POS sales•Price•Store inventory•Promotional plans•Store replen. rules•Store forecasts
Ret
ail
Sto
re
Dat
a
•DC shipments•DC inventory•DC replen. rules
•Retail loyalty•AC Nielsen/ Synovate•3rd party demographic•Causal (weather,etc.)•RFID / EPC•Unstructured textO
ther
E
xter
nal
D
ata
Data Avalanche - Management and Control
Examples of Transaction Data Outside the 4 Walls
SOA / Middleware Technologies
Data sources centrally cleansed, harmonised and aggregated
“Sense & Respond” event management
Cap
ture
Man
age
An
alyz
e
Res
po
nd
Demand Signal
Repository
Inte
gra
te
Trade Promotions Management
Distribution Management
Sales and Operations Planning
Category Management
Transaction Repository Inside the 4 Walls
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Design Chain
An Avalanche of Data - Summary
Demand Chain
Delivery Chain
Customer Hub
Customer Hub
ProductHub
ProductHub
Site HubSite Hub
Demand Signal
Repository
Demand Signal
Repository
Avalanche of Data Outside the 4 Walls
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3 Key Enablers3 Key Enablers
• Mass Collaboration
•Optimisation Techniques and Leading Edge Processes
•Data Avalanche
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Optimisation Techniques and Leading Edge Processes
• Trade Promotions Optimisation
• Delivery Scheduling Optimisation
• Baysian-Markov Forecasting Technique
• Product Lifecycle Management
• Promotion Management
• Transportation Management
Optimisation Techniques
Leading Edge Processes
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Creating Sustainable Competitive Advantage outside your Four WallsCreating Sustainable Competitive Advantage outside your Four Walls
More Competitive
More Profitable
Mass Collaboration
Data Avalanche
Optimisation
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• More than 80% of new products launched failed to meet their goals
• More than 100,000 new products were launched last year, but only 1% or 2% of new consumer products become $100M (USA scale) brands
• Breakthrough innovation was rare; 56% of new products launched were current products or line extensions
• In the face of the Consumer Goods companies’ failure to innovate, retailers are becoming innovators and launching new products
Source: AMR Research, “Part 2: How Can You Be Demand Driven If You Don’t Know Your Shopper?”, March 2007
The Design Chain
While growth and innovation remain a top priority for Consumer Goods companies, the success rate was poor in 2006:
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The FMCG Company
Business Challenges and Pain Points
Longer & More Complex Supply
Chains
Relentless Demand for More Choice
Greater Legislative Compliance
•Inability to meet launch dates•Disconnected innovation activities•Poor collaboration and approval processes•No visibility into innovation projects globally•Stale project and portfolio measurements•Lack of involvement from value chain partners
•Disconnected data model•Incomplete or inaccurate specifications•Lack of global visibility and traceability•Manual review and approval process•Lack of visibility into global sourcing network•Poor external collaboration
•Lack of compliance screening•Slow manual (re)formulation/ optimisation process•Isolated packaging and labeling activities•Manual packaging/labeling collaboration& apprvl•No visibility & traceability into compliance/ quality•Disconnected systems storing formulation, compliance, nutrition, quality and safety data
Typical Pain PointsManaging innovation projects
Managing product and supplier data
Improving product formulation, packaging, labeling quality, compliance and safety
Latency and Inaccuracies in
Manual Collaboration
Disparate Data Sources. Latency and Inaccuracies in Data
Available
Lack of Specific Tools to Support Innovation
Process
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Design Chain - Old Paradigm
MARKETING
Enterprise
Value Chain
Enterprise
Value Chain
ProjectProject
PRODUCTION
MESMESERPERP SCMSCM
PROCUREMENT
ERPERP
ExcelExcel
LEGAL & CA
AccessAccessEDMSEDMSNotesNotes
R&D (Aust)
SUPPLIERS
REGULATORY BODIES
OUTSOURCED PARTNERS
ARTWORK DESIGN
ExcelExcel
MCADMCAD
Recipe
Mgmt
Recipe
Mgmt
CADCADSpec
DB
Spec
DB
QuarkQuark AdobeAdobeCADCAD ERPERP SCMSCM
CUSTOMERS
R&D (USA) R&D
(Asia)
SubmissionFilesArtwork
FilesArtwork
Files Formulas
Design Briefs
Audits
Specifications
Package Designs
IdeasIdeasIdeasCAD
Models
Samples
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Cas
h f
low
Time
Product Launch
Product Launch
Reduced development costs
Product LaunchProduct Launch
More rapid innovation cycles
Faster, Better, More Effective Innovation
Shorter time to market
Higher sales and margins from new products
Higher success rate of new products
Reduced risk
Objective of the Design Chain
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Design Chain - New Paradigm
Mass Collaboration
Data Avalanche
Optimisation
25
The H.J. Heinz Company
CUSTOMER PERSPECTIVE“Oracle Agile Prodika has greatly improved our raw material, supplier, and product intelligence. Information which used to take weeks to gather is now a natural extension of our day-to-day business processes." Deb Crosby, Chief Quality Officer
COMPANY OVERVIEW H. J. Heinz Company manufactures and markets a line of
processed food products throughout the world. The Company’s principal products include ketchup, condiments and sauces, frozen food, soups, beans and pasta meals, infant food and other processed food products, which are sold to consumers, as well as foodservice and institutional customers.
Revenues (2006): $9.0 Billion; employees (2006): 33,000
CHALLENGES/OPPORTUNITIES Proliferation of specifications (from finished products to
ingredients) Limited visibility and security with data stored in multiple
manual systems Inconsistent specification management process Inconsistent and slow new product introduction process
SOLUTIONS Oracle Agile Product Lifecycle Management for Process Oracle Agile Product Data Management for Process Oracle Agile Formulation and Compliance for Process Oracle Agile Product Supplier Collaboration for Process Oracle Agile New Product Development Launched Project Viper in 2000 Implemented in over 175 sites, in 21 languages/cultures,
with over 4,500 registered users
RESULTS• Simplification and global standardisation
of business processes• Global information visibility with one single “version of the truth” (data accessible in seconds vs. weeks)
• SKU rationalisation and reduction of number of specifications (30% reduction in SKUs)
• Faster new product introduction cycles (reduced labeling cycle from 45 to 7 days)
• Improved supplier collaboration
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McDonald’s
CUSTOMER PERSPECTIVE“Our service provider for Merlin had to understand the technology needs; but more importantly, understand how the information would be used to support business processes and solve problems. Oracle Prodika understood this expectation without being asked … Other potential vendors talked about technology and functionality. Oracle Prodika talked to us about process optimisation.”Catherine Adams, Corporate VP, Worldwide Quality, Food Safety and Nutrition
COMPANY OVERVIEW McDonald’s Corporation primarily franchises and operates
restaurants in the food service industry. These restaurants serve a value-priced menu in more than 100 countries around the world. All restaurants are operated either by the Company, by franchisees or by affiliates and developmental licensees operating under license agreements.
Revenues (2006): $21.6 Billion; employees (2006): 465,000
CHALLENGES/OPPORTUNITIES Islands of information and disconnected systems Inconsistent processes across regions Paper-based menu management, product management and
supplier management
SOLUTIONS Oracle Agile Product Lifecycle Management for Process
Oracle Agile Product Data Management for Process OracleAgile Formulation and Compliance for Process Oracle Agile Product Supplier Collaboration for Process Oracle Agile New Product Development and Introduction
for Process Launched Project Merlin in 2005 Implemented in North America, Europe and Australia with over
400 registered users
RESULTS
• Global information visibility• Improved communication and
coordination across regions and functions, and with suppliers
• Improved ability to design quality into new products, and manage conformance to design
• Streamlined new product development process
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Creating Sustainable Competitive Advantage outside your Four WallsCreating Sustainable Competitive Advantage outside your Four Walls
More Competitive
More Profitable
Mass Collaboration
Data Avalanche
Optimisation
29
Demand Driven leaders typically have:• 15% less inventory• 17% stronger order fulfillment• 35% shorter cash-to-cash cycle times
0
50
100
150
200
250
300
350
Strong Weak
Perfect Order Inventory
Cash-to-Cash SCM Costs
Source: AMR Benchmark Analytix
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Complete order
fill rate
% Gross margin % Customer
retention
Laggard
Industry norm
Best-in-class
Cur
rent
% p
erfo
rman
ce
Performance metric© 2004 AberdeenGroup
S&OP leaders outperform their competitors:• Improved order fill rates• Increased gross margin• Higher customer retention
The Demand Chain
Which translates to:•60% better profit margins •65% better EPS •2-3X the ROA
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The FMCG Company
Business Challenges and Pain Points
Longer & More Complex Supply
Chains
Relentless Demand for More Choice
Typical Pain Points
Need Higher Service Levels at Lower Cost
• Stock outs & non-availability
• Excessive Inventory
• Low Service Levels
• Promotion’s negative ROI
• Loss of Revenue
• New Product Introduction
Failure
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Sense Demand “Real-Time”
• Demand changes get detected real-time and are instantly reflected to all constituents and exceptions are triggered automatically
20th Century Fox processes real time updates from 15,000+ stores daily
Incremental forecasting
Capture demand more frequently, closer to the point of consumption (eg POS data)
Capture demand and forecast at more granular level (store, shelf, attributes, product characteristics)
Achieve consensus demand number more quickly by involving all parties (including customers0
Quickly identify and react to demand changes and exceptions
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Improve Forecast Accuracy
• Bayesian mix modeling• 15 model library
• Auto-regressive moving average (ARMA)• Regression integrated winters• Logistic and logarithmic models• Ridge regression, Markov chain regression• Intermittent regression
• Unlimited causal factors• Seasonality, weather, market indicators• Base + price + multi-event lift decomposition
Historical dataBayesian Estimator
Forecast
Estimator’s models
Multiple causal factors
Bayesian combined model
Superior Bayesian-Markov Analytics
• Promotion effects• Cross-product and cross-location effects• Pre and post event
• Automatic outlier detection• Trend long, short, dampening• Missing data interpolation• Shape modeling and auto-correction• Regime change• Fit and forecast validation
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Promotion Optimisation
• Optimisation option automates promotion selection
• User-defined boundaries for allowable promotions
• Optimisation on profit, revenue, volume or budget funds
• Use granular lift analytics• Save account manager time over manual what-
if analysis
• Analytics output always visible• Volume and profitability of future promotions
• Impact of varying promotional tactics and price points
• Manufacturer and customer profitability
• Lift decomposed to identify cannibalisation, pantry loading, and halo effect
Competitiveswitching
Long termgrowth
Pre and Postpromotion
effect
Cross productcannibalisation
BaselineAn
Avalanche of Data
An Avalanche
of Data
34
Demand Mgmt with Partner Collaboration
Partner Inputs: XML,EDI or Manual
Partner Forecast Metrics
• Improve demand visibility with customer collaboration
• Tailor worksheets to specific customer needs
• Worksheet can be attached to a task
• Direct alerts via application or email• Automate internal notification on
customer input• Field-level security tied to customer
access privileges
Collaborate with customers and measure impacts
35
Case Study
……………
The Solution
The Result
An Avalanche
of Data
An Avalanche
of Data
36
Dramatic increase in forecast accuracy“Six months after implementing Demantra we have seen a dramatic increase in forecast accuracy. This resulted in an immediate 20% inventory reduction.”
– Wendy Malloy, Inventory Planning Manager, Wilton Industries
45% increase in accuracy in 6 weeks
“From an isolated process to a full Demantra solution - within six weeks of going live
our ‘A-items’ improved 45% in accuracy. Today we load daily bookings against the
forecasted plan and feed production management to align back-end production
based on the true feed of real-time demand.”
– Sagi Srinivas, Director, Supply Chain Systems, BiosenseWebster
Other Case Studies
We see the Demantra product doing far more than just trade promotions. The ability to have Trade Promotion Management really be embedded with the demand plan and integrated post-analysis, all in one tool -- that is the one key that no other manufacturer of this type of product could accomplish.
- Larry Rencken, Chief Information Officer, Welch’s
Integrated Forecasting and Promotions Planning
37
Creating Sustainable Competitive Advantage outside your Four WallsCreating Sustainable Competitive Advantage outside your Four Walls
More Competitive
More Profitable
Mass Collaboration
Data Avalanche
Optimisation
38
The Delivery Chain
28.9%
42.1%
13.2% 13.2%
2.6%
0%
10%
20%
30%
40%
50%%
of
Co
mp
an
ies
Re
sear
ched
1-5% 6-10% 11-20% 21-30% x > 30%
Companies with Annual Transportation Spend > $10 Million Source: The Logistics Institute at Georgia Tech
Savings Opportunity
Improvements in the
delivery chain can save
between 5-25% of cost
39
The FMCG Company
Business Challenges and Pain Points
Relentless Demand for More Choice
Need Higher Service Levels at Lower Cost
Greater Legislative Compliance
Typical Pain Points•Increase Demand for accurate delivery status and cost information
•Demands for shorter cycle times and more frequent deliveries
•Market pressures to reduce delivered cost
•Tightening freight capacities and increasing accessorial costs
•Increasing complexity and lengthening supply chain
•Increasing Regulatory Compliance
Longer & More Complex Supply
Chains
- Container and trailer optimisation & configuration- Shipment assignment, stringing & continuous moves- Fleet sizing & assignment (execution, strategic)
- International shipping- Facility resource balancing- Bid collaboration and
optimisation
Support a Wide Range of Optimisation Needs
• Route
• Mode• Route
• ModeOptimisedDecisionsOptimisedDecisions
• Timing
• Equipment
• Timing
• Equipment
• Multi-Leg Multi-Mode Consolidation
• Common Leg Consolidation
• Multi Stop Consolidation
• Multi-Tier Networks
• LTL Consolidation
• Continuous Moves
Algorithms
• Consolidation
• Service Provider
• Consolidation
• Service Provider
Engines& Rules
• Service Time Calculation
• 3-Dimensional Container Optimisation
• Itineraries & Profiles
• Carrier Capacity
• Throughput
• Rating
Shipment Planning and OptimisationMaximise Fulfillment Service, Minimise Transportation Costs
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Carrier Bid OptimisationSecure Best Value from Service Providers
Oracle Global LogisticsOracle Global Logistics
Load ExecutionEnvironment
•Prepare bids using real history, forecasts, and actual orders
•Electronically sendout bid packages
•Optimise results and send out awards
•Automatically loadthe winning contractinto the execution environment
Your Company
Receive Demand
• Orders• Lane Forecasts Bid
Initiation
Quotes
Award Notice
Selected Carrier
Optimised AwardRecommendation
Bid Packet
QuoteAnalysis
Accept
Contract
Transportation Service Providers
42
Retailer 1
Retailer 2
(Bangkok) (Sydney)OEMPlant
PortPort PortPort
Alert! … Delayed in customs
Automated Action …Split shipment of good
Alert! … Dealer msg “Partial Ship”
Automated Action … 1) Order and routing change2) Expedite replenishment order
• Receive Proactive Notifications and Rapidly Adjust to Unforeseen Delays
• Utilise Event Management to Trigger Automated “Corrective Action” Flows
Supply Chain Event Management
DataAvalanche
DataAvalanche
43
Intelligent Truck Scheduling and Regulatory Compliance
Break Start Time
Break Completion Time (Break Duration)
Data Avalanche
Data Avalanche
44
Kraft Foods• Company Overview
• Kraft Foods is the world’s second largest food and beverage company with 2006 net revenues of $34 billion. Kraft is headquartered in Northfield, Illinois and has 104,000 employees and operations in 72 countries.
• What is the business problem we are solving?• For daily shipment planning, Kraft utilises OTM's direct planning, bulk
planning, shipment pooling, carrier commitments, carrier capacity and shipment tendering/execution.
• Kraft plans to gradually bring up 180 planning sites on OTM throughout 2008.• What components of OTM are we implementing?
• Freight Financials (Live in August 2006)• Cooperative Routing (Live in January 2007)• Transportation Planning and Execution( Live on Sept 21, 2007)
• Future plans• Deploy transportation planning & execution to all 180 sites (2008)• Cooperative Routing Execution (2008)• Dock Scheduling (2008) • Other potential projects include ocean/vessel, procurement, planning and
financials in Europe
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COMPANY OVERVIEW• €37B international retailer based in Cheshunt Hertfordshire, U.K.• 2,365 total stores throughout Europe and Asia selling 50K product
lines (food retailing comprises over 2,000 stores)• 367,000 total employees and 5 years of consecutive growth
CHALLENGES/OPPORTUNITIES
• Non-invasively integrate logistics management and key support systems to minimise both internal and external IT resources
• Utilise factory gate pricing to reduce costs and gain complete controlof inventory from supplier to store shelf for 6,000 daily shipments (70% of inbound freight) including the tracking of costs and performance service levels, order booking, and support for financial settlement
• Integrate demand (from order management system) and status (from warehouse management system) with transportation logistics
ORACLE SOLUTIONS
• New deployment of Oracle Transportation Management solution• Utilises Oracle E-Business Suite for Financials and Procurement,
PeopleSoft Enterprise for HR, and Oracle Retail (Retek) for Merchandising
RESULTS
• Improved on-time deliveries by 14%
• Supports 24 / 7 shipping operation with 9 planners
• Reduced cost per case by 10-15% (£500M in distribution costs)
PROJECT HIGHLIGHTS
• Automated 95% of all inbound scheduling resulting in improved availability, reduced stockholding, and increased vehicle / trip utilisation
• Automatically optimises loads & manages communication with carriers
• Eliminated EDI by enabling carriers and suppliers direct entry of shipment details (e.g., appointment, pick-up, out-gate times)
April 2007
46
COMPANY OVERVIEW
• AUD$4 B provider of integrated transportation & logistics services, based in Melbourne (Australia)
• Maintains a network of 450+ sites throughout the Australasian region and managed by 20,000 employees
• Utilise Oracle Transportation Management as a key component of their industry-focused Autologistics and Transport Operations Management (ATOM) and Energy solutions.
RESULTS
• Increased freight managed in system by 400% in one year
• Supports multiple industries with a single instance
• Improved on-time delivery and customer satisfaction
• Streamlined operational processes with improved collaboration
• Enhanced supply chain efficiencies resulting in cost reductions
• Improved in-transit shipment visibility for better decision-making
• Supports industry-specific requirements for automotive, consumer packaged goods, and retail
47
Creating Sustainable Competitive Advantage outside your Four WallsCreating Sustainable Competitive Advantage outside your Four Walls
Local & Global Economics
Technology
Business Philosophies
Politics & Legislation
The FMCG Company
Trading Partners
More Competitive
More Profitable
The Demand Chain
The Delivery Chain
The Design Chain
Business Techniques
Longer Supply Chains
Choice
Influences Outside the 4 Walls
Mass Collaboration
Data Avalanche
Optimisation