performance improvements for high manufacturing yields - sapfm.sap.com/data/upload/files/value...

Jack ChildsVP, Global Value Delivery

September 17, 2009

Performance Improvements for HighManufacturing Yields

Are we investing in the right initiatives?

Are we realizing the full value potential ofthese investments?

How do we enforce benefit commitments withthe same passion that we drive budgetcommitments?

What governance, practices andcompetencies are required to ensure benefitsare achieved?

© SAP 2009 / Value Academy / Confidential /

Executives Want Answers to Key QuestionsAbout Value

Disciplines to Answer Critical ExecutiveQuestions

ProcessPerformance

BenefitsQuantification

Initiativeprioritization

Value basedRoad map

How do wecompare?

What is ourpotential?

How do weenable?

How do we getthere?

SAP AG 2005, Confi dential Document / For Di scussi on Only / 5

Additional S/W Maintenance Cost

Lesser customization leads tolower application support cost

Reduced QA Cycle due to a simplerlandscape- hence betterresponsiveness

Leveraging Industry OpenStandards in Application platform

Past CDPs – they being covered inCore – hence simplify landscape

Current CDPs – being supported inthe core – hence avoid futurecustom development effort

Cost of Upgrade

Service Enablement of Businessprocesses

FactorsConsidered

Option Evaluations (Intangibles)

Option 2Upgrade in ‘06

Option 1Upgrade NOW

Option 3Upgrade in ‘08

ArchitecturalBenefits

Functional/BusinessBenefits

ITLandscape

Financial

HighBenefit

LowBenefit No conclusive decision

could be made

SAP AG 2006, Value Realizati on / 24

Power SupplyProcurementUsability, Production Orders, Reliability Centered MaintenanceAnalytics, Mobile

FinanceProject SystemsNew General Ledger, Financial ReportingPortfolio Management, Bus Planning & Simulation, Consolidations

Transmission and DistributionWork Order Mgmt, Warehouse Mgmt, Predictive MaintenanceDocument Management SystemProject Management, Contractor & I nvoice ManagementDistribution Work Order System Replace ment

Customer Care / BillingData Accuracy, Meter Validations, Credit and Collections, Collections Operations,Scheduling fo r Outside Service ProvidersEnergy Data Management

Information Technology (IT)Archiving , General Reporting & Analytics, Knowledge ManagementInfrastructure Consolidation, Elimination of Duplicate Applicatio ns

Human Resources ManagementOpen Enrollment Consolidation, Compensation & Skills DB, Auditing, Time EntryLife Event Processing

SRM/SCMOperational ReportingSupplier Collaboration, Catalog & Content Mgmt, Maverick Spend, Vendo r Portal

2 – ERP 05 3 – New App 4 – Later1 - Now

Deliverable Example: Business Initiatives Roadmap

SAP America 2006 Roadmap Imperati ves, Jack Childs July 2006 42

ESA Roadmap Example:Innovative Order-to-cash Process

2005 2006 2008Time

2007

short term mid term long term

ApplicationsRoadmap toApplicationLandscape

R/3 „P01“ 4.6c

R/3 „P02“ 4.6c„P03“ mySAP ERP05

LOTUS DB

SIEBEL CRMmySAP CRM 5.0

HYPERION

ERP

CRM

SEM

PlatformRoadmap toNetweaver

SAP XI / BPM 3.0 SAP XI / BPM „2006“

SAP Portal 6.0 SAP Portal „2006“

SAP MDM 3.0PoC

PoC

PoC

SAP BW 3.5PoC SAP BW „2006“

SAP BW „2006“

BusinessProcessesRoadmap toEnterpriseServices

Order entry

OTC

Order management (IDOC)order entry

Clearing

Validation CheckATP checkGTS check

Credit checkOrder processing

InvoicingControlling

Detailed Solution Priority Analysis

Urg

ency

(B

usin

ess

& I

T)

Implementation Effort

TrainingTools

Project /Portfolio

Mgt

FinanceDataMgt

IntellectualProperty

Management

LowHigh

Low

Hig

h

Notes: (1) The size of the circle corresponds to the magnitude of the anticipated financial benefits(2) Yellow circles indicate initiatives/opportunities with a strong usability component

Treasury

SupplyPlanning &Visibi lity

DemandPlanning

HRInteraction

Center

HR DataMgt

ComplianceAutomation

Sales/MarketingSupport

ProcurementPricingTools

Portal

CustomerLoyaltyTools

MaintenanceScheduling

& Parts

MgrReporting& Tools

ChannelMgt

Forms& Office

UI

SAP AG 2005, VE Plan page 6

2. Order to Cash BenefitsTangible Benefits

Source: Customer-provided data. SAP analysis.

Strategic BenefitsIncreased customer satisfactionEnhanced marketing effectivenessImproved order and billing accuracy, and reduced disputesReduced sales cycle timeImproved pricing/margin managementIncreased agent satisfaction and retention of top sales and service peopleAccelerated agent ramp-up timeImproved first contact resolution and increased customer self-serviceEnhanced product feedback and quality informationImproved alignment and consistent execution of corporate strategy

($36 – 68Mone-time)$2.5 – 4.88-15%$454M4

$31.8M4

Reduced DSO (accounts receivable):One-time cash increaseOn-going cost of capital impact

$0.5 – 0.7M20-25%60 FTEs3Increased customer service productivi ty(cost avoidance)

$0.3 – 0.4M15-20%40 FTEs2Reduced order entry/management costs(cost avoidance)

$7.0M – $17.1MTotal Annual Benefit

$3.7 – $11.2M1-3%$375M1Increased revenue (margin) via enhancedmarketing and lead mgmt effectiveness

Improvement % BenefitBaselineValue Source

Assumptions1 Revenue for the trailing 4 quarters (Q4 ’04 – Q3 ’05) is $1931M; ‘Incremental’ margin of 19.4% was calculated as the average gross

margin over the period (22.2%) minus 25% of the SG&A (11.4%)2 120 global customer service representatives; ~33% of time spent on order mgmt; assume $45k fully-loaded cost per employee3 120 global customer service representatives; ~50% of time spent on customer service (excluding order management, training, breaks

and vacation time); assume $45k fully-loaded cost per employee4 Accounts receivable as of the end of Q3 ’05 were $454M (or 78 days of sales); cost of capital is assumed to be 7%.

SAP AG 2005, VE Plan page 2

Estimated Solution Benefits ($M)

Low-end Estimates

High-end Estimates

Notes:• Analysis is direct ional in nature; Assumptions are outlined in the

appendix• Sources: Customer-Provided Data; Interviews; SAP analysis

tbd tbd

One-time Benefi t

Potential Annual Benefits:

Potential One-time Benefits: tbd tbd

tbdtbdReduce Tooling Expenses

tbdtbdReduced Spares Inventory

tbdtbdAsset Uti lization

tbdtbdIncreased Product Management Efficiency

tbdtbdIncreased Revenues/ Sales Effectiveness

tbdtbdManufacturing

tbdtbdSupply Chain

tbdtbdCustomer Service

tbdtbdSales and Marketing

tbdtbdReduced Direct Labor

tbdtbdReduced Indirect Labor

tbdtbdReduced Freight CoststbdtbdReduced Supply P lanning

tbdtbdReduced Inventory Carrying CostsReduced Inventory

tbdtbdIncreased Sales Order Management Efficiency

tbdtbdReduced Incentive Spend/ Increased Effectiveness

tbdtbdIncreased Sales Efficiency

tbdtbdReduce Deduction Admin

tbdtbdReduced Indirec t Material SpendtbdtbdReduced Direc t Spend

tbdtbdReduce Hardware Costs / Maintenance

tbdtbdReduced Compliance CoststbdtbdInc reased AP/AR Efficiency

tbdtbdReduced System Costs / Maintenance

tbdtbdReduced External Labor Costs

tbdtbdIT

tbdtbdFinance and Pricing

tbdtbdProcurement

Reduced IT Backlog (cost avoidance)

tbdtbdReduced IT Adminis trative Costs

tbdtbdDSO Costs

tbdtbdReduced Pricing Admin

tbdtbdReduced Deductions

tbdtbdReduced Obsolete Materials

tbdtbdInc reased Procurement Efficiency

tbd tbd

tbd tbd

P. 13

Overall Staffing Levels

140

80

35

76

Q1 Average Q4 Company X

Employees Served by One HR FTE

Source: Participant Responses, SAP Analysis

P. 37

Recruiting and Staffing

HR FTEs per 1,000 EE’s Cost per Employee ($)

Ap plica nt t ra cking syst em is in teg rat ed with emplo yee d ata re po sitor y8

Re cru iting syst em ha s a uto ma te d a na lysis a nd re po rting ca pa bilitie s to a nalyz e t he tale nt po ol a nd to me asu reso urce effe ctive ne ss

7

Re cru iting syst em de livers a broa d rang e of repor ts and a nalys es s pe cifically de sign ed to me asu re th e e ffe ctive nesso f th e Re cruitin g p rocess, inc lu din g time to hire, a cce pta nc e rate an d source eff ect iven ess

6

Emplo yee pe rfo rman ce exp ecta tio ns c lear ly co mmun icat ed du ring Re cru iting proce ss. App lic ant tr ackin g s ystem isin teg rat ed with emplo yee d ata repos itory; no re-key in g of dat a a t th e time of hire

3

5

4

2

1

# Best Practice Listing

Hir ing ma na ge rs h ave co mp re he nsive re cru iting se lf -s ervic e, in clud ing th e a bility to cre ate an d submit jo breq uireme nt profiles , th e use of ap prova l workflow s; a nd viewin g o f c and ida te sho rt lis ts a nd profile an d app licatio nd ataRe cru iting syst em au toma tes can did ate ad min istr atio n, with in te rvie w invit atio n, reje ctio n le tters a nd sta nd ard of ferle tters gen erated a uto ma tica lly based o n st an dard templa tes, an d asse ssment s co mp let ed and track ed on lin e

Ext ensi ve p ret est ing of ap plica nts per formed to de termin e fit with job requ ireme nts

Ext ernal a nd int erna l app lican ts are ab le to p lace th emselv es in a tale nt pip eline acc ording to th eir own int erests org oa ls

Best Practice Ranking 1 = No Cover age5 = Full Cover age

1 = No Coverage5 = Full CoverageOutsourcingIT Systems Used Org. Model

Cost per Hire ($):• Average:• Q1:• Company X:

T ime to Hire (Days):• Average:• Q1:• Company X:

Recruiting Process:• Automated = 53%• Manual = 47%

Other Benchmarks

Manu al/N on eO utso urc ed

SAP & O the rO the r

SAP

Dec en tra liz ed

Cen trally man ag ed /d ecen trally d ep loyed

Cen tralized

Of fsh ore

< 33 % O .S.3 3% t o 6 6%

In ho use

Fully O ut sou rce d> 66 % O .S.

10%

45%

5%

35%

5%10%

45%

5%

35%

5%

14%

21%

36%

29%1

2

3

4

5

#1 #2 #3 #4 #5 #6 #7 #8

Average Q1 Co mpany X

0.1

0.4

0.1

Q1 Avg Co X

$14

$58

$26

Q1 Avg Co X

Company X = between Ave rage and Q1Company X = SAP Company X = Central izedCompa ny X = Inhouse

Leading Companies Have Something inCommon – Adoption of VM Best Practices


1. Performance Improvement: structured, on-going measurement and comparison process to diagnoseand recommend improvement opportunities

2. Justification: Formal collaborative business case development approach that results in a proposal withachievable benefits & timelines

3. Value Realization: value-based implementation approach that focuses on process design andpromotes a culture of accountability and measurement

4. Business Strategy & IT Alignment: Seamless alignment of IT and business in multi-year planningand execution processes; Clear strategic goals translated to operational objectives

5. Governance & Portfolio Management: Active leadership involvement in program enablement

6. Organization Excellence: Execution skills in change and program management

Value Discovery“Build the Case”Diagnose performanceDevelop initial recommendationBuild the business caseAlign with CEO / Board agenda

Value Optimization“Drive more Value”

Measure performanceIdentify improvementDefine actionLeverage best practices

Value Realization“Realize the Value”

Design for valueDefine KPI’s to trackManage portfolio lifecycleIdentify and manage riskDesign governance model

Process Codified via Value Lifecycle


ValueLifecycle

Defining Value to the Organization

Discussion Questions:

1. How does your approach to articulating value vary across each of these types?2. What other ‘types of value’ does your organization use to justify investments?

Extracting Value from large transformation initiatives requires a balanced view betweenstrategic and tangible benefits. This is the only way to keep all stakeholders engaged.


Measurement Is A Pre-requisite for BetterPerformance

YOY %

Performance

Improvem

ent

Source: Aberdeen, August 2008

CustomerSatisfaction

Conclusions:

Companies that measure andcompare their performanceare better able to improvetheir performance year-over-year

More frequent,comprehensive measurementdrives better performanceimprovement

Inquiry-to-SalesConversion

ForecastAccuracy

Level of Measurement and comparison ofoperational KPIs


Active Some None

Available Benchmarking and Best PracticesSurveys

Human CapitalManagement

Talent Management

Financial Excellence

NPDI

Customer ContactCenters

Sales Effectiveness

Finance

Financial Compliance

Order to Cash

Enterprise Health Check

Trade PromotionManagement

CRM Strategy

Best People and Talent Product and ServiceLeadership

Total Cost of Ownership(TCO)

Business Intelligence/Analytics

Centers of Excellence

Organizational ChangeManagement

Running the ERPMarathon

Value Realization

AMR – Terabyte Survey

Strategic IT

Supply Chain Planning

TransportationManagement

Warehouse Management

SRM/ Procurement

Manufacturing

Enterprise AssetManagement

EH&S Compliance

Operational Excellence

ResponsiveSupply Networks

High Performing Assets

Superior Customer Value

End-To-End Processes

= Best Practice Surveys

HR Shared Services

Enterprise PerformanceManagement

Cash to Cash

Finance Shared Services

Value ManagementGlobal Submission SummaryTotal Benchmarking Best Practice

Submissions 6,900 4,150 2,750Unique Customers n/a 2,060 1,100

Enterprise DataManagement


Participant FeedbackConsistent Baseline for Apples to Apples Comparison

“Since participating in the Benchmarkingand Best Practices program we can

compare apples to apples.

We know what each business process costsand we can go after improvements to

reduce the costs.”

Mike Stoko, Director, SAP Global Operationsand Value Capture, DuPont


Leverage a Strong FoundationBest Practices Aligned With Business Process Steps

Provide analyses ofsourcing activitiesand procurementprocesses

Market sourcingprogram across theenterprise

Aggregatepurchases foraccurate globalanalysis of supplierspend data

Develop SourcingStrategies

Select Suppliers &Execute Contracts

Order Materials &Services

Appraise &Develop Suppliers

Adopt FormalRequest forInformation andQuotation process

Single, centralizedrepository ofsupplier contracts

Monitor suppliercompliance withcontract terms

Mandate contractcompliance andmonitor complianceto catch maverickactivity

Review supply baseagainst KPI’s

Negotiate andmanages innovativecontract terms

Use on-line itemcatalogs for self-services requisition

Enable systems forelectronicrequisitions &approvals

Adopt automaticprocessing of PO’sand electronicsubmission tosuppliers

Support electronicinvoicing, disputeresolution andfinancial settlement

Synchronize masterdata

Provide suppliers theability to maintainand upload theircontent

Facilitate suppliercollaboration andreplenishment

Enable suppliers toself-register

Review suppliers’performance

Track quantitativeand qualitative KPIs

Source: SAP/ASUG SRM Benchmarking

1


Procurement Strategies For High Yield

Gain Organizational Buy InLink Executive KPIs to Operational Metrics/Drivers

72%

12%

16%

Profit

SG&A

COGS

ProcessingOther

Overhead

Materials, 79%

Source: SAP/ASUG SRM and Manufacturing BenchmarkingNote 1: On an average 87% of Direct Material Spend is Controllable Spend on which savings can be realized

% AverageAnnual Savings

% MaverickSpend

% Spend ManagedStrategically

Procurement FTEs perBillion of Spend

% of Time Spent onTrans. Activities

Overhead,

8%Dire

ct La

bor,

13%

ContractedNot underContract

Revenue

2


Fact-based DiagnosisStandard KPIs for Procurement

Average Annual Savings (in %)1

High Impact Procurement KPI’s

Spend Managed Strategically (in %)1 Maverick Spend (in %)2

Procurement FTEs per Billion in Spend % of Time Spent on TransactionalActivities

3


Procurement Strategies For High Yield

Fact-based DiagnosisQuantify Initial Value Range to Prioritize Opportunities


Value Source BaselineMetric

Baseline1

($) NewCo 1st Quartile GAPTarget

(Close Gapby 50%)

AnnualBenefit ($)

Average AnnualSavings (Direct)

ControllableSpend $1.2 B 3.0% 8.2% 5.2% 2.6% $31.2 M

Spend ManagedStrategically (Direct)


Procurement FTEsper $Billion in Spend

Total AnnualSpend $1.5 B 153 31 122 61 $3.6 M

Maverick Spend(Direct)


“Stake in the ground” total annual benefit estimate $45 M

3

Quick “What-If” analysis based on assumed targets (50% of gap to top quartile)

Prioritize top two KPIs that make up most of the projected value


Fact-based DiagnosisBest Practice Comparison for Procurement

0

1

2

3

4

5

6

Strategy andLeadership

Sourcing:Category

Management

SupplierPerfomance

Mgmt.

Contract Mgmt. Order Processing Supplier DataMgmt.

Average Coverage Q1 Coverage New Co Coverage New Co Importance

3

Lines represent NewCo’s input and bars represent peer data

Internal “gap”: delta between lines; External “gap”: delta between red line and bars

Focus needed on processes with big gaps (so ignore “contract management”)© SAP 2009 / Value Academy / Confidential /

Develop Hypothesis - InternalLink KPI Performance to Best Practice Assessment

Best Practices for Category Management Process NewCoInternal Gap

1 Organization fosters supplier competition for commodity spend to further reduce price and achieve true market value 1.0

2 Organization has ability to accurately measure both direct and indirect spend using a single repository of data 3.0

3 Organization conducts regular spend reviews to identify new areas of contract opportunity 0.0

4 Buyers and commodity managers have access to a sourcing cockpit and regularly analyze supply strategy/perform portfolioanalysis for key commodities. There is an ongoing focus on sourcing cycle time reduction 3.0

5 System has ability to aggregate purchases across all business units for accurate global analysis of supplier spend data 4.0

Category Metric NewCoBenchmarks

Average Q1

Spend Analysis% of Spend Managed Strategically (Direct) 40.0 75.0 95.8

% Average Annual Savings (Direct) 3.0 4.0 8.2

3

Initial HypothesisA global system that could aggregate purchases across business units would help NewCo manage

spend strategically, resulting in more leverage with suppliers and improved average annual savings


Develop Hypothesis - External ValidationLinking Best Practices to High Value KPIs

Best Practice

Gap X %

“System has ability to aggregate purchases across allbusiness units for accurate global analysis of spend data” 4.6%2.9%

+60%

LowMaturity

HighMaturity

“Organization conducts regular spend reviews to identify newareas of contract opportunity” 5.2%2.8%

+90%

Linkage between Best Practice Coverage and KPI (Average Annual Savings)

“Organization operates a single, integrated procurementsystem” 5.6%3.9%

+45%

“Organization has single, centralized repository of suppliercontracts” 5.9%2.8%

> 2x

“System provides various standard analyses & reports tomonitor purchasing operations and provide detailedanalysis of compliance…”

5.0%3.8+30%


3


Example Procurement Best Practices

Provide analyses ofsourcing activitiesand procurementprocesses

Market sourcingprogram across theenterprise

Aggregatepurchases acrossbusiness units foraccurate globalanalysis of supplierspend data

Develop SourcingStrategies

Select Suppliers &Execute Contracts

Order Materials &Services

Appraise &Develop Suppliers


Adopt FormalRequest forInformation andQuotation process

Single, centralizedrepository of suppliercontracts

Monitor suppliercompliance withcontract terms

Mandate contractcompliance

Monitor contractcompliance to catchmaverick activity

Review supply baseagainst KPI’s

Negotiate andmanages innovativecontract terms

Use on-line itemcatalogs for self-services requisition

Enable systems forelectronicrequisitions &approvals

Adopt automaticprocessing of PO’sand electronicsubmission tosuppliers

Support electronicinvoicing, disputeresolution andfinancial settlement

Synchronize masterdata

Provide suppliers theability to maintainand upload theircontent

Facilitate suppliercollaboration andreplenishment

Enable suppliers toself-register

Review suppliers’performanceperiodically

Track quantitativeand qualitative KPIs


Procurement Strategic Goals

TransformProcurement to

World Class Levels

Aggregate buying categories and supplier baseAggregate spend for volume discount leverageReduce indirect costs by 10%Drive contracted materials to 80% of spendMonitor and enforce supplier performance compliance

Improvepurchasingpower

Improve supplier forecasting to top quartile levelsTransition to 75% electronic billingAutomate Integrated dock to pay processDrive 100% electronic ordering with suppliersReduce individual PO's < 10% of volume

ImproveProcurementProcesses

Create & centralize strategic sourcingStandardize procurement processes across organiz.Reduce local resources to 20% of total proc. org.

Organize forScale andLeverage

© SAP 2009 Value Management Review JUL 09 Confidential

Supply Chain Planning for High Yield

Improve Forecast AccuracyGain visibility into consumption (e.g. POS, channel, customer forecasts)Build forecast collaboration capabilities with sales & finance (Consensus forecasting)Integrate sales initiated perturbations into planning (e.g. promotions)Manage inventory and replenishments for key customers (e.g., VMI)

Align Production to DemandPostpone product differentiation and positioningReduce execution lead-times to minimize "pre-building"Drive all activities by a single, consistent demand signal

Integrate & align upstream planning processesEnsure supply, distribution and production plans are consistent in short-termGain cross-functional, executive alignment on mid-term operating plans (e.g., S&OP)Keep plans up to date with feedback from execution systemsProvide visibility of availability to customers (e.g., order promising)

Reduce Variability in ExecutionIdentify and reduce sources of variability (e.g., production variability, supply variability)

Incent stakeholders to increase consistency in execution (i.e., consistent supply lead-times)Selectively use buffers to manage remaining variability (i.e., inventory optimization)

Integrate Supplier NetworkProvide visibility into forecast to suppliersGain supplier commitment that they can meet forecastHave suppliers manage inventory of low-value items (e.g., SMI)Monitor supply chain performance to anticipate constraints

Organize for Speed, Scale & Performance ImprovementDrive expert based organization for planning best practicesProvide analytics to identify and remedy root cause issuesEnable an enterprise view of planning to recognize leverage from consolidation (e.g., transportation planning)Integrate new product teams to standardized manufacturing ramp-up procedures

Collaborative Demand and Supply PlanningKey Stakeholders & Objectives

CollaborativeDemand Management


SupplyPlanningSupply

Planning

How do I increase revenueand profits withoutsacrificing customerservice?

How do I improve mydemand visibility to keep theshelves stocked?

How do I keep service levelsup and the inventory low byaccelerating my supplyresponse?

Revenue GrowthOperating marginCustomer Satisfaction

Revenue ObjectivesCustomer SatisfactionForecast Accuracy

Customer Service LevelsInventory LevelsSupply Chain costs

CooCoo

Effective Collaborative Demand and Supply Planning requires alignment between severalstakeholders with differing objectives

Supply chainSales

Sales andOperations Planning


How do I balance demandand supply to grow thebusiness profitably?

Total RevenueTotal ThroughputTotal Profitability

OperationsCOO

Operations: Procurement

Operations: Manufacturing

Supply chain

Sales

SupplyNetworkPlanning


Procurementplanning

Procurementplanning

Rough cutProductionPlanning


VMI /Responsive

Replacement

VMI /Responsive

Replacement

Collaborative Demand and Supply PlanningEnd-to-End Process

Collaborative Demand and Supply Planning connects processes across departments to enable atimely, profitable response to customer demand

DemandSignal

Capture

DemandSignal

Capture

SalesForecast

Collaboration

SalesForecast

Collaboration

PromotionPlanning

PromotionPlanning

DemandPlanningDemandPlanning


CollaborativeDemand Management Supply PlanningSupply PlanningCooCoo

Supply chainSales



COO

Finance

SupplierCollaboration


SafetyStock

Planning

SafetyStock

Planning

DistributionPlanning


DemandAnalysisDemandAnalysis

SupplyAnalysisSupply

Analysis

CapacityPlanningCapacityPlanning

Finance& BudgetPlanning


Demand& SupplyAlignment


Operations

Cross-Functional Performance Management and AnalyticsPerformance Management and Analytics

Manufacturing Strategies for High Yield

Integrate and control assets, energy and labor for higher utilization & efficiencyIntegrate production planning with demand/supply constraints driving to lowest possible cycle timesExtend capital asset life with preventive & predictive maintenance integrated to MRO sourcing & inventoryAutomate and analyze energy balances for efficiency leakage and corrective actionIncrease labor efficiency with more standardized /directed work processes

Improve responsiveness to demandStandardize product ramp-up processes with up-stream organizations for repeatable launchesIntegrate upstream enterprise for better visibility to demand variationTransition from push to pull mfg modelsEliminate bottlenecks with lean and finite scheduling practicesReduce the lead-times of manufacturing steps and line changeoversIncrease scheduling frequency to optimize work for constraints

Enable and rationalize manufacturing networkRationalize make/ outsource decisions for cost and flexibilityExtend visibility and control to manufacturing networkIntegrate supplier services to optimize supply chain efficienciesRedesign components for greater manufacturing network leverage

Drive excellence in operations and product qualityImplement stage-gate methodology for new product development processMonitor real-time machine performance metrics to predict quality issuesAutomate and audit manufacturing processes to track compliance and to detect and eliminate deviationsEstablish and enforce quality standards for supplier network

Organize for Speed, Scale & Performance ImprovementConsolidate expertise based cross-facility functions (e.g. sales, transportation, finance, HR, procurement)Leverage centralized asset information to manage cross facility assetsStandardize mfg operations to drive consistency and best practice adoption across facilitiesLeverage analytics to analyze performance and diagnose issues

Design for ManufacturabilityRationalize product designs to optimize manufacturing efficiency and flexibilityReduce options variability with more configurable/interoperable components

Manufacturing Network Planning and ExecutionKey Stakeholders & Objectives

ProductionPlanning &Execution


OutsourcedManufacturing

OutsourcedManufacturing

ManufacturingNetwork Planning

ManufacturingNetwork Planning

How do I orchestratealignment across supplychain functions toincrease responsivenesswhile maintainingmargins?

How do I coordinatethe supply network toreduce lead times toimprove service andreduce inventory?

How do I enhanceflexibility andresponsiveness atinternal sites?

How do I enhanceflexibility andresponsiveness atoutsourced sites?

RevenueOperating MarginCustomer Service Level

Customer ServiceLevelFG Inventory TurnsInventory Writeoffs/Write Downs

Lead TimesDelivery to CommitmentManufacturing Costs

Lead TimesDelivery toCommitmentCompetitive Costs

Chief Operating Officer

Material Supply &Replenishment

How do I ensurematerial availability formaximum flexibilitywhile reducing cost?

Manufacturing SupplyService LevelMaterial Inventory TurnsMaterial Cost

Supply ChainManufacturing ProcurementSupply Chain

Quicker response to demand and supply variability and shorter lead times lead to lowerinventory levels and improved customer service

Manufacturing Network Planning and ExecutionEnd-to-End Process

Chief OperatingOfficer

Supply ChainManufacturingSupply ChainPlanning

MaterialsManagement

InternalProductionOperations

Raw MaterialSupplier

ContractManufacturer

Cross-Department Cross-Functional Supply Chain Performance Management

ManufacturingExecution &

Visibility

ManufacturingExecution &

Visibility

OutsourcedMaterialsVisibility




ProductionPlanning &Scheduling

ProductionPlanning &Scheduling

OutsourcedWorkorder

Process

OutsourcedWorkorder

Process

Subass’y &ComponentInventory

Optimization

OutsourcedWorkorder

Process

OutsourcedWorkorder

Process

Plan/Source toDemand SignalPlan/Source toDemand Signal

Plan/Sourceto ForecastPlan/Sourceto Forecast

Collaborative Procureto Forecast

Supplier ManagedInventory

Collaborative Procureto Forecast

Supplier ManagedInventory

Process co-owned withBusiness Network Partner



Outsourced ManufacturingOutsourced ManufacturingManufacturing

NetworkPlanning

ManufacturingNetworkPlanning

Material Supply &Replenishment

MNPE integrates supply chain, manufacturing, and procurement to orchestrate aresponsive supply network.

CoordinateConfiguration

Change


Change


Change


Change

Justifying Investments

ExecutiveAlignment

DiscoveryWorkshops andData Collection

Business CaseAnalysis and

validation

Validation &Final Presentation

Process

Tool: Value Lifecycle Manager (VLM) Template: Collaborative Value Assessment


VLM Walkthrough & Exercises – End Productis an Executive Ready Business Case


ExecutiveAlignment

DiscoveryWorkshops and Data

Collection

Business CaseAnalysis and validation

Validation &Final Presentation

VLM tool brings process and templatestogether

Interview executives for strategy alignment with pre-developed checklistspecific to initiative scope

Model customer needs and pain points

Match to solutions and value drivers

Set realistic targets based on industry benchmarks

Build business case and assumptions

Revise business case interactively

Overview

Navigated Methodology

Navigated business case development methodology

Rich content drives rapid skills ramp-up

Enables collaboration with process, IT and finance teams to leveragetalent and increase speed for builds

Drive executive involvement in initiative development

Enables live executive “what-if” analysis reducing cycles of analysis

Multiple Usage ModelsAnalysis

Funding

Final implementation benefit commitments

Value attainment reviews

Portfolio analysis and prioritization

8,800+ users today900+ users added monthly

2,2000+ Active Business Cases


Value Realization

Mission AlignmentOrganization-wide mission clarityScope and benefit reconciliationOperational expectation setting & buy-in

Design for ValueTranslating benefits to process changeMapping process change to solution designEnsuring non-application designs: Policy, roles,procedures

Measurement & AccountabilityKPI definition and specificationIntegrating KPIs for managementDefining accountabilityCreating organizational discipline by design

ValueLifecycle


Full Adoption Is Critical For Realization

Scopedriven by

ROI

Maturity Level 3 – 4

Maturity Level 1 – 2

Adoption of Value Realization

Disciplines Lose Traction As the Project Continues

Source: ASUG/SAP Value Realization Survey Findings, 2007

45%

75%

Project goalsdocumented for

guidingprinciples

38%

63%

Business casetranslated to

design strategy

Consistent KPIdevelopment for

operationalimprovement

Designcheckedagainst

businesscase

Ownershipfor benefitsassignedbefore go-

live

30%

61%

23%

47%

4%

28%

7%

25%

0Mission

Alignment& Readiness

1Project

Preparation

2BusinessBlueprint

3Realization

4Final Prep

5Go-Live


Dashboards

Data TransparencyData source clarityCalculation clarity

Baselines, TargetsSigned-offWell socialized

ContentMeaningful formatDrill-downs for enhanced visibility

CadencePerformance management processScheduled reviews

AccountabilityPerformance oversightCoordination for continuous improvement

Supports the on-going ValueRealization process

Mechanism for communicatingresults

Multiple views for targetaudiences:

Senior executivesFunctional leadershipProcess managers


• Focus on value to the business• Ensure visibility and consistent execution success• Drive a culture of measurement & accountability

• Translate strategy to operational deliverables• Drive business ownership for benefits• Build justification on executable improvements

• Governance best practices• Best practice collaborative planning• Value driven prioritization

• Diagnosing high impact areas• Best practice solutions• Maturity based adoption strategies

• Mission clarity for organizational alignment• Design for value principles• Performance management as a process

AdoptionSponsorship

Business &IT Alignment

PerformanceImprovement

Practices

ValueRealization

Practices

InvestmentJustification

Value Academy Enables Adoption Strategy

© SAP 2008 Value Academy Overview July 2009 Confidential/ /

VMO stages of maturity

Value Management Office Objectives and Models

Value Management Office aims at assuring value delivery of business transformation programenabled by IT investmentsThe VMO generally goes through different maturity stages

Methodology & toolsStandardsDevelopmentAdoption enablement(Training & piloting)Project set-up andtools support

Methodology & toolsStandardsDevelopmentAdoption enablement(Training & piloting)Project set-up andtools support

Metrics Development,Tracking & ReportingProject initiation &supportPlanning &PrioritizationMethodology &SupportInvestment reviewsPerformance tools andbenchmarkingOrganizationalalignment &governance

Metrics Development,Tracking & ReportingProject initiation &supportPlanning &PrioritizationMethodology &SupportInvestment reviewsPerformance tools andbenchmarkingOrganizationalalignment &governance

Planning &Prioritizationsponsorship &executionRisk Management andMitigationPortfolio Management& OptimizationInvestmentauthorizationProject performancetracking & auditsPerformance &Accountabilitydefinition & tracking

Planning &Prioritizationsponsorship &executionRisk Management andMitigationPortfolio Management& OptimizationInvestmentauthorizationProject performancetracking & auditsPerformance &Accountabilitydefinition & tracking

Strategy development& scenario evaluationPerformanceManagement definition& reviewMarket evaluation andoperating strategy &alignment

Strategy development& scenario evaluationPerformanceManagement definition& reviewMarket evaluation andoperating strategy &alignment

AdvocateAdvocate COECOE Investment &Project SteeringInvestment &

Project SteeringEnterpriseOversight

EnterpriseOversight

© SAP 2008 Value Academy Overview July 2009 Confidential/ /

Operational MetricsScorecard

Category Q1 Average Q4

Customer ServiceOn-time Delivery-to-Request Date (%) 92 70 61

On-time Delivery-to-Commit Date (%) 97 86 40

Production Plan Adherence (%) 99 84 62

ManufacturingResponsiveness

Manufacturing Cycle Time (Days)1 26 80

Manufacturing Efficiency

Capacity Utilization (%) 90 74 24

COGS as a % of Revenue 51 71 90

Labor Cost as a % of COGS 4 17 37

Material Cost as a % of COGS 42 59 92

Overhead Cost as a % of COGS 3 11 20

ManufacturingEffectiveness

First-Pass Yield (in %)** 98 89 13

Inventory Days of Supply 17 85 202

Overall Equipment Effectiveness (%)* 95 78 58

Maintenance ManagmentMachine Uptime (%) 99 93 87

Preventive Maintenance (as a % ofTotal Maintenance)

80 30 1

*Benchmarks for Discrete Industries (n = 28)

**Benchmarks for Overall Database (n = 100)

Comparison to High-Tech unless stated otherwise (n = 50)

Manufacturing: Level 1 and Level 2 StrategiesMapped to Primary KPIs

Overall Strategies Sub - Strategies KPIs

Improved utilization of assetsand resources

Integrate production planning with demand and supply constraints

OEE / CapacityUtilization

Incorporate maintenance schedule in the production plan to minimize downtime andmaximize asset lifeIncrease the proportion of standardized work processes for consistent and measurableperformanceIncrease scheduling frequency to optimize resource utilization to meet dynamic workorders

Drive excellence in qualitystandards

Provide real-time reporting on supplier scorecards for quality, compliance, delivery andprice for corrective actions

Customer Reject Rate/ Scrap as a % ofManufacturing Cost

Track first pass yields and eliminate causes of failures and variations at machine andoperator levelAudit manufacturing processes to ensure compliance and detect variations beforedefects occur

Ensure compliance withenvironmental and safetystandards

Comply with national and international regulations for product safetyOSHA related costsper FTE

Comply with substance exposure regulations and safety proceduresManage an effective auditing and reporting process to ensure compliance with definedprocedures and processes

Improve responsiveness todemand

Leverage pull-based methods to replenish inventory based on customer demand signals

Days in InventoryEliminate bottlenecks by building only to actual demand whenever possibleGather point-of sale data to net out impacts of changes in demandRelease supply orders based on pull signals from actual demand

Organize for Scale & Leverage

Share sales data and netted forecasts with suppliers for long term capacity planning andseasonal planning

Manufacturing Costsas a % of Revenue

Leverage shared services for non-differentiated processes in HR, Finance, ProcurementRoll out integrated business platform with automated workflow to ensure consistentglobal processesDevelop differentiated localized processes that differentiate company and serve localmarket requirements

Operations: Procurement

Operations: Manufacturing

Supply chain

Sales



Procurementplanning

Procurementplanning



VMI /Responsive

Replacement

VMI /Responsive

Replacement

Collaborative Demand and Supply PlanningEnd-to-End Process

Collaborative Demand and Supply Planning connects processes across departments to enable atimely, profitable response to customer demand

DemandSignal

Capture

DemandSignal

Capture

SalesForecast

Collaboration

SalesForecast

Collaboration

PromotionPlanning

PromotionPlanning

DemandPlanningDemandPlanning


CollaborativeDemand Management Supply PlanningSupply PlanningCooCoo

Supply chainSales



COO

Finance



SafetyStock

Planning

SafetyStock

Planning



DemandAnalysisDemandAnalysis

SupplyAnalysisSupply

Analysis

CapacityPlanningCapacityPlanning





Operations

Cross-Functional Performance Management and AnalyticsPerformance Management and Analytics

Logistics and Fulfilment ManagementEnd-to-End Process

VP of SupplyChain

Cross-DeptSupply Chain Mgt

Sales

LogisticsDistribution

Effective Logistics and Fulfillment Management requires alignment between several stakeholders withdiffering objectives

Inbound FreightManagement

Inbound FreightManagement

Logistics

Outbound FreightManagement

Outbound FreightManagement

Logistics

Storage andFulfillment

Storage andFulfillment

Distribution

CustomerCommitment

CustomerCommitment

Customer Service

Logistics

Risk / Compliance

Finance

Procurement

CustomerInvoice

ProcessingAR Processes

DeliveryCommitmentOrder Capture

OutboundDeliveryCreation

SupplierInvoice

Processing

SupplierInvoice

ProcessingAP ProcessesAP Processes

POManagement

POManagement

ASN / InboundDeliveryCreation

ASN / InboundDeliveryCreation

FreightSettlement

FreightSettlement

TransportationExecution

TransportationExecution

Inbound Trans.Planning /

Optimization

Inbound Trans.Planning /

Optimization

FreightSettlement

FreightSettlement

Transportation Execution

Transportation Execution

OutboundTrans. Planning/ Optimization

OutboundTrans. Planning/ Optimization

ImportManagement

ImportManagement

ExportManagement

ExportManagement

InventoryManagement

InventoryManagement

OrderFulfillment

OrderFulfillment

Sourcing andSupply

Commitment

Global Supply Chain Visibility, Event Management, Alerting, ReportingGlobal Supply Chain Visibility, Event Management, Alerting, Reporting

performance improvements for high manufacturing yields - sapfm.sap.com/data/upload/files/value...

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