transformational steps on the journey to demand driven supply network

[ Transformational Steps on the Journey to Demand Driven Supply Network

Padman Ramankutty, Intrigo Systems, Inc.

Real Experience. Real Advantage.

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Learning Points

� Learn how Clorox , a leader in the consumer products industry, maintained its well-coveted customer service levels of beyond 99.5%, throughout a large scale SAP Supply Chain Management (SAP SCM) implementation -across eight business units

� Examine how processes were enhanced to manage the variability of systems across multiple brands to enable a demand-driven foundation

� Learn which SAP SCM and partner components were selected to achieve a demand-driven supply network

� Identify key processes, technologies, and decision systems necessary to move towards a DDSN


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Best Practices

� Leverage and fine tune statistical forecasting models with a consensus based approach

� Planning parameters based on demand and supply characteristics (segmented approach)

� Focus on strategic and tactical planning to minimize firefighting in the near term

� Align tools, business processes, and organization


[ About Intrigo

� Premier Enterprise Consultancy, focused on orchestrating Customer Value

Networks at the confluence of Demand, Supply and Innovation using SAP

Technologies.

� Provide solutions for our clients :

� Insights about Customers and Channels ( Sense: TPM/Channel…)

� Risk/Response modeling on Supply Side ( Risk Reduction: CTM/CTP/SC Risk..)

� Accelerate the innovation cycle that impacts the Demand and Supply equations

Supply Respond Sense

Innovate

Source: AMR

Create

Demand

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Intrigo Approach & Offerings

Approach: � Implement an integrated base line capability, reduce risk� Help clients with the ability to ramp up new users and increase its

business operational capabilities, eliminate prolonged change management and technological challenges including redundant interfaces

� Leverage common practice templates to reduce the design cycle time� Iterative realization methodology to reduce time/cost and risk

Offerings: � Authorized SAP reseller/VAR for High-tech� iSemi®: A solution for growing semiconductor

companies� Implementation & Support

� SCM, S&OP, Collaboration, SCRM, SCPM

� ERP, Channel, PLM� SRM � BI & Analytics� TPM

� IT Strategy/Architecture Roadmaps

CPG, Semiconductor, Hi-Tech, AFS


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The Clorox Company

� 1913 - America's first commercial-scale liquid bleach factory – Oakland, CA

� 1914 - Product named Clorox® bleach.

� Owned by Procter & Gamble 1957–1968

� Growth through diversification

� Worldwide manufacturer and marketer of consumer products- trusted & recognized brands

� 8300 Employees worldwide


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The Clorox Company - Today

Primary Products� Laundry Cleaning Products� Home Cleaning Products� Specialty Products� Other Businesses

House Hold & Professional Brands

FY’10 Revenues of $5.2 Billion Global

North

America

South

America

Central

America

Africa

Europe

Middle

East

Asia

Pacific


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Advanced:� Demand Shaping

Incremental:� Demand Sensing

Clorox DDSN Vision & iPlan Foundation SU

PP

LIE

R

Planning & Execution Processes

Physical Network Strategy

Planning & Execution Systems

Foundational:� Order Sourcing� Inventory Optimization� Demand Planning� Supply Planning� Deployment� VMI� Load-building� Retire Legacy Applications

CU

STO

ME

R

Challenges

� Planning capabilities were limited by

system complexity and outdated

functionality

� Planning process/system landscape

created long information flow cycle

times resulting in supply chain losses

Objectives & Scope

� Deliver foundational capabilities

required to enhance product supply

planning and execution processes

� Tools to deliver supplier-to-

consumer integration

Supported by one SAP suite of tools and

one set of master data

� Real time and visible

� Demand driven

� Synchronized end-to-end


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iPlan

Strategy

� Designed to improve efficiency and reduce cost by:

� Implementation of new supply chain planning system and process transformation

� Simplification of global supply chain network

� Improve quality and reduce variability in supplier, carrier, and production signals

� Increase agility/ability to react to changes in demand and/or supply faster and more efficiently

� Reduce 3 systems down to 1 (SAP SCM – APO module replaces Logman, i2, and Logility)

� Provide best-in-class total response time*: < 10 days

* Response is the time it takes for a change in demand to be translated into an actual response at a first tier supplier

� Planning supported by a single suite of tools (SAP APO) using one set of master data, reducing maintenance costs of 3 highly customized systems

� Eliminates existing non-SAP systems (Logman, Logility, i2) and implements leading-class inventory management tools including:

� SAP APO

� SmartOps Inventory Optimization

� LEO (Ortec) Load Building


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Business Units – Complexity & Requirements

Business

Unit

Attributes

Laundry Multi-Plant Sourcing, Multi-Work Center Sourcing , Complex Network, Production & Storage

Capacity, Mutli-Echelon Inventory, Demand Categories

Homecare Multi-Plant Sourcing, Multi-Work Center Sourcing , Complex Network, Intermodal Shipments,

Production & Storage Capacity, Mutli-Echelon Inventory, Demand Categories

Kingsford Multi-Plant Sourcing, Multi-Work Center Sourcing, Complex Network, Upstream Process

Constraints, Storage Constraints, Seasonal Pre-Builds, Production & Storage Capacity, Mutli-

Echelon Inventory, Demand Categories

Glad Multi-Plant Sourcing, Multi-Work Center Sourcing , Complex Network, Upstream Process

Constraints, Global Sourcing, Intermodal Shipments, Production & Storage Capacity, Mutli-

Echelon Inventory, Demand Categories

Foods Multi-Plant Sourcing, Inter-Plant sourcing, Complex Network, Shelf Life, Production & Storage


Brita Multi-Plant Sourcing, Inter-Plant sourcing, Complex Supply Network, Long Lead Times, Global

Sourcing, Production & Storage Capacity, Mutli-Echelon Inventory, Demand Categories

Litter Single Plant, Global Sourcing, Multi-Work Center Sourcing , Intermodal, Production & Storage


Auto Multi-Plant Sourcing, Multi-Work Center Sourcing , Complex Network, Intermodal Shipments,

Production & Storage Capacity, Mutli-Echelon Inventory


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iPlan Guiding Principles

� Focus on servicing the business at 99.5% fill rate, while minimizing inventory levels, spoilage, logistics, and manufacturing costs

� Function as an integrated planning organization where there is a strong linkage between Sales & Operation planning, Demand Planning, Supply Planning, CRP, Deployment, and Load building

� Collaborate and communicate effectively with the commercial side of the business as well as with Manufacturing

� Fully leverage available tools and technology and adopt an exception based planning approach

� Reduce need for near term fire-fighting by focusing on the medium to long term

� Provide visibility to long-term (24 months) Production, Sales and Inventory plans to drive strategic decision making

� Drive to standardized processes across both supply and demand planning

� Ensure that the team is trained on supply chain planning tools and technologies


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Manufacturing Locations:

Multi-Echelon Supply Chain Model

MFG Plant

Co-located

DC

Co-Pack Plant

Co-Pack DC

Suppliers RDCPost-pone DC

VMIOrdersWIP

Finished Goods Finished Goods

Postponement DCs:

CustomerOrders

RDC Network:


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Integrated Process Overview

= iPlan Process Area (APO)

= Execution Steps

Supply Planning(SCM-APO)

VMI(SCM-APO)

STRATEGIC

PLANNING

TACTICAL

PLANNING

EXECUTION

PLANNING

EXECUTION

SOURCEDISTRIBUT

E

CU

STO

ME

R

Deployment (SCM-APO)

Demand Planning(SCM-APO)

DELIVER

SUP

PLI

ER

MAKE

REPORTING MEASURE ANALYZE

Load Building (ORTEC)

ORDER

Inventory Planning

(SmartOps-MIPO)

= iPlan Process Area (SmartOps)

= iPlan Process Area (ORTEC)

S&OP, Budget Planning


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High Level Process Areas

Demand Planning

Inventory Optimization /

Supply Planning /

Load Building

�Produce a forecast

of customer

shipments to be used

for supply planning,

sales planning,

financial analysis, and

external financial

reporting

Objectives:

Key Outputs:

Metrics� Forecast Accuracy

� Forecast bias (over

time)

� Forecast Volatility

� Base statistical

forecast

� Unconstrained consensus

forecast

� Metrics and Exceptions

� Specify Inventory

Levels at different

nodes

� Produce a constrained

supply plan to be used

for production planning,

plant budgeting tactical

planning, long range

planning and distribution

planning that complies

with approved strategies

and policies

� Inventory Turns

� Inventory Days on Hand

� Capacity Utilization

� Constrained supply

plan

� Inventory projection

� Lane velocity and

projected storage

Deployment Planning

�Generate a

deployment plan

that complies with

approved strategies

and policies,

incorporating the

supply plan

�TL Utilization

� IM Utilization

�Redeployment

� Replenishment plan

CRP / VMI

� Produce a forecast

of VMI / CRP

customer shipments,

generate and

execute

replenishment

plan that complies

with approved

strategies and

policies

� Service Levels

� Inventory Turns

�Customer Days of

Supply

�TL Utilization

�VMI forecast

�Replenishment Plan

�Generate an

executable load

plan that complies

with approved

strategies and

policies,

incorporating

customer specific

requirements

�TL Utilization

� Executable load


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APO DP Forecast

Translation

UPC/

Ship To

APO SNPFERT/

Ship From Deployment

Optimizer

ECC

ORTEC LEO

A Nuanced Approach – Forecast Translation

� Keeps the demand signal clean and provides for a more accurate picture of the demand signal from the customer, aligns with Demand Driven Supply Network (DDSN) vision

� 1 UPC : n Products (SKU). The mapping is a function of demand source

� Prevents opportunistic shipments from becoming repeated as an ongoing forecast

� Role clarity & accountability

� Demand Planners – Customer Demand

� Supply Planners - Sourcing Decision and Supply Efficiencies


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A Nuanced Approach – Segmentation

Sup

ply

Pre

dic

tab

ility

Demand PredictabilityLowHigh

Low

High

Promotion-driven

Bread & Butter

Distribution-driven

Outlier

Cluster Analysis to Identify Segments

� Demand predictability

� Supply predictability

� Assuming that the higher the volume, the more secure and predictable the capacity is

Promotion-driven

Bread & Butter

Distribution-driven

Promotion-driven

Bread & Butter

Outlier

Distribution-driven

Promotion-driven

Bread & Butter


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A Nuanced Approach – Planning Parameter Definitions

� Segmentation:

� Identifies SKUs that behave similarly

� Structured approach to support differentiated supply chain

� Development of business rules to drive results

� Mass updates of parameter maintenance

Outlier

Bread & Butter

Promotion Driven

Distribution

Demand Predictability(Coefficient of Variation)

% o

f Total V

olu

me


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iPlan Enabled Process Changes

DemandPlanning

SupplyPlanning

Deployment

CRP/VMI

LoadBuilding

Time

Gran

ularity

Where we plan today

Course

FineNear Far

Most time and energy is here


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Value Drivers

Cross Functional Value Drivers:

� Single integrated system across planning

� Exception based planning that is supported by customized alerts and reporting

Demand Planning

CRP / VMISupply Planning

/ Inventory Optimization

Load Building

Deployment Planning

� Enhanced statistical forecastingcapabilities

� Automated updates of sales and marketing intelligence into demand forecasting solution

� Ability to plan VMI and non-VMI demand

� Improved planning capabilities across planning life-cycle

Value Drivers:

� Providing a capacity constrained plan to finite scheduling and deployment

� Improved master plan stability and reduced “fire fighting”

� Incorporation of supply planning intelligence into forecast disaggregation

� Improved management of product transitions

Value Drivers:

� Deployment plans generated based on constrained supplyplans


� Improved intermodal and truckload utilization

Value Drivers:

� Synchronization ofdemand planning and CRP/ VMI forecasts


� Improved truckload utilization

Value Drivers:

� Build executable loads based on deployment plan (includes CRP)

Value Drivers:


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Benefits

Area Benefit Supporting Modules

Transportation

Increase Inter-Modal Utilization Deployment, Load Building (ORTEC)

Increase Truckload Utilization Load Building (ORTEC)

Reduce Redeployments Supply Planning, Deployment

WarehousingReduce Outside Warehousing Supply Planning

Reduce RDC Variable Operating Expenses Supply Planning

Manufacturing Reduce Unplanned Overtime Spend Supply Planning

Obsolescence Reduce Liquidations Demand Planning, Supply Planning

Inventory Optimize inventory levels across the network MIPO (SmartOps), Supply Planning

IS Operations Retire Obsolete Application PlatformsMIPO (SmartOps), APO-SCM, ORTEC (Load Building)


[Q & A

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For additional information,

please contact us at [email protected]

or visit www.intrigosys.com.


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[

]� Thank you for participating.

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transformational steps on the journey to demand driven supply network

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