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IVNSmartOps
Enterprise Inventory Optimization
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What do the Analysts say?
ContractManufacturers
ComponentManufacturers
Supply Chain
Operations
Engineering
Sales/Marketing
HQ/Finance
ServiceOperations
In-HouseManufacturing
“Inventory has been and continues to be the lifeblood of supply chains. Properly managed,it drives revenue and efficiency for companies. But as the nature of supply chains changes, so must the policies used to manage inventory. Traditional inventory management practices are being made obsolete by increasing global supply chains and contract manufacturing, more dynamic product life cycles, and multi-channel distribution..”Aberdeen, 2006
Complex Supply Chains Make Inventory Optimization Critical
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Analyst Reports – Inventory Optimization
According to analysts including AMR Research, Aberdeen, and Gartner the Inventory Optimization solutions market is the #1 SCM growth
market and spending priority
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Most companies still use simple solutions
How Companies Manage Inventory Policies Today
26%
35%
27%
13%
0%
10%
20%
30%
40%
General Rules ABCD Rules Basic SafetyStock and
EOQcalculators
Multi-echelonInventory
Optimizarion
Increasing supply chain performance
Source: Aberdeen Group, 2006
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SAP Enterprise Inventory Optimization by SmartOps
The EIO solution provides a enterprise-scale process for dynamically optimizing inventory levels in multi-tier distribution and manufacturing supply chainsEnterprise Inventory Optimization is a key component of Dynamic S&OP and Sense and Respond business processes
Industry Pain PointsAs the business innovates, globalizes, and grows in complexity there is increasing pressure to provide perfect product availability while, at the same time, reduce inventory, operating cost, and working capitalCustomer service KPIs including order lead time performance and order fill rates are below best-in-class and a key factor for customer satisfactionHigh inventory levels tie up working capital and reduce Return on Capital EmployedIncreasing supply and demand uncertainty causes planners to spend too much time expediting and “firefighting”Product proliferation and globalization means planners and analysts have less time to manage more and more products and supply chains
Solution CapabilitiesMulti-echelon inventory optimizationAdvanced demand, production, and supply analytics leverage SAP ERP, SCM and BITotal supply chain view and operational synchronizationEfficient management by exception workflowsIndustry data model and data validation process Flexible workflows, content, and reporting through SAP Portal or SmartOps user interfacesPreconfigured Standard Data Interfaces with SAP
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Value Proposition
SAP Enterprise Inventory Optimization by SmartOps delivers an immediate and sustainable step-change improvement in supply chain performance
1. Stabilize and Improve Product Availability– 5-10% increase in Order Fill Rates and On-time Delivery– 20-30% reduction in average Order Lead Time– 50-75% reductions in Order Lead Time variability
2. Reduce working capital– 20-40% reduction in Total Chain Inventory costs– Optimal and visible multi-echelon SKU-Location inventory policies (“Fix the Mix”)
3. Improve planner and analyst productivity– Automated, reliable process allows planners to focus on highest value products and
customers– Visibility into inventory cost drivers
4. Quick and large ROI– Investment payback within 3-6 months– Low TCO with joint development, delivery, and support with SAP integration
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SmartOps Overview
Great companies and relationships
Leader in Inventory Optimization, SAP xApp and SAP Endorsed Business Solution
Over $12 Billion of inventory being managed, over $3 Billion in documented customer value
Complementary extension to SAP ERP, SCM, and BW
Broad SAP SponsorshipHigh growth and profitabilityHeadquarters in Pittsburgh,
offices in Philadelphia, and Germany
Leader in Inventory Optimization, SAP xApp and SAP Endorsed Business Solution
Over $12 Billion of inventory being managed, over $3 Billion in documented customer value
Complementary extension to SAP ERP, SCM, and BW
Broad SAP SponsorshipHigh growth and profitabilityHeadquarters in Pittsburgh,
offices in Philadelphia, and Germany
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Bayer MaterialScience
Leading developer, manufacturer, and marketer of plastics, polyurethanes, coatings, and adhesivesDynamic integration of Enterprise Inventory Optimization (EIO) with SAP ERP and SCM platformLess than one year payback on investment
"Integrating inventory optimization software into our daily operations is one way by which we plan to meet our goal of improving supply chain efficiencies while achieving customer requirements throughout our products' lifecycles. These types of process and technology improvements are designed to achieve a high level of supply chain excellence and bring significant value to Bayer MaterialScience."
John Houston,Senior Vice President
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Customer Success Story
Bayer MaterialScience Case Study
Company ProfileIndustry: ChemicalsRevenues: $13B
Business ChallengesLarge volume of SKUs with many unique packaging configurations, customer-specific products, and customer-specific service level targetsSizable number of products with intermittent and low volume demand as well as seasonal products with different periods of seasonalityCustomer order sizes range from very small (single drum) to verylarge (full tank truck)Many unique processing stages with intermediates sold directly to end customersProduction Capacity is shared across many products with large batch sizes and/or fixed production sequencesMultiple plants with similar capabilities and tight capacities drive dynamic sourcing and network alignmentsFlexible policies allow for demand to be fulfilled from multiple ship points including plant warehouses and distribution centers with various container optionsDistribution networks can be unique to each product with finite “hard”capacity constraints of storage containers
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Customer Success Story
Bayer MaterialScience (continued)
Project ObjectivesInitial goal to reduce total inventory by 10% while improving customer service for Bayer MaterialScience NAFTA region Focus EIO process on large number of low volume stochastic products to allow planners to more efficiently focus on higher-volume, more predictable products
Why SmartOps?True multi-stage optimization across a global networkAbility to handle time-varying demand patterns to model seasonal and intermittent demand items as well as new and obsolete productsVision and product roadmapAbility to effectively deliver implementation servicesCustomer referencesPartnership and integration options with SAP
ImplementationInitial go live in February 2005 interfaced with SAP R/3 and APO
Benefits RealizedSustained inventory reduction of 12% while maintaining service level targets, exceeding the initial conservative goal of 10%
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SAP Enterprise Inventory Optimization by SmartOps
What are some example Customer benefits of an Endorsed Business Solution?
SAP-SmartOps Joint Development
– Sharing of current and future solution map – collaboration on ongoing development
– SAP testing and solution qualification of SmartOps solution
– Interfaces are supported by SAP and SmartOps as the products are updated, reducing cost and risk
SAP-SmartOps Joint Delivery
– Coordinated pre-sales, sales, and value engineering builds a clear value proposition and reduces sales/purchasing process complexity and risk
SAP-SmartOps Joint Support
– SAP provides Level 1 support and customers may use SAP OSS to manage the customer service process
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High-Level Solution Architecture
ERP
SCMICH
EM RR ATP
SOPAPO
BW
Portal and UIReports and Scorecards
SA
P S
tand
ard
Inte
rface
Data Gateway
SDLT
Data Store
Inventory Optimization
MIPO
Data Processing and Analytics
DIM SIM PIM
Dashboard
User Interface
Reports
MM PP
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High-Level Solution Architecture
Flexible, tight integration with SAP ERP, SCM, BI
ERP
SCMICH
EM RR ATP
SOPAPO
Bus. Whse (BW)
Portal and UIReports and Scorecards
SA
P S
tand
ard
Inte
rface
Data Gateway
SDLT
Data Store
Inventory Optimization
MIPO
Data Processing and Analytics
DIM SIM PIM
Reports
Dashboard
User Interface
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High-Level Solution Architecture
ERP
SCMICH
EM RR ATP
SOPAPO
Bus. Whse (BW)
Portal and UIReports and Scorecards
Data Gateway
SDLT
Data Store
Inventory Optimization
MIPO
Data Processing and Analytics
DIM SIM PIM
Reports
Dashboard
User Interface
Analytics and Optimization that leverage SAP ERP, SCM, and BI
SA
P S
tand
ard
Inte
rface
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High-Level Solution Architecture
ERP
SCMICH
EM RR ATP
SOPAPO
Bus. Whse (BW)
Portal and UIReports and Scorecards
SA
P S
tand
ard
Inte
rface
Data Loadset
Processor
SDLT
Data Store
Inventory Optimization
MIPO
Data Processing and Analytics
DIM SIM PIM
Reports
Dashboard
User Interface
Analytics, Reporting, and Exception Management in the context and UI of your choice
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Example SAP (R/3 & APO) - SmartOps Integration Scenario
SmartOpsDIM
SmartOpsSCI
SmartOpsSIM
SmartOpsMIPO
SAP APO SNP
SAP APO DP
SAP APO PPDS
SAP R/3
MM PP
Lot Sizing Application
Consensus Forecast
Supply Chain Analysis
Production Plan / Schedule
Time varying Safety Stocks
Manufacturing Run Cycles
•Current Inventory•Customer Orders•Stock Transfer Orders
Supply Plan
•Network Topology•Supply Ratios•Transportation Times
•Historical & Future Forecasts•Shipments History
Future Forecasts and Forecast Error Updates to Lead Time and Variability
Transactional PO Data
•Items•UOMs•Locations•Network Topology•Supply Ratios•Transportation Times•Dwell Times•Manufacturing Run Cycles•Manufacturing Frozen Windows•Service Level Targets•Costs•Bills of Materials•Shelf Lives•Current Inventory
•Order Processing Times•Manufacturing Times•Replenishment Frequencies•Service Times
•Historical & Future Forecasts•Shipments History
•Bills of Materials
SAP BW
Z-Ta
bles
•Recommended Deployments
•Items•UOMs•Locations•Dwell Times•Service Level Targets•Shelf Lives•Costs
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Why SmartOps Product Differentiation
Advanced demand, production, and supply analytics leverage SAP ERP, SCM and BIMulti-echelon inventory optimization enables lean supply chain postponement strategiesTotal supply chain view and operational synchronizationPowerful what-if scenario analysisEfficient management by exception workflowsIndustry data model and data validation process Flexible workflows, content, and reporting through SAP Portal orSmartOps user interfacesPreconfigured Standard Data Interfaces with SAPProven in very large scale implementationsOver $12 Billion of Inventory under management, over $2.5 Billion of customer value
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The Overall Objective for the SAP/SmartOps partnership is to enable best-run supply chains for SAP customers
+The world’s leading provider of business solutions
Solution backbone
World-class integrated solutionsPreconfigured processesIndustry-specific prepackaged solutionsReliable technology
The market leader in Inventory Optimization and Stochastic Models
EIO Expertise
Deep and broad industry knowledge and referencesxApp partner, tight integration with XI ContentImmediate impactFast implementation
Best-in-class Industry solution for Integrated SCM
Customer Value
Enable best-run supply chainsLower TCOShorter implementation projectsMinimizing riskDecreasing project costsImprove relationships
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