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SAP AG 1999 SCM / 1
Supply Chain Management in the Age of Electronic Marketplaces
Claus HeinrichMember of the Executive Board, SAP AG
SAP AG 1999 SCM / 2
Content
Evolution of Supply Chain Management
mySAP.com – Enabling Collaboration andCommunities Beyond Commodity Trading
Learning from the Financial Markets
SAP AG 1999 SCM / 3
Content
Evolution of Supply Chain Management
mySAP.com – Enabling Collaboration andCommunities Beyond Commodity Trading
Learning from the Financial Markets
SAP AG 1999 SCM / 4
Production-oriented Planning: MRP II
My Company
Managing the production processes within one manufacturing plant
SAP AG 1999 SCM / 5
Supply Chain Management
My Company
Optimizing the entire supply chain processes withinone company (considering partner‘s constraints)
SAP AG 1999 SCM / 6
Supply Chain Management : Extending the Enterprise
Concentrating on core competencies bycollaborating with partners to
search for mutual benefits
My Company
SAP AG 1999 SCM / 7
Supply Chain Management: Entering into Communities
Using electronic marketplaces to optimize the complete processes within business communities
My Company
SAP AG 1999 SCM / 8
Content
Evolution of Supply Chain Management
mySAP.com – Enabling Collaboration andCommunities Beyond Commodity Trading
Learning from the Financial Markets
SAP AG 1999 SCM / 9
Learning from the Evolution of Capital Markets
Direct TransactionDirect capital investmentRisk distribution
First Capital MarketsIncreased participationIncreased liquidityStandardizationSecuritization
ExchangesDefined procedures and
standardsServices (brokerage, financing,
hedging, derivatives)
Integrated ServicesBank processing integrationService passed on to consumerSpeed, service, perfect competition
$ $
$ $
$ $
Value - Added
Increased participation
Speed Market
overviewAdded
servicesActive mgmt
of exchange
Ease of participation
Remote access to exchanges
SAP AG 1999 SCM / 10
Learning from the Evolution of Capital Markets
$ $
Direct Transaction
Markets
Exchanges
Integration
Stocks Oil Clothing TurbinesExamples:
Commodity Standardizedproducts
Highlyconfigurable
products
Financialproducts
$ $
$ $
SAP AG 1999 SCM / 11
Influencing Factors
Minimal logistics
make tostock
engineerto order
CommodityStandardized
products
Highlyconfigurable
productsFinancialproducts
Increasing transaction complexity
Decreasing number of players
More difficult price setting
Decreasingproduct
standardization
Value chaincomplexity
SAP AG 1999 SCM / 12
Extending the Reach of Electronic Marketplaces with Information Technology
Minimal logistics
make tostock
engineerto order
I N F O R M A T I O N
M A T C H I N G
T R
A N
S A
C T
I O
N
V A
L U
E A
D D
E D
S E
R V
I C
E S
Value chaincomplexity
Decreasingproduct
standardization
SAP AG 1999 SCM / 13
Content
Evolution of Supply Chain Management
mySAP.com – Enabling Collaboration andCommunities Beyond Commodity Trading
Learning from the Financial Markets
SAP AG 1999 SCM / 14
Information
make tostock
engineerto order
I N F O R M A T I O N
Value chaincomplexity
Information offering needs to be at least as good as in other information channels (agents, telephone, catalogs…) Personalized, structured and detailed Interactive Up-to-date
Information need increases with product complexity Industry-specific content required
Decreasingproduct
standardization
Minimal logistics
SAP AG 1999 SCM / 15
Example: Environmental Health & Safety Information
Marketplace
EH&S Expert
EH&S Marketplace
Chemicals supplier BuyerProduct 1
Ingredients:E201E205E601
Product 1Ingredients:
E201E205E601
XML: List of
ingredients
XML: Material Safety Data Sheet (MSDS) Dangerous goods classification Hazardous materials classification Risk phrases / Safety phrases
MSDSMSDS
Value chaincomplexity
Electronicsignature
Reduce costs for creation of Material Safety Data Sheet
Reduce costs by selecting products with less hazardous ingredients
Reduce costs for safety procedures
Download
SAP AG 1999 SCM / 16
Matching
make tostock
engineerto order
M A T C H I N G
Value chaincomplexity
Matching exceeds matching of price and date
Matching needs to incorporate supply chain dimensions Availability, costs for
intermediate storage, taxes, ... Complex, agent-type matching
rules can continuously search for opportunities & substitutes(push & pull)
Decreasingproduct
standardization
Minimal logistics
SAP AG 1999 SCM / 17
Example: Available to Promise
ATPServer
1. Which vendors
leadtimeslead
times
Marketplace
2. Get deliverable dates Integration as close as
vendor allows
3. Generate delivery schedule Multi-vendor Calculate transportation
times
4. Propose delivery schedule & price
articlequantitylocation
desired dates
real-time
leadtimeslead
times
periodicupload
Vendor 2
Vendor 3
Vendor 1
periodicmanualinput
SAP AG 1999 SCM / 18
Demo: Tendering for Engineering Products
MarketplaceSupplier Manufacturer
Create bid invitation
Define specification
Collaborate on design
Collab. Engineerng
Collaborate on design
Review BidsReview BidsCreate bid
Tendering
Receive notification Accept bidAccept bid
Supplier directory
SAP AG 1999 SCM / 19
Transaction Processing
make tostock
engineerto order
T R
A N
S A
C T
I O
N
Value chaincomplexity
Reduce logistically complex transactions to the simple exchange of goods for cash.
Success of electronic market-places beyond MRO procurement requires sophisticated integration to back-end systems Pricing Tendering process Procurement transaction
Marketplaces need to operate in heterogeneous IT environments Open XML-based interfaces XML conversions or service
Decreasingproduct
standardization
SAP AG 1999 SCM / 20
Transaction Processing
TraditionalTransaction Processing
Marketplaces asCommunication Catalyst
BuyersSellers
BuyersSellers
EDI
(Edifact,
Odette,...)
XML
XMLXML
XML
XML
Order Order
BOM BOM
Different languages, cultures Communication standards Timezones
Defined transaction procedures Neutralized business culture Technical (XML) mapping facilitating
integration
SAP AG 1999 SCM / 21
Completing Complex Transactions Today
Transport Logistics
Letters of Credit
Foreign Trade
Financing
Currency/Country Risk
Goods/Credit Insurance
Foreign Trade
Transport
Banks
Insurance
Transport
Banks
Insurance
SAP AG 1999 SCM / 22
Requirements in Transaction Processing
Risk management Letters of credit Peripheral risks
Legal procedures Contracts Foreign trade Environmental …
Subsequent supply chain processes Transportation Intermediate
Storage Delivery
schedule of supplier
…
Financing Overall
transaction costing
Insurance Liquidity …
SAP AG 1999 SCM / 23
Solution: Marketplace Services
MarketplaceIntermediary services
Efficiency of Transaction services
Lower Transaction costs
Single service providers
Buyers
Service companies
TransportBanks Foreign TradeInsurance
Sellers
Goalto reduce transaction to exchange of
goods for cash
SAP AG 1999 SCM / 24
Value-Added Services
make tostock
engineerto order
V A
L U
E A
D D
E D
S E
R V
I C
E S
Value chaincomplexity
To increase liquidity and participation extra value-added services beyond transaction processing are added
These can focus on extending: Ease of transaction processing Risk management Financing options Outsourced processes Paid services
Service providers as marketplace drivers
Decreasingproduct
standardization
Minimal logistics
SAP AG 1999 SCM / 25
Situation Today: Supplier & Demand Match
Supplier 1 Buyer 1
Supplier 2 Buyer 2
Supplier 3 Buyer 3
Geography DemandSupply
SAP AG 1999 SCM / 26
Marketplace Service: Demand & Supply Optimization
Supplier 1
Supplier 2
Supplier 3
Electronic Marketplace
S
U
P
P
L
Y
D
E
M
A
N
D
Marketplace Services Negotiations Demand aggregation Transportation Intermediate Storage Payment Supply Chain Optimization
Buyer 1
Buyer 2
Buyer 3
SAP AG 1999 SCM / 27
Marketplace Service : Storage and Transport Management
BuyersSellers
WAREHOUSE
WAREHOUSE
WAREHOUSE
WAREHOUSE
Transport
BuyersSellers
WAREHOUSE
Transport
WAREHOUSEThrough centralization of transport services, warehouse and transport logistics can be geographically optimized when liquidity and participation is
sufficient
SAP AG 1999 SCM / 28
Marketplace Service : Financing and Risk Management
Marketplace BuyersFinancial Service companies
Banks Insurance
Sellers
Account Services including: Payment settlement Non-cash settlements Periodic clearing Internal netting Factoring Billing services Risk (Currency, credit, country) hedging Credit rating Account services (checking, interest…) Outsourced receivable/payable management
6070
Adding value in: Reducing costs Improving forecasting Improving liquidity
6070
800
SAP AG 1999 SCM / 29
Marketplace Service : Collaborative Forecasting
Demand / supply aggregation
Statistical methods
Guided negotiation process
Alert notification
Interfaces to planning systems
Information services
Marketplace
Tier 1 Suppliers Buyers
Tier 2 Suppliers
SAP AG 1999 SCM / 30
Volatility of Supply and Demand
Order Order
My CompanyKey Suppliers Key Customers
demand
supply
inventory
SAP AG 1999 SCM / 31
Collaborative Forecasting
My CompanyKey Suppliers Key Customers
Collaborative ForecastingCollaborative Forecasting
demand
supply
inventory
SAP AG 1999 SCM / 32
Use of Market‘s Liquidity
My Company
demand
supply
Supply Demand
Usage of auctions to Sell exceed inventory Cover shortage
Marketplace
Key Suppliers Key Customers
SAP AG 1999 SCM / 33
Marketplace Service : Specification Management
Collaborative engineering to align specification of productsVersion mgmt.Reconciliation
Database for product specifications open to selected partners
Reference for selling process
MarketplaceSellers Buyers
SAP AG 1999 SCM / 34
Evolution of Collaboration Processing
Bilateral Communications
Dependent on stable relationships
Multilateral
Basic matching
Value-adding services
Process integration
SAP AG 1999 SCM / 35
SAP as Software Provider for Electronic Marketplaces
Marketplace
Integrated electronic marketplaces lead the supply chain management process to a new level
B2BProcure-
ment
B2BProcure-
mentCollaborativePlanning
CollaborativePlanning
ATPATP
BWBW
Foreigntrade
Foreigntrade
CostMgmt.Cost
Mgmt.
CostMgmt.Cost
Mgmt.
FinancialsFinancials
SCMSCM
ProductLifecycle
Mgmt.
ProductLifecycle
Mgmt.
Trans-portation
Trans-portation
......
InternetSales
InternetSales
TravelTravel
PriceConfigurator
PriceConfigurator
MarketplaceInfrastructureMarketplace
Infrastructure
SAP AG 1999 SCM / 36
Supply Chain Management in the Age of Electronic Marketplaces
Claus HeinrichMember of the Executive Board, SAP AG