SCOR in Action: SAP Supply Chain Performance Management

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 0 | 11 February 2011

Greg Gilbert | Supply Chain Solution Principal

Agenda

1. Why Supply Chain Performance Management2. Measurement and Metrics3 SAP S l Ch i P f M t3. SAP Supply Chain Performance Management4. Path Forward

© SAP 2010 / 1

Supply Chain Excellence is Imperative in Times of Economic Uncertainty

Supply-chain generally accounts for between 60% and 90% of all company costs1

A 2% i t i ffi i f l

Fortune-10 Company Supply-Chain Cost as % of Total Costs 2

A 2% improvement in process efficiency for supply-chain processes has 3000% - 5000% the impact of a 2% improvement in efficiency for… IT… HR… Finance1… Sales…

GM 94%

Ford 93%

Conoco 90%

Wal Mart 90%

Decreasing spending by 5% raises net income by 45%4 , increasing sales by 5% raises net income only by 5%.

Wal-Mart 90%

Chevron 88%

IBM 77%

Exxon 75%y

In 2007, US business logistics costs rose to an all time high of $1.4 trillion (10.1% of US nominal Gross Domestic Product)3

Exxon 75%

GE 63%

)1 Exclusive of Financial Services companies2 Source: Hoovers 2006 Financial Data, Supply-Chain Council 2006 SCM Benchmark data on SCM cost for discrete & process industries3 CSCMP 19th Annual State of the Logistics Industry4 ASUG / SAP benchmarking 2007

Focused initiatives in Supply Chain Management can result in 30-35% cost

2

Focused initiatives in Supply Chain Management can result in 30-35% cost reductions, liberation of working capital, and revenue increases of 3-5%

Supply Chain Performance ManagementBeing efficient is no longer enough

Supply ChainCosts

ReduceWorking Capital

Supply ChainReliability

? ? ?

Costs Working Capital Reliability

CEO / CFO

Effectiveness = ???

DESIGN SOURCE MAKE STORE MOVE SELL SERVICEInter-enterpriseend-to-end

Effectiveness = ???

Collaborative Demand and Supply Planning

T ti l

Strategic

processes

VP Supply Chain

Logistics andM f t i N t k

TacticalEfficiency =

Logistics Manager

© SAP 2010 / 3

Logistics and Fulfillment management

Manufacturing Network Planning & ExecutionExecution

SC Analyst

Supply Chain Performance ManagementImproving Supply Chain Effectiveness

Supply ChainCosts

ReduceWorking Capital

Supply ChainReliabilityCosts Working Capital Reliability

Supply ChainPerformanceManagement

CEO / CFO

Inter-enterpriseend-to-end

DESIGN SOURCE MAKE STORE MOVE SELL SERVICE

financial impactstrategic impact compliance impact

processes

Collaborative Demand and Supply Planning

T ti l

StrategicVP Supply Chain

Logistics andManufacturing Network

Tactical

Logistics Manager

© SAP 2010 / 4

Logistics and Fulfillment management

Manufacturing Network Planning & ExecutionExecution

SC Analyst

Agenda

1. Why Supply Chain Performance Management2. Measurement and Metrics3 SAP S l Ch i P f M t3. SAP Supply Chain Performance Management4. Path Forward

© SAP 2010 / 5

Why Measurement MattersDealing with Information Overload

Right measures drive right behavior

Right behavior drives performance

Pick metrics that matter

Tie metrics to action (and processes)

© SAP 2010 / 6

Foundation: SCORSupply Chain Operations Reference model

Return on S l Ch i

Return on W ki

Supply Chain M tCash to Cash Order

F lfill t Cost of GoodsPerfect Order

SCPM 1st Level KPI’s

Supply Chain Fixed Assets

Working Capital

Management Costs

Cash to Cash Cycle Time Fulfillment

Cycle Time

Cost of Goods Sold

Perfect Order Fulfillment

PLAN

SOURCE MAKE DELIVER RETURN

© SAP 2010 / 7

http://www.supply-chain.org/

Putting It All Together360º View for Better Control Along Processes

Supply Chain Effectiveness

+

P f t O d S l Ch i

CEO / CFO

Material Acquisition Cost

Planning and Finance Cost

Perfect Order Fulfillment

Supply Chain Management Cost

-+

Order Management Cost

-

VP Supply Chain

Outbound Transportation Cost

Finished Goods Warehouse Cost

CustomerService Cost

Logistics Manager

Fuel Cost Express Freight Returns Invoices Outstanding

SC Analyst

© SAP 2010 / 8

Agenda

1. Why Supply Chain Performance Management2. Measurement and Metrics3 SAP S l Ch i P f M t3. SAP Supply Chain Performance Management4. Path Forward

© SAP 2010 / 9

SAP BusinessObjectsSupply Chain Performance Management

Demo

© SAP 2010 / 10

It’s not about fancy DashboardsAppearances may be deceiving

© SAP 2010 / 11

It’s not about fancy Dashboards Need for full solutions instead

No business model, no metrics management, no content

C b il h i i i k i bl

© SAP 2010 / 12

Custom-built approach is expensive, risky, not sustainable

Consequences: Over budget, behind schedule, project failure

Beyond SCOR and Dashboards

1. Not just measurement; compare against goals andbenchmarks

2. Not just status-quo; what-if analysis to validate impact of lower level metrics against top levelimpact of lower level metrics against top-level targets

3. Eliminate searching for issues; setup automated alerts when targets not met

4. Save snapshots; create briefing books as part of standard management performance reviewsg p

© SAP 2010 / 13

Agenda

1. Why Supply Chain Performance Management2. Measurement and Metrics3 SAP S l Ch i P f M t3. SAP Supply Chain Performance Management4. Path Forward

© SAP 2010 / 14

Packaged apps: faster time to valueAt lower cost, lower project risk

Configure and extendSet up usersSet up usersPersonalizeGather requirementsDefine business questions

Time and C t S iDesign and build data model

Design and build reportsDefine metricsDesign and build dashboards

Cost Savings

Design and build analytic workflowsDefine business meta buildDefine data staging and loadingDefine scope

Configure and extendSet up usersPersonalize

Identify best practicesSelect components

PersonalizeGather requirementsDefine business questions

Packaged ApplicationBuild

© SAP 2010 / 15

g pp(like SAP BO SCPM)

Fast Time to Value

Metrics Management Functionality

SCOR based

Best practices

Self-defined

© SAP 2010 / 16

Get started with metrics that matter –Customer Centric

C2C2

Customer Centric

Forecast Accuracy

Perfect Order Fulfillment

Delivery Performance

Order Fulfillment Cycle Time

The Opportunity Improving Performance on Customer CentricThe Opportunity – Improving Performance on Customer Centric Metrics

∼ Focus: Identify the contributing factors to customer service performance∼ Benefit: Develop organizational understanding of how differentBenefit: Develop organizational understanding of how different

organizational processes impact the supply chain’s customer centric performance.Sample Business Scenario

∼ A VP of Supply Chain tracks declining delivery performance over a period of time.∼ Upon further investigation, he learns that forecast accuracy for one product

family is suspect. A d t il d l i th h th t i t t i t i th f ti∼ A detailed analysis then shows that one important input in the forecasting process- the customer forecast- has been missing for some time now.

Get started with metrics that matter –Enterprise Centric

ECEnterprise

Centric

R t R t S l Ch iReturn on Supply Chain

Assets

Return on working Capital

Supply Chain Management

CostsCash To Cash

CycleCost of Goods

Sold

Th O t it I i P f E t i C t iThe Opportunity – Improving Performance on Enterprise Centric Metrics∼ Focus: Identify the contributing factors to internal financial performance metrics∼ Benefit: Develop organizational understanding of how the supply chain’s p g g pp y

performance is contributes to the overall financial performance of the organization.

Sample Business ScenarioThe VP of Supply Chains tracks increasing supply chain costs over some time∼ The VP of Supply Chains tracks increasing supply chain costs over some time.

∼ Upon further investigation, he learns that the cost of transportation has been increasing.

∼ A further drill down into the data shows that for one customer, the sales team has been demanding air freight, impacting costs.

∼ Further analysis shows that one late shipment drove the unofficial mode change.

SAP BO SCPM Solution Summary

Receive pro-active alerts about deviations for performance targets, and better balance trade-off decisions for improved supply chain performance

Evaluateand

Improve decisions for improved supply chain performanceImprove

At any time know your operational and relatedIdentify and Analyze

At any time, know your operational and related financial performance, and understand operational drivers affecting performance

Comply with leading industry standards from performance management (SCOR), focusing on metrics that matter

Model and Understand

CCollect and collate data directly from operational

© SAP 2010 / 19

Collect processes, such as order-to-cash, from SAP- or non-SAP systems

Key Points to remember

Right measurement drives superior performance

Pick the metrics that matterPick the metrics that matter

Tie metrics to business strategy

Link metrics to business processesLink metrics to business processes

Pick a business process and go end-to-end

E d t d th l ti hi b t l h i t iEnsure everyone understands the relationship between supply chain metrics and how those metrics impact each other

Understand the root-causes of poor performance to determine corrective p poptions and simulate impact of potential solutions

© SAP 2010 / 20

Copyright 2010 SAP AGAll Rights Reserved

No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed without prior notice.

Some software products marketed by SAP AG and its distributors contain proprietary software components of other software vendors.

SAP, R/3, xApps, xApp, SAP NetWeaver, Duet, SAP Business ByDesign, ByDesign, PartnerEdge and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned and associated logos displayed are the trademarks of their respective companies. Data contained in this document serves informational purposes only. National product specifications may vary.

The information in this document is proprietary to SAP. No part of this document may be reproduced, copied, or transmitted in any form or for any purpose without the express prior written permission of SAP AG. This document is a preliminary version and not subject to your license agreement or any other agreement with SAP. This document contains only intended strategies, developments, and functionalities of the SAP® product and is not intended to be binding upon SAP to any particular course of business, product strategy, and/or development. Please note that this document is subject to change and may be changed by SAP at any time without notice. SAP assumes no responsibility for errors or omissions in this document. SAP does not warrant the accuracy or completeness of the information, text, graphics, links, or other items contained within this material. This document is provided without a warranty of any kind, either express or implied, including but not limited tothe implied warranties of merchantability, fitness for a particular purpose, or non-infringement.

SAP shall have no liability for damages of any kind including without limitation direct, special, indirect, or consequential y g y g , p , , qdamages that may result from the use of these materials. This limitation shall not apply in cases of intent or gross negligence.

The statutory liability for personal injury and defective products is not affected. SAP has no control over the information thatyou may access through the use of hot links contained in these materials and does not endorse your use of third-party Web pages nor provide any warranty whatsoever relating to third-party Web pages.

© SAP 2010 / 21

pages nor provide any warranty whatsoever relating to third party Web pages.