Service Parts Planning (SPP)

at Intuitive Surgical, Inc.

Dheeraj Singh,

LEARNING POINTS

� Hear how Intuitive Surgical transformed its service parts planning

with the implementation of SAP SPP Service scenarios.

� Review the solution highlights including custom developments

built to meet the business requirements.

� Review Benefits and Lessons learned

Contents

• Company Overview

• Project Objectives

• Why SAP?

• Project Overview/Implementation Details

• Implementation Timeline

• Benefits

• Summary/Lessons Learned

3

Company Overview

� Founded in 1995, IPO 2000

� 2012 Financial Results

Revenue $2.18 Billion, up 24% from 2011

Net Income - $654 Million, up 33% from

2011

$2.9 Billion in cash & investments

� ~2400 employees

~1000 field based Sales and Service team

� Approximately 450,000 da Vinci®

procedures performed in 2012

� 2585 da Vinci® System installed base as of

12/31/2012

1878 United States, 416 Europe, 291 Rest of

World

� Target Markets – Urology, Gynecology,

General, Cardiac, Thoracic, Trans oral

Surgery

4

Company Overview –Recurring Revenue Model

5

Annual Worldwide Procedures

6

Uniqueness of SPP at Intuitive

� Very high number of parts and locations

� Fast replenishment requirement

� Sporadic demand

� Low turnover but high impact

� Single / limited sourcing

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Key Drivers for SPP

� Increased business volumes

� Complex Spare parts logistics

� New product introductions

� Support for older versions

� Increase in global market

ISI Confidential

Project Objectives

� Plan by exception capability

� Re-plan parts on a daily basis

� Efficiency gains in planner time

� Better future forecasting of material

needs

� Scalable for future volume

� Introduce Automation

� Better management of global inventory

locations

� Increased inventory optimization

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Why SAP SPP

� Seamless Integration with other SAP solutions- Equipment, Procedures,

field returns, material movements, financial integration

� Robust and comprehensive service parts functionality &SAP’s vision for SPP

Service and its breadth of solutions

� Scalable with future IT architecture

� Stand-alone implementation of SPP

� Effective solution for Repair Vs. Buy

� Ease of Support – leverage in house SAP expertise. Develop in house

employees to support SPP SCM - SPP

ECC

CRM BI

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11

SPP Solution Architecture

SPP Functionality – BOD

� Service network represented using Bill of Distribution

� Storage locations from ECC read as MRP areas based

locations in SPP

SPP Functionality – Master Data

• Master data and transaction data from SAP ECC

integrated using CIF

• Product Master Enhanced to default SPP relevant fields

• Material Stock Inventory interface enhanced to consider

inventory at special storage locations

• Supersession chain considered in the inventory chain to

add all older versions

• Repairable inventory recognized based on Split Valuation

in ECC

SPP Functionality – Master Data

� Custom program to auto create Procurement

Relationships that differ from ECC

� Order Interface enhanced to restrict based on order type

� Part substitution logic used in the order CIF

� Planned Independent Requirements from ECC CIF’d to

SPP as special demand

SPP Functionality – Forecasting

• Demand and Returns History captured based on

inventory movement from ECC - standard LIS

• Custom logic to calculate Return / repair forecasting –

standard SPP allows only demand forecasting

• Demand history realigned along supersession chain using

standard functionality

• Forecasting calculated based on standard models along

theBOD

• Custom enhancement done for applying index factor for

product / product groups

SPP Functionality – Forecasting

SPP Functionality – Inventory Planning

� Stocking levels – Safety stock and Economic Order

Quantity determined based on demand, lead times and

target service levels

� Normal distribution method used for the calculation of

stocking levels

� Custom enhancement to overwrite EOQ as 1 after it

was calculated for SS, to avoid rounding during

procurement

SPP Functionality – Inventory Planning

SPP Functionality – Distribution Planning

� Distribution Requirement planning for net demand

calculation

� SAP recommended BADI’s implemented for Repair vs

Buy determination

� Custom enhancement to suppress the requirement of

BOD / PDS in the Repair / Planner order proposals

� Planned Independent Requirements from ECC read as

Incoming receipts for demand not converted as orders

� Repair process integrated with QM process in ECC

� DRP (in SPP) and MRP (in ECC) ran together with out

any adverse effect

SPP Functionality – Distribution Planning

SPP Functionality – Distribution Planning

� Custom logic to create Planner Orders not

recommended by system

SPP Functionality – Deployment

� STO recommendations for stocking at child locations

� Pull methodology used with appropriate priority tiers

� Custom enhancement done to recognize In transit

inventory from ECC as incoming receipt using Fixed

Receipts

� Deployment program modified to suppress the impact of

substitution demand for low volume parts

� Priority Tiers implemented in a fashion to ensure demand

and SS at forward stocking locations are fulfilled from the

entry locations

SPP Functionality – Deployment

SPP Functionality – Deployment

SPP Functionality – Deployment

� Deployment integrated with Shipping Process in ECC

� Inventory transactions used instead for STO for sloc –

sloc movement

SPP Functionality – Deployment

� Custom logic to create Deployment STO’s not

recommended by system

SPP Functionality – UI

� Planners Worklist aids in approval and alerts for

exception handling

� Custom Notes functionality implemented to record

approval / rejection notes

� Cockpit modified to add custom stocking level fields

� Worklist Refresh functionality modified to adapt the

selection screen from current screen and applied to all

queries.

SPP Functionality – UI

Planner Worklist

SPP Functionality – UI

Custom Notes

SPP Functionality – UI

SPP Cockpit

Project Timeline

ISI Confidential

� Accurate forecasting of future demand

� Optimized service parts stocking resulting in reduced storage cost

� Reduced Procurement cost due to intelligent repair vs. buy

� Increased operation efficiency with system recommended Deployments

� Increase in parts availability

� Scalable to new customer facing locations

� Consideration of supersession resulting in utilization of old versions

How SPP added Value

ISI Confidential

Lessons Learned- What worked well

� Outstanding support from top management.

� Full engagement of key stakeholders.

� Entire project team –business and IT working on-site with close coordination.

� Verification of strategic planning results with actual production data.

� Rapid global implementation in six months.

� Flawless go live with concurrent SAP projects.

ISI Confidential

Lessons Learned

1. Significant learning curve for functional and technical IT resources that did not

have prior SPP experience

2. Testing with real-time data and realistic volumes that users are familiar with

flattens the learning curve

3. More testing and preparation needed for integration with all stakeholders

4. Ensure End users are trained well and use the solution extensively during testing

and pre-go-live.

5. SAP solution on Repair vs. Buy process is not mature and needs further

enhancements

6. SPP challenges planners’ operational and tactical abilities.

7. Understand and emphasize the impact of process re-engineering as a result of SPP

implementation.

ISI Confidential

What next?

1. Resolve issue around System not suggesting accurate deployment orders in case

stock goes below Safety stock for Parent location.

2. Fine-tune the recommended buy suggestions made by the tool-consider changing

parameters for parts based on attributes

3. Provide ability to use Procedure history & installed base as a leading indicator for

spare parts planning

4. Integrated Procurement

ISI Confidential

Keys to our success

It is safe to say that we would not be here without the support of partners

1. Westernacher- Primary Consulting partner

2. SAP

3. Other Consulting partner- DGN Technologies

ISI Confidential

Question?

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