KP Loke Director, Supply Chain Solutions Oracle Corporation Australia / New Zealand Creating...

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KP LokeDirector, Supply Chain SolutionsOracle CorporationAustralia / New Zealand

Creating Sustainable Competitive Advantage outside your Four WallsCreating Sustainable Competitive Advantage outside your Four Walls

2

Influences Outside the 4 Walls


Local & Global Economics

Technology

Trading Partners

Business Philosophies

Politics & LegislationThe FMCG Company

Business Techniques

Longer Supply Chains

Choice

3


“The leaders in the industry are winning because they are building competitive capabilities from the “outside in”: for example, joint

value creation with retailers, demand sensing and translation, eliminating stock-outs, perfect product launches, understanding consumer behaviors

and using insights to shape demand.”

“This approach contrasts isolated “inside-out” thinking, which strives for operations excellence in functional silos across the business without

improving overall performance of the end-to-end value network.”

AMR ResearchTech Trends 2007, March 2007

4



Technology

Trading Partners


Politics & Legislation

The Demand Chain

The FMCG Company

The Delivery Chain

The Design Chain

Business Techniques


Choice


5


What are the Major Enablers ?

More Competitive

More Profitable

6

3 Key Enablers3 Key Enablers

• Mass Collaboration

•Optimisation Techniques and Leading Edge Processes

•Data Avalanche

7


News Article 27-Dec-2007

A combination of the Internet, cheap computing, Web-based software, open-source projects such as Linux and new ways of thinking about management are mixing together to dramatically drop the transaction costs of doing business outside a company's walls

The "company," as we've known it for almost a century, is about to go the way of vinyl albums, floppy disks and perked coffee

Mass Collaboration could change ways companies operate

8

Service Oriented Architecture (SOA) is Enabling Mass Collaboration

1970s - 1980sComputerProgram B

ComputerProgram A

EDI

1990s - 200X

200X & Beyond

Service Oriented Architecture (SOA)

Fine Grain Collaboration

9




•Data Avalanche

10

Data Avalanche

Radio Frequency Identifier (RFID), GPS,

Satellite Tracking

Mobile Devices/

Wireless Broadband

“Near Realtime Data”

11

Data Avalanche• State and Store Level Raw Data

Via the web.• Regional Data or store clusters.• Control / Test Store level

analysis.

Spatial/ Global Positioning Data

Granular Timely Market Data

12

GDSN provides a single point of truth for product information

Data Avalanche

Syndicated Data - Example 1

13

The ACOM has been designed to provide a national central repository for information on all prescription and non-prescription medicines, including complementary healthcare products, currently marketed in Australia. This includes details on the medicine’s active and equivalent ingredients, medication form, container type, unit of measure, poison schedule, plant part and plant preparation. Each medicine is also grouped into a virtual medicine, based on the product’s active ingredient, form and strength

Australian Catalogue of Medicines (ACOM)

Data Avalanche

Syndicated Data - Example 2

14

Data Avalanche - Management and Control

Examples of Master Data Outside the 4 Walls

ACOM

Master Data Management (MDM)Inside the 4 Walls

Site HubSite Hub

Prod. Hub

Prod. Hub

Cust. Hub

Cust. Hub

Single Source of Truth

SOA / Middleware Technologies

15

Ret

ail

DC

/ D

istr

ibu

tor

Dat

a•POS sales•Price•Store inventory•Promotional plans•Store replen. rules•Store forecasts

Ret

ail

Sto

re

Dat

a

•DC shipments•DC inventory•DC replen. rules

•Retail loyalty•AC Nielsen/ Synovate•3rd party demographic•Causal (weather,etc.)•RFID / EPC•Unstructured textO

ther

E

xter

nal

D

ata

Data Avalanche - Management and Control

Examples of Transaction Data Outside the 4 Walls

SOA / Middleware Technologies

Data sources centrally cleansed, harmonised and aggregated

“Sense & Respond” event management

Cap

ture

Man

age

An

alyz

e

Res

po

nd

Demand Signal

Repository

Inte

gra

te

Trade Promotions Management

Distribution Management

Sales and Operations Planning

Category Management

Transaction Repository Inside the 4 Walls

16

Design Chain

An Avalanche of Data - Summary

Demand Chain

Delivery Chain

Customer Hub

Customer Hub

ProductHub

ProductHub

Site HubSite Hub

Demand Signal

Repository

Demand Signal

Repository

Avalanche of Data Outside the 4 Walls

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•Data Avalanche

18


Optimisation Techniques and Leading Edge Processes

• Trade Promotions Optimisation

• Delivery Scheduling Optimisation

• Baysian-Markov Forecasting Technique

• Product Lifecycle Management

• Promotion Management

• Transportation Management

Optimisation Techniques

Leading Edge Processes

19


More Competitive

More Profitable

Mass Collaboration

Data Avalanche

Optimisation

20

• More than 80% of new products launched failed to meet their goals

• More than 100,000 new products were launched last year, but only 1% or 2% of new consumer products become $100M (USA scale) brands

• Breakthrough innovation was rare; 56% of new products launched were current products or line extensions

• In the face of the Consumer Goods companies’ failure to innovate, retailers are becoming innovators and launching new products

Source: AMR Research, “Part 2: How Can You Be Demand Driven If You Don’t Know Your Shopper?”, March 2007

The Design Chain

While growth and innovation remain a top priority for Consumer Goods companies, the success rate was poor in 2006:

21

The FMCG Company

Business Challenges and Pain Points

Longer & More Complex Supply

Chains

Relentless Demand for More Choice

Greater Legislative Compliance

•Inability to meet launch dates•Disconnected innovation activities•Poor collaboration and approval processes•No visibility into innovation projects globally•Stale project and portfolio measurements•Lack of involvement from value chain partners

•Disconnected data model•Incomplete or inaccurate specifications•Lack of global visibility and traceability•Manual review and approval process•Lack of visibility into global sourcing network•Poor external collaboration

•Lack of compliance screening•Slow manual (re)formulation/ optimisation process•Isolated packaging and labeling activities•Manual packaging/labeling collaboration& apprvl•No visibility & traceability into compliance/ quality•Disconnected systems storing formulation, compliance, nutrition, quality and safety data

Typical Pain PointsManaging innovation projects

Managing product and supplier data

Improving product formulation, packaging, labeling quality, compliance and safety

Latency and Inaccuracies in

Manual Collaboration

Disparate Data Sources. Latency and Inaccuracies in Data

Available

Lack of Specific Tools to Support Innovation

Process

22

Design Chain - Old Paradigm

MARKETING

Enterprise

Value Chain

Enterprise

Value Chain

ProjectProject

PRODUCTION

MESMESERPERP SCMSCM

PROCUREMENT

ERPERP

ExcelExcel

LEGAL & CA

AccessAccessEDMSEDMSNotesNotes

R&D (Aust)

SUPPLIERS

REGULATORY BODIES

OUTSOURCED PARTNERS

ARTWORK DESIGN

ExcelExcel

MCADMCAD

Recipe

Mgmt

Recipe

Mgmt

CADCADSpec

DB

Spec

DB

QuarkQuark AdobeAdobeCADCAD ERPERP SCMSCM

CUSTOMERS

R&D (USA) R&D

(Asia)

SubmissionFilesArtwork

FilesArtwork

Files Formulas

Design Briefs

Audits

Specifications

Package Designs

IdeasIdeasIdeasCAD

Models

Samples

23

Cas

h f

low

Time

Product Launch

Product Launch

Reduced development costs

Product LaunchProduct Launch

More rapid innovation cycles

Faster, Better, More Effective Innovation

Shorter time to market

Higher sales and margins from new products

Higher success rate of new products

Reduced risk

Objective of the Design Chain

24

Design Chain - New Paradigm

Mass Collaboration

Data Avalanche

Optimisation

25

The H.J. Heinz Company

CUSTOMER PERSPECTIVE“Oracle Agile Prodika has greatly improved our raw material, supplier, and product intelligence. Information which used to take weeks to gather is now a natural extension of our day-to-day business processes." Deb Crosby, Chief Quality Officer

COMPANY OVERVIEW H. J. Heinz Company manufactures and markets a line of

processed food products throughout the world. The Company’s principal products include ketchup, condiments and sauces, frozen food, soups, beans and pasta meals, infant food and other processed food products, which are sold to consumers, as well as foodservice and institutional customers.

Revenues (2006): $9.0 Billion; employees (2006): 33,000

CHALLENGES/OPPORTUNITIES Proliferation of specifications (from finished products to

ingredients) Limited visibility and security with data stored in multiple

manual systems Inconsistent specification management process Inconsistent and slow new product introduction process

SOLUTIONS Oracle Agile Product Lifecycle Management for Process Oracle Agile Product Data Management for Process Oracle Agile Formulation and Compliance for Process Oracle Agile Product Supplier Collaboration for Process Oracle Agile New Product Development Launched Project Viper in 2000 Implemented in over 175 sites, in 21 languages/cultures,

with over 4,500 registered users

RESULTS• Simplification and global standardisation

of business processes• Global information visibility with one single “version of the truth” (data accessible in seconds vs. weeks)

• SKU rationalisation and reduction of number of specifications (30% reduction in SKUs)

• Faster new product introduction cycles (reduced labeling cycle from 45 to 7 days)

• Improved supplier collaboration

26

27

McDonald’s

CUSTOMER PERSPECTIVE“Our service provider for Merlin had to understand the technology needs; but more importantly, understand how the information would be used to support business processes and solve problems. Oracle Prodika understood this expectation without being asked … Other potential vendors talked about technology and functionality. Oracle Prodika talked to us about process optimisation.”Catherine Adams, Corporate VP, Worldwide Quality, Food Safety and Nutrition

COMPANY OVERVIEW McDonald’s Corporation primarily franchises and operates

restaurants in the food service industry. These restaurants serve a value-priced menu in more than 100 countries around the world. All restaurants are operated either by the Company, by franchisees or by affiliates and developmental licensees operating under license agreements.

Revenues (2006): $21.6 Billion; employees (2006): 465,000

CHALLENGES/OPPORTUNITIES Islands of information and disconnected systems Inconsistent processes across regions Paper-based menu management, product management and

supplier management

SOLUTIONS Oracle Agile Product Lifecycle Management for Process

Oracle Agile Product Data Management for Process OracleAgile Formulation and Compliance for Process Oracle Agile Product Supplier Collaboration for Process Oracle Agile New Product Development and Introduction

for Process Launched Project Merlin in 2005 Implemented in North America, Europe and Australia with over

400 registered users

RESULTS

• Global information visibility• Improved communication and

coordination across regions and functions, and with suppliers

• Improved ability to design quality into new products, and manage conformance to design

• Streamlined new product development process

28


More Competitive

More Profitable

Mass Collaboration

Data Avalanche

Optimisation

29

Demand Driven leaders typically have:• 15% less inventory• 17% stronger order fulfillment• 35% shorter cash-to-cash cycle times

0

50

100

150

200

250

300

350

Strong Weak

Perfect Order Inventory

Cash-to-Cash SCM Costs

Source: AMR Benchmark Analytix

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Complete order

fill rate

% Gross margin % Customer

retention

Laggard

Industry norm

Best-in-class

Cur

rent

% p

erfo

rman

ce

Performance metric© 2004 AberdeenGroup

S&OP leaders outperform their competitors:• Improved order fill rates• Increased gross margin• Higher customer retention

The Demand Chain

Which translates to:•60% better profit margins •65% better EPS •2-3X the ROA

30

The FMCG Company



Chains


Typical Pain Points

Need Higher Service Levels at Lower Cost

• Stock outs & non-availability

• Excessive Inventory

• Low Service Levels

• Promotion’s negative ROI

• Loss of Revenue

• New Product Introduction

Failure

31

Sense Demand “Real-Time”

• Demand changes get detected real-time and are instantly reflected to all constituents and exceptions are triggered automatically

20th Century Fox processes real time updates from 15,000+ stores daily

Incremental forecasting

Capture demand more frequently, closer to the point of consumption (eg POS data)

Capture demand and forecast at more granular level (store, shelf, attributes, product characteristics)

Achieve consensus demand number more quickly by involving all parties (including customers0

Quickly identify and react to demand changes and exceptions

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Improve Forecast Accuracy

• Bayesian mix modeling• 15 model library

• Auto-regressive moving average (ARMA)• Regression integrated winters• Logistic and logarithmic models• Ridge regression, Markov chain regression• Intermittent regression

• Unlimited causal factors• Seasonality, weather, market indicators• Base + price + multi-event lift decomposition

Historical dataBayesian Estimator

Forecast

Estimator’s models

Multiple causal factors

Bayesian combined model

Superior Bayesian-Markov Analytics

• Promotion effects• Cross-product and cross-location effects• Pre and post event

• Automatic outlier detection• Trend long, short, dampening• Missing data interpolation• Shape modeling and auto-correction• Regime change• Fit and forecast validation

33

Promotion Optimisation

• Optimisation option automates promotion selection

• User-defined boundaries for allowable promotions

• Optimisation on profit, revenue, volume or budget funds

• Use granular lift analytics• Save account manager time over manual what-

if analysis

• Analytics output always visible• Volume and profitability of future promotions

• Impact of varying promotional tactics and price points

• Manufacturer and customer profitability

• Lift decomposed to identify cannibalisation, pantry loading, and halo effect

Competitiveswitching

Long termgrowth

Pre and Postpromotion

effect

Cross productcannibalisation

BaselineAn

Avalanche of Data

An Avalanche

of Data

34

Demand Mgmt with Partner Collaboration

Partner Inputs: XML,EDI or Manual

Partner Forecast Metrics

• Improve demand visibility with customer collaboration

• Tailor worksheets to specific customer needs

• Worksheet can be attached to a task

• Direct alerts via application or email• Automate internal notification on

customer input• Field-level security tied to customer

access privileges

Collaborate with customers and measure impacts

35

Case Study

……………

The Solution

The Result

An Avalanche

of Data

An Avalanche

of Data

36

Dramatic increase in forecast accuracy“Six months after implementing Demantra we have seen a dramatic increase in forecast accuracy. This resulted in an immediate 20% inventory reduction.”

– Wendy Malloy, Inventory Planning Manager, Wilton Industries

45% increase in accuracy in 6 weeks

“From an isolated process to a full Demantra solution - within six weeks of going live

our ‘A-items’ improved 45% in accuracy. Today we load daily bookings against the

forecasted plan and feed production management to align back-end production

based on the true feed of real-time demand.”

– Sagi Srinivas, Director, Supply Chain Systems, BiosenseWebster

Other Case Studies

We see the Demantra product doing far more than just trade promotions. The ability to have Trade Promotion Management really be embedded with the demand plan and integrated post-analysis, all in one tool -- that is the one key that no other manufacturer of this type of product could accomplish.

- Larry Rencken, Chief Information Officer, Welch’s

Integrated Forecasting and Promotions Planning

37


More Competitive

More Profitable

Mass Collaboration

Data Avalanche

Optimisation

38

The Delivery Chain

28.9%

42.1%

13.2% 13.2%

2.6%

0%

10%

20%

30%

40%

50%%

of

Co

mp

an

ies

Re

sear

ched

1-5% 6-10% 11-20% 21-30% x > 30%

Companies with Annual Transportation Spend > $10 Million Source: The Logistics Institute at Georgia Tech

Savings Opportunity

Improvements in the

delivery chain can save

between 5-25% of cost

39

The FMCG Company



Need Higher Service Levels at Lower Cost

Greater Legislative Compliance

Typical Pain Points•Increase Demand for accurate delivery status and cost information

•Demands for shorter cycle times and more frequent deliveries

•Market pressures to reduce delivered cost

•Tightening freight capacities and increasing accessorial costs

•Increasing complexity and lengthening supply chain

•Increasing Regulatory Compliance


Chains

- Container and trailer optimisation & configuration- Shipment assignment, stringing & continuous moves- Fleet sizing & assignment (execution, strategic)

- International shipping- Facility resource balancing- Bid collaboration and

optimisation

Support a Wide Range of Optimisation Needs

• Route

• Mode• Route

• ModeOptimisedDecisionsOptimisedDecisions

• Timing

• Equipment

• Timing

• Equipment

• Multi-Leg Multi-Mode Consolidation

• Common Leg Consolidation

• Multi Stop Consolidation

• Multi-Tier Networks

• LTL Consolidation

• Continuous Moves

Algorithms

• Consolidation

• Service Provider

• Consolidation

• Service Provider

Engines& Rules

• Service Time Calculation

• 3-Dimensional Container Optimisation

• Itineraries & Profiles

• Carrier Capacity

• Throughput

• Rating

Shipment Planning and OptimisationMaximise Fulfillment Service, Minimise Transportation Costs

41

Carrier Bid OptimisationSecure Best Value from Service Providers

Oracle Global LogisticsOracle Global Logistics

Load ExecutionEnvironment

•Prepare bids using real history, forecasts, and actual orders

•Electronically sendout bid packages

•Optimise results and send out awards

•Automatically loadthe winning contractinto the execution environment

Your Company

Receive Demand

• Orders• Lane Forecasts Bid

Initiation

Quotes

Award Notice

Selected Carrier

Optimised AwardRecommendation

Bid Packet

QuoteAnalysis

Accept

Contract

Transportation Service Providers

42

Retailer 1

Retailer 2

(Bangkok) (Sydney)OEMPlant

PortPort PortPort

Alert! … Delayed in customs

Automated Action …Split shipment of good

Alert! … Dealer msg “Partial Ship”

Automated Action … 1) Order and routing change2) Expedite replenishment order

• Receive Proactive Notifications and Rapidly Adjust to Unforeseen Delays

• Utilise Event Management to Trigger Automated “Corrective Action” Flows

Supply Chain Event Management

DataAvalanche

DataAvalanche

43

Intelligent Truck Scheduling and Regulatory Compliance

Break Start Time

Break Completion Time (Break Duration)

Data Avalanche

Data Avalanche

44

Kraft Foods• Company Overview

• Kraft Foods is the world’s second largest food and beverage company with 2006 net revenues of $34 billion. Kraft is headquartered in Northfield, Illinois and has 104,000 employees and operations in 72 countries.

• What is the business problem we are solving?• For daily shipment planning, Kraft utilises OTM's direct planning, bulk

planning, shipment pooling, carrier commitments, carrier capacity and shipment tendering/execution.

• Kraft plans to gradually bring up 180 planning sites on OTM throughout 2008.• What components of OTM are we implementing?

• Freight Financials (Live in August 2006)• Cooperative Routing (Live in January 2007)• Transportation Planning and Execution( Live on Sept 21, 2007)

• Future plans• Deploy transportation planning & execution to all 180 sites (2008)• Cooperative Routing Execution (2008)• Dock Scheduling (2008) • Other potential projects include ocean/vessel, procurement, planning and

financials in Europe

45

COMPANY OVERVIEW• €37B international retailer based in Cheshunt Hertfordshire, U.K.• 2,365 total stores throughout Europe and Asia selling 50K product

lines (food retailing comprises over 2,000 stores)• 367,000 total employees and 5 years of consecutive growth

CHALLENGES/OPPORTUNITIES

• Non-invasively integrate logistics management and key support systems to minimise both internal and external IT resources

• Utilise factory gate pricing to reduce costs and gain complete controlof inventory from supplier to store shelf for 6,000 daily shipments (70% of inbound freight) including the tracking of costs and performance service levels, order booking, and support for financial settlement

• Integrate demand (from order management system) and status (from warehouse management system) with transportation logistics

ORACLE SOLUTIONS

• New deployment of Oracle Transportation Management solution• Utilises Oracle E-Business Suite for Financials and Procurement,

PeopleSoft Enterprise for HR, and Oracle Retail (Retek) for Merchandising

RESULTS

• Improved on-time deliveries by 14%

• Supports 24 / 7 shipping operation with 9 planners

• Reduced cost per case by 10-15% (£500M in distribution costs)

PROJECT HIGHLIGHTS

• Automated 95% of all inbound scheduling resulting in improved availability, reduced stockholding, and increased vehicle / trip utilisation

• Automatically optimises loads & manages communication with carriers

• Eliminated EDI by enabling carriers and suppliers direct entry of shipment details (e.g., appointment, pick-up, out-gate times)

April 2007

46

COMPANY OVERVIEW

• AUD$4 B provider of integrated transportation & logistics services, based in Melbourne (Australia)

• Maintains a network of 450+ sites throughout the Australasian region and managed by 20,000 employees

• Utilise Oracle Transportation Management as a key component of their industry-focused Autologistics and Transport Operations Management (ATOM) and Energy solutions.

RESULTS

• Increased freight managed in system by 400% in one year

• Supports multiple industries with a single instance

• Improved on-time delivery and customer satisfaction

• Streamlined operational processes with improved collaboration

• Enhanced supply chain efficiencies resulting in cost reductions

• Improved in-transit shipment visibility for better decision-making

• Supports industry-specific requirements for automotive, consumer packaged goods, and retail

47



Technology


Politics & Legislation

The FMCG Company

Trading Partners

More Competitive

More Profitable

The Demand Chain

The Delivery Chain

The Design Chain

Business Techniques


Choice


Mass Collaboration

Data Avalanche

Optimisation

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KP Loke Director, Supply Chain Solutions Oracle Corporation Australia / New Zealand Creating...

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