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Realizing the Value of anRealizing the Value of ane-Enabled Supply Chaine-Enabled Supply Chain
Robert PyzdrowskiRR DonnelleyOctober, 2003
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Generating Value And ROI From papiNet
papiNet offers the opportunity to improve the entire supply chain
papiNet is an enabler for collaboration, information sharing, process improvement and shared decision making
A critical mass of participants across the value chain is needed in order to generate significant value
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Merchandisers & Publishers Paper Suppliers Printers
Improved total cost of ownership Supports better decision making
through feedback & transparency Emulate JIT and best practices
used in merchandising supply chain
Easier to manage paper across multiple printers
Clear view of demand for better forecasting & planning
Consolidate shipments Less storage space Decreased inventory Enhanced data collection for
manufacturing & materials optimization
Consistent inputs Greater inventory turns and less
storage space Better equipment effectiveness Enhanced data collection for
manufacturing & materials optimization
Universal Benefits
Lower working capital requirements Increased consistency throughout the process Lower inventory Lower transaction costs Reduced staffing needs for order and process management Better customer service & reporting Global standards enhances ability to service global customers
Collaboration Across The Supply Chain Benefits All Parties
The Network Effect: the payoff and benefit of using a system increases exponentially as the number of users increases
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Too many supply chain managers
Poorly coordinated and non-standardized communications and work flows
Excessive inventory at printer and/or manufacturer
Mediocre returns on invested capital in paper and printing
Investor pessimism results in low stock prices and P/E ratio
Third party intervention: Paper brokers, dot-com’s
Customer distrust of mills and printers
Slow adoption of XML and e-business links
Declining pace of technological innovations compared to 1970’s and 1980’s
Growth rate at 1% and declining
Lack of collaboration and shared decision making
These problems will not be solved through further industry consolidation
The Merchandiser/Publishing, Paper & Print Supply Chain Is Not Optimized Today
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Product Attributes Planning
Request ForQuotation
Availability Purchase Order Order Confirmation Call-Off Order Status Inventory Status
ProductQuality
Usage Inventory
Change Product
Performance
Delivery Message Goods Receipt Invoice
Credit/Debit Note Business Acknowledgement Information Request Complaint Complaint Request
Plan Make Deliver Source Utility
papiNet Provides Standards For Communication Between Partners
Standards are fundamental to an efficient supply chain: Enable timely, efficient and effective communications Avoid costly non-value added translation activities Enable fast and widespread connectivity Avoid “one-off”custom connections
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Transactional Efficiency
Trim waste
Web breaks Process delays
Yield Excess freight
Late Deliveries
Transit damage
Multiple handling
End-to-end cycle-time
Warehouse fees
Data Critical to Making Improvements:
Press delays
Delays
Press damage
Inventory turns
Strip wasteDamage
Perceived Value
Intrinsic Value
The Supply Chain “Iceberg”
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E-Business Link Perspective Collaboration Perspective
Approach: “Efficient and cost effective transactions”
“An efficient and cost effective supply chain”
Scope: Transaction between trading partners
The entire supply chain
Objectives: Transactional efficiency Operational improvement
ROI: Break-even (at best) Positive
Impact: Enables reduced admin and systems cost
Enables reduced operating costs, improved quality, throughout and working capital
Potential $ Return:
Tens-hundreds of thousands/company
Tens-hundreds of millions/company
How viewed: An IT project A margin improvement project and strategic enabler for supply chain improvements
Different Perspectives Lead To Different Viewpoints Of The Value Of papiNet
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Data Collection:
• Merchandisers & publishers
• Printers• Paper
Companies
Data Collection:
• Merchandisers & publishers
• Printers• Paper
Companies
papiNet is the Foundation…
papiNet Is An Enabler For Collaboration And Creating Value
… for enabling collaboration that will generate value within the supply chain. Supply chain partners can
leverage data to drive improvement and eliminate waste
DataTransmission
(XML)
DataTransmission
(XML)
Specifications:
• PapiNet Messages
• Common Definitions
• Standards
Specifications:
• PapiNet Messages
• Common Definitions
• Standards
Implement improvement
projects
Implement improvement
projects
Identifyimprovement opportunities
and select improvement
projects
Identifyimprovement opportunities
and select improvement
projects
Data Review and AnalysisData Review and Analysis
DataAggregation
DataAggregation
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To achieve maximum ROI potential, data must be:
•Collected
•Analyzed
•Used to inform and identify improvement opportunities
Collaboration Is The Key To Value Creation
The opportunities must be acted upon to deliver value!
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Project Example: Increase Average Roll Diameter To Reduce Total Cost
Increased roll diameter reduces waste, number of SKU’s, and material handling
1. Establish papiNet links between printer & paper supplier
2. Co-develop scorecard and feedback metrics
3. Use data results to increase the average roll diameter and reduce total cost
1997
Jan-00
Apr-00
Jul-00
Oct-00
Jan-01
Apr-01
Jul-01
Oct-01
Jan-02
Apr-02
Jul-02
Ro
ll D
iam
eter
(In
ches
)
1111
Project Example: Lower Number Of Web Breaks To Reduce Waste
1. Use scorecard and feedback metrics to measure paper performance on press
2. Paper supplier used data to change how paper was produced
3. Resulting paper ran better on press, reducing waste, delays and web break penalty charges
Web breaks result in paper waste, delays and web break penalty charges
Mill "X" Offset Break Ratios by Month Printed: 2002-2003
Feb Apr Jun Aug Oct Dec Feb Apr Jun
Bre
ak
s/1
00
Ro
lls
Press
Unk-Press
Unk-Paper
Paper
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A 20% reduction in inventories would cover the annual dividend payout for a major paper company
Four large paper companies have a total of over $5 billion tied up in inventory
One large printer has approximately 15% of manufacturing floor space consumed by paper storage – the equivalent of 3 large plants
One large paper company reports recovering only a small portion of the millions of dollars of annual freight damage
Merchandisers and publishers can free-up cash flow to startup or acquire new properties
The Opportunities Are Significant For All Parties Within The Supply Chain
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Use E-Business as an opportunity to review your entire supply chain
Recognize that papiNet is an industry-wide opportunity to lower costs
Position papiNet as a partnership with your key trading partners to improve the supply chain– include suppliers, publishers, merchants, printers, component vendors
Develop a vision of a papiNet-enhanced future business model that includes your trading partners
Sell the project as essential to this future model of doing business
How Do I Get A papiNet Project Started?
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Next Steps:
Mobilize the “critical few” major players
The “critical few” establish timelines for implementation and expectations of their trading partners
Confirm message selection and priority with major trading partners
Focus on collaboration, not just implementing papiNet links
There Must Be A Critical Mass Of Users To Improve The Efficiency Of The Supply Chain
The IT cost of implementation will not be justified by the transactional
efficiency alone. Participants will only generate significant ROI through
collaboration to improve supply chain efficiency.
Enabling Supply Chain Collaboration
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Appendix
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“papiNet is the global initiative to develop, maintain and promote the implementation of standard electronic transaction standards to facilitate the flow of information and facilitate computer to computer communications among all parties engaged in the buying, selling, and distribution of forest, paper and wood products. The set of standards is referred to as the papiNet standard. The standards include common terminology and standard business documents (e.g. purchase orders, shipping notices, and invoices).
The goals are to improve the reach and richness of communication throughout the supply chain, increase efficiencies in transactions and marketplace activities, and to support interoperability among trading partners. The papiNet standards are open and freely available.”
Source: papiNet website
papiNet Mission & Goals
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Needs for and Benefits of Standards
"The Internet offers new opportunities for efficient and cost-effective execution of transactions. It is a truly global infrastructure available to all. It is also more cost-effective than the value-added networks (VANs) that EDI is built upon. “
"The papiNet standard is open, free, and easy to adopt, providing common benefits to supply chain participants. With the papiNet standard, companies will no longer need to negotiate and agree on data definitions and formats with each trading partner, a costly and arduous task. Instead, papiNet provides a common messaging interface to enable supply chain partners to have:
• a simplified process for dealing with multiple suppliers and customers through use of common business solutions.
• reduced manual work, resulting in fewer entry errors and improved supply chain management (e.g. replenishment, VMI).
• more "real-time" exchange of information and greater electronic information availability.
• the opportunity to participate in e-business transactions, irrespective of company size or technical expertise. "
Source: papiNet website
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“A company's demand management, direct material procurement, logistics, part management and order fulfillment processes are closely linked to supply chain partners. Value is created by close integration of these processes among the company’s suppliers, logistics & service providers and customers. Collaborative processes that provide visibility to forecasts, inventory levels, order execution, and shipments between trading partners achieve this. The collaborative process is hampered by lack of industry-wide processes and data standards that enable system-to-system automation of core processes…..”
“In today’s competitive world, well-oiled and responsive extended supply chains are increasingly becoming a foundation for competitive advantage. No longer can companies restrict their focus on increasing supply chain efficiencies within the four walls of the enterprise. The supply chain that extends beyond a company’s organizational boundaries increasingly determines its effectiveness. There is an increasing dependence on "collaboration" as key to bridging the boundaries – not only within the enterprise, but also between enterprises and across industry boundaries.”
“Adoption of RosettaNet standards could well be a critical factor in bringing the high technology dream of dynamic value chain management to fruition.”
Source: RosettaNet website, Implementing RosettaNet E- Business Standards for Greater Supply Chain Collaboration and Efficiency
The RosettaNet Value Proposition
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Mill Mill WarehouseWarehouse Train/Truck Train/Truck
Warehouse
Warehouse
Warehouse
Warehouse PressPress
Warehouse
Warehouse Printer DockPrinter Dock
Distribution Center
Distribution CenterTruckTruck
Warehouse
WarehouseBindBind
Customer/ConsumerCustomer/Consumer
W,Q I,W,C,H W,C,Q,H I,W,C,H
I,W,C,H W,C,Q
I,C,H
I,W,H W,H
C,Q I,C,H Q,H
C
Improvement Opportunities:
I: Inventory/Working Capital
W: Waste
C: Cycle-time
Q: Quality
H: Multiple handling
The Print Supply Chain – Improvement Opportunities
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The Need for Collaboration
"90% of enterprises that fail to provide visibility and supply chain automation by 2004 will lose their status as preferred suppliers."
Karen Peterson, Director, Gartner Inc., August 2002
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51
29
0 10 20 30 40 50 60
Production
Short Term
Total papiNet Trading Partner Implementations: In Production & Short Term Plans
Status:
Implementation benchmark survey completed November 2002
80 trading partners engaged in implementation
2003 goal
– All 80 in production
– 50 more in testing
Quarterly surveys throughout 2003
Comments:Basic messages are used most
frequently including Delivery Message, Purchase Order, Invoice, Order Confirmation, Business Acknowledgement and Goods Receipt
There is still a long way to go on Basic messages before other messages will be implemented
Europe is moving faster than North America
Implementation Status
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Population and paper consumption per capita in 2001
Source: PPI Annual Review 2002
Western EuropeChina
Other Asian countries
Japan
Latin America
Africa
Oceania
Worldwide
North America
Paper consumption, kg per capita: 52
Other Europe
303
527
316
34031392
201
15
2456
127
242
148
30
35
1285
807
29
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Populations, millions: 6,090
Market Size
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Getting a Project Started
Use E-Business as an opportunity to review your entire supply chain Recognize that papiNet is an industry-wide opportunity to lower costs Position papiNet as a partnership with key trading partners to improve the supply
chain Include suppliers, publishers, merchants, printers, component vendors Develop a vision of a papiNet-enhanced future business model that includes your
trading partners Sell the project as essential to this future model of doing business Partner with Solution Providers
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Other Industry Benefits From Standards
Electrical safety
Quality systems
Internet
Electronics Supply Chain
Paper Supply Chain
UL (Underwriters Labs)
ISO
HTML
RosettaNet
papiNet
Industry Standard
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Message Priorities
PublisherPaper
Supplier PrinterCommon to 2 or More
1 Availability Y2 Business Acknowledgement Y Y X X3 Call-off4 Complaint Y Y Y5 Complaint Response Y Y Y6 Credit/Debit Memo Y7 Delivery X X X X8 Goods Receipt X X X9 Information Request Y
10 Inventory Change X11 Inventory Status X X X12 Invoice X X X13 Order Confirmation X X X14 Order Status Y15 Planning X Y Y16 Product Attributes X17 Product Performance X18 Product Quality Y19 Purchase Order X X X20 RFQ Y21 RFQ Response22 Usage X
Top Priority
Next Priority