Improve Supply Chain Efficiencies using SAP Software

M. Raghunath, Vice President Patni Computer Systems

Typical Supply Chain Issues for Large Organizations

1. The Forecasting Accuracy Problem - typically 60% or less in CPG, food & pharma even less 2. Inventory Disposition Problem - Dead inventory accounts for 5% of overall inventory, increasing

overall supply chain costs & operations

3. Inventory Visibility & Optimization Difficulty in tracking inventory at global level and having drill

down capability for decision making

Strictly Confidential April 2007

1. The Forecasting Problem

The Need Improving process, technology, communication and Metrics

Forecast Accuracy is usually below 70% at department store level

Forecast error leads to either stock out/missed sales or high inventory level at DC
100% 75% 50% 25% 0%
Ju l Au g Se p Oc t No v De c Ja n Fe b Ma r Ap r Ma r Ap r Ma y Ju n

Get the Top Customers Right Problems in Forecast Accuracy at the top accounts creates instability in the value chains inventories and customer service.

Gain unprecedented access to Top Retailers information

Improve the business processes driving promotional and baseline forecast creation Shared KPI metrics among departments to drive continuous improvement Gain efficiencies in the forecasting process by leveraging SAP/APO technology

Current Relevance Large Customers account for a disproportionate share of the supply chain Tools available to provide visibility of POS & Inventory data on daily basis Move from gut feel to knowledge based decisions Manage politics & conflicting pulls from different stakeholders Strictly Confidential April 2007

Solution: Collaborative Process with APO DP

Analyze Past Performance Create Baseline Statistical POS Forecast Incorporate Promotional Impacts

Understand Customer Inventory Strategy

Create the Order Forecast

Collaborate with Customer

Add Business and Customer Intelligence to Order Forecast

Reach Consensus on Demand Plan

Provide Forecasts to National Demand Planning

Strictly Confidential

April 2007

POS based Forecasting Model

Business Problem Useful for Global CPG orgzns who would like to use POS (Point of Sales) based forecasting to ensure optimum inventory levels at their DC, customer DC and stores by calculating optimum order quantity. Calculation of optimum order quantity is based on applying various planning parameters such as customers inventory policies, different time lags, target coverage days etc Calculate optimum order qty, statistical POS forecast, internal matrices, etc Patni Solution Leverage statistical forecasting in DP and apply that to POS data - Algorithms based on DP macros (thus avoiding SNP) and on actual customer data (received through POS) Improved accuracy in SKU replenishment Business Value Improved efficiencies across supply chain & reduction in inventory costs Enhanced customer service and communication between the client and its customers Solution can benefit any CPG/Hi-Tech client who wants to leverage SAP SCM investment for customer based forecasting Visit Booth # 1347 & see demo of solution

Strictly Confidential

April 2007

Typical Supply Chain Issues for Large Organizations

1. The Forecasting Accuracy Problem - typically 60% or less in CPG, food & pharma even less 2. Inventory Disposition Problem - Dead inventory accounts for 5% of overall inventory, increasing

overall supply chain costs & operations

3. Inventory Visibility & Optimization Difficulty in tracking inventory at global level and having drill

down capability for decision making

Strictly Confidential April 2007

2.Patnis Inventory Optimizer

Identification of slow-moving inventory Standard SAP solution identifies slow-movers based on material movements for past x days Patnis Inventory Optimizer takes into account the Forecast Information from Planning Systems to identify slow movers Action on slow-moving inventory Standard SAP Solution does not provide mechanism for taking action on Slow Movers or Monitor the progress of the same Patnis Inventory Optimizer provides facility to take action on identified slow movers and monitor the progress of action taken Action taken is integrated with backend system

Strictly Confidential

April 2007

Inventory Optimizer Features

Features
Identify non-performing SKUs based on Profitability thresholds Implement an action plan with speed and flexibility to dispose off non-performing SKU i.e. repackaging, trashing etc.
Measure

Inventory Monitoring
Optimize

Choose, define and modify an action plan for inventory disposal

Monitor progress in the implementation of action plan for inventory disposal Reports, alerts, and notification for visibility, escalations and exceptions in the implementation of action plan Monitor Progress of Elimination Process Overview Reports for Senior Management Escalations and Alert Enablement

And Disposition Planning

Analyze

Strictly Confidential

April 2007

Typical Inventory Optimizer Architecture in SAP Environment

Strictly Confidential

April 2007

Process Flow
Role Process Step What happens? How?

Action Plan Owner

Approver

Step 1
User logs onto Portal Based on his role / profile, he views list of slow moving SKUs For all SKUs in the region, calculate diff. of Inventory levels and forecast. Compare to parameter value and tag as slow/non/fast mover Create a screen to show this list
Read Inventory data at SKU level

Step 2
User chooses to either create new action plan or view status of existing action plan and if necessary, modify the same. This includes dashboard reports for monitoring the status of

Step 3
After creation / modification of action plans, he can submit the action plan which will be sent for approval based on the workflow maintained. Workflow process is triggered when the owner submits the action plan and notification mechanism takes over to notify the approver of a pending work item for approval

Step 4
Approver approves / disapproves the action Plan. If approved, the information is stored persistently in the CAF DB, else a notification is sent to the owner regarding the disapproval Workflow process is triggered when the approver approves/ rejects the action plan and notification mechanism takes over to notify the owner of the status of the work plan

Business Logic to be developed in xApp

action plans

Enterprise Services

Read DP data at SKU level

Backend System Functional Area Strictly Confidential

SKU Inventory ERP e.g SAP R/3

Demand Plan System e.g. i2, Manugistics April 2007

Inventory Optimizer Plan Status Report

Summary Report on Plan Status

Strictly Confidential

April 2007

Thank You