SAP PI Proposal (Use To Prepare Proposal)

SAP ERP for the
Dairy Industry
Challenges, Strategies, and Benefits

The Solution

The Solution
The Dairy Industry Ecosystem
Farmer
Supplier
Dairy
Collect
Raw Milk
Tank
Truck
Dairy
Production
Raw Material, Packaging, Service

Add. Purchase of Raw Material / Raw Milk
Retailer
Distr. Centers
Wholesaler
Broker
Sell Raw Material and Ingredients
Cooperatives
SAP AG 2006
Authorities
External Laboratories
Dairy Companies Often Have

the Right Focus and the Right Strategies
Protect and
enhance
revenue
YOUR
FOCUS
Improve margins
Increase Shareholder Value
Drive for lower costs
Increase Revenue and Profit Margins
Get closer to the consumer
Operational Excellence
Improve
time-to-market
Product Leadership
Enhance operational efficiency
Improve Customer Satisfaction
SAP AG 2006
Business STRATEGY
YOUR FOCUS
Increase Shareholder Value
Increase Revenue and Profit Margins
Cost Leadership
Product Leadership
Improve Customer Satisfaction
But Mostly They Lack the Ability to Execute

Often employees cannot execute the companys business
strategy because the business platform is
COMPLICATED TO OPERATE
Complex and broken process flows
Incomplete or hidden information
DIFFICULT TO CONTROL
Lack of visibility
Lack of traceability
CHALLENGING TO CHANGE
Multiple costly integration points
Redundant and inconsistent data
A business enabler is required to

help the organization refocus on
business strategies!
SAP AG 2006
Business STRATEGY
Business
Enabler
Ability to EXECUTE
Market Forces and Business Needs

Market Forces
Retailer power (Wal-Mart effect)

Consumer concerns about food safety;
media attention
Increased legislation and regulations
around food safety by FDA and other
authorities (e.g., EU Dir. 178/2002,
the U.S. Bioterrorism Act of 2002)
Changing consumer demands due to
demographics and trends
Shorter product life cycles
Extreme price pressure and margin
erosion
Restrictive consumer spending pattern
Market consolidation (globalization, M&As)
Increasing competition
Emerging private labels
New technologies reshaping the industry
SAP AG 2006
Resulting Key Challenges

Develop new products faster
and more effectively
Optimize supply chain
Increase efficiency in
procurement
Optimize manufacturing
Ensure food safety and
regulatory compliance
Improve sales efficiency
Develop New Products Faster and More Effectively

Challenges
Strategies
Adapt to ever-changing
consumer tastes and

requirements
Develop product efficiently
Address increased demands
for new products
Enable collaborative
engineering
Consolidate product
development data and

documents
Reduce development effort
and time-to-market
SAP can help you

Integrate all product-related
information
Reduce data redundancy and
inconsistency
Integrate into manufacturing
process
SAP AG 2006
Benefits
Faster development by
creating reusable product

specifications
Reduced time-to-market
Ensured competitive
advantage
Optimize Supply Chain

Challenges
Strategies
Decrease process costs
Reduce costs
Create operational efficiencies
Streamline supply chain
and supply chain

transparency
Manage shelf-life-based
picking and distribution
processes
Improve supply chain control
Gain more supply chain
visibility
Ensure accurate and timely
shipments
Avoid out-of-stocks
SAP can help you

Optimize distribution
processes
excellence
Lower capital commitment
Improve asset utilization
Reduced operating costs
Fully integrate logistics
Higher customer satisfaction
Shorten order-to-delivery
cycles
SAP AG 2006
Improved operations
Optimize end-to-end planning
management, including
transportation and warehouse
and inventory management
Benefits
Increase Efficiency in Procurement

Challenges
Strategies
Cope with ever-changing
quantity and quality of the raw

milk
Manage complex payment
conditions
Cope with seasonal
fluctuation
Reduce costs
Streamline processes
Gain more visibility and
transparency
Improve relationship with
producers
and transparency
SAP can help you

Set up integrated and flexible
processes for procurement

Streamline raw milk collection
and reception
Ensure integrated quality
management
Track batches
SAP AG 2006
Benefits
Increased demand planning
accuracy
Consistent internal and
external procurement
reporting
Integrated processes
Optimize Manufacturing
Challenges
Strategies
Base plans on a non-
standardized raw material

Define optimal product mix
and transparency
Optimize production
Maximize raw material
utilization
Increase demand planning
accuracy
Streamline processes
Gain more visibility and
transparency
SAP can help you

Set up integrated and flexible
processes for manufacturing

Monitor raw material
utilization and losses

Ensure integrated quality
management
Track batches
SAP AG 2006
Benefits
Improved asset utilization
Increased profitability of
produced product mix

Consistent cross-stages
monitoring
Integrated processes
Ensure Food Safety and Regulatory Compliance

Challenges
Strategies
Align with governmental
regulations (EU 178/2002, the

U.S. Bioterrorism Act of 2002,
import/export)
Enable fast, effective product
recalls
Track and trace from cow to
Support mid- and long-term
company success by ensuring

regulatory compliance
Set efficient processes in
place to enable traceability

Allow targeted product recalls
to minimize costs
consumer
SAP can help you

Track, monitor, and trace
batches and inventory

Streamline procurement,
production, and sales

Manage sales returns
Enable targeted product
recalls
SAP AG 2006
Benefits
Reduced penalty risk
Decreased risk of food-safety
compensation payments
Reduced risk of bad
reputation
Lower operating costs
Improve Sales Efficiency

Challenges
Strategies
Protect market share
Meet increased service level
expectations of customer
Get visibility in the sales
process
Manage quality-based price
determination for raw material

sales
SAP can help you

Plan, track, control, and
optimize sales performance

Expand service processes
Strengthen collaboration with
partners and key customers

Track indirect sales and
customers
Ensure correct handling of
rebates
SAP AG 2006
Obtain first-hand information
about the market

Optimize process settlement
in sales
Increase customer service
offerings
Increase customer
satisfaction
Benefits
Higher sales volume
Better account retention
Closer customer relationship
Optimal sales force operation
Higher customer satisfaction

The Solution
SAP ERP packaged solution for the dairy industry

Description
Focuses on key business processes that create a baseline for future growth
Delivers immediate benefits by solving the need for system heterogeneity
Enables significant business process automation
Business
Objectives
Analyze,
Plan, and
Develop
Procure
Manufacture
Define business
strategy and
goals
Realize savings
in aggregate
purchasing
Improve
manufacturing
efficiency
Understand
company
performance and
profitability
Improve
purchasing
efficiency
Ensure tracking
and traceability
Ensure quality
management in
manufacturing
process
Market
and Sell
Improve marketing
effectiveness
Increase sales
effectiveness
Deliver and
Service
Establish closer
contact with
customer
Enhance control
over delivery
process
Complete logistical and financial integration
Key Performance Indicators
SAP AG 2006
Gross Profit/Total Net Sales
Order Fulfillment Rate
Demand Forecast Accuracy
Raw Material Utilization and Losses
Inventory Turns
Warehousing/Distribution Costs
SAP ERP packaged solution for the dairy industry

Suppliers &
Partners
Analyze, Plan & Develop
Procure
Manufacture
Market & Sell
Deliver & Service
Sourcing & Procurement

Milk Procurement from Producer
Additional Raw Material Procurement
Procure to Stock
Internal Procurement
Product
Development
Recipe Management
Manufacturing
Dairy Production
Planning
Dairy Process Control
Sell & Deliver
Sales Order Processing
Raw Material Sales
Returns
Operational End-to-End Scenarios
Traceability & Food Safety
Inventory Management
Quality Management
Enterprise Management & Support
Financials
Financial Accounting
Cash Management
Asset Management
Controlling
Standard Cost & Profit Center

Accounting
SAP AG 2006
Product Cost Planning
CO-PA for Consumer Products
Cost Object Controlling
Customers (e.g.
Retailers) &
Channel
Partners
Generic Food Scenarios

Suppliers &
Partners
Analyze, Plan & Develop
Procure
Manufacture
Market & Sell
Deliver & Service

Procure to Stock
Sell & Deliver

Returns
Quality Management
Financials
Cash Management
Asset Management
Controlling

Accounting
SAP AG 2006
Customers (e.g.
Retailers) &
Channel
Partners
Procure to Stock
Supports price comparison of vendors offers
Suppliers & Partners
Analyze, Plan &

Develop
Procure
Manufacture
Market & Sell
Deliver & Service

Procure to Stock
Third Party
Plan &
Manufacture
Production Planning
Production
Provides tools to gain greater spend visibility in procurement
Sell & Deliver

Direct Store Delivery (DSD)
Rebate & Bonus Management
Commissions
Indirect Sales
Returns
Empties Processing
Helps to manage quotations, contracts, batch handling and quality
Industry Pain Points
Improving purchasing activities efficiency
Realizing savings in purchased value
Allowing visibility on vendors conditions and

services
Ensuring tracking and traceability
Business Benefits
Automate operational tasks
Improve vendors selection and prices comparison

through quotation handling
Formalize agreements by contract management
Guarantee quality check through goods receipt

inspections
SAP AG 2006

Quality Management
Cross Company Transactions
Financials & Controlling
Excise Duty (Beverage) G65
Solution
Procurement of
Stock materials
Procurement
Contracts
Request for
quotation
Prices Comparison
Purchase
requisition
Purchase order
processing
Goods receipt
Inspect goods
Batch number
assignment
Stock update
Invoice verification
Create contract:
Quantity contracts;
Value contracts;
Delivery schedule
Create purchase
requisition
Assign vendor to
contract
Customers,
Consumers, Channel
Partners
Encompasses cross-plant internal procurement of products including
creation of all required documents for both with or without delivery
Provide functions to monitor stock in transit
Analyze, Plan &

Develop
Procure
Manufacture
Market & Sell
Deliver & Service

Procure to Stock
Third Party
Plan &
Manufacture
Production Planning
Production
Sell & Deliver
Commissions
Indirect Sales
Returns
Empties Processing
Quality Management
Improving internal purchasing activities
Ensuring tracking and traceability
Solution
Stock transfer
with delivery
Create stock
transport order
Process delivery
Post goods issue
Business Benefits
Automate operational tasks
Increased visibility of stock and stock transfers
SAP AG 2006
Stock transfer
without delivery
Create stock
transport order
Post goods issue
Customers,
Consumers, Channel
Partners

Manage the entire customer order process variable pricing, delivery,
invoicing, and payment.
Long order cycle times
Meeting customers requests for

improved services
Managing sales returns cost effectively
Sales
Process sales
order
Billing
Payment
Business Benefits
Improve sales execution timeline
Improve order fulfillment rate
Provide the customer with alternative services and

methods for invoicing and payments
SAP AG 2006
Manufacture
Market & Sell
Deliver & Service
Customers,
Consumers, Channel
Partners
Plan &
Manufacture
Production Planning
Production
Sell & Deliver
Commissions
Indirect Sales
Returns
Empties Processing
Quality Management
Solution

Managing variable pricing conditions
Procure

Procure to Stock
Third Party
Includes Electronic Data Interchange (EDI), handling of consignment sales,

and foreign trade
Analyze, Plan &

Develop
Distribution
Picking &
distribution based
on shelf life
expiration date
Freight settlement
Handling unit mgt.
Inbound/Outbound
EDI Processing
Inbound sales
order via EDI
Outbound billing
document via EDI
Returns
Focuses on the processing of credit memos if no goods are sent back.
Analyze, Plan &

Develop
Procure
Manufacture
Market & Sell
Deliver & Service

Procure to Stock
Third Party
Plan &
Manufacture
Production Planning
Production
Includes quality evaluation for returned goods and appropriate stock

movement.
Sell & Deliver

Commissions
Indirect Sales
Returns
Empties Processing
Quality Management
Solution
Efficient handling & document

complaints.
Managing sales returns cost efficiently.
Returns and
Complains
Process credit
memos
Quality evaluation
Goods movement
to blocked or
unrestricted stock.
Business Benefits
Enable corporate compliance strategy
Effective batch-specific returns processing
SAP AG 2006
Returns
Processing
Ship pallets
Return pallets
Customers,
Consumers, Channel
Partners
Traceability and Food Safety

Capability to track and trace products at all stages of production,
processing, and distribution
Analyze, Plan &

Develop
Procure
Manufacture
Market & Sell
Plan &
Manufacture
Production Planning
Production
Sell & Deliver
Commissions
Indirect Sales
Returns
Empties Processing
Allow fast and efficient recall of a defective product batch

Quality Management
Complying with food regulations
HACCP (Hazard Analysis & Critical Control Points)
EU (Article 18 of Regulation 178)
US (the US Bio-terrorism Act 2002)
Addressing growing food-safety concerns from

consumers
Business Benefits
Professionally managing a possible product

recall
Minimize risk of non-compliance with food &

beverage regulations
Effective batch-specific returns processing
SAP AG 2006
Deliver & Service

Procure to Stock
Third Party
Solution
Quality
Management
Quality planning
Quality inspection
Recording of
laboratory analysis
Quality reporting
Quality
improvement
Batch
Management
Batch creation and
determination
Batch-where-use
lists
Recall batches and
create follow-up
activities
Manage batchspecific return
processing
Manage batches
based on shelf life
expiration
Customers,
Consumers, Channel
Partners
Consists of the whole procurement and delivery cycle with warehouse for
the storage management, including quality inspection
Analyze, Plan &

Develop
Procure
Manufacture
Market & Sell
Deliver & Service
Customers,
Consumers, Channel
Partners

Procure to Stock
Third Party
Plan &
Manufacture
Production Planning
Production
Sell & Deliver
Commissions
Indirect Sales
Returns
Empties Processing
Return rejected goods to the vendor

Quality Management
Maintaining low inventory levels
Avoiding out-of-stock situations at retailers
Establishing visibility to inventory levels

throughout the entire supply chain
Business Benefits
Reduce working capital by keeping

inventory levels low
Increase sales by reducing out-of-stock

situations
Improve consumer retention due to

product availability
SAP AG 2006
Solution
Inventory
Management
Integration with
supply chain
accounting
Goods receipt
Goods issues
Managing different
stock categories
Inventory valuation
Warehouse
Management
Storage
Management
Quality
Management
Quality Inspection
Return of goods
Transportation
Management
Plan transports
Monitor execution
Calculate costs
Manage
transportation
settlement
Financials and Controlling

Helps to get an insight into all aspects related to accounting and
controlling
Meeting local legal and fiscal requirements
Improving administrative activities efficiency
Maintaining focus on most profitable customers

and brands
Business Benefits
Implement an ERP solution fully compliant

and continuously updated with local legal
and fiscal requirements
Improve efficiency in accounting activities

due to a seamless process integration
Enhance company profitability analysis

through profit and loss calculation
SAP AG 2006
Procure
Manufacture
Market & Sell
Deliver & Service

Procure to Stock
Third Party
Plan &
Manufacture
Production Planning
Production
Sell & Deliver
Commissions
Indirect Sales
Returns
Empties Processing
Provides streamlined functionalities that allows visibility, increases

productivity and regain control of their business processes
Analyze, Plan &

Develop

Quality Management
Solution
Financials
General Ledger
accounting
Accounts payable
accounting
Accounts
receivable
accounting
Bank accounting
Closing activities
Cash management
Assets
management
Controlling
Standard cost and
profit center
accounting
Profitability analysis
Product costs
planning
Product cost
controlling
Customers,
Consumers, Channel
Partners
Our Specific Solution Offering for the Dairy Industry

Analyze, Plan &

Develop
Procure
Manufacture
Market & Sell

Procure to Stock
Milk Procurement from Producer
Product
Development
Recipe Management
Deliver & Service
Dairy
Food
Manufacturing
Dairy Production
Planning & Process
Control
Sell & Deliver
Returns
Raw Material Sales

Quality Management

Financials
Cash Management
Asset Management
Controlling

Accounting
SAP AG 2006
Customers (e.g.
Retailers) & Channel
Partners
Product Development with Recipe Management

Managing the fast and efficient product development by structured reusable product specifications
Seamless integration into the production planning and execution process
Slow and inefficient product development
Changing consumer tastes and

requirements
Increasing demand for new products
Business Benefit
Reduce development cycle time & costs
Ensure company-wide consistent product

information
Reduce time-to-market to gain competitive

advantage
SAP AG 2006
Solution
Product Data
Management
Maintain product
specifications
Label Management
Multilevel recipe
mgt.
Define Batch
Management
Product Lifecycle
Management
Document
Management
Change
Management
Integrate Recipe
into production
process
Create master
recipe
Create process
order
Milk Procurement from the Producer

Encompasses the efficient procurement and collection of raw milk
Ensure compliance with high quality standards and traceability requirements
Calculate payments based on quantity and quality characteristics
Monitor procurement and payment process
Managing the complex payment conditions
Coping with seasonal fluctuation and

changing demands
Complying with the high quality standards

and traceability requirements
Business Benefits
Enable accurate payment both for

producer and transport service provider
Provide payment reporting to the producer
Streamline raw milk collection & reception

process
SAP AG 2006
Solution
Milk Collection
Milk Reception
Maintain standard
Dairy reception
routes
cockpit
Provide route list to Process purchase
truck driver
Order
Automatic creation
of inspection lot
and batch number
Batch management
Milk Payment
Reporting &
Analysis
Calculate payment Monitor raw milk

for producer
quantity & quality
characteristics
Calculate payment
Payment reporting
for transport
service provider
Settle payment
Maintain payment
calculation scheme
Milk Analysis
Gather results of
inspection lots from
producer samples
Gather results of
inspection lots from
tank truck samples
Create usage
decision for
inspection lots

Supports the additional purchase of raw materials from other companies on
the determined shortage in the demand planning process
Calculate vendor payment based on the raw material quantity and quality
characteristics.
Determining demand for additional

required raw material due to everchanging quantity and quality of collected
raw milk
Managing the vendor payment based on
raw material quality characteristics
Business Benefits
Increase demand planning accuracy
Handle the quality-based payment for the

vendor
SAP AG 2006
Solution
Raw Material
Demand
Planning
Raw Material
Reception
Determine required Post goods receipt

additional raw
Automatic creation
materials
of inspection lot
Create purchase
and batch number
order
Batch management
Raw Material
Payment
Reporting &
Analysis
Calculate vendor
Monitor raw
payment for
material quantity &
additional
quality
purchased raw
characteristics
material
Payment reporting
Settle payment
Maintain payment
calculation scheme
Raw Material
Analysis
Gather results of
inspection lots
Create usage
decision for
inspection lots
Dairy Production Planning and Process Control

Manage the multilevel manufacturing processes including seamless batch
and quality management
Incorporates the ever-changing quantity and quality of the raw material
Provide powerful tools to gain a cross-stages raw material controlling
Production Planning based on a nonstandardized raw material

High cost of the raw material comparing to
the total production costs
Defining optimal product mix in order to
maximize utilization & profitablity
Business Benefits
Optimize and streamline production process

Increase profitability by improved visibility
to raw material utilization and losses
Comply with the high quality standards and
traceability requirements
SAP AG 2006
Solution
Production
Planning
Demand planning
based on historical
data
Production
planning
synchronous to
sales
Material resource
planning (without
shelf-life)
Simulate planning
Graphical capacity
planning
Controlling &
Analysis
Cross-stages raw
material controlling
Product costing
Batch information
cockpit
Production
information system
Process Control
Maintain product
master data &
recipes for multilevel
production
Batch management
across all stages
Separate raw milk
into components
Material valuation
Manage shelf-life
expiration date for
final products
Quality
Management
Create inspection
lots for semifinished and
finished goods
Gather results of
inspection lots
Create usage
decision for
inspection lots
Raw Material Sales

Supports the sales of raw materials between dairies based on the raw
material requirements and the available surpluses
Pricing and distribution are based on the raw material quality characteristics
Managing variable pricing conditions

based on quality characteristics
Solution
Production
Manage process
order
Create inspection
lot
Business Benefits
Simplify price determination by using

the integrated batch and quality
management system
SAP AG 2006
Billing
Invoice processing
Price determination
based on quality
characteristics
Sales
Process sales
document
Distribution
Picking based on
quality
characteristics
Create inspection
lot for picked raw
material
Usage decision
and goods issue
SAP ERP for the Dairy Industry Provides Increased

Shareholder Value for Your Business
Business Objectives
Revenue
Growth
Business Areas
Improve customer
satisfaction
Business Opportunities
Improve order fulfillment

Improve customer understanding
Increase sales
Shareholder
Value
SAP Scenarios
(SAP ERP for the Dairy Industry)
Sales and Customer Order

Indirect Sales
Distribution
Improve order fill rate

Reduce operating costs and
increase efficiency
Recipe Management
Finance
Enable detailed profitability

analysis
Financials and Controlling
Raw Material Sales
Improve efficiencies in
accounting activities
Reduce
Cost
Customer service
Procurement
Increase efficiency for sales

returns
Improve transparency in dairy
procurement
Milk Procurement
Lower raw materials costs
Procure to Stock
Realtime access to production

cost information
Production
Reduce
Working
Capital
Reduce
Risk
Returns
Product Cost Controlling
Improve yield and reduce waste

Calculate and monitor production
costs seamlessly
Manufacturing
Inventory
Optimize inventory usage
Comply with food

regulations
Utilize full track-and-trace

capability
Food Safety
* For further details, please refer to the SAP ERP for the Dairy Industry Brief.
SAP AG 2006

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SAP ERP for the

Challenges, Strategies, and Benefits

Challenges, Strategies, and Benefits

The Dairy Industry Ecosystem

Raw Material, Packaging, Service

Sell Raw Material and Ingredients

Dairy Companies Often Have

But Mostly They Lack the Ability to Execute

A business enabler is required to

Market Forces and Business Needs

Retailer power (Wal-Mart effect)

Resulting Key Challenges

Develop New Products Faster and More Effectively

consumer tastes and

for new products

development data and

SAP can help you

creating reusable product

Optimize Supply Chain

Create operational efficiencies

Streamline supply chain

and supply chain

picking and distribution

Ensure accurate and timely

SAP can help you

Improve asset utilization

Reduced operating costs

Fully integrate logistics

Higher customer satisfaction

Optimize end-to-end planning

Increase Efficiency in Procurement

quantity and quality of the raw

Create operational efficiencies

SAP can help you

processes for procurement

standardized raw material

Maximize raw material

SAP can help you

processes for manufacturing

utilization and losses

produced product mix

Ensure Food Safety and Regulatory Compliance

regulations (EU 178/2002, the

Support mid- and long-term

company success by ensuring

place to enable traceability

SAP can help you

batches and inventory

production, and sales

Improve Sales Efficiency

determination for raw material

SAP can help you

optimize sales performance

partners and key customers

Obtain first-hand information

about the market

Challenges, Strategies, and Benefits

SAP ERP packaged solution for the dairy industry

Complete logistical and financial integration

Key Performance Indicators

Gross Profit/Total Net Sales

Order Fulfillment Rate

Demand Forecast Accuracy