SCOR in Action: SAP Supply Chain Performance Management
SCOR in Action: SAP Supply Chain Performance Management
SCOR in Action: SAP Supply Chain Performance Management
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<strong>SCOR</strong> <strong>in</strong> <strong>Action</strong>: <strong>SAP</strong> <strong>Supply</strong> Cha<strong>in</strong><br />
<strong>Performance</strong> <strong>Management</strong><br />
© 2010 <strong>Supply</strong> Cha<strong>in</strong> Council. ALL RIGHTS RESERVED. | < filename > | Slide 0 | 11 February 2011<br />
Greg Gilbert | <strong>Supply</strong> Cha<strong>in</strong> Solution Pr<strong>in</strong>cipal
Agenda<br />
1. Why <strong>Supply</strong> Cha<strong>in</strong> <strong>Performance</strong> <strong>Management</strong><br />
2. Measurement and Metrics<br />
3. <strong>SAP</strong> <strong>Supply</strong> Cha<strong>in</strong> <strong>Performance</strong> <strong>Management</strong><br />
4. Path Forward<br />
© <strong>SAP</strong> 2010 / 1
<strong>Supply</strong> Cha<strong>in</strong> Excellence is Imperative <strong>in</strong> Times of<br />
Economic Uncerta<strong>in</strong>ty<br />
• <strong>Supply</strong>-cha<strong>in</strong> generally accounts for between 60%<br />
and 90% of all company costs 1<br />
Fortune-10 Company <strong>Supply</strong>-<br />
Cha<strong>in</strong> Cost as % of Total<br />
Costs 2<br />
• A2%i improvement t<strong>in</strong> process efficiency i for supplycha<strong>in</strong><br />
processes has 3000% - 5000% the impact of a<br />
2% improvement <strong>in</strong> efficiency for… IT… HR…<br />
F<strong>in</strong>ance 1 … Sales…<br />
GM 94%<br />
Ford 93%<br />
Conoco 90%<br />
Wal-Mart 90%<br />
• Decreas<strong>in</strong>g spend<strong>in</strong>g by 5% raises net <strong>in</strong>come by<br />
45% 4 , <strong>in</strong>creas<strong>in</strong>g sales by 5% raises net <strong>in</strong>come only<br />
Chevron<br />
IBM<br />
88%<br />
77%<br />
by 5%.<br />
Exxon 75%<br />
Domestic Product) 3<br />
• In 2007, US bus<strong>in</strong>ess logistics costs rose to an all<br />
GE 63%<br />
time high of $1.4 trillion (10.1% of US nom<strong>in</strong>al Gross<br />
1 Exclusive of F<strong>in</strong>ancial Services companies<br />
2 Source: Hoovers 2006 F<strong>in</strong>ancial Data, <strong>Supply</strong>-Cha<strong>in</strong> Council 2006 SCM Benchmark data on SCM cost for discrete & process <strong>in</strong>dustries<br />
3 CSCMP 19 th Annual State of the Logistics Industry<br />
4 ASUG / <strong>SAP</strong> benchmark<strong>in</strong>g 2007<br />
Focused <strong>in</strong>itiatives <strong>in</strong> <strong>Supply</strong> Cha<strong>in</strong> <strong>Management</strong> can result <strong>in</strong> 30-35% cost<br />
reductions, liberation of work<strong>in</strong>g capital, and revenue <strong>in</strong>creases of 3-5%<br />
2
<strong>Supply</strong> Cha<strong>in</strong> <strong>Performance</strong> <strong>Management</strong><br />
Be<strong>in</strong>g efficient is no longer enough<br />
<strong>Supply</strong> Cha<strong>in</strong> Reduce <strong>Supply</strong> Cha<strong>in</strong><br />
Costs Work<strong>in</strong>g Capital Reliability<br />
? ? ?<br />
Effectiveness = ???<br />
CEO / CFO<br />
Inter-enterprise<br />
end-to-end<br />
processes<br />
DESIGN SOURCE MAKE STORE MOVE SELL SERVICE<br />
Strategic<br />
Tactical<br />
Collaborative Demand and <strong>Supply</strong> Plann<strong>in</strong>g<br />
Efficiency = <br />
VP <strong>Supply</strong> Cha<strong>in</strong><br />
Execution<br />
Manufactur<strong>in</strong>g Network<br />
Plann<strong>in</strong>g & Execution<br />
Logistics and<br />
Fulfillment management<br />
Logistics Manager<br />
© <strong>SAP</strong> 2010 / 3<br />
SC Analyst
<strong>Supply</strong> Cha<strong>in</strong> <strong>Performance</strong> <strong>Management</strong><br />
Improv<strong>in</strong>g <strong>Supply</strong> Cha<strong>in</strong> Effectiveness<br />
<strong>Supply</strong> Cha<strong>in</strong><br />
<strong>Performance</strong><br />
<strong>Management</strong><br />
<strong>Supply</strong> Cha<strong>in</strong> Reduce <strong>Supply</strong> Cha<strong>in</strong><br />
Costs Work<strong>in</strong>g Capital Reliability<br />
CEO / CFO<br />
strategic impact<br />
f<strong>in</strong>ancial impact<br />
compliance impact<br />
Inter-enterprise<br />
end-to-end<br />
processes<br />
DESIGN SOURCE MAKE STORE MOVE SELL SERVICE<br />
Strategic<br />
Tactical<br />
Collaborative Demand and <strong>Supply</strong> Plann<strong>in</strong>g<br />
VP <strong>Supply</strong> Cha<strong>in</strong><br />
Execution<br />
Manufactur<strong>in</strong>g Network<br />
Plann<strong>in</strong>g & Execution<br />
Logistics and<br />
Fulfillment management<br />
Logistics Manager<br />
© <strong>SAP</strong> 2010 / 4<br />
SC Analyst
Agenda<br />
1. Why <strong>Supply</strong> Cha<strong>in</strong> <strong>Performance</strong> <strong>Management</strong><br />
2. Measurement and Metrics<br />
3. <strong>SAP</strong> <strong>Supply</strong> Cha<strong>in</strong> <strong>Performance</strong> <strong>Management</strong><br />
4. Path Forward<br />
© <strong>SAP</strong> 2010 / 5
Why Measurement Matters<br />
Deal<strong>in</strong>g with Information Overload<br />
• Right measures drive right behavior<br />
• Right behavior drives performance<br />
• Pick metrics that matter<br />
• Tie metrics to action (and processes)<br />
© <strong>SAP</strong> 2010 / 6
Foundation: <strong>SCOR</strong><br />
<strong>Supply</strong> Cha<strong>in</strong> Operations Reference model<br />
SCPM 1st Level KPI’s<br />
Cash to Cash<br />
Cycle Time<br />
Order<br />
Fulfillment<br />
Cycle Time<br />
Perfect Order<br />
Fulfillment<br />
Cost of Goods<br />
Sold<br />
<strong>Supply</strong> Cha<strong>in</strong><br />
<strong>Management</strong><br />
Costs<br />
Return on<br />
Work<strong>in</strong>g<br />
Capital<br />
Return on<br />
<strong>Supply</strong> Cha<strong>in</strong><br />
Fixed Assets<br />
PLAN<br />
SOURCE MAKE DELIVER RETURN<br />
http://www.supply-cha<strong>in</strong>.org/<br />
© <strong>SAP</strong> 2010 / 7
Putt<strong>in</strong>g It All Together<br />
360º View for Better Control Along Processes<br />
CEO / CFO<br />
<strong>Supply</strong> Cha<strong>in</strong><br />
Effectiveness<br />
+<br />
VP <strong>Supply</strong> Cha<strong>in</strong><br />
Perfect Order<br />
<strong>Supply</strong> Cha<strong>in</strong><br />
Fulfillment<br />
+<br />
<strong>Management</strong> Cost<br />
-<br />
Logistics Manager<br />
Order<br />
<strong>Management</strong> Cost<br />
-<br />
Material<br />
Acquisition Cost<br />
Plann<strong>in</strong>g and<br />
F<strong>in</strong>ance Cost<br />
Outbound<br />
Transportation Cost<br />
F<strong>in</strong>ished Goods<br />
Warehouse Cost<br />
Customer<br />
Service Cost<br />
SC Analyst<br />
Fuel Cost Express Freight Returns Invoices Outstand<strong>in</strong>g<br />
© <strong>SAP</strong> 2010 / 8
Agenda<br />
1. Why <strong>Supply</strong> Cha<strong>in</strong> <strong>Performance</strong> <strong>Management</strong><br />
2. Measurement and Metrics<br />
3. <strong>SAP</strong> <strong>Supply</strong> Cha<strong>in</strong> <strong>Performance</strong> <strong>Management</strong><br />
4. Path Forward<br />
© <strong>SAP</strong> 2010 / 9
© <strong>SAP</strong> 2010 / 10<br />
<strong>SAP</strong> Bus<strong>in</strong>essObjects<br />
<strong>Supply</strong> Cha<strong>in</strong> <strong>Performance</strong> <strong>Management</strong><br />
Demo
It’s not about fancy Dashboards<br />
Appearances may be deceiv<strong>in</strong>g<br />
© <strong>SAP</strong> 2010 / 11
It’s not about fancy Dashboards<br />
Need for full solutions <strong>in</strong>stead<br />
• No bus<strong>in</strong>ess model, no metrics management, no content<br />
• Custom-built approach is expensive, risky, not susta<strong>in</strong>able<br />
• Consequences: Over budget, beh<strong>in</strong>d schedule, project failure<br />
© <strong>SAP</strong> 2010 / 12
Beyond <strong>SCOR</strong> and Dashboards<br />
1. Not just measurement; compare aga<strong>in</strong>st goals and<br />
benchmarks<br />
2. Not just status-quo; what-if analysis to validate<br />
impact of lower level metrics aga<strong>in</strong>st top-level<br />
targets<br />
3. Elim<strong>in</strong>ate search<strong>in</strong>g for issues; setup automated<br />
alerts when targets not met<br />
4. Save snapshots; create brief<strong>in</strong>g books as part of<br />
standard management performance reviews<br />
© <strong>SAP</strong> 2010 / 13
Agenda<br />
1. Why <strong>Supply</strong> Cha<strong>in</strong> <strong>Performance</strong> <strong>Management</strong><br />
2. Measurement and Metrics<br />
3. <strong>SAP</strong> <strong>Supply</strong> Cha<strong>in</strong> <strong>Performance</strong> <strong>Management</strong><br />
4. Path Forward<br />
© <strong>SAP</strong> 2010 / 14
Packaged apps: faster time to value<br />
At lower cost, lower project risk<br />
• Configure and extend<br />
• Set up users<br />
• Personalize<br />
• Gather requirements<br />
• Def<strong>in</strong>e bus<strong>in</strong>ess questions<br />
• Design and build data model<br />
• Design and build reports<br />
• Def<strong>in</strong>e metrics<br />
• Design and build dashboards<br />
• Design and build analytic workflows<br />
• Def<strong>in</strong>e bus<strong>in</strong>ess meta build<br />
• Def<strong>in</strong>e data stag<strong>in</strong>g and load<strong>in</strong>g<br />
• Def<strong>in</strong>e scope<br />
• Identify best practices<br />
• Select components<br />
Build<br />
Time and<br />
Cost Sav<strong>in</strong>gs<br />
• Configure and extend<br />
• Set up users<br />
• Personalize<br />
• Gather requirements<br />
• Def<strong>in</strong>e bus<strong>in</strong>ess questions<br />
Packaged Application<br />
(like <strong>SAP</strong> BO SCPM)<br />
© <strong>SAP</strong> 2010 / 15
Fast Time to Value<br />
Metrics <strong>Management</strong> Functionality<br />
• <strong>SCOR</strong> based<br />
• Best practices<br />
• Self-def<strong>in</strong>ed<br />
© <strong>SAP</strong> 2010 / 16
Get started with metrics that matter –<br />
Customer Centric<br />
C 2<br />
Customer<br />
Centric<br />
Forecast<br />
Accuracy<br />
Perfect Order<br />
Fulfillment<br />
Delivery<br />
<strong>Performance</strong><br />
Order<br />
Fulfillment<br />
Cycle Time<br />
• The Opportunity – Improv<strong>in</strong>g <strong>Performance</strong> on Customer Centric<br />
Metrics<br />
∼ Focus: Identify the contribut<strong>in</strong>g factors to customer service performance<br />
∼<br />
Benefit: Develop organizational understand<strong>in</strong>g of how different<br />
organizational processes impact the supply cha<strong>in</strong>’s customer centric<br />
performance.<br />
• Sample Bus<strong>in</strong>ess Scenario<br />
∼ A VP of <strong>Supply</strong> Cha<strong>in</strong> tracks decl<strong>in</strong><strong>in</strong>g delivery performance over a period of time.<br />
∼ Upon further <strong>in</strong>vestigation, he learns that forecast accuracy for one product<br />
family is suspect.<br />
∼ A detailed d analysis then shows that t one important t <strong>in</strong>put <strong>in</strong> the forecast<strong>in</strong>g<br />
process- the customer forecast- has been miss<strong>in</strong>g for some time now.
Get started with metrics that matter –<br />
Enterprise Centric<br />
EC<br />
Enterprise<br />
Centric<br />
Return on<br />
Return on<br />
<strong>Supply</strong> Cha<strong>in</strong><br />
<strong>Supply</strong> Cha<strong>in</strong> work<strong>in</strong>g <strong>Management</strong><br />
Assets<br />
Capital<br />
Costs<br />
Cash To Cash<br />
Cycle<br />
Cost of Goods<br />
Sold<br />
• The Opportunity – Improv<strong>in</strong>g <strong>Performance</strong> on Enterprise Centric<br />
Metrics<br />
∼<br />
∼<br />
Focus: Identify the contribut<strong>in</strong>g factors to <strong>in</strong>ternal f<strong>in</strong>ancial performance metrics<br />
Benefit: Develop organizational understand<strong>in</strong>g of how the supply cha<strong>in</strong>’s<br />
performance is contributes to the overall f<strong>in</strong>ancial performance of the<br />
organization.<br />
• Sample Bus<strong>in</strong>ess Scenario<br />
∼<br />
∼<br />
∼<br />
∼<br />
The VP of <strong>Supply</strong> Cha<strong>in</strong>s tracks <strong>in</strong>creas<strong>in</strong>g supply cha<strong>in</strong> costs over some time.<br />
Upon further <strong>in</strong>vestigation, he learns that the cost of transportation has been<br />
<strong>in</strong>creas<strong>in</strong>g.<br />
A further drill down <strong>in</strong>to the data shows that for one customer, the sales team has<br />
been demand<strong>in</strong>g air freight, impact<strong>in</strong>g costs.<br />
Further analysis shows that one late shipment drove the unofficial mode change.
<strong>SAP</strong> BO SCPM Solution Summary<br />
Evaluate<br />
and<br />
Improve<br />
Receive pro-active alerts about deviations for<br />
performance targets, and better balance trade-off<br />
decisions for improved supply cha<strong>in</strong> performance<br />
Identify and<br />
Analyze<br />
At any time, know your operational and related<br />
f<strong>in</strong>ancial performance, and understand operational<br />
drivers affect<strong>in</strong>g performance<br />
Model and<br />
Understand<br />
Comply with lead<strong>in</strong>g <strong>in</strong>dustry standards from<br />
performance management (<strong>SCOR</strong>), focus<strong>in</strong>g on<br />
metrics that matter<br />
Collect<br />
Collect and collate data directly from operational<br />
processes, such as order-to-cash, from <strong>SAP</strong>- or non-<br />
<strong>SAP</strong> systems<br />
© <strong>SAP</strong> 2010 / 19
Key Po<strong>in</strong>ts to remember<br />
Right measurement drives superior performance<br />
Pick the metrics that matter<br />
Tie metrics to bus<strong>in</strong>ess strategy<br />
L<strong>in</strong>k metrics to bus<strong>in</strong>ess processes<br />
Pick a bus<strong>in</strong>ess process and go end-to-end<br />
Ensure everyone understands d the relationship between supply cha<strong>in</strong> metrics<br />
and how those metrics impact each other<br />
Understand the root-causes of poor performance to determ<strong>in</strong>e corrective<br />
options and simulate impact of potential solutions<br />
© <strong>SAP</strong> 2010 / 20
Copyright 2010 <strong>SAP</strong> AG<br />
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