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SCOR in Action: SAP Supply Chain

Performance Management
Greg Gilbert | Supply Chain Solution Principal
2010 Supply Chain Council. ALL RIGHTS RESERVED. |

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Slide 0

11 February 2011

Agenda

1.
2.
3
3.
4.

Why Supply Chain Performance Management


Measurement and Metrics
SAP S
Supply
l Ch
Chain
i P
Performance
f
M
Managementt
Path Forward

SAP 2010 / 1

Supply Chain Excellence is Imperative in Times of


Economic Uncertainty
Supply-chain generally accounts for between 60%
and 90% of all company costs1
A 2% iimprovementt iin process efficiency
ffi i
ffor supplyl
chain processes has 3000% - 5000% the impact of a
2% improvement in efficiency for IT HR
Finance1 Sales
Decreasing spending by 5% raises net income by
45%4 , increasing sales by 5% raises net income only
byy 5%.
In 2007, US business logistics costs rose to an all
time high of $1.4 trillion (10.1% of US nominal Gross
Domestic Product))3

Fortune-10 Company SupplyChain Cost as % of Total


Costs 2
GM

94%

Ford

93%

Conoco

90%

Wal Mart
Wal-Mart

90%

Chevron

88%

IBM

77%

Exxon

75%

GE

63%

1 Exclusive of Financial Services companies


2 Source: Hoovers 2006 Financial Data, Supply-Chain Council 2006 SCM Benchmark data on SCM cost for discrete & process industries
3 CSCMP 19th Annual State of the Logistics Industry
4 ASUG / SAP benchmarking 2007

Focused initiatives in Supply Chain Management can result in 30-35% cost


reductions, liberation of working capital, and revenue increases of 3-5%
2

Supply Chain Performance Management


Being efficient is no longer enough

Supply Chain
Costs

Reduce
Working Capital

Supply Chain
Reliability

CEO / CFO

Effectiveness = ???
Inter-enterprise
end-to-end
processes

DESIGN

SOURCE

MAKE

STORE

MOVE

SELL

SERVICE

Strategic
Collaborative Demand and Supply Planning

VP Supply Chain

T ti l
Tactical

Efficiency = 5
Logistics Manager

Execution

Manufacturing
M
f t i Network
N t
k
Planning & Execution

Logistics and
Fulfillment management

SC Analyst
SAP 2010 / 3

Supply Chain Performance Management


Improving Supply Chain Effectiveness

Supply Chain
Performance
Management

Supply Chain
Costs

Reduce
Working Capital

CEO / CFO

financial impact

strategic impact

Inter-enterprise
end-to-end
processes

Supply Chain
Reliability

DESIGN

SOURCE

MAKE

compliance impact

STORE

MOVE

SELL

SERVICE

Strategic
Collaborative Demand and Supply Planning

VP Supply Chain

T ti l
Tactical

Logistics Manager

Execution

Manufacturing Network
Planning & Execution

Logistics and
Fulfillment management

SC Analyst
SAP 2010 / 4

Agenda

1.
2.
3
3.
4.

Why Supply Chain Performance Management


Measurement and Metrics
SAP S
Supply
l Ch
Chain
i P
Performance
f
M
Managementt
Path Forward

SAP 2010 / 5

Why Measurement Matters


Dealing with Information Overload
Right measures drive right behavior
Right behavior drives performance
Pick metrics that matter
Tie metrics to action (and processes)

SAP 2010 / 6

Foundation: SCOR
Supply Chain Operations Reference model
SCPM 1st Level KPIs
Cash to Cash
Cycle Time

Order
Fulfillment
F
lfill
t
Cycle Time

Perfect Order
Fulfillment

Cost of Goods
Sold

Supply Chain
M
Management
t
Costs

Return on
W ki
Working
Capital

PLAN

SOURCE

http://www.supply-chain.org/
SAP 2010 / 7

MAKE

DELIVER

RETURN

Return on
Supply
S
l Chain
Ch i
Fixed Assets

Putting It All Together


360 View for Better Control Along Processes
CEO / CFO
Supply Chain
Effectiveness
+
Supply
S
l Chain
Ch i
Management Cost
-

Perfect
P
f tO
Order
d
Fulfillment
+

VP Supply Chain

Order
Management Cost
-

Material
Acquisition Cost

Outbound
Transportation Cost

Finished Goods
Warehouse Cost

Customer
Service Cost

Express Freight

Returns

Logistics Manager

SC Analyst
Fuel Cost

SAP 2010 / 8

Invoices Outstanding

Planning and
Finance Cost

Agenda

1.
2.
3
3.
4.

Why Supply Chain Performance Management


Measurement and Metrics
SAP S
Supply
l Chain
Ch i Performance
P f
Management
M
t
Path Forward

SAP 2010 / 9

SAP BusinessObjects
Supply Chain Performance Management
Demo

SAP 2010 / 10

Its not about fancy Dashboards


Appearances may be deceiving

SAP 2010 / 11

Its not about fancy Dashboards


Need for full solutions instead

No business model, no metrics management, no content

C
Custom-built
b il approach
h iis expensive,
i
risky,
i k not sustainable
i bl

Consequences: Over budget, behind schedule, project failure

SAP 2010 / 12

Beyond SCOR and Dashboards

1.

Not just measurement; compare against goals and


benchmarks

2.

Not just status-quo; what-if analysis to validate


impact of lower level metrics against top
top-level
level
targets

3.

Eliminate searching for issues; setup automated


alerts when targets not met

4.

Save snapshots; create briefing books as part of


standard management
g
p
performance reviews

SAP 2010 / 13

Agenda

1.
2.
3
3.
4.

Why Supply Chain Performance Management


Measurement and Metrics
SAP S
Supply
l Ch
Chain
i P
Performance
f
M
Managementt
Path Forward

SAP 2010 / 14

Packaged apps: faster time to value


At lower cost, lower project risk

Configure and extend


Set up users
Personalize
Gather requirements
Define business questions

Time and
C tS
Cost
Savings
i

Design and build data model


Design and build reports
Define metrics
Design and build dashboards
Design and build analytic workflows
Define business meta build
Define data staging and loading
Define scope
Identify best practices
Select components

Build

SAP 2010 / 15

Configure and extend


Set up users
Personalize
Gather requirements
Define business questions

Packaged
g Application
pp
(like SAP BO SCPM)

Fast Time to Value


Metrics Management Functionality

SCOR based
Best practices
Self-defined

SAP 2010 / 16

Get started with metrics that matter


Customer Centric
C2
Customer
Centric

Forecast
Accuracy

Perfect Order
Fulfillment

Delivery
Performance

Order
Fulfillment
Cycle Time

The Opportunity Improving Performance on Customer Centric


Metrics

Focus: Identify the contributing factors to customer service performance


Benefit: Develop organizational understanding of how different
organizational processes impact the supply chains customer centric
performance.

Sample Business Scenario

A VP of Supply Chain tracks declining delivery performance over a period of time.


Upon further investigation, he learns that forecast accuracy for one product
family is suspect.
Ad
detailed
t il d analysis
l i then
th shows
h
that
th t one important
i
t t input
i
t in
i the
th forecasting
f
ti
process- the customer forecast- has been missing for some time now.

Get started with metrics that matter


Enterprise Centric
EC
Enterprise
Centric
Return
R
t
on
Supply Chain
Assets

Return
R
t
on
working
Capital

Supply
S
l Chain
Ch i
Management
Costs

Cash To Cash
Cycle

Cost of Goods
Sold

Th
The Opportunity
O
t it Improving
I
i
Performance
P f
on Enterprise
E t
i Centric
C ti
Metrics

Focus: Identify the contributing factors to internal financial performance metrics


Benefit: Develop
p organizational
g
understanding
g of how the supply
pp y chains
performance is contributes to the overall financial performance of the
organization.

Sample Business Scenario

The VP of Supply Chains tracks increasing supply chain costs over some time
time.
Upon further investigation, he learns that the cost of transportation has been
increasing.
A further drill down into the data shows that for one customer, the sales team has
been demanding air freight, impacting costs.
Further analysis shows that one late shipment drove the unofficial mode change.

SAP BO SCPM Solution Summary

Evaluate
and
Improve

Receive pro-active alerts about deviations for


performance targets, and better balance trade-off
decisions for improved supply chain performance

Identify and
Analyze

At any time,
time know your operational and related
financial performance, and understand operational
drivers affecting performance

Model and
Understand

Comply with leading industry standards from


performance management (SCOR), focusing on
metrics that matter

C
Collect

Collect and collate data directly from operational


processes, such as order-to-cash, from SAP- or nonSAP systems

SAP 2010 / 19

Key Points to remember

& Right measurement drives superior performance


& Pick the metrics that matter
& Tie metrics to business strategy
& Link metrics to business processes
& Pick a business process and go end-to-end
& E
Ensure everyone understands
d t d th
the relationship
l ti
hi b
between
t
supply
l chain
h i metrics
ti
and how those metrics impact each other
& Understand the root-causes of p
poor p
performance to determine corrective
options and simulate impact of potential solutions

SAP 2010 / 20

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