How Deloitte helped Cameron Achieved Sales and Operations

Planning (S&OP) Excellence at Cameron using SAP APOs

Characteristic-Based Planning
Vikas Dhand
Deloitte Consulting LLP
 Contents
Cameron Overview

Manufacturing Strategies
Introduction to Manufacturing Strategies
Configure-To-Order (CTO)/ Variant Configuration Overview
Cameron complex manufacturing scenarios

Key planning challenges at Cameron

Sales & Operations Planning (S&OP)

What is S&OP
Why S&OP is important in MTO Environment
Key Business objective for S&OP

SAP APO Characteristic Based Planning

APO Characteristic Based Forecasting
How Deloitte Helped Improve S&OP Process at Cameron
Deloitte Solution Highlight- Overview & Detail
Deloitte Solution Highlight- Tool Limitation
Camerons Improved S&OP-Business Benefits

Wrap Up
Key Take Away
Question
 In This Session

We will discuss how Deloitte helped Cameron

Improve its S&OP process

Optimize forecasting and supply planning by leveraging SAP ECC & APO-
Characteristic Based Planning (CBP)
 Cameron International - Facts

Cameron is leading provider of flow equipment products,

systems, and services to worldwide oil, gas, and process
industries

Fortune 500 company

$8.05 billion in revenues in 2012

Leadership position in most of the market segment served

Leading aftermarket service provider

25,000+ employees in 300+ locations worldwide

Cameron International Market Coverage

Refining/
Offshore Drilling Offshore Production Topsides Processing Petrochemical/LNG

Onshore Production Subsea Production Transmission/Storage Industrial

Cameron is in nine market segments, offering a full suite of

products and services to the drilling, production,
processing, refining, petrochemical and LNG, transmission
and storage, and industrial segments of the industry.
 Manufacturing Strategies at Cameron

Manufacturing strategy determines the degree of product customization

that is offered to customers.
Delivery Lead Time

Make-to-Stock Engineering Procurement Processing Assembly Shipping

(MTS)

Reduced Delivery Lead Time

Delivery Lead Time

Assemble-to-Order Engineering Procurement Processing Assembly Shipping

(ATO)
Delivery Lead Time

Increased Product Customization

Configure-To-Order Engineering Procurement Processing Configuration Assembly Shipping
(CTO)
Delivery Lead Time

Make-to-Order Engineering Procurement Processing Assembly Shipping

(MTO)
Delivery Lead Time

Engineer-to-Order Engineering Procurement Processing Assembly Shipping

(ETO)

Customer Order-
Forecast-Driven Driven

Key:
 SAP CTO/Variant Configuration Overview

Class Characteristic Char Values Object Dependencies

2 IN Components (2 BODY ASSY, 2 STEM ASSY)

Valve Size 4 IN Components (4 BODY ASSY, 4 STEM ASSY)

6 IN
Constraint - Invalid Combination
150 PSI

Ball Valves Pressure Class 300 PSI Operation (Machining = 24 Hrs, Workcenter = M1)

600 PSI Operation (Machining = 48Hrs, Workcenter = M2)

Raised Face Price = +$400

End Connection
Flat Face

T3 Default if (Size = 2 IN and Pressure Class = 300)

Trim
T7 Default if Pressure Class = 600

GB1
Yield Strength
GB3
Object Dependencies identify rules for :
Configured Products Characteristics are Characteristic Values Defaults/ Constraints
are assigned to a used to define product identify options within Pricing
Class. features. product features. BOM Components
Routing Operations
 Cameron Manufacturing Scenarios/Requirements

Single Product Line may be sold using multiple scenarios

Make To Order VC - Dynamic BOM/ Routing

Engineering To Order VC - Order specific BOM/ Routing

Engineering To Order Finished Product
Used when customer requirements are too complex to handle with VC
Make To Order Product Variant
Low Sales Volume - Normally VC material but Material Variants defined for STO process

Make To Stock Product Variant

High Sales Volume - Material Variant functionality used to simplify BOM/ Routing
maintenance

Business requirement was to be able to plan a product line at a characteristic level

irrespective of the manufacturing scenarios (KMAT/ FIN/ Material Variants) .
 Key Planning Challenges at Cameron

Lack of collaborative planning. Master plans, production plans and production schedules change
frequently.
Configured products have a very large number of features and options.
Sales history is not always a good predictor of future demand.
The same product lines are using a mix of Configurable Materials, Product Variants and one-off
finished products (ETO).
Lack of clear visibility on capacity utilization, forecast accuracy, obsolete inventory, product-to-market
time and transportation costs
New products regularly miss their launch dates.
Infinite planning & cumbersome capacity leveling.
Lack of long term visibility to the suppliers.
Product phase-outs are costly.
Inaccurate Financial Plans.
 Case for an Improved S&OP Process at Cameron

Executive S&OP via PowerPoint and Spreadsheets

Market Indicators
Demand Planning CRM- solid
Manual forecast No simulations for available but not Forecast Models
on spreadsheets or forecast data not
to suppliers supply capacity identified for all built only for 2
non- existent available.
Products Product Lines

Supplier ECC Customer

Execution System ECC

What is Sales & Operations Planning

S&OP Process S&OP is a collaborative, cross-functional, periodic

process to reach consensus and set future
direction based on a single operating plan.
Step 1: Step 2:
Demand Supply
Review Review
- What and who?
- Time horizon: multiyear or annual
- Linkages to business or functional strategies
- Sample output: service policies
Strategic

Step 4: Step 3:
Executive Pre- S&OP - How much?
- Time horizon: quarterly or monthly
S&OP Meeting Tactical - Forecast driven
Meeting - Sample output: monthly production plan

- Where and when?

- Time horizon: weekly, daily, or shift
Operational - Order driven (internal or external)
- Sample output: production schedule

- Do it
- Time horizon: real time
- Order driven (internal/external)
Executional - Sample output: execution
 Why S&OP is important in MTO Environment

Forecasting is critical even in MTO environment. Customers

require custom-manufactured products in the shortest possible
time
MTO products may have several sub-assemblies/components
that are built/procured to a forecast in order to reduce
overall lead times

MTS products are sold from inventory; MTO products are sold
from capacity

Long-range capacity planning (long before customer order is

received) is critical to ensure quick cycle times and on-time
delivery
 Key Business Objectives for S&OP at Cameron

For Variant Configured Product Lines (Configure-To-Order

Manufacturing Strategy)
Able to plan a product line at a characteristic level irrespective of the
manufacturing scenarios (KMAT/ FIN/ Material Variants)

Plan for long lead shared components (manufactured or procured) before

customer order is received

Validate manufacturing capacity based on Forecasted+ Actual

Demand

Increase involvement of Sales function in the Planning process.

Improve Forecast Accuracy

 SAP APO- Characteristic Based Planning (CBP)

Product Loc Size Pressure End Conn May Jun Jul Aug Sep Oct

CAM_PLN A311 2 150 RF 10 15 10

CAM_PLN A311 2 300 WE 20 30 20
CAM_PLN A311 4 150 RF 40 60 40
CAM_PLN A311 4 150 WE 80 120 80
CAM_PLN A311 2 150 RF 15 15 15
CAM_PLN A311 2 300 WE 30 30 30
CAM_PLN A311 4 150 RF 60 60 60
CAM_PLN A311 4 150 WE 120 120 120
CAM_PLN A311 2 150 RF 15 15 15
CAM_PLN A311 2 300 WE 30 30 30
CAM_PLN A311 4 150 RF 60 60 60
CAM_PLN A311 4 150 WE 120 120 120

Characteristics-Based Forecasting (CBF) is a powerful tool that enables you to forecast

demand on both the product and the characteristics level.

In Characteristics-Based Forecasting, we can produce demand plans for combinations

of characteristic values or for individual values. We generally restrict the
characteristics used in CBF to those that are important for planning purposes.
How Deloitte Helped Improve S&OP Process at
Cameron

Generate
Baseline
Forecast
Demand Planner
Demand Planner

Develop
Release Consensus
Unconstrained
Demand Plan
Sales Forecast

Demand Planner/ MPS

MPS Planner
planner
Validate
Develop Consensus
Manufacturing
Demand Plan
Capacity

Consensus Demand Plan - One Number that drives Execution

 Deloitte Solution Highlights - Overview
CBP Cube Fcst
BI (Versioned) Accuracy
7c Report

Backup Transfer
7a
APO BI History Cube Cube
Cube 7b

3b 3c
Adjustments to Sales Generate Dependent 5b
CTM Finite Capacity Planning
Forecast Demand
(Simulation Vers)
(PKMAT+Char) (Simulation Vers)

Manage History
3a
(PKMAT+Char) 5a
1c

Statistical Fcst
DP 1d (PKMAT+Char)
1b 4

2
Opportunity Fcst Sales Fcst Consensus Fcst
(PKMAT+Char) (PKMAT+Char) (PKMAT+Char)

Manual Fcst
1f (PKMAT+Char)

5c 5d
1a Sales Order CTO
MRP Forecast Consumption Component Planned /
ECC Planned Order PIR Components
Sales Order FIN Production Order
6b 6c
6a
Sales Order PV 1e

CRM Opportunity
 Deloitte Solution Highlight-Configurable Planning
Material
Sellable KMAT (SKMAT) Planning KMAT (PKMAT)
Size Size
2, 4.. 2, 4,
6, 10, 12..
XXX
Pressure Class
150 psi,
300 psi..

Yield Strength Pressure Class

Stem Size N, GB1 ASME150
1.0, 1.5 End GB5.. ASME 300..
2.0.. Connection
FF, RF..

Wall Thickness Trim

0.25, 0.5, T3, T7 Trim End Connection
0.75 Standard T3 Flanged FF
Standard T7.. Flanged RF..

Yield Strength
N, GB1
GB5..

Using Planning KMAT simplifies forecasting & planning process

Planning KMAT material holds forecasted demand
Planning KMAT allows us to consolidate history/ forecast at a characteristic level
Use of Planning KMAT material overcomes the limitations of CTM support for complex
characteristics & object dependencies.
 Deloitte Solution Highlight- PKMAT Product Data
Structure
Maintain representative critical sub-assemblies in Planning BOM
VC Material on Sales
Planning VC
Order

SKMAT
Make-To-Order PKMAT
10
10
20

Make-To-
Stock
A11 A12 A13 A21 A22 A23 B1 B2 B3 A12 A23
VS = 16 VS = 16 VS = 16 VS = 16 VS = 16 VS = 16
VS = 16 VS = 16
PR = 600 PR = 600 PR = 600 PR = 600 PR = 600 PR = 600
PR = 600 PR = 600
EC = WE EC = WE EC = WE EC = WE EC = WE EC = WE
EC = WE EC = WE
TR = T31 TR = T30 TR = T3 TR = T31 TR = T30 TR = T3
YS = x60 YS = x61
YS = x60 YS = x60 YS = x60 YS = x61 YS = x61 YS = x61
30 50 70 120 140 160
40 60 80 130 150 170 90 100 110 Representative
critical sub-
P1 P1 P1 P2 P2 P2 P3 P3 P3 assemblies

PIR sent at this

level to ECC from Critical Critical
APO Component Operation
 Deloitte Solution Highlight- Merge Order History

Custom interface to merge order history with

FIN
SKMAT
matching configuration. Product

Product
For VC scenario, sales order configuration is used. Variant
For FIN type materials, Engineering classification
(Class Type = 001) is used.
For Material Variants, material/plant level
classification linked to configurable material is used.
Sales from distribution centers is consolidated into
Consolidated Sales History @ PKMAT Level
manufacturing plant.

History is first loaded into APO BI and then to

Planning Book.

Standard BAPI for Planning Area upload does not

work with CBP !
 Deloitte Solution Highlights - Opportunity Forecasts

Sales history is not always a good predictor of future demand in MTO environments.
Therefore, potential order pipeline (the sales funnel) visibility is key to Demand Planning.

Instead of simply specifying total anticipated pipeline demand, maintaining individual

opportunities and related forecast quantities in DP allows the sales teams to provide
forward-looking input to the demand planning process

Opportunities is integrated into DP from an Microsoft

Dynamics CRM system depending on the stage in the sales
funnel (Leads Opportunities Quotes Orders)

Sales Funnel

The total of opportunity quantities is reflected in the Opportunity Key Figure in the
Planning Book leveraging the same custom functionality developed to upload order history
from ECC into APO.
 Deloitte Solution Highlights - Forecast Consumption

Standard SAP Forecast Consumption could not be used because Forecast and
Sales Orders are for different materials.

Net Sales Forecast is calculated using a BADI macro in DP = Sales Forecast

Order History. (BADI macro used instead of regular macro due to complexity of
forward/ backward consumption requirement).

This avoids doubling of demand in CTM Actual demand from Sales Orders will
come from Production Orders/ Planned Orders for the Sellable KMAT.
Forward 1 bucket/ Backward 1 Bucket consumption -
M1 M2 M3 M4 M5 M6 M7
Forecast 10 15 5 10 5 0 10
Sales Order 15 5 10 0 10 0 0
Net Forecast -5 10 -5 10 -5 0 10 Step1 (Without backward consumption)

0 0 0 5 0 0 10 Step 2(With backward/forward consumption)

Net Forecast
 Deloitte Solution Highlights - Capacity Validation

Net Unconstrained Sales Forecast released to Simulation Version.

CTM used for capacity validation and finite capacity planning. CTM explodes
PDS of Planning KMAT based on object dependencies.

CTM cant run on the Sellable KMAT (as CTM cannot evaluate complex object
dependencies). Instead Planned Orders and Production Orders from ECC
(generated by MRP) are CIFed to APO to generate work center load.

Review Demand
requirement dates Vs
Supply Receipt dates

Review aggregated
and also details @
product level
 Deloitte Solution Highlight- Sales Forecast
Adjustments
When CTM is run based on Unconstrained Sales Forecast, it may push out Planned Orders if
capacity is not available

Planner reviews planned orders based on characteristic values.

Pegging Overview shows forecast pegged to planned orders. This helps planners identify
which forecast cannot be met.
 Deloitte Solution Highlights Forecast Transfer to
ECC
Demand Plan at characteristic level cant be released to ECC directly. Instead consensus
demand plan is exploded using CTM to determine component requirements (in a separate
simulation version without considering resource constraints.)
 Deloitte Solution Highlights Forecast Accuracy
Forecast (Statistical/ Opportunity/ Sales/ Consensus) + History transferred to BI
(different version every month).

Lagged Forecast Accuracy report developed at Product Line + Characteristic Level in BI.
Metrics include - Forecast Error/ MSE/ MAPE, etc.
Since BI cannot handle an indefinite number of characteristics, update rules are used to translate classification characteristics
(different for every product line) into 4 generic InfoObject characteristic name value pairs.
 Deloitte Solution Highlight- Tool Limitation
Ref: SAP Note- 1284461

There is no possibility to release any planning data from DP to SNP with the intention to
use in SNP heuristic (Location; Multilevel; Network); SNP Optimizer. CBF planning results
can only be used in CTM and PP/DS scenario.

Standard CBP functionality does not support Proportional Factor calculation

(/SAPAPO/MC8V) at classification characteristic level.

For reference characteristics only components /SAPAPO/CULL_CFG_COMPONENT-QUANT

and /SAPAPO/CULL_CFG_MODE_PROCEDURE-DURVAR are supported.

Complex select conditions are not supported. Multi-value characteristics are not
supported.

PDS must come from an ERP system. The supply chain should not mix VC and CDP
scenarios.

Multilevel Phantom and component duplication under phantom are not supported.
 Camerons Improved S&OP-Business Benefits

Improved predictability and accuracy of customer commitments

Planning based on consensus across functions- One Number

Alignment between strategic plans and day-to-day activities

Greater visibility of demand and supply across the company- improved

decision making (e.g. Make Vs. Buy)

Improved inventory management- Optimized inventory Levels

Predictable throughputs- Minimized hockey stick effect

Shortened customer lead times for MTO/CTO product lines

Improved Product Lifecycle Management process

 Key Points to Take Home

Forecasting is critical even in MTO environments- MTO products

are sold from capacity, just as MTS products are sold from
inventory
In MTO environment, Sales history is not always a good predictor
of future demand.
APO features allow sales function to provide input into the
Demand Planning process at aggregate levels.
Identify key business roles and ownership to support the APO
implementation
Engage business users early on to define scope of APO. Keep initial
scope simple and ramp up over time. Crawl Walk Run!
Size your system adequately using SAP Quick Sizer.
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Appendix
 APO CBP before & after SCM 7.0

CBP in APO (VC Scenario) CBP in APO (VC Scenario)

Before SCM 7.0
Demand Plan (@characteristic level) of
Configurable (KMAT) material released
to Inactive Version.
PP/DS run explodes object
dependencies and creates dependent
demand of components. (SNP/ CTM is
not supported)
Dependent Demand of components
converted into Forecast of components
in Active version (and/ or ECC PIRs).
SCM 7.0 Onward
Demand Plan (@characteristic
level) of KMAT material released
to Active Version.
CTM can be used for supply
planning (in addition to PPDS)
Forecast of KMAT consumed by
Sales Orders (with matching
configuration).

Forecast consumed by dependent

demand of Sales Order in Active
version.
 Whats New in APO 7.0

Application Component-wise New Functionalities

Application New Industry Coverage Enhancement Details
Functionality
APO Characteristic- Mill, Industrial
based Cross Machinery
Location Planning & Components, Hi
Tech, Chemicals,
Pharma
New Cross Location Planning Heuristics
(JJ_INT_SRC, SAP_PP_022)
Shelf Life Propagation across locations and
production levels
Rescheduling of Operation at Block Changes
Shipment Creation in TPVS based on planned
Stock Transfers

Planning with Configuration in MTS segment

for non-DIMP clients
 APO Characteristic Based Forecasting

APO supports two configuration schemas [client level

setting] :

Variant Configuration (VC) Allows configuration only for

sales orders. The VC-configuration scheme was developed
mainly for the automotive and engineering industries and is
closely linked to the variant configuration in R/3.

Characteristic Dependent Planning (CDP) - allows a

configuration for other objects like forecast, planned orders,
production orders and batches. The CDP configuration
scheme was developed mainly for the mill industries.