Ensure the right Inventory at the right
place, on time, and every time
Joseph Grobler
Reveal USA
Premier Sponsor
Platinum Sponsor
Produced by:
Basic hypothesis
 There are inefficiencies within all functions of the supply chain
 It is understood that the chain is only as strong as the
weakest link, yet few organizations are able to link together the functions
in an integrated way and root out the inefficiencies one at a time, while
validating the strengthening supply chain
 SAP’s real strength lies in its integration capability
 Implementation decisions, individual’s understanding, knowledge of what
the system has to offer, and daily working with the SAP system all have
the ability to overcome the inefficiencies
 This session helps you to identify where you can reduce costs and
strengthen your supply chain
2
2
Issues within a typical maintenance
MRP
engineering SC
•
•
•
•
SUPPLY
SUPPLIER
• Late deliveries
• Incomplete
deliveries
• PO # not reflected
• Delivered to the
wrong location
3
Not trusted
Not used
Not understood
Not working correctly
DEMAND
WAREHOUSE
• Non-moving parts
• Incorrect parts held
• Poor stock counting
• Use obsolete stock
• Issues without
reservations
PROCUREMENT
• PO after the fact
• Unprocessed purchase
requisition
• Undelivered PO
• Incorrect supply
lead times
• Delivery date not aligned
with reservation
requirement date
• Manual purchase orders
MAINTENANCE
• No forward planning
• Buy now, order later
• Free text purchases
• No reservation
• Re-open work orders for stock
adjustments
• Poor specifications
• Lack BOMs
• Satellite, Squirrel, or Magpie stores
• Add new requirements to old
requisitions
• Rotable/Repairable process is an
ongoing challenge
What I’ll Cover
Standard SAP tools to optimize Supply with Demand
Purchasing practices that optimize inventories and
improve service levels
Maintenance tools and practices that support supply
Key points to Take Home
Questions
What I’ll Cover
Standard SAP tools to optimize Supply with Demand
Purchasing practices that optimize inventories and
improve service levels
Maintenance tools and practices that support supply
Key points to Take Home
Questions
Integration
Using
Standard
Control the
Master
Data Tools
Process Performance
Exception
Monitoring
6
Master Data
Inventory Analysis
Inventory Analysis
Value Funnel
•
Working outside SAP
• Outdated data
• Transact different to expectation
• Manual intervention
• Customized reports
• 3rd Party alternatives
Information
Ownership
Grouping &
Prioritizing
EXCEPTION
MONITORING
PROCESS
PERFORMANCE
ANALYSIS
TOOLS
Report
Frequency
•
•
7
Stocking Policy
• Lot sizing
• Lead Times
• ATP rule
• MRP Controller Groups
• BOM’s
Recipes
Business Value
•
•
•
•
•
•
•
Stock
Service
Cost
Revenue
Information
Flexibility
Optimization
Exception Management in Supply
8
Demand
Over / Under
6
7
ATP
Rules
MRP
Actual
Inventory
Expedite
3
Finish
4
Supply
5
MRP
Planned Order
Purchase Requisition
Proposal
BOM
Schedule
Start
Process/Production Order
Purchase Order
8
1
Sales
Production
Maintenance
Integration
Plan
Can’t plan
Production Schedule
2
Schedule Firming
Exception Management on Supply activity
Often the exception messages are:
 Ignored
 Not understood
“It does not reflect our business”
9
The system is telling you that the strategy and the rules you put in place are not
correct, or not being adhered to.
The system is attempting to ensure the integration and the transactional automation.
Works Order Monitor
Not Started
10
Partially Complete
Complete
Inventory Availability for Works Orders
Non-Availability
Works Order
Requirement Qty
Available Qty
ATP Message
Required Date
11
Service Order Monitor
12
Process Analysis Tools and Graphs
13
Display Work Orders
Graphs that look Back and Forward
Future behavior based on planned
requirements
Past consumption based on historic
activity
Make changes and rerun the
future plan to find the ideal fit
15
We continue to work outside the system
Plan
Execute
Analyze
All within the
system
Increased
Effort and Cost
• Working outside the system
• Working outside of integration
• Very high manual activity
(correction and fix)
• Weak audit trails and transparency
• Nonstandard customization
16
Information Maturity in the Supply Cain
2
1
Data Integrity
Open Transactions
l Overdue
Transactions
On time Transactions
l Real-time
transactions
 Single Data Source
DataCleansing
and Process
l Data
Accountability
 Inside the System
Frequent
l Communications
Exception Monitoring
 Cooperation
 Data Accuracy
 Data and Process
Accountability
 User Confidence
 Lead Time Accuracy
HOUSEKEEPING
l
l
l
l
l
l
l
l
4
3
Business Rules
Process Optimization
Integration
Data
grouping(MD07)
Groups and
priorities
Exception
management
MRP rules plans
Maintenance
ATP management
Work
Shutdown
management
Lead Time/s
Customer
service
Service Levels
Master
data management
Exceptions
KPI
management
Master
Data
Automation
 lPM
value chain
time reduction
 lPMLead
strategies
Enhanced
process
 lLong
term planning
Enhance existing
 lOperational
planning
 functionality
Priority model
Collaboration
l
 Scheduling
model
 ‘Plan Do Review Revise’
 Walk down management
 Tagging of problems
 Workshops & Services
 Refurbishment
 Permit management
 ‘Commonality’
 Control over work
 Control over contractors
l Increase Service
Levels
Control over costs
 Improve
OEE
l Increased
Revenue
Improve ROI
 l Improve
Reducelabor
Valueutilization
of
Stock
Increase service
 l Improve
Reducemanagement
Operating
information
(Visibility)
Costs
l Set new targets
FUNCTIONALITY
BUSINESS VALUE
INTEGRATION
Business Value
OWNERSHIP, ACCOUNTABILITY, and GOVERNANCE
Get what was implemented to work as intended. Get
the processes integrated
copyright © 2008 Reveal. All rights reserved.
17
Get the system to work for
you, rather than you
working for the system
Get the system to work for
your business. Set VALUE
targets and achieve those
targets, using your system
The right approach
What I’ll Cover
Standard SAP tools to optimize Supply with Demand
Purchasing practices that optimize inventories and
improve service levels
Maintenance tools and practices that support supply
Key points to Take Home
Questions
real VALUE to business
Purchasing Practices That Inflate Costs and Inventory
Top five purchasing practices that inflate costs and inventory are:
1. A disjoint between supply and demand in the supply chain. Exception
2.
3.
4.
5.
19
message prove this.
Accountability for inventory levels. Warehouse, purchasing, or
maintenance?
Access to do MRP Master Data maintenance. Centralized or
decentralized.
Manual creation and modifications to Purchase Orders. Blanket
Purchase Orders are a big contributor.
The MRP strategy as maintained in the Material Master Data. Often
these don’t achieve the desired results
19
The Power of
Visualization
provides a compelling argument in
managing and making business
decisions when organizations learn to
use the visual tools and reports that
are standard in the system they
already have
Are managers using the system
as effectively as they could be?
20
Using the Past to Interpret the Performance
Consumption is
predictable
If consumption is so
predictable, why do we
supply in such an
unpredictable way?
• Varying lot sizes
• Varying cycle times
21
21
Predictable, Yet Out of Control
• High inventories
• Confused suppliers
Although predictable in consumption, this process
is completely unstable and out of control on the
supply end.
What will happen next?
22
22
Stock Optimization – The Opportunity
• V1
• ERSA
• LT is 115 days
Max Stock
ROP
How are we controlling this?
Stock Optimization – The Opportunity
• V1
• LT is 35 days
• Class A Material
Max Stock
ROP
Regular Stock outs
Can we improve this?
Stock Optimization – The Opportunity
Dead stock value = ????
• V1
• LT is 35 days
• Class A Material
Max Stock
ROP
Regular Stock outs
Dead Stock
2. Pressure from Within the Organization
Very often buyers have no say in the matter, and inflation of inventories
is out of their control







26
Engineering/Maintenance set the target stock figures
An unrealistic or ever changing Maintenance Demand
Weak preventative maintenance planning
Unreliable inventory accuracy
An email instruction from someone in Maintenance
Parts are delivered by the supplier before a requisition is created
MRP / ATP and supplier lead times are poorly managed, especially with
interdependent supply chains
26
ATP Across Interdependent Plants
Suppliers
5 days
RFQ
Reservation Triggers
System
Requisition
Created
Purchase Order
to Supplier
Procurement
30 days
Supplier Lead Time
Plant ABC
Shore Base PD Shipping Vessel
?
2 day
GR Lead Time
7 days
Delivery Lead Time
Central Platform PD
?
2 day
GR Lead Time
Plant WXY
TRLT = 46 working days
27
TRLT
= Total replenishment lead time
27
Supplier Lead Times are poorly managed
How are your suppliers performing?
≥ 4d early
1-3d
early
0-5d
late
6-10d late
> 10d late
Very Late Delivery
On Time Delivery
Very Early Delivery
48% late
19% on-time (or
is it?)
33% early –
inventories are
inflated
28
28
3. ERP or SAP Deficiencies
When the power of SAP’s “business” solution is not understood, the
system is often seen only as a transactional “IT” solution. This is
possibly the greatest contributor to inefficiencies and cost in the
supply chain.
 MRP is primarily used to propose planned orders and purchase
requisitions
o
Yes, some organizations actually create a planned order for something
they intend to purchase externally
 Spreadsheets are still the order of the day to calculate supply
quantities
 Third-party systems are used to calculate safety stocks and order
quantities in an “automated” fashion
 Purchase orders are manually created from the purchase requisition
 Safety stock is used as a reorder point
29
29
30
Get the Value by Controlling the Supply
•
•
•
•
•
Predictable consumption
Smaller lot sizes
Controlled cycles
Lower inventories
Higher turns
This SAP organization achieved an
overall inventory savings of > 40%
Achievable with high moving
consumable parts
30
What I’ll Cover
Standard SAP tools to optimize Supply with Demand
Purchasing practices that optimize inventories and
improve service levels
Maintenance tools and practices that support supply
Key points to Take Home
Questions
Management of Maintenance activities
FTM,
CBM
With accurate and well managed
Maintenance data Purchasing and supply are
able to provide a much better service and
inventory availability
Break
Downs,
Others
Direct
Backlog
Work management
•
•
•
•
•
•
•
Slide 32
Housekeeping
Work types
Master data
Approvals
Dates
Priorities
Basic design
Capacity evaluation
•
•
•
•
•
Housekeeping
Capacity available
Load distribution
Responsibilities
Basic design
Planning
Board
Scheduling model
•
•
•
•
•
•
•
•
Housekeeping
Future outlook
Managing system
Schedule lock
Relationships
Break-ins
Confirmations
Material availability
• Housekeeping
• Exception
•
•
•
•
management
Balancing schedule
loading and break-ins
Proactive procurement
Status management
Settlements &
Completion
Stock, non-stock, one-time-buys
& services
• Housekeeping
• Requirements planning
• Release strategies
PM Process Health Check points
1
2
3
1.1 Display
notifications
2.1 Display
email inbox
3.1 Display
failure data &
breakdown data
1.2 Display
work orders
1.3 Display
capacity
loading
1.4 Display
confirmations
2.2 Display
material
requirements
2.3 Validate
releases
3.2 Display callouts, walk
downs, NPR’s
3.3 Display
breakdown
history
NPR = No Planning Required (no work order to follow)
Slide 33
1.5 Display
settlement
balances
1.6 Display
costs
1.1 Display Notifications
Slide 34
1.2 Display Work Orders
Slide 35
1.3 Display Capacity Loading
BEHAVIOIR & RISK:
•No capacity planning
possible
•Labour costs and
contractor costs will be
un-manageable
•Resource utilization ineffective
Slide 36
1.4 Display Confirmations
BEHAVIOIR & RISK:
•This is a very old list of
confirmations – NO
confirmations were done for
the selected period
•Thus no costs can flow,
capacity used cannot be
cleared, work orders cannot
be closed, schedule
attainment not possible
Slide 37
1.5 Display Settlement Balances
BEHAVIOIR & RISK:
•2 days work done
already shows an
outstanding actual
balance
•Budget control becomes
a problem
Slide 38
1.6 Display Costs
BEHAVIOIR & RISK:
•Actual debits represents
material and services only
•Cost control will not be
effective
•Over expenditure can be
expected
Slide 39
2.1 Display email inbox (SAP, Outlook)
BEHAVIOIR & RISK:
•Inbox must be managed
every day
•If this is not done it can
lead to schedule break-ins
and poor service levels to
production
Slide 40
2.2 Display material requirements
BEHAVIOIR & RISK:
•Unsuccessful ordering of spares will lead to poor
schedule attainment and can negatively impact
production
Slide 41
2.3 Validate releases
BEHAVIOIR & RISK:
•If and when purchase releases are not monitored
regularly and purchase requests are not released in
time – this will lead to delays in performing
necessary maintenance work and ultimately
supporting production activities
Slide 42
3.1 Display failure data & breakdown data
BEHAVIOIR & RISK:
•Un-disciplined feedback on
equipment failures
•Equipment reliability
studies and preventive
maintenance strategy
design and optimization
depend on this data
Slide 43
3.2 Display callouts, walk downs, NPR's
BEHAVIOIR & RISK:
•The notification type has
been set up to capture
events like ‘call outs’, ‘walk
down inspections’ and ‘no
planning required requests’
provided the coding is
available
•This type of data will enable
much needed control over
call outs etc.
Slide 44
3.3 Display breakdown history
Slide 45
What I’ll Cover
Standard SAP tools to optimize Supply with Demand
Purchasing practices that optimize inventories and
improve service levels
Maintenance tools and practices that support supply
Key points to Take Home
Questions
Many people within the organization are introduced to SAP software
through training at the transactional level only
 Create a purchase requisition, do a goods receipt, etc.
 Very few have a clear understanding of the upstream and downstream
functions they impact, or are impacted by
Standard SAP tools and reports, which are aligned with integrated business
processes and designed to govern master data performance, are not
understood or allocated within the supply chain operations
Ability to analyze and interpret situations and opportunities, using
standard analytic techniques, is not being taught within the integrated supply
chain operations
Spreadsheet data is used for management reporting, because
management often doesn’t even work inside the system
47
47
Objectives:
•
•
•
•
Put management inside the system
Give management the vision and the ability to lead their
teams into integration
Structure the organization to suit integration
Educate the organization on how to monitor exceptions,
run reports, and do analysis
SAP R/3
HR
System
Focused education:
•
•
•
•
•
•
Integration
Exception monitoring
KPI-building across integration
Reporting and analysis
Business-to-business presentation
Management in real time
Management
Dashboard development in SAP NetWeaver® BW
Working and Managing Inside the System
Exceptions
Process
Analysis
48
48
• Supply chains are all about moving quantities in time, across an
•
•
integrated supply chain
Most organizations are very poor at integrated lead-time
management and loose out on the bottom line opportunities as
a result
Top five causes for inaccurate lead-time estimates are:
1. Master data lead times are the same since “go-live.” Lead times are not challenged and
maintained within daily activities.
2. Preventative Maintenance planning is not done inside of SAP, and breakdown maintenance
becomes the order of the day.
3. Supplier lead times are set much longer than they need to be to reduce the expediting
activity on the buyers, and suppliers don’t deliver to the delivery date.
4. The functions within the supply chain do not follow the plan.
• SAP is not working for the business
• Customized “Z” reports are developed while standard reports exist
49
49
Supplier Delivery Performance Monitoring
50
Very Late Delivery
On Time Delivery
Very Early Delivery
Only 21% delivered
on time
•
•
49% delivered very
early
Inventory is inflated
50
After Implementation Errors
• In an attempt to fix the post implementation issues, companies
continue down the road of poor decisions
1. SAP doesn’t work for our system; we need to bolt on a third-party solution
2. Our lead times aren’t correct; we need to develop a customized program
that updates the corrections automatically
3. We can’t manage our supply chain without these customized “Z” reports
4. External non SAP business consulting is what we need to fix our SAP
experienced problems
5. Maybe we need to re-implement
51
51
“You pointing at it won’t help!”
“I still have to add it to the B.O.M.,
create a material master and routing,
release it twice, stage it, transfer it and
confirm it......”
“Come back a week on Wednesday!”
real VALUE to business
Joseph Grobler
Reveal USA
jgrobler@revealvalue.com
Premier Sponsor
Platinum Sponsor
Produced by:
March 27 – 30, 2011
Hyatt Regency Huntington Beach Resort and Spa
Huntington Beach, California
Premier Sponsor
Platinum Sponsor
Produced by: