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Achieve Rapid Results Today and Long-Term Success Tomorrow

by Bob Ferrari | SAPinsider

October 1, 2003

by Bob Ferrari, SAP Global Marketing, Inc., and Katrin Ströbel, SAP AG SAPinsider - 2003 (Volume 4), October (Issue 4)
 

With IT budgets shrinking, solutions that can quickly demonstrate concrete, measurable value with short implementation cycles and quick ROI are more in demand than ever. Even so, companies still must keep an eye on their long-term strategies for the future of their supply chains. But what if implementing a focused project with immediate impact could also support your long-range vision? How can you sustain and enhance all that you gain with these quick implementations?

Consider inventory management, for instance. Reliable, accurate inventory handling systems are vital to every aspect of manufacturing, distribution, and marketing. Now, though, many companies are shifting the emphasis from production (push) to demand (pull), enterprises face shorter product life cycles, and, in this networked economy, demand can shift overnight. Manufacturers, distributors, retailers, and, especially, consumers increasingly expect products and delivery processes to be tailored to their specific needs. Stakeholders continue to see efficient inventory management as an indicator of an enterprise’s well being.

Under increasing pressure to not only anticipate but also proactively respond to customer demand, companies need to quickly ramp up their demand planning and replenishment efforts. As a result, they find themselves with immediate requirements for accurate demand information and forecasting, as well as for consistent information shared across internal and external organizational boundaries.

To help customers meet these challenges in both the short- and long-term, SAP has selected specific, tightly focused components from the mySAP Supply Chain Management (mySAP SCM) solution and made them available as standalone offerings. The first two are now available: SAP Collaborative Replenishment Planning (SAP CRP), designed specifically for the consumer products industry, and SAP Demand Planning (SAP DP), to support the demand planning needs of a broad range of enterprises. With attractive pricing and implementation options for SAP DP and SAP CRP, most companies can expect to see a fast ROI for these solutions.

But these applications provide more than just a short-term fix for specific business pain points. SAP will continue to provide them as part of the extensive mySAP SCM solution, so these applications are ready to deliver competitive advantage by enabling a long-range, strategic vision for your supply chain.

No Need to Choose Between Short-Term Returns and Long-Term Investments

In SAP Demand Planning and SAP Collaborative Replenishment Planning, SAP offers two powerful, easy-to-implement applications from mySAP SCM to meet business demands today and tomorrow. By creating a baseline for building out more complex business scenarios and offering a seamless upgrade path, these two applications help customers take the next steps forward on a strategic roadmap for their supply chain.

SAP Demand Planning
SAP Demand Planning, as part of the SAP Advanced Planning and Optimization (SAP APO) component within mySAP SCM, provides companies with all of the tools required to implement and manage a robust process for forecasting and managing overall customer demand.

As a standalone offering, SAP Demand Planning includes SAP APO and sophisticated statistical forecasting techniques coupled with data representation and demand management features that support processes related to planning for customer demand. For instance, the planner can highlight a specific item under “APO Product” in the SAP Demand Planning example in Figure 1, and SAP DP lists past production data, calculates forecasted demand, and presents the data in table and graphic form.

Figure 1
Demand Planning Screen in SAP DP

SAP DP embodies all the features of a best-of-breed demand planning solution (see Figure 2) and supports the drive toward collaborative, consensus-driven demand planning processes, including delivery of content over the Internet.

Multilevel planning
Forecasting and planning are supported at any level and any dimension.

Data analysis
Gives customers flexibility to easily view large volumes of data, both in tables and graphics.

Statistical forecasting
SAP DP comes with a complete toolset of practical and proven tools that include univariate forecasting, causal analysis, and composite forecasting.

Trade promotion planning
Includes the ability to track and factor the effect of any product trade promotion on any level, including integration with the mySAP Customer Relationship Management (mySAP CRM) solution.

Collaborative demand-planning processes
Planners can enable collaborative planning by sharing demand plans with different process participants to collect, forecast, or plan demand from multiple input sources. Offers the ability to leverage the Internet for sharing content with partners (for example, via planning books).

Figure 2
SAP DP Features At a Glance

SAP DP is ideal for getting forecasting up and running in as little as six months, depending on the complexity of customer requirements. But it can also be leveraged in a future, broader implementation of supply network planning (another of mySAP SCM’s capabilities), or in key customer planning and replenishment programs, such as Vendor Managed Inventory (VMI), or to meet the demand-planning criteria of a Collaborative Planning Forecasting and Replenishment (CPFR) program (discussed later in this article). With SAP DP, you also gain an entry point for future deployment of other supply chain planning applications in SAP APO.

All in all, SAP DP provides key operational benefits:

  • Lowered costs by exchanging crucial information to help reduce inventory build-up, streamline overall cycle times, and make more efficient use of resources.

  • Improved customer service through more accurate and timely order fulfillment, increasing order fill-rate and on-time performance.

  • Increased responsiveness due to broader visibility into demand and supply information, with the ability to manage unanticipated changes in demand or supply.

  • Enhanced productivity among planners, as well as operational and other functional personnel throughout the supply chain, due to a more timely planning process and real-time availability of key information.

What’s CPFR?

CPFR (Collaborative Planning, Forecasting, and Replenishment) is a collection of business practices designed to provide visibility into end-customer demand.1 CPFR processes are designed to support shared, consistent forecasts of sales and orders between individual manufacturers and distributors. They are particularly helpful for avoiding unexpected special promotions and ensuring that other factors — seasonal sales, etc. — are accounted for by both the retailer and the manufacturer. The process model involves the manufacturer and distributor creating a joint business plan, including exception criteria. Sales and forecasts are created together, and resolving exceptions is done collaboratively as well.

CPFR development began in 1995 and is currently promulgated by the Voluntary Interindustry Commerce Standards (VICS) committee, which includes more than 100 leading U.S. retailers and trade associations.

1 For details and case studies on CPFR guidelines, including a sample process model, see www.cpfr.org. For more information on VICS, see www.vics.org.

SAP Collaborative Replenishment Planning
In their relationships with retailers and distributors, manufacturers are increasingly required to take greater responsibility for sharing inventory planning and replenishment information by implementing a CPFR program. CPFR is a set of collaborative business practices supporting shared, transparent inventory forecasting and replenishment (see “What’s CPFR?”). With US-based retailers like Wal-Mart and Target requesting or even requiring that top suppliers implement CPFR — sometimes in a matter of months — this is a looming issue for the consumer products (CP) industry. These two retailers alone can represent up to 50% of a CP manufacturer’s revenue, and other retailers are reportedly planning to follow suit.

Despite this pressure from retailers and the valuable returns CPFR has shown, many CP manufacturers have been slow to respond for many reasons: CPFR can be very labor intensive, and most CPFR solutions are not sufficiently automated for the exception-handling steps (e.g., managing discrepancies or conflicts in a forecast) required in the CPFR model — leading to follow-up emails and phone calls for resolution. What’s more, most CPFR-compliant solutions currently on the market are point solutions that are expensive to integrate with backend planning and transaction systems.

To make CPFR implementation more attractive and manageable, SAP created Collaborative Replenishment Planning (SAP CRP) specifically for the consumer products industry (see Figure 3). SAP CRP implements automated exception-based CPFR processes, such as order and sales forecasting, which allow you to integrate a retail partner into your supply chain without overburdening your current staff (see Figure 4). SAP CRP is a scalable solution that is VICS-certified and that interoperates with any VICS-certified system, such as Wal-Mart’s RetaiLink.

Forecast management
Automated forecast reconciliation process that alerts staff to exceptions.

Order management
Automated order reconciliation process.

Alert overview
Web-based, task-oriented GUI that delivers a complete view of all current exceptions along with the data needed to resolve them.

Alert generation
Tool that allows suppliers to create and manage alerts and alert thresholds using simple rules.

Planning book
Web-based GUI for sharing forecasts with partners.

Figure 3
SAP CRP Features At a Glance

Figure 4
Planning Book from SAP CRP

Companies using SAP CRP can quickly and efficiently respond to a distributor’s request to implement CPFR. SAP CRP is built on the scalable, open SAP NetWeaver technology platform, and integration with most backend planning and transaction systems is a snap via SAP-supplied connectors and XML.

Benefits of SAP Collaborative Replenishment Planning include:

  • Increased visibility and velocity — SAP CRP brings visibility to end-customer data. More information can be handled faster.

  • Minimized inefficiency — Time lags in communication are eliminated, and the exception-based process focuses in on potential problem areas.

  • Improved execution of sales and production plans — Companies can proactively manage their supply chains. Aligning their goals with their partners’ results in increased sales and reduced costs.

Conclusion

Given today’s demand for solutions that are quick and connected, SAP DP and SAP CRP meet customers’ needs for a running start in special aspects of their supply chain initiatives. Because SAP DP and SAP CRP are also packaged within the mySAP SCM offering, they offer low-risk, quick implementation and a tangible ROI that supports broader supply chain initiatives in the future.

For more information on SAP DP, see www.sap.com/solutions/scm/ demand/index.asp.

For details on SAP CRP and mySAP SCM replenishment features, see www.sap.com/solutions/scm/ replenishment/ index.asp.


Bob Ferrari is a Director of Product Marketing for mySAP SCM and a member of SAP Global Marketing, based in Boston, Massachusetts, USA. He is responsible for driving inbound marketing processes for the planning capabilities within mySAP SCM and other products. Before joining Global Marketing, Bob was a Research Director at AMR Research, delivering client research in the areas of supply chain, procurement, and ERP processes.

Katrin Ströbel is a Marketing Manager for mySAP SCM at SAP AG in Walldorf, Germany. She is responsible for driving outbound marketing processes, including launch management and partner marketing and communication. Before joining global marketing, Katrin was Product Manager for Network Design and later part of the GBU SCM's program management team, where she was primarily responsible for the supply chain planning and supply chain coordination focus areas.

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