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Supply Chain Collaboration Solving the Supplier Integration Problem

Patni Computer Systems - Sapphire 2009

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Agenda
Economic Recession Impact on Supply Chain SAP SNC Solution & Patni Add-on Capability Patnis Inventory Risk Liability Solution for High Tech Supplier On-boarding Methodology Deployment Roadmap

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Impact of Economic Recession on Supply Chain

What is the committed inventory with my suppliers? Can I reduce the committed inventory with my suppliers?

Demand is reducing
Which location, Which supplier has the highest inventory? What is the dollar value of the committed inventory?

Demand is cancelled

How much inventory I am liable for?

What is the total cumulative lead-time?

How total cumulative lead-time is affecting my inventory liability?

Can I reduce the total cumulative lead-time?

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Typical Scenario in CPG Industry

Performance Dimension Metric Inventory Days of Supply Total Inventory Inventory Carrying Costs (% of Revenue) Inventory Analysis Inventory Obsolescence (% revenue) Safety Stock (% revenue) Transportation costs (% revenue) Supply Chain Planning Cost (% of Revenue) Supply Chain Planning FTE (per $ Billion in Revenue) Client1 65 1.3% 0.6% 60% 5.86% 0.90% CP Ind. ( n=) Avg 75 3.2% Q1 28 0.6%

Potential Benefits: Value of Closing the Gap

Effectiveness: Reduce Inventory Carrying Cost ($M)

$15.5 $0.0
Effectiveness: Increase free cash flow One-time ($M)
$136.1

0.95% 0.15% 64% 2.6% 30% 0.01%

$0.0
Effectiveness: Reduce Obsolescence (One-Time $M)

0.37% 0.03%

Internal Costs/ Staffing Levels

$10.0 $0.0
61.4 51.3 5.6
Below Average Between Average and 1st Quartile

Gap to Q1 Gap to Avg

First Quartile

Key Observations
  

Source - SAP

Client has higher inventory carrying cost which could be due to high costs of capital, high inventory obsolescence, high DC operating costs Client significantly higher transportation costs which could be due to increased expediting of shipments. Client has significantly high safety stock and days of supply as compared to Q1 peer group.

Worse than Average

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Between Average and First Quartile

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First Quartile

SAP SNC Solution to Supplier Integration Problem

SAP SNC 7.0 Supply Network Inventory
Enable end-to-end and real time net work inventory visibility
User Interaction Web-Based User Interface Business Processes

Purchase Order process

Real time collaboration with suppliers Reduced FTE for PO follow-ups

Supplier Managed Inventory Purchase Order Process

Dynamic Replenishment Supply Network Inventory Responsive Replenishment

Kanban Process

Contract Manufacturing Purchasing

Complete visibility and control on contract manufacturing purchasing Share forecast of FG seamlessly

Release Process

Contract Mfg. Purchasing

Delivery Control Monitor

Supplier Managed Inventory

Let Supplier manage component inventory levels at your locations Reduce inventory burden and stock out risks
Work Order Collaboration Demand Collaboration

Basic Services
Master Data Exception Management Data Validation

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SNC Benefit Derivation

Benefits
Streamlined Supplier Communication Productivity Improvement Reduction in Buyer Manual Effort  

20% to 30% improvement (annual benefit) 10% to 15% improvement (annual benefit)

Value from SNC Supplier Collaboration

Lead Time Improvement Inventory Reduction Lead Time Variability Reduction  

7% to 10% improvement (one-time benefit) 15% to 20% improvement (onetime benefit)

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Leverage SAP SNC Capabilities with Patni Add-on Features

SAP SNC Standard Modules Patni Add on Features

 Simplified Navigation & Screens for users of outsourced manufacturing locations

 Templates for uploads of Component Demand / production schedules / planned receipts / on-hand inventory data  Custom functionality for creation of Purchase Requests from SNC / customized alert framework  What if Analysis using Xcelsius Dashboards  Information Broadcasting over different mediums

SK3

Improve Visibility & Collaboration using SAPs SNC Solution

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Slide 8 SK3 May need to modify LHS graphic to avoid redlined items as currently all modules are relevant for SNC - am still not talking at this stage about Risk Liability Also need to check with Ramesh but we should be able to integrate reports and other functionality onto handhelds (will send u mail on this from Ramesh) Would this graphic work ? Can u think of text block at bottom outlining benefits of using SNC with PAtni Add-on features
Suraj Krishnan, 5/11/2009

Simplification Example all key functions on 1 screen for users at the outsourced manufacturer location
This helps Vendor User to Search Work Order based on only the required search criteria. In most cases the Vendor Knows the PO Number that he is working with than the WO Number

The related WO is pulled up and displayed in the PO Information Area

This section allows the Vendor to modify the Planned Production Schedule and also Split Production Runs. This section displays the completed Production Status. Similar to the Production Progress in Standard SNC

The Actual Production is reported here. This creates a line for the corresponding Phase. The updated data is displayed in the Production Status above.
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Work Order Processing - Batch Update for QC Phase

This screen allows updating the QC Phase in a Work Order. Since hundreds of records are created each day, there is a requirement to be able to update multiple Orders simultaneously. On Save the program creates lines for the QC Phase for all the Orders selected based on the Lot status (Custom field).

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SC Visibility & Risk Projections Business Challenges

Contract manufacturer
Component Inventory

How much Inventory am I holding?

Component Inventory

Finish Product Inventory

Finish Product Inventory

Component Inventory

Supplier
Component Inventory Component Inventory WIP

My Plant Distribution Centre

Suppliers Supplier

Suppliers Supplier

What if the demand reduce/ cancel? How can I reduce my Inventory Liability?

Demand

Inventory held by supplier is not reflected in my books

Customer

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Patni Solution for High Tech - Inventory Risk Liability Analytics using SAPs SNC
Traditional inventory metrics fall short to address these issues and guide supply chain managers Traditional inventory metrics are lagging indicators i.e. it takes weeks or months for the problem to register in metrics In todays environment, companies should measure and evaluate Inventory Risk instead of just Inventory Look at the whole supply chain and not just the portion within their own organization

Inventory Risk Liability Analytics addresses this gap by developing N-tier inventory metrics which helps in informed decision making in supply chain

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Decision Making w/o Risk Liability Analytics

Check finish product Inventory, WIP and component inventory owned by me. Use Inventory Reports provided by ERP. Check component inventory liability across supply chain. Contact Suppliers to get the inventory data at their end. Reconcile data from various suppliers Check contract agreement with each supplier. Calculate liability of component inventory at each suppliers Compare the actual inventory data with actual requirements Calculate liability of unused component inventory at each suppliers Complexity and volume of data increases with number of components and suppliers

Contract manufacturer

Supplier

 Laborious manual consolidation and data comparison

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Suppliers Supplier

Suppliers Supplier

Decision Making with Risk Liability Analytics

Business Question - Demand for a product is reducing by 20%. What will be my inventory liability for unused components?
Easy intuitive dashboard to pin point Inventory Risk across network Simulate changing business situations and understand impact on Inventory Risk

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Inventory Exposure - Definition

It is the amount of money at risk in the supply chain at any given point of time due to unsold inventory It depends upon Price (Cost) of finished product Cumulative Lead-time to build finished product Average Demand for the finished product

Risk Liability KPIs Explained

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Inventory Exposure Solution Overview

Check component exposure details in next tab

Inventory Exposure Turns

Inventory Exposure

Inventory Exposure Percentage

Trend values from historic data

Provides projection of inventory liability in dollar terms, percentage as of Cost of goods sold and exposure turns. Indicates high vulnerability SKUs requiring attention
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Component Inventory Exposure Solution Overview

Product Details Graphical representation of KPI Trend

Lead time

Standard Cost

On Hand Inventory

Cumulative Lead time

Inventory Exposure of component

Value of On Hand Inventory

Provides projection of inventory exposure of applicable components

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Supplier On-boarding Key Challenges

Comes in all size & shape
C

Supplier Geography Supplier Language Supplier Size Supplier Time Zone

Supplier Technology/IT Infrastructure On boarding /Integration Time and

A

Cost

How do we integrate all our suppliers in a SNC solution?

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Supplier On Boarding Process

Term Acclimatization

Process Acclimatization

Scenario Introduction

Sample WBT

Database Congruence

Process Congruence

Personalization & UI Settings

2-3 days Web based training to super users Supplier User Manuals
Navigation Comfort Process checks

D:\sap\sapphire

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SNC Deployment Roadmap Risk Free Approach

Step 1 Step 2 Step 3 Step 4
Expert Virtual Roundtable: Initial conference call with customer to understand network collaboration needs, current tools and share Patni experience Complementary Value Assessment Workshop: Free consulting offer from Patni to assess a) inventory management processes and functions. (b) Potential immediate cost savings opportunities c) Solution options d) Cost benefit analysis Pilot & Deployment Roadmap : Build of SAP SNC &/or Risk Liability Dashboard demo Solution in Patni system sand box for review and sign off. Review of detailed deployment road map Value-Based Implementation: Key features include fixed price deployment contract, best fit solution based on SAPs SNC best practices and integrated Risk Liability Dashboard. Time line 16 weeks. Pilot Suppliers -10 Nos.

Part of SAPs Best Run Now Industry Solutions for High Tech

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Thank You

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