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Sap Scm Colgate Cs

Sap Scm Colgate Cs

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SAP Case Study
mySAP\u2122Supply Chain
Management
mySAP\u2122 SCM
AT COLGATE-PALMOLIVE
COLLABORATIVE PLANNING FUELS GLOBAL GROWTH
SUMMARY

Colgate-Palmolive Company is a U.S. $9.4 billion global consumer
products company. The company manufactures and markets a
wide variety of products in the United States and around the
world, including toothpaste, soaps, laundry detergents, and pet
foods. Colgate operates in over 200 countries, and approximately
70% of its sales come from international operations. The company
has about 37,000 employees, of which approximately 80% are
located outside the United States.

Colgate\u2019s SAP R/3 implementation began in 1994, providing a
platform for responding to global customer requirements
through better understanding of costs and prices, for analyzing
sourcing options, and for determining competitive strategies.
With this SAP R/3 execution framework in place, Colgate
embarked on an ambitious plan to streamline its global supply
chain planning processes. Implementation of this plan would not
only enable significant operational improvements in service and
inventory reduction, but also position the company to move from
regional sourcing to a globalized model. This supply chain
strategy \u2013 allowing for a breakthrough in production efficiencies
and economies of scale \u2013 required full visibility of supply and
demand information worldwide and a highly responsive supply
chain planning process. These essential characteristics of Colgate\u2019s
supply chain are being enabled by the optimization, scheduling,
and collaboration capabilities of SAP APO in mySAP\u2122Supply
Chain Management (mySAP\u2122SCM).

\u201cThe capabilities of SAP APO are critical to enabling Colgate
to take the next logical steps in enhancing global supply chain
performance,\u201d says John Giroux, Colgate\u2019s director of global IT

strategic planning. \u201cSAP APO delivers solutions on three key fronts:

We gain visibility to global logistics data, optimize our operations through use of advanced mathematical planning functions, and provide a platform for collaboration with customers and partners. By making use of SAP APO, our worldwide operations are truly progressing toward excellence in supply chain planning.\u201d

AT A GLANCE
Strategic Goals

Enhance the competitive position of Colgate\u2019s consumer
products business by continually improving margins, enhancing
service to the retail trade and internal customers, improving
responsiveness to promotions, and enabling a transformation to
globally standard operations.

Approach

Focus initially on employing the supply network planning (SNP)
capabilities in SAP\u00aeAdvanced Planner and Optimizer (SAP\u00ae
APO) for replenishment optimization. Employ demand planning
(DP) and the collaborative engine in SAP APO for determining
demand. Ultimately, make use of a broad range of SAP APO
functions to enable Internet-based collaborative planning with
internal and external partners. Enhance and extend the initial
SAP APO implementation by embracing the solution across
global brands and incorporating emerging functions in
production planning and detailed scheduling (PP/DS) and
other areas of SAP APO.

Results:
These achievements in North America-based implementations
have set the stage for the global rollout:
\u2022Achieved performance gains with SAP APO beyond what had
already been achieved with SAP\u00aeR/3\u00ae
\u2022Improved on-time and complete orders from 70% to 98% for
vendor-managed inventory (VMI) replenishment, and
improved customer order fulfillment to 95%
\u2022Reduced cycle times from 5 days to 1 day for VMI
replenishment and from 62 days to 33 days for cross-border
sourcing
\u2022Deployed collaborative planning to reduce forecast error

from 62% to 22%, reduce inventory by 22%, contribute to
improvements in cycle times and customer service,
and benefit even further from the global sourcing model

\u2022Provided a foundation for e-business developments, enabling
Colgate to maintain even better relationships with its partners
and customers
mySAP SCM
AT COLGATE-PALMOLIVE
2
BUSINESS

Colgate has in place a powerful strategy for sustained financial
success. The company drives top-line growth by rapidly bringing
innovative products to world markets, strengthening its global
brands, and concentrating on customer service. Colgate is also
focused on continually improving its profit margins by a myriad
of cost-reduction programs. Colgate\u2019s long-term trend of

improving its gross profit margin
(from 39.2% in 1984 to 54.4%

in 2000) is expected to continue.
The company is targeting a 60%
margin by 2008, and the
anticipated savings continue
to be facilitated by supply chain
programs and the enterprise-wide
SAP software. The broad global

reach of its products, coupled
with these continuing margin
improvements, enables reinvestment in growth-building activities
and confers on Colgate a sustainable competitive advantage.

SUPPLY CHAIN CHALLENGE

In 1993, Colgate recognized that it faced lack of standardization in
systems and data throughout the world and incurred costly
duplication of effort on many fronts. The company had inventory
levels that were unnecessarily high, order-related cycle times that

were excessively long, and IT and other costs that were much higher
than they would be with global standardization of systems and data.

In 1994, Colgate began its SAP R/3 implementation, which enabled
the company to improve operations through consistent, global
support for financial analysis, logistics planning, and other business
processes. Moreover, a complementary standardization mandate
came from senior management that covered all general naming

conventions, formulas and raw materials, manufacturing data and
processes, and financial information. These standardization
initiatives supported by SAP systems contributed to tremendous
improvements in efficiency. For example, in the operations arena,
these efforts supported substantial consolidation of
manufacturing facilities.

Colgate has now implemented
SAP R/3 in 49 countries covering
80% of its business, and by early
2002 will be managing 95% of its
global operations with SAP R/3.
While SAP R/3-enabled efforts
produced significant results, the
competitive pressures in Colgate\u2019s

global markets have driven the
company to seek further
improvements using mySAP SCM:

\u2022On-time and complete customer order fulfillment had been
improved from very poor levels to rates of around 90%.
However, these rates were hampered from further improvement

by inadequate visibility into capacity constraints and demand,
and the continuing lack of product availability meant
potentially losing out on revenue opportunities. Moreover,
these fulfillment rates were still significantly below the
increasingly stringent requirements of large customers.

\u2022The replenishment order cycle time had been reduced from

nine days to five days in North America. However, Colgate\u2019s
order cycle times elsewhere in the world remained much
longer, and competitors were gaining significant ground on this
service metric that customers were finding increasingly
important. Moreover, the long order cycle times represented
unacceptably high internal costs to Colgate.

\u201cThe capabilities of SAP APO are critical
to enabling Colgate to take the next
logical steps in enhancing global supply
chain performance,\u201d says John Giroux,
Colgate\u2019s director of global IT strategic

planning.
3

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