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An Advanced Planning Success Story in Thailand

Case study : Nestle Thailand

09.08.2006
Logistics Management

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Introduction Nestle Supply Chain Management
Overview of SAP APO
SAP APO – Demand Planning
SAP APO – Supply Network Planning
SAP APO – Production Planning and Details scheduling
SAP APO – Global Available to Promise
SAP APO – Integration and Architecture
DSP KPI
Benefit of implementation
Limitation
Key success factors
Summary
09.08.2006
Logistics Management

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

The Nestle Supply Chain Model
P = Procurement M = Manufacturing
D = Distribution / Customer Service

Sales &
Marketing

Procurement Supply
Planning

Suppliers

P

M
Manufacturing

09.08.2006
Logistics Management

S = Demand & Supply Planning
C = Channel Support

D

S

Consumer

Distributor
Operator

C

Distribution

3

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Nestle Globe (Global Business Excellence)
WHAT does
GLOBE aim
to do

– To remain competitive as the No.1 food company in the world,
GLOBE aims to unlock Nestlé's potential by :
• Using the size of Nestlé as a strength in a rapidly changing
environment
• Unifying and aligning Nestlé on the inside to be more globally
competitive on the outside
• Unlocking potential benefits by the power of the "e" world with a
focus on customer/channels and consumers

HOW

1. Implementation
of harmonized
Nestlé Business
Excellence Best
Practices

2.Implementation of Data
standards and Data
Management - "Managing
Data as a Corporate
Asset"

3. Implementation
of standardized
information
systems and
technology

Unlock Nestlé's Potential
09.08.2006
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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Demand & Supply Planning
The mission of the Demand & Supply
Planning is to ensure that stock of finished
goods is available at correct stock location
to meet customer demand while optimising
the resource utilisation.
Demand & Supply Planning is a key
enabler for Nestlé's operating companies to
:
•reduce the working capital
•improve the customer service level
•increase the ability to react to changes in
market

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Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Demand & Supply Planning 09.2006 Logistics Management 6 .08.

2006 Logistics Management Forecast Planned Order Recommended Stock Transport Requisition Firmed Stock Transportation Requisition Stock Transport Order 7 .Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Overview of APO Planning Horizon 1 Demand Planning 2 Supply Network Planning 3 Production Planning / Detailed Scheduling 4 Deployment 5 Transport Load Builder 09.08.

Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Demand Planning Planning Horizon Demand Planning Supply Network Planning Production Planning / Detailed Scheduling Deployment Transport Load Builder 09.2006 Logistics Management 8 .08.

Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Consensus Demand Planning Process objective To create the best estimate of future demand.2006 Logistics Management Customers 9 . the number upon which all operational activities will be based Business Strategy Generating Demand Demand Planning Demand & Supply Review Supply Planning 09.08.

08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary 50 45 Demand Planning Process 40 35 30 25 20 15 10 5 29 25 23 31 W W 21 19 17 27 W W W W W W 9 15 13 3 7 5 11 W W W W w W W W 1 0 Statistical Methods and Techniques* Define Forecast Methodology Administration BW Gather Historical Elements Clean and Comment on Hist.) Forecast and Evaluate Events Achieve Consensus Demand Plan Create Base Demand Plan Store and Release Demand Plan SNP Setting Up the Demand Plan * Monitor Demand Plan Process 09. Data CRM FICO (OPL vol.2006* Training Course Logistics Management 10 .

08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary CRM – Integration EP Baseline Volume APO Consensus Demand Plan One Number Principle FICO = OPL Volume Consensus Monthly Forecast Review Demand Plan Business Planning Uplift GD Volume Profitability Analysis CRM Consumer Communication & Trade Activities Planning 09.2006 Logistics Management Commercial Planning Budget 11 .

08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Demand Planning Key Principles • • • • One number philosophy Unconstrained Consensus Demand Plan Collaboration essential between: – Generating Demand – Demand Planner Weekly (shelf stable) or daily (chilled) processes DSP Planner provide Base line Ba se as e lin e as e lin e Ba se Ba Ba se se lin lin lin e e e Ba se lin e lin e Uplift lin e Ba se Generating Demand provide Uplift Ba se lin e Consensus Demand Plan = Baseline + Uplift 09.2006 Logistics Management 12 .

It is an integral part of any organizations Sales & Operations Planning Process.08. • Consolidate consensus demand plan • Perform collaborative forecast • Mange product life cycle • Plan promotion • Plane new product • Release Final consensus demand plan to supply APO Demand Planning is a set of functionalities around Demand Management. Promotion and Life-cycle Planning processes.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary APO support Demand Planning APO support Demand Planning process • Gather historical data element • Clean and comment on historical data • Generate base line via statistical forecast tools. 09.2006 Logistics Management 13 . Statistical Forecasting.

Introduction Overview of APO Stat model KPI Benefit & Limitation Key Success factors Summary APO support Demand Planning Base line from Statistical forecast Uplift from CRM Final consensus demand * Training Course 09.2006 Logistics Management 14 .08.

Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Supply Network Planning or Distribution Requirement Planning Planning Horizon Demand Planning Supply Network Planning Production Planning / Detailed Scheduling Deployment Transport Load Builder 09.2006 Logistics Management 15 .08.

etc.) Master Data Management SNP PPDS SNP Receive Collaborative Data Sales History Run DRP Prepare MPS Material Requirements Planning Prepare DPS Production R/3 09.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Manage Exceptions (Stock outs.2006 Logistics Management Demand Planning BW DP DRP Process Send Dispatch Plan Create Dispatch Plan Send Load Plan Build Load Create Shipments 16 .08. Write-offs.

) stic e m (do Market Boundaries Origin A Source (production site) Producer Market Destination (distribution center) 09.08. new network structure need to be set up.2006 Logistics Management 17 .Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary The Supply Network Structure Receiver Market Destination 1 (IM SP ) Destination 2 Origin B Su pp ly Li nk Destination 3 L ply p u S ink Supply Network planning are cover both •Domestic and •IMSP Once the link is required.

•These dispatch requirement are input to the production planning process.g.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Distribution Requirement Receiver Market Destination 1 Destination 3 Origin B Su pp ly Li nk (IM SP ) Destination 2 S Origin A Producer Market 09. by factory production capacity 18 . Distribution requirement (NRR)are generated base on stock policy target which corresponds to Dispatch requirement (NDR) at source. •The calculated distribution requirement are not constrained (e.08.2006 Logistics Management me (do k n i ly L upp ) stic •By input of •Initial stock •Demand •Stock policy •At destination .

08.2006 Logistics Management 19 . Producer Market 09.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Deployment Receiver Market Destination 1 (IM SP ) Destination 2 Origin B Su pp ly Li nk Destination 3 S Origin A nk y Li l p up me (do ) stic • At factory. the deployment run generates firmed stock transport orders (dispatch plan). Dispatch requirement are input of Production Planning. • After production planning is completed and the system knows what will actually be produced.

Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Deployment • • • • A variety of deployment strategies are used depending on the current situation . and minimum cost flow optimization If demand exceeds supply. surplus stock can be distributed according to push logic 09. use a fair share allocation If demand is less than supply or excess inventory exists. When excess inventory exists.2006 Logistics Management DC1 Plant DC2 20 . pull-push deployment.08.fair share. push deployment. use a push strategy to be able to transfer stock as early as possible.

08.2006 Logistics Management 21 .Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Load Planning • • • • • Load Plans consolidate current and short term deployment stock transfers into loads : – Vehicle loads – Mixed product loads Confirm how many transport units are required to move planned goods taking transport constraints into account (pallet/weight/volume) Enable internal supply chain partners to view short term stock evolution in detail Are used to create outbound deliveries (input to materials handling) Are not used in case of "push dispatch" process (transport loads directly built by materials handling) Min Max 09.

08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Distribution Requirements Planning Key Principles • • • • • • Management by exception to focus mostly on areas requiring attention rather than on all areas Internal collaboration with other Nestlé companies – planning of cross-border supplies according to IMS principles Provide end-to-end visibility of demand and supply plans Demand and Supply Review process to align demand and supply mutually and to business objectives Uses Nestle common rounded calendar Provides available to deploy/sell stock cover according to the type of location (factory/distribution center) 09.2006 Logistics Management 22 .

2006 Logistics Management 23 .Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary APO support DRP APO support Distribution Requirement Planning process • Calculate Distribution Requirement/Dispatch requirement both domestic and IMSP • Calculate Despatch Plan • Calculate Load Plan • Provide Supply Planning visibilities • Provide DRP alert monitor for stock exception management 09.08.

2006 Logistics Management 24 .Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary APO support DRP Demand release from DP module Dispatch plan Load Plan Distribution requirement 09.08.

2006 Logistics Management 25 .08.Introduction Overview of APO KPI Key Benefit success & Limitation factors Key Success factors Summary InterMarket Supply Planning (Nestle Affiliate) Weekly Weekly Cycle Cycle EDI Sales SalesForecasts Forecasts Stocks Stocks Sales Sales Rolling Rolling Horizon Horizon (4W (4W ++ 14M) 14M) RECEIVER PRODUCER EDI Supply Supply Plans Plans The TheProducer Produceris isresponsible responsiblefor formaintaining maintainingthe thelevel levelof ofstock stockin inthe theReceiving Receiving markets marketswithin within agreed agreedlimits limits Receivers provide good Sales Forecasts Receivers provide good Sales Forecastson onaatimely timelybasis basis 09.

2006 Logistics Management 26 .08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Production Planning and Details scheduling Planning Horizon Demand Planning Supply Network Planning Production Planning / Detailed Scheduling Deployment Transport Load Builder 09.

setup times) Planner – labor constraints – material availabilities – inter-factory requirements Resource 1 Resource 2 Resource 3 30 Resource 3 20 Resource 2 Resource 1 09.08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Production Planning Key Principles • • • • Planning in Weekly or Daily buckets Utilizing capacity and resource Plans Optimized Detailed Production Schedule that fulfils Net Dispatch requirements NDR + Customer Taken into account: – production constraints (e.g.2006 Logistics Management 10 27 ..

Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Master Production Scheduling Key Principles • • • • • • • • Snapshot planning Rough cut machine and labor constraints Detailed Master Data Sequencing possible Material availability checked Weekly / daily for shelf stable On SKU level On individual machine basis 09.08.2006 Logistics Management 28 .

cleaning) by optimizing production sequence • Reviews with Manufacturing as often as necessary in order to have the most accurate status of production and maximize the schedule stability.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Detailed Production Scheduling Key Principles (1 of 2) • Maintains the schedule as often as is necessary.g. if possible continuously. changeover.2006 Logistics Management 29 . taking all constraints into account • Minimizes non-production time (e.08. Includes the information related to plan maintenance Maximizes master schedule attainment • 09.

08.2006 Logistics Management 30 .Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Detailed Production Scheduling Key Principles (2 of 2) • • • • Synchronizes with Master Production Schedule on a continuous basis Synchronize and works seamlessly with Material Requirements Planning In repetitive high-volume and non-complex factories Detailed Production Scheduling may be able to be skipped and the factory run from the Master Production Schedule Very detailed scheduling may be done at shop floor level by the operator – DPS will not schedule everything 09.

Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary APO support PPDS APO support Production Planning and Details scheduling process • Calculate Master Production Plan • Calculate Details Production scheduling 09.08.2006 Logistics Management 31 .

Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary APO support PPDS Machine capacity and utilization MPS/DPS Plan order 09.08.2006 Logistics Management 32 .

Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Global Available to promise 09.2006 Logistics Management 33 .08.

*Source : SAP Advance Planning and optimizer www. You can also integrate this logic with the product substitution rules.com 09. and so on. memoryresident data for even better performance Global ATP maintains simultaneous.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Global Available to promise The Global Available-to-Promise (GATP) component uses a rules-based strategy to ensure you can deliver what you promise to your customers. Global ATP performs multilevel component and capacity checks in real time and in simulation mode to ensure that you can match supply and demand. You can also perform these ATP checks against aggregated. Allocation: You can allocate products or components that are in short supply to customers. Global ATP can source materials from alternative locations.08.2006 Logistics Management 34 . so you can be confident that you can meet your delivery commitments Product substitution: If a finished product or component is not available. markets. the system automatically selects a substitute using rules-based selection criteria. immediate access to product availability along the supply chain.sap. The ATP calculation and response take these allocations into consideration. orders. Selection of alternative locations: As with product substitution.

Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Integration and Architecture 09.2006 Logistics Management 35 .08.

Four APO modules are used in the Nestle DSP process: – DP (Demand Planning) for forecasting demands.2006 Logistics Management 36 .08. BW (Business Information Warehouse) is used as a reporting tool.) • SAP APO (Advanced Planner and Optimizer) is the planning system integrated with SAP R/3.The Introduction Integrated Supply Chain Overview IT and of Supply APO Chain Case KPI study Nestle Key Benefit success & Limitation factors Key Success factors Summary Main IT support in Nestle includes • SAP R/3 is the transactional ERP (Enterprise Resource Planning) system. finance and etc. PMFE budget planning. (Customer service and distribution. procurement. CRM : Customer Relationship management is integrated with APO for Trade spend . • • 09. and it consists of multiple modules covering numerous business processes. – PP/DS (Production Planning/Detailed Scheduling) for envisaging production plan. – SNP (Supply Network Planning) for managing distribution requirements planning covering both domestic and international stock replenishment. production. – GATP (Global Available to Promise) for checking supply availability against demands.

2006 Logistics Management CRM EBP BW 3rd Party SEM 37 .08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Overview Nestle’s system Global Cluster Master Data (Master Data Repository) Master Data (Supplemetary Data Repository) HR Payroll ERecruiting QA Audit Global Reporting 1:3 Zone Cluster Finance Reporting EBP Restitution (EUR only) 1:many Commercial Cluster COS DP CRM SEM 1:many Supply Cluster GATP SNP PP/DS SOS R3 core APO 09.

Indicators Indicators Supply Supply Network Network Planning Planning External External data data Deployment Deployment 38 .Introduction Overview of APO KPI SAP SAP R/3 R/3 Customer order Material Requirements Planning 09. Perform.08.2006 Logistics Management Key Success factors Summary APO APO Supply Supply Chain Chain Cockpit Cockpit Advanced Advanced Forecasting Forecasting and and Demand Demand Planning Planning Manufacturing execution Inventory Management Benefit & Limitation GATP GATP Production Planning and Scheduling BW BW Historical Historical Data Data Key Key Perform.

Any inconsistencies of master data between 2 systems will block in CIF queue 39 ...2006 Logistics Management CIF Location Product Resource Production Process model All transfer handle via CIF integration model.08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary APO Application Architecture Transactional and master data will interface between R/3 to APO via CIF (Core interface) R/3 APO live Cache Sales order Order CIF Planned order Real-time •Production Production order Procurement Purchase order Replenishment . Plant. customer... Material master Capacity Routing and Bill of material 09..

08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary DSP KPI 09.2006 Logistics Management 40 .

2006 Logistics Management 41 .08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary DSP KPI • • • • • • • • Demand Plan Accuracy Stock cover report Customer Service level Master Scheduling Attainment Detail Scheduling Attainment Despatch Plan Attainment Freshness on inventory Freshness on shipment 09.

2006 Logistics Management 42 .08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Benefit of implementation 09.

2006 Logistics Management 43 . DSP planner have more time in analysis. 09.08. the sharing of demand & supply planning Information across network help • Improve demand plan accuracy with time lag • Improve customer service level • Reduce working capital • Manage as exception.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Benefit of implementation With real-time information .

Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Limitation 09.2006 Logistics Management 44 .08.

08. •Require a lot of training for end user and take time for learning.2006 Logistics Management 45 . • With real time integration with execution. require closely monitoring on CIF management. 09. with real-time information sometime may cause planning discrepancy if • Not discipline well for past due management • Require the 100% correctness of master data and modeling.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Limitation However.

2006 Logistics Management 46 .08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Key success factors 09.

08.2006 Logistics Management 47 .Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Key success factors •Benefit and costs must be clarified •Buy-in and follow-up from top management •Agreed and aligned business process •Excellent master data •Cooperative environment and communication •Proactive change management •Training 09.

2006 Logistics Management 48 .08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Summary 09.

2006 Logistics Management Sales & Customer Service 49 .Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary • Information technology is a key driver to manage and synchronize activities throughout the supply chain network APO: Supply-Chain Planning PPDS /GATP SNP /GATP APO DP R/3 : Execution System (Procurement/ Production/Distribution/Sales) R/3 : Finance and Accounting / HR BW : Reporting Vendors Inbound Consumer Logistics Manufacturing Transportation Distribution Delivery Customer Logistics and Distribution 09.08.

) Master Data Management SNP PPDS SNP APO/DP Receive Collaborative Data Sales History Run DRP Prepare MPS Material Requirements Planning Prepare DPS Production R/3 APO is the support tools to provide planning information which used to synchronize the activities within Supply Chain Network Demand Planning Send Dispatch Plan Create Dispatch Plan Send Load Plan Build Load Create Shipments APO/DRP Manufacturing Transportation Distribution Delivery Customer and Distribution BW DP Summary of key points (1 of 3) Sales & Customer Service 50 .Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary APO/DRP Vendors Inbound Consumer Logistics Logistics 09.2006 Logistics Management APO/PPDS Manage Exceptions (Stock outs. etc.08. Write-offs.

Sales and Finance – one number principle – no Supply constraint 09.2006 Logistics Management 51 . Marketing.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Summary of key points (2 of 3) • • • • Demand and Supply Planning (DSP) ensures the availability of finished goods to optimize customer service at the lowest total supply chain cost DSP is an integrated Process DSP is supported by APO application Consensus Demand Plan (CDP) – a consensus between DSP.08.

08.Introduction Overview of APO KPI Benefit & Limitation Key Success factors Summary Summary of key points (3 of 3) • • • Distribution Requirements Planning (DRP) determines the stock requirements in locations (warehouses) to meet objectives based on stock policies and CDP Master Production Scheduling (MPS) provides feasible Production Plans at weekly level per location Detailed Production Scheduling (DPS) generates a feasible factory schedule for all process and packaging lines 09.2006 Logistics Management 52 .

Thank You Very Much 09.2006 Logistics Management 53 .08.