SAP™ ERP For The Dairy Industry

SAP ERP for the
Dairy Industry
Challenges, Strategies, and Benefits
The Solution
The Solution
The Dairy Industry Ecosystem
Farmer Tank Dairy Retailer

Collect
Raw Milk
Truck
Production Distr. Centers
Raw Material, Packaging, Service Wholesaler
Supplier
Add. Purchase of Raw Material / Raw Milk Broker
Dairy
Sell Raw Material and Ingredients
Cooperatives Authorities External Laboratories
SAP AG 2006
Dairy Companies Often Have
the Right Focus and the Right Strategies
Protect and enhance

YOUR FOCUSrevenue Business STRATEGY
Improve margins
Increase Shareholder Value
Drive for lower costs
Increase Revenue and Profit Margins YOUR FOCUS
Get closer to the consumer
Increase Shareholder Value
Operational
Improve Excellence
time-to-market Increase Revenue and Profit Margins
Product Leadership
Enhance operational efficiency Cost Leadership
Improve Customer Satisfaction Product Leadership
Improve Customer Satisfaction
SAP AG 2006
But Mostly They Lack the Ability to Execute
Often employees cannot execute the companys business

strategy because the business platform is
COMPLICATED TO OPERATE
Complex and broken process flows Business STRATEGY
Incomplete or hidden information
DIFFICULT TO CONTROL Business

Lack of visibility Enabler
Lack of traceability
CHALLENGING TO CHANGE
Ability to EXECUTE
Multiple costly integration points
Redundant and inconsistent data
A business enabler is required to

help the organization refocus on
business strategies!
SAP AG 2006
Market Forces and Business Needs
Market Forces
Retailer power (Wal-Mart effect)
Consumer concerns about food safety; Resulting Key Challenges
media attention
Develop new products faster
Increased legislation and regulations
around food safety by FDA and other and more effectively
authorities (e.g., EU Dir. 178/2002, Optimize supply chain
the U.S. Bioterrorism Act of 2002)
Changing consumer demands due to Increase efficiency in
demographics and trends procurement
Shorter product life cycles
Optimize manufacturing
Extreme price pressure and margin
erosion Ensure food safety and
Restrictive consumer spending pattern regulatory compliance
Market consolidation (globalization, M&As)
Improve sales efficiency
Increasing competition
Emerging private labels
New technologies reshaping the industry
SAP AG 2006
Develop New Products Faster and More Effectively
Challenges Strategies
Adapt to ever-changing Enable collaborative
consumer tastes and engineering
requirements
Consolidate product
Develop product efficiently development data and
documents
Address increased demands
for new products Reduce development effort
and time-to-market
SAP can help you Benefits

Integrate all product-related Faster development by
information creating reusable product
specifications
Reduce data redundancy and
inconsistency Reduced time-to-market
Integrate into manufacturing Ensured competitive

process advantage
SAP AG 2006
Optimize Supply Chain
Decrease process costs Reduce costs
Create operational efficiencies Streamline supply chain

and supply chain processes
transparency
Improve supply chain control
Manage shelf-life-based
Gain more supply chain
picking and distribution
visibility
Ensure accurate and timely
shipments
Avoid out-of-stocks

Optimize distribution Improved operations
processes excellence
Optimize end-to-end planning Lower capital commitment
Improve asset utilization Reduced operating costs
Fully integrate logistics Higher customer satisfaction

management, including
transportation and warehouse
and inventory management
Shorten order-to-delivery
cycles
SAP AG 2006
Increase Efficiency in Procurement
Cope with ever-changing Reduce costs
quantity and quality of the raw
Streamline processes
milk
Gain more visibility and
Manage complex payment
transparency
conditions
Improve relationship with
Cope with seasonal
producers
fluctuation
Create operational efficiencies
and transparency

Set up integrated and flexible Increased demand planning
processes for procurement accuracy
Streamline raw milk collection Consistent internal and
and reception external procurement
reporting
Ensure integrated quality
management Integrated processes
Track batches
SAP AG 2006
Optimize Manufacturing
Base plans on a non- Maximize raw material
standardized raw material utilization
Define optimal product mix Increase demand planning
accuracy
Create operational efficiencies
and transparency Streamline processes
Optimize production Gain more visibility and

transparency

Set up integrated and flexible Improved asset utilization
processes for manufacturing
Increased profitability of
Monitor raw material produced product mix
utilization and losses
Consistent cross-stages
Ensure integrated quality monitoring
management
Integrated processes
Track batches
SAP AG 2006
Ensure Food Safety and Regulatory Compliance
Align with governmental Support mid- and long-term
regulations (EU 178/2002, the company success by
U.S. Bioterrorism Act of 2002, ensuring regulatory
import/export) compliance
Enable fast, effective product Set efficient processes in
recalls place to enable traceability
Track and trace from cow to Allow targeted product recalls
consumer to minimize costs

Track, monitor, and trace Reduced penalty risk
batches and inventory
Decreased risk of food-safety
Streamline procurement, compensation payments
production, and sales
Reduced risk of bad
Manage sales returns reputation
Enable targeted product Lower operating costs
recalls
SAP AG 2006
Improve Sales Efficiency
Protect market share Obtain first-hand information
about the market
Meet increased service level
expectations of customer Optimize process settlement
in sales
Get visibility in the sales
process Increase customer service
offerings
Manage quality-based price
determination for raw material Increase customer
sales satisfaction

Plan, track, control, and Higher sales volume
optimize sales performance
Better account retention
Expand service processes
Closer customer relationship
Strengthen collaboration with
Optimal sales force
partners and key customers
operation
Track indirect sales and
Higher customer satisfaction
customers
Ensure correct handling of
rebates
SAP AG 2006
The Solution
SAP ERP packaged solution for the dairy industry
Description
Focuses on key business processes that create a baseline for future growth
Delivers immediate benefits by solving the need for system heterogeneity
Enables significant business process automation
Analyze,
Market Deliver and
Plan, and Procure Manufacture
and Sell Service
Develop
Define business Realize savings Improve Improve marketing Establish closer
Objectives
Business
strategy and in aggregate manufacturing effectiveness contact with

goals purchasing efficiency customer
Increase sales
Understand Improve Ensure quality effectiveness Enhance control
company purchasing management in over delivery
performance and efficiency manufacturing process
profitability process
Ensure tracking
and traceability
Complete logistical and financial integration
Key Performance Indicators

Gross Profit/Total Net Sales Order Fulfillment Rate
Demand Forecast Accuracy Raw Material Utilization and Losses
Inventory Turns Warehousing/Distribution Costs
SAP AG 2006
SAP ERP packaged solution for the dairy industry
Suppliers & Analyze, Plan & Develop Procure Manufacture Market & Sell Deliver & Service Customers (e.g.
Partners Retailers) &
Channel
Partners
Sourcing & Procurement
Milk Procurement from Producer
Additional Raw Material Procurement
Procure to Stock
Internal Procurement
Product
Development
Recipe Management Manufacturing
Dairy Production
Planning
Dairy Process Control
Sell & Deliver

Sales Order Processing
Raw Material Sales
Returns
Operational End-to-End Scenarios
Traceability & Food Safety
Inventory Management
Quality Management
Enterprise Management & Support

Financials
Financial Accounting Cash Management Asset Management
Controlling
Standard Cost & Profit Center
Product Cost Planning CO-PA for Consumer Products Cost Object Controlling
Accounting
SAP AG 2006
Generic Food Scenarios
Suppliers & Analyze, Plan & Develop Procure Manufacture Market & Sell Deliver & Service Customers (e.g.
Partners Retailers) &
Channel
Partners
Procure to Stock
Sell & Deliver

Returns

Quality Management

Financials
Controlling
Accounting
SAP AG 2006
Procure to Stock
Supports price comparison of vendors offers
Suppliers & Partners Analyze, Plan & Procure Manufacture Market & Sell Deliver & Service Customers,
Develop Consumers, Channel
Partners

Procure to Stock
Third Party
Plan &
Manufacture
Provides tools to gain greater spend visibility in procurement

Production Planning
Production
Sell & Deliver
Direct Store Delivery (DSD)
Rebate & Bonus Management
Commissions
Indirect Sales
Returns
Empties Processing
Helps to manage quotations, contracts, batch handling and quality

Quality Management
Cross Company Transactions
Financials & Controlling
Excise Duty (Beverage) G65
Industry Pain Points Solution

Improving purchasing activities efficiency Procurement of Procurement
Realizing savings in purchased value Stock materials Contracts
Allowing visibility on vendors conditions Request for Create contract:

quotation Quantity contracts;
and services Prices Comparison
Value contracts;
Delivery schedule
Purchase
Ensuring tracking and traceability requisition
Create purchase
requisition
Purchase order
Assign vendor to
Business Benefits
processing
contract
Goods receipt
Inspect goods
Batch number
Automate operational tasks assignment
Stock update
Improve vendors selection and prices comparison Invoice verification
through quotation handling
Formalize agreements by contract management
Guarantee quality check through goods receipt
inspections
SAP AG 2006
Encompasses cross-plant internal procurement of products including
Partners

Procure to Stock
Third Party
Plan &
Manufacture
creation of all required documents for both with or without delivery Production Planning
Production
Sell & Deliver
Commissions
Indirect Sales
Provide functions to monitor stock in transit

Returns
Empties Processing
Quality Management

Improving internal purchasing activities Stock transfer Stock transfer
Ensuring tracking and traceability with delivery without delivery
Create stock Create stock

transport order transport order
Process delivery Post goods issue
Post goods issue
Business Benefits
Automate operational tasks
Increased visibility of stock and stock transfers
SAP AG 2006
Manage the entire customer order process variable pricing, delivery,
Partners

Procure to Stock
Third Party
Plan &
Manufacture
invoicing, and payment. Production Planning

Production
Sell & Deliver
Commissions
Indirect Sales
Includes Electronic Data Interchange (EDI), handling of consignment sales,

Returns
Empties Processing
Quality Management
and foreign trade


Managing variable pricing conditions
Inbound/Outbound
Sales Distribution
Long order cycle times EDI Processing
Meeting customers requests for Process sales Picking & Inbound sales
order distribution based order via EDI
improved services Billing on shelf life Outbound billing
Payment expiration date document via EDI
Managing sales returns cost effectively Freight settlement
Handling unit mgt.
Business Benefits
Improve sales execution timeline
Improve order fulfillment rate
Provide the customer with alternative services and
methods for invoicing and payments
SAP AG 2006
Returns
Focuses on the processing of credit memos if no goods are sent back.
Partners

Procure to Stock
Third Party
Plan &
Manufacture
Includes quality evaluation for returned goods and appropriate stock

Production Planning
Production
Sell & Deliver
Commissions
Indirect Sales
Returns
movement.
Empties Processing
Quality Management

Efficient handling & document
Returns and Returns
complaints. Complains Processing
Managing sales returns cost efficiently. Process credit Ship pallets
memos Return pallets
Quality evaluation
Goods movement
to blocked or
unrestricted stock.
Business Benefits
Enable corporate compliance strategy
Effective batch-specific returns processing
SAP AG 2006
Traceability and Food Safety
Capability to track and trace products at all stages of production,
Partners

Procure to Stock
Third Party
Plan &
Manufacture
processing, and distribution Production Planning

Production
Sell & Deliver
Commissions
Indirect Sales
Allow fast and efficient recall of a defective product batch

Returns
Empties Processing
Quality Management

Complying with food regulations Quality Batch
Management Management
HACCP (Hazard Analysis & Critical Control Points)
EU (Article 18 of Regulation 178) Quality planning Batch creation and
Quality inspection determination
US (the US Bio-terrorism Act 2002) Recording of Batch-where-use
laboratory analysis lists
Addressing growing food-safety concerns from Quality reporting Recall batches and
Quality create follow-up
consumers improvement activities
Manage batch-
Business Benefits
specific return
processing
Manage batches
based on shelf life
Professionally managing a possible product expiration
recall
Minimize risk of non-compliance with food &
beverage regulations
Effective batch-specific returns processing
SAP AG 2006
Consists of the whole procurement and delivery cycle with warehouse for
Partners

Procure to Stock
Third Party
Plan &
Manufacture
the storage management, including quality inspection

Production Planning
Production
Sell & Deliver
Commissions
Indirect Sales
Returns
Return rejected goods to the vendor

Empties Processing
Quality Management

Maintaining low inventory levels Inventory Warehouse Transportation
Management Management Management
Avoiding out-of-stock situations at retailers
Integration with Storage Plan transports
Establishing visibility to inventory levels supply chain Management Monitor execution
accounting
throughout the entire supply chain Goods receipt
Quality
Management
Calculate costs
Manage
Goods issues Quality Inspection transportation
Managing different Return of goods settlement
stock categories
Business Benefits Inventory valuation
Reduce working capital by keeping

inventory levels low
Increase sales by reducing out-of-stock
situations
Improve consumer retention due to
product availability
SAP AG 2006
Financials and Controlling
Helps to get an insight into all aspects related to accounting and
Partners

Procure to Stock
Third Party
Plan &
Manufacture
controlling Production Planning

Production
Sell & Deliver
Commissions
Indirect Sales
Provides streamlined functionalities that allows visibility, increases

Returns
Empties Processing
Quality Management
productivity and regain control of their business processes


Meeting local legal and fiscal requirements Financials Controlling
Improving administrative activities efficiency
General Ledger Standard cost and
Maintaining focus on most profitable customers accounting profit center
accounting
and brands Accounts payable
accounting Profitability analysis
Accounts Product costs
Business Benefits
receivable planning
accounting Product cost
Bank accounting controlling
Closing activities
Implement an ERP solution fully compliant Cash management
and continuously updated with local legal Assets
management
and fiscal requirements
Improve efficiency in accounting activities
due to a seamless process integration
Enhance company profitability analysis
through profit and loss calculation
SAP AG 2006
Our Specific Solution Offering for the Dairy Industry
Suppliers & Partners Analyze, Plan & Procure Manufacture Market & Sell Deliver & Service Customers (e.g.
Develop Retailers) & Channel
Sourcing & Procurement Partners
Procure to Stock
Internal Procurement Dairy
Additional Raw Material Procurement Food
Manufacturing
Product Dairy Production
Development Planning & Process
Recipe Management Control
Sell & Deliver

Returns
Raw Material Sales

Quality Management

Financials
Controlling
Accounting
SAP AG 2006
Product Development with Recipe Management
Managing the fast and efficient product development by structured re- Suppliers & Partners Analyze, Plan &
Develop
Procure
Sourcing & Procuremen t

Manufacture Market & Sell Deliver & Service Customers (e.g.
Retailers) & Channel
Partners
usable product specifications

Procure to Stock
Produc t
Development
Recipe Management
Manufactu ri
ng
Dairy Production
Planning
Dairy Proce ss Control
Seamless integration into the production planning and execution process

Sell & Deliver
Raw Material Sales
Indirect Sales
Opera tional End-to-End Scena rios

Quality Management
Cro ss Company Transactions
Ente rprise Management & Support

Financials
Controlling

Slow and inefficient product development Product Data Product Lifecycle
Management Management
Changing consumer tastes and
requirements Maintain product
specifications
Document
Management
Increasing demand for new products Label Management Change
Management
Multilevel recipe
mgt. Integrate Recipe
Define Batch into production
Management process
Business Benefit Create master

recipe
Create process
order
Reduce development cycle time & costs
Ensure company-wide consistent product
information
Reduce time-to-market to gain competitive
advantage
SAP AG 2006
Milk Procurement from the Producer
Encompasses the efficient procurement and collection of raw milk Suppliers & Partners Analyze, Plan &
Develop
Procure

Partners

Ensure compliance with high quality standards and traceability requirements

Procure to Stock
Produc t
Development
Recipe Management
Manufactu ri
ng
Dairy Production
Planning
Sell & Deliver

Calculate payments based on quantity and quality characteristics

Raw Material Sales
Indirect Sales

Quality Management

Financials
Monitor procurement and payment process

Controlling

Managing the complex payment conditions Milk Collection Milk Reception Milk Analysis
Coping with seasonal fluctuation and
changing demands Maintain standard Dairy reception Gather results of
routes cockpit inspection lots from
Complying with the high quality standards Provide route list to Process purchase producer samples
truck driver Order Gather results of
and traceability requirements Automatic creation inspection lots from
of inspection lot tank truck samples
and batch number Create usage
Business Benefits Batch management decision for

inspection lots
Enable accurate payment both for Reporting &

Milk Payment
Analysis
producer and transport service provider
Provide payment reporting to the producer Calculate payment
for producer
Monitor raw milk
quantity & quality
Calculate payment characteristics
Streamline raw milk collection & reception for transport Payment reporting
process service provider
Settle payment
Maintain payment
calculation scheme
SAP AG 2006
Supports the additional purchase of raw materials from other companies on the Suppliers & Partners Analyze, Plan &
Develop
Procure

Partners
determined shortage in the demand planning process

Procure to Stock
Produc t
Development
Recipe Management
Manufactu ri
ng
Dairy Production
Planning
Calculate vendor payment based on the raw material quantity and quality
Sell & Deliver
Raw Material Sales
Indirect Sales

Quality Management
characteristics.

Financials
Controlling

Raw Material
Determining demand for additional Demand
Raw Material Raw Material
required raw material due to ever- Reception Analysis
Planning
changing quantity and quality of collected Determine required Post goods receipt Gather results of
additional raw inspection lots
raw milk materials
Automatic creation
of inspection lot Create usage
Create purchase and batch number decision for
Managing the vendor payment based on order Batch management inspection lots
raw material quality characteristics
Business Benefits Raw Material Reporting &

Payment Analysis
Increase demand planning accuracy Calculate vendor Monitor raw
payment for material quantity &
Handle the quality-based payment for the additional quality
purchased raw characteristics
vendor material Payment reporting
Settle payment
Maintain payment
calculation scheme
SAP AG 2006
Dairy Production Planning and Process Control
Manage the multilevel manufacturing processes including seamless batch Suppliers & Partners Analyze, Plan &
Develop
Procure

Partners
and quality management

Procure to Stock
Produc t
Development
Recipe Management
Manufactu ri
ng
Dairy Production
Planning
Sell & Deliver
Incorporates the ever-changing quantity and quality of the raw material

Raw Material Sales
Indirect Sales

Quality Management
Provide powerful tools to gain a cross-stages raw material controlling

Financials
Controlling

Production Planning based on a non- Production Quality
Process Control
standardized raw material Planning Management
High cost of the raw material comparing to Demand planning Maintain product Create inspection
the total production costs based on historical
data
master data &
recipes for multilevel
lots for semi-
finished and
Defining optimal product mix in order to Production production finished goods
planning Batch management Gather results of
maximize utilization & profitablity synchronous to across all stages inspection lots
sales Separate raw milk Create usage
Business Benefits Material resource

planning (without
into components
Material valuation
decision for
inspection lots
shelf-life) Manage shelf-life
Simulate planning expiration date for
Optimize and streamline production process Graphical capacity final products
planning
Increase profitability by improved visibility
Controlling &
to raw material utilization and losses Analysis
Comply with the high quality standards and Cross-stages raw
material controlling
traceability requirements Product costing
Batch information
cockpit
Production
information system
SAP AG 2006
Raw Material Sales
Supports the sales of raw materials between dairies based on the raw material Suppliers & Partners Analyze, Plan &
Develop
Procure

Partners
requirements and the available surpluses

Procure to Stock
Produc t
Development
Recipe Management
Manufactu ri
ng
Dairy Production
Planning
Pricing and distribution are based on the raw material quality characteristics
Sell & Deliver
Raw Material Sales
Indirect Sales

Quality Management

Financials
Controlling

Managing variable pricing conditions Production Sales Distribution
based on quality characteristics
Manage process Process sales Picking based on
order document quality
Create inspection characteristics
lot Create inspection
lot for picked raw
material
Usage decision and
Business Benefits goods issue
Simplify price determination by using

Billing
the integrated batch and quality
management system Invoice processing
Price determination
Improve sales execution timeline based on quality
characteristics
SAP AG 2006
SAP ERP for the Dairy Industry Provides Increased
Shareholder Value for Your Business
Business Objectives Business Areas Business Opportunities SAP Scenarios
(SAP ERP for the Dairy Industry)
Improve customer Improve order fulfillment
Sales and Customer Order
Revenue satisfaction Improve sales execution timeline
Growth Improve customer understanding
Indirect Sales
Increase sales
Improve order fill rate Raw Material Sales
Reduce operating costs and
Distribution increase efficiency Recipe Management
Enable detailed profitability

Finance analysis Financials and Controlling
Improve efficiencies in
accounting activities
Shareholder
Increase efficiency for sales
Value Customer service returns
Returns
Reduce
Cost Improve transparency in dairy
Milk Procurement
procurement
Procurement
Lower raw materials costs Procure to Stock
Realtime access to production

Product Cost Controlling
cost information
Production Improve yield and reduce waste

Manufacturing
Calculate and monitor production
Reduce costs seamlessly
Working Inventory Optimize inventory usage Inventory Management
Capital
Reduce Comply with food Utilize full track-and-trace Food Safety
Risk regulations capability
* For further details, please refer to the SAP ERP for the Dairy Industry Brief.
SAP AG 2006

SAP™ ERP For The Dairy Industry

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SAP ERP for the

Farmer Tank Dairy Retailer

Cooperatives Authorities External Laboratories

Protect and enhance

Often employees cannot execute the companys business

DIFFICULT TO CONTROL Business

A business enabler is required to

SAP can help you Benefits

Integrate into manufacturing Ensured competitive

Create operational efficiencies Streamline supply chain

SAP can help you Benefits

Improve asset utilization Reduced operating costs

Fully integrate logistics Higher customer satisfaction

SAP can help you Benefits

Optimize production Gain more visibility and

SAP can help you Benefits

SAP can help you Benefits

SAP can help you Benefits

strategy and in aggregate manufacturing effectiveness contact with

Complete logistical and financial integration

Key Performance Indicators

Sell & Deliver

Enterprise Management & Support

Sell & Deliver

Operational End-to-End Scenarios

Enterprise Management & Support

Sourcing & Procurement

Provides tools to gain greater spend visibility in procurement

Helps to manage quotations, contracts, batch handling and quality

Industry Pain Points Solution

Allowing visibility on vendors conditions Request for Create contract:

Sourcing & Procurement

Provide functions to monitor stock in transit

Industry Pain Points Solution

Create stock Create stock

Sourcing & Procurement

invoicing, and payment. Production Planning

Includes Electronic Data Interchange (EDI), handling of consignment sales,

and foreign trade

Industry Pain Points Solution

Sourcing & Procurement

Includes quality evaluation for returned goods and appropriate stock

Industry Pain Points Solution

Sourcing & Procurement

processing, and distribution Production Planning

Allow fast and efficient recall of a defective product batch

Industry Pain Points Solution

Sourcing & Procurement

the storage management, including quality inspection

Return rejected goods to the vendor

Industry Pain Points Solution

Business Benefits Inventory valuation

Reduce working capital by keeping

Sourcing & Procurement

controlling Production Planning

Provides streamlined functionalities that allows visibility, increases

productivity and regain control of their business processes

Industry Pain Points Solution

Sell & Deliver

Operational End-to-End Scenarios

Enterprise Management & Support

Sourcing & Procuremen t

Milk Procurement from Producer