- 1 -Confidential

CASE STUDY

Part –1 PLANNING

Part –2 MANAGING

Part –3 ADAPTING

Zesati

Hiren Shah

Hiren@zesati.com

650 954 7047

San Jose, CA 95134

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CASE STUDY – Part I

PLANNING

Background

Company: PDA Manufacturer

Description: Maker of Handhelds

Note: This is a fictional case study for illustration purposes

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Case Study - IntroductionCase Study - Introduction

Problem Description

– PDA Manufacturer is evaluating different design options

– Basic PDA

– Basic PDA with cell phone

– Basic PDA with cell phone and camera

What product has the highest profit potential?

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Challenges / Pain TodayChallenges / Pain Today

What is the profit potential of each PDA design option?

– Investment

– Service Costs

– Transformation Costs

– Material Costs

What is the best warranty contract to offer with this product that maximizes Palm’s profitability

Are there any other tradeoffs that I can make?

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Cost of an Incorrect DecisionCost of an Incorrect Decision

Not building the optimal product

Offering the wrong Warranty Options

Incorrect Launch Date

…

…

->Lost revenue

->Higher Costs

->Lost Margins

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Systems Flow of InformationSystems Flow of Information

Zesati PPMA

SAP PLM SRM SAP ERP CRM

Design Manufacturing Service

In-house

Logistics

PPMA: Product Profitability Management and Analysis

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RESULTS OF THE ANALYSIS – Impacting Spend before the fact

RESULTS OF THE ANALYSIS – Impacting Spend before the fact

Decision made to go ahead with the PDA+HANDSET+CAMERA

Informed Planning D

ecisio

ns

Informed Planning D

ecisio

ns

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CASE STUDY – Part II

MANAGING SPEND

Background

Company: PDA Manufacturer

Description: Maker of Handhelds

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Zesati PPMA notifies the SAP PLM App Zesati PPMA notifies the SAP PLM App

Zesati PPMA

SAP PLM SRM SAP ERP CRM

Design Sourcing Manufacturing Service

In-house

Logistics

1. The SAP PLM System is notified to initiate the Design for the PDA+HANDSET+CAMERA

PROCESS BUILDER

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Release of Procurement BOM to SRMRelease of Procurement BOM to SRM

Zesati PPMA

SAP PLM SRM SAP ERP CRMIn-house

1. The Procurement BOM is release to the SRM Application2. SRM User is notified3. SRM User initiates the Sourcing Process

PROCESS BUILDER

Release

Note:

PDA Manufacturer uses an EMS provider and may source on behalf of the EMS provider.

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Release of Manufacturing BOM to SAP ERP

Release of Manufacturing BOM to SAP ERP

Zesati PPMA

SAP PLM SRM SAP ERP CRMIn-house

1. The Manufacturing BOM is released to the SAP ERP Application2. SAP ERP User is notified

PROCESS BUILDER

Release

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Setting and meeting spend management targets

Setting and meeting spend management targets

Managing your p

lan

Managing your p

lan

Plan Vs. Actual Comparison

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Release of Manufacturing BOM to SAP ERP

Release of Manufacturing BOM to SAP ERP

Zesati PPMA

SAP PLM SRM SAP ERP CRMIn-house

1. The Manufacturing BOM is released to the SAP ERP Application2. SAP ERP User is notified

Note: PDA Manufacturer uses an EMS provider for its manufacturing and the role of the SAP ERP system is To monitor the process.The process of managing the communication with the EMS provider is a template by itself

PROCESS BUILDER

Release

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Notification to In-house System (Logistics)Notification to In-house System (Logistics)

Zesati PPMA

SAP PLM SRM SAP ERP CRMIn-house

1. Logistics System is notified to plan for stocking and delivery

PROCESS BUILDER

Release

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Zesati PPMA monitors Plan Vs. ActualZesati PPMA monitors Plan Vs. Actual

Zesati PPMA

SAP PLM SRM SAP ERP CRMIn-house

Managing your p

lan

Managing your p

lan

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CASE STUDY – Part III

ADAPTING SPEND

PDA Manufacturer has recently introduced a new PDA 4 months back

Projection are sales of 1,000,000 quantity over nine months

However …

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Total: $9,900,000

1. Revenue did not meet projections

Projected Vs. Actual Sales

0

100

200

300

400

March April May June

Period

Qu

anti

ty Projected Qty

Actual Qty

MonthProjected Qty

(,000)Actual Qty

(,000)March 50 75April 100 100May 200 175June 300 200July 200

August 100 Sep 25 Oct 20 Nov 5 Total 1,000

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2. Total Costs higher due to unplanned service costs

Planned Vs. Actual Service Costs

0

2

4

6

8

10

12

14

16

March April May June

$/U

nit

Planned Unit ServiceCost

Actual Unit Service Cost

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Total: $9,900,000

3. Actual Profitability is much lower

Projected Vs. Actual Profit Margins

-2000

-1500

-1000

-500

0

500

1000

1500

March April May June

Period

$(,0

00) Projeted Profit

Actual Profit

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4. Inventory on Hand

Inventory on Hand-June

0500

1,0001,5002,0002,5003,0003,500

LCD

Chip

Casin

g

Micr

opho

ne

Acces

sorie

s

Keypa

d

Components

$ (

00

0)

Series1

Total: $9,900,000

There is $9.9MM Inventory at the EMS provider spread across different components

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What should the OEM do

1. Reduce price to increase total revenue?

2. Switch to higher quality components ?

3. Phase out product and liquidate inventory?

4. Use excess inventory components for next PDA?

5. Delay the launch date of the next PDA?

6. What if ?

7. …

When ?

How ?

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Proactive Monitoring would detect in real-time a deviation from planned profitabilityProactive Monitoring would detect in real-time a deviation from planned profitability

Zesati PPMA

SAP PLM SRM SAP ERP CRM

Design Sourcing Manufacturing Service

In-house

Logistics

With -Zesati, PDA Manufacturer would have detected the situation much earlier since Increase in service and warranty cost would be an indication of poor quality and hence predict a drop in sales

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Execution of the Remedial Action carried out via Zesati

Execution of the Remedial Action carried out via Zesati

Zesati PPMA

SAP PLM SRM SAP ERP CRM

Design Sourcing Manufacturing Service

In-house

Logistics

1. Zesati provides the ability to do trade-off analysis such as :a. Impact on profitability if prices are dropped to exhaust the finished goods inventoryb. Cost of liquidating current inventoryc. Moving Up the launch date of the successor PDA d. …e. …Adaptin

g to M

arket Conditio

ns

Adapting to

Market

Conditions

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PlanPlan

Summary: Zesati Value Proposition Summary: Zesati Value Proposition

1. Making Informed Decision upfront by taking in to

account all cost and revenue drivers to determine

products with highest profit potential and NPV

2. Managing and monitoring the cost of the product

over its entire lifecycle to meet the projections set in

step 1.

3. Handling unplanned events and resolving crisis

situations

MangeMange

AdaptAdapt

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Product Profitability Analysis

Technology and Architecture

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Product Profitability Analysis – Technology Overview Product Profitability Analysis – Technology Overview

Zesati Repository

J2EE Application Server

EntSAP ERPrise Communication

Tools

Object and Process Modeling Framework

Product Model

Demand Model

Mfg Logistics

Model

Sourcing Model

Investment Model

Service Model

Product Financial Model

Sources

Simulated Profit/Loss Statement

NPV of Simulated

Product Profit

Product Profit Sensitivity

Product Profit Optimization

Databases

EntSAP ERPrise Applications

Flat file formats

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Servlet Engine/App Server

GUI Services(Web Browser)

GUI Services(Web Browser)

External Applications(SAP, Pro/INTRALINK)

External Applications(SAP, Pro/INTRALINK)

ProcessTemplateDesigner

ProcessTemplateDesigner

ProductStructureManager

ProductStructureManager

ZesatiVisualization

ZesatiVisualization AdministrationAdministrationZesati

Reporting

ZesatiReporting

ZSQL (JDBC)

Relational Data Store (Oracle/SQL Server)

Internationalization

ProcessExecution

Engine

ProcessExecution

Engine

Zesati Repository(Document and Product Lifecycle Management)

Zesati Repository(Document and Product Lifecycle Management)

Zesati Integration ServerZesati Integration Server

AdapterAdapter AdapterAdapter AdapterAdapter

Zes

ati

Ser

ver

(J2E

E A

pp

lica

tio

n)

Zesati

Ap

plicatio

ns

Architecture and Technology

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JSP’s/Applets

GUI Services(Web Browser)

GUI Services(Web Browser)

External Applications(SAP, Pro/INTRALINK)

External Applications(SAP, Pro/INTRALINK)

SecurityService

SecurityService

File AccessService

File AccessService

ProductService

ProductService

Work FlowService

Work FlowService

BusinessProcessService

BusinessProcessService

ZSQL (JDBC)

Relational Data Store (Oracle/SQL Server)

Data AccessService

Data AccessService

Root ObjectRoot Object

Java UI BeansJava UI Beans

Zes

ati

Ser

ver

(J2E

E A

pp

lica

tio

n)

Zesati

Service

Mo

du

lesSoftware Architecture

UserUser FileFile PartPart Work FlowWork FlowProcessProcessGroupGroupBusinessObjects

AdapterService

AdapterService

AdapterAdapter AdapterAdapter

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Examples of Product Demand in Zesati Examples of Product Demand in Zesati

Can be loaded from Excel

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Examples of the Investment Model in Zesati Examples of the Investment Model in Zesati

Can be loaded from Excel

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Examples of SAP PLM Data in Zesati Examples of SAP PLM Data in Zesati

Can be loaded from Excel

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Examples of SRM Data in Zesati Examples of SRM Data in Zesati

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Examples of SAP ERP (Manufacturing) Data in Zesati

Examples of SAP ERP (Manufacturing) Data in Zesati

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Examples of Customer Specific Data in Zesati

Examples of Customer Specific Data in Zesati

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Examples of CRM (Service) Data in Zesati

Examples of CRM (Service) Data in Zesati