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Agenda
• Kraft Overview• Catalyst Project Introduction• External Manufacturers (EM)• Supplier Managed Inventory (SMI)• Supply Network Collaboration (SNC)• Benefits & Lessons Learned• Questions
2
3
Fast Facts
3
2008
$41.9 billion in revenue
Sales in approximately 150 countries
Operations in more than 70 countries
Approximately 98,000 employees
Nearly $100 million in charitable contributions
4
An Amazing Brand Portfolio
4
9 Brands with more than $1 billion in revenue
50+ Brands with more than $100 million in revenue
40+ Brands over 100 years old
Agenda
• Kraft Overview• Catalyst Project Introduction• External Manufacturers (EM)• Supplier Managed Inventory (SMI)• Supply Network Collaboration (SNC)• Benefits & Lessons Learned• Questions
5
6
Introduction to Catalyst
• Catalyst is the name of our multi-year program to streamline and standardize how we work throughout the company and do business with customers, suppliers and other external partners
• Catalyst will provide Kraft with access to better information that we can use to respond more effectively to opportunities in the marketplace while helping us to better support business growth and address business challenges
7
Enabling Responsive Supply NetworksManage collaborative business processes end to end
End-to-End Processes
Collaborative Demand and Supply Planning
SOUCE SUPPLY MAKE SELL MOVE SERVICE CUSTOMER
Logistics and Fulfillment management
Manufacturing Network Planning & Execution
Customer DemandResponse & Execution
Supply Network Strategy and Design
Supply Network Traceability
Tactical
Strategic
“ Responsive Supply Networks enable companies with fluctuating demand and high product complexity to sense and respond faster and smarter to demand, supply and compliance dynamics across a globally distributed environment.
Delivered in 2008 Future Value Scenarios
Customer places order with
customer service team
1
Order is verified, fully priced and credit check
applied based on standard rules
2Integration with logistics enables Available to
Promise (GATP)
3Demand forecast is updated with actual orders to integrate
with Manufacturing
4
From forecasts product supply plans a
2 year horizon
5
Suppler demand is visible in SNC,
Suppliers confirm replenishment, Alerts
signal changes
6
Finished goods are shipped to buffers/mixing centers & made
available for GATP
7
’’
8
Catalyst North America
Status: 1 Aug st 2009
Today End state28 54
$24B
Plants (% of COGS)
Ext MFG(% of Spend Value)
Revenue
2009 2010
2009 2010
63%
82%
1502009 2010
69%
2008
2008
2008
30,000Users
2009 2010
30%
2011 2008
9,000
*(Revenue numbers based on 2007 figures)
52
$20B
Catalyst NA went live in October 2007 with releases planned through 2011.
2009 20102008
Agenda
• Kraft Overview• Catalyst Project Introduction• External Manufacturers (EM)• Supplier Managed Inventory (SMI)• Supply Network Collaboration (SNC)• Benefits & Lessons Learned• Questions
9
10
Kraft SAP External Manufacturing objective is standard business practices
• Standard Purchase Order Process– Eliminate manual cost and purchase tracking
processes with SAP contracts and Purchase Orders • Supplier Collaboration
– Replace the historic manual process of e-mails / phone calls with a system driven solution to communicate and collaborate on requirements
• Receipts into Kraft Distribution Network – Transition from inventory at the vendor location to
initial receipt at the Kraft warehouses
• System Driven Three Way Match Payments– Transition from manual invoice coding and receipt
matching process to an automated match between the PO, Receipt, and Invoice
– Automated payment after matching within the terms on the contract
Purc
hase
Ord
er P
roce
ss
Supp
lier C
olla
bora
tion
Kraft
Rec
eipt
s
Paym
ent
EM Program
Four Pillars of the Kraft EM Program
External Manufacturing Design Summary
• EM’s divided into two groups – will have 2 designs:– Subcontracting (Tolling/Converters)
• Plants that have Kraft owned materials (1 or more)– Vendor (Finished Goods)
• Vendors that buy all materials – Kraft does not own ANY material
• All Purchases for Kraft owned / vendor ordered items at subcontracting EM’s will utilize a Standard SAP PO
11
Purchase Order Collaboration
• External Manufacturers access PO data via the SNC tool
• Standard Tasks:– Review Purchase Orders– Confirm Delivery Dates– Update Delivery Quantities– Review Long Term Demand via Demand Monitor
• Sub Contractors Create R&P POs– Portal Access enables EM to Order Materials via
Kraft Contracts– Kraft owned materials used at EM location to
produce Kraft Products
12
Agenda
• Kraft Overview• Catalyst Project Introduction• External Manufacturers (EM)• Supplier Managed Inventory (SMI)• Supply Network Collaboration (SNC)• Benefits & Lessons Learned• Questions
13
Kraft enabled its SMI Business Model by implementing processes and systems focused on four capabilities
• Statistically Driven Safety Stock– Utilize a statistical approach to defining material
stocking parameters, which leverages historical demand and supply characteristics
• Collaborative Replenishment– Transfer the responsibility for defining quantity and
timing of material inventory replenishments (shipments to Kraft and manufacturing of materials) to the supplier
• Inventory Consignment– Migrate from transfer of inventory ownership upon
receipt to transfer of inventory ownership upon consumption
• Payment– Migrate from transfer of liability to supplier upon
receipt to transfer of liability to supplier after consumption
– Weekly payment to supplier for consigned materials consumed during the period
14
Stati
stica
lly –
Driv
en
Safe
ty S
tock
Colla
bora
tive
Repl
enis
hmen
t
Inve
ntor
yCo
nsig
nmen
t
Paym
ent
SMI Program
Four Pillars of the KNA SMI Program
NOTE: SMI Consumption: DefinedIssuance to Production Staging AreaPhysical Inventory AdjustmentsDamaged Material Write-offsObsolete Material Write-offs
Mapping
Kraft Supplier
SAP ECC SAP SNC
Current inventory positions, status,
parameters, & Gross
requirements
POD (material receipts)
Supplier’s Systems
Kraft Gross Requirements &
Inventory
Inventory alerts
POD (material receipts)
Planned Replenishments
ASN’sASN’s
(Inbound Delivery)
B2B Hub
XML
EDI
852
Planned Replenishments
Kraft Gross Requirements,
Inventory &Stocking Parms
EDI852
ASN’s
iDocXML
XMLEDI
861
POD (material receipts)
SMI EDI requirements
Supplier to provide following datato support SMI
XMLEDI
856
iDoc
XI
iDoc
XMLiDoc
Existing New
iDoc
iDoc
XI
15
iDoc
Agenda
• Kraft Overview• Catalyst Project Introduction• External Manufacturers (EM)• Supplier Managed Inventory (SMI)• Supply Network Collaboration (SNC)• Benefits & Lessons Learned• Questions
16
17
Purchase Orders
Kraft’s MFG Network Planning and Execution Using SAP’s SNC
Kraft Foods
Internal ERP & APS environment
Gross Demand & Stock
Replenishment Plan (Min/Max)ASNs
SMI Process
EM
SMI
Confirmations
Sub Contractors
ASNs
Contract MfgConfirmations
EMPurchase Orders
Bill of Materials
Receipts
18
Purchase Orders
Kraft’s MFG Network Planning and Execution Using SAP’s SNC
Kraft Foods
Internal ERP & APS environment
Gross Demand & Stock
Replenishment Plan (Min/Max)ASNs
SMI Process
EM
SMI
Confirmations
Sub Contractors
ASNs
Contract MfgConfirmations
EMPurchase Orders
Bill of Materials
Receipts
Web Browser
SAP ERP
Internet Internet
EM only
External Access and Security
ProvidesFront doorSecurity
ProvidesApplication
Access
Provides Content Security
SupplierKraft’s
Supplier Portal
Remote Connectivity
Backend SAP
Servers
19
SAP SNC
SAP BW
Both
SMI only
Advance Shipment Notifications
• Prior to Shipments, EM/SMI Create Advance Shipment Notifications (ASNs) for each Truck Load– Document lists Materials and Quantities being Delivered– Interface to ECC creates an Inbound Delivery Document– Additional EM specific requirements:
• Linkage to Purchase Orders for Invoice Payments• Delivery Dates for GATP and Dock Scheduling• Bills of Lading for Freight Payments
– Additional SMI specific requirements:• Load Numbers in place of PO Numbers• Vendor Batch Numbers
20
E-Mail Alerts
• Kraft and EM/ SMI Set Up Alerts– Used primarily by smaller volume vendors – User will go into SNC for further details– Additional EM specific requirements:
• Notification when POs are created or changed• E-Mail contains basic PO data
– Additional SMI specific requirements:• Min/Max Stock warnings• ASN Receipts differences
21
Master Data
• CIF (Core Interface) process is how SAP sync’s Master Data between servers
• Both EM and SMI needs SNC Master Data– CIF Models define which records are sync’d on SNC
• ECC Plant Master become SNC Customer Locations• ECC Vendors become SNC Supplier Locations and BP Orgs• ECC Materials become SNC Products• ECC Contracts and Schedule Agreements become SNC
Transportation Lanes
• SNC User are linked to BP Persons which are linked to BP Org’s
• SNC BP Orgs limit what data content Users can access
22
External Manufacturer – Example Message Flows
23
SAP ICH 5.0 ERPSAP NW 2004s
SupplierKraft
EAI
Create or Change a PO
PORDCR1PORDCR102
IDoc XML
RON
Receive ASNReceive ASN or create in
Web UI
DESADV DELVRY 03
IDoc XML XMLPublish
ASNDDN DDN
Receive delivery and post goods
receipt
Display GR information
STPPOD DELVRY 03
IDoc XML
RDN
Display PO
iDoc
DESADV
SAP ECC 6.0
No M
appi
ng
Map
ping
Map
ping
SAP NW 2004s
Change PO Confirm PODESADV DELVRY 03
IDoc XML
DDN
Supplier Managed Inventory – Example Message Flows
24
SAP ICH 5.0 ERPSAP NW 2004s
SupplierKraftEAI
Publish current stock status and gross demand
PROACT PROACT 01
IDoc XML
PAN
Receive ASNReceive ASN or create in
Web UI
DESADV DELVRY 03
IDoc XML XMLPublish
ASNDDN DDN
Receive delivery and post goods
receipt
Display GR information
STPPOD DELVRY 03
IDoc XML
RDN
Display current stock
status
iDoc
DESADV
SAP ECC 6.0
No M
appi
ng
Map
ping
Map
ping
SAP NW 2004s
SNC Upgrade Plan
• Kraft is planning on upgrading from SCM 5.0 to SCM 7.0 next year.• New features we are looking at are:
– The “PO Work List” is a new screen in SAP SNC 5.1/7.0. The purpose of the PO Work List is to increase usability and the business users productivity when processing PO’s.
– The “File Transfer” feature enables external partners to download data that they would otherwise see on the given SAP SNC Web screens, edit the downloaded file locally on the PC and update SAP SNC with latest changes by uploading the modified file to SAP SNC.
– Quickview (Entry Screen)– Gives comprehensive “at-a-glance” view of the users work and helps the
user to focus on most critical items– Allows user to take immediate action by drilling-down to the detailed SNC
screens.
25
Agenda
• Kraft Overview• Catalyst Project Introduction• External Manufacturers (EM)• Supplier Managed Inventory (SMI)• Supply Network Collaboration (SNC)• Benefits & Lessons Learned• Questions
26
EM & SMI Catalyst Design Summary
• EM’s divided into two groups:– Subcontracting (Tolling/Converters/IMSC)–Accounts for 20% EM Spend
• Plants that have Kraft owned materials (1 or more)• 18 EM and 20 Re-packers (Plant Managed and IMSC)
– Vendor (Finished Goods) – Accounts for 80% EM Spend• Vendors buy all materials consumed+• 110 locations
• Supplier Managed Inventory (SMI) – Materials owned by our partners until just prior to their use in the manufacturing process:– Demand visible through the SNC tool– Materials are brought in and systematically segregated and staged– Once materials are consumed, Kraft will pay for the materials w/out PO
or Invoices– Benefits of costs savings shared between Kraft & Partners
27
28
External ManufacturerKraft
Kraft – External Manufacturing Process Benefits
• Integration of planning & costing processes for external manufacturers
• Harmonized material and product master files
• Enable supplier evaluations and security access controls
• Standard Reporting capability to drive business improvements
• Retirement of legacy systems • Reduced contract complexity • Variance analysis and cost
tracking • Improved External manufacturing
Invoice matching and payments
• Standard process used for Kraft purchased FGs.
• Secure access to Kraft systems for sub contract material ordering.
• Simplified delivery scheduling process.
• Improved payment cycle
Kraft – Supplier Managed Inventory Process Benefits
• Reduced working capital investment due to transfer of inventory ownership
• Reduced costs associated with material waste and obsolescence
• Less effort required to manage raw/pack inventory
• Lower payment processing costs• Reduced contract complexity
29
SupplierKraft• Greater control of inventories
throughout the supply chain• Improved and expanded supply
relationship with Kraft• Flexibility in meeting Kraft material
requirements• Enhanced ability to optimize
operations through improved planning
• Greater visibility to Kraft material usages and variances
SNC Lessons Learned
• Alert Process– User defined Notification Profiles need to be monitored
• Access– Varies by company and user and therefore can complicate the
startup and support model• Demand monitoring functionality limited
– PO updates are not real time (once Daily)• EDI Process
– Timing of jobs on both sides (inter-dependencies)– Commercialization synchronization– Validating cross-references– Accuracy and timing of ASN’s
• CIF Process– Defining the models to dynamically adapt to business– Queue issues sending data to SNC
30
Agenda
• Kraft Overview• Catalyst Project Introduction• External Manufacturers (EM)• Supplier Managed Inventory (SMI)• Supply Network Collaboration (SNC)• Benefits & Lessons Learned• Questions
31