Supply Chain Forum Thursday 30th August 2012

Agenda

Introduction

Presentation 1 – Turning Warehousing into an Effective Service

Presentation 2 – Inventory Analytics in Practice

Future Sessions

Agenda

13.00 – 13.30 Networking Lunch

13.30 – 13.40 Welcome & Introduction

13.40 -14.10 Bjoern Harzer, SAP Solution Architect

Turning Warehousing into an Effective Service

14.10 -14.20 Questions

14.20 – 14.30 Coffee Break

14.30 – 15.00 Karen Studley, Principal Consultant Hexarus, an Absoft Company

Inventory Analytics in Practice

15.00 – 15.10 Questions

15.10 – 15.20 Future Sessions, topic suggestions, volunteers for input, AOB

15.20 - Coffee & Networking

Agenda

Introduction

Future Sessions

Presentation 1 – Turning Warehousing into an Effective Service

Presentation 2 – Inventory Analytics in Practice

Health and Safety Information

Fire Alarm

Assembly Point

Fire Exits

Restrooms

Mobile Phones

Please put on silent/vibrate

About Absoft

Over 20 years in business

SAP consultancy practice – Oil & Gas

SAP experience since initial release of R/3

100+ permanent employees

High Staff Retention / Low Staff Turnover (7.4%)

Significant investment made to on-going training (12 days

per annum)

Why Absoft?

SAP Oil and Gas Partner

SAP Business Objects Partner

Unrivalled track record

Global turnkey project capability

39 countries

Optimisation of Requirements Gathering – right people, right questions

Accelerated implementation via purpose-built Templates

Resource augmentation and change management

Continuity of service beyond go-live

Absoft has deployed SAP into 39

countries worldwide…

• EUROPE

• MIDDLE EAST

• AMERICAS

• AFRICA

• ASIA

Products and Services

SAP Implementation

SAP Consulting

SAP Training

SAP Support (Front & Back-office)

SAP Infrastructure

Data Migration

Winshuttle

ReadSoft

Business Objects

Aims

Informal network for Oil and Gas organisations using SAP

Share best practice use of SAP in the Supply Chain arena

Foster discussion around potential solutions for common

pain points

Context

Forum not recognised or sponsored by SAP

Forum is not intended to in any way compete SAP User Group

http://www.sapusers.org/members/sigs.php?sig

Calum Davidson – Calum.Davidson@subsea7.com for more

info

Keen to extend reach of forum: Open to all SAP using

companies in Oil and Gas sector

Maintenance and Operations Forum alternating with Supply

Chain

Absoft happy to act as co-ordinator – agenda/topics to be driven

by participants

Questions

Agenda

Introduction

Presentation 1 – Turning Warehousing into an Effective Service

Presentation 2 – Inventory Analytics in Practice

Future Sessions

Mission

Warehousing

Maintenance

Exploration

Projects

Procurement

Finance

Logistics

Turning warehousing into

an effective service

Recognize trends

Adjust stock policies

Deliver in time

The elements of inventory controlling

Business Challenges – Inventory Controlling

Data transformation (Excel wiz)

Adjust procedures

Prioritize & interpret data

Monitor

&

Reitera

te!

Data collection (SAP)

Data extraction (Report?)

S

Data presentation (xls charts)

A • Step 1

B • Step 2

C • Step 3

?

Challenges:

Thousands of items

Loads of MRP

parameters

Complex calculations

No structured data

It is a time-consuming task!

Symptoms:

Increasing stock levels

Shortages on spares

Overages on spares

Data transformation (Data w/h)

Data extraction (Automatic)

Data presentation (BOBJ)

!

(A) Stock controlling – Stock visibility

“Measure performance of a warehouse”

Measuring warehouse performance

Stock optimisation

Monitor

&

Reitera

te!

Stock visibility

Stock classification

How can I gain visibility?

Consumables

Spares

Insurance spares

Min/Max

Performance

Questions in Inventory Controlling

Metrics

(1) Stock levels = How much have I got?

(2) Stock turnover = How quickly does stock move?

(3) Stock coverage = How long does my stock last?

(4) Stock dates = When did my stock move last?

(5) Stock count = How much did I lose?

(1) Stock levels

Definition?

Measured in quantity or value by period

How to read it?

The stock value describes the stock balance sheet – note that some stock in the warehouse is

deemed a financial asset and is therefore only captured as a quantity.

Identify trends, influences and impacts on stock balance sheet

How much have I got?

e.g. “Stock

reduction effort”

(2) Demand

Definition?

Expressed as “demand” or “demand value” being the consumption by period.

Average demand/demand value = Consumption / Occurences by period.

How to read it?

The demand/demand value allows to identify high turnover or high value materials in the

warehouse. It allows classifying into fast and slow movers.

Identify potential dead materials / identify increase in usage / … by trending

0

1

2

3

4

5

6

2012.01 2012.02 2012.03 2012.04 2012.05 2012.06

Consumption pattern

Total

Average

How quickly does stock move?

(3) Stock coverage

Definition?

Stock coverage = Stock on hand / Average demand by period

How to read it?

Expresses how long current stock in warehouse will last if no further receipt (from vendor)

happens – based on average demand or average demand value

Helps prevent potential stock out situations

Helps stock controller to adjust minimum stock levels for materials

How long does my stock last?

(4) Dates

Definition?

Last Goods movement / Goods issue / Goods receipt

How to read it?

Identify potential dead stock / excess stock

When did my stock move?

Material Last movement

100021 01/09/2007

100023 04/05/2011

100029 06/07/2012

100030 01/09/2009

100031 21/12/2011

“Older than 3 years”

Potentially dead stock?

Again, why are we interested?

What to do with this?

Measure success and outcome of improvement projects

objectively.

Stock holding

Stock balance sheet reduction > 10%

Stock value usage increase > 100%

Stock movements

Stock turnover (month) increase > 20%

Stock coverage reduction > 20%

(without impact on operations)

(B) Stock segmentation

“How can we manage stock levels effectively?”

Understanding my materials in stock

Stock optimization

Monitor

&

Reitera

te!

Stock visibility

Stock segmentation

How can I prioritise?

Consumables

Spares

Insurance spares

Min/Max

Performance

The ABC of stock optimisation

(1) Segmentation of inventory

Assign a ABCD to each material based on demand value.

(2) Criticality analysis

Promote ABCD class for materials based on criticality in

maintenance and by lead time analysis.

(3) Profiling materials

Consumable or spare?

(4) Stock policies / Service levels

Define the risk of a stock out situation.

(5) Suggest stock levels

Applied statistics to help the stock controller.

(6) Review materials

Working it.

Seg

men

tati

on

O

pti

miz

ati

on

(1) ABCD classification

B – middle 15% value

A – top 80% value

C – bottom 5% value

D – no usage

B – middle 15%

of all materials

A – Top 5%

C – bottom 80%

of all materials

D – no usage

ABC = Demand value of last

12 months, sorted top-down 5% of materials make up

80% of balance sheet

Which material first?

Minimum effort with maximum return

(2) Identify priority in Maintenance

24 hours 14 days 2 months

14 days 2 months 3 months

2 months

6 months

3 months

3 months

6 months

6 months

Stock policy

Stock controlling

Equipment criticality

Spare BOMS

Insurance spares

Is it critical spare?

Recognize oil & gas specifics and promote critical

spares, which usually have no/infreqeuent

consumption

Need one version of truth, i.e., PM data in SAP

Spares

Component

Equipment Mud pump

Motor

O-ring Shaft

Valve

Impact

criticality

Installed

systems

(3) Profiling materials – consumption pattern

Consumable

Lower

bandwith

Upper

bandwith

Constant turnover

in bandwith

Average

consumption

Spare Flat demand

with peaks

Lower

bandwith

Upper

bandwith

Average

consumption

Decide

statistical

method for

suggesting

stock levels

How does

the material

behave?

Segmentation – Example

Material Demand value ABC analysis ABC Cumulative ABC classification

10011 £200,000.00 88.83% 100.00% A

10012 £9,100.00 4.04% 11.17% B

10013 £6,920.00 3.07% 7.13% B

10014 £3,722.94 1.65% 4.06% C

10015 £2,700.00 1.20% 2.40% C

10016 £1,180.00 0.52% 1.20% C

10017 £600.00 0.27% 0.68% C

10018 £550.00 0.24% 0.41% C

10019 £400.00 0.18% 0.17% C

10020 £300.00 0.13% -0.01% D

10021 £2.00 0.00% -0.14% D

10022 £0.00 0.00% -0.14% D

10023 £0.00 0.00% -0.14% D

10024 £0.00 0.00% -0.14% D

10025 £0.00 0.00% -0.14% D

10026 £0.00 0.00% -0.14% D

10027 £0.00 0.00% -0.14% D

10028 £0.00 0.00% -0.14% D

10029 £0.00 0.00% -0.14% D

10030 £0.00 0.00% -0.14% D

10031 £0.00 0.00% -0.14% D

10032 £0.00 0.00% -0.14% D

10033 -£40.00 -0.02% -0.14% D

10034 -£279.00 -0.12% -0.12% D

Total £225,155.94 100.00%

Promote by

Long Lead

Promote

critical

spares

Promote

insurance

spares Demand

value = 0 for

insurance

spares!

(C) Stock optimisation

“How to suggest stock levels?”

Stock optimising

Stock optimisation

Monitor

&

Reitera

te!

Stock visibility

Stock classification

How do I suggest stock levels based

on facts?

Consumables

Spares

Insurance spares

Min/Max

Performance

Spares

Component

Equipment Mud pump

Motor

O-ring Shaft

Valve

(4) Define Stock Policy / Service Level

24 hours 14 days 2 months

14 days 2 months 3 months

2 months

6 months

3 months

3 months

6 months

6 months

Stock policy

Stock controlling

Equipment criticality

Spare BOMS

Insurance spares

How much should I keep in stock?

Objective response of how much should be kept in

stock – based on usage history & criticality.

ABC classification Service Level Months

A 99.90% 12/12

B 91.67% 11/12

C 75.00% 9/12

D 50.00% No stock

Cycle count

2x year

1x year

every 2 years

not applicable

(5) Stock optimising – How does it work?

Warning!

Dark arts

(5.1) Suggest stock levels – for consumables

Period Usage Quantity

2011.07 10.0 EA

2011.08 15.0 EA

2011.09 12.0 EA

2011.10 11.0 EA

2011.11 9.0 EA

2011.12 10.0 EA

2012.01 10.0 EA

2012.02 15.0 EA

2012.03 12.0 EA

2012.04 11.0 EA

2012.05 9.0 EA

2012.06 10.0 EA

Total usage = Sum of usage quantity 134.00 EA

Average (AVG) = Sum of usage quantity / number of months 11.17 EA / Month

Standard Deviation (STDEV) = Square root [ Sum { usage - average } 2̂ } / (number of months - 1) ] 2.04 EA

Desired reorder frequency = Parameter set by Procurement, e.g. once per month 1 Month

Lead time = Average or worst case lead time, set by procurement 20 days

Lead time = Average or worst case lead time, set by procurement 0.67 months

A B C D

Service level (SL) = likelihood expressing how often to avoid a stock out situation 99.90% 91.67% 75.00% 50.00%

Service factor (SF) = norms inverse (Service Level) 3.09 1.38 0.67 0.00

Safety stock level (SSL) = lead time * standard deviation * service factor (in months) 4.2 1.9 0.9 0.0

Reorder point (RP) = lead time * average consumption (in months) 7.4 7.4 7.4

Minimum stock level (MIN) = safety stock level + reorder point 12 9 8 0

Reorder quantity (ROQ) = desired reorder frequency * average consumption (in months) 11.2 11.2 11.2

Maximum stock level (MAX) = minimum stock level + reqorder quantity 23 20 20 0

Averages & Deviation

Procurement input

Usage history

Service levels

(5.2) Suggest stock levels – for consumables

Reorder

point

Safety

stock level

Higher

consumption

Longer

lead

ROP = average lead time

* average consumption

SSL = standard deviation

* average lead time

* service factor

ROQ = desired reorder frequency

* average consumption

Desired reorder

frequency

Reorder

quantity

Average

Lead time

MAX =

SSL + ROQ

MIN =

SSL + ROP

Period Usage Quantity

2011.07 0.0 EA

2011.08 0.0 EA

2011.09 0.0 EA

2011.10 0.0 EA

2011.11 0.0 EA

2011.12 0.0 EA

2012.01 5.0 EA

2012.02 1.0 EA

2012.03 0.0 EA

2012.04 0.0 EA

2012.05 0.0 EA

2012.06 0.0 EA

Total usage = Sum of usage quantity 6.00 EA

Average (AVG) = Sum of usage quantity / number of months 0.50 EA / Month

A B C D

Service level (SL) = likelihood expressing how often to avoid a stock out situation 99.90% 91.67% 75.00% 50.00%

Minimum stock level (MIN) = Percentile of Usages of last 12 months for service level 5.0 EA 1.3 EA 0.0 EA 0.0 EA

Maximum stock level (MAX) = Coverage for Total of usages of last 12 months 6.0 EA 6.0 EA 6.0 EA 0.0 EA

(5.1) Suggest stock levels – for spares

Averages

Usages

Service levels

(5.2) Suggest stock levels – for spares

Spare

Minimum for B =

coverage for 11

months out of year =

Service level = 91.7%

Minimum for A

= coverage for 12

months out of year =

Service level 99.9%

Maximum = coverage

for whole demand in

year

Minimum for C =

coverage for 9 months

out of year = Service

level = 75.0%

MAX

MIN B

MIN A

MIN C

(5) Stock optimizing – How does it work?

You

survived!

(5) Review it! Industrialise!

Reviewing:

Review materials on a

frequent basIs

Review materials

by demand value

by criticality

by actual/proposed

stock levels

Understand consumption

patterns

Understand integration to

Maintenance and

Procurement

Assign a review date or

review status to the material.

Segmentation (ABCD)

Usage history

Policies / Service levels

Criticiality analysis

Propose stock levels

Consumption profiles

Review by traffic light • Demand value

• Criticality

• Current/Proposed SL

24 hours 14 days 2 months

14 days 2 months 3 months

2 months

6 months

3 months

3 months

6 months

6 months

Consumable

or Spare?

Procurement

Lead time +

Reorder

frequency

Current /

Proposed MRP

parameters

Adjust materials

ABC classification Service Level Months

A 99.90% 12/12

B 91.67% 11/12

C 75.00% 9/12

D 50.00% No stock

Effective and repeatable

stock optimisation

Monitor

&

Reitera

te!

Take away message!

Stock optimisation never stops!

It is an iterative cycle, because projects (upgrade, commission,

decomission) phase in and out equipments / spares

(D) Management reporting

“Impact on other business areas?”

Inventory Control Maintenance

Eco system – Maintenance

Consider KPIs in their context of maintenance ops!

Aim for stock reduction in inventory

Aim for minimizing downtime in maintenance

Drive both KPIs down without implicating the other!

Stock level Downtime

Enterprise

Dashboard

Overall ops performance Right material / right price / right

quality / in time / first time

Inventory Control Purchasing

Eco system – Purchasing

Consider KPIs in their context of purchasing!

Aim for stock reduction in inventory

Aim for minimising lead time to purchasing

Drive both KPIs down without implicating the other!

Stock level

Overall ops performance Right material / right price / right

quality / in time / first time

Lead time

Enterprise

Dashboard

(E) Conclusion

“One version of the truth”

Summary

Thank you!

Questions?

Thank you!

Björn Harzer

Agenda

Introduction

Presentation 1 – Turning Warehousing into an Effective Service

Presentation 2 – Inventory Analytics in Practice

Future Sessions

Rapid Application and Insight Development

(RAID)

Project Approach

What is RAID and what are benefits?

• Rapid Application and Insight Development (RAID) is an

approach to quickly delivering Business Intelligence capability

with a defined business objective.

• Absoft offer a “Test Drive” approach where the various

components of the Business Objects toolset can be reviewed

using customers’ own data in conjunction with Absoft insight

into common (specific) business issues.

• Proof of Value, with minimal time and cost investment.

• Direct link to recognised standard KPI’s

• Business Objects familiarisation and comfort.

• Understanding of cost / benefit for BI investment.

• Foundation for incremental BI value.

50

What would RAID look like for me? K

ey A

ctivitie

s

Ke

y O

utc

om

es

Prepare

fixed format

CSV extract

files

CSV Extract

files

Explore Data

BOBJ

familiarisation

Reports

available for

extended period

of review

Users trained

Customer review of

reporting content and

compilation of Gaps /

Issues / Questions log

Import of RAID technical

objects to customer

systems

Gap / Issue / Question

Log

ERP system able to

support on demand

refresh

Review of gaps and questions

IT review

Transition and automation planning

Gap fill estimate

Capability Transition estimate

Technology roadmap

Capability and Functionality

roadmap

Wk 0 Wk1 Wk2 Wk3 Wk4 Wk6 Wk7 Wk8

Step 1 :

Data

Preparation

Step 2 :

Data

Exploration.

Step 3 :

Customer Review Step 4 :

RAID Gap / Fit Review

What would RAID look like for me?

Wk8 Wk9 Wk10 Wk11 Wk12 Wk13 Wk14 Wk15

Wk

16

Wk

17

Wk

18

Wk 19

Step 7 : BI Technical Implementation

Step 5 :

Baseline Stock

Optimisation

Generate a

Baseline

stock

position.

As-is

position

understood

Perform stock optimisation process

Transition defined BI capability to customer

environment

Optimised Inventory management processes

.Reporting capability to manage process on-going

Refresh and view reports

to gauge improvements

and further areas for

improvement

Inventory control process

in control and within

management tolerances

Cost savings from more

efficient stock

management

Ke

y A

ctivitie

s

Ke

y O

utc

om

es

Step 6 : Process Stock Optimisation Step 8 : Feedback /

Monitor and Review

What would RAID look like for me? K

ey A

ctivitie

s

Ke

y O

utc

om

es

Prepare

fixed format

CSV extract

files

CSV Extract

files

Explore Data

BOBJ

familiarisation

Reports

available for

extended period

of review

Users trained

Customer review of

reporting content and

compilation of Gaps /

Issues / Questions log

Import of RAID technical

objects to customer

systems

Gap / Issue / Question

Log

ERP system able to

support on demand

refresh

Review of gaps and questions

IT review

Transition and automation planning

Gap fill estimate

Capability Transition estimate

Technology roadmap

Capability and Functionality

roadmap

Wk 0 Wk1 Wk2 Wk3 Wk4 Wk6 Wk7 Wk8

Step 1 :

Data

Preparation

Step 2 :

Data

Exploration.

Step 3 :

Customer Review Step 4 :

RAID Gap / Fit Review

• Stock Turnover

• Stock Value

• Stock Movements

• Stock Coverage

Reporting

DEMO

• Stock Value using

BOBJ Explorer

Data Exploration

DEMO

What would RAID look like for me?

Wk8 Wk9 Wk10 Wk11 Wk12 Wk13 Wk14 Wk15

Wk

16

Wk

17

Wk

18

Wk 19

Step 7 : BI Technical Implementation

Step 5 :

Baseline Stock

Optimisation

Generate a

Baseline

stock

position.

As-is

position

understood

Perform stock optimisation process

Transition defined BI capability to customer

environment

Optimised Inventory management processes

.Reporting capability to manage process on-going

Refresh and view reports

to gauge improvements

and further areas for

improvement .

Inventory control process

in control and within

management tolerances.

Cost savings from more

efficient stock

management

Ke

y A

ctivitie

s

Ke

y O

utc

om

es

• ABC

Classification

• Consumption

Pattern

Stock

Optimisation

DEMO

Step 6 : Process Stock Optimisation Step 8 : Feedback /

Monitor and Review

Step 8 : Feedback /

Monitor and Review

• Dashboard

Monitor /

Feedback and

Review

DEMO

Questions & Comments

Agenda

Introduction

Presentation 1 – Turning Warehousing into an Effective Service

Presentation 2 – Inventory Analytics in Practice

Future Sessions

Thank You