2003 Supply Chain Management Forum

Implementing APO Demand Planning at a small company

Session Code: Presenters: 710 Mike Beller, Entegris Chandra Mohan, Bristlecone Joan Ellison, Entegris

Who is Entegris?
Core competency: Materials Integrity Management Core markets: Semiconductor, Data Storage, Life Sciences, Fuel Cell Core products: Silicon wafer carriers, wafer shippers, disk shippers, fluid handling Fiscal year 2003 revenue approx. $245M

Geographical Supply Map: Indicative

Manufacturing Locations

DCs

Customers

SAP landscape
Went live on SAP R/3 4.0B in August 1998 (MM,PP,FI,CO,SD,HR) Upgraded to 4.6C in August 2001 R/3 currently implemented at all major facilities outside of Japan Licensed mySAP suite in 2002 Outsourced hardware maintenance for SAP systems in spring 2003.

Importance of Planning
Semiconductor has traditionally been Entegris largest market. Semiconductor market has historically been subject to rapid and significant changes in demand. Failure to anticipate upturns leads to high level of expedites, long lead times, and loss of market share Failure to anticipate downturns leads to excess inventory and capacity

Supply chain planning at Entegris: the old days

Planning/forecasting processes ranged from inconsistent to nonexistent Planning responsibilities divided into four groups:
Sales: Generated a high-level dollar-based forecast on a quarterly basis Product management: Refused to provide forecasts our products are too unique to forecast. Operations: No unit forecast available, planned at a high level based on the dollar forecast Logistics: Received forecasts from certain key customers, data not visible to other groups

Early attempts to improve

In February 2002, implemented a custom forecasting system in R/3 for selected product lines
Bare-bones functionality Low participation Ongoing programming support

No experience with R/3 Sales & Operations Planning functionality or budget for investigating it No business push for consistent practices and tools

Business emphasis on supply chain

In early 2002, internal reorganization placed greater emphasis on supply chain planning
Supply chain functions consolidated under one senior VP Creation of a demand management group responsible for forecasting Executive push for a project to address supply chain planning processes and tools

Project goals
Define one global forecasting/demand planning process based on industry best practices to apply for all Entegris facilities/product lines. Implement tools within the SAP environment to enable the realization of the global demand planning process. Match inventory to customer demand Reduce lead times by reducing schedule disruption

Planning tool selection

For cost reasons, decided to make use of existing and available functionality within SAP for demand planning did not consider third-party supply chain planning systems. Considered R/3 Sales & Operations Planning APO Demand Planning selected:
SAPs long-term direction Collaborative capabilities

Consulting partner evaluation

Selected three candidate consulting partners based on past experience/other contacts Each candidate received a detailed requirements document, and conducted a series of fact-finding interviews to gather further data Each candidate then presented:
Their proposed demand planning business process A demo of how this process would be implemented within APO-Demand Planning

Why we selected Bristlecone

High level of knowledge and experience with demand planning business practices Significant experience with APO-Demand Planning implementation Close ties to SAP Local resource

Business case prep

Project budget approved, but difficulty in quantifying projected benefits/ROI. Before implementation, build a detailed business case to quantify benefits and justify the project

Chandra Mohan Bristlecone

Bristlecones Company Statistics

Founded Ownership Number of Employees Headqrtrs Areas of Expertise Key Industries Global Presence Business Offices 1998 Private 125 San Jose, CA Supply Chain Management, Product Lifecycle Management, Enterprise Resource Planning Process Manufacturing, Consumer Packaged Goods, Apparel/Footwear, High Tech, Industrial, Oil & Gas United States, Germany, India Santa Clara, California; Atlanta, Georgia; Cleveland, Ohio; Houston, Texas; Richmond, Virginia.

Bristlecone Services
Consulting Services
SC Opportunity Assessment SC Network Strategy SC Process benchmarking SCOR framework SC Business Process Improvement SAP APO Implementation Meta-app development SCM-PLM SCM-CRM

Packaged Solutions
plannerDATM SAP APO Value Accelerators Model Validator Planning Results Analyzer

SCM ERP SMB PLM

Managed Services
APO Help Desk Planning Expert On Call

Bristlecones Supply Chain Experience

SAP APO Implementation SC Strategy ITT Night Vision Nike GaAsTek Pennzoil Nestle USA Shell Millennium Chemicals Motorola SC Process HP Nike Dow Corning LSI Logic Palm Entegris Pennzoil VWR Owens Corning Eastman Chemicals Entegris Hasbro Baker Hughes SC system evaluation/selection Celestica Ferro Corporation

Highest number of successful APO implementations Supply Chain domain expertise that spans several industry verticals

Objective, Scope and Deliverables

Identify business benefits:
Identifying Supply Chain Opportunities for Realization Benchmark against other companies Estimating the realization value

Scope for the assessment exercise

Demand Planning Supply Planning

Objective, Scope and Deliverables

Benefit Scope
Inventory Reduction Order to Delivery Cycle Time Reductions

Drivers:
Demand Plan Accuracy Improved Supply Planning Capabilities
Where,When, How Much to produce

Deliverables:
Value matrix

Approach using, Supply Chain Analysis (SCAn)

Secondary Data Gathering

Primary Data Gathering

Data Analysis

Estimation of Realization Value

Benchmarking & Gap Analysis (PMG)

Understanding of Entegris Business

Revenue forecast was the only prevalent forecast Unit level forecasting was introduced for a small subset of products recently
Lack of a formalized consensus demand plan building process (Product Management, Sales, Production and Procurement function in isolation) Forecast accuracy was difficult to estimate as the interim forecasting system had been operational for a couple of months only.

Understanding of Entegris Business

No demand visibility upstream in manufacturing and procurement
Expedites was all pervasive Manual changes to the production schedules were common

Capacity planning was done once a year Three manufacturing strategies were prevalent, though not formally used:
50% Made-to-Stock 35% Made-to-Order 15% Assemble-to-Order

Understanding of Entegris Business

Forecast Accuracy arrying Cost 90% 80% 70% MAPE % 60% 50% 40% 30% 20% 10% 0% Best In Class Median Entegris
Estimated Entegris forecast accuracy

nished Goods P 100 M Days of Supply 80

2002 19.17 1.17 3.35

Total 2001 Inventory 2002 24.3 2.13 11.34 0.13 3.8 3.35

2001 2.7 1.26 3.8

2002 21.3 1.3 6.7

2001 27 12.6 7.6

60 nished Goods P 40 M 20 -

2002 19.17 1.17 3.35

2002 2.13 0.13 3.35

The benchmarks are based on Fiscal 2001 Entegris data

Inventory Carrying Cost 7 Best In Class 5 Median

Entegris

Finished Goods Inventory Reduction

Opportunity
1. One time Inventory Reduction
Current days of supply = A Target days of supply(#) = B

Financial Value ($ mil)

1. One time Inventory Reduction = $X Mil
Savings in $ per year X * Cost of Capital % = $Y Mil

# Calculated based on assuming customer service requirements, an improvement in forecast accuracy and reduction in supply variability all for made to stock products

Root Cause
1. 2. Inaccurate forecast Lack of Formal Demand Planning & Supply Planning Processes Lack of Planning System

APO Enabler
Demand Planning Supply Planning

3.

Raw Materials Inventory Reduction

Opportunity
1. One time Inventory Reduction
Current days of supply = C Target days of supply = D

Financial Value ($ mil)

1. One time Inventory Reduction = $W Mil
Savings in $ per year W* Cost of Capital % = $Z Mil

Root Cause
1. 2. Inaccurate forecast Lack of Formal Demand Planning & Supply Planning Processes Lack of Planning System

APO Enabler
Demand Planning Supply Planning

3.

Other Benefits (not quantified)

Reduction in obsolescence costs Potential increase in revenue due to better customer service Reduction in expediting costs (Transportation costs) Better plant throughput Reduction in warehousing costs Visibility of RM demand to suppliers
Reduced RM delivery variability Negotiate better terms with suppliers

Benefit: Total Quantified Value

Annual $ benefit per year, resulting from inventory reduction due to better Demand and Supply planning. This was based on the following assumptions:
Improvement of forecast accuracy Support customer service requirements (Line Fill Rate) of up to 95%

Future Potential (based on further improvement in forecast accuracy, reduction in manufacturing batch sizes and reduction in planning cycle times)

Joan Ellison Project Leader and Sr. Business Analyst, IT Entegris, Inc

APO-DP Implementation details

Phase 1 Nov-02 till May-03
This is the development of the initial forecast process for products that are identified as High Revenue and make-tostock strategy. Go-Live March 3rd 2003. This includes moving the system hardware & basis support to our Hosting Vendor. Go-Live mid May. Project Team = core team + extended team IT Project Lead/Business Analyst ( 1 ) Demand Management Business Project Lead ( 1 ) Bristlecone Consultants ( 2 ) IT Business Warehouse Analyst ( 2 ) Extended Team from the Business ( 6 )

APO-DP Implementation details

Initial fears and concerns
Getting the business to own the process, not the IT department. Resistance to forecasting from the business as a whole. We cant forecast our products, its not possible First use of BW in a productive environment any prior BW efforts were only in a development project. Entegris knew very little about APO & BW and their dependencies. We were relying heavily on our consulting partner, Bristlecone, to educate us. Decisions and timing of the hosting move impacted hardware size, performance & client availability. Initial system was inhouse and only a Dev to QA landscape. APO and BW shared a box.

Forecast Process
Blueprinting determined we needed to develop two forecasting processes in APO.
Monthly Forecast - by Product Managers
System generated forecast that is adjusted by the Product Manager. The Adjusted PM Forecast is reviewed in a Monthly Consensus Meeting and finalized. The Consensus Forecast is then moved to R/3 as Independent Requirements.

Forecast Process
Blueprinting determined we needed to develop two forecasting processes in APO.
Weekly Forecast by Logistics Managers
Customer forecast is what drives this process. The Logistics Manager gets forecasts from a select group of customers who we have established contracts with. This Customer Forecast can be adjusted by the Logistics Manager. The Adjusted Logistics Forecast is moved to R/3.

Forecast Process
Blueprinting determined we needed a way to identify the products that were to be forecasted in APO Developed the Forecast Tier / Manufacturing Strategy relationship based on revenue. Tier 1 = 80% revenue + Tier 2 = 95% revenue + Tier 3 = 100%

Tier 1 Tier 2 Tier 3

Make-to-stk 350 products

Assemble-to-order Build-to-Ord

Monthly forecast process

Monthly Product Manager Forecast Process User roles : End User display only ( 4 users ) Supervisors & Managers End User change capability ( 18 users ) Product Managers Location of users - US based in Minnesota and Colorado Forecast timing first week of the fiscal month is the duration of this forecast cycle. Forecast horizon 12 months in the future with current month as unchangeable. Forecast includes only Tier 1010 Tier 1 / Make-to-stock approx 350 products. Forecast profile Univariate profile #14 Weighted Moving Average

Monthly forecast process

Timeline for Monthly Forecast Process
Day 0 Extract sales order history and master data elements from R/3 into BW. Transfer data from BW to APO. In APO, run clean up jobs to prepare for the forecast. In APO, run the forecast jobs and alerts. Day 1 Day 3 Distribute the Forecast vs. Actual report from BW. Product Managers and Logistics Managers make their adjustments in their planning books. Day 4 Run jobs in APO and reports in BW for use in the Consensus meetings. Day 5 Finalize the Consensus Demand Plan. Transfer to R/3.

Weekly Logistics forecast process

Weekly Logistics Forecast Process User roles : End User display only ( 1 users ) Manager / Director End User change capability ( 4 users ) Logistics Managers Location of users Global - based in Germany, Singapore, Portland Or. Forecast timing Monday & Tuesday of each week is the duration of this forecast cycle. The first week of every fiscal month the Logistics Weekly forecast cycle overlaps the Monthly Product Managers forecast cycle. Forecast horizon 17 weeks in the future with current week as unchangeable. Forecast products Tier 1010 in Logistics Distribution Plants. Forecast profile Univariate profile - #56 Forecast with automatic model selection.

Weekly Logistics forecast process

Timeline for Weekly Forecast Process
Day 0 Extract sales order history and master data elements from R/3 into BW. Transfer data from BW to APO. In APO, run clean up jobs to prepare for the forecast. In APO, run the forecast jobs and alerts. Day 1 Day 2 Distribute the Forecast vs. Actual report from BW. Logistics Managers make their adjustments in their planning books. Finalize the Adjusted Logistics Forecast. Day 2 Transfer to R/3.

APO - R/3 BW landscape

BW BW Development Development

1 9

BW BW Production Production

11
APO APO Development Development

6 2
APO APO QA QA APO APO Production Production

10
R/3 R/3 Development Development

8
R/3 R/3 QA QA

5
R/3 R/3 Production Production

Transports Data Flow

R/3 R/3 Sand Box Sand Box

How we use the system technical aspects

Single Planning Area Storage bucket periodicity week & fiscal month Single Master Planning Object Structure Characteristics = 15 Key Figures = 21 Characteristic combinations = 27,014 Planning Book = 40 Macros in use = approx 40

How we use the system

Planning Books / Data Views :
A planning book was created for each Product Manager and Logistics Manager. (quantity 25) Configuration assigns a planning book to a user id and restricts what they can get into. This allows us to easily separate and identify each product manager and their selections. It allows us to define alerts differently for each product manager. It makes adding or changing an existing macro more difficult to roll out. Time will tell if this is a good decision. We have planning books / data views (quantity 15) that we use in processing macros to prepare the data.

How we use the system Monthly forecast process

Characteristics
Product number Market Segment number Product Family number Product Manager number Profit Center Forecast Tier / Mfg Strategy Ship to number Sold to number Customer Market Segment Country Region Sales District Ship from location

Key Figures
Sales order history quantity Invoiced sales Previous consensus forecast Actual sales order bookings Batch statistical forecast Product Manager adjustments Adjusted Product Manager forecast Sales forecast Adjusted Logistics forecast Consensus forecast

Product Managers monthly data view

How we use the system Weekly Logistics forecast process

Characteristics
Product number Market Segment number Product Family number Product Manager number Profit Center Forecast Tier / Mfg Strategy Ship to number Sold to number Customer Market Segment Country Region Sales District Ship from location

Key Figures
Sales order history quantity Previous Logistics forecast Actual sales order bookings Adjusted Product Manager forecast Batch statistical forecast Customer Forecast Logistics adjustments Adjusted Logistics forecast

Logistics weekly data view

APO-DP Implementation details

Business Warehouse and APO dependency complexity reporting using BEX learning curve

APO-DP Implementation details

Phase 1 accomplishments Established two forecast processes Established a data flow from R/3 to BW to APO to BW Setup the APO-DP tool and generated forecasts by the Go-live date of March 3rd. Trained 25 end users on both the process and the system Transferred the forecast to R/3 Moved the BW and APO systems to the Hosting vendor with minimal downtime and impact to the business.

APO-DP Implementation details

Mid project fears and concerns Resistance to forecasting from the business as a whole. Management says we will do it, but PM level is still resisting. First use of BW in a productive environment any prior BW efforts were only in a development project. Building real cubes with real data and ensuring accuracy of the data was challenging. Entegris knew very little about APO & BW and their dependencies. Moving data from system to system gets easier to understand, but timing and dependencies continue to challenge us. Very small team keeps internal knowledge base concentrated in a few individuals. Decisions and timing of the hosting move impacted hardware size, performance & client availability. Initial system was in-house and only a Dev to QA landscape. Hardware was undersized and performance was poor. We went live on the APO-QA system and BW-Dev system.

APO-DP Implementation details

Phase 2 May-03 till July-03 Forecast for Fiscal Year Budget Planning, including Capacity Evaluation in the R/3 sandbox system. Develop forecast in APO-DP for all products using a separate planning area and multiple versions. Project Team IT Project Lead/Business Analyst ( 1 ) Demand Management Business Project Lead ( 1 ) Bristlecone Consultants ( 1 ) IT Business Warehouse Analyst ( 1 ) Phase 2 accomplishments created another planning area used to generate the forecast for all non-tier 1010 products. Added the values from tier 1010 to generate a comprehensive forecast of all products. Transferred the forecast to a R/3 sandbox system and performed rough capacity evaluation for 18 months.

BW
APOODSSF Invoiced History Sales Org 1000

APO
Historical Revenue & Units (BUoM)

Historical Revenue & Units (EA)

Units Conversion
Hist Revenue Hist inv. Sales (BUoM) (ZV_EA)

Converted Units
Hist Revenue Hist inv. Sales (BUoM) Hist inv. Sales (EA) (APOASPFV)

Converted Units
Hist Revenue Hist inv. Sales (BUoM) Hist inv. Sales (EA) (ZFV_BW_EA)

Planning Area (Conversion) (ZFV_EA)

Reports

ASP (EA)
(MATNRASP5)

Planning Area (APO) (ZQ_PA) Tier 1010

Forecast Versions
Sales History Version Units (APOFVER)

Version Units

APO Forecast Versions

Version Units (ZV_BW)

Planning Area (APO) (ZFV_PA)

APOODSIN Sales Order Hist. Master Data Master Data

APO Info Cube

Sales history (Z_FV_IC)

Sales Changes
Profit Center changes (ZFV_PC)

Flat file based on Sales Excel sheet

APO-DP Implementation details

Phase 3 June-03 till Sept-03 Incorporate sales units from the newly developed Sales Forecast Process to the existing Monthly Forecast Process. Project Team IT Project Lead/Business Analyst ( 1.5 ) Demand Management Business Project Lead ( .5 ) Bristlecone Consultants ( 1 ) IT Business Warehouse Analyst ( 1 ) Phase 3 accomplishments the Sales Forecast values are transferred from the front-end system to BW, then to APO resulted in integrating the Sales & Unit processes. The Sales forecast values appear in the planning book where there was previously blank spaces. Changes to the characteristics were also made.

BW

APO
Historical Revenue

A
BW Revenue
Revenue BW Revenue History (ZQ_SALES)

Consensus Revenue (Consensus Units * ASP + Other Revenue)

BW Structures
Sales History Consensus Revenue Final Revenue

Final Revenue (Adjusted)

APO Revenue
Revenue APO (ZQ_APO_SA)

Planning Area (Sales) (ZQ_MSALES)

APO Units
Consensus Units
Consensus Units + + (ZQ_BW_F)

Master Data Master Data

Planning Area (APO) (ZQ_PA)

A
APO Info Cube
Sales history (ZQ_IC)

Frontend Data
Sales Unit Forecast (ZQ_FRONT)

Frontend data via BW

Sales Unit Forecast (FE)

APO-DP Implementation details

Long term project fears and concerns Resistance to forecasting from the business. We still have varying degrees of participation and support. Management is pushing use of the process but we still have several Product Managers who barely participate. Entegris knew very little about APO & BW and their dependencies. Moving data between systems is stable. Need more development of BW-BEX reporting skills outside of the BW team. Very small team keeps internal knowledge base concentrated in a few individuals.

Six months later

Unified global forecasting process is established and adhered to APO tool is performing well, although still requires significant technical support Some inventory reductions have been achieved, although still far from the two-year goals Forecast accuracy has improved, but not as much as we would like

Future direction
Stabilize APO-BW data transfer Continue to work towards targeted inventory and lead time reductions Investigate/prepare for APO Supply Network Planning

2003 Supply Chain Management Forum

Thank You For Attending! Please remember to complete and return your evaluation form following this session. Mike_beller@entegris.com Joan_ellison@entegris.com Chandra.mohan@bcone.com
Session Code: 710