An Advanced Planning Success Story in Thailand

Case study : Nestle Thailand

09.08.2006
Logistics Management

Introduction Nestle Supply Chain Management

Overview of SAP APO
SAP APO Demand Planning
SAP APO Supply Network Planning
SAP APO Production Planning and Details scheduling
SAP APO Global Available to Promise
SAP APO Integration and Architecture
DSP KPI
Benefit of implementation
Limitation
Key success factors
Summary
09.08.2006
Logistics Management

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

The Nestle Supply Chain Model

P = Procurement M = Manufacturing
D = Distribution / Customer Service

Sales &
Marketing

Procurement Supply
Planning

Suppliers

M
Manufacturing

09.08.2006
Logistics Management

S = Demand & Supply Planning

C = Channel Support

Consumer

Distributor
Operator

Distribution

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Nestle Globe (Global Business Excellence)

WHAT does
GLOBE aim
to do

To remain competitive as the No.1 food company in the world,

GLOBE aims to unlock Nestl's potential by :
Using the size of Nestl as a strength in a rapidly changing
environment
Unifying and aligning Nestl on the inside to be more globally
competitive on the outside
Unlocking potential benefits by the power of the "e" world with a
focus on customer/channels and consumers

HOW

1. Implementation
of harmonized
Nestl Business
Excellence Best
Practices

2.Implementation of Data
standards and Data
Management - "Managing
Data as a Corporate
Asset"

3. Implementation
of standardized
information
systems and
technology

Unlock Nestl's Potential

09.08.2006
Logistics Management

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Demand & Supply Planning

The mission of the Demand & Supply
Planning is to ensure that stock of finished
goods is available at correct stock location
to meet customer demand while optimising
the resource utilisation.
Demand & Supply Planning is a key
enabler for Nestl's operating companies to
:
reduce the working capital
improve the customer service level
increase the ability to react to changes in
market

09.08.2006
Logistics Management

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Demand & Supply Planning

09.08.2006
Logistics Management

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Overview of APO
Planning Horizon
1

Demand Planning

Supply Network
Planning

Production Planning
/ Detailed Scheduling

Deployment

Transport Load
Builder

09.08.2006
Logistics Management

Forecast
Planned
Order

Recommended
Stock Transport
Requisition

Firmed Stock
Transportation
Requisition
Stock Transport
Order

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Demand Planning
Planning Horizon
Demand Planning
Supply Network
Planning
Production Planning
/ Detailed Scheduling
Deployment
Transport Load
Builder
09.08.2006
Logistics Management

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Consensus Demand Planning Process objective

To create the best estimate of future demand, the number upon
which all operational activities will be based

Business
Strategy
Generating
Demand
Demand
Planning
Demand &
Supply
Review
Supply
Planning
09.08.2006
Logistics Management

Customers

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

50
45

Demand Planning Process

40
35
30
25
20
15
10
5

29

25

23

31
W

21

19

17

27
W

15

13

11
W

Statistical
Methods and
Techniques*

Define
Forecast
Methodology

Administration

BW

Gather
Historical
Elements

Clean and
Comment
on Hist.
Data

CRM

FICO
(OPL vol.)

Forecast
and
Evaluate
Events

Achieve
Consensus
Demand
Plan

Create
Base
Demand
Plan

Store and
Release
Demand
Plan

SNP

Setting Up the Demand Plan *

Monitor
Demand
Plan
Process
09.08.2006* Training Course
Logistics Management

10

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

CRM Integration

EP
Baseline
Volume

APO

Consensus
Demand Plan

One Number
Principle

FICO

= OPL Volume
Consensus

Monthly
Forecast
Review

Demand Plan

Business Planning

Uplift

GD

Volume

Profitability Analysis

CRM
Consumer
Communication & Trade
Activities Planning

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Logistics Management

Commercial
Planning Budget

11

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Demand Planning Key Principles

One number philosophy

Unconstrained Consensus Demand Plan
Collaboration essential between:
Generating Demand
Demand Planner
Weekly (shelf stable) or daily (chilled) processes
DSP Planner provide
Base line
Ba
se
as
e

lin
e

as
e

lin
e

Ba
se

Ba
Ba
se
se
lin
lin
lin
e
e
e
Ba
se

lin
e

lin
e

Uplift

lin
e

Ba
se

Generating Demand provide

Uplift

Ba
se

lin
e

Consensus Demand Plan = Baseline + Uplift

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Logistics Management

12

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

APO support Demand Planning

APO support Demand Planning process
Gather historical data element
Clean and comment on historical data
Generate base line via statistical forecast tools.
Consolidate consensus demand plan
Perform collaborative forecast
Mange product life cycle
Plan promotion
Plane new product
Release Final consensus demand plan to supply

APO Demand Planning is a set of functionalities around Demand

Management, Statistical Forecasting, Promotion and Life-cycle Planning
processes.
It is an integral part of any organizations Sales & Operations Planning
Process.
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Logistics Management

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Introduction

Overview of
APO

Stat model

KPI

Benefit &
Limitation

Key Success
factors

Summary

APO support Demand Planning

Base line from

Statistical
forecast

Uplift from CRM

Final consensus
demand

* Training Course

09.08.2006
Logistics Management

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Supply Network Planning

or
Distribution Requirement Planning
Planning Horizon
Demand Planning
Supply Network
Planning
Production Planning
/ Detailed Scheduling
Deployment
Transport Load
Builder
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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Manage Exceptions (Stock outs, Write-offs, etc.)

Master Data Management

SNP
PPDS
SNP

Receive
Collaborative
Data

Sales History

Run DRP

Prepare MPS

Material
Requirements
Planning

Prepare DPS

Production

R/3

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Logistics Management

Demand
Planning

BW

DP

DRP Process

Send
Dispatch Plan

Create
Dispatch Plan

Send Load
Plan

Build Load

Create
Shipments
16

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

The Supply Network Structure

Receiver Market
Destination 1

(IM

SP

Destination 2

Origin B

Su
pp
ly

Li

nk

Destination 3

L
ply
p
u
S

ink

Supply Network planning

are cover both
Domestic and
IMSP
Once the link is required,
new network structure need
to be set up.

)
stic
e
m
(do

Market Boundaries
Origin A

Source (production site)

Producer Market
Destination
(distribution center)
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Logistics Management

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Distribution Requirement
Receiver Market
Destination 1

Destination 3

Origin B

Su
pp
ly

Li
nk

(IM

SP

Destination 2

Origin A

Producer Market

09.08.2006
Logistics Management

me
(do
k
n
i
ly L
upp

)
stic

By input of
Initial stock
Demand
Stock policy
At destination , Distribution
requirement (NRR)are
generated base on stock policy
target which corresponds to
Dispatch requirement (NDR) at
source.
These dispatch requirement are
input to the production planning
process.
The calculated distribution
requirement are not constrained
(e.g. by factory production
capacity
18

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Deployment
Receiver Market
Destination 1

(IM

SP

Destination 2

Origin B

Su
pp
ly

Li
nk

Destination 3

Origin A

nk
y Li
l
p
up

me
(do

)
stic

At factory, Dispatch
requirement are input of
Production Planning.
After production planning is
completed and the system
knows what will actually be
produced, the deployment run
generates firmed stock
transport orders (dispatch
plan).

Producer Market

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Logistics Management

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Deployment

A variety of deployment
strategies are used depending on
the current situation - fair share,
push deployment, pull-push
deployment, and minimum cost
flow optimization
If demand exceeds supply, use a
fair share allocation
If demand is less than supply or
excess inventory exists, use a
push strategy to be able to
transfer stock as early as
possible.
When excess inventory exists,
surplus stock can be distributed
according to push logic

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Logistics Management

DC1

Plant

DC2

20

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Load Planning

Load Plans consolidate current and short term deployment stock

transfers into loads :
Vehicle loads
Mixed product loads
Confirm how many transport units are required to move planned goods
taking transport constraints into account (pallet/weight/volume)
Enable internal supply chain partners to view short term stock evolution
in detail
Are used to create outbound deliveries (input to materials handling)
Are not used in case of "push dispatch" process (transport loads
directly built by materials handling)

Min Max

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Distribution Requirements Planning Key Principles

Management by exception to focus mostly on areas requiring

attention rather than on all areas
Internal collaboration with other Nestl companies planning of
cross-border supplies according to IMS principles
Provide end-to-end visibility of demand and supply plans
Demand and Supply Review process to align demand and supply
mutually and to business objectives
Uses Nestle common rounded calendar
Provides available to deploy/sell stock cover according to the type of
location (factory/distribution center)

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

APO support DRP

APO support Distribution Requirement Planning process
Calculate Distribution Requirement/Dispatch requirement
both domestic and IMSP
Calculate Despatch Plan
Calculate Load Plan
Provide Supply Planning visibilities
Provide DRP alert monitor for stock exception
management

09.08.2006
Logistics Management

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

APO support DRP

Demand release
from DP module

Dispatch plan

Load Plan

Distribution
requirement
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Logistics Management

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Introduction

Overview of
APO

KPI

Key
Benefit
success
&
Limitation
factors

Key Success
factors

Summary

InterMarket Supply Planning (Nestle Affiliate)

Weekly
Weekly
Cycle
Cycle

EDI

Sales
SalesForecasts
Forecasts
Stocks
Stocks
Sales
Sales

Rolling
Rolling Horizon
Horizon
(4W
(4W ++ 14M)
14M)

RECEIVER

PRODUCER
EDI

Supply
Supply
Plans
Plans
The
TheProducer
Produceris
isresponsible
responsiblefor
formaintaining
maintainingthe
thelevel
levelof
ofstock
stockin
inthe
theReceiving
Receiving
markets
marketswithin
within agreed
agreedlimits
limits
Receivers
provide
good
Sales
Forecasts
Receivers provide good Sales Forecastson
onaatimely
timelybasis
basis
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Logistics Management

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Production Planning and Details scheduling

Planning Horizon
Demand Planning
Supply Network
Planning
Production Planning
/ Detailed Scheduling
Deployment
Transport Load
Builder
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Logistics Management

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Production Planning Key Principles

Planning in Weekly or Daily buckets

Utilizing capacity and resource Plans
Optimized Detailed Production Schedule that fulfils Net Dispatch
requirements
NDR +
Customer
Taken into account:
production constraints (e.g., setup times)
Planner
labor constraints
material availabilities
inter-factory requirements
Resource 1

Resource 2

Resource 3

30

Resource 3
20

Resource 2
Resource 1

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Logistics Management

10

27

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Master Production Scheduling Key Principles

Snapshot planning
Rough cut machine and labor constraints
Detailed Master Data
Sequencing possible
Material availability checked
Weekly / daily for shelf stable
On SKU level
On individual machine basis

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Logistics Management

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Detailed Production Scheduling Key Principles (1 of 2)

Maintains the schedule as often as is necessary, if possible

continuously, taking all constraints into account

Minimizes non-production time (e.g. changeover, cleaning) by

optimizing production sequence

Reviews with Manufacturing as often as necessary in order to have

the most accurate status of production and maximize the schedule
stability. Includes the information related to plan maintenance
Maximizes master schedule attainment

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Logistics Management

29

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Detailed Production Scheduling Key Principles (2 of 2)

Synchronizes with Master Production Schedule on a continuous

basis
Synchronize and works seamlessly with Material Requirements
Planning
In repetitive high-volume and non-complex factories Detailed
Production Scheduling may be able to be skipped and the factory
run from the Master Production Schedule
Very detailed scheduling may be done at shop floor level by the
operator DPS will not schedule everything

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

APO support PPDS

APO support Production Planning and Details scheduling
process
Calculate Master Production Plan
Calculate Details Production scheduling

09.08.2006
Logistics Management

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

APO support PPDS

Machine capacity
and utilization

MPS/DPS Plan
order

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Logistics Management

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Global Available to promise

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Logistics Management

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Global Available to promise

The Global Available-to-Promise (GATP) component uses a rules-based
strategy to ensure you can deliver what you promise to your customers.
Global ATP performs multilevel component and capacity checks in real time
and in simulation mode to ensure that you can match supply and demand.
You can also perform these ATP checks against aggregated, memoryresident data for even better performance Global ATP maintains
simultaneous, immediate access to product availability along the supply chain,
so you can be confident that you can meet your delivery commitments
Product substitution: If a finished product or component is not available,
the system automatically selects a substitute using rules-based selection
criteria.
Selection of alternative locations: As with product substitution, Global ATP
can source materials from alternative locations. You can also integrate this
logic with the product substitution rules.
Allocation: You can allocate products or components that are in short supply
to customers, markets, orders, and so on. The ATP calculation and response
take these allocations into consideration.

*Source : SAP Advance Planning and optimizer www.sap.com

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Integration and Architecture

09.08.2006
Logistics Management

35

The
Introduction
Integrated
Supply Chain

Overview
IT and of
Supply
APO
Chain

Case
KPI
study
Nestle

Key
Benefit
success
&
Limitation
factors

Key Success
factors

Summary

Main IT support in Nestle includes

SAP R/3 is the transactional ERP (Enterprise Resource Planning)

system, and it consists of multiple modules covering numerous business
processes. (Customer service and distribution, production, procurement,
finance and etc.)

SAP APO (Advanced Planner and Optimizer) is the planning system

integrated with SAP R/3. Four APO modules are used in the Nestle DSP
process:
DP (Demand Planning) for forecasting demands.
SNP (Supply Network Planning) for managing distribution
requirements planning covering both domestic and international stock
replenishment.
PP/DS (Production Planning/Detailed Scheduling) for envisaging
production plan.
GATP (Global Available to Promise) for checking supply availability
against demands.
CRM : Customer Relationship management is integrated with APO for
Trade spend , PMFE budget planning.
BW (Business Information Warehouse) is used as a reporting tool.

09.08.2006
Logistics Management

36

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Overview Nestles system

Global
Cluster

Master Data
(Master Data
Repository)

Master Data
(Supplemetary
Data Repository)

HR

Payroll

ERecruiting

QA Audit

Global
Reporting

1:3

Zone Cluster

Finance

Reporting

EBP

Restitution
(EUR only)

1:many

Commercial Cluster

COS

DP

CRM

SEM

1:many

Supply Cluster

GATP
SNP
PP/DS

SOS

R3 core

APO

09.08.2006
Logistics Management

CRM

EBP

BW

3rd Party
SEM

37

Introduction

Overview of
APO

KPI

SAP
SAP R/3
R/3

Customer
order

Material
Requirements
Planning

09.08.2006
Logistics Management

Key Success
factors

Summary

APO
APO
Supply
Supply Chain
Chain Cockpit
Cockpit
Advanced
Advanced Forecasting
Forecasting and
and Demand
Demand Planning
Planning

Manufacturing
execution
Inventory
Management

Benefit &
Limitation

GATP
GATP

Production
Planning and
Scheduling

BW
BW
Historical
Historical
Data
Data
Key
Key
Perform.
Perform.
Indicators
Indicators

Supply
Supply
Network
Network
Planning
Planning

External
External
data
data

Deployment
Deployment

38

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

APO Application Architecture

Transactional and master data will interface between R/3 to APO via CIF
(Core interface)

R/3

APO

live
Cache

Sales order
Order
CIF
Planned order Real-time Production
Production order
Procurement
Purchase order
Replenishment
...

Plant, customer,...
Material master
Capacity
Routing and
Bill of material

09.08.2006
Logistics Management

CIF

Location Product
Resource
Production
Process
model

All transfer handle via

CIF integration model.
Any inconsistencies of
master data between 2
systems will block in CIF
queue
39

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

DSP KPI

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Logistics Management

40

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

DSP KPI

Demand Plan Accuracy

Stock cover report
Customer Service level
Master Scheduling Attainment
Detail Scheduling Attainment
Despatch Plan Attainment
Freshness on inventory
Freshness on shipment

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Benefit of implementation

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42

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Benefit of implementation
With real-time information , the sharing of demand & supply
planning Information across network help
Improve demand plan accuracy with time lag
Improve customer service level
Reduce working capital
Manage as exception, DSP planner have more time in
analysis.

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Limitation

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44

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Limitation
However, with real-time information sometime may cause
planning discrepancy if
Not discipline well for past due management
Require the 100% correctness of master data and modeling.
Require a lot of training for end user and take time for
learning.
With real time integration with execution, require closely
monitoring on CIF management.

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Key success factors

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46

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Key success factors

Benefit and costs must be clarified
Buy-in and follow-up from top management
Agreed and aligned business process
Excellent master data
Cooperative environment and communication
Proactive change management
Training

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Summary

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48

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Information technology is a key driver to manage and

synchronize activities throughout the supply chain network
APO: Supply-Chain Planning
PPDS
/GATP

SNP
/GATP

APO
DP

R/3 : Execution System (Procurement/ Production/Distribution/Sales)

R/3 : Finance and Accounting / HR
BW : Reporting
Vendors Inbound
Consumer
Logistics

Manufacturing Transportation Distribution Delivery Customer

Logistics and Distribution

09.08.2006
Logistics Management

Sales & Customer Service

49

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

APO/DRP

Vendors Inbound
Consumer
Logistics

Logistics

09.08.2006
Logistics Management

APO/PPDS

Manage Exceptions (Stock outs, Write-offs, etc.)

Master Data Management

SNP
PPDS
SNP

APO/DP

Receive
Collaborative
Data

Sales History

Run DRP

Prepare MPS

Material
Requirements
Planning

Prepare DPS

Production

R/3

APO is the support tools to provide

planning information which used to
synchronize the activities within Supply
Chain Network

Demand
Planning

Send
Dispatch Plan

Create
Dispatch Plan

Send Load
Plan

Build Load

Create
Shipments

APO/DRP

Manufacturing Transportation Distribution Delivery Customer

and

Distribution

BW

DP

Summary of key points (1 of 3)

Sales & Customer Service

50

Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Summary of key points (2 of 3)

Demand and Supply Planning (DSP) ensures the availability of

finished goods to optimize customer service at the lowest total
supply chain cost
DSP is an integrated Process
DSP is supported by APO application
Consensus Demand Plan (CDP)
a consensus between DSP, Marketing, Sales and Finance
one number principle
no Supply constraint

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Introduction

Overview of
APO

KPI

Benefit &
Limitation

Key Success
factors

Summary

Summary of key points (3 of 3)

Distribution Requirements Planning (DRP) determines the stock

requirements in locations (warehouses) to meet objectives
based on stock policies and CDP
Master Production Scheduling (MPS) provides feasible
Production Plans at weekly level per location
Detailed Production Scheduling (DPS) generates a feasible
factory schedule for all process and packaging lines

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Thank You Very Much

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