Advanced Planning

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
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
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
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
Introduction
Overview of
APO
KPI
Benefit &
Limitation
Key Success
factors
Summary
Demand & Supply Planning
09.08.2006
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
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
Deployment
Transport Load
Builder
09.08.2006
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
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
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
09.08.2006
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
09.08.2006
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.
09.08.2006
13
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
14
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
Deployment
Transport Load
Builder
09.08.2006
15
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
09.08.2006
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)
09.08.2006
17
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
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
09.08.2006
19
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
09.08.2006
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
09.08.2006
21
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)
09.08.2006
22
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
23
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
09.08.2006
24
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
09.08.2006
25
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
Deployment
Transport Load
Builder
09.08.2006
26
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
09.08.2006
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
09.08.2006
28
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
09.08.2006
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
09.08.2006
30
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
31
Introduction
Overview of
APO
KPI
Benefit &
Limitation
Key Success
factors
Summary
APO support PPDS

Machine capacity
and utilization
MPS/DPS Plan
order
09.08.2006
32
Introduction
Overview of
APO
KPI
Benefit &
Limitation
Key Success
factors
Summary
Global Available to promise
09.08.2006
33
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

09.08.2006
34
Introduction
Overview of
APO
KPI
Benefit &
Limitation
Key Success
factors
Summary
Integration and Architecture
09.08.2006
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
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
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
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
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
09.08.2006
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
09.08.2006
41
Introduction
Overview of
APO
KPI
Benefit &
Limitation
Key Success
factors
Summary
09.08.2006
42
Introduction
Overview of
APO
KPI
Benefit &
Limitation
Key Success
factors
Summary
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.
09.08.2006
43
Introduction
Overview of
APO
KPI
Benefit &
Limitation
Key Success
factors
Summary
Limitation
09.08.2006
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.
09.08.2006
45
Introduction
Overview of
APO
KPI
Benefit &
Limitation
Key Success
factors
Summary
Key success factors
09.08.2006
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
09.08.2006
47
Introduction
Overview of
APO
KPI
Benefit &
Limitation
Key Success
factors
Summary
Summary
09.08.2006
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
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
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
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
09.08.2006
51
Introduction
Overview of
APO
KPI
Benefit &
Limitation
Key Success
factors
Summary
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
09.08.2006
52
Thank You Very Much
09.08.2006
53

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An Advanced Planning Success Story in Thailand

Case study : Nestle Thailand

Introduction Nestle Supply Chain Management

The Nestle Supply Chain Model

S = Demand & Supply Planning

Nestle Globe (Global Business Excellence)

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

Unlock Nestl's Potential

Demand & Supply Planning

Demand & Supply Planning

Consensus Demand Planning Process objective

Demand Planning Process

Setting Up the Demand Plan *

Demand Planning Key Principles

One number philosophy

Generating Demand provide

Consensus Demand Plan = Baseline + Uplift

APO support Demand Planning

APO Demand Planning is a set of functionalities around Demand

APO support Demand Planning

Base line from

Uplift from CRM

Supply Network Planning

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

Master Data Management

The Supply Network Structure

Supply Network planning

Source (production site)

Load Plans consolidate current and short term deployment stock

Distribution Requirements Planning Key Principles

Management by exception to focus mostly on areas requiring

APO support DRP

APO support DRP

InterMarket Supply Planning (Nestle Affiliate)

Production Planning and Details scheduling

Production Planning Key Principles

Planning in Weekly or Daily buckets

Master Production Scheduling Key Principles

Detailed Production Scheduling Key Principles (1 of 2)

Maintains the schedule as often as is necessary, if possible

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

Reviews with Manufacturing as often as necessary in order to have

Detailed Production Scheduling Key Principles (2 of 2)

Synchronizes with Master Production Schedule on a continuous

APO support PPDS

APO support PPDS

Global Available to promise

Global Available to promise

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

Integration and Architecture

Main IT support in Nestle includes

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

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

Overview Nestles system

APO Application Architecture

All transfer handle via

Demand Plan Accuracy

Key success factors

Key success factors

Information technology is a key driver to manage and

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

Manufacturing Transportation Distribution Delivery Customer

Logistics and Distribution

Sales & Customer Service