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| How to Extend SAP to Create a Global, Integrated S&OP Process | ||
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By Stuart Reekie, Global Process Manager, Integrated Supply Chain, Air Products |
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One of the fundamental challenges in implementing Sales and Operations Planning (see Footnote 1) is the integration of plans from various functions and driving consensus among these functions. At a company like Air Products(see Footnote 2), this challenge gets compounded when you take into account a global organization with 17 business units servicing more than 30 countries with more than 100,000 product configurations.
In the latest Supply Chain Council’s SCOR (Supply Chain Operations Reference) model (version 7.0), S&OP is accentuated as one of the most important best practices in supply chain management (see Footnote 3). Air Products’ challenge has been to deploy this key business process across various business units, in all regions of the world, and with different stages of deployment of SAP. Recognizing the adage “People, Process, Tools”, Air Products has had over 10 years of experience in S&OP, and has created a broad recognition of its importance, with many practitioners involved. Addressing the global integration challenge requires a strong commitment towards standardization of processes across the organization, scalable IT infrastructure, and flexible and easy to use tools that can be deployed rapidly. Air Products has embraced this philosophy and turned to SCOR for process definition and standardization, SAP to build a scalable IT infrastructure and Steelwedge Software for flexible and rapid S&OP deployment tools.
Business Challenge
At Air Products, past processes were somewhat business dependent and not always universal or standardized. These variations extend to systems, use of currency, units of measure, data definition and so on. In an effort to drive out inefficiencies in the supply chain, Air Products decided to implement SAP and subsequently embraced the SCOR model for process definition and standardization. Additionally, the Integrated Supply Chain organization was formed to bring together the synergies of SAP, Continuous Improvement, Work Process and Supply Chain management; one project commissioned in this organization has been to implement a global, integrated S&OP process. The charter of the Integrated S&OP team is to deploy S&OP in a consistent manner to all applicable businesses globally, with a standardized process and appropriate automation. This automation includes SAP and related tools, as well as non-SAP solutions. One particular challenge at Air Products is that some regions and businesses do not have SAP and the associated planning & optimization APO (Advanced Planning & Optimization) tools. S&OP has traditionally been placed as the “pre-production plan” process. SCOR, as well as best practices across many companies, suggests that S&OP can, and should be, much more than this. Inside a business, there are many plans that coexist, and indeed, exhibit interdependencies. 
Effective S&OP can be used to ensure that all of these plans are developed, agreed, communicated and acted on together, with the promise of huge gains in alignment, effectiveness and efficiency across the organization. 
At Air Products, the Integrated S&OP team quickly realized that effective accomplishment of integrated S&OP requires simple but effective Planning and Reporting tools that provide financial and operational projections, and the capability to evaluate alternatives and options (which cannot readily be accomplished in SAP as currently implemented). Also to enable this reporting and analysis implies the availability of a holistic demand forecast, containing adequate statistical projections along with business intelligence. While SAP APO Demand & Supply Planning -- where deployed -- can meet many of Air Products analytic and planning capabilities, it does not alone support a global S&OP process for Air Products. And where SAP APO is absent, other tools must be available to bring all business units to a level playing field. Further, effective deployment of S&OP requires reliable, accurate and timely analysis of multiple data types including: customer forecasts, market intelligence, actual sales history, pricing and cost information, projected demand and supply options, known or expected pricing changes, cost or margin improvement and new product introduction forecasts. This requires a single enterprise-wide S&OP capability that enables consistent, standardized approach to S&OP across businesses and geographies. In summary, the S&OP team’s challenge was to create a global S&OP process that:
Air Products – Steelwedge Software Solution
Air Products’ overall process management approach is described within the Enterprise Process Blueprint Model shown below. This approach includes organizations called Global Process Management Teams (GPMTs) that operate across businesses and functions to define how work is done. Businesses define why work is done, and functions define where work is done. Part and parcel of the PLAN GPMT approach is the Sales and Operations Planning process. 
It should be noted in the above picture that Supply Chain Planning, including S&OP, also impacts manufacturing, sourcing and distribution. Steelwedge analysis and reporting will enable the Air Products Sales and Operations Planning process across multiple divisions. Selected Air Products divisions (that do not have SAP APO) will also use Steelwedge for forecasting and demand planning. Using the Steelwedge Solution, Air Products is able to create a rough cut capacity plan, balance supply with demand, improve forecast accuracy, and align business and operational plans. SAP, where applicable, is the master source of data for transactional, financial and plan information. Data is interfaced into Steelwedge at the desired frequency (daily, weekly and monthly) and rolled up to various defined hierarchy levels to support the S&OP cycle. 
Specifically, Steelwedge will drive Air Products S&OP process in the following areas:
Implementation
To minimize the risk associated with change management and provide quick value, enterprise wide deployment of S&OP tool was broken down into multiple phases. In partnership with Steelwedge, Air Products developed and implemented the first phase of S&OP within 16 weeks. This phase was deployed to one business unit as a pilot to validate the rules, decisions, and processes made during the Enterprise S&OP design. It was structured to make users more comfortable with the Steelwedge application and gain better understanding of functionality available, which contributed to further development of the solution. This phase also helped resolve outstanding business issues; test interfaces and batch jobs; and served as a training platform to Air Products IT department for additional deployments. Additional business units will be rolled out in waves every two months with a target of deploying 10 business units by end of year. This includes business elements in Asia, where the base source of data will not initially be SAP, but other ERP-like systems (for example, Francium). 
Anticipated Benefits
Using the Steelwedge Solution, Air Products will be able to create a rough cut capacity plan, balance supply with demand, improve forecast accuracy, align business and operational plans, accelerate planning cycles, minimize COGS, reduce logistics costs, lower inventory, improve customer delivery performance and share best practices through common tools and processes. Aligned Strategy and Operations: Improve the alignment between Air Products business plan (yearly/quarterly plan) and the functional operational plans (monthly, 12 months horizon) influenced by shifting demand patterns and volatile market conditions. Currently, it is difficult to see when business and operating plans grow apart due to changes in market and/or internal operational environments. Ability to identify the deviations in advance, capability to analyze various alternatives and clear insight into the financial consequences of decisions, will significantly minimize the risk of deviating from business plan objectives. Improved Corporate Visibility and Control over Global Supply Chain: Each Business Unit can improve their control over all parts of their business. As is the industry norm, each business unit is broken up into various functions (Marketing, Finance, Product Development, Sales, Production and Distribution) which in turn are scattered across the world (countries). These businesses often do not share the same operating plans, have the same unit of measure (eaches, kgs, cylinders, etc) or have the same information systems (SAP, Francium, spreadsheets, etc). Providing a single view of plan synchronized by a formal consensus process, where everyone understands what it means to them will go a long way in reducing operational mistakes. Fact Based Planning: By recording the assumptions as part of the plans it becomes possible to track their validity over time, to adjust where necessary, and to evaluate the consequences. Communicating these assumptions will increase the trust in a plan for all parties involved, and will increase the feasibility of the plan. Concentrate on Exceptions: Effective exception management is a key to successful execution of S&OP process. It’s practically not feasible to sift thru and resolve issues for thousands of products on a monthly basis. The process becomes more manageable and effective by prioritizing and focusing on situations outside pre-defined thresholds. Consistent Performance Management: Having commonality and consistency of supply chain measures will align and point all functions and regions to one set of goals.
Next Steps
In order to more efficiently drive the supply chain, the Air Products demand planning groups must include business intelligence, including both anomalistic events that impact forecastability and future facing sales opportunities to create accurate forecasts. Not only is this demand information critical, but the timeliness in which it is received will also be a determining factor in developing an improved forecast. To this effect we are investigating:
Footnotes (1) Sales & Operations Planning (APICS definition):
(2) Air Products Corporate Overview
(3) Supply Chain Council’s SCOR (Supply Chain Operations Reference) model (version 7.0)
- Establish communication links between executives and managers; - Establish a common language of discussion between sales, marketing, production, and finance; - Develop integrated aggregate business plans; - Balance the supply of products or services with the demand for them; - Provide information that executives can use to validate the business plan; - Provide operating managers with information they can use to measure performance. S&OP does this by focusing on serving the customer’s needs and matching marketplace and customer expectations with the sales plan and balancing the sales plan with the manufacturing capabilities…S&OP answers four questions: - WHAT is supposed to happen? - WHEN is it supposed to happen? - WHO is responsible for it? - WHAT actually happened and why?” The S&OP process is not a monthly meeting or a software package module. The S&OP process is a series of actions that require involvement and supports communication.”
About the Author
Stu Reekie is the Global Process Manager, Integrated Supply Chain for Air Products & Chemicals, Inc. His responsibilities include the development and implementation of work processes associated with Supply Chain planning, deployment of the Supply Chain Council’s SCOR model, integration of work processes among process groups in SOURCE, MAKE and FULFILL, and managing the company’s process design program. Specifically, Stu is responsible for the design, deployment and implementation of a globally standard approach to Sales & Operations Planning across all relevant businesses and geographies. This project has been the reason for the present relationship with Steelwedge. Since joining Air Products over 30 years ago, Stu has held a wide range of commercial and operational roles, including sales, product & supply chain management, marketing management and business management within the European organization in the UK and Belgium, and operations management, quality management, and continuous improvement since coming to the US 14 years ago. In these roles, Stu has worked in, or with, virtually all of Air Products’ major strategic business units. He took on his current role in 2004 as the Integrated Supply Chain organization was being developed. Stu’s accomplishments include the entry into new application markets and geographical extensions of existing markets, building the electronics division’s European organization, and leading the design of APCI’s continuous improvement model (merging Lean and Sigma), and process architecture. He is also currently the Chairman and Past President of the Mid Atlantic Manufacturing Consortium, a not-for-profit regional grouping of companies whose intent is to share learnings and capabilities aimed at improving customer satisfaction. |
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