Generate demand forecast

On basis of the transferred sales data a demand forecast can be automatically generated using statistical forecasting techniques or causal analysis.

Employee Roles

Demand Planner

Document Flow

Business Documents

Demand Plan

Supply and distribution planning

The demand forecast serves as a basis for the supply planning process, which leverages the partner`s inventory data to generate a constraint-based production, procurement, distribution and transportation plan. By using actual consumption data as input to the supply planning process, manufacturers can optimize their production and procurement plans and establish optimal inventory plans that support customer service targets by factoring in expected demand, channel inventory, forecast error, lead times as well as supply risk. In a subsequent step, distribution planning calculates optimal replenishment orders required to support the forecast whilst respecting minimum order quantities and lot sizing rules as well as the partner`s inventory policies and customer service targets. By considering demand and channel inventory across the entire distribution network, optimal distribution plans can be generated leading to optimal customer service whilst minimizing inventory levels.

Employee Roles

Supply Chain Planner

Document Flow

Business Documents

Planned Order

Efficient Truck load building

Transport Load Builder allows to model shipping rules individual to each trading partner. An advanced algorithm calculates optimal truck loads considering business rules as well as channel inventory and expected demand and supply in generating multi product shipments.

Employee Roles

Supply Chain Planner

Document Flow

Business Documents

Sales Order

Automated sales order creation

In this process step, a sales order is automatically generated in the execution system of the vendor for triggering the replenishment process.

Sales order processing and delivery

The execution of the delivery and the further SD process steps are done based on the automatically created sales order. The stock-in-transit is automatically calculated by the system and could be automatically reduced by the exchange of delivery information (e.g. Proof-of-Delivery or Open Orders).

Transfer of inventory and sales data

In this process step the customer (retailer) transfers historical inventory data and - optionally sales or forecasting data - into the vendor`s system using EDI or XML data transfer mechanismns. In the case of store level VMI, actual point-of-sales data are transferred, whereas distribution center (DC) withdrawals are used in the more common DC-level scenario.

Employee Roles

Procurement Planner

Document Flow

Business Documents

Stock

Forecasted Sales Data

Actual Sales Data

Automated purchase order creation

The order confirmation is received from the trading partner through EDI, XML data transfer - or xCBL document exchange in public or private marketplace scenarios - and a corresponding purchase order is generated in the customer's ERP system (eg. R/3). The purchase order may be changed and transferred back to the vendor system.

Employee Roles

Operative Buyer

Document Flow

Business Documents

Purchase Order

Vendor Managed Inventory (VMI)

The aim of Vendor-Managed Inventory (VMI) is to integrate key customers in supply chain planning.It is particularly advisable to implement VMI in the following circumstances:

· If key customers constitute a high percentage of the vendor’s sales figures,

· If the products are standardized and requested repeatedly,

· If product growth is not excessive, meaning that the requirement patterns are stable and you can assume that requirements will not occur spontaneously,

· If the transaction costs for order processing and production planning are high.

This Business Scenario Map shows how vendors include key customers to optimize their supply chain planning process. The map illustrates the benefits of collaboration for both parties.

Show Document Flow

Value Potentials	Business Benefits
100%****	Increased Revenue
70%****	Lower inventory levels
From 89% to 98%*	Increased service level
Up to 28%***	Reduced operating costs through full truck loads
	Enhanced visibility
	Less paperwork

Vendor

Customer / Retailer

Generate demand forecast

Supply and distribution planning

Efficient Truck load building

Automated sales order creation

Sales order processing and delivery

Transfer of inventory and sales data

Automated purchase order creation

Inbound Delivery

Source:

* SAP APO Consumer customer

** Barilla / Cortese - SCMR 10/2000

*** Manco - Mfg Systems 9/2000

****AMR-Report 8/2003

The value potentials shown in this table have been reported by selected SAP customers or independent third parties as referenced herein. However, there is no guarantee that such value potentials can be realized in any particular customer-specific business processes, and SAP does not make any representations and disclaims any liability as to the appropriateness of the referenced value potentials for any specific customer situation.
©SAP AG 2008

Business Benefits	Value Potentials
Increased sales	100-200%****
Lower inventory turns	27-70%****
In-stock rate improvement	From 2% up to 3%****
Improved customer service and relationships	From 93% up to 99%**
Reduced supply risk
Higher cash flow


Vendor Managed Inventory (VMI) In the traditional replenishment process, the customer has to create an order for the vendor at every step in the supply chain. The customer does not give prior notification of requirements, which means that the vendor is compelled to store safety stock that acts as a ‘buffer’ for all eventualities. The customers also have safety stock available of the same items as a protective mechanism in case they do not receive the required stock. This procedure leads to a larger amount of stock in the entire goods supply chain and, paradoxically, to a reduced level of customer service and a poorer response level. Through vendor managed inventory programs, manufacturers can offer their customers a value added service by performing the replenishment planning task for their business partners. Besides giving the manufacturer increased visibility into actual consumer demand, VMI also recognizes that often vendors may have better decision-support systems in place and more knowledge and control over the logistical processes. By increasing visibility into actual consumer demand as well as customers inventory levels, VMI programs allow manufacturers to make better decisions on how to deploy goods across various customers, which leads to increased customer service levels, lower transportation costs, reduced inventory levels and lower sales cost. Both parties benefits from reduced cycle times and lower overhead, since the process can be highly automated. * = This business process is supported by Best Practices for SAP Business Suite. Best Practices for SAP Business Suite represent prepackaged business expertise in the form of methodology, documentation and reliable preconfiguration for SAP solutions. This helps you to start with a fully documented and reusable prototype for this scenario only days after you have installed the software. A prototype representing the results of a complete implementation project done up front and encapsulated in one single product that can rapidly turn into your productive solution. Best Practices for SAP Business Suite puts the power of SAP Business Suite in your hand.