<Insert Picture Here> Advancements in Demand Chain Management

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1 <Insert Picture Here> Advancements in Demand Chain Management 정명진한국오라클

2 SCM Value Chain Supplier Supply Base Contract Mfg (EMS) / Original Design Mfg (ODM) OEMs OEMs Distributors & Channel Partners Component Mfg Web Direct Configure & Package VAR / Retail Distribution & Retail Channels Customers

3 Demand Driven Adaptive Planning The demand driven company runs on real-time information Demand Shape Demand Supply Demand Driven leaders have: 15% less inventory 17% stronger order fulfillment 35% shorter cash-to-cash cycle times Sense Demand Respond to Demand Which translates to: 60% better profit margins 65% better EPS 2-3X the ROA Source: AMR Benchmark Product

4 Oracle Demand Driven Adaptive Planning Real-time demand sensing and collaborative consensus forecasting Eliminate decision making latency by focusing on excellence in demand visibility Sense demand more frequently and closer to the point of consumption Replace spreadsheets with one number demand management - Collaborate with all constituents Improve your forecast accuracy Use advanced analytics and statistics Shape demand Promotion excellence and decomposition Leverage granular demand signals (customer, channel, store, shelf) Identify and simulate cross selling opportunities Evolve to real-time S&OP Profitable demand response Identify supply side opportunities Define and monitor customer based metrics Get real time visibility to sales tactics (price breaks, promotions, deals)

5 Real Time Sales & Operations Planning Sense demand real-time Demand Management & Advanced Forecasting Demand Signal Repositories

6 Reach Downstream to Cut The Noise Manufacturer OEM Retailer/Distributor Consumer Sales Sales Sales Time Sales Inventories Forecasts Time POS Data Inventories Forecasts Time

7 Data Integration With Oracle DSR Retail Store Data POS sales Price Store inventory Promotional plans Store replen. rules Store forecasts Retail DC/ Distributor Data DC shipments DC inventory DC replen. rules Other External Data Retail loyalty IRI/AC Nielsen 3 rd party demographic Causal (weather,etc.) RFID/EPC IMS, NDC, EDI (867, 852), Scripts, Pedigree Unstructured text Capture Manage Analyze Respond Integrate Oracle Demand Signal Repository SOA Messages Aggregated Demand Signals Data sources centrally cleansed, harmonized and aggregated Pre-built dashboards and reports Powerful BI capabilities Sense & Respond event management TPM TPO APS S&OP DRP SNO PLM More timely data to better sense, shape and respond to demand Reduced manual effort and cost Consistent data more easily leveraged across teams and applications

8 US Sense Demand Real-Time Involve all constituents and forecast closer to the point of consumption 11/20 12pm: New camera sales at 150% of estimate REGION EAST FCST REGION WEST FCST REGION SOUTH FCST JAPAN STORE FORECAST PRODUCT FORECAST CHANNEL FORECAST 11/18 5pm: New photo printer sales at -25% of estimate, request TV add HQ Region South Sales Forecast QTY Change MANUFACTURING FCST Tokyo Store 1 Forecast Change (YEN) 11/20 2pm: Budget approval for global TV add MARKETING FCST SALES FCST TV add camera + printer promotion airs 12/21 8pm Consensus Forecast ALERT: Problem in US Region East Demand 20 th changes Century get Fox detected processes real-time and time are updates instantly from reflected 15,000+ to all constituents stores daily and exceptions are triggered automatically

9 Improve Forecast Accuracy Designed for planners, not programmers ( PhD in a box ) History Bayesian Estimator Bayesian Optimizer Causal Factors Model A Seasonality Causals Analysis Promotional Events Cyclical Combined Model Forecast 5-35% improvement Outlier Detection Patterns Trend Seasonality Promotion Events Causal Analysis Trend Outlier Detection Cyclical Patterns

10 Sense Demand Real-Time Monitor customer demand and respond to ensure high service levels Customer & Company Forecasts Disti Inventory Levels Week of Inventory Cover Disti, Product & Disti UPC # Replenishment Status Forecast based on POS data from Distis Measure the weeks of Inventory cover at the distis Actual POS On Hand Inventory Resolution Compare POS data with Consensus Plan Identify potential stock outs and resolve Consensus Forecast Demand Variability Orange: Potential OOS Red: Current OOS

11 Sense Demand Real-Time Collaborate with customers and measure impacts Partner Inputs: XML,EDI or Manual Partner Forecast Metrics Improve demand visibility with customer collaboration Tailor worksheets to specific customer needs Worksheet can be attached to a task Direct alerts via application or Automate internal notification on customer input Field-level security tied to customer access privileges

12 Real Time Sales & Operations Planning Shape Demand for Profitability Predictive Trade Planning & Optimization

13 New Products Introduction Accurately forecast demand for new products based on existing data New products present forecasting challenges Limited or no demand history for a given item May combine characteristics of several previous products Price points, changing market conditions may be different Product demand changes over product life cycle Chaining New Product C = 30% Product A + 75% Product B Shape Modeling Apply shapes, scaled for volume and time Re-scale base on initial demand data Attribute-Based Forecasting Model new item based on past behavior of other items with similar attributes

14 New Products Introduction Accurately forecast demand for new products based on existing data View demand of comparable products based on characteristics Automatically detect outliers Derive forecast for new product and adjust forecast based on actual demand

15 True Promotional ROI Is Not Obvious Promoted Volume Does Not Provide Complete Picture Analytics Required to Measure Real ROI TPR Display TPR Display Cases Actual Cases Net lift Cannibalization Pre- and post-effects Competitive switching Category growth Baseline Baseline Actual 0 Week 1 Week 6 Week 11 Week 0 Week 1 Week 6 Week 11 TPR Display TPR Display Product Margin $450,000 $450,000 Promotion cost $250,000 $250,000 Net profit $200,000 $200,000 Promotion ROI 80% 80% $150,000 $300,000 $250,000 $250,000 -$100,000 $50,000-40% 20% *. TPR : Temporary price reduction

16 Decomposition of the Promotional Lift Data Intelligence-Knowledge-Collaboration-Value Advertising Pantry Load Pantry Load Consumer Forward Buy Brand Cannibalization Category Cannibalization Incremental vs. Trade Account Switching Brand Growth Competitive Brand Switching True Net Lift Category Growth Competitive Account Switching Baseline Baseline Baseline Baseline Traditional Item Evaluation Manufacturer Demantra s Promotion Evaluation Retailer

17 Manufacturer and Retailer Analysis Compare planned versus actual results Color coding highlights better than expected or under performing results Lift decomposition to identifies components of lift including cannibalization Drill down to speed analysis Exception process can route analysis based on user defined rules

18 TPM Case Study - Vtech Consumer Driven TPM Process Architecture Its All About Sell Through, Not Sell In Manufacturer Funded Trade Promotions RETAILER National Promotions Customer Specific Promotions POS Data Promotional Plan Retailer Driven TPM Application (Oracle/Demantra) Profitability Review and Approval with Senior Management Replenishment Plan Corporate Demand Management Application (Oracle/Demantra RT S&OP) Internal S&OP Process, Inventory Optimization to Maximize ROI on Trade Spend

19 TPM Case Study - Vtech Demand Planning and TPM Analytical Linkage

20 TPM Case Study - Vtech Justifying the Investment & returns P&L P&L Item DESCRIPTION Benefit Reference & saving Sales Gross Domestic Sales Improved Service leads to instock improvement 3% Of revenue Increased Opportunity sales as a reliable vendor 3% Of revenue Sales Allowances & Adjustments Price Protection Reducing Retail inventory proportionately reduces PP -3% Of revenue Rebate Expenses Less requirement to "blow out" excess -2% Of revenue Cost of Sales Obsolete Inventory - NRV Reduces reserves required for obsolete inventory -30% Of existing reserves Ocean Freight Amortization Optimize inbound freight to reduce costs -35% Of existing costs Air Freight Eliminate all but exceptions & emergencies -75% reference existing costs Freight on Sales Optimize outbound freight & eliminate expedites -25% reference existing costs Net Profit (Loss) 3% to 5% improvement is achievable 3% plus An extraordinary opportunity

21 Real Time Sales & Operations Planning Evolve to Real-Time S&OP Real-Time Sales & Operations Planning Hyperion

22 Evolve to Real-Time S&OP Make demand and supply decisions simultaneously Strategic plans Marketing Profitability Promotional and volume plans Demand plans Sales Strategic Tactical Decisions Finance Service levels Inventory levels Capacity plans Phase in and phase out products Executives Manufacturing Product Development Promotion effectiveness Plan accuracy Identify financial and revenue goals Analyze demand and develop sales forecast Synchronize plan across Finance, Sales, Marketing, and Supply Chain Determine potential market variables Review supply and demand plans Develop constrained plan Monitor results and respond to deviations Create promotions and incentives to shape demand and close gaps

23 Real-Time S&OP Case Study Zebra Synchronizes Demantra Demand Management and Oracle CRM Opportunities with Hyperion Financial Plans/Budgets as part of S&OP MARKETING and SALES Business Planning and Budgeting (Hyperion) OPERATIONS and CONTRACT MFG Demand Management Development Plan Aggregate Sales Plan Sales & Operations Planning (Demantra) Financial Plans (Hyperion) Production Plans (SNO) Rough-Cut Capacity Planning Demantra Detailed Sales Plans Marketing Forecast CRM Opportunities Oracle CRM Master Scheduling Detailed Material/ Capacity Planning ASCP Sales Forecast Plant & Supplier Scheduling Sales Execution Execution

24 Real-Time S&OP Case Study Demand Data Adjust & Clean historical data (Demantra) Base Line Forecast (Demantra) Statistical, Rulebased, adaptative Forecast) Marketing Input (Demantra) Pricing, Market Analysis, Seasonality, etc. Sales Input (Demantra) New/Lost Customers input,regional Market changes, key customer forecasts Collaboration with customer (Demantra) Includes customer input, tracks accuracy, adjusts if necessary Demantra Plan Performance Measurement (Hyperion) And identification of areas of improvements Plan Tune-Up (Demantra) Exception-based monitoring of key demand indicators Consensus Forecast (Demantra) used as an input to supply planning Financial Plans/Budgets (Hyperion) review, consolidation Supply Planning, Demand Shaping (Demantra and SNO)

25 Business Planning & Budgeting Hyperion generate business planning & budgeting

26 Profit & Loss Analysis Hyperion Worksheets are Generated during S&OP Process for P&L Impact View of S&OP Plans sent from Demantra

27 Automate Consensus Planning Tailored worksheets for management participation Sales Manager at customer and product family by month Seeded worksheet templates for the consensus process Stakeholders review and adjust forecast Data tailored for role Compare with Consensus Forecast Track accuracy of input to the consensus process Marketing Manager at category by quarter

28 Highly Interactive Simulation and Analysis Publish working consensus forecast Optimize supply network and constrain Compare scenarios for decision making

29 Management Review - Demand Review How has the plan changed? Order backlog increasing? How are we tracking to forecast?

30 Management Review - Supply Review Are we supply constrained? How are product categories performing? Are we Where are we resource constrained? producing to plan? Supplier overloading?

31 Management Review - Executive Review How are we performing to performance metrics? Where are we Are we on plan financially? behind budget?

32 References We predict the impact of today s business decisions on tomorrow s business performance Consumer Goods Consumer Durables Industrial Manufacturing Media and Entertainment High Technology Medical Devices Retail / Wholesale

33 Q U E S T I O N S A N S W E R S