0:03

My trading partner comes to the planning

0:07

table, if you will, just like an internal

0:10

stakeholder. So that synchronises

0:13

that aspect, which used to be kind of

0:16

arm's length away. I may share a

0:18

spreadsheet over email and then

0:20

wait for response in a in a week.

0:23

That doesn't work anymore. It needs to be real time.

0:28

Good morning, good afternoon or good evening wherever you

0:31

are in the world. This is the Digital

0:33

Supply chain podcast. The number one podcast

0:36

focussing on the digitisation of Supply chain.

0:38

And I'm your host, Global vice president of SAP.

0:41

Tom Raftery. Hi, everyone, welcome to

0:45

the Digital Supply chain podcast. My name is Tom Raftery

0:48

with SAP and my special guest on the show today

0:50

is David. David, welcome back.

0:53

Would you like to introduce yourself?

0:55

Thank you so much, Tom, for having me. Yes. David Vallejo

0:58

here, I lead solution management and go to

1:01

market for all of our Supply chain planning

1:04

solutions at SAP, namely integrated

1:07

business planning, which is a very

1:10

exciting innovation to rethink and

1:13

innovate supply chain planning in the cloud.

1:16

So I'm happy to be on your show. Thank you.

1:18

Thanks, David. Just for because we've

1:22

we've had a couple of conversations about this before and about

1:26

supply chain planning in particular. And it's a very grey area for

1:30

me. So just I know everyone else

1:31

listening to the show knows

1:32

exactly what you're talking

1:34

about. But just for me. Can you tell me what's

1:37

the function of planning in a supply

1:39

chain?

1:40

Yeah. So, so very interesting, because

1:43

I think it has a long history and it has

1:45

also evolved over over the years.

1:48

Fundamentally, what Supply chain planning does is essentially

1:51

connecting what I'm seeing as demand out

1:54

there in the market and connect it to all

1:56

the resources required to service that

1:59

demand. So it goes back to

2:03

to like the 70s or even back into the

2:06

60s, whereas things like mature

2:07

requirements planning were were

2:10

invented, which became then eventually part of of ERP.

2:15

And since then, it has evolved into

2:18

a very integrated

2:21

environment that is not just looking at

2:24

the logistics aspect of connecting the

2:27

demand to what needs to be produced, what

2:29

needs to be procured, but also integrating

2:32

it with the finance perspective.

2:35

What investments are unnecessary?

2:37

How does that look like with, from a

2:39

revenue perspective, working capital perspective and then

2:43

on all the different dimensions of supply

2:47

chain planning, adding machine

2:49

enabled capabilities, for example, to do a

2:52

better view of my demand plan, using

2:55

statistical methods, removing essentially

2:59

that human bias. What have I sold in

3:01

the past, projecting that into the future,

3:05

using techniques like different optimisation

3:08

and hueristic to increase the

3:10

efficiency of my production resources

3:13

of the material that I'm buying. Because what is

3:16

really, really expensive is inventory that is

3:19

inserted into the supply chain that is not needed.

3:23

So an integrated supply chain planning

3:27

brings all of these things essentially

3:29

together. And so we're very excited to

3:32

have a lot of companies around the world adopting these

3:35

solutions to essentially mature

3:38

their supply chain planning discipline.

3:41

OK, I think I got that.

3:45

So for, let's say,

3:48

a toilet paper company, the signal of a an

3:52

imminent lockdown might be a something that

3:55

they put into their planning to say "Oops,

3:58

there's going to be a spike in demand. We better

4:01

start buying up more recycled paper" or

4:04

change to, you know, say instead of selling

4:08

to hotels, maybe start selling to grocery

4:11

stores or something like that.

4:13

That's exactly right. So so you're introducing actually

4:16

an interesting point, which is the time

4:19

horizon of my planning. And that's really

4:22

important. There are aspects

4:25

what what we call strategic supply

4:27

chain planning. So that has a longer lens. I'm looking out

4:30

like two to three years to create

4:34

a plan that says, here's how much I

4:36

want to sell. Here are the resources

4:39

that I need. Maybe I need some investments

4:41

here, some new products that I'm introducing.

4:44

So I have to make sure that they are

4:45

introduced to not cannibalise

4:48

products that I already have. And then you're

4:50

getting into the more short

4:52

term horizon. We call this the

4:53

tactical horizon. So this is

4:55

more looking at like six months out.

4:58

And then now you're introducing the example why in

5:03

the recent few months this time, horizons

5:06

have essentially collapsed for companies, things

5:09

that happened over years in terms of

5:12

evolving demand or changing the channels

5:16

from, for example, shipping in bulk,

5:20

shipping directly

5:22

to to to other

5:25

businesses or distributors have

5:28

changed. All the sudden during the lockdown, I had

5:31

to react very, very quickly.

5:34

So that introduces this concept of

5:38

of that short term planning

5:41

being essentially embedded in my strategic planning,

5:45

meaning decisions that I'm making today.

5:47

You mentioned that, you know, toilet paper

5:49

company. They woke up overnight and all the

5:52

shelves were empty and toilet paper.

5:56

It is an example that has a really high

5:59

ratio of volume to price.

6:04

So that means it's very, very expensive to store because it

6:07

consumes a lot of volume, which

6:10

introduced actually the problem for these companies, because

6:13

normally toilet paper has a very steady

6:16

demand. OK, it's very predictable long term

6:19

how much is being consumed. So that is easily

6:23

then being disrupted. So it introduces

6:25

essentially the need for what we call

6:28

synchronised planning, connecting

6:31

that strategic planning long term

6:34

with the tactical mid-term, with the

6:36

short term, because what happens in the here and then now can

6:40

impact what I'm strategically trying to accomplish.

6:43

So that's one trend that we're seeing

6:46

that actually got amplified in the last

6:49

few months. There are other trends

6:51

that essentially influence the need

6:56

to be a more

6:58

real time and more synchronised in

7:01

your planning activity with what's happening

7:04

on the execution side.

7:06

Some companies have, like the consumer

7:08

products companies, think

7:11

about a more direct to consumer model. So that introduces

7:16

obviously now a consumer products

7:19

brand. I typically sell indirectly through

7:22

the retailers. I'm sort of taken a

7:25

back step. I'm shipping in bulk,

7:27

shipping in big volumes. Now I have my

7:31

my brand out there. I have a shopping

7:34

experience directly for consumers and

7:36

more intimate with them. But I also then

7:39

introduce a more diverse and complex

7:43

distribution models that are all the

7:46

sudden. I own myself. So that brings in

7:49

that planning what I'm thinking I'm

7:53

going to sell how much will be needed,

7:56

which is going to change.

7:58

Link that with my execution. How much

8:00

am I producing? How much am I

8:04

needed to load in my logistics? How many

8:06

trucks will I need? Where do I ship this?

8:10

So that's that's another example of

8:13

trends. The other trend is, I

8:16

think the timeliness, as I mentioned, Covid

8:20

kind of made us all realise that time is

8:22

collapsing. If I would ask you,

8:24

what days is it today? You would be

8:26

like looking at your calendar. I don't even know.

8:29

So that compression of time, the

8:31

expectation also for consumers to get

8:34

things in a very short amount

8:37

of time. Same day shipments

8:40

that. Something in the morning and it arrives at your

8:42

doorstep in the evening,

8:45

essentially changes the whole way we

8:48

think about planning, which is not just

8:51

articulate. How much will be

8:53

needed. How much will be ordered. And then weeks from

8:57

now. I that connects to how much I'm

8:59

producing, how much and my shipping.

9:02

It needs to be acting a lot more in a

9:06

synchronized way.

9:39

OK. I mean, you've you've used the term

9:42

synchronised planning now a couple of times

9:45

in the podcast. What do you mean by

9:46

that? And what does it mean

9:49

to link up your demand

9:51

to your execution?

9:53

Yeah, a great question. So. So typically I

9:56

introduced this concept of strategic

9:58

planning, tactical and operational

9:59

planning. What that typically

10:01

does is it is looking at volumes

10:06

by a certain time period. So, for

10:08

example, how much I'm not gonna

10:10

sell in week four, week five,

10:14

week six. And it's just using

10:16

one number because that number is

10:18

actually a lot easier to handle.

10:21

It's kind of the thought process of a more aggregator plan.

10:25

Operational planning then says, all right,

10:28

I'm now putting it into days. How much am I going

10:30

to produce next Monday, Tuesday,

10:33

Wednesday? And it's still

10:35

somewhat aggregated plan.

10:38

If you look actually into a factory

10:42

in a plant, they have to actually

10:45

look at shifts. They have to look at

10:49

detailed production lines that need to be

10:52

scheduled. So some large

10:53

companies are overseeing

10:56

potentially a hundred factories around the

10:58

globe. And every factory you

11:00

have production lines that have to be

11:01

scheduled. So execution actually

11:05

means being a lot closer to the actual

11:08

physical world and the intricacies that

11:10

are required to actually get things done.

11:13

That is what we call execution. So in on

11:17

the production side, we had a solution and

11:20

have a solution at SAP, which is called production planning

11:23

and detailed scheduling. What that does is

11:26

it's essentially opening the factory

11:29

door and look at the 30 different

11:33

production lines that are out there, the

11:35

jobs that have to be scheduled. The labour

11:37

that is required to

11:39

actually get these jobs completed.

11:43

It looks at the warehouse to pick the

11:45

material and issue it to the line.

11:48

So it's essentially every little

11:50

transaction that happens in order

11:53

to get from. I want to produce.

11:58

500 pallets on this day from the start

12:02

to actually finish it and everything that is

12:05

required. So that is the execution.

12:08

Environment planning traditionally has

12:10

been somewhat abstract from this.

12:14

So it just looked at how much do I want to

12:16

sell? And on a high level, how much can I

12:19

produce? How much do I have an inventory?

12:23

More on a kind of high level. And what we're doing

12:26

now and see that amplified with the

12:29

trends that we're seeing is connecting

12:32

these two worlds in a much more real time

12:35

fashion and also connecting it by

12:37

directly. That means back to the example.

12:40

I want to ship 500 pallets next Monday.

12:44

I'm putting that down to the factory.

12:47

I'm loading the lines. Can I accomplish this?

12:50

What does that mean in terms of

12:51

potentially change over maybe

12:54

these lines are already running some jobs

12:56

still from last week and getting that

12:58

feedback back and say,

13:01

is it possible to produce the 500?

13:03

Or do I have to adjust? Because if I do have

13:06

to adjust, I have to adjust my customer

13:08

commitments. I have to change

13:12

potentially my transportation plants, because if I

13:15

now have to produce this over two days,

13:18

well, then that means I have to reschedule the trucks that pick

13:21

in the subway. So it it shows you how this

13:23

is all actually connected.

13:26

And this is what we're accomplishing.

13:29

In SAP products speak, it's

13:32

connecting integrated

13:34

business planning, which is in the cloud

13:38

that accomplishes this, this demand

13:42

and supply matching and inventory

13:45

planning to production planning,

13:48

for example. And we've released

13:52

this recently with our August release to

13:55

have this bi directional connexion

13:58

and also harmonise this in one user

14:00

experience. So it brings up the

14:03

new topic also of different

14:05

organisational roles.

14:07

Okay, now that we have the ability to

14:10

have a demand

14:12

planner that looks more at high level

14:15

volumes across

14:17

the portfolio, across

14:20

a region, for example, to connect

14:22

this to actually what's happening in the factory brings the

14:26

ability to actually have some level of

14:29

supply chain convergence. Now, I can introduce,

14:31

for example, a production planner

14:34

that schedules the lines across multiple

14:37

factories. Because now technology

14:40

allows me to do this and I can rebalance

14:44

if I'm producing the same products across

14:47

multiple factories. I can make the

14:50

decision to produce it here versus here.

14:53

So it introduces a new level of

14:55

efficiency. It also enables

14:59

companies to run more sustainably.

15:02

Because in the end, you're not wasting

15:04

resources unnecessarily.

15:07

Nice, okay. Are there any industries that this

15:09

kind of thing suits more than others?

15:12

Yeah, that's a great question. There are certainly

15:15

for industries that also own

15:19

the execution part, meaning, for example,

15:21

companies that still they are doing their

15:24

own manufacturing. So consumer product

15:26

companies, chemical companies, oil and

15:29

gas companies, they're highly

15:30

connected with the

15:33

discrete products that they're selling with the

15:36

manufacturing process, which sometimes is

15:38

actually very process oriented. So you have

15:40

that convergence from from Prosser's

15:43

manufacturing into discrete goods that

15:47

I'm selling. There are other

15:48

industries where this applies,

15:52

not so much or in a different way.

15:54

High tech is a good example there. Most high tech

15:57

companies today are 100 percent

16:00

outsource their manufacturing with

16:03

contract manufacturers that have the ability

16:07

to produce for a lot of high tech firms.

16:10

So they have that efficiency. So high tech

16:13

companies have resorted to be more

16:15

of a brand owner. So our customers that

16:18

we have, like Hewlett Packard, Microsoft,

16:22

they're building devices, but they're not

16:24

building it themselves. They use outsource

16:27

partners to do this. So their linkage to

16:30

execution is not to connect their

16:32

boardroom with their own shop

16:34

floor. What they require is

16:37

a business network to collaborate

16:39

intimately with their with their trading

16:41

partners that are doing the

16:44

manufacturing on their behalf. And how easy is it to

16:46

link them in? Yeah. It used to be

16:49

actually a complicated undertaking to

16:51

connect your trading partners. So things

16:54

like EDI, I have been out there for a long

16:56

time, but it is a huge investment to

17:00

actually do that peer to peer plumbing to

17:03

connect a brand owner with their contract

17:06

manufacturer. Often time requires like

17:09

30, 40, 50 different

17:11

data objects that need to be that need

17:13

to be connected from forecasting,

17:16

manufacturing, visibility, work and processes in

17:20

transit orders. Sometimes orders are

17:23

executed in the multi tier way, meaning,

17:27

for example, we have Microsoft using

17:29

our integrated business planning

17:30

environment and they have they

17:35

own sometimes the relationship of the

17:37

second tier supplier. And I think, for

17:40

example, of the camera lens that are

17:42

in in the laptop, they own that

17:44

relation. That's a very

17:45

strategic component.

17:47

So they're buying this and then

17:50

essentially guide

17:52

that buying process. They own that

17:54

relationship and then have that

17:57

dropship to the contract manufacturer.

18:00

So it brings in a new way to do that.

18:03

Real-Time orchestration. And what we're doing

18:06

here, Tom, is is connecting integrated

18:10

business planning with the business network.

18:13

Ariba has innovated their business network

18:16

to actually take on payload for supply

18:20

chain. These objects that I

18:22

mentioned like forecast inventory,

18:24

manufacturing, logistics.

18:26

These processes are now modelled in

18:29

Ariba, so I can now onboard my contract

18:32

manufacturer on the Ariba Network and

18:36

that natively integrates with integrated

18:38

business planning. So now my

18:42

trading partner comes to the planning

18:46

table, if you will, just like an internal

18:48

stakeholder. So that synchronises

18:51

that aspect, which used to be kind of

18:54

arm's length away. I may share a

18:56

spreadsheet over email and then

18:59

wait for response in a in a week.

19:01

That doesn't work anymore. It needs to be real time.

19:04

So that's part of the synchronised planning

19:07

is the business network that we're

19:09

harnessing for this. David, you mentioned

19:13

earlier, when you're talking with, as you mentioned, the user interface then

19:16

that it was the same user interface across.

19:18

How how does that work? And why is that

19:20

important?

19:21

Yeah, great question. I think it is really

19:24

important because user roles are now

19:28

starting to converge, because now I have access

19:31

to planning and execution information.

19:35

I may not need 10 different roles that

19:38

interact with. Different technologies. I can actually bring this

19:41

information together and the same user experiences

19:44

and innovation that we call the planners workspace,

19:47

the planners workspace is essentially one single

19:51

screen. Think of it the morning

19:54

when you open up your Outlook. This is the the window

19:58

to interact with your professional business

20:01

environment. One screen that shows you

20:03

here, the emails of everything that has has

20:06

come up. You can click on one and

20:09

then see the context of this. You can open

20:11

attachments. You have essentially one

20:13

experience. Right. And in this planet's

20:17

workspace aims to do the exact same thing.

20:20

I see my long term plan,

20:22

my midterm plan, my short term plan. And I see

20:25

exceptions. I see things that I need to

20:27

react to that the machine hasn't already taken care

20:31

of. And and now I can say,

20:34

all right, here I have, for example, a sales

20:38

order from a customer that exceeds what I'm currently

20:41

planning on producing. OK, how is the situation?

20:45

I want to I want to get this business.

20:48

I don't have it in inventory. I'm currently not

20:50

scheduling to produce this. Typical example.

20:54

It's a large amount of revenue. By the way, this is a very

20:56

important customer. And they say, hey, we have

20:59

this emergency order. We need more of your

21:03

goods. So how can I react to this

21:07

and get back to that customer in

21:11

like ten minutes? So this requires a

21:14

completely new way of

21:17

organising the user experience. I cannot afford

21:19

to have him go through a labyrinth to

21:23

understand. OK, what is the service

21:26

level that I have for the customer? How much is he

21:29

ordering? Do I have it in inventory? Do I not have it

21:32

in inventory? Can I rebalance the inventory,

21:35

for example, from other customers?

21:37

I need this all in one place to

21:40

immediately make a call.

21:43

OK, I can potentially. Add this to another job in

21:48

a current production line. This is how I'm going to

21:53

ship it to this customer so that the freight aspect

21:57

and transportation resource aspect comes into play.

22:00

Do I have the transportation resources to actually

22:02

deliver this on time? All of this now comes

22:05

together in one environment to make these sort of

22:09

decisions in a very ad hoc way. And we call this

22:12

the the planners workspace very, very exciting.

22:15

We've shown prototypes to two companies

22:19

that were like, hey, this is a game changer for us

22:22

that enables new ways of doing businesses.

22:26

And we have very large companies that we're doing

22:29

conservation on that front, very large consumer

22:33

products companies. If I would tell you, you would immediately know,

22:36

because I think they're at the forefront of innovating

22:40

new business models. I mentioned direct to

22:43

consumer models. They're on the forefront

22:46

of more sustainable ways to deliver the goods of

22:50

providing more efficiencies, but also improve actually

22:54

the ultimate customer experience with more

22:57

kind of the... I love the other podcast

23:00

that you did with Coca-Cola. "The speed to need" to

23:03

ride the speed to actually service customers when

23:08

it is needed. And that may be in the here

23:11

and now today. So it is that

23:16

what we're actually catering to with our technology?

23:19

Super, super. We of gone over the 20

23:22

minute mark, David. So we're in kind of the wind

23:26

down period of the podcast now.

23:28

Is there anything I've not asked you that do you think

23:30

I should have asked? Are there any points we've not brought up that you

23:33

think it's important for people to be aware of?

23:36

Yeah, I think just the clarification I talked

23:39

about some because this question will come up for

23:42

especially for customers that for, for example, have

23:44

been SAP customers for a long time.

23:46

They may be familiar with integrated business

23:49

planning. They may be familiar with production

23:51

planning and detailed scheduling. Will this become one?

23:54

Will this be integrated somehow?

23:57

Will this be on premise? Will this be cloud?

24:00

I just want to clarify. Integrated business

24:02

planning is is will be our go forward

24:06

solution for doing supply chain planning at SAP.

24:10

That is where the

24:12

the user experience will surface all the

24:15

information necessary to make decisions because

24:18

ultimately supply chain planning is a

24:22

framework of decision making.

24:25

I need to make decisions as things are changing.

24:28

I need to decide what to do next.

24:31

And so integrated business planning will bring the

24:34

Real-Time visibility will bring essentially the

24:38

finance aspect. Does it make sense

24:41

to stick to the example? Does it make sense for me

24:45

to service this customer orders that just came in

24:48

unexpected? Does that make sense to me

24:51

financially? Is it still profitable?

24:54

Right. If I if I have to put it into an aeroplane

24:57

to send it over and with overnight freight that

25:00

burns away, all the profit perhaps doesn't make sense.

25:04

Perhaps it's OK for the customer to wait another

25:06

day. And these types of decisions

25:09

have to be made. Our go forward solution for

25:11

that is Integrated Business Planning in the cloud.

25:14

The synchronised planning aspect means that we're

25:18

integrating into auxiliary assets from an

25:22

SAP perspective to seamlessly support

25:26

that decision process. So there will still be

25:30

things like transportation management, production

25:33

planning. These are all supporting aspects for

25:37

a cohesive supply chain planning.

25:39

But the good news is I don't have to guess where

25:43

to go to to make a decision.

25:45

That will it be happening in IBP

25:48

how we call it an abbreviated.

25:51

Super Dave if people want to know more about

25:55

yourself. David Valejo, or about synchronised

25:57

planning or about IBP or any of the other

25:59

things we talked about on the podcast today,

26:03

where would you have me direct them?

26:05

Oh, very easy. SAP is always a big

26:08

fan of three letter acronyms, so SAP dot

26:11

com slash IBP. Very simple to

26:14

remember where you can find more

26:15

information about IBP.

26:18

We have an extremely active community

26:21

that is not just technology, but we

26:24

have a partner network of system

26:28

integrators and management consulting

26:31

firms that all are informed about

26:35

IBP best practises. It's a rich community

26:38

that we have. You can look myself

26:40

up on LinkedIn, on Twitter, and

26:44

I'm very active. That community as

26:46

well. Very happy for for

26:49

somebody who wants to learn more.

26:51

Superb. Superb. David, that's been

26:52

great. Thanks a million for coming on the show today.

26:55

Thank you very much, Tom, for having me. And you have a great

26:58

rest of your day. Thank you, everyone.

27:02

OK, we've come to the end of the show.

27:04

Thanks, everyone, for listening. If you'd like to know more

27:07

about digital supply chains, head on over to

27:10

S.A.P.. Dot com slash digital supply chain.

27:12

Or simply drop me an email to Tom Dot Raftery at SAP

27:16

dot com if you'd like to show.

27:20

Please don't forget to subscribe to it. And your podcast

27:22

application of choice to get new episodes as soon as

27:25

they're published. Also, please don't forget

27:28

to rate and review the podcast. It really does help new

27:31

people to find the show. Thanks.

27:34

Catch you all next time.