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Sapphire 2011 Highlights: Part One

Among the many sessions from SAP's annual conference, we highlight SAP's new Supplier InfoNet and one of their customer's implementation of SRM 7.0.

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As always, Sapphire was loaded with news, events, and interesting people. In Part One of this article, we look at SAP’s new Supplier InfoNet. In Part Two, we explore B. Braun’s SRM 7 implementation.

Supplier InfoNet

If you read “SAP's Transformation: A Work-in-Progress”, you may recall that I gave SAP’s Supplier InfoNet my informal “Coolest Initiative of the Show” award for the SAP Insider Supply Chain and Procurement Conference. At Sapphire, I heard more about Supplier InfoNet and was impressed.

Anonymously Sharing Supplier Performance Data

Supplier InfoNet is delivered as a cloud-based Software-as-a-Service. Participating companies agree to share key performance data they collect about suppliers, such as on-time delivery, quality, and corrective actions. This data is pooled, anonymized, put into specific industry groupings, and shared back to participants within those industries allowing them to benchmark their own suppliers’ performance against the industry group’s average.

Using all that data, SAP now can provide predictive analytics and early warning risk indicators. An example of such a prediction would be a supplier’s on time delivery rates, with specific confidence levels attached to each one. Supplier InfoNet incorporates machine learning technology which should let them keep improving the prediction accuracy for these metrics over time.

Scouring the News for Relevant Events

In addition to taking in KPI (Key Performance Indicator) data from participating firms, SAP has technology that analyzes and classifies updates from the web in real time looking for important news about suppliers. Their technology categorizes each article it finds: by company name, what type of event happened (lawsuits, site disruptions, debarments, bankruptcy, etc.); the severity of the event, and so forth. From this, they create a database of events about suppliers.

Predictive Alerts

Using this data, Supplier InfoNet can generate an alert when a supplier is potentially in trouble. Users subscribe to alerts, selecting the critical suppliers, and KPIs they want to track, as well as the KPI thresholds. The system sends alerts via email for both KPI-based and external events. 

Figure 1 – Supplier InfoNet Alert Impact Screen

KPI-based alerts include a link that takes the user to a screen showing the supplier’s performance data on a standard deviation scale (see Figure 1). This visualization provides an easy to understand and very standardized way to see how far outside the norm each supplier is. As well, it shows the user’s annual spend with the supplier and the revenue impact of that supplier. External event alerts, such as a lawsuit against the supplier, provide an abstract of the article about the event and link to the source.

Drilling Down, Examining Trends and Causes

Over time, the computer learns to better predict when there will be a problem. The prediction given by the system shows what is likely to happen if nothing changes. This gives the user a chance to pre-empt the problem, working with the supplier or finding alternates to manage the risk. The system shows the date of the prediction and its confidence level. Clicking on the alert brings up a benchmarking screen to show how your own experience with the supplier compares to the average experience of all the other participants in the network. KPIs tracked can include things like average lead time, percent on-time delivery, CAR (Corrective Action Requests), DPPM (Defective Parts per Million), LAR (Lot Acceptance Rate), and Fill rates.

The system can also show history and trends for last the six months, along with the ability to look at older trends in six month blocks. For example, perhaps you have been working hard with this supplier and their performance with you has improved, but you notice that their performance with others has deteriorated. You can do further analysis, comparing the supplier to others in the same industry, in the same region, or by other dimensions. The system will show you the top reasons for the alert. For example, one of your supplier’s suppliers may be experiencing production problems, or they are moving major production activities to a new plant. The system predicts that these events are likely to impact performance negatively. 

Closed Loop - Learning from Users’ Comments and Actions

In addition, users can add a comment about an issue. This can be a private note only the user sees, or public for the rest of the company to see as part of the supplier’s record. The system also is able to create an activity and task list, actually capture what actions the user took, and analyze how effective they were. For example, it might find that in dealing with late deliveries, some people start sharing forecasts with the supplier and get much better results, as compared to the more common response of just expediting late deliveries. Armed with the knowledge of what works, a company may choose to put the more effective actions into standardize workflows and practices. And the system closes the loop by confirming how effective the new practices are.

Visibility into Sub-tiers

InfoNet builds a network map showing multiple sub-tiers of the supply chain—suppliers’ suppliers and beyond. Supplier InfoNet has a ‘Network Explorer,’ which shows a graph of the users’ company, its suppliers, their suppliers, and so forth (see Figure 2). Confidentiality is protected—by default, the user is able see the names of its own suppliers, but not the names of tier 2-and-beyond suppliers. Those sub-tiers appear anonymously. The system does, however, have graphic indicators showing when there is some significant problem with one of a supplier’s suppliers—for instance, a debarment. At that point, the user can send a request to their supplier asking to be granted visibility to specific suppliers, such as the ones that are highlighted. This allows the user to have multi-tier visibility into supply chain issues and build the network with social network like controls for privacy and expansion. 

Figure 2 - Network Explorer within Supplier InfoNet

Large Overlap in Supply Bases

Supplier InfoNet is not only for SAP software customers. It can take in KPI data from non-SAP systems and, in fact, already have one participant doing so.  By focusing on industry clusters , the solution utilizes the inherent overlap in the supply base of customers within an industry to achieve these pools. The first two customers (major aerospace manufacturers) had an overlap in their supply base of 34%. The third company had 78% overlap with the list of suppliers of the first two firms—representing over 90% overlap in spend.

SAP started with Aerospace and Defense. They have also started building out High Tech and Industrial Manufacturing—there is a fair amount of overlap between those three sectors. And they are starting to build out consumer goods as well.

Changing the Way Supplier Performance is Managed

SAP says they have seen a change in the way companies manage supplier performance. Once companies get advanced warning about issues, it makes them more likely to work more collaboratively with suppliers to try and resolve the issues before it is too late, rather than scrambling for alternatives at the last minute. That would seem to be better for all the businesses involved.

Rapid Development

A product of SAP Lab’s Global Business Incubator, InfoNet was developed in barely a year. SAP used agile development methods, developing in two-week sprints (i.e. releases with feedback from users every 2 weeks). They said it keeps changing and improving each time you look at it. That approach sounds more like the way a startup operates than an $18B software behemoth! Supplier InfoNet is scheduled for release in North America by early June (by the time this is published). I look forward to seeing how companies will use this innovative new capability.

To view other articles from this issue of the brief, click here.

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