Transcript The PapiNet Value Proposition

Realizing the Value of an
e-Enabled Supply Chain
Robert Pyzdrowski
RR Donnelley
October, 2003
Generating Value And ROI From papiNet
 papiNet offers the opportunity to improve the entire supply chain
 papiNet is an enabler for collaboration, information sharing,
process improvement and shared decision making
 A critical mass of participants across the value chain is needed
in order to generate significant value
2
Collaboration Across The Supply Chain
Benefits All Parties
Merchandisers & Publishers
 Improved total cost of ownership
 Supports better decision making
through feedback & transparency
 Emulate JIT and best practices
used in merchandising supply
chain
 Easier to manage paper across
multiple printers
Paper Suppliers
 Clear view of demand for better
forecasting & planning
 Consolidate shipments
 Less storage space
 Decreased inventory
 Enhanced data collection for
manufacturing & materials
optimization
Printers
 Consistent inputs
 Greater inventory turns and less
storage space
 Better equipment effectiveness
 Enhanced data collection for
manufacturing & materials
optimization
Universal Benefits







Lower working capital requirements
Increased consistency throughout the process
Lower inventory
Lower transaction costs
Reduced staffing needs for order and process management
Better customer service & reporting
Global standards enhances ability to service global customers
The Network Effect: the payoff and benefit of using a system
increases exponentially as the number of users increases
3
The Merchandiser/Publishing, Paper & Print
Supply Chain Is Not Optimized Today

Too many supply chain managers

Poorly coordinated and non-standardized communications and work flows

Excessive inventory at printer and/or manufacturer

Mediocre returns on invested capital in paper and printing

Investor pessimism results in low stock prices and P/E ratio

Third party intervention: Paper brokers, dot-com’s

Customer distrust of mills and printers

Slow adoption of XML and e-business links

Declining pace of technological innovations compared to 1970’s and 1980’s

Growth rate at 1% and declining

Lack of collaboration and shared decision making
These problems will not be solved through further
industry consolidation
4
papiNet Provides Standards For
Communication Between Partners
Plan
Source
 Product Attributes  Request For
 Planning
Quotation
 Availability
 Purchase Order
 Order Confirmation
 Call-Off
 Order Status
 Inventory Status
Make
 Product
Quality
 Usage
 Inventory
Change
 Product
Performance
Deliver
 Delivery Message
 Goods Receipt
 Invoice
Utility
 Credit/Debit Note
 Business Acknowledgement
 Information Request
 Complaint
 Complaint Request
Standards are fundamental to an efficient supply chain:
 Enable timely, efficient and effective communications
 Avoid costly non-value added translation activities
 Enable fast and widespread connectivity
 Avoid “one-off”custom connections
5
The Supply Chain “Iceberg”
Perceived Value
Transactional
Efficiency
Data Critical to Making
Improvements:
Trim waste
Web breaks
Intrinsic Value
Transit damage
Process delays
Press delays
Strip waste
Damage
Press damage
End-to-end
cycle-time
Yield
Delays
Excess freight
Inventory turns
Warehouse fees
Multiple handling
Late
Deliveries
6
Different Perspectives Lead To Different
Viewpoints Of The Value Of papiNet
E-Business Link Perspective
Collaboration Perspective
Approach:
“Efficient and cost effective
transactions”
“An efficient and cost effective
supply chain”
Scope:
Transaction between trading
partners
The entire supply chain
Objectives:
Transactional efficiency
Operational improvement
ROI:
Break-even (at best)
Positive
Impact:
Enables reduced admin and
systems cost
Enables reduced operating costs,
improved quality, throughout and
working capital
Potential $
Return:
Tens-hundreds of
thousands/company
Tens-hundreds of
millions/company
How viewed:
An IT project
A margin improvement project and
strategic enabler for supply chain
improvements
7
papiNet Is An Enabler For Collaboration And
Creating Value
papiNet is the Foundation…
Specifications:
Data Collection:
• PapiNet
Messages
• Common
Definitions
• Standards
• Merchandisers
& publishers
• Printers
• Paper
Companies
Implement
improvement
projects
Identify
improvement
opportunities
and select
improvement
projects
Data
Transmission
(XML)
Data Review
and Analysis
Data
Aggregation
… for enabling collaboration that will generate value
within the supply chain. Supply chain partners can
leverage data to drive improvement and eliminate waste
8
Collaboration Is The Key To Value Creation
To achieve maximum ROI potential, data must be:
•Collected
•Analyzed
•Used to inform and identify improvement opportunities
The opportunities must be acted upon to
deliver value!
9
Increased roll diameter
reduces waste, number
of SKU’s, and material
handling
Roll Diameter (Inches)
Project Example: Increase Average Roll
Diameter To Reduce Total Cost
Jul-02
Apr-02
Jan-02
Use data results to increase the average roll
diameter and reduce total cost
Oct-01
3.
Jul-01
Co-develop scorecard and feedback metrics
Apr-01
2.
Jan-01
Establish papiNet links between printer &
paper supplier
Oct-00
Jul-00
Apr-00
Jan-00
1997
1.
10
Project Example: Lower Number Of Web
Breaks To Reduce Waste
Press
Unk-Press
Breaks/100 Rolls
Web breaks result in
paper waste, delays
and web break penalty
charges
Mill "X" Offset Break Ratios by Month
Printed: 2002-2003
Unk-Paper
Paper
Feb
Apr
Jun
Aug
1.
Use scorecard and feedback metrics to
measure paper performance on press
2.
Paper supplier used data to change how paper
was produced
3.
Resulting paper ran better on press, reducing
waste, delays and web break penalty charges
Oct
Dec
Feb
Apr
11
Jun
11
The Opportunities Are Significant For All
Parties Within The Supply Chain

A 20% reduction in inventories would cover the annual dividend payout for a
major paper company

Four large paper companies have a total of over $5 billion tied up in inventory

One large printer has approximately 15% of manufacturing floor space consumed
by paper storage – the equivalent of 3 large plants

One large paper company reports recovering only a small portion of the millions
of dollars of annual freight damage

Merchandisers and publishers can free-up cash flow to startup or acquire new
properties
12
How Do I Get A papiNet Project Started?
 Use E-Business as an opportunity to review your entire supply chain
 Recognize that papiNet is an industry-wide opportunity to lower costs
 Position papiNet as a partnership with your key trading partners to improve the supply
chain
– include suppliers, publishers, merchants, printers, component vendors
 Develop a vision of a papiNet-enhanced future business model that includes your
trading partners
 Sell the project as essential to this future model of doing business
13
There Must Be A Critical Mass Of Users To
Improve The Efficiency Of The Supply Chain
Next Steps:
 Mobilize the “critical few” major players
 The “critical few” establish timelines for implementation and expectations of their trading
partners
 Confirm message selection and priority with major trading partners
 Focus on collaboration, not just implementing papiNet links
The IT cost of implementation will not be justified by the transactional
efficiency alone. Participants will only generate significant ROI through
collaboration to improve supply chain efficiency.
14
Enabling Supply Chain Collaboration
Appendix
16
papiNet Mission & Goals
“papiNet is the global initiative to develop, maintain and promote the
implementation of standard electronic transaction standards to
facilitate the flow of information and facilitate computer to
computer communications among all parties engaged in the buying,
selling, and distribution of forest, paper and wood products. The set of
standards is referred to as the papiNet standard. The standards include
common terminology and standard business documents (e.g. purchase
orders, shipping notices, and invoices).
The goals are to improve the reach and richness of communication
throughout the supply chain, increase efficiencies in transactions
and marketplace activities, and to support interoperability among
trading partners. The papiNet standards are open and freely available.”
Source: papiNet website
17
Needs for and Benefits of Standards
"The Internet offers new opportunities for efficient and cost-effective execution of
transactions. It is a truly global infrastructure available to all. It is also more costeffective than the value-added networks (VANs) that EDI is built upon. “
"The papiNet standard is open, free, and easy to adopt, providing common benefits to
supply chain participants. With the papiNet standard, companies will no longer need to
negotiate and agree on data definitions and formats with each trading partner, a costly
and arduous task. Instead, papiNet provides a common messaging interface to enable
supply chain partners to have:
•
a simplified process for dealing with multiple suppliers and customers
through use of common business solutions.
•
reduced manual work, resulting in fewer entry errors and improved supply
chain management (e.g. replenishment, VMI).
•
more "real-time" exchange of information and greater electronic
information availability.
•
the opportunity to participate in e-business transactions, irrespective of
company size or technical expertise. "
Source: papiNet website
18
The RosettaNet Value Proposition
“A
company's demand management, direct material procurement, logistics, part
management and order fulfillment processes are closely linked to supply chain partners.
Value is created by close integration of these processes among the company’s
suppliers, logistics & service providers and customers. Collaborative processes that
provide visibility to forecasts, inventory levels, order execution, and shipments between
trading partners achieve this. The collaborative process is hampered by lack of industrywide processes and data standards that enable system-to-system automation of core
processes…..”
“In today’s competitive world, well-oiled and responsive extended supply chains are
increasingly becoming a foundation for competitive advantage. No longer can
companies restrict their focus on increasing supply chain efficiencies within the four walls
of the enterprise. The supply chain that extends beyond a company’s organizational
boundaries increasingly determines its effectiveness. There is an increasing
dependence on "collaboration" as key to bridging the boundaries – not only within the
enterprise, but also between enterprises and across industry boundaries.”
“Adoption of RosettaNet standards could well be a critical factor in bringing the
high technology dream of dynamic value chain management to fruition.”
Source: RosettaNet website, Implementing RosettaNet E- Business Standards for Greater Supply Chain Collaboration
and Efficiency
19
The Print Supply Chain – Improvement
Opportunities
Mill
Warehouse
Train/Truck
Warehouse
W,Q
I,W,C,H
W,C,Q,H
I,W,C,H
Press
Warehouse
W,C,Q
I,W,H
W,H
Warehouse
Truck
Distribution
Center
I,C,H
Q,H
Warehouse
I,W,C,H
Bind
C,Q
Printer Dock
I,C,H
Improvement Opportunities:
I: Inventory/Working Capital
W: Waste
C: Cycle-time
Q: Quality
H: Multiple handling
Customer/
Consumer
C
20
The Need for Collaboration
"90% of enterprises that fail to provide
visibility and supply chain automation
by 2004 will lose their status as
preferred suppliers."
Karen Peterson,
Director, Gartner Inc.,
August 2002
21
Implementation Status
Status:
 Implementation benchmark survey
completed November 2002
Total papiNet Trading Partner Implementations:
In Production & Short Term Plans
 80 trading partners engaged in
implementation
 2003 goal
– All 80 in production
29
– 50 more in testing
Production
 Quarterly surveys throughout 2003
Comments:
 Basic messages are used most
frequently including Delivery
Message, Purchase Order, Invoice,
Order Confirmation, Business
Acknowledgement and Goods
Receipt
 There is still a long way to go on
Basic messages before other
messages will be implemented
 Europe is moving faster than North
America
Short Term
51
0
10
20
30
40
50
60
22
Market Size
Population and
paper consumption per capita in 2001
201
303
2456
31 340
392
Other Europe
Western Europe
316
807
North America
Latin America
35
527
6
1285
242
29
China
Japan
15
Other Asian
countries
127
148
Africa
Oceania
30
Worldwide
Paper consumption, kg per capita: 52
Source: PPI Annual Review 2002
Populations, millions: 6,090
23
Getting a Project Started







Use E-Business as an opportunity to review your entire supply chain
Recognize that papiNet is an industry-wide opportunity to lower costs
Position papiNet as a partnership with key trading partners to improve the supply chain
Include suppliers, publishers, merchants, printers, component vendors
Develop a vision of a papiNet-enhanced future business model that includes your trading partners
Sell the project as essential to this future model of doing business
Partner with Solution Providers
24
Other Industry Benefits From Standards
Industry
Standard

Electrical safety

UL (Underwriters Labs)

Quality systems

ISO

Internet

HTML

Electronics Supply Chain

RosettaNet

Paper Supply Chain

papiNet
25
Message Priorities
Top Priority
Next Priority
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
Availability
Business Acknowledgement
Call-off
Complaint
Complaint Response
Credit/Debit Memo
Delivery
Goods Receipt
Information Request
Inventory Change
Inventory Status
Invoice
Order Confirmation
Order Status
Planning
Product Attributes
Product Performance
Product Quality
Purchase Order
RFQ
RFQ Response
Usage
Publisher
Y
Y
Y
X
X
Paper
Supplier
Printer
Common to
2 or More
Y
X
X
Y
Y
Y
Y
X
X
X
Y
Y
X
X
Y
X
X
X
X
Y
X
X
Y
X
X
X
X
X
Y
X
X
Y
X
Y
X
X
X
26