Managing Process Variability with OPM

1. Managing Process Variability with OPM

3. Program Agenda Variability and Process Customer Case study � Dairy Crest How Oracle Helps

4. Is my Product a Process Item?Take the Physical Inventory Test Count the computers, count the coffee

5. Sources of Variability

6. Product Identity

7. Inventory Transaction Management Variability Storage considerations for gases, liquid, powders Containers � 1 L, 35 L, tankers, bags Tanks Deriving quantities on-hand Unit of measure variations any UOM any time Order vs ship vs bill UOM Tare weights Tank and silo inventory Catch weight Potency Accuracy Never ship exact quantity

8. Materials Quality Variability Item number does not fully define materials Need physical and chemical characteristics Lot to lot, container to container, season to season Generic vs Customer specific products Materials change with time Shelf-life Transformation Grade is the % Carbon in Steel, addition of carbon makes it harder and stronger Cheese or wines are examples where the item code changes to accommodate the quality characteristics�agingGrade is the % Carbon in Steel, addition of carbon makes it harder and stronger Cheese or wines are examples where the item code changes to accommodate the quality characteristics�aging

9. Recipe Variability

10. Discrete - Bill of Material

11. Process - Recipe

12. Bill of Material Assumptions Many components make one end item The �A Bill� Predictable in what is made A + B always = AB Predictable in how much is made 1+1 always = 2 Always made the same way

13. Bill of Material Assumptions Many components make one end item The �A Bill� Predictable in what is made A + B always = AB Predictable in how much is made 1+1 always = 2 Always made the same way

15. Who/what are Dairy Crest ? The UK�s leading dairy companyTurnover about $3.0bn (�1.4bn in 05/06)17 factories, 180 local depots, 9,000 employees Dairies - milk delivered up to three times daily direct to supermarket stores Foods � cheese, spreads and yoghurt, manufactured for just in time stock, and then delivered daily from our NDC to retailer RDCs �Household� � milk and 1,000+ other products, delivered daily/weekly to 15,000 smaller customers, and on 2m consumer doorsteps

16.

17. �We invest inindustry leading facilities to create competitive advantage.�

18. The competitive challenge Customers The power of UK supermarkets Consolidation of smaller chains Continuing decline in doorstep Suppliers Farmer groups moving into processing Regulators Common Agriculture Policy reform (EC) Dairy industry consolidation/rationalisation, Office of Fair Trading (competition authority) Food standards

19. The corporate response Focus on building brands (cheese, spreads, yoghurts) � lots of consumer advertising  Rationalisation of delivery channels (recent doorstep business acquisition)  Emphasis on �least cost� in commodities(milk to �own label� supermarkets, exit cheese) Drive for innovation and improved food quality  Drive for business process improvements, with strong support for relevant investment

20. Business Systems role Best practice and value Do it properly Do it well Do it cost effectively Driving improvements in business processes Achieved through focus on business analysis and project management capability/skills, and outsourcing

21. The approach Gradually enhance or replace existing �best of breed� applications with an integrated system� the Oracle e-Business suite Ensure all core applications are available �anywhere�, e.g. via the internet, at home and when mobile, and can be shared across the �extended� supply chain

22. Integration A consistent approach to business Common processes and systems Standard functionality A consolidated infrastructure  Multi-disciplinary projects An integrated Business Systems department

23. The commitment All systems proposals must pass the Oracle �test�  Many other projects (including the acquisition of two dairies and 76 depots) Issue���How to determine project priorities?ROI �hurdles�, investment portfolio, etc.

24. Investment portfolio

25. History POMS implemented (11.5.8) in July 04Separate decision, prior to Board strategyAll direct and indirect goods/services, except milkHandles expenditure of about �500m Board decision on e-Business suite Nov 04 Financials implemented September 05Included upgrade of POMS to 11.510 Manufacturing approved March 05 Order Management approved July 06

26. Manufacturing Slow start � affected by two acquisitions, and shortage of business resources Three �pilots� now implemented, rollout programme is �one a month� � 15 sites in all (+2)  Growing emphasis on automated data collection and lot traceability (milk, packaging) Planning, including MRP, more standardised.Scheduling is still �one for the future�, and MES.

27. Manufacturing related projects EAM Inventory ManagementFirst site live, rollout over next 12/18 months Planned maintenancePilot site January 07 Sourcing (POMS phase 2) RFQs, supplier evaluation Bring auctions in-house Improved business intelligence Potentially, supplier access for invoicing

28. Order Management Project started September 06,target completion early 08 Replaces existing EDI/SOP systems Integrated internal supply chainand better reporting The extended supply chain Warehouse management

29. In summary We�re clear about where we�re trying to get to in the medium/longer term  POMS and Financials were very successful, and we�re building on that with Manufacturing We�re trying to keep it simple, short and snappy in the medium term It�s essential to manage scope effectively, focusing on the business benefits

30. What is variability? Materials Manufacturing processes The nature of the product itself Storage and transit Business processes People And of course, the ever changing�.customer requirements and business priorities

31. Materials � milk example Some milk is segregated, for example organic.But most is collected in tankers throughout a day, and is stored in tanks, before pasteurisation We test for quantity and quality. The latter will affect how it�s used in production, or rejected. We pay farmers based on collection and initial checks. But we measure intake 3 times, for loss in transit, and wastage during production. Milk quality affects what the farmer is paid, and thus our costs, and how subsequent recipes are used to optimise overall costs.

32. Manufacturing processes - cheese Cheddar cheese is made in 20kg blocks, 50 to a pallet, which then weighs about a tonne Recipes vary depending on the intended product � mild, mature, vintage, colour We used to measure product quality after > 24 hours, after palletisation. Now we bring process control details into OPM on a continuous basis. The product is lot controlled. We can now trace back variability to each block, and to the specific milk tanker intake, and potentially the farm.

33. The nature of the product - cheese Cheddar cheese matures over 3 to 18 months, depending on the intended product. It is �graded� every 3 months, resulting in a resource change to recognise the increased value of the WIP. Previously, this could be done only at pallet level. We can now differentiate by block, and select for further processing as appropriate, recognising the specific cost vs. potential value The latter can of course be up or down, but it does enable us to match to specific requirements

34. Storage and transit We store over 30,000 tonnes of cheese at any given time, representing �100m stock value. This is mostly held in a central temperature controlled warehouse, and shipped for packing only when needed. Maintaining records of grading during storage is crucial. Blocks/pallets are selected for cutting and packing based on grading. Pallets are then shipped to a packing site, but blocks are individually issued to production. This maintains traceability and optimises the product use on a �best before� basis.

35. Business processes All the recording and checking transactions referred are part of fully documented processes, that have been the subject of rigorous analysis and review as part of the implementation In some cases, the amount of manual effort has increased, in other areas reduced. But overall, there is no doubt that the ability to measure and control is significantly enhanced. Linkage with process control systems has been a challenge, and the analysis and reporting of measurements and trends even more so.

36. People However well designed the technology and business process solutions may be, they are still dependent on people to operate them, and to take appropriate actions based on sound information. Business Systems provide overall programme and project management, but the teams consist of systems staff and users who have been seconded to the project (plus the occasional consultant). Consultants and systems staff can only support the users, and it has been they who�ve driven the major changes. And that gives credibility to the solution when implementing at each site.

37. Summary We could not have made this progress without OPM, but equally OPM doesn�t provide all of the solution. We have �extended� the software in a number of areas, together with ASCP and Quality. And we have obviously worked with process control manufacturers to develop links. But the �end� is certainly justifying the means! Variability leads to unpredictability. Capturing details as early as possible in the process is enabling us to control the outcome to a much greater degree. And the result will be reduced costs, satisfied customers, and improved cashflow and profitability

39. Process Manufacturing At-a-Glance

40. Oracle Process Manufacturing Products Oracle�s Service solution is comprised of 6 stand-alone products: Interaction Center � communication options for your customer service center isupport � self-service solution TeleService � call center agent facing solution Field Service � field engineer dispatch solution Depot Repair � in-house repair/exchange/loaner solution Advanced Service Online � complex equipment maintenance, repair, and overhaul solution Service Contracts � entitlements and warranty tracking solution The remaining products are optional and can be purchased as add-ons to the Field Service stand-alone product. These optional products include: Advanced Scheduler � resource scheduling optimization Wireless Field Service � remote connected field service (wireless/PDA) Mobile Field Service � remote disconnect field service (Laptop/PDA)Oracle�s Service solution is comprised of 6 stand-alone products: Interaction Center � communication options for your customer service center isupport � self-service solution TeleService � call center agent facing solution Field Service � field engineer dispatch solution Depot Repair � in-house repair/exchange/loaner solution Advanced Service Online � complex equipment maintenance, repair, and overhaul solution Service Contracts � entitlements and warranty tracking solution The remaining products are optional and can be purchased as add-ons to the Field Service stand-alone product. These optional products include: Advanced Scheduler � resource scheduling optimization Wireless Field Service � remote connected field service (wireless/PDA) Mobile Field Service � remote disconnect field service (Laptop/PDA)

41. Quality-Driven Inventory Attributes Classify Inventory with Precision The OPM process inventory model enables precise inventory management. Items can exist in many warehouses with different rules. Some of the main inventory options available to you include: �������� Warehouse Definition: A warehouse can be a tank farm, rail siding, a racked warehouse, a floor space, or any designation that you choose. �������� You can choose to divide your warehouse into locations which can further breakdown the physical location of the inventory. Examples of locations are Tank 1, Tank 2, Aisle3/Rack4. �������� Lot control is another option that provides a traceability number for inventory. When you choose to use lot control, you turn on an additional option of sublot control which allows you to manage your inventory at an additional level of granularity. For example, you may have a production quantity as a lot but the actual drum is a sublot. �������� User-defined status rules allow the usage restriction of inventory and segregation and analysis; for example, you may define item-specific shelf life and retest intervals, and potency. �������� You can subdivide lot and sublot-controlled items into user-defined grade control, for example Grade A, B, or C. For quality purposes, quality specifications can be defined for a lot, and they can be specific to a production batch and step, customer, or supplier. This allows an unlimited set of quality measures and tests for analysis purposes. ��������� To help you maximize inventory usage and minimize costs, rule-based allocation procedures can be established. At the item and warehouse level, OPM can automatically allocate inventory on a first in-first out or first expired-first out basis. This is especially critical in the food and beverage industry where shelf-life is a critical consideration. ��������� Maximum flexibility is provided for classification of items into an unlimited number of categories. The OPM process inventory model enables precise inventory management. Items can exist in many warehouses with different rules. Some of the main inventory options available to you include: �������� Warehouse Definition: A warehouse can be a tank farm, rail siding, a racked warehouse, a floor space, or any designation that you choose. �������� You can choose to divide your warehouse into locations which can further breakdown the physical location of the inventory. Examples of locations are Tank 1, Tank 2, Aisle3/Rack4. �������� Lot control is another option that provides a traceability number for inventory. When you choose to use lot control, you turn on an additional option of sublot control which allows you to manage your inventory at an additional level of granularity. For example, you may have a production quantity as a lot but the actual drum is a sublot. �������� User-defined status rules allow the usage restriction of inventory and segregation and analysis; for example, you may define item-specific shelf life and retest intervals, and potency. �������� You can subdivide lot and sublot-controlled items into user-defined grade control, for example Grade A, B, or C. For quality purposes, quality specifications can be defined for a lot, and they can be specific to a production batch and step, customer, or supplier. This allows an unlimited set of quality measures and tests for analysis purposes. ��������� To help you maximize inventory usage and minimize costs, rule-based allocation procedures can be established. At the item and warehouse level, OPM can automatically allocate inventory on a first in-first out or first expired-first out basis. This is especially critical in the food and beverage industry where shelf-life is a critical consideration. ��������� Maximum flexibility is provided for classification of items into an unlimited number of categories.

42. Quality-Driven Lot UOM ConversionAccount for potency variability Leverage quality test result(s) to: Account for lot-to-lot quality variations Recommend lot-specific inter-class UOM conversions OPM Inventory > Item Lot/Sublot Standard Conversion: 1 Primary Base UOM = (Current Factor) x Secondary Base UOM 1 Secondary Base UOM = (Current Reverse Factor) x Primary Base UOM where Factor = 1 / (Reverse Factor) � OPM Quality > Specifications For a Test on an Item Specification, From UOM = Item UOM To UOM = Item UOM2 � OPM Quality > Item Samples or Results > Quality Change Disposition For a Test Result, Existing: 1 From UOM = (Current Item UOM Factor) x To UOM Recommended: 1 From UOM = (Proposed Item UOM Factor) x To UOM where Proposed Item UOM Factor = Result and 1 From UOM = (Item-to-Base UOM Factor) x Primary Base UOM and 1 To UOM = (Item-to-Base UOM2 Factor) x Secondary Base UOM � Recommended Lot-Specific Inter-Class Conversion: �1 Primary Base UOM = (Proposed Factor) x Secondary Base UOM 1 Secondary Base UOM = (Proposed Reverse Factor) x Primary Base UOMOPM Inventory > Item Lot/Sublot Standard Conversion: 1 Primary Base UOM = (Current Factor) x Secondary Base UOM 1 Secondary Base UOM = (Current Reverse Factor) x Primary Base UOM where Factor = 1 / (Reverse Factor) � OPM Quality > Specifications For a Test on an Item Specification, From UOM = Item UOM To UOM = Item UOM2 � OPM Quality > Item Samples or Results > Quality Change Disposition For a Test Result, Existing: 1 From UOM = (Current Item UOM Factor) x To UOM Recommended: 1 From UOM = (Proposed Item UOM Factor) x To UOM where Proposed Item UOM Factor = Result and 1 From UOM = (Item-to-Base UOM Factor) x Primary Base UOM and 1 To UOM = (Item-to-Base UOM2 Factor) x Secondary Base UOM � Recommended Lot-Specific Inter-Class Conversion: �1 Primary Base UOM = (Proposed Factor) x Secondary Base UOM 1 Secondary Base UOM = (Proposed Reverse Factor) x Primary Base UOM

43. Model Complex Process Flows Control Chemical and Biological Reaction Variability OPM allows you to manage the variability often associated with the ingredients and processes in Process Manufacturing to ensure that the characteristics of the product are consistent. It handles co products and byproducts (such as waste), and different types of scaling. It also allows you to manage production at the step level; you can record material and resource usage by step, compare planned with actual step quantities and resource usage, and substitute ingredients or resources. � OPM allows you to manage the variability often associated with the ingredients and processes in Process Manufacturing to ensure that the characteristics of the product are consistent. It handles co products and byproducts (such as waste), and different types of scaling. It also allows you to manage production at the step level; you can record material and resource usage by step, compare planned with actual step quantities and resource usage, and substitute ingredients or resources. �

44. Computer-Aided Formulation Model Product Requirements to Target Specifications

45. Ingredient SubstitutionsSimplify promotional/regulatory label changes  Modify formulas with date-driven, one-to-one ingredient substitutions Restrict to an approved list of alternate items Apply the substitution list to multiple formulas Plan, cost, and produce according to effective item substitutions Process manufacturers often need to replace the ingredients (such as raw materials, intermediates, or packaging components) in their formulas as stock supplies are exhausted or special promotions become expired. In Release 12, OPM users can modify formulas without invoking version control by using an item substitution list for simple, one-to-one replacements based on a date range. An item substitution is restricted to an approved list of alternate item replacements, in case of concerns with accidentally picking a material that is regulated, hazardous, or high cost. To simplify the setup and approval of substitutions allowed, this list can be associated to multiple formulas instead of modifying each formula affected. Once the list is effective and associated to formulas, you can plan, cost, and produce using the substitute ingredient based on the date of the requirement. For example, a product formulator can create a standard formula and include a label as one of the packaging ingredients. Rather than changing the formula each time a label change is required, an item substitution list is created with start and end dates, so that a promotional label can be assigned to the holiday period between November and December 2006. Planning and production have visibility to the substitute items available on any given date. Process manufacturers often need to replace the ingredients (such as raw materials, intermediates, or packaging components) in their formulas as stock supplies are exhausted or special promotions become expired. In Release 12, OPM users can modify formulas without invoking version control by using an item substitution list for simple, one-to-one replacements based on a date range. An item substitution is restricted to an approved list of alternate item replacements, in case of concerns with accidentally picking a material that is regulated, hazardous, or high cost. To simplify the setup and approval of substitutions allowed, this list can be associated to multiple formulas instead of modifying each formula affected. Once the list is effective and associated to formulas, you can plan, cost, and produce using the substitute ingredient based on the date of the requirement. For example, a product formulator can create a standard formula and include a label as one of the packaging ingredients. Rather than changing the formula each time a label change is required, an item substitution list is created with start and end dates, so that a promotional label can be assigned to the holiday period between November and December 2006. Planning and production have visibility to the substitute items available on any given date.

46. New in R12: Least Cost FormulationOptimize Costs while Managing Variability I�m sure everyone on this call has their own vision of what Computer Aided Formulation means and how it can be achieved. A good general description would be �using software, R & D can model formulas based on any number of characteristics associated with ingredients (raw materials or intermediates).� It�s my intent to describe to you what we intend to do in the software to enable computer aided formulation. In a nutshell, we�re using this term as an umbrella to describe a number of enhancements to our Laboratory features, including further integration with Production and Quality.I�m sure everyone on this call has their own vision of what Computer Aided Formulation means and how it can be achieved. A good general description would be �using software, R & D can model formulas based on any number of characteristics associated with ingredients (raw materials or intermediates).� It�s my intent to describe to you what we intend to do in the software to enable computer aided formulation. In a nutshell, we�re using this term as an umbrella to describe a number of enhancements to our Laboratory features, including further integration with Production and Quality.

47. Oracle Variability Management Material Lot UOM conversions for potency, catch-weight, aging� Simultaneous quantity tracking Quality results used in CAF and Customer Spec Matching Stability Studies

48. For More Information

49. Bring up on stage two customers to tell the audience about their experiences. Manpower Associates is a $14.9B global company with 27,000 employees in the temporary staffing business. Manpower runs a combined PeopleSoft Enterprise and JD Edwards EnterpriseOne shop. These experts in human resources use Enterprise HCM for their own staffing and EnterpriseOne Payroll and Service Billing for handling the large volumes of US-based temporary staff. Manpower is very happy with Oracle�s support since purchasing PeopleSoft and is looking forward to a long relationship with Oracle. Spokesperson will be Jay Schaudies, Vice President, Global eCommerce. Welch Foods is the food processing and marketing arm of National Grape Cooperative Association. Organized in 1945, National Grape is a grower-owned agricultural cooperative with 1,461 members. The company, headquartered in Concord, Massachusetts, operates six plants located in Michigan, New York, Pennsylvania and Washington. The company was running a mix of legacy, home grown, and manual systems that failed to provide senior management with accurate and timely cost and production information. Welch�s required a centralized manufacturing and financial information system to improve management decision making. The solution had to be hot-pluggable with existing technologies, for example, Welch�s Plumtree portal. Welch Foods chose Oracle over SAP for this business-critical application. The key to the customer�s business problem was their ability to manage costs. The company�s costs are driven by fruit solid content in each of their products, and they use a specialized technique called BRIX for measuring and calculating the cost of materials. Welch�s compared SAP and Oracle SAP�s software was too rigid and, therefore, unable to include the BRIX calculation in their manufacturing solution. Only Oracle�s OPM could bind this custom cost method into the Quality Management Process. Technology customer yet to be determined. Current possibilities include eBay and FTD Florists.Bring up on stage two customers to tell the audience about their experiences. Manpower Associates is a $14.9B global company with 27,000 employees in the temporary staffing business. Manpower runs a combined PeopleSoft Enterprise and JD Edwards EnterpriseOne shop. These experts in human resources use Enterprise HCM for their own staffing and EnterpriseOne Payroll and Service Billing for handling the large volumes of US-based temporary staff. Manpower is very happy with Oracle�s support since purchasing PeopleSoft and is looking forward to a long relationship with Oracle. Spokesperson will be Jay Schaudies, Vice President, Global eCommerce. Welch Foods is the food processing and marketing arm of National Grape Cooperative Association. Organized in 1945, National Grape is a grower-owned agricultural cooperative with 1,461 members. The company, headquartered in Concord, Massachusetts, operates six plants located in Michigan, New York, Pennsylvania and Washington. The company was running a mix of legacy, home grown, and manual systems that failed to provide senior management with accurate and timely cost and production information. Welch�s required a centralized manufacturing and financial information system to improve management decision making. The solution had to be hot-pluggable with existing technologies, for example, Welch�s Plumtree portal. Welch Foods chose Oracle over SAP for this business-critical application. The key to the customer�s business problem was their ability to manage costs. The company�s costs are driven by fruit solid content in each of their products, and they use a specialized technique called BRIX for measuring and calculating the cost of materials. Welch�s compared SAP and Oracle SAP�s software was too rigid and, therefore, unable to include the BRIX calculation in their manufacturing solution. Only Oracle�s OPM could bind this custom cost method into the Quality Management Process. Technology customer yet to be determined. Current possibilities include eBay and FTD Florists.

50. Bring up on stage two customers to tell the audience about their experiences. Manpower Associates is a $14.9B global company with 27,000 employees in the temporary staffing business. Manpower runs a combined PeopleSoft Enterprise and JD Edwards EnterpriseOne shop. These experts in human resources use Enterprise HCM for their own staffing and EnterpriseOne Payroll and Service Billing for handling the large volumes of US-based temporary staff. Manpower is very happy with Oracle�s support since purchasing PeopleSoft and is looking forward to a long relationship with Oracle. Spokesperson will be Jay Schaudies, Vice President, Global eCommerce. Welch Foods is the food processing and marketing arm of National Grape Cooperative Association. Organized in 1945, National Grape is a grower-owned agricultural cooperative with 1,461 members. The company, headquartered in Concord, Massachusetts, operates six plants located in Michigan, New York, Pennsylvania and Washington. The company was running a mix of legacy, home grown, and manual systems that failed to provide senior management with accurate and timely cost and production information. Welch�s required a centralized manufacturing and financial information system to improve management decision making. The solution had to be hot-pluggable with existing technologies, for example, Welch�s Plumtree portal. Welch Foods chose Oracle over SAP for this business-critical application. The key to the customer�s business problem was their ability to manage costs. The company�s costs are driven by fruit solid content in each of their products, and they use a specialized technique called BRIX for measuring and calculating the cost of materials. Welch�s compared SAP and Oracle SAP�s software was too rigid and, therefore, unable to include the BRIX calculation in their manufacturing solution. Only Oracle�s OPM could bind this custom cost method into the Quality Management Process. Technology customer yet to be determined. Current possibilities include eBay and FTD Florists.Bring up on stage two customers to tell the audience about their experiences. Manpower Associates is a $14.9B global company with 27,000 employees in the temporary staffing business. Manpower runs a combined PeopleSoft Enterprise and JD Edwards EnterpriseOne shop. These experts in human resources use Enterprise HCM for their own staffing and EnterpriseOne Payroll and Service Billing for handling the large volumes of US-based temporary staff. Manpower is very happy with Oracle�s support since purchasing PeopleSoft and is looking forward to a long relationship with Oracle. Spokesperson will be Jay Schaudies, Vice President, Global eCommerce. Welch Foods is the food processing and marketing arm of National Grape Cooperative Association. Organized in 1945, National Grape is a grower-owned agricultural cooperative with 1,461 members. The company, headquartered in Concord, Massachusetts, operates six plants located in Michigan, New York, Pennsylvania and Washington. The company was running a mix of legacy, home grown, and manual systems that failed to provide senior management with accurate and timely cost and production information. Welch�s required a centralized manufacturing and financial information system to improve management decision making. The solution had to be hot-pluggable with existing technologies, for example, Welch�s Plumtree portal. Welch Foods chose Oracle over SAP for this business-critical application. The key to the customer�s business problem was their ability to manage costs. The company�s costs are driven by fruit solid content in each of their products, and they use a specialized technique called BRIX for measuring and calculating the cost of materials. Welch�s compared SAP and Oracle SAP�s software was too rigid and, therefore, unable to include the BRIX calculation in their manufacturing solution. Only Oracle�s OPM could bind this custom cost method into the Quality Management Process. Technology customer yet to be determined. Current possibilities include eBay and FTD Florists.