Driving Agility & Growth in the Chemical Industry

Driving Agility & Growth in the Chemical Industry Dr. Thorsten Wenzel Director Industry Business Solutions Chemicals SAP AG SAP FORUM Mexico City 2014

Chemical Industry Mexico The Manufacturing Industry has a share of Mexico Secondary Sector GDP of over 60% and the major contributors are: Food Industry Manufacturing Transportation Equipment Basic Metal Industry Chemical Industry The Chemical industry is the 4th most important in the manufacturing secondary sector of Mexico Source: INEGI and ANIQ 2

Chemical Industry Outlook 2014 LA & Mexico Chemical Industry Sector Challenges & Opportunities: Missing Integration Low Utilization Rates Logistic disadvantage due to Raw Material Imports Tax Protection Reduction (TPP) Compete with Global Players in the Domestic Market with different cost components and taxes (especially asian players) Shifting in Demand The need to export and compete in foreign Markets Recovery of Consumer Demand in the US Shale Gas Boom in the US Percentage of Raw Materials and Auxiliaries used in the Chemical Industry Source: INEGI and ANIQ 3

Use SAP Innovations to Win in Chemicals SAP Innovation Applications Database & Technology Relevance for Chemicals Product Compliance Regulations multiply - Regulatory Impact Analysis (Hana App) analyzes thousands of regulations against BoM formulas. Sustainable Manufacturing Integrated manufacturing excellence Sales & Operations Planning (Hana App) re-plan production on frequent basis, allowing for lower inventory with high customer service SAP CRM on HANA rapid analysis of pipeline and customer profitability Position Suite on HANA apps: ROLTA OneView, COPA, BW on HANA. Continue work with CEAC, CISUG, VCI on HANA analytics app piloting Mobile Analytics Cloud Cross Topics: Suite on HANA HEC Mobile device management & Syclo for plant automation Mobile sales - Sales automation & order tracking Predictive analytics maintenance, supply chain ROLTA one view Price & Margin Optimization Vendavo partner solution Ariba Business Network all customers should consider to join network Success Factor Talent Management hybrid scenario aging workforce SAP Cloud for Sales sales automation and enablement incl. sample management Chemical Company in a Box - Rapid go-live for SMEs and branch offices 4

Database & Technology: Transform Big Data Into a Big Advantage PaaS SAP HANA Enterprise Cloud Private and Public Cloud Data Platform SAP HANA, ASE, IQ, EIM Integrated Development Environment Integrated Sales and Operations Planning on HANA CRM on HANA enhance user experience, accelerate reporting and decision making, and reduce IT costs Asian Paints could reduce its data loading time by 95% and improve the compression rate from 180 gigabytes to 29 gigabytes with SAP HANA Many pilots in process for Sales & Operations Planning (Dow Chemical, DuPont, SABIC, Exxon, Dow Corning, Albemarle) 5

SAP 360 Customer Portfolio at a Glance SAP Customer Engagement Intelligence* [HPA] Mobile Apps Mobile Sales Mobile Service Customer Briefing Sales Diary Social Collaboration SAP JAM SAP Cloud for Sales* Service* Social Engagement* SAP JAM Customer Value Intelligence SAP CRM (On Premise) Account Intelligence (Mobile) Audience Discovery & Targeting Sales Marketing Service Analytics Web- Channel Interaction Center SAP CRM SAP CRM on HANA SAP 360 Customer SAP HANA * These solutions are licensed separately 6

Innovating our Business with Real-Time Information AT A GLANCE Objective Proof of Concept Solution SAP CRM powered by SAP HANA Benefits Innovate the business and empower users with real-time information After a successful proof of concept, we have quickly made the decision to implement SAP CRM powered by SAP HANA. We believe this is the right move for Bayer as it will allow us to innovate the way products are being developed by focusing more on the individuals requirements rather than generic markets. We will also create a better user experience by providing our users with real-time information while reducing our overall operating cost in IT. The next logical step for Bayer will be to move the whole SAP Business Suite to SAP HANA. Kurt De Ruwe, CIO, Bayer MaterialScience 7

Mobile: Access Anywhere, Anytime Platform, Device Management and Security Sybase Unwired Platform & Mobile Device Management Sales SAP Mobile Sales Operations Syclo*, EHSM Incident Management 50% Decrease in lost assets using Afaria Mobile Device Management from SAP 23% Increase in revenues per sale using SAP CRM and Mobile Sales Comprehensive approach to operational integrity leveraging SAP s Mobile Asset Management Platform *Planned for Chemicals Q1 2014: cooperation with Motorola to deliver intrinsically safe devices preconfigured with Syclo via RDS for plant floor maintenance applications 8

SAP Mobile Solutions SAP Work Manager SAP Inventory Manager SAP Rounds Manager SAP CRM Service Manager SAP Sales Manager Asset Management Work Orders CATS - Time & Attendance Notifications on-the-spot Measurement Documents Material Management Cycle Counts Goods Issues Stock Transfers Goods Receipt Condition Monitoring Fast Rounds & Fast Rounds & Readings Measurement Docs Integration to Data Historian Safety Warnings Readings Measurement Docs Integration to Data Historian Safety Warnings Field Service Service Orders Customer data Territory data Entitlements Vehicle Inventory Sales Accounts Contacts Activities Leads Product Search Quotes 9

Analytics: Quicker Data to Decision Predictive Analytics and Visualization Predictive Maintenance Operational Dashboards Preconfigured KPI framework on Overall Equipment Effectiveness Price and Margin Management SAP Price and Margin Management by Vendavo Uses SAP Predictive Analytics to analyze market trends and data to make better business decisions and identify new opportunities Greater flexibility in building KPIs for enterprise wide performance management Profit Improvement driving sizable 14 large deal 10

SAP PMM Pricing Suite Enabling Full, Closed-Loop Price & Margin Management Profit opportunity identification, sizing, and tracking Root cause analysis Actionable insights and analysis Rapidly transition from static to dynamic pricing Manage base prices, list prices Set & manage price & margin guidance policies Manage approval workflow rules Drive Profit Improvements at the Front Lines Negotiate better customer-specific pricing (quotes, contracts, rebates, etc.) with confidence from insights and embedded analytics. 11

Pocket-Price Waterfall or Price Waterfall Source: McKinsey Quarterly 12

EASTMAN SAP Business Transformation Study We now have a data- and process-based approach to pricing. We re using standard techniques globally, with very few errors. When we state a price, there s science behind the decision. Russ Hickman, Senior Systems Associate, Information Technology, Eastman Chemical Company Given our competitive environment and high levels of volatility in petroleum feedstock and other costs, we knew we needed to attain excellence in pricing. We wanted to ensure that we were efficiently making data-based decisions, recovering costs, and achieving target margins. Robert Smith, Director of Pricing, Performance Chemicals and Intermediates Business, Eastman Chemical Company Low Total Cost of Ownership Minimal future customizations Use of standard software and processes across all units Continual improvement of business processes Favorable return on investment after 3 months 13

SAP Price & Margin Management: Experience from 45+ major chemicals divisions Our first customer was a chemicals manufacturer and they represent our largest industry served Typical Annual Benefits of 1% to 3% of Revenue 14

Cloud: Accelerate Business Through Cloud Solutions SAP Cloud for Sales with Sample Management for Chemicals Co-innovation with Qnovate Cloud enablement with CRM Over 400 samples per month through e-channels Samples lead to opportunities and pipeline sales when managed properly 15

Chemical Company in a Box Value Solutions Key Building Blocks Best Practices for chemical industry Partner hosted MCaaS Simplified Deployment Simplified Landscape Simplified Contract (ONE package and ready to go) Live in 2 days Qualified Partners: 16

www.chemicalsbestpractices.sap.com 17

Many Available RDS Solutions for Chemicals Product Innovation & Integrity SAP Capital Project Accounting RDS SAP Commercial Project Management RDS SAP PLM for Process Manufacturing RDS SAP Portfolio Management for Innovation and Product Development RDS SAP IT Portfolio and Project Management RDS SAP Project Portfolio Management RDS SAP Global Batch Traceability RDS SAP Quality Issue Management RDS Customer Centric Sales & Marketing SAP HANA Customer Engagement Intelligence RDS SAP CRM Interaction Center RDS SAP CRM Service Management RDS SAP CRM RDS for Analytics SAP Customer Relationship Management RDS SAP CRM RDS powered by SAP HANA Operations Packages Innovation Packages Supply Chain Packages Sales & Marketing Packages Manufacturing Performance & Asset Utilization SAP KANBAN Process RDS SAP MII Batch Manufacturing RDS SAP Condition-Based Maintenance RDS SAP Multiresource Scheduling RDS ROLTA Asset Insights (Partner) ROLTA Maintenance Reliability Insights (Partner) ROLTA Operations Insights (Partner) Complex and Volatile Supply Chains SAP Advanced Production Scheduling RDS SAP SNC Supplier Collaboration RDS SAP Supply Network Planning RDS SAP freight tendering for Shippers RDS SAP Ocean Carrier Booking for Shippers RDS SAP Transportation Charge Management for Shippers RDS SAP transportation planning for Shippers RDS SAP Extended Warehouse Management RDS SAP Global Batch Traceability RDS SAP Order Tracking and Exception Management RDS To learn more see SAP Rapid Deployment Solutions, click here 18

End-to-End Industry Solutions Example: Best Run Chemical Company Where did this start? An answer to the question: What have SAP s Best Run Chemical customers done? 19

Peer Group Selection IBU IBS Qualitative assessment of companies implementations based on conformance to SAP s Best Practices and overall Solution Portfolio for Chemicals. Global Top 50 Chemical Companies for 2011 Billion Dollar Club 20

Best Run Practices 21

Best Run Chemical Company KPI s Considered Days Sales Outstanding (DSO) Days Sales of Inventory (DSI) Days Payable Outstanding (DPO) Chem. Sales ($M) 2010 & Change from 2009 2010 Total Sales & Change from 2009 Chem Sales as % of Tot Sales Chem. Oper. Profits ($ M) & Change from 2009 Chem. Profits as % of Tot Oper. Profit Chem. Oper. Profit Margin Identifiable Chem. Assets ($ M) Chem. Assets as % of Tot. Assets Return on Chem. Assets Source: Forbes Finance, Chemical Week Billion Dollar Club metrics, C&EN Global Top 50, and company 10K s 22

Best Run Chemical Company Profiles 8 headquartered in US 3 headquartered in Europe Revenues ranged from $6.4B to $95.6B 4 companies had revenues under $10B 2 companies had revenues $50B or over Average revenues per employee ranged from $380,000 to $1,100,000 Wide range of chemical sub-segments represented: Specialty chemicals Agricultural chemicals Bulk chemicals Industrial gases 23

Finance Human Resources Procurement Product Development FI/CO Enterprise Performance Management Profitability Analysis with HANA Invoice Mgmt (Open Text) Spend Performance Mgmt BPC Commodity Management GRC Financial SCM HR Sustainability Performance Mgmt HCM MM PUR SAP ERP with Best Practices for Chemicals Adobe Forms PLM SD Standardize Employee File Mgmt (Open Text) MM PP QM Extended Procurement for Chemicals EHSM - Product & REACH Compliance PM LIMS BI/BW Workforce Planning & Analysis Talent Management Ariba Collaborative Sourcing Recipe Mgmt EHSM Product Safety Collaborative Product Dev t CRM EHSM - Environmental Compliance & Safety IT Security & Compliance Ariba Collaborative Commerce & Finance Sustainability Performance Mgmt Extend Spend Performance Management Portfolio and Project Mgmt GTS Adobe Forms Mobile Device Mgmt Transportation Management EWM MII SCM/ APO Sales OnDemand Adobe Forms EAM Enterprise Content Mgmt (OpenText) Enterprise Info Mgmt Incentive Admistration (Vistex) Price & Margin Mgmt (Vendavo) Inventory Optimization (SmartOps) Reliability Centered Maintenance (Meridium) Differentiate Asset Hub (NRX) Information Risk Mgmt (NextLabs) Document Access & Archiving (OpenText) Legend Standard among Peer Group Common among Peer Group Strategic among Peer Group New Innovations Supply Chain Performance Mgmt Sales & Operations Planning Mobile Asset Management Maintenance Mentor (NRX) IT Insight & Analytics Energy Mgmt The Visual Enterprise HANA IT Operational & Service Excellence Global Batch Traceability Sybase Unwired Platform Transform Sales, Marketing & Service Supply Chain Manufacturing & Maintenance Information Technology 24

SAP is a Recognized Solution Leader in Chemicals Feedback from Analysts Gartner 2013 Magic Quadrant for SME Solutions* Based on TM 8.0 s best of breed functionality and architecture, and robust chemical industry features, it is time for chemical companies to take another look at TMS. Because of SAP s installed base in the chemical industry, we expect the chemical industry will become a high growth vertical for the TMS market, and that SAP will rather quickly assume TMS market leader-ship in this vertical. ARC on SAP TM 8.0, ARC Research Brief, June 2011 SAP customers who need real-time batch execution in the plant, but don t need full MES capabilities, should definitely consider SAP MII Solutions for Batch Manufacturing Execution. ARC on SAP Batch Manufacturing RDS, ARC Research Brief, April 2012 SAP is the only ERP vendor with a significant EH&S business. Most enterprises that use SAP as their ERP system of record have considered or are using some component of its EHS management software. In particular, it has a substantial number of customers using SAP to manage product safety and compliance, including SDS management.. Gartner on SAP EHSM, Vendor Guide for EHSM, Feb 2013 *This graphic was published by Gartner, Inc. as part of a larger research document and should be evaluated in the context of the entire document. The Gartner document is available upon request from SAP. Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose 25

SAP Drives Value for Chemical Companies The following key Chemical companies have already realized value through business transformation enabled by SAP. Customer Goal Highlights Transform from a manufacturing centered firm to a customer centric business, 35% of sales staff connected in 2 months 8-10 weeks to implement solution 700 people servicing 30.000 shops Improve planning, increase sales and optimize customer service Finding a Formula for Success with Efficient Inventory Planning Visibility into operational, financial and enterprise performance metrics to drive corporate goals Deployed SAP MII across 28 global sites to standardize processes Standardize, provide realtime information sharing. Better serve customers Use SAP EHSM to protect people, product, and planet to ensure a bright future 90% reduction in efficiency-related logistics costs 18% increase in sales forecast accuracy US$ 3 million value generated in first year after implementation Enables each business to analyze the link between inventory and customer service levels 8% reduction in inventory in Packaging Graphics division Gives holistic view of supply chain, identifying inputs and outputs at each stock point Greater flexibility in building key performance indicators (KPIs) for enterprise-wide performance management Better ability to manage operations and take timely, proactive actions 99.97% faster batch reporting, from 15 days to 5 minutes 7-10% fewer weigh and dispense errors Real time data from SAP and non-sap systems provide plant visibility in a business context 400% increase in number of material documents created in SAP ERP 1 source of real-time data for an integrated world 100% reduction in duplicate data entry 70% faster reporting of EHS incidents 60% time savings from process automation 100% visibility of EHS key performance indicators throughout organization 26

Thank you! Don Mahoney Vice President & Global Head IBS Chemicals SAP Americas USA don.mahoney@sap.com Dr. Thorsten Wenzel Director IBS Chemicals SAP AG Germany thorsten.wenzel@sap.com