Advanced Planning Systems: Proactive or Reactive?

1. Advanced Planning Systems:Proactive or Reactive? Ton G. de Kok School of Technology Management Eindhoven University of Technology Amsterdam 1999

2. Contents • Basic principles of APS • Proactive planning • DAM: a new concept • Comparison of APS and DAM • Understanding the consequences • Outlook

3. Plan Plan Plan Plan Plan Plan Plan Plan Plan Plan Plan Plan Scope of presentation A Supply Chain . . . Source Make Deliver Customer & Supplier Customer & Supplier Customer & Supplier

4. Basic principles of APS • Demand forecast • Availability checking • Capacity checking • No support for coping with demand uncertainty • Black box (LP-based with collection of heuristic add-ons) • Rolling schedule approach

5. Rolling schedule approach At the start of every planning cycle • Update all input variables • actual inventory levels • actual orders outstanding • actual demand • Forecast all exogenous variables • customer demand for items • Solve a deterministic optimization problem • Generate all immediate order- release decisions

6. Proactive planning • Proactive implies anticipation with respect to unexpected events • Unexpected events are • actual demand differs from forecast • actual lead time differs from planned lead time • actual yield differs from planned yield • Time and quantity buffers not endogenous to APS concept but exogenous, i.e. user-defined parameters • Unexpected events are dealt with through periodic replanning APS is reactive!

7. Demand Availability Managementa new concept for material coordination • Demand forecast • Availability checking • No capacity checking • Supports allocation of safety stocks • Supports (automates) rescheduling • Concept requires fundamental rethinking

8. TV Supply Chain cabinet tube TV chassis IC

9. IC tube chassis cabinet TV TV Supply ChainDAM time hierarchy view

10. DAM concept features • Qualitative • Provides insight into interaction between decision taken at different points in time and different links in the chain • Reallocation of availability upon changes in receipts and demand • Quantitative • Generalized ATP based on Supply Chain constraints • Early warning signals through time-dependent stockout probabilities at MPS level

11. DAM concept features • Calculation of optimal (time or quantity) item buffers, given • supply chain structure • product structure • lead time structure • Calculation of optimal item availability performance • Extremely simple logic • base stock levels • allocation rules

12. 1 2 1 3 4 Comparison of APS and DAM target fill rate 95% common component

15. Comparison of APS and DAM

16. Understanding the consequences • APS logic yields optimal plans with respect to the model defined • material constraints • resource constraints • and the estimates made • demand • lead times • APS logic yields suboptimal plans with respect to actual demand and actual lead times • DAM provides a first attempt to plan complex material flows proactively, taking into account demand uncertainty

17. Outlook • Development of DAM prototype • Implementation in a pilot environment • Learning cycles concerning • interactive planning • early warning signals • supply chain design • Research aimed at incorporation of • lot sizing • finite capacity

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