Content

1. Enterprise Systems OptimizationCourse OverviewEGN 5623 Enterprise Systems Optimization (Professional MSEM) Fall, 2011

2. Course objective • Course organization • Introduction to Global Bike International Co. (GBI) Content

3. Course Objective Supply chain management (SCM) concepts, modeling, configuration, integration, data transfer, and supply network planning and optimization. With a focus on SAP implementation

4. Single facility SCM • Increased planning capabilities for a single facility • Finite-capacity scheduling • Multiple facility SCM • Integrated planning for the entire supply chain network • Multiple plants and distribution centers • Multiple vendors • Multiple customers • Multiple transportation options SCM Scope

5. Related ERP Modules • Materials Management (MM) and Production Planning (PP) modules • Sales and Operations Planning (SOP) • Forecasting • Master Scheduling • Material Requirements Planning (MRP) • Capacity Requirements Planning (CRP) • Order release and receipt ERP Operations related to SCM

6. SAP ERP: • Holds master data for materials, plants, customers, vendors, purchasing information records • Holds transactional data (e.g., sales orders, planned orders) • Is where plans get executed • SAP SCM: • Is where “advanced planning” happens • Imports master and transactional data from ERP • Sends plans back to ERP for execution ERP SCM Core Interface (CIF) ERP & SCM Basics (SAP View)

7. Section 1: • Review and create Master data (Modules 1 – 3) • Section 2: • Configuration and Integration (Modules 4 – 9) • Create forecast in SAP ERP • Port master and transaction data from ERP to SCM • Add additional master data in SCM • Section 3: • Planning in SCM (Modules 10-12) • Supply Network Planning (SNP) Heuristics • Deployment and Transport Load Builder (TLB) • Capable to Match (CTM) SCM Exercises Plan with GBI v 1.0

8. The products and modules involved in the SCM exercises are: • ERP (ECC 6.0): • MM, • PP, • SD • SCM 5.0: • DP (Demand Planning), • SNP, and • Deployment Modules related to ECC and SCM

9. Section 1A: Planning in SAP ERP Section 1B v2: Prep for SAP SCM Section 2: Integrating ERP & SCM Section 3: Supply Network Planning in SCM Exercise Sequence

10. Objective: • Introduction to the MM, PP, and SD modules in ERP • Focus on planning and control functions. • Master Data I: Material Masters • Master Data II: BOMs and Routings • Forecasting and Sales and Operations Planning • Master Scheduling and Material Requirements Planning • Purchasing and Financial Accounting Section 1A: Planning and Execution in ERP

11. Objective: • Prepare master data in ERP for transfer to SCM • Focus on planning and control. • Module 0: Overview of the Global Bike Company. • Module 1: New Master Data for the Ridge Front Bike Family • Module 2: Change Master Data to Prepare for SCM • Module 3: Add Master Data to Prepare for SCM Section 1B: Prepping the Master Data in SAP ERP

12. Objective: • Transfer master Data from ERP to SCM and review transfer in SCM • Focus on data transfer and its for automation (especially with Modules 5-7) • Module 4: Creating forecast for finished products • Module 5: Master data transfer from ERP to SCM • Module 6: Production Data Structure in SCM • Module 7: Transfer of transactional data from ERP to SCM • Module 8: Maintain Supply Chain model in Supply Chain Engineer • Module 9: Setup of transactional data transfer from SCM to ERP Section 2: Configuration and Integration

13. Objective: • Understand the different heuristics available in Supply Network Planning • Very dense material, with focus on tools for planning analysis. • Module 10: Interactive SNP planning- Heuristics • Module 11: Deployment and Transport Load Builder • Module 12: Capable to Match Section 3: Planning in SNP

14. Work Flow in SAP SCM

15. Work Flow for our Exercises

16. Exercise Overview: GBI Supply Chain It is set up to be a single platform for both ERP and SCM GBI produces 1 brand of bicycle and sells 25 trading goods GBI has operations in two countries (USA and Germany (DE)) Supply chains in other countries could be added The supply chain in each country is distinct and there is no collaboration between the two supply chains. Author:

17. Full View of the GBI Supply Chain US-DC2 DE-DC2 US-Customers DE-Customer US-DC1 DE-DC1 US-Vendors DE-Plant DE-Vendor • USA: • 2 vendors • 1 plant • 2 DCs • 2 customers • Germany: • 1 vendors • 1 plant • 2 DCs • 1 customers One product One work center per plant No transportation links between US and Germany Author:

18. To Keep Things Simple: US-DC2 DE-DC2 US-Customers DE-Customer US-DC1 DE-DC1 US-Vendors DE-Plant DE-Vendor • USA: • 2 vendors • 1 plant • 2 DCs • 2 customers • Germany: • 1 vendors • 1 plant • 2 DCs • 1 customers This simplifies our task dramatically Author:

19. One plant (DL) • Two DC’s (CA and FL) • Two Vendors (NY and MI) • Two Customers (WA and MS) North American Supply Chain

20. Introduction to SCM and SAP APO Theories & ConceptsEGN 5623 Enterprise Systems Optimization (Professional MSEM) Fall, 2011

21. The APICS-Standard Planning Framework

22. Materials • Any commodities used directly or indirectly in producing a product or service. • Raw materials, component parts, assemblies, finished goods, and supplies • Supply chain • Flow of materials through various organizations from the raw material supplier to the finished goods consumer. Intro to Supply Chain

23. Definition • All management functions related to the flow of materials from the company’s direct suppliers to its direct customers. • Functions included: • purchasing, traffic, production control, inventory control, warehousing, and shipping. • Two alternative names: • Materials management • Logistics management Supply Chain Management

24. Supply Chain • A supply chain is the network of organizations, people, technology, activities, information and resources involved in the production of a product or a service • Includes suppliers, manufacturers, transporters, warehouses, retailers and customers • Production System • A manufacturing subsystem that includes all functions required to design, produce, distribute, and service a manufactured product. • A Supply Chain consists of one or many production systems that work together in the fulfillment of a customer order • Best viewed as a network Supply Chains Definition

25. MINING COMPANY Mines iron ore STEEL MILL Forms steel ingot STEEL COMPANY Forms sheet metal Iron ore Steel ingots Sheet metal AUTOMOTIVE SUPPLIER Makes door AUTOMOBILE MANUFACTURER Makes automobile CAR DEALERSHIP Does preparation Car Car door Prepared car FINAL CONSUMER Drives automobile Supply Chain for Steel in an Automobile Door

26. Receiving and Inspection Raw Materials, Parts, and In-process Ware- Housing Production Finished Goods Ware- housing Inspection, Packaging, And Shipping Customers Suppliers Materials Management Warehousing and Inventory Control Shipping and Traffic Purchasing Production Control Supply Chain Managementin a Manufacturing Plant Physical materials flow Information flow

27. Logistics usually refers to management of: • the movement of materials within the factory • the shipment of incoming materials from suppliers • the shipment of outgoing products to customers Logistics

28. The typical locations from/to which material is moved: Incoming Vehicles Receiving Dock Quality Control Warehouse Work Center Other Work Centers Packaging Finished Goods Shipping Shipping Dock Outgoing Vehicles Movement of Materials within Factories

29. Shipments To and From Factories • Distribution Resource Planning • Distribution resource planning extends DRP so that the key resources of warehouse space, workers, cash, and vehicles are provided in the correct quantities at the correct times.

30. The “Transportation Problem” • Problem involves shipping a product from several sources (ex. factories) with limited supply to several destinations (ex. warehouses) with demand to be satisfied • Per-unit cost of shipping from each source to each destination is specified • Optimal solution minimizes total shipping cost and specifies the quantity of product to be shipped from each source to each destination Analyzing Shipping Decisions

31. Definition • Warehousing is the management of materials while they are in storage. • Viewed as distribution center (DC) • Warehousing activities: • Accounting • Ordering • Storing • Dispersing Warehousing

32. Record keeping within warehousing requires a stock record for each item that is carried in inventories. • The individual item is called a stock-keeping unit (SKU). • Stock records are running accounts that show: • On-hand balance • Receipts and expected receipts • Disbursements, promises, and allocations Warehousing

33. Common Supply Chain Processes

34. Common Time Horizons for SCM Processes

35. Level of Detail and Time Horizon for SAP APO Modules

36. SCM Processes in SAP APO Modules

37. SAP APO System Structure and Integration with SAP ERP

38. Distribution Center Supplier Manufacturer Customer Example of a Supply Chain Network Information / Cash PULL Cycle Time PUSH Products Delivery Time Decoupling point

39. Each node may consist of a production system of its own • Links in the network represent a business relationship between two nodes • e.g. transportation of a product between two nodes • The number of levels in a supply chain varies and depends on the complexity of the product • Flows can skip levels by that: • Supplier ships direct to DC • Manufacturer ships directly to customer • The decoupling point is the shift occurs from make-to-stock to make-to-order • The decoupling point is not fixed to one level of the supply chain and is influenced by postponement strategies (e.g. Dell) Characteristics of the SC Network

40. Multiple Products, each with possibly different Bills of Material and multiple configurations • Multiple Suppliers for raw materials, parts or subassemblies • Multiple Subcontractors • Multiple Plants possibly containing a wide variety of equipments • Multiple Warehouses • Distribution centers, local, regional and factory warehouses • Different means of Transportation (air, sea, rail, FTL, LTL) either leased, owned or contracted • Different information systems and communication channels • People with various skills at all levels of the organization Characteristics of the SC Network

41. Costs • Production and purchasing costs • Setup or changeover costs • Transportation and handling costs • Hiring and firing costs • Overtime costs • Inventory costs • Promotional and advertising costs • Renting and leasing costs • Subcontracting costs • Overhead • Capital investments and depreciation • Taxes and duties • Revenue • Customer is the only source of revenue • From sale of products, spare parts, materials or service Example of Costs and Revenues in the Supply Chain

42. Productivity constraints • Equipment capacity constraints • Labour availability • Technological constraints • Inventory constraints • Purchasing, manufacturing and distribution lead times • Demand uncertainties and seasonalities • Service requirements • Budget • Regulations and other constraints Example of Constraints

43. Categories and Attributes of a Supply Chain - Reproduced from Fleischmann B., Meyr H, Hierarchy and Advanced Planning Systems, Handbooks in OR and MS, Chapter 9, Elsevier, 2003, pp 457-523

44. Pure Inventory Systems • Simplest form of logistic system • Only procurement activities with no production or complex distribution processes • Example: wholesale or retail operations where items are purchased • Continuous production Systems • Manufacturing of a few families of technologically related products in large quantities • Example: Assembly lines or fabrication lines • Intermittent production Systems • Batch production of many products which share several processing centers • Project based systems • Production of a unique complex product such as a ship or a bridge Types of Production Systems

45. Make to Stock • Production is based on forecasted amounts for stocked items • Make to Order • Production of a product is made for a customer order in the quantity specified by the order Production Strategies

46. Hierarchical planning was first introduced by Robert Anthony in 1965* as a three level management framework that consists of: • Strategic or long-term planning • Tactical planning (or management control) for mid-term planning • Operational planning for short term planning • The results of one each level are considered as an inputs to the lower level planning • Effective implementation and control of the plans requires: • An execution layer that captures the events as they occur • Feedback loops at all levels 2. Hierarchical Planning * R.N. Anthony, Planning and Control Systems: A Framework for Analysis, Cambridge. Mass., 1965

47. Material programs • Supplier selection • Cooperation • Plant location • Production systems- Subcontractors • Physical distribution structure- Transportation strategy • Product program- Strategic sales planning Long term • - Personnel training • - Contracts • - Material Requirements Planning • - Master production Scheduling • - Capacity planning • - Distribution planning • - Mid-term sales planning Mid term • - Personnel scheduling-- Material ordering • - lot-sizing- operations scheduling- shop floor control - Warehouse replenishment- Transportation planning • - Mid-term sales planning Hierarchical Planning Framework Short term EXECUTION Flow of goods Information Feedback

48. Differentiating Factors by Planning Levels

49. Introduction to SCM and SAP APO SAP Implementation EGN 5623 Enterprise Systems Optimization (Professional MSEM) Fall, 2011

50. SAP Business Suite SAP NetWeaver SAP PLM SAP ECC SAP SRM SAP CRM SAP SCM