SCM Master Data - 2 Theories & Concepts EGN 5623 Enterprise Systems Optimization Fall, 2012

1. SCM Master Data - 2Master Data for Distribution & Production Processes EGN 5623 Enterprise Systems OptimizationFall, 2012

2. SCM Master Data - 2Theories & Concepts EGN 5623 Enterprise Systems OptimizationFall, 2012

3. Distribution Planning in SCM (review) THEORY AND PRACTICE OF ADVANCED PLANNER AND OPTIMIZER IN SUPPLY CHAIN DOMAIN by Sam Bansal

4. Time Horizons for Distribution and Production Planning in SCM (review)

5. Level of Detail and Time Horizon of Distribution and PP in APO Modules (review)

6. Distribution Planning and Production Planning Processes in APO Modules (review)

7. Distribution and PP Modules in APO System Structure and Integration with ERP (review)

8. Master Data and Application in (DP) distribution planning and PP (review)

9. Master Data for Distribution Planning: • Location, Product, Resource, Transportation lane, Quota arrangement, and Interchangeability group. • Master data for Production Planning: • Location, Product, Resource, PPM/PDS , Quota arrangement, Set up Group & matrix, and Interchangeability group. Master Data and Application in Distribution Planning and PP (overview)

10. Transportation lanes: • Transportation lanes are required from plant and distribution center to the transportation zone and have to be created manually. • The allowed carriers have to be assigned per means of transport and transportation lane explicitly. • Quota arrangement (vendors’s quota): • Quota arrangement must be used, if it is intended to source from multiple locations on a regular basis. • The concerned products are assigned to the quota arrangement, and the ratio of the resources is defined per product. Master Data and Application in Distribution Planning and PP (Overview)

11. SCM Master Data - 2Master Data for Distribution Planning EGN 5623 Enterprise Systems Optimization(Professional MSEM)Fall, 2012

12. Distribution planning between the manufacturing plants and warehouses is important, as companies reduce inventory by changing their logistics processes to global inventory management, from non-coordinated local inventory management. • Distribution (and supply chain) planning focuses on make-to-stock production. Distribution (and Supply Chain) Planning

13. Distribution (& Supply Chain) Planning, and Replenishment

14. Process Chain for Distribution and Supply Chain Planning

15. Distribution planning is performed based on demand and stock information with the result of planned stock transfers. The most important issues are usually the netting of the local stocks, safety stock levels, sourcing options, transportation times and lot sizes for the planned stock transfers. If required, restrictions are considered regarding storage capacity and handling capacity for goods issue and goods receipt. Distribution and Supply Chain Planning

16. Replenishment involves two processes: • Deployment, and • Deployment is concerned with the fair share of quantities to the requesting parties in case of shortage or surplus. The constraints are available quantities. • Transport load building. • Transport load building is one step closer to execution and focuses on the creation of truck loads, where the task is to adjust the planned stock transports to the available trucks/transport means and take their capacity restrictions into account. Distribution and Supply Chain Planning

17. SAP APO supports distribution and production planning, with the following 4 applications: • For distribution: • SNP heuristic • PP/DS heuristics • For SCP • SNP optimizer • CTM (with SNP or PP/DS master data) Distribution and Supply Chain Planning

18. Applications for Distribution and Supply Chain Planning

19. Features of the Application for Distribution

20. Distribution planning with SNP heuristic is often used in the environments where multiple sourcing is not an issue and production is usually able to meet the demands, so that the main task for SNP heuristic is to calculate the demands for production planning based on local inventories, transportation times, safety stocks and lot sizes. • SNP optimization allows a complete consideration of the supply chain determinants (i.e., sources and cost, production capacity, transport, storage and handling). The aim of SNP optimizer is to find a global optimum for supply chain based on cost and penalty cost. • CTM pursues a priority based simple rules such as FIFS. Distribution and Supply Chain Planning

21. Order Cycle for Stock Transfer

22. The stock transfer order has two aspects – as a demand in the source location and as a supply in the target location. The documents differ in SAP ERP and SAP APO. The creation of the planned stock transfer, deployment and transport load building (TLB) is performed in SAP APO. The execution part from the creation of the outbound delivery in the source location until the goods receipt in the target location is performed in SAP ERP, and the information is displayed in SAP APO. Order Cycle for Stock Transfers

23. Three order types in SAP APO • Planned stock transfer, • Deployment confirmed stock transfer and • TLB-confirmed stock transfer • They are matched to: • the stock transfer requisition and • the stock transfer order in SAP ERP, according to the setting for SNP transfer. Order Cycle for Stock Transfers

24. Order Flow for Stock Transfer on SAP ERP side

25. Stock transfer order is first scheduled in SAP APO, then transferred to SAP ERP and scheduled again in SAP ERP according to the delivery date. The scheduled dates in SAP ERP are not transferred back to SAP APO. Stock transfers are executed according to the order dates in SAP ERP, therefore it is important to keep the scheduling in SAP APO and SAP ERP consistent. The transport duration in SAP APO is calculated using the entry from the transportation lane, whereas SAP ERP uses the planned delivery time of the material master of the target location. Stock Transfer Order

26. for transportation for transportation Stock Transfer Scheduling

27. Since SAP APO does not know any company codes, there is no difference in SAP APO whether stock transfers are planned within one company code or across company codes. On SAP ERP side, cross-company stock transfers require the additional settings. The assignment of the sales area and the customer to the plant is made with maintenance view V_001W_IV. Setting for Stock Transfer within and across Company Codes in SAP ERP

28. Setting for Stock Transfer within and across Company Codes in SAP ERP

29. Stock transfer across two SAP ERP systems is modelled by a purchase order in the target plant and a sales order in the source plant. Setting for Stock Transfer Across Systems

30. Setting for Stock Transfer Across Systems

31. SCM Master Data - 2Master Data for Production Planning Process EGN 5623 Enterprise Systems OptimizationFall, 2012

32. The relevant master data for production planning: • Location • Product • Resources • PPM and PDS • Quota arrangement, • Set up Group & matrix, and • Interchangeability group. • Note on resources: • SNP and PP/DS have a different view of the capacity. • SNP – in buckets • PP/DS – time-continuous capacity Production Master Data Overview

33. The idea of SNP is to perform an aggregated planning. Since SNP is an application for bucket-oriented planning, the resources for SNP offer a certain capacity per time bucket – usually per day. The bucket resources provide the capacity – e.g. the amount of working hours per day – of the resource which is used for the capacity consumption of the orders. For the scheduling of the production orders, the factory calendar is assigned to the resources. The standard capacity is defined in the resource master. Figure 13.13 shows these setting for the bucket resource. Another way to define the capacity is the use of a reference resource to save time. Resources for SNP

34. Settings for a Bucket Resource

35. In PP/DS, scheduling and capacity consumption are not separate steps, but the capacity is consumed by the scheduled operation. The basic resource property in PP/DS is the working time, which depends on the standard working hours, the break time, and factory calendar. Usually the available working time is modelled per shift, and the shifts are assigned to a shift sequence to model circumstances. Resources for PP/DS

36. Settings for PP/DS (single Resource)

37. PPM The Production Process Model (PPM) defines the detailed information required for manufacturing a product. The PPM combines routing and the bill of materials (BOM) into one master data object. Each PPM includes one or more operations. Each operation, in turn, includes one or more activities, for which materials, relationships and resources are maintained. The activities and resources defined in the PPM are assigned to costs that are used by the SNP Optimizer and for finite scheduling by Production Planning and Detailed Scheduling (PP/DS). Production Master Data Overview

38. Supply Network Planning (SNP) is a long term, rough cut planning tool. SNP requires a PPM with less information than the one used for production planning and detailed scheduling (PP/DS). During a planning run, SNP can schedule resources down to the day. In order to perform scheduling at the day level, the PPMs and resources must be simplified. Additionally, when using optimization technologies, it is important to limit the number of inputs (materials) to find a proper solution in a reasonable runtime. SAP SCM allows you to generate SNP production process models (PPMs) based on existing PP/DS PPMs. Restriction to a specific lot size is required to determine the exact production consumption or mode duration. Production Master Data Overview

39. PDS (production data structure) SAP initially developed the Production Process Model (PPM) to model manufacturing master data. It was replaced in SCM 4.1 by PDS. However PPMs are still supported. In some industries modeling the production and evolution of a certain product can be very complicated. When a product has many variations due to customers choosing a combination of features and options they typically used the variant configuration solution in standard SAP ERP. Production Master Data Overview

40. The main motivation to develop the PDS was to have an integration of the Engineering Change Management (ECM) and the Variant Configuration between SAP ERP and APO. From SCM 4.1 on, the Production Data Structure (PDS) is the key master data for all kinds of production planning related processes. The PDS is supported by the applications of PP/DS, SNP, CTM and DP. Like the PPM, the PDS corresponds to the production version on SAP ERP system. Though both PPM and PDS are still available as alternatives, there is no further development for the PPM since SCM 4.0. Production Master Data Overview

41. Structure of PDS and PPM

42. Transfer of PPM and PDS

43. Production Planning: • Creates planned order and purchase requisition for the demand, • Creates detailed scheduling (a sequence for the orders which is sufficiently capacity-feasible, usually in the short-term), • Desirably performs a rough feasibility check of the production plan, and • execute the production plan. • The detailed scheduling is usually only performed for the short term horizon. • Traditionally both production planning and scheduling are limited to the plant level. Production Process Overview

44. If a supply chain contains alternative production plans (possibilities), the process becomes more complex. It often requires an integrated distribution and production planning. • Depending on the business requirements, it might be favourable to create a rough-cut production plan for the mid-term or even long-term before the more detailed production plan. • The approach represents the idea of a hierarchical planning, i.e. to plan with less detail for the farther future and has the benefits of avoiding unnecessary information and unnecessary system load and to have a tighter integration with the distribution planning. Production Process Overview

45. Process Chain for a Make-to Stock Production

46. Objectives for Production Planning: • to meet the demand • to consider the resource capacities and the material availabilities • to improve utilisation of the resources • to low set up time • to minimise the stock, and • to minimise the work in process (WIP) • to improve stability of the plan Production Process Overview

47. The complexity of production planning increases with the number of BOM-levels, number of operations, and finite resources, the use of fixed, or minimized lot sizes and sequence dependent set-up. • Though APS (Advanced planning and Scheduling) systems allow theoretically a one-step approach, experience shows it is better and more reliable to use a two step approach to create a feasible plan (i.e. infinite production planning first and finite scheduling on the key resources later), and keep the constraints as less as possible in modeling and. Production Process Overview

48. Order Cycle for Production

49. The result of production planning are planned orders which contain the information about the dependent demand and the capacity requirement in SAP APO. • The production orders are reduced by the order confirmation and remain in SAP APO until it is technically completed. Order Cycle for Production

50. SAP APO offers different applications for production planning and detailed scheduling. Production planning is supported by the SNP and PP/DS modules with two different levels of details. - rough-cut and bucket-oriented planning (SNP), and - time-continuous planning (PP/DS). Detailed scheduling with the purpose of creating a sequence for order execution is only supported by PP/DS since SNP is limited to bucket-oriented planning and there is no sequence within a bucket. Production Planning Applications