Course Objective

1. Enterprise Systems OptimizationIntroductionEGN 5623 Enterprise Systems Optimization Fall, 2013

2. Course Objective Supply chain management (SCM) concepts, modeling, configuration, integration, data transfer, and supply network planning and optimization. Hands-on with SAP

3. 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

4. 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

5. 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)

6. Review Master data • APO Demand planning • Planning in SCM • Supply Network Planning (SNP) Heuristics • Deployment and Transport Load Builder (TLB) • Capable to Match (CTM) SCM Exercises Plan with GBI v 2.11

7. The products and modules involved in the SCM exercises are: • ERP (ECC 6.0): • MM, • PP, • SD • SCM 7.0: • DP (Demand Planning), • SNP, and • Deployment Modules related to ECC and SCM

8. Work Flow in SAP SCM

9. Work Flow for our Exercises

10. Introduction to SCM and SAP APO Theories & ConceptsEGN 5623 Enterprise Systems OptimizationFall, 2013

11. The APICS-Standard Planning Framework

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

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

21. 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

22. Common Supply Chain Processes

23. Common Time Horizons for SCM Processes

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

25. SCM Processes in SAP APO Modules

26. SAP APO System Structure and Integration with SAP ERP

27. 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

28. 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

29. 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

30. 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

31. 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

32. 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

33. 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

34. 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

35. 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

36. Differentiating Factors by Planning Levels

37. Introduction to SCM and SAP APO SAP Implementation EGN 5623 Enterprise Systems OptimizationFall, 2013

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

39. Basic Components of SAP SCM SAPECCERP SAP SCM(includes SAP BW) Core Interface (CIF) • Demand Planning • Supply Network Planning and optimization • Production Planning with capacity considerations • ATP • CTP • Detailed Scheduling • Deployment • Transportation planning • Vehicle routing and scheduling • Mater data • Materials • Locations • Partner • Plants • Info records • Transactional data • Customer orders • Production orders • Purchasing orders • Execution Planning with SAP ERP & SCM

40. SAPECC 1 Core Interface SAPSCM SAPECC 2 - Planning may be done centrally SAPECC n Planning at Supply Chain Level - Each SAP ECC component covers one or more locations In the network

41. SAP SCM Functionality THEORY AND PRACTICE OF ADVANCED PLANNER AND OPTIMIZER IN SUPPLY CHAIN DOMAIN by Sam Bansal

42. SAP SCM Modules THEORY AND PRACTICE OF ADVANCED PLANNER AND OPTIMIZER IN SUPPLY CHAIN DOMAIN by Sam Bansal

43. Alternative Scenario Base Scenario SCM 7.0 Two planning Scenarios for SAP SCM

44. If you select Location (heuristic), the system plans the specified products at the specified location. • The system explodes dependent demand for one BOM level at the production location in the planning direction. • However, dependent demand is neither fulfilled nor further propagated through the supply chain. • The system only uses this information to generate planned orders. SNP Location Heuristics

45. If you select Network (heuristic), the system plans the specified products at all specified locations in the network to which the selected product is assigned. • The system explodes dependent demand for one BOM level at the first production location encountered in the planning direction. • However, dependent demand is neither fulfilled nor further propagated through the supply chain. • The system only uses this information to generate planned orders. Network Heuristic

46. If you select Multi-level (heuristic), the system plans all products specified at all locations, whether they are finished, intermediary, or purchased goods from the highest level down to the lowest BOM level. • In other words, the system plans all products specified, including all dependent demand. • The multi-level heuristic is performed across all locations to which the selected products are assigned, as well as across all locations to which dependent products are assigned. Multi-Level Heuristics

47. Cost or price driven • Mixed integer programming • Must define all sourcing, production, transportation, inventory costs and constraints Cost-Based Optimization

48. Tasks • Identify sources for finished products • Plan and consider safety levels in any location • Distribute production over plants • Choose production resources in plants • Explode bill of materials in plants • Identify sources for supply of raw materials and components • Outputs • Purchase requisitions • Stock transport purchase requisition • Planned production orders Supply Planning Tasks and Output for SCM

49. SAP APO Architecture

50. PDS/PPM and Resources