Distribution Planning in SCM (review)

1. SCM Master Data - 2Master Data for Distribution & Production Processes EGN 5346 Logistics EngineeringFall, 2015

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

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

4. Identify the time horizon for the following planning: Horizon type: Planning type in SCM: Sales Demand planning Transportation planning Distribution planning Replenishment Production planning Detail scheduling Production Purchasing 1. Execution 2. Short-term 3. Medium-term 4. Long-term Time Horizon

5. Identify the time horizon for the following planning: Planning type in SCM: Horizon type: Sales (2) Demand planning (4) Transportation planning (1) Distribution planning (3) Replenishment (2) Production planning (3) Detail scheduling (2) Production execution (1) Purchasing (3) 1. Execution 2. Short-term 3. Medium-term 4. Long-term Time Horizon

6. 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

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

8. Transportation lanes: • Transportation lanes are required to link locations in SCM, such as from plant to distribution centers (DCs), from vendors to plants, and from plants or DCs to customers. • Quota arrangement (vendor’s quota): • Quota arrangement must be used, if it is intended to source from multiple locations on a regular basis. • 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)

9. SCM Master Data - 2Master Data for Distribution Planning

10. Distribution planning between the manufacturing plants and warehouses (DCs) 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

11. SCP considers production constraints, while distribution planning does not. Distribution (& Supply Chain) Planning, and Replenishment

12. Distribution planning is performed based on demand and supply 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

13. Replenishment involves two processes: • Deployment • Deployment is concerned with the fair share of quantities to the requestingparties in case of shortage or surplus. The constraints are available quantities. • Transport Load Building (TLB). • Transport load building 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

14. SAP APO supports distribution and production planning, with the following 4 applications: • For distribution: • SNP heuristic • PP/DS heuristics • For SCP (Supply Chain Planning) • SNP optimizer • CTM (with SNP or PP/DS master data) Distribution and Supply Chain Planning CTM: Capable-to-Match PP: Production Planning DS: Detailed scheduling

15. Applications for Distribution and Supply Chain Planning

16. 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. • CTMpursues a priority based simple rules such as FIFS. Distribution and Supply Chain Planning

17. The stock transfer order has two aspects – as a demand in the source location and as a supply in the target location. 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

18. (ALE: Application Link Enable) Order Flow for Stock Transfer on SAP ERP side

19. 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. 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 within and across Company Codes in SAP ERP

20. Place a purchase order to a source plant Create a sales order in the source plant Setting for Stock Transfer within and across Company Codes in SAP ERP

21. SCM Master Data - 2Master Data for Production Planning Process

22. 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

23. 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. For the scheduling of the production orders, the factory calendar is assigned to the resources. The standard capacity is defined in the resource master. Resources for SNP

24. The basic resource property in PP/DS is the working time, which depends on the standard working hours, the break time, and factory calendar. Resources for PP/DS

25. 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. Activities and resources defined in the PPM are assigned to costs used by the SNP Optimizer and by Production Planning and Detailed Scheduling (PP/DS) for finite scheduling . Production Master Data Overview

26. 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. When using optimization technologies, it is important to limit the number of inputs (for example, materials) to find a proper solution in a reasonable runtime. SAP SCM allows 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

27. 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

28. PDS is used to integrate Engineering Change Management (ECM) and 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 PPM, 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

29. Structure of PDS and PPM Operation is used as a grouping entity, the relevant data for planning is maintained at activity level, such as activity type. Mode: analogous to routing (work step) and defines the activity duration and resource (work center).

30. Operations-Activities of PDS

31. Operations-Activities-Modes of PDS

32. Lot sizes have a significant impact on the production planning result and challenges for scheduling. The fixed, minimum and periodical lot sizes in material master data increase the complexity of the planning problem. Lot Size

33. Lot Size in SAP ERP

34. Lot Size Methods In the period lot-sizing procedure the system groups together the quantities of uncovered requirements that lie in one period.

35. 32 32 32 32 Lot Size Methods

36. 32 32 32 32 32 32 64 32 32 32 32 32 56 32 30 30 28 32 Lot Size Methods 120

37. Though CTM supports minimum and fixed lot sizes, but CTM performs a finite planning and does not split orders across buckets which might lead to a very low utilisation. Lot Size

38. SCMMaster Data - 2 Master Data for Distribution & Production Processes SAP Implementation

39. Transportation zone Vendor Customer Plant Distribution Center Supply Network Chain

40. Locations

41. Products

42. Resources

43. Transportation Lanes

44. Components of PDS

45. Exercises: (Due date 12/5/2015) • Create integration model for plants in SAP ERP system and verify them in SCM system 2. Create integration model for DCs in SAP ERP system and verify them in SCM system 3. Create integration model for vendors in SAP ERP system and verify them in SCM system 4. Create integration model for customers in SAP ERP system and verify them in SCM system 5. Create integration model materials at plants in SAP ERP system and verify them in SCM system 6. Create integration model materials at DCs in SAP ERP system and verify them in SCM system 7. Create integration model work centers in SAP ERP system and verify them in SCM system 8. Create integration model purchasing info records in SAP ERP system and verify them in SCM system