1. Enterprise Systems Optimization Course Overview EGN 5623 Enterprise Systems Optimization (Professional MSEM) Fall, 2011

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

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. SCM Scope 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

5. ERP Operations related to SCM 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

6. ERP & SCM Basics (SAP View) 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 ERPSCM Core Interface (CIF)

7. SCM Exercises Plan with GBI v 1.0 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)

8. Modules related to ECC and SCM 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

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

10. Section 1A: Planning and Execution in ERP 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

11. Section 1B: Prepping the Master Data in SAP ERP 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

12. Section 2: Configuration and Integration 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

13. Section 3: Planning in SNP 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

14. Work Flow in SAP SCM

15. Work Flow for our Exercises

16. Author: 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.

17. Author: Full View of the GBI Supply Chain DE-Customer DE-DC1 DE-Plant DE-Vendor US-Vendors US-DC1 US-Customers DE-DC2 US-DC2 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

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

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

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

21. The APICS-Standard Planning Framework

22. Intro to Supply Chain 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.

23. Supply Chain Management 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

24. Supply Chains Definition 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

25. Supply Chain for Steel in an Automobile Door MININGCOMPANY Mines iron ore STEELMILL Forms steel ingot STEELCOMPANY Forms sheet metal IronoreSteelingots AUTOMOTIVESUPPLIER Makes door AUTOMOBILEMANUFACTURER Makes automobile CARDEALERSHIP Does preparation Cardoor Car Car FINALCONSUMER Drives automobile Prepared Preparedcar Sheetmetal

26. Supply Chain Management in a Manufacturing Plant ReceivingandInspectionRawMaterials, Parts, and In-processWare-HousingProductionFinishedGoodsWare-housingInspection,Packaging,AndShipping Suppliers Customers Materials Management PurchasingProductionControl Warehousing and Inventory Control Shipping and Traffic Physical materials flow Information flow

27. Logistics 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

28. Movement of Materials within Factories IncomingVehiclesIncomingVehiclesReceivingDockReceivingDockQualityControlQualityControlWarehouseWarehouse WorkCenterWorkCenter Other Work Centers CentersPackagingPackagingFinishedGoodsFinishedGoods ShippingShippingShippingDockShippingDockOutgoingVehiclesOutgoingVehicles The typical locations from/to which material is moved: The typical locations from/to which material is moved:

29. Shipments To and From Factories l Distribution Resource Planning l 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. Analyzing Shipping Decisions 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

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

32. Warehousing 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

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. Example of a Supply Chain Network SupplierManufacturer Distribution Center Customer Delivery TimeProductsPULL Decoupling point Cycle TimePUSHInformation / Cash

39. Characteristics of the SC Network 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)

40. Characteristics of the SC Network 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

41. Example of Costs and Revenues in the Supply Chain 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

42. Example of Constraints 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

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. Types of Production Systems 1. 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 2. Continuous production Systems – Manufacturing of a few families of technologically related products in large quantities – Example: Assembly lines or fabrication lines 3. Intermittent production Systems – Batch production of many products which share several processing centers 4. Project based systems – Production of a unique complex product such as a ship or a bridge

45. Production Strategies 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

46. 2. Hierarchical Planning 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 * R.N. Anthony, Planning and Control Systems: A Framework for Analysis, Cambridge. Mass., 1965

47. Hierarchical Planning Framework Procurement Production DistributionSales Long term -Material programs - Supplier selection - Cooperation - Plant location - Production systems - Subcontractors - Physical distribution structure - Transportation strategy - Product program - Strategic sales planning -- 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 Short term EXECUTION InformationFeedback Flow of goods

48. Differentiating Factors by Planning Levels Factor- LevelStrategicTacticalOperational PurposeSupply chain design, resource acquisition Planning resource utilization Operation scheduling and execution Implementation instruments Policies, objectives, capital investment BudgetsSchedules, procedures and reports Planning horizonLong: 3-5 yearsMedium: 6-18 months Short: daily, weekly, monthly ScopeBroad corporate level Medium plant level Short floor level Level of Management TopMiddleLow Frequency of re-planning Low: every few years Medium: monthly or quarterly High: weekly, daily or as required Source of information Largely externalExternal and internalLargely internal Level of aggregation - product data - time High Product families years Medium Product groups Month Low individual products continuous Degree of uncertainty HighMediumLow Degree of riskHighMediumLow

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

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

51. ERP & SAP (Solutions) Solutions for large companies - SAP ERP - SAP CRM - SAP PLM - SAP SCM - SAP SRM - SAP Analytics - SAP Manufacturing - SAP Service - SAP Mobile Solutions - SAP xApps Small & Medium Size Solutions - SAP Business One - SAP Business by Design - SAP Business All-in-One Platforms - Enterprise Services Architecture - SAP NetWeaver technology platform

52. Planning with SAP ERP & SCM SAP ECC ERP 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 Basic Components of SAP SCM

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

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

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

56. Two planning Scenarios for SAP SCM Alternative Scenario Base Scenario

57. SNP Location Heuristics 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.

58. Network Heuristic 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.

59. Multi-Level Heuristics 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.

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

61. Supply Planning Tasks and Output for SCM 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

62. SAP APO Architecture

63. PDS/PPM and Resources

64. Section 1A: Planning and Execution in ERP Emphasis on walking through much of the standard APICS planning framework Good “refresher” to get everyone on the same supply chain page ◦Intermediate-term goal: seamless integration with ERP and SCM labs.

65. Section 1B: Prepping the Master Data in SAP ERP First step in getting ready to plan in SAP SCM ◦Takes place entirely in SAP ERP ◦Assumes some SAP ERP familiarity ◦Intermediate goal: integrate with 1A to remove duplication. Module 0: Overview of the Global Bike Int. Company ◦Reviews supply chain of GBI ◦No data entry ◦Eliminated from documentation: detailed review of GBI master data in view mode

66. Section 1B: Prepping the Master Data in SAP ERP Module 1: New Master Data for the Ridge Front Bike Family ◦Enter master data on Ridge Front Bike family  Copy existing data to speed things up ◦Duplicates first two modules of 1A  When 1A is tested with SAP SCM, optional if starting with 1A Module 2: Change Master Data to Prepare for SCM ◦Some master data elements must be set to work with SCM  Workcenter capacities  Material type  Transportation zones

67. Section 1B: Prepping the Master Data in SAP ERP Module 3: Add Master Data to Prepare for SCM ◦Create “production version” for each manufactured material  BOM-routing combo – feeds into product data structure of SCM ◦Add APO capacity parameters for workcenter ◦Create finished products at DCs ◦Create purchasing information records  Link vendors to plant – basis of transportation lanes

68. Author: GBI Locations in ERP Each company has the following locations: ◦One plant  ##A1 (USA) with 1 assembly lines in the plant: ◦Two vendors:  US - 1000(##+1) Great Lakes Bike Supply – Mount Pleasant (Michigan – MI)  US - 1001(##+1) International Bike Supplier – Albany (New York – NY) ◦Two customers:  US – ##+1 Mt Baker Biking Company – Bellingham (Washington – WA)  US – 1(##+1) King Bike Company – Tupelo (Mississippi – MS) ◦Two DCs:  US - ##A2 Bike DC1 – San Diego (California – Ca)  US - ##A3 Bike DC2 – Miami (Florida – Fl) Example: for dataset 23 In ERP vendor Great Lakes will be 100024 In SCM vendor Great Lakes will be 0000100024

69. Author: Finished and semi-finished products The plant ##A1 (USA) and ##D1 (DE) of Global Bike is introducing a new model of finished products, the Ridge Front bike. ◦FG – 0020 – ##Ridge Front Std ◦FG – 0021 – ##Ridge Front Komfort These semi-finished products are used in the process: ◦SF – 0010 – ## Front Wheel ◦SF – 0020 – ## Rear Wheel ◦SF – 0030 – ## Saddle ◦SF – 0031 – ## Komfort Saddle ◦SF – 0040 – ## Handle ◦SF – 0050 – ## Handle Bar

70. Author: Components bought from vendors Raw material list has been simplified but is still long ◦RM – 0011 – ## Front Wheel Assembly ◦RM – 0022 – ## Rear Wheel Assembly ◦RM – 0090 – ## Post ◦RM – 0100 - ## Seat ◦RM – 0101 - ## Komfort Seat ◦RM – 0110 - ## Clip ◦RM – 0120 - ## Bell ◦RM – 0130 - ## Clasp ◦RM – 0140 - ## Hi bar ◦RM – 0150 - ## Pedal ◦RM – 0160 - ## Break Kit

71. Author: Storage location Plant ◦For each type of material we have a separate storage location:  10 Raw materials  20 Semi finished products  30 Finished products DC level ◦For each DC center a storage location is defined for the finished products and trading goods:  30 Finished products

72. Author:Sales There are two distribution channels: ◦Internet Sales ◦Wholesale The pricing is different in each distribution channel. MaterialDescriptionInternet SaleWholesale FG-0020-##Ridge Front Std390 USD399 USD FG-0021-##Ridge Front Komfort450 USD549 USD

73. Author: BOM for FG-0010-00

74. SAP Access through SAPGUI SAPGUI Download The latest SAP GUI release posted on SAP @CSU, Chico web server http://worker.cob.csuchico.edu http://worker.cob.csuchico.edu User = sap; Password = sapgui4me. This GUI works on Windows 7 systems, as well as Vista and Windows XP.

75. SAPGUI Download Instruction

76. SAPGUI Setup SAP ERP

77. SAPGUI Setup SAP SCM

78. SAP ERP/SCM Clients, Userid, Password SAP ERP Client: 785 Userid: gbi-001 to ides-027 Initial password: 123456 SAP SCM Client: 185 Userid: gbi-001 to gbi-027 Initial password: 123456

79. Website of UA (University Alliance) www.sdn.sap.com

80. Exercises: 1. Overview of the Global Bike Company (GBI): GBI Supply Chain GBI Dataset Company Location Materials Bill of materials Workcenter Storage locations Distribution Channels and proces 2. Module 1 (Section 1B) Create material masters Create ridge front Std Create ridge front komfort Create ridge front komfort saddle Create komfort seat Create front wheel assembly Create real wheel assembly

81. Exercises: Create bills of material Create BOM for ridge front std Create BOM for ridge front komfort Create BOM for komfort saddle Create routings Create routing for ridge front std Create routing for ridge front komfort Create routing for komfort saddle Change customer information Change customer information for Mt. Baker Bike Change customer information for King Bike Company 3. Module 2 (Section 1B) Change work center Change distribution centers Change of node type