1. SCM Master Data - 2 Master Data for Distribution & Production Processes EGN 5623 Enterprise Systems Optimization (Professional MSEM) Fall, 2011

2. SCM Master Data - 2 Theories & Concepts EGN 5623 Enterprise Systems Optimization (Professional MSEM) Fall, 2011

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. Overview Master Data and Application in DP and PP (review)

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

10. Master Data and Application in Distribution Planning and PP (Overview) 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): If it is intended to source from multiple locations on a regular basis, quota arrangement must be used. The concerned products are assigned to the quota arrangement, and the ratio of the resources is defined per product.

11. SCM Master Data - 2 Master Data for Distribution Planning EGN 5623 Enterprise Systems Optimization (Professional MSEM) Fall, 2011

12. Distribution and Supply Chain Planning Distribution planning between the manufacturing plants and warehouses becomes important, as many companies change their logistics processes from non- coordinated local inventory management to a global inventory management in order to reduce inventories. The focus for distribution and supply chain planning is on make-to-stock production.

13. Distribution Planning, Supply Chain Planning, and Replenishment

14. Process Chain for Distribution and Supply Chain Planning

15. Distribution and Supply Chain Planning 1.Distribution planning is performed based on demand and stock information with the result of planned stock transfers. 2.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. 3.If required, restrictions are considered regarding storage capacity and handling capacity for goods issue and goods receipt.

16. Distribution and Supply Chain Planning Two processes exist within replenishment: 1.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. 2.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.

17. Distribution and Supply Chain Planning In SAP APO, there are four applications that support distribution and production planning: 1.SNP heuristic 2.SNP optimizer 3.CTM (with SNP or PP/DS master data) 4.PP/DS heuristics

18. Applications for Distribution and Supply Chain Planning

19. Features of the Application for Distribution

20. Distribution and Supply Chain Planning 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 on approaches such as FIFS.

21. Order Cycle for Stock Transfer

22. Order Cycle for Stock Transfers 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.

23. Order Cycle for Stock Transfers Three order types in SAP APO 1.Planned stock transfer, 2.Deployment confirmed stock transfer and 3.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 (SAPAPO/SDP110).

24. Order Flow for Stock Transfer on SAP ERP side

25. Stock Transfer Order 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.

26. Stock Transfer Scheduling for transportation

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

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

29. Setting for Stock Transfer Across Systems 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.

30. Setting for Stock Transfer Across Systems

31. SCM Master Data - 2 Master Data for Production Planning Process EGN 5623 Enterprise Systems Optimization (Professional MSEM) Fall, 2011

32. Production Master Data Overview 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 require a different view of the capacity. SNP – in buckets PP/DS – time-continuous capacity

33. Resources for SNP 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.

34. Settings for a Bucket Resource

35. Resources for PP/DS 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.

36. Settings for PP/DS (single Resource)

37. Production Master Data Overview 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).

38. Production Master Data Overview 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. Restriction to a specific lot size is required to determine the exact production consumption or mode duration. SAP SCM allows you to generate SNP production process models (PPMs) based on existing PP/DS PPMs.

39. Production Master Data Overview 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.

40. Production Master Data Overview 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. 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.

41. Structure of PDS and PPM

42. Transfer of PPM and PDS

43. Production Process Overview Production Planning consists mainly of creation of planned order, purchase requisition for the demand, the detailed scheduling to create a sequence for the orders which is sufficiently capacity-feasible (usually in the short-term) and execution of the production order. In many cases it is desired to have at least a rough feasibility check of the production plan in the mid-term as well. The detailed scheduling is usually only performed for the short term horizon. Traditionally both production planning and scheduling are limited to the plant level.

44. Production Process Overview 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.

45. Process Chain for a Make-to Stock Production

46. Production Process Overview 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

47. Production Process Overview 1.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. 2.Though APS (Advanced planning and Scheduling) systems allow theoretically a one-step approach, experience shows it is better and more reliable to keep the constraints as less as possible in modeling and 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.

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.

50. Production Planning Applications SAP APO offers different applications for production planning and detailed scheduling. Production planning is supported by the modules SNP and PP/DS 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.

51. Applications for Production Planning and Scheduling

52. Production Planning Applications Based on the variety of the applications there are many options for creating a feasible plan in SAP APO. Each has its advantages and disadvantages. 1.Distribution and medium-term production planning with SNP heuristic, the SNP optimiser or CTM with SNP master data, short-term production planning by conversion of SNP orders to PP/DS orders and detailed scheduling with the DS heuristics or PP/DS optimiser. 2.Distribution planning with SNP heuristic, medium-term production planning with SNP optimiser, short-term production planning by conversion of SNP orders to PP/DS orders and detailed scheduling with DS heuristic or PP/DS optimiser.

53. Production Planning Applications 3. Production planning for medium-term and short-term horizon with higher level of detail in PP/DS using PP heuristics or TM and detailed scheduling with DS heuristic or PP/DS optimiser. 4. Demand planning in SAP ERP – especially when there is already a sufficient solution using SOP or long-term planning. Production planning is performed with PP heuristics, scheduling with DS heuristics or PP/DS optimiser. 5. Demand planning and production in SAP ERP – SAP APO is used only for scheduling.

54. Production Planning Applications 6. Only medium-term production planning on rough-cut level is performed in SAP APO – either by SNP heuristic, SNP optimiser or CTM. The benefit is having a capacity check and purchase requisitions for components with long lead time. Planned orders are transferred to SAP ERP, where production planning and scheduling on detailed level are for the short-term horizon. 7. Production planning is triggered by the sales order entry either via CTP or multi-level ATP. Scheduling is performed with scheduling heuristics or PP/DS optimizer. PP/DS optimiser is used only for scheduling, not for creation of orders.

55. Scenarios for Production Planning using Different Applications

56. Lot Size 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.

57. Lot Size Methods

58. Lot Size 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.

59. SCM Master Data - 2 Master Data for Distribution & Production Processes SAP Implementation EGN 5623 Enterprise Systems Optimization (Professional MSEM) Fall, 2011 SCM Master Data - 2 Master Data for Distribution & Production Processes SAP Implementation EGN 5623 Enterprise Systems Optimization (Professional MSEM) Fall, 2011

60. PP/DS Module in SAP SCM Note: Strategic network design issues are not handled by SAP SCM

61. Order Cycle for Stock Transfers The outbound delivery for the stock transfer order is created with transaction VL10B in SAP ERP, picking and the posting of goods issue is done with the transaction VL02N in the delivery. Using the message type LAVA, the inbound delivery in source location can be triggered with the posting of the goods issue (or manually with the transaction VL31N). For the use of deliveries it is necessary that a vendor is assigned to the source location and that an info record exists in SAP ERP. The inbound delivery is transferred to SAP APO as a purchase order memo with the significance of the stock transit.

62. Exercises: 1. Module 4 (Section 2) Create a forecast for the finished products Product group Create product group in SAP ERP system Create SOP plan for product group Create SOP plan Transfer plan to demand management Transfer plan Check the transfer results in demand management 2. Module 5 (Section 2) Generation and activation of integration models Integration models Create integration model for plants in SAP ERP system Activate integration model Confirm data transfer in SCM system Create integration model for DCs in SAP ERP system Activate integration model for DCs in SAP ERP system Confirm data transfer for DCs in SCM system

63. Exercises (- continued): Create integration model for vendors in SAP ERP system Activate integration model for vendors in SAP ERP system Confirm data transfer for vendors in SCM system Create integration model for customers in SAP ERP system Activate integration model for customers in SAP ERP system Confirm data transfer for customers in SCM system Create integration model for materials at plant level in SAP ERP system Activate integration model for materials in SAP ERP system Confirm data transfer in SCM system Create integration model for materials at DCs level in SAP ERP system Activate integration model for DC materials in SAP ERP system Confirm data transfer materials (DCs) in SCM system