1. Enterprise Systems Optimization Introduction EGN Enterprise Systems Optimization (Professional MSEM) Fall, 2012

2. Content
Course objective
Course organization

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 Multiple 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
ERP
SCM
Core Interface (CIF)

7. SCM Exercises Plan with GBI v 1.0
Review Master data
APO Demand planning
Planning in SCM
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 7.0:
DP (Demand Planning),
SNP, and
Deployment

9. Work Flow in SAP SCM

10. Work Flow for our Exercises

11. Introduction to SCM and SAP APO Theories & Concepts EGN Enterprise Systems Optimization (Professional MSEM) Fall, 2012

12. The APICS-Standard Planning Framework

13. Intro to Supply Chain Materials Supply chain
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.

14. 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

15. Supply Chains Definition
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

16. Supply Chain for Steel in an Automobile Door
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
door
Car
Prepared
car
FINAL
CONSUMER
Drives automobile

17. Supply Chain Management in a Manufacturing Plant
Receiving
and
Inspection
Raw
Materials,
Parts, and
In-process
Ware-
Housing
Production
Finished
Goods
Ware-
housing
Inspection,
Packaging,
And
Shipping
Suppliers
Customers
Materials Management
Purchasing
Production
Control
Warehousing and
Inventory Control
Shipping
and Traffic
Physical materials flow
Information flow

18. 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

19. Movement of Materials within Factories
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

20. Shipments To and From Factories
Distribution Resource Planning
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.

21. 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

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

23. 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

24. Common Supply Chain Processes
VMI: vendor managed inventory

25. Common Time Horizons for SCM Processes
VMI: vendor managed inventory

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

27. SCM Processes in SAP APO Modules
DP: demand planning
TP/VS: transportation planning and vehicle routing
SNP: supply network planning
VMI: vendor managed inventory
PP/DS: production planning and detailed scheduling

28. SAP APO System Structure and Integration with SAP ERP
LIS: logistics information system: transportation data
CIF: core (information) interface: master data
ATP: Available to promise

29. 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)

30. 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
FTL – Full Truck Load
LTL – Less than Truck Load

31. Example of Costs and Revenues in the Supply Chain
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

32. 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

33. 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

34. Types of Production Systems
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

35. 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

36. 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

37. Hierarchical Planning Framework
Procurement
Production
Distribution
Sales
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
Short term
EXECUTION
Flow of goods
Information
Feedback

38. Differentiating Factors by Planning Levels
Factor- Level
Strategic
Tactical
Operational
Purpose
Supply chain design, resource acquisition
Planning resource utilization
Operation scheduling and execution
Implementation instruments
Policies, objectives, capital investment
Budgets
Schedules, procedures and reports
Planning horizon
Long: 3-5 years
Medium: 6-18 months
Short: daily, weekly, monthly
Scope
Broad corporate level
Medium plant level
Short floor level
Level of Management
Top
Middle
Low
Frequency of re-planning
Low: every few years
Medium: monthly or quarterly
High: weekly, daily or as required
Source of information
Largely external
External and internal
Largely internal
Level of aggregation - product data - time
High
Product families years
Medium Product groups
Month
Low individual products
continuous
Degree of uncertainty
Medium
Degree of risk

39. Introduction to SCM and SAP APO SAP Implementation EGN Enterprise Systems Optimization (Professional MSEM) Fall, 2012

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

41. Planning with SAP ERP & SCM
Basic Components of SAP 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

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

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

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

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

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

47. Supply Planning Tasks and Output for SCM
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

48. SAP APO Architecture

49. SAP Access through SAPGUI SAPGUI Download
The latest SAP GUI release posted on SAP @CSU, Chico web server
User = sap; Password = sapgui4me.
This GUI works on Windows 7 systems, as well as Vista and Windows XP.

50. SAPGUI Download Instruction

51. SAPGUI Setup SAP SCM

52. SAP ERP/SCM Clients, Userid, Password
SAP SCM
Client: 600
Userid: fiu-101 to fiu-130
Initial password: SAP4US

53. Exercises: Overview of SCM (APO) Master Data
1) Location master data in APO
2) Transportation lanes in APO
3) Product master data in APO
4) Resource master in APO
5) Production Process Model in APO
6) Quota Arrangement in APO
7) External Procurement Relationships in APO