Enterprise Systems Optimization

Introduction

EGN 5623 Enterprise Systems Optimization(Professional MSEM) Fall, 2012

Course ObjectiveSupply chain management (SCM) concepts, modeling, configuration, integration, data transfer, and supply network planning and optimization.With a focus on SAP implementation

SCM ScopeSingle facility SCMIncreased planning capabilities for a single facilityFinite-capacity scheduling

Multiple facility SCMIntegrated planning for the entire supply chain networkMultiple plants and distribution centersMultiple vendorsMultiple customersMultiple transportation options

ERP Operations related to SCMRelated ERP ModulesMaterials Management (MM) and Production Planning (PP) modulesSales and Operations Planning (SOP)ForecastingMaster SchedulingMaterial Requirements Planning (MRP)Capacity Requirements Planning (CRP)Order release and receipt

ERP & SCM Basics (SAP View)SAP ERP:Holds master data for materials, plants, customers, vendors, purchasing information recordsHolds transactional data (e.g., sales orders, planned orders)Is where plans get executedSAP SCM:Is where advanced planning happensImports master and transactional data from ERPSends plans back to ERP for execution

ERP

SCMCore Interface (CIF)

SCM Exercises Plan with GBI v 1.0

Review Master data APO Demand planningPlanning in SCMSupply Network Planning (SNP) HeuristicsDeployment and Transport Load Builder (TLB) Capable to Match (CTM)

Modules related to ECC and SCMThe products and modules involved in the SCM exercises are:ERP (ECC 6.0): MM, PP, SDSCM 7.0: DP (Demand Planning), SNP, and Deployment

Work Flow in SAP SCM

Work Flow for our Exercises

Introduction to SCM and SAP APO

Theories & Concepts

EGN 5623 Enterprise Systems Optimization(Professional MSEM) Fall, 2012

The APICS-Standard Planning Framework

Intro to Supply ChainMaterials Any commodities used directly or indirectly in producing a product or service.Raw materials, component parts, assemblies, finished goods, and suppliesSupply chain Flow of materials through various organizations from the raw material supplier to the finished goods consumer.

Supply Chain ManagementDefinitionAll management functions related to the flow of materials from the companys direct suppliers to its direct customers.Functions included:purchasing, traffic, production control, inventory control, warehousing, and shipping.Two alternative names:Materials managementLogistics management

Supply Chains DefinitionSupply ChainA supply chain is the network of organizations, people, technology, activities, information and resources involved in the production of a product or a serviceIncludes suppliers, manufacturers, transporters, warehouses, retailers and customersProduction SystemA 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 orderBest viewed as a network

Supply Chain for Steel in an Automobile DoorMININGCOMPANY

Mines iron oreSTEELMILL

Forms steel ingotSTEELCOMPANY

Forms sheet metalIron

oreSteel

ingotsAUTOMOTIVESUPPLIER

Makes doorAUTOMOBILEMANUFACTURER

Makes automobileCARDEALERSHIP

Does preparationCar

door Car

FINALCONSUMER

Drives automobile Prepared

carSheet

metal

Supply Chain Managementin a Manufacturing PlantReceivingandInspectionRawMaterials,Parts, andIn-processWare-Housing

ProductionFinishedGoodsWare-housingInspection,Packaging,AndShippingSuppliersCustomersMaterials Management

PurchasingProductionControlWarehousing andInventory ControlShippingand TrafficPhysical materials flowInformation flow

LogisticsLogistics usually refers to management of:the movement of materials within the factorythe shipment of incoming materials from suppliersthe shipment of outgoing products to customers

Movement of Materials within FactoriesIncoming VehiclesReceivingDockQualityControlWarehouseWork CenterOther Work CentersPackagingFinishedGoodsShippingShippingDockOutgoingVehicles The typical locations from/to which material is moved:

Shipments To and From FactoriesDistribution Resource PlanningDistribution 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.

Analyzing Shipping DecisionsThe Transportation ProblemProblem involves shipping a product from several sources (ex. factories) with limited supply to several destinations (ex. warehouses) with demand to be satisfiedPer-unit cost of shipping from each source to each destination is specifiedOptimal solution minimizes total shipping cost and specifies the quantity of product to be shipped from each source to each destination

WarehousingDefinition Warehousing is the management of materials while they are in storage.Viewed as distribution center (DC)Warehousing activities:AccountingOrderingStoringDispersing

WarehousingRecord 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 balanceReceipts and expected receiptsDisbursements, promises, and allocations

Common Supply Chain Processes

Common Time Horizons for SCM Processes

Level of Detail and Time Horizon for SAP APO Modules

SCM Processes in SAP APO Modules

SAP APO System Structure and Integration with SAP ERP

Characteristics of the SC NetworkEach node may consist of a production system of its ownLinks in the network represent a business relationship between two nodese.g. transportation of a product between two nodesThe 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 customerThe decoupling point is the shift occurs from make-to-stock to make-to-orderThe 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 NetworkMultiple Products, each with possibly different Bills of Material and multiple configurationsMultiple Suppliers for raw materials, parts or subassembliesMultiple SubcontractorsMultiple Plants possibly containing a wide variety of equipmentsMultiple WarehousesDistribution centers, local, regional and factory warehousesDifferent means of Transportation (air, sea, rail, FTL, LTL) either leased, owned or contractedDifferent information systems and communication channelsPeople with various skills at all levels of the organization

Example of Costs and Revenues in the Supply ChainCostsProduction and purchasing costsSetup or changeover costsTransportation and handling costsHiring and firing costsOvertime costsInventory costsPromotional and advertising costsRenting and leasing costsSubcontracting costsOverheadCapital investments and depreciationTaxes and dutiesRevenueCustomer is the only source of revenueFrom sale of products, spare parts, materials or service

Example of ConstraintsProductivity constraintsEquipment capacity constraintsLabour availabilityTechnological constraintsInventory constraintsPurchasing, manufacturing and distribution lead timesDemand uncertainties and seasonalitiesService requirementsBudgetRegulations and other constraints

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

Types of Production SystemsPure Inventory SystemsSimplest form of logistic systemOnly procurement activities with no production or complex distribution processesExample: wholesale or retail operations where items are purchasedContinuous production SystemsManufacturing of a few families of technologically related products in large quantitiesExample: Assembly lines or fabrication linesIntermittent production SystemsBatch production of many products which share several processing centersProject based systemsProduction of a unique complex product such as a ship or a bridge

Production StrategiesMake to StockProduction is based on forecasted amounts for stocked itemsMake to OrderProduction of a product is made for a customer order in the quantity specified by the order

2. Hierarchical PlanningHierarchical planning was first introduced by Robert Anthony in 1965* as a three level management framework that consists of:Strategic or long-term planningTactical planning (or management control) for mid-term planningOperational planning for short term planningThe 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 occurFeedback loops at all levels* R.N. Anthony, Planning and Control Systems: A Framework for Analysis, Cambridge. Mass., 1965

Hierarchical Planning FrameworkLong termMaterial 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 planningMid term- Personnel scheduling -- Material ordering- lot-sizing - operations scheduling - shop floor control- Warehouse replenishment - Transportation planning

- Mid-term sales planningShort termEXECUTIONInformationFeedbackFlow of goods

Differentiating Factors by Planning Levels

Factor- LevelStrategicTacticalOperationalPurposeSupply chain design, resource acquisitionPlanning resource utilizationOperation scheduling and executionImplementation instrumentsPolicies, objectives, capital investmentBudgetsSchedules, procedures and reportsPlanning horizonLong: 3-5 yearsMedium: 6-18 monthsShort: daily, weekly, monthlyScopeBroad corporate levelMedium plant levelShort floor levelLevel of ManagementTopMiddleLowFrequency of re-planningLow: every few yearsMedium: monthly or quarterlyHigh: weekly, daily or as requiredSource of informationLargely externalExternal and internalLargely internalLevel of aggregation - product data - timeHighProduct families yearsMedium Product groupsMonthLow individual productscontinuousDegree of uncertaintyHighMediumLowDegree of riskHigh MediumLow

Introduction to SCM and SAP APO

SAP Implementation

EGN 5623 Enterprise Systems Optimization (Professional MSEM) Fall, 2012

SAP Business Suite

Planning with SAP ERP & SCMSAP ECC ERPSAP 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 dataMaterialsLocationsPartnerPlantsInfo records Transactional data Customer orders Production orders Purchasing orders ExecutionBasic Components of SAP SCM

Planning at Supply Chain LevelSAP ECC 1SAP SCMSAP ECC 2SAP ECC n- Each SAP ECC component covers one or more locations In the network- Planning may be done centrally

SAP SCM FunctionalityTHEORY AND PRACTICE OF ADVANCED PLANNER AND OPTIMIZER IN SUPPLY CHAIN DOMAIN by Sam Bansal

SAP SCM ModulesTHEORY AND PRACTICE OF ADVANCED PLANNER AND OPTIMIZER IN SUPPLY CHAIN DOMAIN by Sam Bansal

Two planning Scenarios for SAP SCM

Cost-Based OptimizationCost or price drivenMixed integer programmingMust define all sourcing, production, transportation, inventory costs and constraints

Supply Planning Tasks and Output for SCMTasksIdentify sources for finished productsPlan and consider safety levels in any locationDistribute production over plantsChoose production resources in plantsExplode bill of materials in plantsIdentify sources for supply of raw materials and componentsOutputsPurchase requisitionsStock transport purchase requisitionPlanned production orders

SAP APO Architecture

SAP Access through SAPGUI SAPGUI DownloadThe latest SAP GUI release posted on SAP @CSU, Chico web server http://worker.cob.csuchico.edu

User = sap; Password = sapgui4me.

This GUI works on Windows 7 systems, as well as Vista and Windows XP.

SAPGUI Download Instruction

SAPGUI Setup SAP SCM

SAP ERP/SCM Clients, Userid, Password

SAP SCM

Client: 600Userid: fiu-101 to fiu-130Initial password: SAP4US

Exercises:

Overview of SCM (APO) Master Data 1) Location master data in APO2) Transportation lanes in APO3) Product master data in APO4) Resource master in APO5) Production Process Model in APO6) Quota Arrangement in APO7) External Procurement Relationships in APO

***************VMI: vendor managed inventoryVMI: vendor managed inventoryDP: demand planningTP/VS: transportation planning and vehicle routing SNP: supply network planningVMI: vendor managed inventoryPP/DS: production planning and detailed schedulingLIS: logistics information system: transportation dataCIF: core (information) interface: master dataATP: Available to promiseFTL Full Truck LoadLTL Less than Truck Load*******