sap apo

Supply Network Planningand Deployment

Functions in Detail

SAP Advanced Planner & Optimizer

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SAP AG ● Neurottstraße 16 ● 69190 Walldorf ● Germany

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Supply Network Planning and Deployment ● December 1999

©Copyright 1999 SAP AG. All rights reserved.

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Contents

Supply Network Planningand Deployment

1 Supply Network Planning and Deployment

1 Introduction

2 Overview of SAP Advanced Planner & Optimizer

4 The SAP Business Framework

4 Benefits of SAP Advanced Planner & Optimizer

5 Overview of Supply Network Planning

7 Benefits of Supply Network Planning

7 Functions of Supply Network Planning

7 Supply Chain Planning Integration

7 Supply Network Planning Heuristic

8 SNP Optimizer

10 Capable to Match

12 Deployment

12 Transport Load Builder

12 Vendor-Managed Inventory

13 Sales and Operations Planning

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Supply Network Planning and Deployment

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Introduction

Problems and Challenges of the Supply Chain

The hallmarks of today’s business environment arevolatile demand, decreased customer loyalty, shorterproduct life cycles, and tougher global competition. Tosurvive, organizations need an information infra-structure that allows them to make accurate decisionsin real time and to make customer satisfaction a toppriority, while still remaining competitive and profitable.

The stakes are high. Miscalculations in forecasting thatresult in excess inventory can prove fatal. Failing tomeet promised delivery dates can drive away cus-tomers. To handle these challenges, manufacturers areturning to new, advanced planning and schedulingtechniques that generate optimized executable plansin response to rapid changes in supply or demand.

Data-Driven Process

Huge amounts of data drive these planning andscheduling processes. Much of it comes from theorganization itself, but other data comes from outsidethe organization – from suppliers, partners, and evencustomers. Unlike the data models used by existingEnterprise Resource Planning (ERP) systems, supplychain decision support systems require a new breedof memory resident data model that can handle vastamounts of complex data in real time. Until now, ifyou wanted an end-to-end solution, you had tointegrate specialized software with your existing ERPsystem and built custom interfaces to handle outsidedata sources. This can work, but only at an enormouslyhigh cost.

The SAP Supply Chain Management Solution

SAP has introduced the Supply Chain Managementsolution to meet the challenges of managing the entiresupply chain from end to end. The SAP AdvancedPlanner and Optimizer (SAP APO) is an important part.With SAP APO, SAP has combined the ERP executionpower of the SAP R/3 System with advanced dataanalysis and supply chain management tools.

Robust Integration Layer

Because SAP has built a robust integration layer betweenSAP APO and the underlying execution system, SAP APOcan gain immediate and seamless access to OnlineTransaction Processing (OLTP) business data. While thedata objects contained within SAP APO are, in mostinstances, structurally optimized instances of OLTP data,they remain synchronized through a series of real-timetriggers and messaging, a task that is seamlesslyaccomplished through the integration services of theBusiness Framework. SAP refers to this technique as”semantic synchronization”. The SAP APO server alsointegrates with the SAP Business Information Warehouseusing this same mechanism providing unprecedentedaccess to vital business decision data.

Advanced Optimization Techniques and Technology

In addition to highly specialized data objects, SAP APOuses a library of advanced optimization algorithms anda high performance, memory resident data processorto perform planning and optimization. You canconfigure SAP APO to provide task-specific, industry-specific, and company-specific optimization, automateddecision, and real-time event notification to the under-lying business processes.

This brochure provides an introduction to SAP APOand discusses in depth Supply Network Planing, oneof the SAP APO components.

Figure 1: SAP APO Overview


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Overview of SAP AdvancedPlanner & OptimizerThe SAP Advanced Planner and Optimizer builds onthe SAP Business Framework to improve informationflow by incorporating real-time collaborative decisionsupport, advanced planning, and optimization into theSAP R/3 System. SAP APO uses a powerful memoryresident analytical engine and highly specialized, highlyconfig-urable data objects that offer major newcomponents:

n Supply Chain Cockpit

n Demand Planning

n Supply Network Planning and Deployment

n Production Planning and Detailed Scheduling

n Global Available-to-Promise

Supply Chain Cockpit

Graphical Command Center

The Supply Chain Cockpit component is a graphicalinstrument panel for modeling, navigating, andcontrolling the all the links in the supply chain. It givesyou a complete view of the entire length of the supplychain. It’s the command center – the cockpit fromwhich you manage your supply chain.

Using the Supply Chain Engineer, you can build anelaborate graphical representation of even the mostcomplex supply chain. Once you have built a map ofthe supply chain, you can select any part of it and zoomin to a detailed level. Using a series of event triggersand alarm conditions, the Alert Monitor can automa-tically identify problems in the supply chain. It canalso monitor material, capacity, transportation, andstorage constraints, and it can handle such metrics asdelivery performance, cost flow, and throughput.

Demand Planning

Accurate Forecasting

The Demand Planning component is a toolkit ofstatistical forecasting techniques and demand planningfeatures that helps you create accurate forecasts andplans. Demand Planning is tightly linked to the SAPBusiness Information Warehouse, so you can useadvanced Online Analytical Processing techniques todrill down to detailed levels of data and analyzehistorical, planning, and business intelligence.

Because it integrates such a wide set of data, DemandPlanning gives you a sound understanding of all thefactors that affect demand, delivering context-baseddemand planning, which raises forecasting to a newlevel of sophistication and accuracy. Like the SupplyChain Cockpit, Demand Planning uses the Alert Monitorto report exceptions, like orders that exceed forecastsor orders that fall short of forecast and therefore maylead to excess inventory if production is not adjustedaccordingly. Using Demand Planing, you can:

n Perform collaborative forecastingYou can collect forecast data from multiplesources and store it in a common repository soplanners from marketing, sales, logistics, and eventhird-party vendors and suppliers can worktogether on a consensus forecast.

n Manage product life cyclesYou can manage the life cycles of your productsaccording to such factors as product supercession,substitution, and cannibalization.

n Plan promotionsYou can counteract fluctuations in demand usingpromotions that are based on your profitabilitygoals, product availability, and historical patterns.You can even predict how price increases ordecreases will affect future demand.

n Forecast new product demandYou can develop accurate forecasts for newproducts based on models from similar products,demand histories, and other factors. You canmonitor the launch of a new product and the endof a product’s life using point-of-sale data.

n Perform causal analysisYou can identify and predict how such factors asdemographic changes, environmental variables, andsocial or political factors affect demand for yourproducts. You can analyze actual demand using avariety of tools, such as multiple linear regression,and incorporate causal factors like price.


Model Your Entire Supply Chain

Using the Supply Network Planning and Deploymentcomponent you can develop a model of your entiresupply network and all of its constraints. Then, usingthis model, you can synchronize activities and planthe flow of material along the entire length of the supplychain. This allows you to create feasible plans forpurchasing, manufacturing, inventory, and trans-portation and to closely match supply and demand.


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Drawing on data in liveCache, a high-performancememory-resident technology, and using algorithms,user-developed rules, and policies, the Deploymentcomponent helps you dynamically rebalance andoptimize your distribution network. It also helps youdynamically deter-mine how and when to distributeinventory. Using the Supply Network Planning andDeployment component, you can:

n Model plans at aggregate and detailed levels

n Perform what-if analysis

n Dynamically match supply and demand usingproduct substitutions

n Use vendor-managed inventory techniques

n Determine the optimum distribution of supply tomeet short-term demand

Global Available-to-Promise

Match Supply and Demand with Available-to-Promise

The Global Available-to-Promise (ATP) componentuses a rules-based strategy to ensure you can deliverwhat you promise to your customers. Global ATPperforms multilevel component and capacity checksin real time and in simulation mode to ensure thatyou can match supply and demand. You can also per-form these ATP checks against aggregated, memory-resident data for even better performance. Global ATPmaintains simultaneous, immediate access to productavailability along the supply chain, so you can be con-fident that you can meet your delivery commitments.

Global ATP draws on a number of criteria to arrive ata commitment, including:

n Product substitutionIf a finished product or component is not available,the system automatically selects a substitute usingrules-based selection criteria.

n Selection of alternative locationsAs with product substitution, Global ATP cansource materials from alternative locations. Youcan also integrate this logic with the productsubstitution rules.

n AllocationYou can allocate products or components that arein short supply to customers, markets, orders, andso on. The ATP calculation and response take theseallocations into consideration.

Figure 2: Supply Chain Engineer

Production Planning and Detailed Scheduling

Generate Production Plans Rapidly

The Production Planning and Detailed Schedulingcomponent is an integrated set of tools that helps yourespond rapidly to changing market conditions. Usingthis component, you can generate production plans andschedules that optimize resources. The componentoffers optimization based on state-of-the-art methods,such as the theory of constraints and optimizationlibraries.

•Using this component, you can:

n Perform forward and backward scheduling onmultiple levels

n Perform detailed capacity planning and materialplanning simultaneously

n Synchronize schedules and make schedulingchanges at multiple levels of the bill of materials(BOM)

n Use what-if scenarios to simulate actual conditionsand consider the effect of various constraints

n Perform interactive scheduling and plan optimi-zation using a Gantt chart

n Integrate sales and distribution backorder sched-uling into the manufacturing process


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The SAP Business FrameworkIntegrate New Technology and Legacy Systems

SAP APO is a separate SAP solution with its own releasecycle. It is a Business Component of the BusinessFramework, SAP’s strategic product architecture,which is designed to facilitate the seamless and rapidintegration of new business functions and informationtechnology into existing environments. The BusinessFramework provides an open architecture, allowingits basic elements, the Business Components, tooperate through standardized Business ApplicationProgramming Interfaces (BAPIs). Each of the SAP APOcomponents, such as SAP APO Demand Planning, canbe implemented as a stand-alone product or as anintegrated part of the Business Framework.

Benefits of SAP AdvancedPlanner & OptimizerSAP APO provides a number of benefits, including thefollowing:

n CompletenessSAP APO supports all of the key supply chain plan-ning and optimization functions and processestraditionally found in stand-alone advanced plan-ning and scheduling solutions.

n PerformanceThe SAP liveCache memory resident computingtechnology enables forecasting, planning, andoptimization functions to be executed in real time.

n IndependenceSAP APO performs planning functions and proc-esses outside of the OLTP system, ensuring greaterflexibility and high availability of the SAP APO server.

n OpennessSAP built SAP APO to function in heterogeneousenvironments. It interoperates with SAP R/3, third-party, and legacy OLTP systems.

n IntegrationSAP APO is seamlessly integrated with the R/3 Systemso you can integrate all the links in your supplychain. A robust and sophisticated integration layerfacilitates the use of SAP APO with additionaloptimization and forecasting algorithms.

Overview ofSupply Network PlanningThe most critical factors in supply chain planning are thedemand-driven and constraint-based nature of advancedplanning. Working with the Supply Chain Engineer andSupply Chain Cockpit components, the Supply NetworkPlanning component gives you all the features you needto perform advanced supply chain planning. It helps youmake the right decisions at the right time.

Planning and Optimization

Plan at Aggregate and Detailed Levels

The Supply Network Planning component plans at bothaggregate and detailed levels, primarily on a tacticalplanning horizon. Planning objectives are subject to avariety of constraints, such as transportation,warehouse capacity, major production capacities,calendars, costs, and profit.

You can define the component’s planning strategies tomodel different environments, including:

n Make to stock

n Package to order

n Assemble to order (with or without final assembly)

Figure 3: Bucketed Planning Periods

These strategies influence how production is plannedand how forecast is consumed. SAP APO uses timebuckets (a collection of days of data summarized into acolumn) to plan independently of the planning horizon.You can define the granularity of the time buckets.


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Simulate and Store Multiple Versions

You run planning activities, such as interactive planning,and heuristics and optimization techniques, in simulationmode, and then store them as individual versions. Youcan recall these versions later, evaluate and comparethem, and then release them as live planning data.

Shorten Planning Cycles

When you change plans, the system propagateschanges forward and backward through the network,which leads to very short planning cycles. The systemsupports interactive planning via online simulation andthe integrated Alert Monitor.

Solution Techniques

Generally, you can use two different approaches tofind the best solution to an optimization problem: exactand heuristic. With global exact methods (like linearprogramming), you apply well-defined, proven algo-rithms to obtain the optimal solution. Heuristics arelocal optimization methods based on empirical experi-ence. There is no guarantee that the solution is optimal,but an effective heuristic can deliver a feasible solutionthat is close to the optimum. Supply Network Planninguses several optimization techniques:

n Simplex-based algorithmsThe simplex method is an algebraic procedure forsolving linear programming problems. Themethod, which is based on Gaussian elimination,iteratively searches for the corner points of thefeasible region as candidates for an optimumsolution. SAP APO leverages the robust, well-testedILOG library functions (CPLEX), which includes avariation called the interior-point method, to solveproblems efficiently. In addition, CPLEXautomatically detects network flow problems andsolves them with special network flow algorithms.

n Branch and bound methodsThis is a divide-and-conquer strategy for solvingdiscrete problems. These methods use a depth-first search strategy for traversing the search space.The system systematically trims the search tree bypruning branches that only lead to infeasible solu-tions and those that aren’t as good as the best solu-tion found so far. For business scenarios, a completebranch and bound search usually requires a prohibi-tively long run time, but Supply Network Planningspeeds up the search by using filtering techniques.

n Constraint–based PropagationConstraint-based Propagation (CBP) is the mostadvanced technique, combining logic program-ming and artificial intelligence. CBP exploits existingconstraints to deduce additional constraints and todetect inconsistencies among possible solutions.This propagation method eliminates much of thesearch space, and the system can find a feasiblesolution faster by traveling the search tree. SAP APOuses the ILOG library for fast constraint propagation.

Inventory Planning

Supply Network Planning enables you to assign optimalsafety stock and target stock levels to all inventoriesthroughout the supply network. The system basessafety stock calculations on lead times, forecast varia-bility, and customer service levels. You can assign avariety of inventory strategies and parameters to prod-ucts based on product characteristics, such as ABC classi-fications. The parameters of the inventory policies canbe time phased to address planning issues, including:

n Phase in and phase out in a product life cycle

n Seasonal demands that lead to inventory build up

n Promotional demands

Supply Planning

Smooth Material Flow

The Supply Network Planning component smoothes outthe flow of materials through the supply chain andconsiders such issues as time phasing, distribution andmaterial requirements, capacity constraints, and quotas.

Figure 4: Interactive Planning


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This allows you to:

n Replenish inventory based on a time-phased orderlogic

n Make optimal decisions about sourcing

n Optimize the product mix

n Plan the trade-off between production runs andinventory costs

n Plan an optimal supply path in a multistage pro-duction environment

n Create supply allocations for customers and chan-nels

To simultaneously plan distribution, Supply NetworkPlanning provides production and procurement capabil-ities and advanced heuristics, such as repair-based plan-ning strategies, linear programming techniques, andconstraint-based programming. You can combine thesetechniques as needed. For example, you can use thelinear optimizer to determine the quota arrangements.

Deployment and Transport Load Building

Automatic Deployment Logic

The Deployment function in Supply Network Planningdetermines the optimized inbound and outbounddistribution of available supply in response to short-term demand, including customer orders, stock trans-port requirements, and safety stock requirements.Deployment logic considers a wide variety of short-term constraints, including transportation, warehousehandling capacity and calendars.

Optimize Transportation Loads

The Transport Load Builder (TLB) component ofSupply Network Planning optimizes transport loadsby grouping available products based on the Deploy-ment recommendations. It creates loads of multipleproducts and ensures that vehicles are filled to max-imum capacity.

Vendor-Managed Inventory

Using Supply Network Planning, you can implement aVendor-Managed Inventory (VMI) strategy. The com-ponent handles all the processes, including modelingcustomers as locations in the network, integratinginformation with Electronic Data Interchange (EDI)messages using the Internet or intranets, and auto-mating replenishment.

Sales and Operations Planning

Sales and Operations Planning (SOP) is a process thatgives you the ability to direct your business by inte-grating marketing plans with supply chain manage-ment. This integrates all business processes into oneoverall plan. SAP APO delivers SOP by seamlessly inte-grating the SAP APO data mart, the propagation of net-works in liveCache, and the Key Performance Indicator(KPI) reporting capabilities.

Benefits ofSupply Network PlanningSupply Network Planning is a complete, high-qualitysolution based on leading client/server technology andSAP’s acknowledged business expertise.

Supply Network Planning delivers multiple benefits. Itis:

n A fast solutionBecause it is a component of SAP’s Business Frame-work, you can implement Supply Network Planningrapidly and at a low cost.

n An open solutionSupply Network Planning is not limited to the R/2or R/3 Systems. Using open interfaces, you cancombine Supply Network Planning with both SAPand non-SAP data and tools.

n A function-rich solutionSupply Network Planning gives you all the toolsyou need to develop complex plans and adapt themto your ever-changing business.

n An adaptable solutionIf you change your business processes or environ-ment, Supply Network Planning can adapt to thesechanges – rapidly and without breaking the bank.

n A robust, business-driven solutionBased on SAP’s proven expertise in R/3 client/server technology and in real-world businessprocesses, Supply Network Planning is built towork the way you do.


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Supply Chain Planning IntegrationIntegration Saves Time, Cuts Costs

There are two dimensions to integration. The first aspectis integrating supply planning with an EnterpriseResource Planning (ERP) system to provide master dataelements and data, like on-hand inventory and purchaseorders. The second is the seamless integration ofDemand Planning, Supply Network Planning, andProduction Planning and Detail Scheduling. Thisintegration means that data only needs to be enteredonce, which saves you time and money and reduceserrors. It also means that your system uses one consist-ent set of data, so you never have inconsistent answersor information.

Supply Network Planning HeuristicThe SNP heuristic performs requirements planningthroughout the entire supply chain network to deter-mine how your organization can best satisfy customerdemand. It optimizes your supply chain to meet strin-gent customer service levels, while simultaneouslyminimizing inventory levels and synchronizing the flowof material. The heuristic, based on a repair-based plan-ning approach, efficiently plans complex distributionnetworks in production environments that are spreadacross multiple sites. You can define several planninghorizons to control the SNP heuristic results.

Demand Guidelines

The system represents demand as the demand forecastor actual customer orders. You can specify a demandfence to determine when you should use actualcustomer orders instead of the demand forecast andwhen you should use the maximum of demand forecastand actual customer orders. Forecast consumptionlogic combines the demand forecast with customerorders.

Requirements Planning

The underlying concept of the SNP heuristic nets thedemand for a product (or product family) and thelocation level against inventory, products in transit,and fixed production. The heuristic then recalculatesrequirements for the sources for the products while

taking quota arrangements, lead times, calendars, andlot-sizing rules into account. The system repeats thisprocess for each level in the network until it generatesall the production and purchase requirements. Theprocess generates requirements for intermittentproducts, raw materials, and finished goods.

Proactive Resource Utilization

You can execute a capacity check after the infiniterequirements planning run is completed. This capacitycheck allows you to determine how planned ordersaffect your resources and to quickly determine whetheryour plan is feasible or not. The capacity check tellsyou when resources will be overloaded and which toolsyou will need to balance the load. This allows you toproactively plan resource utilization and to decide howto modify production plans so you can meet demandbefore going into production.

Capacity Leveling

If capacity becomes overloaded, an alert will displaythe problem. In this case, you must perform simulativeplanning by manipulating resource utilization tobalance resource usage, then view the impact of thechanges to ensure that the change has not overloadedanother resource. Once you save the changes, theproduction plan or transportation plan becomes thebasis for the daily production schedule.

Functions of Supply Network Planning

Figure 5: Integration


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You can adjust the plan in several ways:

n You can shift the capacity load backward to satisfydemand with high priorities without due dateviolations.

n You can shift capacity load related to low-prioritydemand and minimize due date violations basedon demand priorities.

n You can remove demands with certain prioritiesfrom the load.

Demand priority depends on demand types, such ascustomer orders, safety stock and forecast, and userselection. If the capacity is not sufficient for the mostimportant demand type, you can define priorities byproduct, product family, customer, or location.

SNP OptimizerIn addition to the SNP heuristic, Supply NetworkPlanning provides linear optimization techniquesbased on simplex-based algorithms and branch andbound methods. They are:

n Basic solveThe optimizer creates an optimal solution basedon all available data. This method is the normalsimplex method in which all the variables arecontinuous.

Figure 6: SNP Optimizer

n DiscreteThe optimizer creates an optimal solution based onall available data. This method is the same as the basicsolve technique, except that some variables can bemade discrete using the profiles. Transportation ismade discrete using the lot size profile, andproduction is made discrete using the productionprocess model.

n Time aggregationThe optimizer speeds up the solution process bygrouping data according to time buckets. It solvesthe problem for the earliest time bucket first, thenproceeds sequentially through the remaining timebuckets.

n Product decompositionThe optimizer speeds up the solution process bybuilding groups of products and solving theproblem one product group at a time.

n Priority decompositionThe optimizer speeds up the solution process bygrouping according to priorities. It solves thehighest priority problem first, then proceedssequentially through the remaining groups inorder of priority.

n IncrementalThe optimizer speeds up the solution process byallowing you to select a subset of products foroptimization.


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Common resource constraints include:

n Market demandMarket demand ultimately determines how muchyour company will produce. The market dictatesyour products and your production plan. Loss ofsales is usually caused by a plant’s inability to meetcustomer requirements at the required time, price,and quality. An example of this type of constrain iscustomer orders. Sometimes there are specificpriorities for customer orders. The SAP APO Opti-mizer either enforces the prioritization of customerorders strictly (meaning it does not delay one cus-tomer order for another with a lower priority), orit can model constraints as soft constraints (meaningit penalizes lateness according to priorities).

n Material availabilityMaterial availability is a fundamental productionrequirement, but pricing is not the only relevantcriterion. If a vendor delivers the raw material lateor the material is defective, the production processis disrupted.

n Resource capacityMachines, tools, and labor must be synchronizedto ensure production proceeds smoothly and ontime. Both capacity and materials may be soft con-straints in the sense that extra capacity and mate-rials can be purchased at an additional cost for mid-term planning. For short-term detailed scheduling,however, these would be hard constraints. The bottle-neck resource may also change over time as supplyor demand changes.

n Infrastructure logisticsInfrastructure logistics includes temporal con-straints and sequencing constraints in operationsmanagement and processes routing. For example,after a part is heat treated, there may be a waitingperiod before the next step can begin. Or therecould be precedence constraint in the routing. Forexample, the first process order produces an inter-mediate product that is consumed by the secondprocess order.

n Organizational issuesCompany policies, marketing strategies, union rules,individual practices and government regulations areall organizational issues that produce constraints.They are often overlooked, but managerial and be-havioral constraints are the roots of many problems.

Easy-to-Use Optimization

Usually, there is a tradeoff between the quality of thesolution and the flexibility of the model. You mustevaluate the result and then enrich or refine the model.Certain assumptions or approximations that you makein the process may invalidate the model, but the SAPAPO models are versatile enough to handle the diverseneeds of different industries. The algorithms have beenthoroughly tested to provide a best-of-breed solution.SAP’s optimization solver is easy to use and extremelyflexible.

Reconcile Conflicting Goals

The objective functions specify the business goals thatyou are trying to achieve. Many problems involve morethan one measure of merit. The result of SAP research isa suite of models that address multiple conflicting goals.You assign weights to these goals to create priorities.

You can combine the following goals:

n Transportation costs

n Storage costs

n Handling costs

n Production costs

n Penalty costs for not satisfy specific demands (suchas safety stocks) or for late delivery

You can choose to maximize profit or minimize costs.

Constraint functions describe the physical or logicallimitations in a supply chain. To improve your company’sproductivity and profitability, you must alleviate theconstraints that limit the performance of the system.The SAP APO Optimizer addresses variable and function-al constraints.

Variable Constraints

Variable constraints reflect the basic properties of thevariables, for example, non-negativity or integration ofproduction volume. These constraints usually define thedomains for the decision variables, such as search space.

Functional Constraints

Functional constraints depict the structural relation-ship of the activities and resources. When you allocateresources to activities, demands must not exceed theavailability.


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Capable-to-MatchCapable-to-Match (CTM) functions match a large set ofprioritized customer demands and forecasts to a set ofcategorized supplies considering the current productioncapacities and transportation capabilities in a multistageproduction environment, as in the semiconductorindustry. CTM is based on constraint-based propagationtechniques and goal-oriented programming.

Preprocessing tools provide a set of categorized suppliesand prioritized demands as input to the CTM Engine,which then performs a fast check of productioncapacities while considering transportation capabilities.

In before production searches (or most to least), thesystem first searches through all supply categories forfinished or semifinished products before it resorts toordering production for that item. The search isconducted top down. The system first searches theproduction process model for finished products, thenintermediate products, then raw materials.

In after production searches (or least to most), thesystem searches for categories after an attempt is madeto produce the item.

Time-Dependent Production Processes

You can define different production processes,including product flow, for different time intervals. TheCTM engine chooses only production processes thatare valid at the representative time.

Model Alternative Components

You can implicitly model alternative components byannotating a list of alternatives within the bill ofmaterial, or you can model alternative componentsexplicitly by defining a set of product substitutions fora given product.

Identification of Raw Material

A special product category identifies material that isavailable in an infinite quantity. But for the consump-tion of this product, a purchase requisition must becreated.

Process Flows Based on Demand

You must select a specific process flow based on theset of characteristics of a given demand. For a planningprocess that covers several physical plants, you mustbe able to restrict the production and distributionnetwork to a set of allowed plants. In addition, theCTM engine can handle the plant substitution rules ofSAP APO’s Global ATP component.

Product Substitution Rules

CTM considers a set of demand characteristics for eachproduct and a prioritized list of substitute productsusing Global ATP rules.

Figure 7: CTM Process

Prioritize by Demand

CTM prioritizes demands, such as customer ordersor forecasts from SAP APO Demand Planning, basedon such characteristics as customer priority, location,and product priority.

Supply Categorization

CTM performs supply categorization based on theavailable supply and user-defined inventory limits, suchas amount of inventory or planned deliveries.

CTM Engine

The CTM engine delivers the functions you need tocontrol supply and demand. The CTM engine processcan be divided into two steps. In the first step, theCTM engine builds the CTM application model usingthe specified supply network model. In a second phase,the CTM engine matches demand to supply consideringproduction capacities and transportation capabilitiesand using constraint-based propagation. CTM searchesbefore production and after production.


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By-Products and Co-Products

Because several different products can result from atesting process, high-tech companies, such as semi-conductor companies, use inverted bill of materialstructures similar to process manufacturers.

Partial Satisfaction and Partial Shipment

If partial satisfaction of one demand is allowed, CTMtakes this into account (in other words, demand canbe split). CTM also considers the possibility of partialshipments.

Late Demand Handling

The due date can be postponed for late demands. Ifthis is done immediately before the handling of furtherdemands, scheduling the late demand can causefurther late demands. This is called the dominostrategy. To avoid this effect, it is useful to postponeunsatisfied demands to the end of the matchingprocess, which is the strategy used by airlinereservation systems.

Time-Dependent Process Parameter for Yield

To describe a time-dependent learning curve as it isfound in semiconductor companies, CTM offers aneasy way to overwrite operation scrap or yield valuesfor a specific time interval.

Time-Dependent Capacity Consumption:

Because of the rapid change of master data and otherrelevant planning data, CTM provides an easy way tooverwrite

n Capacity consumption values

n Duration values

n Quantities of input components

n Quantities of output components for a specific timeinterval

Deployment

Pull and Push Deployment

Figure 8: Pull Versus Push Deployment

Deployment uses push logic to calculate deploymentwhen the Available-to-Deploy (ATD) quantity canadequately cover the demand within the system Youspecify a push rule to identify how the push logic is tobe implemented. With pull distribution, all demandwithin the pull deployment horizon is met throughdeployment. Distribution occurs according to the duedate specified at the distribution centers. With pull-push distribution, all the demand within the pulldeployment horizon is met through deployment imme-diately, without regard to the requirement dates speci-fied by the distribution centers. With push distribution,all the requirements defined in the system are metthrough deployment immediately

Fair Share Deployment

If demand exceeds supply, Deployment uses fair sharelogic to calculate deployment based on the available-to-deploy quantity, the open sales orders, the safetystock, and the forecast. You specify a fair share rulein the product master data to identify how the fair sharelogic is to be implemented. You can:

n Distribute the stock proportionally to all distri-bution centers according to demand

n Raise the stock levels in all distribution centers toapproximately the same percentage of target stocklevel

n Distribute the stock according to priority of thedemand at the distribution centers


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In addition, you can specify priorities for single orders,such as customer order or forecasts, by location andproduct. You first satisfy the demand with higherpriority using the available supply. If demand exceedssupply in a demand class with same priority, you canapply fair share in this class.

Transport Load BuilderThe Transport Load Builder (TLB) uses the results ofthe deployment run (single product transport recom-mendations) to create transport orders for multipleproducts. It ensures that your transportation vehiclesare filled to their maximum capacity and that notransportation vehicle is dispatched unless it is filledto at least its minimum capacity. This minimizes yourtransportation costs.

The system checks the planned transport ordersagainst the minimum and maximum values that youhave defined in the system. If the planned transportorders do not meet either the minimum or maximumrequirements, the system activates an alert and youcan readjust the TLB plan.

Vendor-Managed InventoryThe goal of Vendor-Managed Inventory (VMI) is toinclude key customers in supply chain planning. ForVMI to work, you must integrate your customers’stocks and sales forecasts into your system. VMIplanning produces sales orders in the short term andplanned sales orders in the medium term. Before theseorders are actually created, transport load buildingalgorithms in SNP calculate optimized transport loadsand ensure product availability.

In Supply Network Planning, you create a VMI cus-tomer (both a ship-to and a sell-to customer) as alocation. It is networked with the rest of the supplychain using a transport relationship that you define inthe Supply Chain Engineer. For planning purposes, acustomer of this type is treated in exactly the sameway as a distribution center or production plant. Youcan assign products to a VMI location and define thelocation’s planning attributes.

If your VMI customers do not provide sales forecasts,you can create the forecast using the SAP APO DemandPlanning component. Unlike conventional salesplanning, you forecast consumer demand instead ofincoming orders. The Supply Network Planningcomponent then calculates the anticipated incoming

order volume, taking existing warehouse stocks andeconomic lot sizes into account. This estimateddemand represents a fairly precise starting point forthe rest of the supply chain.

The data required for VMI planning – stocks, on-orderquantities, and sales forecasts – is typically transmittedusing EDI messages and is stored as persistent data inSAP APO. This automates the process and helps toprevent errors.

Depending on the agreement between businesspartners in a VMI relationship, you can set upSAP APO to create actual sales orders in R/3, whichminimizes the administrative work involved.

Sales and Operations PlanningThe Sales and Operations Planning (SOP) process isa business planning process that monitors severalplans and reaches a consensus between differentteams. For example, the sales, marketing, manufac-turing, and finance teams agree on a common planwith elements that pertain to each group.

The objectives of SOP are to:

n Fulfill the business plan and measure actual per-formance against business goals

n Ensure the feasibility of plans and minimize back-logs

n Effectively manage decisions and changes indemand and supply to synchronize the supplychain

The SOP process relies heavily on information, includ-ing sales forecasts, backlogs, inventory, production,lead times, shipments, and financial targets.

The seamless integration of the liveCache data intothe multidimensional data structure of the InfoCubesin the SAP APO data mart allows you to set up an SOPenvironment that meets your specific needs. Using theDemand Planning and Supply Network Planningcomponents, you can incorporate SOP into the supplychain planning process.

The SOP InfoCube represents an integrated set of plans.You can define planning books to view SOP data ingrids and charts, and you can define thresholds tocreate alerts in the Alert Monitor if the variancebetween plans is outside the user-defined tolerances.You can integrate costs and prices into SOP InfoCubesin the data mart to generate a view of the informationbased on revenue, cost, profit, and volume.

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