Its hard to overestimate the influence of constraint based planning in the development of SCM. Prior to SCM, or APO’s introduction, constraint based planning was one of the strongest trends in planning generally. A very popular book called the The Goal, which described the theory of constraints, helped popularize an idea that up until that point had been largely restricted to academic circles. For this reason we want to spend some time discussing what they are and how they have become popularized as a mechanism to improve the management of the supply chain.

Constraints are simply limitations. A supply chain is filled with constraints. Some of these include:

Broadly speaking the supply chain has a load placed upon it by demand, which results in procurement loads, production loads, material holding or storage loads and shipment loads. The loads must be serviced by one or another type of capacity.The supply chain can be seen as constantly attempting to manage the highest number of loads with the fewest resources or the highest possible constraints (that is the lowest investment in assets).

The desire of any company is to maximize loads serviced and minimize the constraints that service the loads (plants, trucks, warehouses, and people).

The concept of constraint based planning migrated from academics to industry only when computerization allowed for the incorporation of limiting factors into software. Previous to computers, these constraints were, and in many cases are still, managed with manually methods. This means people using their experience and judgement to plan and schedule the supply chain.

Resources are one of the most important constraints in SCM. Resources have many control fields which can customize the resource to best emulate the resource being modeled. The resource transaction has many tabs, which allow different types of resources to be configured.

It is one thing to say that a model has constraints, but what is often lost in the statement is how detailed (or should we say available for detailed entry) the constraint capability is within a model. SAP SCM has the ability to enter an incredibly fine level of detail into its constraints. This means that if the customer is willing to put the effort in, they can create a quite realistic and accurate set of resources that can constrain theplan in a realistic fashion. A second issue which is not very often discussed is how capable companies are in maintaining these constraints. The answer is not very. Most companies I have consulted with basically want the system to maintain itself, and the trend towards outsourcing system maintenance in faraway locations where the individuals are purely technical, and lack business knowledge is only exacerbating the situation. One might ask the question if whether the expense of implementations is actually sucking money away from the maintenance of systems. This could be the topic of a separate article by itself.

While every resource has the option of being finite or infinite. Finite scheduling means that capacity constraints will be respected. Infinite means they will not be respected, and a second step of capacity leveling is necessary.

The complexity of optimization is not the same per module. With many resources and more complexity to processes, PP/DS bears the most optimization effort. SNP, which is a higher level of abstraction, is in most cases more straightforward to optimize, and TP/VS, with its few constraints and more explicit costs (transportation, delivery window, etc.) can be seen as the most straightforward to optimize. The fewer constraints inherent to the planning problem, and the more explicitly the costs are (and thus the easier they are to assign a value to), the more straightforward the optimization will be.

Where Are They in SCM? Constraints find their expression in resources in SCM. To read more about resources, see this post.

http://www.scmfocus.com/sapplanning/2008/09/14/resources

SCM began as APO during a different business environment and during the peak of focus on optimization. As this focus has shifted to other areas of supply chain improvement, such as collaboration. SCM has developed from a severely lagging product, to the most widely sold and implemented product in advanced planning. While better than it once was, it still lags in all of its modules. Although SCM does not have a single module that could be considered best of breed, it continues to sell reasonably well because large consulting companies get paid a lot of money in billable hours to recommend it no matter what solution is best for the client. SAP’s development investment in SCM along with its broadening of the role of SCM means that SCM will be more prominent in the architectures of many companies.