Prioritization in Capable to Match (CTM) works on the principle of running some customers through the planning process, and allowing them to have inventory pegged to their requirements before others.

The Tricky Business of Customer Prioritization

Business have a number of ways that they want to prioritize customers. Different departments within companies like to prioritize customers in different ways. There are a seemingly unlimited number of ways to prioritize customers and some examples can include:

• By customer location
• By contract (i.e. different customers are allocated to different contracts)
• By customer product

However, what is often not well understood for companies implementing APO, is that CTM’s prioritization capability (and what eventually becomes allocations which are managed and enforced by GATP, if GATP is in the solution architecture) is much more limited than the prioritization imagination of those coming up with the prioritization scheme. This is why it is important that the prioritization sequence not be created in isolation without understanding what CTM can actually provide. However, what it can do and can not do should be impressed upon the business decision makers, and the earlier this happens on projects the better. It is also important to understand that CTM was originally designed for a specific industry (semiconductors) which as particular requirements, that do not necessarily generalize to other industries, although those industries may have an interest in prioritization.

The priority and order based sequential planning approach is congruent with the mindset of semiconductor planners because it ensures that high priority customers and demands are processed first and forecast is matched to the available capacity after customer order fulfillment. Due to the sequential planning and the tracked pegging relationships connecting supply and demand elements, it is transparent to the planner which planned production or transportation order was created for which demand element. In certain situations it may be desirable to sell a higher grade product for fulfilling a demand for a lower grade product. - Real Optimization with SAP APO

The fact that CTM was really designed for one industry was particular requirements in mind is left out of SAP documentation which is consistent with SAP’s interest in selling their functionality to as wide a customer base as possible. However, there is a lot more to CTM, and a lot more overhead to CTM than simply the ability to perform prioritization.

How CTM Works…at a High Level

One does not need to be a CTM expert in order to understand what CTM is doing. In fact, it is simple to understand.CTM works by sort order on both the demand and supply side. CTM allows segmentation of the following:

1. On demand side, which is made up of customers
2. On the supply side, which is made up of inventory and planned inventory

Supply and demand is then applied to different master data selections. Thus a CTM run can be performed with the following filter or limitations:

• For all the locations in the supply network or just one location, or any number of locations in-between.
• For all the sources of external procurement or in-house production, for just external procurement or just in-house production, or for any combination of limited sources of the product.
• For any time period restriction, or completely unrestricted. (Thus a CTM run could be performed which only creates allocations for one day, or have no limit on the time whatsoever)

Now that we have covered the setup and basics of CTM, we can move on to how CTM is actually run.

The Running of CTM

A CTM run uses the combination of the supply, demand and master data selection to perform sequential planning. The actual process it uses is simple. It runs some demand segments (i.e. customers) before others. Thus, these earlier runs consume inventory through pegging, and then later runs and demand segments have less inventory available to them because the previous runs have taken it. At some point inventory is no longer available for the lowest priority demand segments.

CTM lines up your customers, or customer categories in order. In this way it is glorified queueing software.

Permanent or Temporary Connections Between Supply and Demand Elements?

CTM can be run in a way that fixes pegging, which means that once the association between the demand element and supply element is made, it can not be altered. The other way to run CTM is called dynamic pegging, where after every run all the demands and supplies are re-pegged. (We have never understood the purpose of dynamic pegging, and also never seen it used). There are many other features, but are beyond the scope of this article. There are however other articles that explain more detail about CTM are available in the reference section below.

Traditional Problems with CTM Implementations

An important consideration is that the more times that the supply and demand selections are segmented and more the master data selections are segmented (as opposed to running for all selections and all sources of supply) the more complex the model becomes, and the more difficult it becomes to maintain and to make changes to. What I have seen happen on two implementations is that the number of CTM profiles combined with the master data selections grows to be too large and too complex.

CTM and the Service Level Based Contacts Example

Many companies that are in the finished goods business are attempting to implement service level based planning and contracts. What this means is different customers are assigned to different “contracts.” However, if a number of customers are combined into one category, then CTM will not prevent one of them from taking inventory from others. Lets use an example to make this clear. Take the hypothetical 3 customers that are shown in the graphic below. They are all gold level contract customers so they are initially placed in the same CTM profile and run through at the same time.

• Scenario 1: Because of this they all have the same priority and capability to take inventory.
• Scenario 2: However, after running CTM for a while the company begins to notice that becaus e customer 3 places such high order quantities onto this company, even though customer 1, 2 and 3 are all in the same priority, customer 3 takes too much inventory from the other two customers in a way that the company deems not consistent with its strategy in the market. So the decision is made to break customer 3 into its own profile.

However, now the question is should customer 3, which is now in profile B always be run below customers 1 and 2 in the profile? They are after all the same priority level and paying the same premium contract rate. If they are a big customer, there will be plenty of pressure to sometimes run them first. Perhaps a compromise can be reached. In this hypothetical example it turns out that customer 3 is really only “hogging” the supply for 4 to 5 products. The agreement is made to create two CTM profiles for this customer. One for products that it does not over-consume, and one for products that they consume at an acceptable rate. This third profile will be profile C.

 

Conclusion and Key Observations from CTM

The decision by sales is to run customer 3 first for what is now profile C first, then run profile A with customer 1 and 2, and finally run profile B. Where there was once 1 profile, there are now three. Now imagine how many scenarios like this pop up during and after an implementation and its easy to see how the number of profiles can quickly get out of hand. Part of the problem is that there can be the assumption on the part of the business that CTM performs prioritization magic (it really doesn’t, it simply sequentially allows some demands to come in before others), and secondly there can be the assumption that there is no cost to setting up finer and finer levels of prioritization. This is also not true. Every time a CTM profile is created it has to be maintained. Every time a new policy regarding prioritization is brought, the CTM profile(s) need to be changed. It is a simple relationship, and it holds true for planning in general. That is the more detailed the planning, the higher maintenance the solution, and relatively speaking the less maintainable the solution will be. The right balance is never what is perfect for business requirements, nor what is lowest maintenance for IT, but somewhere in between. That is a level of complexity that the company is willing to pay for to maintain.

Related Material

If you are interested in reading into more detail on some of the topics presented in this article these other articles may be of interest.

CTM Introduction

http://www.scmfocus.com/sapplanning/2009/05/09/ctm/

The CTM Profile

http://www.scmfocus.com/sapplanning/2008/09/18/ctm-profile/

ATP Categories

http://www.scmfocus.com/sapplanning/2009/09/19/atp-categories/

How Pegging Works

http://www.scmfocus.com/sapplanning/2009/05/06/pegging-in-scm/

References

“Real Optimization with SAP APO,” Josef Kallrath, Thomas I. Maindl, Springer Press, 2006