Tag Archives: BOM

Leading Indicator Forecasting in SPP

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What Is It?

A statistical forecast based on sales history is not the only type of forecast that is used in SPP. Sometimes the forecast needs to be based upon factors other than history such as installed base. For instance in A&D, the forecast can be more accurately executed based on installed base rather than historical sales. Leading indicators is a causal forecasting method. (This could be flight hours, or other equipment utilization numbers. These are also called causal factors, or non-demand factors and are notoriously hard to find in company databases.)

If you have information about the failure rate, you can define that in a coefficient. The system then multiplies this coefficient with the equipment that is on the market and can thus forecast how many service parts you will require in the future. The steps generally are:

  1. Equipment source must be tapped and extracted (equipment BOMs, installed based key figures, equipment master data from the BW)
  2. We then bring this into BW, perform a LI preparation service.


Then we select leading indicator folder.


SAP supplies the following leading indicators

  1. Installed base
  2. Operation time
  3. Number of users

You can also define your own leading indicators in addition to the ones provided by SAP. (You must assign the same leading indicator to all locations of a BOD.)

SPPLFISERVICE for Coefficient Determination

These leading indicators are then assigned to a planning profile. You need to select the SPPLFISERVICE. This service is the coefficient determining service. The system generates the demand histories for the leading indicators used. It then uses these histories to determine a value for the coefficient for each period in the past. To do so, it executes the planning service SPP: Preparation Service for Leading Indicator Based Forecast (SPPLFISERVICE).However, you do not need to run the LFI service. If you select either CONSTANT VALUE or MANUALLY ENTERED off of the Leading Indicator tab of the forecast profile. This leads us to an intermediate topic – the Foreast Profile Leading Indicator Tab. Goto this link to read this related topic. Then return to this post. Alternatively, open both posts and read them side by side.

http://www.scmfocus.com/sapplanning/2008/10/02/spp-leading-indicator-forecast-profile-tab/

Here is the SPPLFISERVICE, it is a standard service and can be accessed by creating a planningprofile and by attaching the service to this profile.


/N/SAPAPO/480000009


The service is in the product simple category.


Now we have selected the correct Process Profile category we can go to the next step and select the SPPLFISERVICE.


Now we can access this service by selecting this Leading planning profile that we just created.

If you use period based planning, SPP generates the forecast for a product either on the basis of past sales values or on the basis of leading indicators. If you can not meet your demand within your BOD, SPP covers demands either through external procurement or repair.

SPPFCSSERVICE for Forecasting

This generates the demand histories and performs forecasting. However, you can use the interactive forecasting screen instead. /N/SAPAPO/SPPFCST

On the other hand you can also tie up this service in a planning profile.


STEPS

  1. Based on the demand history generated in step one, the system generates the forecast for the leading indicator and the coefficient. For this you can either schedule the planning service SPP: Forecast Service (SPP_FCS_SERVICE) which generates the demand histories, or you can start the forecast manually in the interactive forecasting screen. This generates the forecast for the leading indicator. In doing so, it proceeds as specified by you in the Leading Indicator Values field on the Leading Indicator tab page in the forecast profile. You have the following options.

a. Forecasted – In this case the system performs the forecast on the basis of the demand history and takes into account the forecast profile that you have defined for the leading indicator

b. Determined from the Installed Base – In this case the system performs a naive forecast. I reads the values from the demand history from the InfoCube SPP: Installed Base Key Figures (9AIBASKF), and copies the value of the current period as the forecast value for future periods

c. Upload / Manually Entered – In this case you can either enter the forecast values manually in the Interactive Forecasting screen or upload them with a BADI

3. The system determines the leading indicator based forecast for your location product on the basis of the forecast values for the leading indicator and the coefficient. As in step 2, this step is either part of the planning service SPP: Forecast Service (SPP_FCS_SERVICE) or part of the interactive forecast that you can start manually in the Interactive Forecasting screen. To generate the leading indicator forecast for your location product, the system multiplies the forecast values of the leading indicator determined in step 2a by the forecast values of the coefficient determined in step 2b. it does so for each period in the future

4. You can display the calculated forecast values on the Interactive Forecasting screen.

Equipment Data

You can load equipment data into SCM from ECC via BI. In the standard, the system transfers equipment data from ECC into the characteristic 0EQUIPMENT in SAP BI. You must schedule this transfer in SAP BI with an InfoPackage.

Overall Sequence

1. The preparation service for leading indicator based forecasting checks all products of the product selection as to whether they are part of a supersession. If a product is part of a supersession, the preparation service checks whether the supersession is a one to one replacement. It is only in this case that the preparation service takes into account this supersession in leading indicator based forecasting. The preparation service for leading indicator based forecasting of the predecessor and successor product then generates a demand history as described below. The preparation service checks whether you have set the read BOM of LI flag in the service profile for the preparation service.

a. If you have set this flag, the system reads all equipment BOMs for the ERP system and check how often a product occurs in which equipment BOMs

b. If you have not set this flag, the system sets an equipment equal to a product.

2. The preparation service checks whether you have restricted your equipment with a selection in customizing or whether you want to take into account all equipment in leading indicator based forecasting. If you want to restrict the equipment taking into account in leading indicator based forecasting, you can define an equipment selection in Customizing. You can specify the semantics and values or value ranges for these semantics that the system is to take into account or not take into account in the selection.

3. The preparation service determines an entry location for all products of the product selection and checks, which leading indicator group you have assigned to this entry location. The system only performs step 4 for those leading indicators that are included in this leading indicator group.

4. If the installed base leading indicator occurs in your leading indicator group, the preparation service distinguishes between the installed base leading indicator and all other leading indicators as follows.

a. The preparation service determines the demand history of the installed base leading indicator form the information from step 1. To do so it counts how often a product occurs in total in all checked equipment BOMs. If you are not using equipment BOMs and an equipment corresponds to a product, the system only counts the equipment.

b. The preparation service determines the first stockholding locations for the product. To do so, it determines at which location the demand for the equipment occurred. If this location is a stockholding location, it determines this location is the first stockholding location. If this location is not a stockholding location, it goes up in the BOD until it finds a stock holding location and determines this location as the first stockholding location.

Whether a location is a stocked location is set here in the SPP Inv. Planning tab on the product location master.

replenishment-indicator
Here the tab for leading indicator has a number of selections which determine if the leading indicator forecast is to be selected from installed based or are manually entered. The coefficient is then used to adjust your mean time between failure.

Forecast Service Profiles


Now we will discuss the planning service indicator.


For details on the Planning Service Manager goto our post on the topic at….

http://www.scmfocus.com/sapplanning/2008/09/28/spp-planning-service-manager

Just some initial screen shots which will be commented further from the forecast profile.


BADI

To define your own logic of wish to use the ATP check for determining the first stockholding location, you can implement the BADI /SAPAPO/EQUIPFIRSTSTOCK_PREP


Planning Areas

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Planning Areas:

Planning areas are the central data structures for Demand Planning and Supply Network Planning.

To go to planning areas, or to create planning areas go to the following:

Both the planning object structure and the planning area can be setup from the same transaction.

Path= Supply Network Planning – Environment – Current Settings – Administration of Demand Planning and Supply Network Planning

POS and Planning Area

They hold key figures. To find out more about key figures see this post.

http://www.scmfocus.com/sapplanning/2009/07/06/key-figures/

Here is an example of a planning object structure, it has a number of characteristics. They must be added to create the POS. When we create one we both add characteristics

Creating the Planning Area

The next step is to create a Planning Area pointing to the Planning Object Structure.


Further it will ask for other details regarding this planning area. Below is the first tab:


The next tab includes the Key Figures (“Key Figures” is just an overly fancy term which means the forecasted line item. Things that you plan that can hold numerical values are Key Figures.)

Now it is very easy to add Key Figures willy nilly however of course its important to remember which need to be setup.


Aggregate Planning Tab

Next its required to select the Aggregate Planning tab which has the various hierarchies to select from. All of these selections need to be setup prior to arriving at this screen. These selections set the level of planning aggregation that you want to do in this particular planning area. After this is filled in its time to save the Planning Area — which creates it.

Planning Area Key Figure Aggregation
The key figure aggregates essentially decide how different key figures will be aggregated (the aggregation type – in this case it is “Pro Rata” which is “S.” Here is what we get when we select the drop down.

Pro Rata
The next feild is how the key figure is disaggregated. The value currently selected which is P, which stands for proportional allocation.

Pro Rata 2
However, this is relatively simple decision making compared to which key figures are to actually be selected. This deserves a great deal of attention.

Once we back out of the S&DP Administration and then go back in we can see that the Planning Area has been created, but it is not yet activated.

Planning Area Activation

Now we need to perform the activation. This is not done in the main area of the object, but requires you go out to the listing level (why, we don’t know). So you save in the item view, but activate in the list view. Below we have a screenshot of the list view. We right mouse click and then select Create Time Series Object.

Create Time Series Object
Its important to fill in the dates. If not, it will activate the time series object for too long of a period of time, and this will tie up the system. This is particularly true since we are setting this up as a test. So we will choose a short time period.

Create Time Series Object 2
Next we will include the Planning Version.

Create Time Series Object 3
Now we are ready to create the time series object. Its important to remember, this creates the time series object, but does not necessarily populate it with data.

SNP Activated
This shows it has been activated.

Characteristics in SCM

Its important to recognize that DP and SNP use different characteristics, and thus different planning areas and planning object structures are created for DP and SNP.


Work Breakdown Structure

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Why Understand Work Breakdown Structures?

Work Breakdown Structures were created by the US defense establishment for actual costing. However within SAP they are the critical elements within the SAP PS system. Understanding the WBS is important to understanding GPD (Grouping, Pegging and Distribution) which is a manufacturing solution for research and development, make-to-order and engineering-to-order environments.

For those interested in learning more about grouping, pegging and distribution see this link…

http://www.scmfocus.com/sapplanning/2009/05/06/gpd-grouping-pegging-and-distribution/

wbs-definition-graphic.png
What is a Work Breakdown Structure?

Simply put, Work Breakdown Structures are “buckets” to which cost centers are assigned , allowing Lockheed to track the costs of its PBL contracts. Below is a sample of a simple WBS structure for the creation of a bicycle. “A WBS is not a project plan, project schedule or a chronological listing. It is considered poor practice to construct a project schedule (e.g. using project management software) before designing a proper WBS. This would be similar to scheduling the activities of home construction before completing the house design. It is not possible to recover from an improperly defined WBS without starting over[citation needed], so it is worthwhile to finish the WBS design before starting a project plan or project schedule parts is not.

Simple WBS Structure for Building a Bicycle

500px-wbsconstruction.png

WBS Capabilities

wbs_exp.gif “In a product-oriented WBS, functional categories of work may form “cost accounts” within a WBS element. Cost account managers are responsible for a functional area’s contribution to a WBS element. Cost accounts from several departments or functions may combine into one WBS element. Internal department planning for a cost account will be made up of individual work packages. A work package will typically have its own budget and schedule. Work packages should be small enough to be executed by individuals or small groups in a single department, and they should be of relatively short schedule duration. A small project might define a maximum work package size as two weeks of effort. Larger projects will assemble larger work packages that can be appropriately managed and controlled.” – SAP Help WBSs allow you to map the structure of a project in SAP. The WBS is made up of WBS elements, which can be broken down further. Structuring the WBS is primarily answered by considering what you want to report on. Dependent Configuration Dependent configuration relates how a configuration one system affects another system. Here it involves other areas in SAP that are affected by WBS creation and use. One of the most important features of WBS usage is distinguishing between Plant Stock and Project Stock. Each material can be coded as several stock types. Typically Plant Stock is the more common, however in a project environment it becomes necessary to code at least some of the materials as Project Stock. Plant Stock vs. Project stock is broken down in the matrix below.

Plant Stock

Project Stock

For: planning collective requirements in warehouse material

For: individual project planning

Usage: Materials at subordinate BOM levels which are required in all projects can be planned and procured in the warehouse, independently of WBS elements. In requirements planning, all the requirements for a material are determined in one plant. Such procurement is made jointly, with no reference to a WBS element.

New Demand to A Location

Usage: In individual project planning, only individual requirements are planned – that is, materials which are required for a WBS element, are planned for that purpose, and procured with reference to the WBS element.

System

Assignment: The material is managed in general stock. It is not assigned to any particular project or sales order.

Assignment: In individual project planning, only individual requirements are planned – that is, materials which are required for a WBS element, are planned for that purpose, and procured with reference to the WBS element.

This procedure is used to plan the finished product and important components.

The material stock is assigned to a single WBS element in the project and is, as far as planning is concerned, available only for that WBS element. Stock is managed separately for each WBS element in a project definition.

Unlike general stock, you must specify the relevant WBS element, as well as the plant and storage location, in all goods movements involving project stock.

From: http://help.sap.com/saphelp_dimp50/helpdata/EN/49/7db835295f962de10000009b38f839/content.htm

Question: What costs will be allocated to a SAP PS Project?

Answer: We will want to allocate the costs of Purchase Orders, Stock Transport Orders and Service Orders to specific projects.

New Demand to A Location

Not New Demand to the Overall System

1. If there is sufficient inventory to cover the STO, a new demand is created at a location, however, this is not a new demand for the system. If one considers this a new demand then it is true to stay that an STO creates a new demand.

2. If there is insufficient inventory to cover the STO, a demand is created both at the location, and for the overall system.

What is Necessary to Tie Back to the PS PBL Project A Network in SAP PS is a parallel hierarchy of the operations of a project rather than the financial areas of the project. The necessity is to tie the operational transactions (and their costs) back to the project. The transactions necessary to map to the PBL projects are: 265678f3b532ed14adc46ca9269a8cf3 “The grouping WBS element is the organizational unit which produces the goods and to which the material belongs. Requirements planning creates the replenishment elements (planned orders, purchase requisitions) which are assigned to the grouping WBS element. A separate planning section is managed for each grouping WBS element in the evaluationsin inventory/requirements planning.”

A sample of WBS Elements in a project

From Project Management Academy:

Notice how the Project is the top of the hierarchy. A Work Package contains a WBS code along with costs. A Work Package is “..is a quantitative and qualitative description of an activity to be carried out in the project – for example, the work to be done and the result to be achieved for a clearly defined task within the project.” Other Important Features of the WBS:

WBS Connections to Other SAP Transactions

WBS Links to Activities

1. The STO is tied in with MRP

1. If there is insufficient inventory to cover the STO, a demand is created both at the location, and for the overall system.

2. The procedure of converting purchase requisitions to Work Breakdown Structures can be monitored using PO history.

New Demand to A Location

2. A goods receipt can be planned in the receiving plant.

System

3. The system can run an availability check for the stock transfer.

3. The goods receipt (GR) can be posted directly to consumption.

WBS elements tie to project stock. To understand more about project stock see this link…

http://www.scmfocus.com/sapplanning/2009/05/03/plant-stock-vs-project-stock/

Summary

The STO is both a type of Stock Transfer and a Purchase Order which has characteristics that closely map to the Transshipment in MCA, most notably its calculation of inventory movement based upon lead times. The STO is used to move materials between two Plants in SAP.


Plant Stock vs. Project Stock

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What is It?

Some industries like aerospace and defense and other industries with substantial government contracts work off of a concept called project stock, which is quite different from the concept of plant stock which is used outside of these specific industries. Plant Stock vs. Project Stock SAP provides different options for material stock management. One possibility is the usage of the collective stock or anonymous plant stock. All projects and orders requiring a material managed in a collective stock can take this material from the plant stock. Another option is the usage of individual stock. In this case material stocks are managed with a reference to a sales order or a WBS element. Project stock is a form of individual stock management where material stocks with reference to WBS elements can be managed as individual stock segments. Using the options Non-valuated stock, Valuated stock or No project stock in the basic data of the project definition, you specify for a project whether a non-valuated or a valuated project stock management or material will be possible or whether individual project stocks can not be used. When non-valuated project stock is used, every WBS element of the project represents a separate stock segment from the logistics point of view.

Valuated and Non-Valuated Project Stock

Material movements with reference to non-valuated project stock take place with out being valuated. For example, when a material managed in a project stock is consumed by a network activity (goods issue for reservation), this does not cause actual costs for the activity and no postings are made in financial accounting. The calculation of MRP networks determines that no planned costs for material components will be managed in the non-valuated project stock. The stock holding WBS element is debited with the actual costs for the external procurement only when the goods or invoice receipt for purchased parts is posted to the project stock. Non-valuated project stock does not completely disclose the costs for the network activities or the assigned production orders. If you implement the non-valuated project stock, a meaningful cost object controlling is possible only on the level of the stockholding WBS elements or the entire project after period end closing. Due to the disadvantages of the non-valuated project stock, the valuated project stock was provided as of SAP R/3 4.0. Network costing can determine planned costs for material components to be managed in the valuated project stock. Normally it is recommended that you implement the valuated project stock if this is permitted by the business process. You can specify the procurement type of a material component either manually or you can use a procurement indicator. Procurement indicators are defined in the Customizing of SAP PS using transaction OPS8.

Requirements Grouping

Stock management per the WBS has disadvantages from the logistics point of view. Because individual stock segments are managed separately from an MRP point of view, an MRP process creates separate PRs of planned orders for every stock segment irrespective of whether there is enough material available in another stock segment. To avoid the logistics disadvantages of individual stock management, requirements grouping can be performed in PS. This is called grouping, pegging and distribution, or GPD, and we go into more depth on it in this post…

http://www.scmfocus.com/sapplanning/2009/05/06/gpd-grouping-pegging-and-distribution/

The top WBS element is then automatically identified in the Basic data as a grouping WBS element. Automatic grouping causes all requirements and stocks of the project referencing the project stock to be managed exclusively on the level of this grouping WBS element. In MRP only one WBS element is used as an individual stock segment, and all PRs, orders, production orders referencing the project stock are assigned to this WBS element. You can read more about the work breakdown structure here..

http://www.scmfocus.com/sapplanning/2009/05/03/work-breakdown-structure/

WBS BOMs This is a bill of material that in addition to the material number of the header material, is identified via a WBS element number. To understand more about BOMs see this link..

http://www.scmfocus.com/sapplanning/2008/01/05/bom/


SCM PPM and PDS as Used in Different Modules

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Introduction to the Structures

PPMs and PDS or Production Process Models and Production Data Structures are containers that connect together materials and resources. The main difference between the PPM and PDS is that the PDS allows for engineering changes, while PPMs do not. SAP has tried to promote people to use PDSs by stopping development on the PPM, but from what we have seen the PPM is still far more common.

PPMs and PDSs are used in the Following SCM Modules

  • DP
  • PPDS
  • SNP
  • CTM

PPMs and PDS are designed to manage capacity constraints and material consumptions, so a natural question would be why PPMs and PDSs are used by DP. It turns out this is a special case of the PPM. DP is not doing anything with capacity or resources, and DP-PPMs/PDSs do not have resources. Instead they are used to perform BOM forecasting. BOM forecasting is simply a form of hierarchical or depenent forecasting, where the top level is forecasted, and then the lower components are derived demand. This makes a lot of sense from both a business and a perfromance perspective. The more hierarchy that can be built into a DP, the better the performance and typically the happier the planners will be.

DP uses PPMs to perform BOM forecasting, and uses PDSs to perform characteristic based forecasting (CBF)

It should be apparent that while resources are assigned to PPMs and PDSs, an interesting feature of SCM is that not all modules that use resources use PPMs or PDSs. You can read more on resources at this link.

http://www.scmfocus.com/sapplanning/2009/05/02/scm-resource-types/

Features of PPMs

  • PPMs are valid for a single location
  • PPMs have validity dates, this can be used to adjust capacity for time of year and other variable factors

Features of PDSs

  • The PDS can be generated from the iPPE, which is an internal SCM structure
  • Can be generated from an SAP ERP BOM

http://www.scmfocus.com/sapplanning/2008/01/05/ippe/

Conclusion

One of the major problems in deciding between the PPM and PDS is that the logic for using the PDS has been miscommunicated by SAP. The official reason for moving the PDS has been justified on the the basis of moving towards a master data object which better allows for engineering change management. However other reasons include the performance and maintenance problems with regards to PPM. These include the following:

  • PPMs are slow, and PDSs are written in a different software language to overcome this
  • PP/DS PPMs must be converted to SNP PPMs, which is not a direct approach (PDSs do not need to go through this conversion)

References

http://help.sap.com/saphelp_scm70/helpdata/EN/3c/cdfb3aebc63b61e10000000a11402f/content.htm

http://help.sap.com/saphelp_scm70/helpdata/EN/e8/d47139f5a04c61e10000000a114084/content.htm


PDS vs. PPM and Implications for BOM and PLM Management

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Is the PDS the Future?

There has been a lot of focus on SCM’s emphasis on the PDS vs. the PPM. The concept is that PDS should be used when possible because PDS has much more flexibility when it comes to engineering change management. However, there are a few disadvantages with this approach.

  • PDS is more complex and difficult to setup than the PPM at least at first
  • It is not at all clear that SAP is a good place to manage engineering changes, this is a presumption by SAP, but its foundations are not strong
  • However engineering change management is only one reason to move to the PDS.
  • We have not analyzed, and have not seen analysis for how well PDS incorporates changes from third party BOM management software.

As we have noted in this post…

http://www.scmfocus.com/servicepartsplanning/2009/04/21/is-sap-plm-for-real/

…change management in SAP ERP is weak. This is primarily because the material management functionality in SAP was never designed with change management or document management in mind. A solution that is extremely effected at BOM and change management is Arena Solutions, which can be sampled at this link.

http://www.scmfocus.com/servicepartsplanning/2008/12/12/arena-solutions-and-where-used-view/

Our perfect solution would have Arena performing the BOM management, and then sending it over to SAP ERP’s material management. In this case would the PDS be able to reflect the changes easier than the PPMs? More specifically, would the extra work involved with setting up PDS be worth the effort.

Undiscussed Constraint Management Maintenance

One issue we have with the PDS is it focuses the attention on engineering change management. What we have not hear much addressed and what we have seen as the main limiting factor to implementing PPDS is that clients do not update their PPMs or PDSs. This means that after the implementation, the accuracy of the production plan increasingly deviates from the realities of the manufacturing floor. This could be managed from two different directions

  • From the process side…..which SAP and the large consulting companies are really not doing – that is explaining the significant maintenance involved with constantly updating the system with changing production constraints.
  • By making the PPM and PDS more easy to update, because right now its still a big ball of effort, which means many companies will not do it and will hope that the old constraints are “good enough.”

The best rundown of the differences between PPMs and PDSs is at the link below.

http://wiki.sdn.sap.com/wiki/display/SCM/Difference+between+PDS+and+PPM

Conclusion

This post is designed to stimulating thinking more than answer a specific question. Essentially, we are proposing that the BOM management and lifecycle management for companies using SAP be rethought. Also, we think more attention needs to be placed on getting clients to actually maintain their PPMs and that that should take first priority over emphasizing PDS as “new objects” for planning. That is the PDS can be wrong even if engineering changes are updated.