Tag Archives: Definition

The Differences Between ERP and Advanced Planning

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Understanding the different between planning and execution is critical to implementing or managing these types of projects.

Why This Article?

Many may think this is somewhat simple, however, people who are unfamiliar with this topic come into contact with SAP SCM and SAP ERP all the time, and so I thought it would be good to provide a brief overview. This post is for those who either have the question, or are questioned on the differences between traditional ERP and advanced planning.

Supply Chain Planning vs. Advanced Planning

It’s important to draw the distinction between supply chain planning and advanced planning. Supply chain planning is covered by the modules of SAP ERP Sales and Distribution (SD), Materials Management (MM) and Production Planning (PP). These provide supply chain execution functionality along with some basic planning functionality (safety stock and MRP, basic forecasting, availability checking, and production planning among a few others) but none of these modules cover advanced planning. Advanced planning is future based and deals in different scenarios, presenting them to planners, which then pick the best alternative. In advanced planning the plan may be recreated several times before it is firmed and sent to the execution system. True advanced planning systems cannot execute recommendations; they can only make recommendations. Thus while SAP had supply chain applications for some time before APO, APO was SAP’s first venture into advanced planning.

Why Did SAP Develop SCM to Begin With?

Generally, software companies like to increase their scope, however, the case of SAP APO is a bit more complicated than simply a vendor looking for new markets. Looking historically back as SAP’s motivation for creating SAP APO tells and interesting story that is not often told or even discussed.

Back in Time

SAP at the time was being pressured by analyst firms and Wall Street to create a separate set of applications, rather than incorporate advanced planning within SAP ERP. Planning systems work fundamentally different from transaction processing systems. At one point, SAP felt that advanced planning was overly esoteric and would only ever be desired by a small fraction of their customer base. Somewhere along the line, and in the early stages we propose it was primarily driven by market expectations (as we explain further on) they changed their view and developed their own advanced planning suite.


SNP Deployment Explained

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A Term Often Used, But Not Often Defined

I have been working in supply chain for some time, and I tended to hear rather indirect explanations for deployment. I finally found several and wanted to locate them in one place for future reference. One is the presentation listed below:

http://www.sap.com/spain/company/events/2008gestioncadenalogistica/pdf/6Killer%20Applications%20Day%20SCM%202008_SNP.pdf

Deployment determines the best short-term solution to allocate available supply to meet demand and to replenish stocking locations. Deployment confirms or changes the supply network plan depending and creates an optimized plan for stock transfers. The rules-based Deployment Heuristic distributes the products according to quotations and priorities. The Deployment Optimizer distributes the products according to cost while also considering specific rules.

Another is in the book Supply Chain Management with SAP APO:.

If the supply chain behaves exactly as planned – i.e. neither changes in the demand nor unpredicted deviations of the supply happen – deployment is not necessary. Since we are living in an imperfect world, both demand and supply will usually differ from the planned quantities when it comes to execution. If the demand exceeds the supply, it has to it has to be decided which demands – in case of the supply chain network: which locations – will be covered and to what extent. This is exactly the scope of deployment. – Supply Chain Management with SAP APO

SNP Deployment

SNP deployment is inherently designed to distribute from one level of the echelon to the next, either with a push or pull method. SNP creates a quantity called “Available to Deploy,” which is much like “Available to Promise.” That is the first step to running the deployment. The deployment also has three horizons that it works with. These are:

  1. The deployment horizon: The number of days over today over which you want to take process stock transfers.
  2. The push horizon: The number of days over today over which you want to take into account receipts
  3. The pull horizon: The number of days over today you want to take into account demands.

The information that the deployment heuristic uses is shown in the graphic below:

These are set in the SNP2 tab, notice below.

Deployment Product Location 2

For those attempting to compare SNP deployment to the inventory rebalancing in SPP, the question is can SNP deployment be configured to act as a redeployment engine. Some more detail can be found by evaluating more from SNP’s training material.

Deployment determines which DC or VMI customer distribution demands can be covered by the present supply. If the available quantities are not sufficient to meet the demand, or if they exceed the demand, deployment makes adjustments to the stock transfers created by the SNP run.

______________________________________

Heuristic versus Optimization Deployment in SNP

The heuristic uses rules to deploy inventory. The optimizer uses costs. The setup of the deployment optimizer is extremely similar to the setup of the normal initial planning SNP optimizer. Of the two methods of deployment (optimization vs. heuristics), the heuristic is far more commonly used than the optimizer.

  • Heuristic = from one plant product by product
  • Optimization = focus on network product by product (cost based optimization)

The Difference With Respect to STOs

To highlight now different the deployment optimizer is from the deployment heuristic approach, the deployment optimizer does not require SNP planned stock transfers. The deployment optimizer calculates the replenishment plan for a product in all locations in the network. In contrast to the SNP optimizer, the production and procurement quantities remain unchanged; only the stock transfers change. Also, as opposed to a normal SNP run, real time deployment will not take transportation lanes or quota arrangements between target locations and locations other than the given source location into account. Stock transfers are thus only created between deployment source locations and target locations. The constraints for the optimizer include:

  1. Product Priority
  2. Storage Capacity
  3. Transportation Capacity
  4. Lot Sizes
  5. Safety Stock

(This requires more analysis).

Release Notes

Deployment Capability

I was recently asked what the deployment capability in SCM actually was. One confusing thing in this area is that SPP, which as picked up a large amount of functionality in redeployment, is actually listed as deployment in the SAP release notes, which is incorrect. However, here is a list of deployment functionality enhancements as of SAP APO 4.1: 4.1 SNP Deployment

  • System ensures that the category group has been specified in the location product.
  • Alert enhancement
  • More flexibility with profile management
  • Enhanced procedures for speeding up the processing
  • Forecast horizon improvements.
  • Improvement in the resulting stock transfers checking with the validity dates of the transportation lane and means of transport.
  • Use of transportation lot size has been improved

5.0 SPP Deployment SNP Deployment

  • Parallel Processing Profiles (enhanced performance)
  • Automatic cost generation for SNP and deployment optimizer – As of 5.0 the cost model has been enhanced and can take into account the maximization of service level, demand and product priorities, procurement priorities.
  • Consideration of demand at the source location – as of 5.0 the deployment heuristic can specify that the system carry out a fair share distribution of the ATD quantity to cover not only the demand at the source location, but also the distribution demand at the destination location. Two new fields in the master data of the source location product (SNP2 tab page) specifies whether the system should consider customer demand or planned independent demand.
  • New planning book 9ADRP_FSS contains the key figure Deployment Reservation Quantity, which saves the quantity it reserves for the demand at the source location.
  • As of 5.0 several source locations can be selected on the screen for executing the deployment heuristic. Supply Network Planning -> Deployment -> Deployment Heuristic -> Consideration of Demands in the Source Location.

5.1 SPP Deployment SNC Deployment SNP enhancement in deployment, but only in regards to considering product interchangeability in the deployment. 7.0 SPP Deployment – Inventory Rebalancing PP/DS Deployment – Similar to SNP deployment

  • The PP/DS deployment horizon allows you to define the number of days the system consider.
  • Heuristic can be called from the Product View
  • Can fit within the process chain
  • However, the PP/DS heuristics only allows pull distribution
  • Uses the planning book 9APPDS_DEP
  • /SAPAPO/HEU_PPDS_DEPLOYMENT algorithm and SAP_PP_024
  • Advanced Planning and Optimization -> Supply Chain Planning -> Production Planning and Detailed Scheduling (PP/DS) -> Deployment -> Maintain PP/DS Deployment Characteristics Profile.

Details on deployment can be found at these links.

SPP deployment — which should really be called redeployment, is covered here:

Pegging vs. Allocations in SCM

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Pegging Description

The book Supply Chain Management with SAP APO has a very good description of pegging, which goes on to describe how pegging connects order objects at different levels. This is an explanation which is often left out of most evaluations of pegging. Here is the quote:

Pegging describes the attachment of supply nodes to demand nodes within he order liveCache. A helpful notation for explammg planning situations in the order network is shown in figure 3.10. The basis of this figure is pegging areas that represent a product in a location (a locationproduct). ) orders have a supply node in one pegging area for their output and demand nodes for their dependent demands in other pegging areas. The supply nodes and the demand nodes of one pegging area are connected by pegging.

The figure described as 3.10 goes on to show how stock is pegged to production orders, which is pegged to transport orders, which is in turn pegged to sales orders. The explanation goes on to say that pegging is performed in liveCache in accordance with the settings on the demand view of the product master.

Pegging is also covered in the SAP white paper Production Planning and Detailed Scheduling:

Pegging is a core feature of SAP APO and key to its ability to synchronize activities across the entire supply chain. In essence, pegging refers to the precisematching of supply to demand and ensures that as changes occur anywhere along the supply chain, thosechanges can be effectively propagated to all orders that are related to them. By using a pegging network, SAP APO can earmark supplies from the moment they are purchased and forecast their destination through production and fulfillment. Set globally as either a static or dynamic state within SAP APO, you can modify pegging characteristics to best suit their particular manufacturing requirements.

Allocations Description

The same book has a good explanation of allocations. Understanding the difference between peggings and allocations is important.

In cases where the demand or the expected demand exceeds the supply – e.g. because of production limitation due to very high investments – allocations help to ensure that customers or customer groups are provided with their share according to the sales and n and marketing policies. Generally allocations prevent ‘first come first serve’ behaviour.

Thus peggings are used in SAP SCM to describe a connection between demand and actual inventory. Allocations are used to describe a connection between demand and future inventory.


Key Figures

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What Are They?

Key figures are best thought of as the numerical values in a spreadsheet. Meanwhile the row and column headings are characteristics. Key figures are stored in planning areas and are assigned to them in this transaction.

Transaction

This transaction shows all of the planning areas. Within the planning areas resides the key figures.

Key Figures

Selecting any of the planning areas will show the key figures.

Key Figures 2

The Key Figures are added from many available.

Key Figure 1

Key Figures also can have aggregates in the Planning Area:

Key Figure 2

Planning Area

Key figures are assigned to a planning area.

http://www.scmfocus.com/sapplanning/2008/01/05/planning-areas/

Make Key Figures Available

If key figures are used in CTM, the key figures must be made available – http://www.scmfocus.com/sapplanning/2009/09/01/ctm-make-key-figures-available/

Resources and Constraint Based Planning in SAP SCM

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Constraints in SCM

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 Defined

Constraints are simply limitations. A supply chain is filled with constraints. Some of these include:
  • The maximum amount of material that can be placed in a truck
  • The maximum number of miles a truck can drive in a day
  • The maximum output available from a piece of machinery
  • The maximum amount a bin at a warehouse can hold
  • The maximum amount of material a warehouse in total can hold
  • The time windows those are acceptable for material delivery for production facilities, warehouses and retail locations.

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).

Standard Objective

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.

Finite vs. Infinite Resources

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.

Optimization Per Area of SCM

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

Conclusion

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.


Resources by SCM Module

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What Are They?

Resources are the mechanism for both constraining the plan and determining if a plan is feasible. A resource represents anything work producing object with a capacity. The resources available change per area of SCM in order to better match the capacities being modeled.

How Resources Vary by Module

The resources below ship with SCM. Each type is a an alternative of the characteristic APO Resource Type.

SNP Resources

  • Bucket resources
  • Single-mixed Resources
  • Multi-mixed Resources
  • Transportation Resources

CTM Resources

  • Multi activity resources
  • Single activity resources

PPDS Resources

  • Multi activity resources
  • Single activity resources
  • Line resources
  • Line mixed resources

TPVS Resources

  • Vehicle resources
  • Handling resource
  • Calendar

EWM Resources

Used to represent users or equipment in the warehouse. They are assigned to warehouses in EWM.

What is interesting is that TPVS and EWM do not use PPMs to organize their resources. DP uses PPMs, but does not use resources. See more about PPMs on our PPM post.

For details on what these different resources mean and what they do, see this post.

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

For more details on resources, see this post.

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

References

http://help.sap.com/saphelp_scm70/helpdata/EN/1d/101d3bf1f7cb1de10000000a11402f/frameset.htm