Tag Archives: Quota Arrangement

Major Functionality in SPP

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Hot Topics

Of the functionality in SPP, these areas seem to be some of the most requested:

  • DRP
  • Deployment
  • Inventory Balancing
  • Buy and Repair

We address each of these areas of SPP in this blog. For those looking for the latests improvements in SPP 7.0, they are listed here:

http://www.scmfocus.com/servicepartsplanning/2009/04/02/how-is-sap-spp-developing-as-of-70/

DRP

Determines the new demands of all locations in the BOD, rounds them and aggregates them along the BOD to the entry location.

http://www.scmfocus.com/sapplanning/2009/04/23/spp-drp-stability-rules-and-the-frozen-horizon/

http://www.scmfocus.com/sapplanning/2009/04/19/spp-drp-special-cases-and-consolidation/

http://www.scmfocus.com/sapplanning/2009/04/23/sppdrp-approval/

DRP is controlled in the Make General Settings for DRP configuration.

Deployment

Deployment is not unique to SPP. SNP also has deployment, which is described here.

http://www.scmfocus.com/sapplanning/2008/10/11/snp-deployment-and-fair-share/

Deployment is the normal or “standard” way of running SPP. SPP has the same concepts of distribution such as Fair Share and Push methods.

  • Fair Share use used when there is a shortage of material (can be allocated a number of different ways – including based upon target stock level and quota arrangements)
  • Push is used when there is an overage of material (push deployment is very similar to Supply Distribution in SNP) (also push can be allocated based upon demand in the system, quota arrangement, and safety stock)

Deployment uses the DRP matrix and decouples DRP planning from deployment planning. http://www.scmfocus.com/sapplanning/2009/04/23/spp-deployment-and-fair-share/

Deployment is triggered by a goods receipt at a parent location (push deployment) or by current demand at the child location (pull deployment)

Deployment is controlled by the SPP Deployment tab on the product location master. Feilds include:

  1. Deployment indicator
  2. Review time
  3. Time Btw. Depl Runs

Deployment can be simulated as well.

Inventory Balancing

Inventory balancing repositions inventory to locations where it has a higherlikelihoodof consumption. This capability is also necessary for finished goods, but SNP has no functionality designedspecificallyfor this. However, it is absolutely critical for service parts because of their low volume. At one client we evaluated the use of SPP Inventory Balancing for finished goods simply because it is only functionality in SCM specifically designed for this task.

Stock transfers are the result.

http://www.scmfocus.com/sapplanning/2009/04/23/inventory-balancing-in-spp/

The formula looks like this:

If inventory savings + warehouse space savings + service benefit – the move cost is greater than a threshold, then a movement is scheduled.

Deployment can be run using the heuristic or the optimizer. However, the output of deployment creates stock transfers.

Buy and Repair

This is something that MCA SPO does very well – making decisions regarding repairing vs. procuring new items.

http://www.scmfocus.com/sapplanning/2009/04/22/spp-operating-parameters-and-repair-vs-buy/


Quota Arrangements in SCM

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Background

A quota arrangement is  a method of controlling the sources of supply in a way that is consistent with the arrangements that the company has made. They are described by SAP documentation as follows:

An inbound quota arrangement determines what percentage of a certain product(SNP PPM or PDS and location) will be shipped from a specific source. This procedure is called multi-sourcing. You can make quota arrangements for external procurement and in-house production. Inbound quota arrangements are master data of the supply chain model and are defined in the SAP SCM system.They can also be maintained for all products, per product, per version and, as of SCM 4.1 , per means of transport.You can define quota arrangements for in-house production (PPMs/PDS) by specifying a PPM/PDS. For example, you can define that you want to cover 30%of the demand from location A, 30% from location B, and 40% from PPM/PDS Y. - SCM230

The setup of a quota arrangement is shown below:


What Are They?

This allows you to assign capacity to different vendors. These are called inbound quota arrangements. However there are also outbound quota arrangements. There can also be quota arrangements for individual products and selections. The following categories can be included in a quot arrangement.

  1. In house production
  2. Stock transfer
  3. External procurement

Reasoning for Quota Arrangements

On the face of it quota arrangements seem counterproductive. For instance instead of a quota, SCM could simply chose the lower priced supplier. However, in the real world businesses do choose to engage in these agreements, therefore its important that they are modeled or else the planning output will be reversed by the planners manually and the system will lose credibility. The logic of source determination is in the event of a quota, the quota is selected first, if there is not quota, then SCM goes through a sequence to select the source of supply. This is explained here…

http://www.scmfocus.com/sapplanning/2009/05/05/source-of-supply-in-scm/

Creating the Quota Arrangement (QA)

To create the QA we need to goto the following transaction (/SAPAPO/SCC_TQ1).

This takes us to this screen

However, when we try to process it we are told that the location is not assigned to the model. We try a different location and it works properly, and we are allowed to create our quota.

Requirements Grouping

You can see that we create a quota with requirements grouping of monthly (that is how the requirements are analyzed, you can also choose daily or weekly). Next we need to maintain a min split quantity, and we will choose 5000. We also need to specify a unit of he split which is BPH or galllons per hour (we are selling and managing a wine distributorship in our model).

 

 

 

 

 

 

 

 

 

 

 

 

 

References

SCM230

Scheduling Agreements

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What is Covered in this Article? 

  • What is a scheduling agreement? 
  • How is a scheduling agreement used, and why were they developed? 
  • What are some examples of the configuration for scheduling agreements? 

What Are Scheduling Agreements?

Scheduling agreements are long term procurement agreements in SAP ERP. It can be considered a non-supply chain control over the procurement. This is in contrast to the forms of control over ordering such as lot sizes. 

“A scheduling agreement is an outline agreement between a customer and a supplier. It specifies the total quantity of the products that a supplier is to deliver to the customer in a specific time period.” – SAP Help

We were never all that happy with the explanation of scheduling agreements until we found this one in the book Supply Chain Management with SAP APO. Here it is:

Scheduling agreements are used if products are procured for considerable quantities with a high frequency. Especially in the automotive industry they are a common way of procurement. The principle is to have one object – the scheduling agreement – with a target quantity and the according conditions, to plan the receipts as ‘schedule lines’ (corresponding to the purchase requisitions) and to send the orders – the ‘releases’ to the supplier with a reference to the scheduling agreement. The releases are created for a defined horizon and are updated in defined intervals. Additionally to the operative releases, it is possible to send the supplier forecast releases to inform him about the planned requisitions in he farther future. This way the scheduling agreement is an object which supports the collaboration with the supplier.

Scheduling Agreements become (in SCM) simply a source of supply. Scheduling agreements are actually two things to SCM.

  1. A procurement relationship (aka source of supply)
  2. A transportation lane

You can find out more about source of supply in SCM at this pos:

http://www.scmfocus.com/sapplanning/2009/05/05/source-of-supply-in-scm/

Integration from SAP ERP

After scheduling agreements are send via the CIF over from SAP ERP to SCM, they are planned and when the planning resuls (Purchase Reqs with Scheduling Agreements as the source) CIFed back to SAP ERP they become Purchase Reqs in SAP ERP. Finally after delivery Acknowledgments and goods receipts come back to SCM to adjust the stock figures. If you are unfamiliar with the CIF or want to know more about it see this post…

http://www.scmfocus.com/sapplanning/2008/05/21/cif/

SCM Scheduling Agreements

SCM has its own version of a Scheduling Agreement. In many ways it is very similar. However, an important distinction is that Scheduling Agreements can be maintained in either SAP ERP or SCM.

Tracking Schedule Agreements in SNC

Schedule agreements in SCM can be tracked in the release collaboration process within SNP. To seemore about how this works see this post.

http://www.scmfocus.com/sapplanning/2009/05/18/snc-release-processing/

Create Scheduling Agreement in ECC

We will start my maintaining a Scheduling Agreement in ECC and then CIFing it over to SCM. We will use transaction (ME31L)

One of the issues we had with trying to create a scheduling agreement is we had a mismatch between currencies. We went to this transaction (OB08) and entered a currency conversion.


Now we will create our Scheduling Agreement


Now we will setup the details of the Scheduling Agreement.


The way to check to see if the Scheduling Agreements have been created is go to SCM and the transaction (/SAPAPO/PWBSRC1 – display external procurement relationships). This is an extremely handy transaction that displays scheduling agreements, contracts and info records all in a very compressed space. You can see we have highlighted our recently created Scheduling Agreement in ECC.


However, when we attempt to find the Scheduling Agreement in SCM, we are not able to. We will go and check the qRFC outbound queues with transaction (SMQ1)


However, the outbound queue is empty, so nothing is holding up sending the Scheduling Agreement…at least here. Now we go into the Scheduling Agreement and notice that we have not selected a transportation lane.


This makes us curious if the Scheduling Agreement failed to generate in SCM because we do not have a transportation lane created. The transportation lane creates the relationship between the vendor and the plant. That is where we will look next. However we did find this text from SAP training material. Also there is the following:

“If a transportation lane does not exist at the time of transfer the system will automatically create one for the specific locations since the info record contains all the data needed to create it.” – SAP SCM215

“You only have to create transportation lanes in SCM manually if you want to represent a stock transfer between two storage location MRP areas in a plant.” - SAP SCM215

We go back to the CIF and we find something interesting…our integration model is missing. (Actually, as we go back and check our other integration models we notice that this screen is always empty after the integration model has been activated.)


Even after we go and reactivate it, we still do not see Scheduling Agreements in SCM. We do have the option of creating the Scheduling Agreement in SCM. We will come back to this post at a later date to fill in how to do this.

Scheduling Agreement in Use

Here you can see a Quota Arrangement in effect when we attempt to create an order, there are two different options we can choose from; one is the standard :P urchasing InfoRecord, and the other is Scheduling Agreement, which we created. After the select the source (called source determination), the system will allow you create the order.

Conclusion

Scheduling agreements are a non-supply chain control over procurement. Scheduling agreements can be maintained in either APO or in ECC. Along with other procurement controls, such as consumption based parameters, they adjust the procurement, however instead being driven by things like ordering or holding costs, scheduling agreements are created to make the system conform with the arrangements that the company has made with suppliers.

 

Material Master MRP Tabs

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Most of the following is taken from the SAP Library and the Performance Assistant in SAP, and thus is not original content. I felt it value added to have it organized in this manner below, because it is setup differently in the SAP Library and lacks screen shots.

The MRP tabs in the material master are the most important for planning tabs in ECC. There are four tabs and each holds the following planning relevant fields:


MRP 1

Purchasing Group: The buyers who are responsible for the item

MRP Group: Groups materials together to allocate them special control parameters for planning (these control parameters include the strategy group, planning horizon and the creation indicator)

MRP Type: Controls the MRP procedure (MRP or reorder point to be used for planning a material). This needs to be set to X0 in order for the product to be externally planned in SCM. However, this is not enough to make the product be planned in SCM all by itself. Rather the MRP Type of X0 must also be selected in the CIF Integration Model in order for it to be relevant for SCM.

Reorder Point: If a reorder point MRP Type is selected, the Reorder Point tells the system how far to let inventory decline until a reorder is placed. The reorder point should cover the average material requirements expected during the replenishment lead time. Safety Stock, Average Consumption and the Replenishment Lead Time work to define the Reorder Point. Reorder point planning can be setup either manually or automatically. Manual is essentially hard coding the value, automatic allows the system to calculate based upon the factors listed on line three of this paragraph.

(Reorder point planning is one of the three consumption based planning methods available in SAP – the other being Forecast Based Planning and Time Based Planning – connecting up to the same cycles as your suppliers i.e. if a supplier always delivers a material on a particular day of the week, material planning can be set to the same cycle)

Planning Cycle: Sets the planning cycle (often to match suppliers delivery dates) listed above.

Lot Size: The ordering methodology

Min Lot Size, Max Lot Size: Self explanatory quantity fields

Takt Time: Control parameter for takt based scheduling:

Definition of Takt Time from Answer.com

“Takt time can be defined as the maximum time allowed to produce a product in order to meet demand. It is derived from the German word taktzeit which translates to clock cycle. There is a logic therefore to setting the pace of production flow to this takt time. Product flow is expected to fall within a pace that is less than or equal to the takt time. In a lean manufacturing environment, the pace time is set equal to the takt time.

History

Takt Time is defined as:

Where: Ta = Net Available Time to Work eg. [minutes of work / day] Td = Total demand (Customer Demand) eg. [units produced / day] T = TAKT Time eg. [minutes of work / unit produced]“


MRP 2

Procurement type: Codes if the item is configured for internal, external or both internal and external procurement.

Special Procurement: Codes for whether the material uses particular procurement such as (Consignment, Subcontracting, Phantom Assembly, etc…) It defines external procurement or in house production more precisely.

Quota Arr. Usage: Configures the quota arrangements for (POs, PRs, Sched Agreements, Planned Orders, MRP and Prod Orders)

In House Production: Lead time in days

GR Processing Time: Time to receive the goods into the facility

Planned Delivery Time: Self evident delivery lead time

Safety Stock: Can be hard coded or calculated. Definition of Safety Stock:

Safety Stock

Extra units of inventory carried as protection against possible stockouts. The safety stock must be carried when the firm is not sure about either the demand for the product or lead time or both. In the case where demand is uncertain, safety stock is the difference between the maximum usage and the average usage multiplied by the lead time. For example, assume that a store is faced with an uncertain usage for its baseballs. Lead time is constant at two weeks. Normal weekly usage is 700 dozen but it can go as high as 850 dozen. – Answers.com

Service Level Used to autocalc safety stock, the higher the level the higher the safety stock required to satisfy this level.


MRP 3 Strategy Group: The strategy group groups all the planning strategies that can be used for a particular material. The planning strategy represents the procedure used for planning a material and is (technically speaking) controlled by the MRP types. Standard values include (Make to Stock, Prod by Lot, Planning with Assembly, Planning w/o Assembly, Make to Order / no Assembly Order, Assembly/Service Order)

Period Indicator: Specifies the period of time the consumptive values are to be stored in the system

Consumptive Mode: Indicator in demand management that controls the direction on the time axis in which sales orders or dependent requirements are allocated to and consume planned independent requirements.

Forward Consumption Per (period):

Planning Material: Material number whose planned independent requirements the system uses to consume the sales order of the material in question if you use the planning strategy, “planning with planning material”.

Conv. factor f plng material: Factor that the system uses to convert the quantity of the current material, measured in the base unit of measure, to the base unit quantity of the planning material.

Bwd Conumption Period: Determines the consumption period (in workdays) for backward consumption. Using backward consumption, sales orders, dependent requirements, or material reservations are assigned to and consume planned independent requirement quantities which lie within the consumption period and before the requirements date.

Mixed MRP: Determines whether the material is available for (subassembly planning with final assembly, gross requirements planning, subassembly planning without final assembly)

Planning Part: Key which specifically identifies the plant from which the planned independent requirements of the reference material comes from.

Planning matl BUnit: Unit of measure in which stocks of the planning material are managed

Availability Check: Specifies whether and how the system checks availability and generates requirements for materials planning.

Total Replenishment Lead Time: After all BOM levels have been procured or produced, it is not calculated in the system, but defined in this field as the total in-house production and or planned delivery times of the longest production path. This time is necessary if, for materials produced in-house, the replenishment lead time is to be taken into consideration in the availability check.


MRP 4 BOM explosion/dependent requirements

Selection method: Indicator determining the selection of the alternative BOM when requirements are exploded in material requirements planning.

  • With Selection by order quantity, the system chooses the alternative BOM into whose lot size range the order quantity falls. The lot size range and area of validity of the BOM apply.
  • With Selection by explosion date, the system chooses the alternative BOM into whose area of validity the date falls according to the setting BOM via dates.
  • With Selection by production version, the system chooses the alternative BOM defined in the valid production version. The lot size range and area of validity of the production version apply.
  • With Selection only by production version, the system chooses the alternative BOM defined in the valid production version. The lot size range and area of validity of the production version apply. If no production version is found, no production orders or process orders can be created.

Individual coll: Determines whether the requirements for the material are individual requirements or collective requirements.

Component scap%: Percentage of scrap that occurs during production, if the material is a component.

Requirements Group: Defines if the system groups together dependent requirements for the material on a daily basis.

MRP dep.requirements: Controls whether dependent requirements are relevant for MRP or not. Dependent requirements include dependent reservations and stock transfer requirements.

You only use this indicator in connection with planning strategies for make-to-stock production, assembly planning. Note that the indicator Dependent requirements not relevant to MRP should only be used when, for example, planned independent requirements exist for an assembly. In this case, no receipt elements for the dependent requirements in MRP should be created as receipts have already been created for the planned independent requirements.

Repetitive manufactring

Fair share rule: If demand exceeds supply, DRP uses fair share logic to calculate deployment based on on the available to deploy (ATD) quantity, the open sales orders, the safety stock, and the forecast.

REM profile: Repetitive manufacturing profile

Controls, via order type, whether you are working with make-to-order repetitive manufacturing, based on sales orders, or with make-to-stock repetitive manufacturing, based on no specific orders. Controls, via order type, whether you are working with make-to-order repetitive manufacturing, based on sales orders, or with make-to-stock repetitive manufacturing, based on no specific orders.

The repetitive manufacturing profile also determines;

  • how the system deals with activities when backflushing
  • which movement type is used to post goods receipts and goods issues
  • how planned order and run schedule quantities are reduced in the backflush transaction
  • how BOM corrections are made – if errors should occur when posting quantities to be backflushed

Push Indicator: If there is excess inventory, surplus stock is retained at its place of origin or is distributed according to push logic.

  • If you leave the field blank, the system uses pull distribution; the demand of the current day is met through deployment, but excess stock is not distributed.
  • If you select P, the system uses pull/push distribution; excess stock is distributed to meet the demand existing within the demand horizon according to the forecast in the DCs. Distribution begins on the first day for which requirements exist in the system and ends with the last day of the demand horizon.
  • If you select X, all the requirements defined in the system are met through deployment. Distribution begins on the first day when requirements exist and continues until all the requirements defined in the system are met.

Backflush Profile: (Backflush is the non manual posting of an issue of components some time after their actual physical withdrawal for an order.) The backflush profile groups together control parameters for the production backflushing process for the discrete industry. In DI backflushing, this profile replaces the repetitive manufacturing profile that was used previously. You add new control parameters for the DI backflusing process to the backflush profile only.