Multi-Method Supply Planning in SAP APO

Screenshots and examples from SAP APO. 

What The Book Covers

Which supply planning method meets your company’s business requirements? The answer might surprise you!

There is no one right supply planning method for all situations, even within one company! It is unnecessary to choose only one method, and using multiple supply planning methods is feasible and, in most cases, has many advantages over using a single method.

This book explains why no one supply planning method meets all requirements and lists the many benefits of using multiple supply planning methods. It gives practical advice about selecting supply planning methods and method modifiers and goes deep into the “how-to” of implementing mixed methods.

By reading this book, you will:

• Understand the supply planning methods available within SAP SNP.
• Separate the sales rhetoric from the truth when making software purchasing decisions.
• Discover prototypes and the benefits of testing supply planning methods before implementation.
• Explore the information and human challenges of combining multiple supply planning methods.
• Make multiple supply planning methods work together in either one or various software applications.

Drawing upon his own vast experience as an implementation consultant, and through extensive use of graphics and screen images from SAP SNP and other software, Shaun Snapp empowers you to choose supply planning methods with confidence. And to integrate multiple methods in one or more applications successfully.

A Book Based in Reality

The book provides many examples from real-life project experiences, the emphasis being on the reality of APO projects.

Interconnected to Web Information

In order the keep the book at a manageable and easily readable length, the book also provides numerous links out to the SCM Focus site, where supporting articles allow readers to get into more detail on topics that interest them.

The Methods Available for Supply Planning

Before we get into how to use multiple supply planning methods, let’s review the supply planning methods that are available. Now is also an excellent time to explain that this book covers various methods for either the S&OP and rough-cut capacity plan or the initial supply plan, but does not include using multiple methods for the deployment plan or the redeployment. There is a reason for this: while S&OP, rough-cut capacity plan, and the initial supply plan use the same methods, only in rare instances would the deployment and redeployment plan use multiple ways. A brief explanation of the different supply planning threads is included below:

1. S&OP & Rough Cut Capacity Plan: These long-range planning threads and are generally not part of the live environment. They are used for analytical purposes rather than to drive recommendations to the ERP system.
2. The Initial Supply Plan (performed by MRP in ERP systems) Produces initial production and procurement plan. It is focused on bringing stock into the supply network, and in creating stock with planned production orders. It can also be called the master production schedule (MPS) if the initial supply plan is run under specific criteria. https://www.brightworkresearch.com/supplyplanning/2011/10/02/the-four-factors-that-make-up-the-master-production-schedule/
3. The Deployment Plan (performed by DRP in ERP systems). Focused on pushing stock from locations at the beginning of the supply network to the end of the supply network.
4. The Redeployment Plan (performed by specialized applications with redeployment functionality or with a custom report). Focused on repositioning stock, which is already in the supply network to locations where it has a higher probability of consumption. https://www.brightworkresearch.com/inventoryoptimizationmultiechelon/2011/10/redeployment/

The Complexity of Method Combination

The tricky part is in understanding how to combine the different methods into a coherent solution logically. Much time is spent debating between the various supply planning methods, but very little is written on how to integrate multiple methods properly. That is unfortunate because all methods and method modifiers can be of value in some circumstances.

Furthermore, the various supply planning methods cannot be compared based on their sophistication, the most common way to grade each technique. Some met is exceptionally sophisticated but is also complex, expensive, and challenging to implement, to troubleshoot, and to explain. For instance, the most complicated methods in supply planning are optimization (both cost-based and inventory optimization and multi-echelon planning). These methods can provide a superior output if implemented correctly, but they cost quite a bit more to achieve.

There are debates as to which methods have the highest maintenance costs because maintenance must be segmented into the costs associated with the planners (or the business side of maintenance) versus the IT costs of maintaining the solution. For example, most companies that implemented advanced supply planning applications since the mid-1990s are, in fact, still using MRP and DRP. While these applications are inexpensive to maintain from an IT perspective (relatively speaking), they require more maintenance by planners who must make adjustments to the results.

Because this topic is complex and multifaceted, I will halt the coverage here. It is, however, a primary topic of my book Supply Planning with MRP, DRP, and APS Software. A complicated supply planning method may be a perfect fit for a company; the company may implement it quite well. However, a complicated supply planning method may take too much processing time for every product location in the entire supply network. But moving some product locations that do not require the complexity of the solution to a more straightforward method may reduce the runtime of the planning run, making the overall solution feasible.

Frequently the decision of which method to use is made without truly understanding the costs and benefits of different methods. For instance, the following limitations apply to method selection:

1. Many companies are driven to constraint-based approaches but may lack the interest or dedication to maintain the resource constraint master data. Companies that implement constraint-based planning generally must increase their investment in master data and their ability to maintain master data. Most companies are willing to purchase new software, but the investment required to build up a company’s master data capabilities is a much tougher sell.
2. Supply planning applications are sold based on being able to plan on multiple types of capacity constraints. In actual practice, the vast majority of companies that do perform constraint-based planning only limitation on production resources. Therefore, most of the code for other types of resources go unused. More on resources can be found at the following link: https://www.brightworkresearch.com/sapplanning/2008/09/14/resources/
3. Companies often select CTM because they want to be able to prioritize either demand or supply or both. However, without a clear plan for how to make these decisions, companies can end up implementing CTM without performing very much prioritization at all. https://www.brightworkresearch.com/sapplanning/2009/12/08/customer-prioritization-and-ctm/
4. Companies may select cost optimization, but without putting any effort into determining if they can set the costs that are necessary to drive the optimizer properly. Companies can go on for years without even evaluating the costs, or just as wrong, with an IT department that attempts to protect or hide the flaws in the cost design. As well as the overall configuration from the business to maintain the system’s “credibility.”

Arriving at the right combination of supply planning methods requires a detailed study of all the requirements and data necessary to drive the method. Without that upfront effort and knowledge, a method can end up being selected, and then be perpetuated because of the strong tendency not to change decisions after they have been made.

To return to the selection of methods and method modifiers, the graphic shown previously is provided again below:

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Chapters

• Chapter 1: Introduction
• Chapter 2: The Different Supply Planning Methods Available within SAP SNP
• Chapter 3: Combining Supply Planning Methods Across External Planning Systems and ERP Systems
• Chapter 4: Preparing for the Prototype for Multi-Method Testing
• Chapter 5: Prototyping the Multi-Method Supply Planning Model
• Chapter 6: Coding the Product-Location Database
• Chapter 7: Planning Beyond a Single Supply Planning Method Per Echelon
• Chapter 8: Creating a Dynamic Master Data Selection for Automatic Product Location Switching Between Methods
• Chapter 9: Overcoming the Human and Information Challenges of the Multi-Method Approach
• Chapter 10: Combining SNP with Inventory Optimization and Multi-Echelon Planning
• Chapter 11: Conclusion

Table of Contents

Chapter 1: Introduction

• SAP SNP versus Other Supply Planning Applications
• The Use of ScreenShots in the Book
• How Writing Bias is Controlled at SCM Focus and SCM Focus Press
• The Approach to the Book
• The Book’s Roadmap
• The SCM Focus Site

Chapter 2: The Different Supply Planning Methods Available within SAP SNP

• Decoding the Statements Regarding the Supply Planning Methods Used
• The Methods Available for Supply Planning
• The Complexity of Method Combination
• Why Are There Two Reorder Point Modifiers?
• Adjusting the Reorder Point Macro in APO to Not Forward Calculate Beyond the Replenishment Lead Time
• Conclusion

Chapter 3: Combining Supply Planning Methods Across External Planning Systems and ERP Systems

• A Trip Down Memory Lane
• The Disadvantages of Splitting the Product Database Between ERP and the External Planning System
• Multiple Systems and Training and Familiarity
• The Enhanced User Interface Capabilities of External Planning Systems
• Reporting Implications
• Gaining Access to SAP ERP Method Modifiers
• Conclusion

Chapter 4: Preparing for the Prototype for Multi-Method Testing

• Prototyping to Obtain the Highest Quality Business Input
• Setting up the Demo Map
• The Demo Map
• Documenting the Prototype / Demo Matrix
• Configuring the Method Profiles
• Setting up the Method Modifiers
• Background on the Configuration of Multiple Supply Planning Methods
• Setting up the Prototype
• Understanding the Planning Book
• The Planning Book Configuration
• The Importance of Documenting Macros
• Understanding the Structures in APO
• Understanding the Areas of the Planning Book
• Understanding the Key Figures of the Planning Book
• Composition of the Key Figures
• Background on the Flow of Requisitions in SNP
• The Flow of the Supply Network, Order Categories, and the Planning Book
• Understanding the Product View
• The Elements Tab
• The Pegging Overview
• Conclusion

Chapter 5: Prototyping the Multi-Method Supply Planning Model

• Understanding Prototyping
• Wikipedia has the following definition of a prototype:
• Prototyping Post Go-Live
• Finally…the Actual Prototype Testing
• The Prototype Design
• The Planning Book Before Step One:
• The Pegging Run
• The Pegging Relationship Explained
• Bugs Bugs Bugs
• Conclusion for Test One
• Test Two: Run Sequence: DC — CTM, RDC — Reorder Point, Factory — Target Stock Level
• The Planning Book Before Step One:
• Conclusion for Test Two
• Test Three: Run Sequence DC — CTM, RDC — CTM, Factory — Target Days Supply
• The Planning Book Before Step One
• Conclusion for Test Three
• Conclusion

Chapter 6: Coding the Product-Location Database

• Spreadsheet Steps to Creating the Product-Location Spreadsheet/Database
• Visibility in Supply Planning Systems
• Conclusion

Chapter 7: Planning Beyond a Single Supply Planning Method Per Echelon

• Horizontal versus Vertical Location-to-Location Interaction
• Effectively Combining Other Methods Not Explained in the Prototype
• Conclusion

Chapter 8: Creating a Dynamic Master Data Selection for Automatic Product Location Switching Between Methods

• Understanding the Static Master Data Selection
• The CTM Dynamic Master Data Selection
• Pseudo Dynamic Selection with the SNP Heuristic and the SNP Cost Optimizer
• Conclusion

Chapter 9: Overcoming the Human and Information Challenges of the Multi-Method Approach

• Information Challenges Human Challenges to Implement the Mixed Method Approach
• Why the Continual Promise of Forecast Accuracy is Not a Way Out of Finding Supply Planning Solutions
• Why Advanced Planning Consultants Often Question a Multi-Method Approach
• Legitimate Concerns Regarding the Multi-Method Approach Conclusion

Chapter 10: Combining SNP with Inventory Optimization and Multi-Echelon Planning

• Using SNP with MEIO
• Using the Different Master Data Parameters from the MEIO Application
• The Human and Process Challenges of Combining MEIO and Other Supply Planning Applications
• Conclusion

Chapter 11: Conclusion

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Questions about the Book?

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