Sap planning

SAP supply chain Planning in wholesale

/distribution industry Jalil mousavi

SAP Logistic &MM Consultant

https://ir.linkedin.com/in/jalil-mousavi-b1564756

© 2011 SAP AG. All rights reserved. 2

Agenda:

Wholesale & dist.

Aggregate planning

SOP

RRP

Sale forecast

Demand management

DRP

MRP for logistics

MD

MPS

RCCP

MRP

CRP

Detailed scheduling

PAC

SAP Planning and best practice for FMCG


Wholesale Distribution are those companies acting as intermediaries between Manufacturers and consumers.

The wholesale distribution industry includes companies that sell products to retailers, merchants, contractors,

and /or industrial,institutional,and commercial users ,however ,do not sell in significant amounts to ultimate

household consumers. Specific sub industries represented in this segment are divided into durable goods (60%)

and nondurable goods (40%) distribution.

Wholesale Distribution


Wholesale/distribution industry types:

Large ASSORTMENT

Distributors sell a Varity (broad-line) of products , allowing customers

minimize the number of faces-to-customer , transactions , and deliveries .

Small Quantities

Distributors sell a small number of units very frequently . Customers want to

hold little inventory and purchase only in useable quantities.

Short lead times

Distributors sell products that need to found and obtained quickly with low

customers sourcing costs. The times between ordering and delivering can be

measured in hours

Value added services

Distributors provide special unique services that include , sorting , packaging

, labeling , kitting , assembly , installation service , etc


SAP(ERP,SCM,…)

High Performance Reporting and analytic platform

High Performance(Demand Planning , Distribution Planning , etc)

Sale and operation planning

Financial Planning

Strategic

Operational

Tactical

Execution

What? • Supply policies (service levels) • Network design • Strategic sourcing

Daily

planning

Now–2

weeks out

Quarterly or yearly planning

1–10 years out

Weekly planning

Up to 3 months out

Monthly or quarterly planning

3 months–1 year out

Planning Timeframe Objectives

When? Where? • Schedule, monitor, and adjust

plan • Order and inventory tracking

Execute • Order fulfillment • Material

transport

Strategic

planning

Supply chain integrity and strategy levels with sap

How?


Sap best practice for FMCG & WH & Dis

Demand planning

MRP

Strategic sourcing

Purchase order mgt

Investment buying

Supplier rebates

Cross docking

Master data management

Invoice verification

Commissions

Inventory management

Profitability analysis

Credit management

Free goods

Mass price maintenance

Price protection

DRP & Deployment

Inbound logistics Outbound logistics internal processing


supply Sale Distribution production

Lo

ng

R

an

ge

M

ediu

m r

ang

e

Sh

ort

ra

ng

e

Strategic planning

Sale forecasting

Material

Requirement Planning

Contract management

MPS

CRP

RCCP

DRP Demand Planning

Available To Promise

Inventory

Replenishment

Transportation management

Safety stock

Production

planning

Production

activity control

Planned order

SCOR & SAP planning

Aggregate planning

SOP

© 2011 SAP AG. All rights reserved. 8 Figure 6.1

Demand

Management

Material

Requirement

Planning(MRP)

Distribution

Requirement

Planning(DRP) Master

Production

Scheduling(MPS

)

SOP

Capacity

Requirement

Planning(CRP)

Rough-Cut

Capacity

Planning(RCC

P)

Resource

Requirement

Planning(RRP)

Purchase &

planning

control

BOM

Long Range (More

than 1 year)

Medium range(6 to

18 month)

Short

range(Days/Week)

Production

activity control

Capacity level Material plan Planning horizon

SAP Planning level in FMCG & WH & Dis


sop

Demand

management

Sale

forecasting Capacity

leveling

Master

production

schedule

RCCP

Planned

Production

order

Planned

PR.

Capacity

Req.

Planning

Detailed

Scheduling Production

activity control

Distributio

n Req.

Planning

Capacity

req.

planning

Purchasing

MRP

WH/SL.

SD MRP or MD

SAP Planning

Updated


Aggregate Production Plan

Hierarchical planning - process that translates annual business & marketing plans & demand forecasts into a production plan for a product family (products that share similar characteristics) in a plant or facility leading to the Aggregate Production Plan (APP)

Planning horizon of APP is at least one year & is usually rolled forward by three months every quarter

Includes costs relevant to the aggregate planning decision include inventory, setup, machine operation, hiring, firing, training, & overtime costs


Aggregate Production Plan

Three basic production strategies : 1. Chase Strategy - Adjusts capacity to match demand. Firm hires & lays

off workers to match demand. Finished goods inventory remains constant. Works well for make-to-order firms

2. Level Strategy - Relies on a constant output rate while varying inventory & backlog according to fluctuating demand. Firm relies on fluctuating finished goods & backlogs to meet demand. Works well for make-to-stock firms

3. Mixed Production Strategy - Maintains stable core workforce while using other short-term means, such as overtime, subcontracting & part time helpers to manage short-term demand


Sales and Operations Planning

Sales and operations planning (SOP):

Input: sales forecast provided by Marketing

Output: production plan designed to balance market demand with

production capacity

Production plan is the input to the next step, demand management

Disaggregating the sales and operations plan

Companies typically develop sales and operations plans for product groups

SAP ERP system allows any number of products to be assigned to a product group

Sales and operation plan disaggregated

Production plan quantities specified for the group are transferred to the individual

products that make up the group

Sales & Operations Planning (SOP) is a universal planning and forecasting tool that

you can use to plan any area of logistics (for example, sales and distribution, production,

purchasing)


Sales and Operations Planning

In SAP ERP, sales forecast can be made using:

• Historical sales data from the Sales and Distribution (SD) module

• Input from plans developed in Controlling (CO) module

• CO module Profit goals for company can be set Sales levels needed to

meet the profit goals can be estimated

© 2011 SAP AG. All rights reserved. 14 14-14

Sales and Operations Planning Process

Sales&

operations

planning

Capacity

constraints

Demand

forecasts

Company

policies

Strategic

objectives

Financial

/CO

MPS

Backlogs ,

backorder

Workforce and

inventory level

Customer service level

Demand management

Sales per month by

product family

Sales

Plan

Operation

plan

Monthly update


Resource Requirements Planning (RRP)

Rough-cut planning profiles are used in resource leveling. In a rough-cut planning

profile, you plan the requirements of one or more of the following resources:

• Work center capacities

• Materials (typically, raw materials)

• Production resources/tools

• Costs

Capacity leveling is an important tool for creating realistic plans. It helps you

ensure that your targets are within capacity constraints. The following topic

describes how to use capacity leveling from the point of view of SOP.

SOP supports planning at any level of your organizational hierarchy from high-

level planning across national boundaries to the detailed planning of finished

products.


Demand Management

The function of Demand Management is to determine requirement quantities and

delivery dates for finished products assemblies. Customer requirements are

created in sales order management. To create a demand program, Demand

Management uses planned independent requirements and customer

requirements.

To create the demand program, you must define the planning strategy for a

product. Planning strategies represent the methods of production for planning

and manufacturing or procuring a product.

Using these strategies, you can decide if production is triggered by sales orders

(make-to-order production), or if it is not triggered by sales orders (make-to-

stock production).You can have sales orders and stock orders in the demand

program.


DM & SOP

You can pass on data planned in Flexible Planning or Standard SOP to Demand

Management.

Demand Management determines the requirement dates and requirement quantities for

important assemblies and specifies the strategies for planning and producing/procuring

finished

products. The result of Demand Management is the demand program. The demand

program

differentiates planned independent requirements and customer independent

requirements.


Demand Management & MPS

Links the sales and operations planning process with detailed scheduling and

materials requirements planning processes

Output: master production schedule (MPS)

Production plan for all finished goods

© 2011 SAP AG. All rights reserved. 19 19

Improvements with SAP FSCM:

Improve efficiency in credit & collection

processes

Ensure consistent company-wide credit

policy and process

Manage proactive credit risk management

Forecast cash levels more accurately

Increase transparency in dispute

handling and accounting

Gain insights to avoid future credit &

collection issues & disputes

Optimize the financial supply chain not only

within the company but also with external

business partners

Credit

Management

Biller

Direct

Dispute

Management

Collections

Management

Cash &

Liquidity

Management

In-House

Cash

Bank

Communication

Management

Treasury &

Risk

Management

SAP FINANCIAL

SUPPLY CHAIN

MANAGEMENT

Treasury

Mgt. of receivables

FSCM


For the optimization of receivables most benefits can be reached by

implementing credit, collections and dispute management.

20

Cross department dispute resolution and integration of

workflows

Automated correspondence activities and internal

escalation

Support of various communication channels

Provision of daily collection work lists

Functions to process and view open receivables

Broad support of the collections procedure

Integration of dispute & credit management

Control and monitor customers credit limit and exposure

Uniform credit rules and automatic credit limit

adjustments

Use of external information about credit ratings

Source: SAP

The functionalities … … and benefits

Dispute

Management

Collections

Management

Credit

Management

All related information is within

the system

Resolve issues before invoice

due date

35% efficiency increase in

dispute management

Identify automatically customers to be called

Efficient and comprehensive information provided

40% efficiency increase in collections management

Focus sales on “good” customers

Comprehensive and up-to-date

information for credit checks

Apply company-wide credit policy

automatically

Overview of the credit, collections and dispute management


Sales Forecasting

With the forecast, you can estimate the future progression of values in a time series on the

basis of past history. You do this either online or in the background.

In standard SOP, you can forecast the sales quantities of a product group or material. The

system bases the forecast on the historical consumption of materials. It then aggregates

these results to the product group level. Consumption data includes every kind of goods

issue, even goods that have been written off as scrap.


Sales Forecasting (cont’d.)

SAP’s ERP system takes an integrated approach

Whenever a sale is recorded in Sales and Distribution (SD)

module, quantity sold is recorded as a consumption value for that

material

Simple forecasting technique

Use a prior period’s sales and then adjust those figures for current

conditions

© 2011 SAP AG. All rights reserved. 23 Figure 6.1

Demand

Management SOP

Resource

Requirement

Planning(RRP)

Long Range (More

than 1 year)


Level 0_planning


Evolution of DC-Inventory Management

Traditional Replenishment Inventory: Lot Size/ Order Point Logic Single item focus Emphasis on cost optimization Long run, steady state approach

The MRP / DRP Approach:

Scheduling emphasis

Focus on quantities and times, not cost

Multiple, inter-related items and locations

Simple heuristic rules

MIT Center for Transportation & Logistics - ESD.260 17 © Chris Caplice, MIT


Evolution cont.


MRP / DRP have limited ability to deal with: Capacity restrictions in production and distribution “set-up” costs fixed and variable shipping costs alternative sources of supply network transshipment alternatives expediting opportunities Next Steps in MRP/DRP

Establish a time-phased MRP/MPS/DRP network Apply optimization tools to the network Consider cost trade-offs across items, locations, and time periods Deal with shortcomings listed above


DRP?

DRP provides the basis for integrating supply chain inventory information and physical

distribution activities with the Manufacturing Planning and Control system.

Managing the flow of materials between firms, warehouses, distribution centers.

DRP helps manage these material flows. Just like MRP did in Manufacturing.

Links firms in the supply chain by providing planning records that carry demand

information from receiving points to supply points and vice versa.


DRP Role

DRP coordinates material flows through the physical distribution system

Effectively managing the flow of goods and inventories between the

firm and the market

Planned timings and quantities for replenishing inventories throughout the

physical distribution system

Provides information to the master scheduler in a format consistent with

MRP records


DRP in the Supply Chain

DRP links firms in the supply chain

Planning records carry demand information from receiving points to

supply points and returns supply information to the receiving points

DRP integrates key linkages in the supply network

DRP can be linked to the MPC systems of the manufacturer, customers,

and suppliers

Spans the boundary from internal to external MPC


Distribution requirements planning and the logistic system

Vehicle loading

Vehicle capacity

planning

Warehouse

receipt planning

Vehicle

dispatching

Distribution

requirement

planning

Master Production

Scheduling

Demand

Management


A Multi-Echelon Inventory System


plant

RDC1 RDC2

LDC3 LDC4 LDC1 LDC2

R7 R8 R6 R5 R4 R3 R2 R1

Higher than expected demand Lower than expected demand

SHORTAGES EXCESS


DRP & Demand Management

Demand management is the connection between mfg. and the marketplace. Plans derived from the DRP information and shipping requirements are the basis for managing the logistics system. Continually adjusts changes in the demand, sending inventories from central warehouse to distribution centers where they are needed.

DRP is connected to the logistics system

By helping determine vehicle capacity planning.

Helping loading.

Developing vehicle dispatching.

Determining warehouse capacity.

Provides the data to accurately say when availability will be improved and

delivery can be expected.


DRP and MPS

DRP greatest payoff is from integrating records and information. Crossing the area of inter firm MPC systems means negotiating with supply chain partners for sharing costs and benefits. DRP permits evaluation of current conditions to determine if mfg. priorities need to revised. Provides the master scheduler better info to match mfg. output with shipment needs.


MRP / DRP Integration

Purchase Orders

MRP

MPS

DRP

Product

CDC

RDC

Retail Retail Retail Retail

Sales/Marketing Plan



34

DRP Benefits

Helps improve customer service

Provides a better and faster understanding of the impact of shortages and/or promotions

Helps reduce costs Inventory Freight Production

Provides integration between the stages in the supply chain


35

Master Production Scheduling

Controls the timing and quantity of production for products or product families

Primary interface point for actual customer orders

Coordinates forecasted demand and actual orders with production activity

Serves as tool for agreement between marketing and operations (but at a

different level than SOP)

More detailed than SOP

weekly versus monthly

specific products versus “average”

must satisfy the needs of marketing

must be feasible for operations


36

Master Scheduling Process

Master

Scheduling

Beginning inventory

Forecast

Committed

Customer orders

Inputs Outputs

Projected inventory

Master production schedule

ATP: Uncommitted inventory


37

A Final View of Master Scheduling

SOP

MPS

Marketing Operations

Rough-Cut Capacity Plan


Rough Cut Capacity Planning (RCCP)

Compares the master production scheduling resource requirements to the capacity

available in critical work centers. You use RCCP to determine if you should revise

the master schedule to create feasible work loads or improve utilization of limited

resources.

Use output from master production scheduler (quantity and due dates)

Use a bill of resources which has times for each part type on each resource

Compare with resource time capacity over planning period

Quick check on capacity of key resources

• Use Bill of Resource (BOR) for each item in MPS

• Generates usage of resources by exploding MPS against BOR

(offset by lead times)

• Infeasibilities addressed by altering MPS or adding capacity (e.g.,

overtime)


Figure 6.1

Demand

Management

Distribution

Requirement

Planning(DRP) Master

Production

Scheduling(MPS

)

SOP

Rough-Cut

Capacity

Planning(RCC

P)

Resource

Requirement

Planning(RRP)

Long Range (More

than 1 year)

Medium range(6 to

18 month)


Level 1_planning


Material Requirements Planning (MRP)

Uses the master production schedule, open

orders, the bill of materials, and inventory

records to Calculate time-phased net

requirements for every item,and creates a plan

for covering material requirements.

End ite

m

Com

ponent

R

aw

mate

rial

R

Time

Time

Time The MRP approach


MRP inputs and outputs


MRP COMPONENT

Component Description

Bills of material •The components and relationships required to produce a parent item. Use

bills of material to: Maintain many configurations for an item without creating

additional part numbers

•Define quantities of intermediate products in any unit of measure as they

progress through the manufacturing process

•Enter similar items by copying bills of material, routings, and processes

Routings •The operations required to produce the parent item. Use routings to: Define

each step of the manufacturing process with allowances for anticipated yield

and scrap

•Add alternate operations to routings

Work centers •The facilities on the shop floor where the routing operations occur. Use work

centers to: Define work center number and description

•Define the number of operators or machines

•Define setup, labor, machine, and overhead rates

•Define information for Capacity Planning

Engineering change

orders (ECOs)

•The document that you use to define and implement changes to your

products structure. Use engineering change orders to: Control item changes

from a single source

•Incorporate approved changes to bills of material


Lot Sizing in MRP Systems

• Lot-for-lot (L4L) ordering policy

• Minimum order quantity (Ex: Min 250)

• Multiple order quantity (Ex: X100)

• Economic order quantity (Ex: 350; annual demand: 4 200)

• Periodic order quantity (Ex: 2 months)


Capacity Requirements Planning (CRP)

Compares the material requirements plans to the capacity available in all work

centers. You use CRP to determine if you should revise the material requirements

plan to create feasible work loads or improve utilization of limited resources

• Uses routing data (work centers and times) for all items

• Explodes orders against routing information

• Generates usage profile of all work centers

• Identifies overload conditions

• More detailed than RCCP

• No provision for fixing problems

• Lead times remain fixed despite queuing


PP: detailed scheduling

Detailed plan of what is to be produced, considering machine capacity and

available labor

One key decision in detailed production scheduling How long to make the

production runs for each product Production run length requires a balance

between setup costs and holding costs to minimize total costs to the company


Production Activity Control

Responsible for executing the:

• Master Production Schedule (MPS)

• Materials Requirements Plan (MRP)

At the same time:

• Make good use of labour , machines and materials

• Minimize work-in-process inventory

• Maintain customer service

• Manage day-to-day activity and provide support


PAC Input / Output Control

Input Rate Control

Output Rate Control

Queue (Load, WIP)

• Control the work going into and out of a work

center: Input/output control

• Set the priority of orders to run at each work

center

Sap planning

Technology

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