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Supply Chain Planning with SAP APO

Functional Solution Management SCM Apri 2010

Pain Points in your Global Supply Chain

Do you have problems with
Forecast quality? Excess inventory? Lack of visibility in your supply chain? Capacity shortages? Creating an optimized finite production plan?

and therefore face

Lost sales due to missing capacity / components or unnecessary production and high inventory Excessive work-in-capital; high scrap/expiry costs for products with shelf life or short life cycle No systematic consideration of inventory in your supply chain, which results in lost sales and/or excess inventory Lack of information for right planning decisions High set-up costs/times and low resource utilization
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Do you therefore need a tool to

improve forecast quality? systematically consider your inventory and calculate safety stock figures? increase the visibility in your global supply chain?

support you in creating optimized production plans in all your factories?

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improve your sales order entry confirmation and provide reliable sales order confirmation dates?

optimize your short term distribution and transportation planning?

How SAP APO is structured

Synchronize supply with demand in your global supply chain by balancing push and pull network-planning processes and by handling replenishment and production based on actual demand. APO DP: Improves the forecast quality and planning accuracy APO SNP: Improves visibility across your global supply chain and lowers inventory APO PP/DS: Supports you in creating optimized production plans APO gATP: Allows state-of-the-art sales order confirmation planning processes APO TP/VS: Optimizes transportation loads and minimizes transportation costs APO Alert Monitor: Powerful exception message system integrated in all APO planning modules

Advanced Planning & Optimization

Demand Planning

Supply Network Planning Alert Monitor

Production Planning & Detailed Scheduling

Global Available-to-Promise

Transportation Planning & Vehicle Scheduling

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Customers and releases SAP APO by the Numbers

First release: Current release: Outlook: SAP APO 1.1 (1998) SAP APO 7.0 (9th APO release) - part of SAP SCM 7.0 Planned next APO shipment: Q4/2009 Enhancement package 1 for SAP SCM 7.0 (APO 7.01) 2000+ CP, HighTech, Mill, IM&C, Chemicals, Automotive, Life Sciences

Active customers:

Top Industries Adoption:

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APO DP (Demand Planning)

Calculate and determine future demand to improve demand quality and accuracy
Features Comprehensive forecasting tool-set Statistical forecasting with causal and time-series methods Selection of best-fit model Automatic outlier detection available Highly configurable planning books with macro functionality Supporting aggregation / disaggregation logic Lifecycle planning Plan promotions separately from the rest of your forecast Track & monitor forecast accuracy Seasonal planning Collaborative demand planning
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Key Benefits Improved forecast quality One tool for power and business user Consolidated demand plan (different regions, countries, departments, )

Statistical Forecasting Methods

Causal Analysis Exponential smoothing Moving average Weighted moving average Trend Exponential smoothing Linear Regression Season (without trend) Exponential smoothing Trend - Season Exponential smoothing Manual Forecasting Seasonal linear regression Others Croston (sporadic demand) History No Forecast External Forecast Composite Forecast Own defined model selection based on error measure Combine different forecasts Weight each forecast (time independent or dynamic) Multiple Linear Regression (MLR) Influence Variables Climate (e.g. Temperature) Price Advertising Distribution ...

Constant A U T O M A T E D P I C K B E S T

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Demand Planning Master Data: Characteristic Value Combinations

Characteristics Characteristic values Characteristic value combinations (CVCs)


Prod01 Prod02 Prod03 DC01 DC02 DC03 Cust01 Cust02 Cust03


Prod01, DC01, Cust01 Prod01, DC01, Cust02 Prod01, DC01, Cust03 Prod01, DC02, Cust01 Prod01, DC03, Cust02 Prod01, DC03, Cust03 .

Planning Object Structure


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Duet Demand Planning (not part of APO)

Duet Demand Planning enables managers, sales executives, and planners to utilize the full Microsoft Excel capabilities as an intuitive planning front end for SAP SCM Faster and accurate plans aligned to customer demand requirements Leverages the full capabilities of Microsoft Excel (formulae, functions, graphics, etc.) Presents an intuitive interface that requires minimum training Delivers improved user acceptance and productivity through simple and timely access to relevant business information Designed as a composite application based on Enterprise SOA

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APO SNP (Supply Network Planning)

Calculates quantities to be produced and delivered to the locations to match customer demand and maintain desired service levels.
Features Integrate purchasing, manufacturing, distribution, and transportation Consider constraints and penalties to plan the product flow along the supply chain Advanced safety stock methods considering multilevel supply chain networks and demand variability Supports system wide inventory modeling and planning Enable planning on different levels of detail (aggregated planning) Choice of heuristic-, rule- or optimization-based algorithm Key Benefits Increased visibility over the overall supply chain Optimized sourcing and capacity utilization Reduced inventory levels Improved customer service

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Algorithm: SNP Heuristic

Planned Production Orders

70% 60% 40%

Planned Stock Transfers Planned Purchase Requisitions Demands





Local DC SNP Heuristic is a heuristic without considering constraints in the supply network. SNP Heuristic does the sourcing based on quota arrangements and priorities. As additional planning step, Capacity Levelling can be performed in order to resolve capacity overloads.
SAP 2008 / SNP Overview, Dr. Gerald Heisig, 11


Plant DC

Algorithm: Capable-To-Match (CTM)

Planned Production Orders -> Production Capacities -> Priority of PPM/PDS

Prio 1 Prio 1 Prio 2 Prio 2

Demands -> Priority Classes

Planned Purchase Requisitions -> Procurement Priorities

Planned Stock Transfers -> Transportation and Handling Capacities -> Quota Arrangements and Procurement Priority

Prio 1 Prio 1
Demands -> Priority Classes

CTM planning uses a constraint-based heuristic planning Local DC approach for the cross-supply-chain checks of capacities as well as material availability. CTM considers predefined supply categories and demand priorities CTM supports characteristic-based planning (as of SCM 7.0)
SAP 2008 / SNP Overview, Dr. Gerald Heisig, 12


Plant DC

Algorithm: SNP Optimization

Planned Production Orders -> Production Capacities -> Production Costs

$ $ $ $
Planned Purchase Requisitions -> Procurement Costs

Demands -> Cost for - non deliveries - late deliveries

Planned Stock Transfers -> Transportation and Handling Capacities -> Transportation Cost

Local DC SNP Optimization is a cost-based optimization considering all capacity constraints and material availability in the supply network. SNP Optimization determines the optimal solution based on predefined costs for supply alternatives and demands.
SAP 2008 / SNP Overview, Dr. Gerald Heisig, 13


Plant DC

Distribution Planning: Deployment and Transport Load Builder


Stock Supply Stock



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 a 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.
SAP 2008 / SNP Overview, Dr. Gerald Heisig, 14

The Transport Load Builder (TLB) groups deployment results for single products (i.e. confirmed stock transport purchase requisitions) to multi product stock transport orders. The TLB considers factors like volume, weight or number of pallets to fill transport vehicles optimal.

Plant DC

Operational Planning Production Planning and Detailed Scheduling (PP/DS)

Create procurement proposals Optimize and plan the resource schedule and the order dates/times in detail Plan critical products and bottleneck resources Create executable production plans

Reduce lead times Increase on-time delivery performance Increase the throughput of products Reduce the stock costs, through better coordination of resources, production, and procurement Optimization integrated into PP/DS

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APO PP/DS (Production Planning & Detailed Scheduling)

Production Planning delivers a short term plan that matches overall supply to demand, given available resources and production methodology.
Features Multi-level production planning Order Pegging Use existing or own developed heuristics Key Benefits Determines how, when, and where resources and materials should be deployed to accomplish the production goals. Master planning for materials and capacity (resource loads).

Detailed Production Scheduling determines optimal production sequence for execution to meet delivery commitments based on actual constraints on the shop floor.
Features Capacity-Load Optimization Optimal Sequencing Flexible & Graphical Activity Scheduling What-if Analysis & Simulation Configurable Exception Alert Monitor
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Key Benefits Optimal production sequence that is feasible and can be executed. Allows simulation of various planning scenarios to determine optimal schedule. Optimization based on actual constraints ensures reliable delivery due date promises.

Powerful Tools : Detailed Scheduling Planning Board

Resource View

Save your own simulation

Product View

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Feature: Multi-level problem solving with order pegging

Sales Order
10 10 30 20 20 10 10 100 40 40 50 Shortage 60 (-10)

Planned Order
Dependent Req.
30 30 50 20 50 50 50 100 30 (+20) Excess coverage 50 50 80 30 70 Delay 50 20 50 50

Planned Order
Dependent Req.

Pur. Requisition

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Screenshot: Order context (table view)


Which orders cover the demand

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Feature: Capacity Reservations

Guarantee most profitable capacity utilization Import from SNP optimization result Flexible levels of finite check Release capacity prior to production to fill total capacity Conversion from time to production unit Example Capacity Reservations for named customers Unreserved capacity everyone can use it Collective reservation not named customers can use it

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Industry Solutions
IMC and AD: Mill and Mining: Auto: Scheduling for Project Manufacturing Block Planning Model Mix Planning

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Production Scheduling
Project Planning Advance Procurement Engineering Production Planning & Optimization Production Scheduling Manufacturing Execution Engineering Change Management Quality Assurance & Control Shipping, Assembly & Start-Up

Monitor alerts on projects / main assemblies

Pegging automatic matching of demand and supply Visualization of complete order context Alerts - Early warning system late orders, bottlenecks Filter on alerts in order context, sort late orders by delay
Project Planning


Interactive scheduling to reduce late projects, orders

Detect critical path for order context Reduce buffers on critical path Reduce duration of project order operations Multi-level forwards/backwards scheduling
Procurement / Warehouse

Interactive scheduling to reduce capacity overload

Evaluate resource utilization, filter on overload Alternative work centers, sequences, production versions Switch to external procurement, subcontracting Work overtime, run additional shifts

Adaptiveness and Simulation

What-if simulation, compare alternatives

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Block Planning (Mill and Mining)

Business Requirement
Combine optimal resource utilization and precise customer due dates Consider constraints like minimal and maximal lot sizes, setup time, fixed maintenance intervals etc. Plan bottleneck resources in an early planning phase where the final products and product characteristics are not known

Define time intervals on a resource where products with certain characteristics can be produced Operations of orders are scheduled into matching blocks

100 to, grade A, grammage 180 Product xy A, 180 Quality S Width 1000
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120 to, A, 200

75 to, C, 150

Product vb A, 200 Quality M Width 1200

Model-Mix Planning: Situation


Line network


Quantity Distance X in Y

Block Equal distribution Position

Generation of a feasible plan for highly configurable products with high volume Adherence to promised delivery date

Business value
Balanced usage of production resources Early identification of potential bottlenecks Reliable delivery date leads to increased customer satisfaction

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Period Slot


day 1

day x

day x+1

day y

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A snapshot of SAP SCM customers

Demand Planning and Supply Planning

Order Fulfillment & Transportation Management

Production Planning & Detailed Scheduling

Supply Network Collaboration

SAP 2007Page 26 Overview 26 SAP 2008 / / PP/DS


Ms. Sherry Gong Ms. Fan Li

Thank you for your interest!
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This presentation is a preliminary version and not subject to your license agreement or any other agreement with SAP. This document contains only intended strategies, developments, and functionalities of the SAP product and is not intended to be binding upon SAP to any particular course of business, product strategy, and/or development. Please note that this document is subject to change and may be changed by SAP at any time without notice. SAP assumes no responsibility for errors or omissions in this document.