SAP: ADVANCED PLANNING AND OPTIMIZATION

~BY PRIYANSHU SAHU

What is SAP APO?

SAP Advanced Planning and Optimization (APO) is a collection of supply chain planning tools
that offers a fully integrated set of solutions for planning and executing your company's
supply chain processes. It is used to design and execute supply chain procedures in SCM
(Supply Chain Management). In short, it is a tool that helps organizations manage their
supply chain.

Order generation, production planning, scheduling and sequencing, pricing, and shipping are
just a few of the internal activities that the platform was designed to assist businesses to
achieve high consistency in. APO may obtain real-time client demand information from
merchants, which is then utilised to create demand triggers. These triggers are quite
complicated, considering factors such as production cycles and raw material delivery
timetables. This allows businesses to better predict the volume and variety of products
needed to fulfil a client's future needs.

What is SAP APO Made Up of?

SAP APO is a collection of programmes that handle the supply chain planning needs of most
businesses. How SAP ERP supply chain planning varies from SAP APO advanced planning is a
topic of considerable interest to businesses. To demonstrate how this works, let's look at
one area that many people are familiar with: supply network planning. SAP ERP has a
reduced version of some SAP APO capabilities, so an application from SAP ERP may be
substituted, at a lower level of functionality, for an application in SAP APO.

Important Components of SAP APO:

SAP APO has different components to provide effective solutions to the users and their
supply chain processes. Following are the main components of SAP APO:
 Demand Planning (DP)

Streamline Your Planning and Execution Processes with Accurate Demand Plans.

Supply Network Planning (SNP)

Effectively plan and execute your company’s supply chain processes for distribution,
production, replenishment and procurement.

Production Planning and Detailed Scheduling (PP/DS)

Manufacturing detailed security check.

Global Available to Promise (GATP)

Efficiently Meet the Demand and Delivery Promises

Transportation Planning and Vehicle Scheduling

Planning transportation routes

Let’s learn about them in detail.

 APO Demand Planning (DP):

Introduction:
A successful business depends heavily on market forecasts and planning. “Demand
Planning” is the art of identifying future client expectations and executing those
demands via corporate supply chain and business management.

Demand Planning is built on a user-friendly Microsoft Excel interface that combines

automated and exception-based planning procedures, as well as traditional and manual
planning features. It offers superior forecasting and demand planning capabilities to
assist businesses in detecting demand changes as soon as possible.

Market demand forecasting with SAP APO Demand Planning is often used for marketing
and promotion.

How SAP DP Can be Implemented?

SAP APO Demand Planning (DP) integrates with SAP APO Supply Network Planning and
provides forecasting and database features (SNP).  SAP DP may be applied at a variety of
levels, for example, it can be used to describe at both a high and detailed level. It has the
ability to swiftly aggregate projections at multiple levels of the hierarchy. SAP DP is
particularly advantageous to businesses since it is built on the same database as SAP
NetWeaver Business Warehouse (BW), the SAP data warehousing solution.

Demand Planning as the Most Popular Application:

SAP DP is the SAP APO application that has the most users. SAP DP was one of the first
programmes released with SAP APO, alongside Supply Network Planning (SNP) and
 Production Planning and Detailed Scheduling (PP/DS). SAP DP is popular because many
organisations are interested in forecasting and strive to enhance the quality of their
predictions on a regular basis. While SAP ERP offers some basic forecasting features, SAP
DP provides considerably more extensive forecasting capabilities. SAP DP addresses a
need for customers that currently use SAP ERP.

For clients that don't have SAP ERP or SAP APO, DP has numerous advantages over
alternative options, including the ability to integrate the forecasting system with the rest
of the business. SAP ERP can be operated with its internal forecasting capabilities
enabled, or it can be deactivated and SAP DP can be utilised to deliver the demand plan
to SAP ERP directly.

Benefits of Demand Planning (DP) are:

 Improved statistical forecasting

 Improved demand response
 More effective product distribution based on short-term demand
 Improved cooperation
 Improved decision-making throughout the whole supply chain

 APO Supply Network Planning (SNP):

Introduction

Purchasing, production, transportation, and distribution are all integrated in Supply

Network Planning (SNP). This allows for the creation of a single consistent model that
can be used to make global tactical planning decisions.

SNP begins with a demand plan and ends with a short-to-medium-term strategy for
meeting projected sales volumes. Quantities that must be manufactured as well as
quantities that must be moved between two places, such as from the distribution centre
to the customer or from the factory to the distribution centre, are included in SNP. As a
result, it is possible to make effective purchasing, production, and distribution decisions.

SNP as Most Important Application:

Because it connects several other SAP APO applications, SNP is frequently referred to be
the "heart" of SAP APO. The interrelationships with other SAP APO apps must be
carefully considered by those installing SNP. SNP is concerned with inventory
management throughout the supply network, which includes all stock storage sites.

Taking the Demand Plan

To decide your production, purchasing, and inventory placement decisions, your

demand plan either begins as or is eventually quantified to a product level, is compared
with the stock on hand and in-transit. This demand plan might be generated using SAP
DP or other demand planning software.
 The system's strength is its ability to look across to the top of the planning horizon, take
into account all planned inbound and outbound material actions, as well as expected
future demand, and make choices that put the company in the highest suitable position
to meet requirements at the lowest possible cost.

Basic Functionality and Concepts of SNP

SNP is a software programme that helps you arrange the flow of materials through a
supply chain. The supply network consists of sites that are linked by transportation
channels. The following are some of the factors that influence the choice to use one
approach over another:

1. Is the company's supply chain taken into consideration?

2. Whether the firm has accurate cost data and can agree on how to apply these
expenses
3. The amount of effort the firm is willing to put into both implementing and
maintaining the solution.

Benefits of Supply Network Planning SNP are:

 Order fulfilment time was decreased

 Inventory levels and costs are lower
 Improved purchasing (procurement), production (planning), and machine
coordination
 Processes for raw materials, product packaging, and delivery are all simplified.

 Production Planning and Detailed Scheduling (PP/DS):

Organizations use Production Planning and Detailed Scheduling (PP/DS) for short-term
planning. It enables industrial units to schedule material and essential resources in the
most efficient way possible. It consists of two parts, as the name implies: Production
Planning and Detailed Scheduling. PP/DS investigates how goods are made, potential
gaps, and how long equipment and work in progress are idle. As a result, production
rises without the need for more resources.

Methods of Running PP/DS

PP/DS can be done in two ways: using the optimizer or with heuristics.

The optimizer must estimate expenses for various manufacturing processes in order to
get the lowest total cost. The PP/DS optimization, as well as the restrictions in PP/DS,
have a beneficial impact on the remainder of the supply chain. As a result, if your
company's production limitations are correctly set up, you can rapidly determine which
goods you can make in-house and, as a result, which must be bought.
 Heuristics are the second technique to execute PP/DS, and they have comparable
advantages and downsides as SNP heuristics. They're easy for planners to comprehend
and adapt, and they usually reflect what the firm is doing right now. They can also be
integrated in unusual ways to provide a customised planning solution. However, unlike
the PP/DS optimizer, they do not provide the most cost-effective option. Material
Requirements Planning (MRP) in SAP is comparable to heuristics. They do, however,
offer a lot more versatility and allow for more complicated issue solutions. They can also
be combined to provide unique planning outputs that are tailored to the planning
context.

PP/DS Interactions

Planned
Requirements
Production

SNP PP/DS Orders SAP ERP

PP/DS is one of the first SAP APO applications, however its implementation falls behind
SAP DP and SNP. Part of the issue is that many product businesses don't have their own
production facilities, so they have to buy everything they need. As a result, SAP DP and
SNP are required by more businesses than SAP PP/DS. The production plan, as well as
the required planned production orders submitted to the implementation system to
make it possible, are the outputs of PP/DS. PP/DS gets needs from SNP or other supply
planning applications at the top level. This is where the requirements come into play.
These requirements are compared to the capacity in PP/DS to arrive at projected
production orders that fulfil limitations or level capacity.

Benefits of Production Planning and Detailed Scheduling (PP/DS) are:

 Shorter delivery and lead times

 Increased delivery assurance

 Lower inventory costs

 Improved purchasing and manufacturing coordination

 Coordinate the whole production development process, including raw materials,

product packaging, and delivery

 Global available-to-promise (GATP):

Global available-to-promise (global ATP) allows companies to consolidate demand data
from several sources into a single SAP repository. It is a tool that allows you to use
several GATP approaches to try to optimise your customer serving capacity. The goal of
"Global availability-to-promise" is to see if the customer's requested goods will be
available on the stated or guaranteed period.

The process entails with enhancing on-time delivery performance, integrating planning

systems, and raising stock levels enough to buffer stocks. Sales orders, scheduling
agreements, deliveries, stock transfer orders, and manufacturing orders may all be
handled using GATP.

Availability Checking

SD’s standard capability is availability checking. On scheduled sales orders, it gives a

return date and amount, which leads to a difference that should be recognised. As a
result, it's critical to distinguish between availability checking, which is an SAP ERP
feature, and availability to assure, which is a GATP feature. This is an essential
observation to make because these terms are frequently used similarly on projects, and
not understanding the distinctions may lead to misunderstanding.

Available to Promise

GATP provides a kind of availability testing called available to promise (ATP). ATP adds to
the capabilities of SD availability checks, making it much more useful. One of the key
distinctions between SAP SD and GATP availability checking is that GATP looks out over
several locations, comparing projected inventory levels with expected demand, and
providing both a guaranteed amount and a position that would meet the need. It may
keep searching until it discovers a place that meets the demand, even if it is far away
from the consumer. GATP not only confirms desired amounts and dates, but also
provides several options for when material could become available.

Capable to Promise

Planned inventory can be included in the analysis and planned production capacity
irrespective of its categorization on the supply side. This is accomplished in SAP SCM by
incorporating PP/DS in the ATP check When manufacturing capacity is added to the ATP
process, the definition of what is being done shifts from ATP to CTP. The distinction
between what is expected to be available: the future projected inventory position, what
is "capable" of promising, and what the manufacturing capacity might create is obvious.

GATP Techniques are divided into three categories:

 Fundamental techniques and their combinations (product check, product

allocation, and check against forecast)
  Rule-based ATP (RBA)

 ATP embedded with manufacturing process.

Benefits of Global available to promise (GATP) are:

 Lower inventory costs

 On-time delivery in required amounts
 Quicker reaction time
 Enhanced customer serviceability, resulting in improved client satisfaction
 Greater visibility across the whole distribution chain

 Transport Planning and Vehicle Scheduling (TP/VS):

Introduction:
A firm may save time, money, and fuel by choosing the best and shortest route for
carrying and delivering items. To plan and optimise shipments for orders (sales orders,
purchase orders, refunds, and stock transport orders), you utilise the Transportation
Planning/Vehicle Scheduling (TP/VS) component. You achieve this by assigning orders
and delivery to vehicles for which shipments are planned. Shipment aggregation, route
determination, carrier selection, multi-pick and multi-drop, and other features are
available.

Benefits of Transport Planning and Vehicle Scheduling (TP/VS) are:

 Reduced transportation costs

 Scheduled and planned transportation
 Better order management
 Better delivery management

How to get more from SAP APO?

With so many APO deployments yielding a negative return on investment, it's important to
get the most out of your SAP APO investment. And, because each edition of SAP APO
contains more apps and functionality than ever before, determining the proper area of
capability to utilize may make or break your SAP APO initiatives.
Where to look for improvement?

In some respects, determining where to seek for methods to improve, expand, or enhance
an existing implementation is easier than determining which programme to instal and how
to apply it. The main reason is that SAP APO is already familiar to your organisation. You can
adopt an aggressive or defensive approach when evaluating how to improve your SAP APO
installation.

So, if you need to save a SAP APO deployment that failed to meet expectations, you'll have
to approach it with caution. You'll be adopting an aggressive strategy if you wish to build on
a current successful deployment or simply add another application to keep the momentum
going and extend advanced planning into additional sections of a company's supply chain.

Benefits of using SAP APO:

 Higher revenue
 Higher profit margins
 Lower purchasing expenses
 Lower manufacturing and shipping costs
 Better inventory management
 Better management

New & Advance features in SAP APO

Following the good results of the SAP APO System for business processes, SAP APO is
expanded with additional capabilities like as

 SAP APO now facilitates the interconnection of transactional ERP systems

throughout the supply chain. This will aid in cost and pricing monitoring.
 The primary memory of APO in SAP has been increased to several gigabytes, making
it considerably faster than previously.
 It now includes sophisticated optimization libraries for scheduling issues, such as a
fast multiple objective solver and efficient constraint application.
 Scheduling is an essential component of every corporate operation. SAP APO
presently utilises the following techniques to deal with Scheduling: Constraint
Planning, Genetic Algorithm, and Repair Algorithm. Latest version of SAP APO will
have more precise planning and will plan precisely at a certain time.


More Functions in the Upcoming Versions

While SNC and EWM include planning functionality, they also have a lot of execution
functionality that was never included in SAP SCM or APO prior. While APO used to stand for
advanced planning, SAP SCM now looks to stand for advanced supply chain functionality,
planning, or execution.

SAP Planning Terminology

APO is no longer as effective a word for us as SAP SCM. SAP SCM covers all modules,
whereas APO only covers a subset of them. However, SAP's nomenclature change is a little
confusing because while SAP ERP has supply chain capability, it does not include "advanced
planning." As a result, by converting APO to SCM, SAP has created the potential for some
misunderstanding.

Conclusion:
Despite the fact that SAP APO is no longer sold separately, its functionality is included in SAP
CRM, SAP E-Procurement, and SAP Supply Chain Management. It is available for additional
enhancements such as model functionality, higher degrees of parallelization, and enhanced
optimization techniques due to its open design.