SS ‘Supply Chain Analysis (Unit 2) 35 Supply Chain Analysis 2. UPPLY CHAIN ANALY: 2.1.1. Introduction Supply chain analysis is the process of evaluating every stage of a supply chain starting from the time the business acquires raw materials or supplies from its suppliers to the delivery of final products to the customers. ‘The purpose of the analysis is to determine which part of the supply chain can be improved or shortened to deliver the product more quickly and efficiently to the customers. The philosophy behind supply chain analysis is that the more flexible a business can be, the faster its growth rate will be. ” Supply chain analysis helps businesses identify the suppliers and/or processes that can be bypassed, reduce inventories, schedule events and programs, and improve forecasts. This increases efficiency, reduces costs and minimizes risks. It helps businesses optimize their processes to remove redundancies in the supply chain while helping create new value-added processes. When starting an improvement process one has to have a clear picture of the structure of the existing supply chain and the way it works. Consequently a detailed analysis of operations and processes constituting the supply chain is necessary. Tools are needed that support an adequate description, modelling and evaluation of supply chains. Supply chain analysis involves reviewing the upstream and downstream processes in a category's supply chain in order to better understand the flow of goods, information and money. Many organisations understand the processes that affect time, cost and value between themselves and the adjacent participants in the supply chain, tut they have less appreciation of what happens elsewhere in the chain. Supply chain analysis is an important part of any cost reduction and risk management exercises. 2.1.2. Constituents of Supply Chain Analysis The biggest challenge in front of business organisations is to find out the ways for integrating their supply chain so as to enhance the effectiveness of the logistics activities. In the today's modernised world, the real competition is not among the individual organisations but among different supply chains. Thus, the success of a supply chain lies in its ability to combine three business activities, viz. procurement, production and distibution, It involves integrating and managing the sub-components associated with functional areas of supply chain, These functional areas are discussed below: Taventony Flow Information Flow pes —f Procurement K4 Processing KC Distribution |e Customer| T T L [Supplier parinership | [Capacity planning Demand planing atrial planning |Production scheduling Responsiveness Material schedule ST inventory system Postponement Procurement exbiity-Volumes and || Distribution methodology Varieties networking eee Figure 21: Components of Supply Chain Management Scanned with CamScannerJn Management and Analyt * Semester (Supply Chain Management and Analytics) yyy MBA Fousth, as mainly from the procurement. Following a 1) Procurement: The total cost incurred on supply chain comes mainly re the factors which affects the cost incurred on Procurement fe manner in which procurement decisions are taken, ont 7 : curement, The procedures and methods involved in the process of procul i of the business firm, iv) Relationship with various suppliers, ¥) Knowledge of the market or market intelligence. ; ionships with t i The expenses on procurement can be lowered by establishing one ee the up Where they are considered to be a part of firm’s production facility. Such part The primary action inthe based on the sharing of resources and profits or other benefits in the Jong run. me Stora this, direction is reducing the quantity of suppliers by replacing them with quality oe a i fie ing to collaborate in compliance with the firm's policies and can effectively fulfil the needs aha This collaboration evolves out the principles of mutual understanding, skills and sharing or earaniges, and Would further result in bringing down the expenses and enhancing the work efficiencies of both the partes, Planning for the required material is one of the crucial parts of the procurement Process. An integrated Supply chain would have its influence on each and every element. Thus, collaborative systems would include covering the complete inventory information required in the supply chain. An efficient flow of Goods under a supply chain can be ensured by establishing effective coordination and communication networks with the suppliers. The schedule of-sending the consignments is decided as per the needs of the Greanisation. The logistics operation is given due consideration to avoid any unforeseen circumstances so that there is no room for inconsistency or delay while the goods are being delivered. 2) Processing: In supply chain management, the main focus is on minimising the large inventory costs incurred due to the production of goods’ more than their actual demands. It puts fewer efforts on the bulk production decreased production costs and the market overflowed with inexpensive goods ‘The stress was on maintaining the quality ofthe goods which could be sold worldwide, Aes result, the Processed goods remained stored in big warehouses where they are left unused and unsold, as they Were unable to meet the changing demands of the consumers, 3) Distribution: The distribution systems were traditionally involved in storage and transportation of processed Goods only. But in the supply chain model, the primary function of the distribute process is to manage the demand, which means to supply right goods at the ri 2.1.3. Steps Involved in Supply Chain Analysis Following are the steps involved in supply chain analysis: surely adapting with advances in technology along the chain, 2 Analyse the Market: The supply chain is not the only one that j . Providing. By analysing the market, marketers wil] be able to ee ‘hone the goods eae Taw materials you need to buy and for the goods marksies are teyinw BOW Pricing works fo te seasonal? What are the prices that others are Paying for mate rial to sell. Are the materia y overhead costs? ‘Tals, labour, transportation, Scanned with CamScannerhain Analysis (Unit 2) a” supply Ch By comparing with others in the space, certain indicators including price indices, employment rates, and other economic factors, marketers will be able to better understand the current state of the market. When tracked over a period of time, these indicators can become predictors of what is fo come. 3) Determine Inefficiencies Along the Chain: Once the supply chain is mapped out and the market has been analysed, the supply chain should be assessed at every level from sourcing to final product delivery. For example, if raw materials ate all being sourced from multiple locations around the country, or even the World, is that the most efficient way to get these supplies? Is there a more cost- fective way to secure these resources for production? Can a product arrive at a store earlier, making the company more money? Is it possible to lower overall shipping costs or shave a few days off of shipping time by consolidating sources? All of these are questions that should be asked while analysing a supply chain. An optimized supply chain js one that operates with a company’s financial bottom line in mind. A few cents saved on certain aspects of, logistics can add up over time, saving the company money. This is why performing a supply chain analysis consistently is important. 4) Adapt: If marketers have made changes in their supply chain, they need to adapt to the new procedures quickly in order to succeed. Consumer demand can change on a whim. Markets evolve quickly. 70 continue to make a profit on goods and services, marketers have to be ready to anticipate this evolution. .d while marketers may think their supply chain is running '5) Repeat: A supply chain is constantly evolving, an Jeting supply chain analyses regularly, to ensure as efficiently as possible, it is important to continue comp! that they are operating at maximum profit and productivity Global supply chain management is one of the fastest-growing areas of franchise consulting. Consultants ‘who understand the value of strategic supply chain analysis and have the knowledge and experience to use data to solve a company’s logistics needs are in high demand. 2.1.4. Importance of Supply Chain Analysis Following are the importance of supply chain analysis: 1) Shorter Delivery ‘Time: Identifying inefficiencies in the sup, user's hands much sooner, leading to increased capacity, new business, 2) Increase Your Bottom Line: Company exists to make money, but having too much (or not enous) ofa certain product can seriously affect the bottom line. A supply chain analysis can help to forecast more accurately and save money on scheduling, ordering, & planning. 3) Identify Weaknesses: Analysing where the weak links are ean help prevent a costly breakdown of the system, giving time to fix the issue before inefficiency becomes a complete work stoppage. ply chain can get the product into the end and happier customers, 2.2. ADVANCED PLANNING Meaning and Definition of Planning agement. Management planning may be defined as the process of drawing up a roadmap to achieve certain goals or objectives. A plan can be defined as ‘future course of action’. itis a particular path for achieving the pre-determined goals. Planning helps the managers in systematically, rationally and realistically preparing a plan of action. Planning facilitates optimum utilisation of tangible and non-tangible resources. It helps the managers in ~ assessing the resources, evaluating strengths, factoring all the threats, considering various possibilities and choosing the most appropriate alternative. Fayol, “Planning is deciding the best alternatives among others to perform different pre-determined goals”. 2.21. Planning is the primary function of man: According to Henry ‘managerial operations in order to achieve the ‘According to Koontz and 0” Donne, “Planning is deciding in advance what to do, how todo it, when to doit and who sto do it Planning bridges the gap from where we are to where we want to go. It makes it possible for things to occur which would not otherwise happen”. Scanned with CamScanner A A ene NN ERC peneain Management and Analytics) a MBA Fourth Semester (Supply Chain Manag ies) TY. Advanced planning and scheduling (APS, also known as advanced manufacturing) a met dent i ieentBement process by which raw materials and production eapacity are optimally see utdress comply Of ally well-suited to environments where simpler planning metho arte due to the Copesinng ) een competin, i i ling is intrinsically ») factorial denies oh sat cton scone nom of tensed Be re APS ee penta onstaints-based planning tool that synchronises and optimises business workflows. APS integrate a Derformance-limiting factors faced by a company such as: i Supply lead times: ) Machine efficiency 3). Product seasonality 4). Storage capacity 5) Delivery lead time 6). Resources use rate From sales forecasting to customer delivery, through stock levels and production Operational wea en Cieinisations to optimise all their processes as areal support decision-making ool from Operational and Supply Chain, to Maintenance and Production managers. 2.2.2. Characteristics of APS ‘There are three main characteristics of APS: 1) Integral planning of the entire supply chain, at least from the suppliers up to the customers of a single enterprise, or even of a more comprehensive network of enterprises. 2) True optimisation by properly defining altematives, objectives, and constraints for the various planning Problems and by using optimising planning methods, either exact ones or heuristics. 3) A hierarchical planning system which is the only framework permitting the combination of the two preceding Properties: Optimal planning of an entire supply chain is neither possible in form of a monolithic system that Performs all planning tasks simultaneously — this would be completely impracticable — nor by performing the Narious planning tasks successively ~ this would miss optimality. Hierarchical planning is a compromise between practicability and the consideration of the interdependencies between the planning tasks, 2.2.3, Components of Advanced Planning and Scheduling Following are the components of advances planning and scheduling: 1) Planning of Demand: Demand planning helps to generate an accurate forecast by considering the previous Sales data and importing consumer forecast. Demand planning allows you to manufacture the exact quantity of products with reduced inventory cost and waste. '2) Planning of Production: Production planning is a process. This process gives a clear picture of available raw materials, available labours, and tools to make products ofthe specified quantity. The production plan allows an organisation to carry out various production activities without any interruption, 3) Scheduling of Production: The production schedule is also a process that helps to handle, arange and optimise the work in the production process. It helps to reduce inventory and load on labourers, 4) Planning of Distribution: This process allows workers to set inventory parameters like on-hand inventory at the beginning and the safety stock requirements for a period of time to reach order fulfilment 5) Planning of Transportation: This proces helps to idemify the goals, future policies, investments required to transport people and goods to destinations. 2.3. STRUCTURE OF ADVANCED PLANNING 659 2.3.1. Introduction : APS have been launched independently by different software companies at different points in time. Nevertheless, a common structure underlying most of the APS can be identified, APS typically consist of several software modules (eventually again comprising several software components), each vt dren, covering 2 certain range of planning tasks. Scanned with CamScanner- — ‘sopply Chain Analysis (Unit 2) 39 ‘The matrix comprises modules for the planning tasks that are characterised by time horizon and involved business functions. The degree of detail increases and the planning horizon decreases by shifting from the strategic to the operational level. To align different locations and business functions, planning tasks on the strategic (strategic network planning) and tactical level (master planning) are usually carried out by a central planning entity. APSs of partners along a supply chain need to be aligned to enhance supply chain's global performance. Thereby, one faces the problem of information asymmetry because each partner has its own objectives and constraints, which might be in conflict with those of the other partners. Moreover, each legally independent partner usually owns a set of private information that he/she is, in general, not willing to share. In fact, the implementation of joint policies requires coordination and cooperation between the members of the supply chain. A critical assumption made throughout the integrated inventory models literature is that the manufacturer/supplier has complete information about the buyer's cost structure. But, in the actual supply chain, this assumption is seldom to be satisfied. Lang Long: ‘Suaegie Nework Planing ‘Term = 8 ‘Demand Tron [Das I] Pom : ‘Short. aie Planning || Planning Term ee Demand ie = amine |) sereduing || TF |] wuitimene Source: Rohde etal, (2000) Figure 2.2: Supply Chain Planning Matrix ‘The following provides an overview of the structure of the software modules and the planning tasks concemed: 1) Strategic Network Planning: Strategic Network Planning covers all four long-term planning sections, especially the tasks plant location and the design of the physical distribution structure, Some questions that arise in strategic sales planning (e.g. which products to place in certain markets) can be considered, too. Basically, the design of the supply chain and the elementary material flows between suppliers and customers are determined. 2) Demand Planning: Further tasks of strategic sales planning (e.g. long-term demand estimates) and the mid-term sales planning are usually supported by a module for Demand Planning. 4) Demand Fulfilment & ATP: Most APS providers offer Demand Fulfilment & ATP components that comprise the short-term sales planning. 4) Master Planning: Master Planning coordinates procurement, production, and distribution on the mid-term planning level. ‘The tasks distribution, capacity and mid-term personnel planning are often considered Simultaneously. Furthermore, master production scheduling is supported. 5) Production Planning and Scheduling: If there are two separate software modules for Production Planning and Scheduling, the first one is responsible for lot-sizing whereas the second one is used for machine Scheduling and shop floor control. Quite often, however, a single software module ought to support all three tasks, Planning on such a detailed, short-term planning level is particularly dependent on the organization of the production system, Therefore, all bottlenecks have to be considered explicitly. If multi-stage production processes and product structures exist, they have to be coordinated in an integrative manner. In order to Inet the specific requirements of particular industries, some software vendors offer alternative Production Planning and Scheduling modules. 6) Transport Planning and Distribution Planning: The: short-term transport planning is covered by @ comesponding software module. Sometimes an additional Distribution Planning module deals with material flows in a more detailed manner than can usually be done by Master Planning. 7) Purchasing & Material Requirements Planning: The planning tasks BOM explosion and ordering of materials ate often left to the ERP system(s), which traditionally intend to supply these functionalities and fare needed as transaction systems, anyway. As far as non-bottleneck materials are concemed, the BOM. explosion indeed can be executed within an ERP system. However, an “advanced” purchasing planning for Scanned with CamScanner40 tba Fount Semester Suply Cain Management and Anayts) ery iscounts, and lower (mid Rusterials and components, with respect to alternative suppliers, quantity discounts pti gag 5 Supply contracts) or upper (material constraints) bounds on supply chasing & Material Requireme, Planins: Not all APS providers launch a special software module Purch ‘Sometimes, at least a furthes anning that supports (mid- to) short-term procurement decisions directly. ment Collaboration module helps 10 speed up the traditional interactive (collaborative) Procurement processey between a manufacturer and its suppliers. 2.3.2. Strategic Netw 3.2. ork Planning i signin ‘Strategic network planning is a long-term planning normally dedicated to plant ee ae = Fening the Physical distribution network. In ‘addition, other strategic decisions related to market gies can be Supported, such as determining which products to position in certain markets. Strategic network planning might be the equivalent of intelligent production planning, i.e. a framework in Which all relevant modalities are accounted for and can be adjusted as necessary. By mapping out Schematic that includes all volumes, customer information, delivery/pickup restrictions, and hub Constraints that affect planet's freight and hub network, strategic network planning enables planner to visualize and share KPIs pertaining to various operational shifts or adjustments that planner might make, Without a clear understanding of network design, it can be difficult to predict the impact of losing or gaining a customer, adjusting a highly-trafficked transport route, changing hub or fulfilment locations, or any other operational change in the value stream. The result is a supply chain that is especially susceptible to risk, owing to the difficulty of making informed adjustments and administrating the network in an aj adaptable way, A strategic network plan helps freight forwarders and shippers to escape the cycle of using incomplete, past- oriented information when it comes to making key decisions about network usage. By transitioning away from a Past-oriented mind-set to a future-focused approach, businesses can begin to better foresee the bottlenecks and breakdowns that will arise as they utilize their value chains. Essentially, it refers to the practice in transport logistics of strategically mapping out transport networks (ie. hubs, warehouses, trucks, routes, yards, containers, delivery points, and everything else that goes into operational transport plans) and adjusting them to align more effectively with specific business goals. This happens through a few different methods, frst by creating a digital copy of planner's existing transport network and then running data analytics on the historical data in order to uncover any areas of waste and predict the ‘outcomes of future changes to network. 23.2.1. Strategic Network Design The Strategic Network Design module supports key strategic decisions concerning the configuration of the entire Supply Chain within a long-term planning horizon, which typically ranges from three to ten yedts, Thus decisions are strategic and long-term ones, which consequently cannot be easily changed or undone without considerable financial impact. The issues addressed consist of four mayor pillars: 1) Product Strategy: Number, main characteristics of products and their sale markets have to be illustrated. 2) Manufacturing Strategy: Number and location of plants, sourcing strategy, investment decisions, supplier selections (for potential long-term collaborations) have to be detected. 3). Logistic Strategy: Number, locations and echelons of distribution centres, sourcing strategy, investment decisions have to be considered. 4) InvestmenvDivestment Decisions: In-/Outsourcing, acquisitions/mergers, new technology introduction have to be reviewed. Goal is to provide an optimal assignment of locations for procurement, production, ware-housing and sale of their most important resources and (semi-finished) goods taking into account of dynamic marker emenges ad regional distinctions In the long run restructuring measures shouldbe reconsidered, so that adjusineae of supply chain are flexible to arrange during changes in the en Scanned with CamScanner‘Supply Chain Analysis (Unit 2) in Regarding solutions for planning issues in terms of location planning there are many optimisation and heuristic methodologies. Such mathematical methodologies often strive for a monetary goal as cost minimisation or profit maximisation, but also other measurable quantities as time and distance minimisation. For planning issues restrictive conditions such as capacities for procurement, production and transportation as well as budget constraints have to be included next to the planning process. Due to shaping the network design many qualitative aspects as infrastructure, political support, stability of respective national currency etc. have to be considered during the planning, thus also scoring models are applicable for location planning. 2.3.2.2. Benefits of Strategic Network Planning Following are the benefits of strategic network planning: 1) Planning Certainty through Data Analysi predictions about the effects of any poss their plans with confidence as to the likely results, meaning that they will be more willing to take calculated risks and exert the flexibility inherent in their value chains. 2) “What-if” Scenarios: An effective strategic network planning workflow should enable planners to do just that, offering “what-if” simulations and planning sandboxes in which planners can see how their networks hold up under different conditions like, say, dramatic fuel price hikes, the installation of tolls on certain roads, or a sudden uptick in demand. This may sound more like a feature than a benefit, but if we think back to our sports betting analogy, these “what-if” scenarios offer opportunities to simulate individual games with the conditions under which planners think they are likely to occur, meaning that even though planners are relying on advanced analytics software to estimate probable outcomes, planners can still set parameters based on their own judgement and expertise. 3) Increased Opportunities for Collaboration: In the past, making predictions about changes in the administration of a transport network would have potentially been made difficult by information and decision-making silos, meaning that a planner might have been thwarted even just trying to figure the exact routes his or her trucks were tacking between warehouses. Because strategic network planning is by its very nature digital, it has the capacity to break down these silos, creating environments not just of improved data visibility, but of increased collaboration. By working with the same information in a streamlined digital interface, users from disparate points on the value chain (say, warehouse management and truck routing) can easily work together to improve their operations. strategic network planning turns existing data into concrete le changes or adjustments. This means that planners can develop 4) A More Proactive Value Chain: By leveraging existing data into stronger predictions and forecasts it is possible to alleviate the kind of blundered planning workflows that fail because they assume that Conditions will continue as is—but let us take things one step further: if planner’s business is-able to model the effects of different conditions and changes in transport network, all of a sudden it is possible to transition planning workflows from reactive (ie. responding to inevitable disruptions only as they arise) to proactive (i.e. having plan b’s and responses to disruptions and events already in place before they come about). This will bolster the overall flexibility of logistics processes, ultimately putting planner in a position to visualize challenges in advance and meet them head on, retaining maximum Value (and even capitalising on demand changes or price fluctuations) in the face of ever-changing circumstances. 2.3.3. Master Planning Supply chain master planning aims to synchronise. production, storage, and transport with demand. The coordination of these elements helps maximise efficiency, cut costs, and support profitability. Master planning is a mid-term process that typicaly takes place monthly or weekly. Sales forecasts and demand planning inform production, distribution, and warehousing decisions. Over the course of a year, seasonal and changing demand can be accounted for and KPI managed. Not making use of master planning means that supply chain elements may work against each other. Without coordination between elements, the risk of stock outs increases and larger buffers are required as a result. This reduces efficiency and increases costs. ; & x Scanned with CamScannerIn Management andl Analyig 5 ee MBA Fourth Semester (Supply Chain Manse Moo My, for raw matey i ce the future nec Atits core, Master planning allows companies 0 determin and balers pPacity fo meet company goals, Master planni ses the wit EW materials and eapaites ae curently avaiable? oun For example, what wey 2) What raw mat id capacities are required to complet pr ction Foe oe ode ‘manufactured, purchased, transferred, or set aside as safety st janned orders. ' jenerate planned Master planning uses the information to calculate the requirements and & ince it generates the enterprise. y. Master planning is often considered the heart of the SCM supet Poe eee pare requites not on master plan, which drives the ‘subsequent operational planning proces ings, material master, location masts Static data pertaining to BUM, bill of distributions, manufacturing rou customer priorities, forecasts, on and yields. But, it also needs dynamic data pertaining to customer orders, hand inventories, and so forth, Additional inputs into master planning inc Jude visibility into the aa and capaci yrocurement process in SRM, Constraints at the suppliers as well as procurement collaboration using the procurement P Master planning uses the forecast information from demand planning and shract the orn from ot Broce in CRM todo forecast netng, which isthe ability to subtract the iterate frecat crea oNet forecasts and also prevent double counting of orders. Masterplan distribution piaé® ig erseast information o come up with procurement, manufacturing, and the procure which drive the subsequent operational planning process. The procurement pl Ee aac ts fo the a SRM for collaboration with the supplier on availability of components. Manu! othe Jost ae sent to the production scheduling and execution sub-process. The distribution plans are sent to the logistics Planning and execution sub-process, and the constrained supply plan to satisfy the netted forecast (ATP) is sent to te order promising sub-process 2.33.1. Important Terminology of Master Based Planning Functionality Following are the important terminology of master-based planning functionality: i 1) Time Fence: The date until which an item's supply plan and planned orders are frozen. The time fence is Cxbressed as a number of working days from the date the simulation is carried out. The time fence is meant to prevent: ') Disturbance of orders that have already started (atthe shop-floor level). 1b) Generation of planned orders with start dates in the past (that is, orders that are late), 2) Planning Horizon: Time period for which Enterpris ing mai planning horizon is expressed as a number of : Processes as there are ies, the author uses is based on a five-stage map or matrix, Stage Ife tea company that has nen es nace regards to master planning, herens & Company at Stage 5 would be regarded ang nn d-class operation wid regards to this business process, Ifa company can achieve Stage’ here to their world-class goals, 'Y Would be regarded as well on the way This methodology has been structured to take management from a ‘disoreanse,r fally ‘integrated’ (Stage 5). At the integrated stage, the organisation willbe provgnats 1) state to one ee levels of service and wil be both flexible and agile to customer demon ling its customers wit Stage 1: Disorganised: At this stage, the company has no Strategy with Planning processes. Little or no technology is being used to ase Iaterials and capacities. Any planning caried outs likely done pe Stage 2: Reactive: The company now recognises the impo considered the appropriate technology. At least a partially ie Master planning processes and bs spreadsheets, is being used to assist in the planning and cone of prigmttted ERP system, together wi Product family and SKU / end item level. ‘rities, materials and capacities at Scanned with CamScannerSupply Chain Analysis (Unit 2) a Stage 3: Organised: At this stage, the master planning processes are integrated throughout the planning hierarchy using at least a monthly planning cycle, An ERP system has been implemented to assist with the planning and control activities at both product family and SKU / end item level. The company is beginning t0 research advanced planning systems (APS) to optimise the processes. Stage 4: Proactive: The master planning processes are now well integrated into the lower level MRP / CRP planning processes. Company performance is improving due to the master planning processes. The use of APS is beginning to optimise the master planning processes. Stage 5: Integrated: An APS system is being used in conjunction with the ERP system to optimise plans at the product family and the SKU / end item level. In addition, the planning systems are being integrated with the external supply chain. Collaborative planning is taking place with digital links and joint service agreements. An effective benchmarking process is in place. ‘The following gives a guide as to what a company may have achieved at each of the five stages for the three basis master planning business processes; demand management, sales and operations planning and master production schedule. 2.3.4. Demand Fulfilment and ATP. ot Customer orders’represent the essential aspect of demand fulfilment, A ‘customer's order usually contains — besides details of the customer himself — information about the types and quantities of products required and also the desired due date. The general task of demand fulfilment is to deal with incoming customer orders. Demand fulfilment starts with receiving a customer order at the CODP and ends with its fulfilment (ie. the delivery of the products ordered). It represents the interface between a company and its customers. As demand fulfilment is concerned with the processes downstream of the CODP, it is closely related to the customer order lead time. Demand fulfilment decides on accepting or rejecting an incoming order and determines how much of an accepted order can be fulfilled. Furthermore, it determines the first promise date (the date the order ought to be delivered) which is communicated to the customer. While doing this, demand fulfilment considers both incoming orders and orders that have been placed in the past but have not yet been delivered. Kecording to Kilger and Meyr, demand fulfilment is defined as “the planning process that determines how the ‘actual customer demaiid is fulfilled”. It is sometimes equivalently called “order fulfilment”. Its central intention is, aécording to Lin and Shaw, to deliver “qualified products to fulfil customer orders at the right time and right place” and to become more flexible in order to hedge against uncertainties like demand or production uncertainty. In order to decide on the fulfilment of incoming orders, information about the availability of resources is needed. The quantity of products available to fulfil incoming orders, i.e. both the company's on-hand inventory and the projected supply, is called available-to-promise ATP. Furthermore, already committed orders are considered in terms of diminishing the on-hand inventory and future supplies. The term ATP is said to be first mentioned by Schwendinger. ‘The information on future production quantities, ie. on projected supplies, is obtained from the results of the decisions made within the master planning. As a consequence, the time granularity, i. the time buckets of the ‘master plan and of ATP are identical. Moreover, also the aggregation level regarding product/product groups or sales region is the same like in the master plan. ‘The ATP-related term capable-to-promise (CTP) denotes (production) capacity which is available to fulfil customer orders. According to Fleischmann and Meyr, the calculation of ATP quantities is rarely explained in literature. Moreover, calculations given in literature often differ from each other. ‘According to American Production & Inventory Control Society (APICS), ATP is defined as “the uncommitted portion of a company's inventory and planned production maintained in the master schedule to support customer ‘order promising”. While the ATP quantity corresponds to components (intermediate products) in ATO settings, it — A A Mic O'R Scanned with CamScannerand Hellingrath, 5 ders. APS systems are particular indePendent of customer orders and the planning tasks related to customer ort ach ‘ot ender promising ora suited to support ATP due to their high processing speed. In the traditional : wer 1g speed. In i feasible quote: e quoted against prodution lead-time i there is no inventory available. This has led ia Quotes as Supply or capacity constraints have not been considered. 2.3. ATP Approach of Contemporary AP! tel vit -y APS Systems : ‘According o Fischer, the ATP approach of contemporary APS systems can be structured around four activites: crP Dimepsion 9 Location F . Dimension Prodfct Dimension Figure 23: ATP Role Representation (Based on Knolmayer et al. 2002) First, the checking of Product Availability is the core of the ATP module. The basis for the product search constitutes available inventories and the quantities calculated in the SNP (the SNP quantities available for order promising are also called “Available-to-Promise"). The ordered volume of the product is reserved and the available quantity in the corresponding time bucket of the SNP is reduced accordingly. If the ordered volume is not available, an alternative delivery date can be proposed or pre-defined rules can be applied. The search can be extended to alternative products (Fig. 2.3, Number 1), alternative locations (Number 2), or both (Number 3). The system can even review production commitments and re-plan the Production. This procedure is called Capable-to-Promise (CTP, Number 4). Secondly, the Initial Order Promising function aims at confirming the delivery date and quantity to the customer. A company that is able to consistently make re-liable promises over a long period of time ereates an important competitive advantage, Thirdly, ATP supports measures and decisions regarding temporary delivery inability. Tis is especially important when only a part of all customer orders can be satisfied with the available volume. In that cove, & Variety of shortage allocation rules can be applied. Some examples are: i Allocation proportional to the volume of customer orders; ii) Allocation proportional to the customers tumover; iii) Allocation proportional to the customer's demand forecast or iv) Allocation according to predetermined priority rules, Fourthly, Due Date Control and Re-Promise are also essential for customer satisfaction as re-planning of already confirmed orders can never be totally avoided due to unexpected events. The objective nf en he case is to identify potential delivery bottlenecks as early as possible, 2.3.4.2. Granularity of ATP along the Product Dimension The graulariy ofthe ATP wih respect to he prodet dimension depends onthe SC decoupling point (Table 2.1). Table 2.1: ATP Granularty (Based on Kiger and Schnceweiss 20022) [Manufacturing Environment] ‘Order Lead-Time ae Make-to-Stock [Transportation time Product goupa/Finat [Make-to-Order [Production lead-time/Transporation time [Preduer ‘Goods [Configure-to-Order Production lead-time/ Transportation time|Capacinio 4 A & a . Scanned with CamScannersupply Chain Analysis (Unit 2) 45 n/a Make-to-Stock (MTS) environment as it can be found in most 1). Make-to-Stock (MTS) Environment: finished products level due to short Consumer Packaged Goods (CPG) industries, the ATP is generally on a customer order lead-times, 2). Make-to-Order (MO) Environment: Asa high number of configurations is possible in a Make-to-Ordet (MTO) environment (e.g. computer industry), the forecast and the ATP are based on product group and component level. Depending on its configuration, an order can consume multiple resources. 3) Configure-to-Order Environment: Characteristics of a Configure-to-Order environment. ¥e long production leadstimes and difficult forecasts with BOMs being only partially available. In that case, capacities must also be considered so that ATP resembles the CTP procedure. Regarding the time, the ATP module is usually represented inthe same granularity as the supply given by the master plan, Therefore, quoting an order means consuming quantities from a particular time bucket. With regard to the future development of the ATP module, Cap Gemini Ernst & Young foresee a further development of so called “Advanced Order Promising”. A very prominent example is “Profitable-to-Promise” in which the profitability of an order can be determined and taken into account to facilitate the fulfilment tiecision, Another expected development is the further expansion of ATP/CTP functions in the areas of multi- fchelon ATP and true CTP, meaning that in fact all modelled capability constraints are considered. Currently, this is not possible in most cases due to the high complexity of the planning problem. 23.43. Order Promising Order promising is the core of the demand fulfilment process. The goal is to create reliable promises for the customer orders in a short time. The quality of the order promising process is measured by the on time delivery and the delivery performance. ‘The on time delivery KPI; it measures the percentage of the orders that are fulfilled as promised (based on the frst promise given). Thus, to achieve a high on time delivery it is important to generate reliable promises. promixe is reliable ifthe customer can trust the ability ofthe supply chain to fulfil the order as promised ie if Fre customer receives the promised product inthe promised quantity at the promised date. A supply chain that is ible to consistently generate reliable promises over along time period gets a competitive advantage over supply chains with a lower on time delivery the actual order promising lead-time is an important aspect of the customer f order entry paths have been created - and more are evolving, For example, in the computer industry, customers can order products at an authorised dealer, at a reseller, in department stores and consumer markets or directly at the manufacturer by telephone or via the Interact. By that the probability that peak situations occur where large number of orders are entered at the same time, increases, A typical value in the computer industry is 1000 orders per hour in peak load situations. Thus, the ible to generate (reliable) quotes for individual orders in a very short time, e.g. ‘order promising process must be at downto milliseconds. Otherwise, customers wait for their promises and — while waiting ~ may change their mind and order online over the Internet or by telephone at a competitor. Besides the on time delivery, service level. In recent times a large variety of On the one hand the online order promising process offers advantages in responsiveness and performance. On the other hand it is not possible that promises can be reviewed by order management before they reach the customer, Especially in allocation situations it might be possible to react on customer orders by trading sllocatigns between customer structures and thereby generating better promises in order not to lose a customer. In other industries it might be sufficient to issue promises for customer orders only once or twice a day. ‘Therefore the promises can be balanced in the allocation situation before they ae issued to the customer. By setting delivery dates for new orders, order confirmations are also created within order promising. These may include a fiat expected delivery date (“Fist Promised Date”) as well asthe planned delivery quantity. Tis requires a delivery date. In connection with the delivery date the company must decide whether it accepts or Tepets the order in principle. If fulfilment of a customer order is necessary or possible due to availability ‘itoations atthe time of order promising, a later delivery date is determined and communicated to the customer, ‘As a result the company is not currently in a position to fulfil the contract. If the order is cancelled by the customer, the order is not fulfilled. Scanned with CamScannersy Chin Management and Anais) INT poly 46 MBA Fourth Semester (SU avery and the delivery performance, j, ‘The quality of the Order Promising is measured by the on-S7%F alive achieve 2 high owt dle measure the percentage ofthe order that was fulfilled a promise® een diferent mols noon are is important to generate reliable promises. Hereby, «distinction © Th 4 Oder Promising, Order Promising divided into On-Line Order Promising, Batch Order Promising 2m is presented below, as it might be an improvement tothe simulation 5 auried out. No order confirmations a ot In the game “Supply Chain Simulation Module” Order Promising W2> not carr ed thatthe bullwhip ete s therefore were sent to the customer and the orders were always accepted It'S ensued from this cause. ; full extent. The game could be For this reason the order promising should be included in the game Oe ai ‘support. extended by the calculation scheme of order promising or the ATP to pro 2.3.5. Demand Plannin; jain management, When talking about Sales and Oncor Planning (S&OP) processes and ary Fess even eae i rt terms “demand forecasting” and “demand planning” are frequently mentioned the other and vice vers know will often use these two terms interchangeably, using one when they mean 1" Ste Ut am But while there is a substantial amount of overlap, they are really two distinct concepts and — areas of the business. AA forecast is in its simplest form, a prediction of future events. Ina business context, demand forecasting, then, is the process by which demand planners attempt to predict what demand for a given product will be in a week's time, a month's time, or even a year’s time. Its singular objective is to arrive at the right answer and, therefore, demand forecasting is very data-focused. Demand planning, on the other hand, refers to the entire undertaking: forecasting consumer demand and then arranging things accordingly. Its overarching goal is to make sure a company can supply customers with a given product or service when, where and how they want to buy it while keeping costs as low as possible, thus increasing chances of profitability. So the demand planner takes the demand forecast and translates ino action, mapping out all necessary steps and ensuring everyone is able to perform their parts well. Demand planning, therefore, encompasses muck more than demand forecasting. Although producing the forecast isa critical component, it triggers a series of other duties'and responsibilities that are all part of demand planning, And demand planners must coordinate with people all along the supply chain to ensure customers ar happy and the overall company remains healthy. Demand planning is defined as “using forecasts and expericice to estimate demand for various items at various points in the supply chain.” In genera, who is responsible forthe forecasts, what are our products, where aft they in their product lifecycle, what is their demand patter, do We understand the variable ae the marketplace, and who is providing the additional information required to ensute an apr on tet course, depending on the individual company, there may be additional questions that Be eet For example, a company consistently over forecasts several : and lower rab p snecerorag. Sealers Sayan best cy Teading to increased inventories process can aid in understanding what the inventory goals should be and sng) Problem: the demand planning forecast should be through ongoing analysis and tracking of the forecast, >” *S Well as what an appropriate 235.1. Structure of Demand Planning Demand Planning means predicting future sales; therefore, it iy ‘ available in a supply chain which could be relevant. But this informesy’”? ©. incorporate all informatica decentrally. For example, a sales person may “only” provide input 19 on is often only specific and stored and the sales region he/she is responsible for. All information pieces bad forecasting process of the products ‘covers the whole demand being served by the supply chain, nally should add ta x forrcare ahich Scanned with CamScanner‘Supply Chain Analysis (Unit 2) 4a On the other hand one must be able to retrieve forecasts aggregated for special purposes, like demand figures aggregated to product groups and weeks for Master Planning. The database of Demand Planning has to support at least the following three dimensions (see also Fig) of aggregations and Coons Dem Figure 24: Three-Dimenslonal Structure of Demand Planning Data 1) Product dimension: Product — product group —> product family —» product line. The product dimension is structured in a hierarchy, relating products to product groups, groups to families, families to product lines etc. The product hierarchy ranges from the top level representing all products to the lowest product level on which a forecast is created. 2) Geographic dimension: Customer —> sales region —> DC region/location. The geographic dimension ‘is also hierarchically structured. It represents the structure of the market, for example regions, countries, industry branches, key accounts etc, 3) Time dimension: Different bucket size (days —+ weeks —> years) and horizon. The third dimension of forecasting is time. The time dimension is normally structured by years, quarters and months, In some cases. itis necessary to go down to the week or even day. Forecast quantities can be attached to any intersection of product, geography and time. 2.3.5.2. Demand Planning Process Planning area administration + Master data setup y Planning books Creation of the Demand Forecast ' Product introduction end-of-life y Creation of Promotions £ Fine-Tuning of Demand Plan x Reconciliation lof Demand Plan Scanned with CamScannera [MBA Fourth Semester (Supply Chain Management and Analytics) INT. 1 up your planning area. The plannin ‘ction of parameters that define the 1. You load into the data mart the xd to create the DP master dat 1) Planning Area Administration: Cary out all the steps needed t0 Se i «sis for all activities in APO Demand Planning. It is a colle Scope of all planning tasks, The planning area is linked to the data mar actual history (for example, bookings, shipments or billings) that wlill be use and generate the demand forecasts. 2) Master Data Setup: Map the structure of your company (for example, regions, and customers) for planning purposes in the DP master data. 3) Planning Book Design: Configure the layout of the planning screens for the different tee cmatean managers, divisions, and so on) who will participate in demand planning by designi Pranning books Define macros to perform calculations, carry out tests, and warn you of exceptional si so 4) Definition/Redefinition of Forecast Models: Define forecast models for time series forecasting, causa) analysis and/or composite forecasting. 5) Creation of the Demand Forecast: Create a forecast of market demand using a top-down, middle-out, or bottom-up approach. Choose from a wide variety of forecasting methods and techniques. 6): ‘Lifecycle Planning: Forecast new products and discontinued products by applying lifecycle planning and “like” modelling techniques. 7) Promotion Planning: Plan promotions and other events. Examples of promotions are free-standing inserts, ‘coupons, discounts, product displays, trade shows, dealer allowances, coupons, contests, and advertising, 1e-Tuning of the-Demand:Plan: Fine-tune the demand plan by adding management overrides and modifications. 9) Reconciliation of Demand Plans: Reconcile the demand plans of different departments by merging the plans into a one-number, consensus forecast. divisions, brands, products 8) 10) Simulation: Simulate different planning scenarios. 11) Monitoring Alerts for Demand: Planning (DP): Monitor exceptional or critical situations through the Alert Monitor. 12) Release of the Demand Plan to SNP: Make the demand plan available in SNP by. releasing it. The demand plan: is often:unconstrained by any. production or distribution restrictions. This step can be completed by either the demand planner or the SNP planner. 13).Releasing the Supply Network Plan to Demand: Planning: Make the SNP-plan available to DP by «ereleasing’it.:The SNP_plan takes into account.any production ar distribution restrictions, A: comparison of Table 2.2: Model Engineering Bill of Materials [Level [Pan # [Revision [Quantity [Unit [Description Maker 1 18456-52156 _[A Parent [Ea [Adapter Buy a 19678-47823 IK n [Ea Tresor Bu 2 14864-47821 [D H [Ea [Moisture Tester [Make 3 12483-47849 _[C 3 [Ea [Enclosure Buy a 18701-14613 _|C. IL IEa [Enclosure oe 3 15494-14273 _[E. Is Hes __[Machine Screw [Buy 3 [09000-16001 —[G i Ea [Cover Buy a 14644-38389 [BB 2 Hea__[Precipitator Assy. [Make 3 [52010-48007 __|F 2 [Ea [element Bo 3 [57102-55200 |F p Ea Tous ay B [98002-66600 _|E 8 Es INachine Soy — EO B 12100-24247 |H. 2 Ea precip M ‘The above abe shows a casi engineering bill of mates. Bath cook BITES bill. The pares bill shows the item which needs tobe completed. Every contro{ Specified in the billion ae ae pot bill. The bill provides ‘the instructions -and context ia manufacturing engineers Scanned with CamScanner3 supply Chain Analysis (Unit 2) a the product structure in context of manufacturing level. Sub- assemblies are known s ‘uv these are immediately consumed and should also be accounted. Phantom bills can be employed for handling these assemblies. The first column of the bill shows the eon may also show product structure. The ‘level 0” is used for representing end product, Subvassemblies are shown through ‘level 1" onwards. In the above given example, ‘level I” signifies the parent, ‘level 2° shows the sub-assemblies and ‘Ievel 3" shows the components, Product levels are also depicted in figure 2.7. Column fourth shows the information about the required quantity for each of parent item, Column fith shows the measurement units. The metrics should be used consistently. Column sixth shows the description of various items included in inventory. It may not be unique, ‘The last column shows the sourcing schedule, ¥)_ Pseudo Bill of Materials: The modularization process entails breaking down th bill of material, Many sub- assemblies may re-categorize as end products. This creates Jot of end items. For the purpose of simplifying forecasting work, 1 pscudo bill of materi "The newly segregated items are gathered on the basis. of options, making it easier to design a pseudo bill. The pseudo bill number shows the optional features. Prodhet structure is used for computing the requirement for component and raw-material. Bill of materials specifies the product structure as it shows thelist of various component pats as well as sub-assemblies. manufacturing bill of Bill of materials file shows all such assemblies. ‘The visualization of the structure related to an assembled produet is done with the help of a simple product where a group of discrete components is used for making two sub-assemblies, The structure has the pyramid form where the botiom is used for feeding items atthe higher level. For example, Cy, Cs and Cshave S; as their parent and P; is parent of Syand S, The quantity of individual items required for making a parent article is also shown, These numbers are given in parentheses below. o_o A> suAssemptis C1 Lo Figure 27 Product Struct or Product Fy For example, sub-assembly S; requires two units of C, and Cseach. It will also require one unit of The bill of material file also contains other information such as child parent number, the effective date, part number, yield percentage and other details. his file keeps record of individual items. It helps in determining net requirements. The fle also shows the inventory transactions as each transaction alters the status of the concemed item. Apart from seat Gata these inventory records also Keep track of planning factors such as timing and size of the order. Such facturs are safety stock, lead time and serap allowance. The lead time for items, components and raw- eretals should be maintained in the inventory record file by the help of which the ordering Tead time can ranetimnated from purchasing records and manufacturing lead time can be estimated from the process route eee "MRP requires precise inventory data for its planning task. This is done by using computerized ing item master file, Following is the example of such system: inventory system which can help in keepi tem —maser| __Prtoo. | Deserpion | Leadsime | Sicot Sea aot ua Segment | Ordon Sere [Chee [_tantnearsumge [Cis [Sep atiowance Curing data Pointers Be, Const Period hen, resert__Moeee Sie [EEE eee ae ‘Allocated Scheduled receipt Segment aT Plannéd order es +|___reteie Ssubsiciay [Order deta cement Pending 208 - Data Seamer" [Counters " i Keeping dak - = ; “Figure 28; Inventory Record File Scanned with CamScannerera nee ~~ 54 agement Aye ay MBA Fourth Semester (Supply Chain Met The file consi Fy ee onsists following of three segment Df - ere bia Segment: It offers item identification using ii) Invent oS TdF wantty, eos and Lead tn MRP ayenes its Sexme id purchased — isting level as well a the gross requirement, scheduled receipts, planned order and on 4 ‘Subsidiary Data Segment: Ths gives information related to sraps rejects, purchase orders and oter things, part numbers 1 al80 Provides other g, hia record for various inventory items, y, $ future level of inventory. The seg, and status. ee Ment These three segments provide the following information: i) Item identification, ii) Characteristics of item, iii) Planning factors, iv) Safety stock ¥) Direction to other files, 2.3.8.4. MRP Outputs MRP er cee 8 He of information which can be employed for scheduling PuPose for fate time, The 7 ill of materials to manage inventory. The major results of this system are: 1) Primary Outputs: It comprises of. i) Planned Order Schedule: It shows the amount of each item which needs to be ordered. The purchase orders are given to supplier by the help of this schedule. The production department employ this schedule for ordering parts, assemblies and sub-assemblies. It is also used for determining production as well as supply. It also helps in prioritizing the tasks. ) Order Release Note: It is used for placing the desired orders. iii) Rescheduling Notices: This notice shows the change in set due date for order. For example, a big order may need to be re-scheduled for making a delivery concession. It may also offer information about scrapped orders, delays and shortages. iv) Cancellation Notices: This shows the cancellation of various open orders due to alteration in master production schedule. 2) Secondary Outputs: This comprises: i) Planning Reports: It is the type of report which is related to future planning. It includes traces of demand resources as well as purchase commitment. ii) Performance Reports: The MRP system offers various other measures such as inventory turnover ratio, stock out index and vendor ratings. iii) Exception Reports: This report shows the orders with specific requirements. It also points out inaccurate bills, errors, invalid dates and late orders. ‘The MRP output is as good as the correctness of these three main inputs. 2.3.8.5. Benefits of MRP Following are the main advantages of MRP: : 1) Reduces Work-in-Progress: MRP helps in keeping right products in the optimum quantity, making them available at the required time. It reduces the amount of WIP to be maintained. 2) Priority Benefits: The system helps in assigning priority to the materials. The orders are placed on the decided dates. Whenever there is a change, a new due date is calculated, 3) Proper Use of Capacity: With proper planning, an effective schedule for various resources Gan be drawn. 4) Miscellaneous Benefits: : , 1) Ithelps in better customer service. 2) Reduces lead time. a : i 3) Reduces overdue order ' i 4) Optimizes finished goods inventory, components and raw-mateti . 5) Increasé in productivity. an : 4 ‘:6) Increases inventory tumover. : : 2 Itis also helpful in’ Controlling production. 8). Offers better response to fluctuation in demand: Scanned with CamScannerSupply Chain Analysis (Unit 2) _ 2.3.9. Distribution Planning Disuon Panning DisP is part of the mid-term planning with a planning horizon in the range of days to m i oie eis the planning of inventory levels of final products and of the distribution of the final prod stomer, with the objective to optimise the trade-off between inventory holding cost and transport cost. Several decisions are to be made within DisP: 1) The determination of aggregate transport quantities for every transport link in the SC is the most important activity to be performed within DisP, 2) The frequencies of regular transports set target values for short-term decisions on shipment quat determine the size of the transport lot. 3). A framework for the selection of distribution paths with regard to limits of order size is set direct delivery if order volume exceeds 30 pallets). 4) Furthermore, on the supply side materials are assigned % irect deli i a oncepts like direct delivery or Logistics Service Provider (LSP). oe eee ee The data input for the DisP module is provided from several other modules. The, structure of the network including the locations of factories, DCs, and suppliers, transport modes and paths, as wel as the allocation of suppliers and customers to areas have been determined in SND. SNP delivers the quantities to be shipped and variations in seasonal stocks. Finally, demand forecasts and safety stocks are added from DP. Generally, DisP overlaps with the SNP module to a large extent and hence, can only increase the planning performance in the case of a transport network with many far-off lying nodes having an identical range of products and materials ‘The results of the distribution planning process are the primary input for the shor erm TP module. Hence, & tight integration between both is a must. However, as the TP module has often been acquired by the APS providers and not developed in-house, the integration is frequently incomplete. Consequently, most vendors currently focus on an increased integration of DisP with TP because a consideration of the constraints of the transportation capabilities wil result in a more efficient distribution plan. s and in DisP (e.g. 2.3.10. Transport Planning Transportation planning is defined as the planning and management processes required to transport people and goods throughout the supply chain. This process is a collaborative effort that looks to identify the transportation Needs of a facility and assess the efficiency, cost, and design of the transportation model. Transportation planning also involves defining future policies, goals, investments, and designs to adequately prepare for any future transportation needs. Transport Planning Based on the distribution plan, TP as a short-term planning module seeks to build the most efficient transportation method considering constraints such as costs, routing information, availability and speed of vehicles, loading constraints and mix, and timing. The planning horizon is hours to days. Knolmayer et al. name three major functions of TP: the same as for PS, that is, it ranges from 1) The Load Consolidation and Vehicle Scheduling function helps to consolidate the load to destination locations and aims at achieving high vehicle fill rates. 2) Route Determination supports the planner to find the best route through a network with regard to ime and cost 3) Carrier Selection allows one to choose from several carriers and usually includes an Internet-based tendering process. Most APS systems apply a combination of heuristics and LP/MILP procedures to solve the planing problem The planner can intervene by means ofa usr interface to integrate specific load optimization strategies, Several civincual features are available within specific APS solutions. Some examples include tracking and tracing functions. Nonetheless, in spite of all the offered functions, the use of the TP module is generally only aansote ifthe company manages a significant own fleet. The TP module's offered functions are particularly tefl for logistics providers. Regarding the future development, it s expected that a.wide range of functional enlargements. will occur in TP. Examples include industry-specifi solutions for 1-SP, fleet management fanctions or the integration with on-board computers. ' . 23.11. Coordination and Integration the configuration of data flows and the, division of planning tasks, to, modules) of A strong coordination (i. €. uration h f AES ont ates is a prerequisite to achieve consistent plas for the different planning levels and foreach entty of the supply chain, The same data shouldbe used for each decentralized planning task and decision. APS can be ERP systems with the focus on planning tasks and not on transactional tasks. In seen as “add-ons” to existing tems with the : eee ae ccs an ERP system wall be a kind of “leading system” where the main transactional data are kept and Scanned with CamScanner4 ser Supply Chain Management and Analytics) ry MBA Fourth Seme ERP sync ee lata basis of APS is incrementally updated and major cha ERD system, This task willbe called integration of APS with ERP systems fd of the different modules cannot be suggested. There are several architect = Planning modules, which ean be used as stand-alone systems, and or i integrated system regularly has the advantage of an identical look-and-feel eee all modules by a single user interface, Furthermore, a single database ee by multiple databases. Differen atnd avoids redund and inconsistencies ia the planning J ae a dale met modules can interact vi; sending messages and exchanging data directly. In cont savant age of this architecture 7 do not have an identical look-and-feel and regularly no common data basis. AN ae te Ine of eae {hit modules can easily be combined and chosen (if not all modules are ee ie pee Most APS providers with such architectures provide special integration modules ree foe te Saad information exchange within the system, Furthermore, an Alert Monitor is often resp 8 of alert situations from different APS modules in one central module. fj al grated planning systems. A fyy all modules and accessibility eded bY every module 5 Sales Production Production Distribution ls ng oe = . ; Tea J [Configuration Simulon Resale] | ame i ‘Master Planning Purchasing ami Capacity Booking Dstbution | Demand IP cae [capacity Booking Stock Leichs] | Quanitatones and Allocations | Planning te Sousa Production Distribution eS Pacing nd taming (>) Planing = Matera mT a ransporation \. Orders — shor Lotaines panies and mode 0 Demand “Term Flimanet and : Transport ATP Scheduling re — Due Dates Due Date Supply Figure 2.9: Coordination and Data Flows of APS Modules Many companies have decided to implement an enterprise resources planning package, to improve the decision- snaking process between functional areas and to be able to answer the customer queries better and quicker, Well known suppliers of ERP systems are SAP, Oracle, SSA Baan, and JDEdwards, Even though one move than Wweloomes the implementation of such packages, this does not suggest that this gives the company the software required for supply chain planning. ERP, in terms (see section 12.1, serves to bring on boanl a managerial soltion, 2.3.1.1. Guidelines for Data Sharing and Feedback Organisation Following guidelines are given, which data are shared and how feedback is organized: 1) Strategic Network Planning: Strategic Network Planting detemines the configuration of the supply chain, This configuration consists mainly of locations foreach supply chin entity sed perce dha channels Long-ieam Demand Planning gives input about wends in future demand, Sinalned aac gle ‘can provide useful hints for capacity enhancements. However, the strategic goals of a supply chain (i. € market position, expanding into new regions and markets, tc.) specify the frame wei fa ero 2) Demand Planning: ‘shor-term Production and Distribution Planning. The forcast for end for Master Planning. The short-term planning modules use curre Demand Planning. Furthermore, de-centralized Demand PI products not planned in Master Planning (c.g. non-critical componeres) ; 3) "Master Panning: Master Planning detérmines 9 produdion,distibitiog hain as a whole with given demand from Demand Planing on an ‘ered leek ae oan Ht ibe supply be done centrally. The results provide purchasing guideins forte aes sos ieee fi Scanned with CamScanner> sopply Chain Analysis (Unit 2) a 4) dD 6). Dn Requirements Planning — like purchasing quantities from extemal suppliers, production guidelines for the de central Production Planning and Scheduling — like capacity booking for potential bottlenecks and stock levels at the end of each period and distribution guidelines - like distribution channel chosen, and distribution quant for de-central Distribution and Transport Planning, Feedback from short-term modules is derived by current stock levels, updated forecasts and current capacity usage, The average realization of given guidelines from short-term modules should be used for model adjustment in Master Planning, Demand Fulfilment and ATP: For Demand Fulfilment and ATP demand data from Demand Planning, production quantities for disaggregated products and intermediates, due dates from Production Planning and Scheduling, distribution plans and detailed vehicle routes from Distribution and Transport Planning and purchasing due dates as well as selected suppliers from Purchasing and Material Requirements Planning are used, Furthermore, current inventory levels at each production and distribution stage are needed as input. ‘To be able to influence production and distribution plans, unused capacity bookings have to be known, too. Production Planning and Scheduling: The main guidelines from Master Planning are capacity bookings and stock levels for each period for the de-central units, Production Planning and Scheduling requires detailed, disaggregated information, Furthermore, current (short-term) forecasts and availability of production resources update the guidelines from Master Planning, Lot-sizes and due dates from this module are exchanged with Distribution and Transport Planning to coordinate production and transportation lot- sizes as well as with Purchasing and Material Requirements Planning to coordinate purchasing lot-sizes and due dates in a more detailed way than it is done by Master Planning, Purchasing and Material Requirements: Planning Purchasing quantities derived from Master Planning provide valuable input for mid-term supplier contracts and supplier selection. Based on these quantities discounts can be negotiated, Considering short-term production duc-dates and lot-sizes as well as mid-term contracts for critical components feasible purchasing plans are obtained. Purchasing plans have to be aligned with production schedules to secure an adequate and timely supply of materials. Distribution and Transport Planning: The coordination of Distribution and Transport Planning is similar to Production Planning and Scheduling. The short-term coordination by lot-sizes and due dates enables accurate production-distibution plans. The actual production quantities provide main input for the transport plans. Furthermore, time windows from customer orders are additional constraints for building and routing vehicle loads. 23.1.2. Integration of APS For the integration between the links of a supply chain, other control systems are needed. These are known as advanced planning (and scheduling) systems (APS). The market for APS is considered the most important growth market for software companies. ‘Advanced Planning Systems (APS) 1. T ERP ERP, ERP Warehouse ‘ Manofactorer ‘Wholesaler Retail Figure 2.10: Integration Through APS [APS is a system that covers the supply chain like an umbrella, and which serves to take real time information from the supply chain’ and use it to calculate workable plans, resulting in a reliable and quick response towards the customen With the support of APS, it is possible to give a definite answer to a customer's question within seconds, This is just one ofthe features of APS. The suppliers of APS can boast considerable results. After the implefnentation of APS-better lead times, delivery times, inventory quantities, and utilisation of capacity lead to betti# business results’and a higher customer service level. ; Companies are continually trying tovimprove thet. logistics processes, thus reducing costs and increasing customer service. In this,way, there isthe danger that.only parts of fhe supply chain are examined and that the entire supply chain is n0t taken into consideration, This creates 1:sub-optimal solution; ater al, the sum of the patts:does not necessarily equal. the, whole. This, sub-optimal. approach.can be countered by supply. chain sah Rathi a attri Scanned with CamScanner38 ygement and Analytics) INTY. MBA Fourth Semester (Supply Chain Mana activities should be supported here by S performance of the entire chain, APS can be cont von system; but APS is not simply supporting here, but also guiding. better init Stabling the entire supply chain to be optimised and not just one cr Interfaces between the logistics processes and enables them to run more efficiently. The APS systems can cover the fink in the chain. This creates Moe 2NEMS are supplied by suppliers with exotic names like Rhythm, Logility, Numetrix (part of IDEdwards), Manugisties,Peoplowh sed SAP-APO tance planner and optimiser). They all use advance algorithms in their packages to optimise the entire supply chain, These algorithms are not new. Optimisation algorithms have been around for some time now in operations research, A problem in the past was tha Sone uers could not perform the calculations fast enough or could only calculate by performing the Sptimisation in parts, and thus, a full optimum could never be calculated and thus resulted in sub-optimisation, The current generation of computers does offer the opportunity to performing the complicated calculations Quickly and fully. Without this technological innovation, APS would never have been developed. Distribution as Manufacturing of Continuation Manufacturer DCWholesaler Retailer ‘Must become: Manufacturer DC/Wholesaler Retailer Manufacturing as Continuation Distribution Figure 2.11: Principles Supply Chain Conversion ‘What is most striking in the current software is really the fact that traditionally distribution is considered as the Continuation of production. A demand-driven vision on SCM in particular, tells us that this is not correct. The Consumer is the conductor of the chain and this means that the replenishment orders should drive the DC or the wholesale business, The consumer demand observed should be the input to production planning. Though a batch size of one item is of course a utopian dream, current mass production forms the other extreme on the scale of possibilities. 2.3.12. Collaborative Planning ‘There have been many positive effects from collaboration in the supply chains that are seen between supply chain participants. Supply chain performance has been enhanced by many initiatives that have been taken to improve supply chain collaboration. While there has been plenty of talk about collaboration and the positive benefits of collaboration, it has been seen that very few organisations actually collaborate in the true sense. For collaboration to be successful, it is necessary that organisation bring in a lot of rational changes so that all the potential benefits of it can be realised. It is necessary that all the inter-firm players understand the concept of supply chain collaboration (SCC) and understand the benefits. This will help towards the success of collaboration efforts throughout the supply chain. Collaboration in a supply chain perspective has been widely studied in the recent years. Supply Chain Collaboration is defined as the concerted effort of two or more supply chain partners to gain competitive advantage. This can be done through sharing information, joint decision making, and the sharing of risks ad rewards so that high returns ae achieved and greater customer satisfaction is realised. Supply chain partners ca achieve more favourable outcomes by collaborating with each other rather that working on their ow, Collaborative planning concepts can be applied to the planning processes that interface with customers ee sales planning) and to those that interface with supplier c.g. procurement planning). Further, collasorGpth cari be distinguished by the objects that are exchanged and collaboratively planned, such as supply capability of suppliers or material demand of customers. a i ‘There also exidt some approaches that cope with motual'teconcilitiGh“of activities such as Collaborative Platning, Fofeasting and Replenishment (CPFR) develo in the consiner goods tiie ood Gone esse Development Chain Management (CDCM),'which folloW the ideas of sittiltaneous énigineering and focus 00 joint development of products by several partners with the tise of web-basell computsrircne = sa Scanned with CamScannerSupply Chain Analysis (Unit 2) 9 3.12.1. Barriers to Effective Collaboration Effective collaboration can be achieved by overcoming the following barri 1) Heterogeneous Infrastructures: Collaboration can be a problem between partners since all of them have different IT infrastructures and procedures, This can have major implications in terms of consumption of cost and time. The predominant mode of communication is fax and phone, There are other tools like Electronic Data Interchange (EDI) which can also be used by the channel partners. This is basically a set of stand -d protocols and language which can be used by the partners for carrying out business transactions, and other operations’ communication within the global supply chain in an integrated manner. ‘Though these technological interventions solve many of the problems of organisation, these An create major cost implications for organisations, and also lot of commitment in terms of information technology. 2) Supplier and Customer Challenges: There can be many challenges which an ‘organisation faces due to certain supply chain issues conceming suppliers and customers. For example the following questions can be critical for ‘an organisation : i) How are variations in demand handled by the supplier? ii) Who is responsible for inventory and safety stock? iii) How precise are the customer's forecasts? iv) Is the lead time justifiable and is the supplier getting a reasonable estimate of the customer demand? Other areas of dispute can be the inventory carrying costs, and the price protection which are generally seen in case of technological products which have shorter product life cycles. 3) Lack of Effective Metrics: It is crucial that the measurement metries should have performance Standards for all the supply chain participants. The focus should not be only on improving individual firm performance: it should be on enhancing the performance of all the members of the extended supply chain through collaboration, so that savings and profitability can be realised. "This implies that the company should monitor the overall supply chain for measuring the performance of firms and : business activities that are in the company’s line of control. There is thus the need for transparency and end to end visibility of the supply chain, so that the results can be obtained through greater ) collaboration. 4) Security and Safety: There also needs to be security across different dimensions of the supply chain. These can include safety from hackers and other malefactors as well as taking steps for holistic disaster management 2312.2. Strategies to Overcome Barriers of Supply Chain Collaboration . 1) Collaboration in Areas of Strengths: The temptation is strong for companies to collaborate in areas enaoer they are lacking the expentise. However, successful organisations often seek to collaborate in : aeons in which they are strong, rather than to cover a weakness. For example a manufacturer which Collaborates with a retailer to get better forecasting abilities through access (o point of sales consumer eter aot really gain, if he does not have the IT resources and ability for data analysisand interpretation. Similarly, if an organisation collaborates in areas which are likely to increase sales then it cam only be beneficial, if it has the excess production capacity which can be hamessed to meet the increased consumer demand. 2)"Right Benefit-Sharing Model! Some examples of collabotation aré’ equally beneficial to both the 'fitrners. In other’ cases, though ihe collaboration will creaté plenty of value, it may benefit one partner Eli ce other. However, otter organisations shonld no abetei from unequal collaborations; but sted ertcipate in benefit sharing models, The benefity,gan be in terms of price discounts or cost _ advantages and other compensations. Gaps,in strategic prigrities can also be minimised by the, model of Benefit sharing, For example, the collaboration between: a growth-oriented manufacturer with a retailer regarding reduction of waste was done, by adding some part of the savings in joint account which could be luséd to garner more sales. - Scanned with CamScanner4) 5S) MIVA Fourth Semester (Supply Chain Management and Analytics ery in mind that the highest poten Pinake this mistake when they seek try. A better approach isto sel should be ke Suited ones for collaborating. Many companl inant players in the indus! ; s ‘sis of these three dimensions i turn to justit The partners need to be sure that the collaboration will generate a sufficient return t0 justty gy

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