Supply Network Planning Heuristic
Purpose
You can use this business process to integrate purchasing, production, distribution (of demands), and transportation so that comprehensive mid-term to long-term tactical planning and sourcing decisions can be simulated and performed on the basis of a single, global, consistent model or sub-model.
Supply Network Planning offers three basic algorithms to carry out the planning:
· Heuristics (together with capacity leveling capability)
· Optimization
· Multilevel supply and demand matching (capable-to-match)
Starting from a demand plan, Supply Network Planning determines a permissible medium- to long-term plan for fulfilling the estimated and real sales volumes. The algorithms plan for all sources of supply from the customer, through distribution centers to the plants and their suppliers.
Each algorithm does the following:
· Distributes production over the plants
· Selects production options and alternatives
· Explodes the bill of materials
· Determines the procurement of semi-finished goods and raw materials
The algorithms differ in the way they make decisions, the constraints (for such factors as production, storage, or transportation) which they consider, and on which level of aggregation they perform the planning.
The result is best – but not necessarily optimal – purchasing, production, and distribution decisions as well as reduced order fulfillment times and inventory levels, and an improved customer service level.
Supply Network Planning is based on a model of the supply network. The model represents a specific supply chain (or network) and consists of individual nodes, links, and other elements. The nodes represent different locations of the network, such as customer locations, distribution centers, plants, or suppliers. The links between the nodes are represented by the transportation lanes. Also, elements such as products, bills of materials, routings, and different kinds of resources are essential parts of the supply network.
The supply network definition itself is not part of the ongoing Supply Network Planning process, but an important prerequisite. The structure of the model and the detailed settings influence the results of the planning run.
Process Flow
This business process runs in SAP SCM:
1. Define supply network.
This results in a model with all nodes and their (transportation) relationship to each other.
To best use the Supply Network Planning process, we recommend creating a network with at least three tiers, consisting of two distribution centers, three plants and two suppliers. This basic model can be enhanced by additional locations (such as customer locations, additional plants, suppliers or distribution centers). Also, the transportation relationships between the locations must to be maintained.
2. Define planning level, scope of planning, and decide on planning algorithm.
The main part of this decision must be made outside the system. The decision, as to which algorithm to use in the Supply Network Planning Run, depends on different factors (such as finite or infinite planning, cost base or priority based planning or performance).
Depending on this decision, alternative process steps in the Supply Network Planning Run need to be performed.
To restrict the scope of the planning run, the selections within the system can be maintained. The selections can be used to reduce the supply chain elements to be taken into consideration during the planning run. Most of the SNP functions support selections.
The definition of master data hierarchies allows the user to define the level of aggregation on which the planning run will be performed. For more information about master data hierarchies, see the SAP Library under mySAP Business Suite ® SAP Supply Chain Management (SAP SCM) ® SAP Advanced Planning and Optimization (SAP APO) ® Supply Network Planning ® Master Data for Supply Network Planning ® Master Data Setup for Hierarchical Planning. The hierarchy definition results in location-product and PPM/PDS hierarchies. The usage of hierarchies allows the planner to run the planning either on product-group or location-group level. This will simplify the planning process, reduce the model complexity, and enable planning of larger supply chains.
For using the aggregated planning functionality, hierarchy structures have to be maintained within the customizing process.
3. Consolidate demand and receipt elements.
Within this process step, both the spatial and the temporal distribution of the demand and receipt elements need to be consolidated. Independent and dependent requirements as well as distribution requirements can exist practically at every node of the supply network (such as at customer locations, distribution centers, and production plants).
There are two main ways to create independent demands at these locations:
¡ As a result of the Consensus Demand Planning process, demand forecasts are released to the different locations of the network.
¡ As a result of the Sales Order Processing process, sales orders are transferred to the different locations of the network.
After releasing the demand forecasts and transferring the sales orders, you get an overview over all independent requirements in the different locations. The supply chain planner can then use the demands and sales orders as the starting point to make the sourcing decisions.
Besides the independent requirements, all other demand elements (for example dependent demands) and receipt elements (such as distribution receipts or planned production orders) as well as the results of the safety stock planning run need to be taken into consideration during the consolidation step. For more information see the SAP Library under mySAP Business Suite ® SAP Supply Chain Management (SAP SCM) ® SAP Advanced Planning and Optimization (SAP APO) ® Supply Network Panning ® Safety Stock Planning.
4. Plan supply network by using heuristic-based planning.
The Supply Network Planning run basically comprises two general planning steps. Depending on the planning algorithm, these steps will be performed separately. However, manual interaction (in case of usage the SNP heuristic) or simultaneously (SNP Optimizer or CTM) is possible.
The two heuristic-based planning steps are:
¡ Decision of supply
In this first step, the locations are determined from which the demands can be satisfied. The temporal distribution of the receipts is calculated to fulfill the demands. This step is performed iteratively because of the multi-tiered characteristic of the supply chain and due to the fact that not only independent requirements on the different levels of the supply chain need to be fulfilled, but their corresponding dependent requirements as well.
¡ Distribution of production
In this second step, the available capacity must be brought into balance with the capacity demand. Depending on the planning algorithm, this process steps does not only consider production capacity, but also transportation and storage capacities.
The SNP planning run considers different, special master data relationships (such as interchangeability relationships) and includes specific sub-processes (such as subcontracting or scheduling agreements) within the overall supply network planning process.
¡ Interchangeability (see the SAP Library under mySAP Business Suite ® SAP Supply Chain Management (SAP SCM) ® SAP Advanced Planning and Optimization (SAP APO) ® Supply Network Planning® Supply Network Planning Run ® Product Interchangeability in Supply Network Planning) is used within logistical processes when there is a need to replace one product with another. Interchangeability relationships can be differentiated between discontinuation (one material is replaced by another after a given date), super-session chains (a chain of materials that can replace each other) and FFF classes (grouping of interchangeable parts which are identical in respect to all of their technically-relevant properties).
¡ Subcontracting is a form of procurement in which the product to be procured is manufactured by a supplier (the subcontractor) to whom the procuring entity supplies components for the purpose. The procuring entity may provide these components to the subcontractor either directly (via one of its plants), or indirectly (via another of its suppliers). When the manufacturing process has been completed, the subcontractor delivers the ordered product (incorporating the components provided) to the ordering party (see the SAP Library under mySAP Business Suite ® SAP Supply Chain Management (SAP SCM) ® SAP Advanced Planning and Optimization (SAP APO) ® Supply Network Planning Run ® Product Interchangeability in Supply Network Planning ® Subcontracting with Source Location in SNP).
¡ Scheduling agreements are considered when procuring products as part of heuristic-based planning within Supply Network Planning. Scheduling agreements can help to improve collaboration with vendors or suppliers. Since they are better informed of demand times and demand quantities, this can reduce processing time. You can also include vendor-confirmed quantities within your planning as maximum vendor capacities (see the SAP Library under mySAP Business Suite ® SAP Supply Chain Management (SAP SCM) ® SAP Advanced Planning and Optimization (SAP APO) ® Supply Network Planning Run ® Heuristic-Based Planning ® Procurement Scheduling Agreements in Heuristic-Based SNP).
The SNP heuristics perform infinite, bucket-oriented planning of the supply chain. It can be run in two modes: interactively and in the background.
There are three SNP heuristic alternatives:
¡ Location heuristic
The selected products at the selected locations are planned and a full BOM explosion takes place.
¡ Network heuristic
The selected products at all locations are planned, but BOM is only exploded to one level (dependent demand is not considered).
¡ Multilevel heuristic
The selected products at all locations are planned and a full BOM explosion takes place. The heuristic is available only in the interactive planning mode, but can also be performed in the background by using the Network heuristic together with the Take into account found components in planning run flag.
In interactive mode, only one product at one location can be selected to run the heuristic.
For more information about SNP heuristics, see the SAP Library under mySAP Business Suite ® SAP Supply Chain Management (SAP SCM) ® SAP Advanced Planning and Optimization (SAP APO) ® Supply Network Planning® Supply Network Planning Run ® Heuristic-Based Planning.
The capacity leveling function is an extension of heuristic-based planning. The SNP heuristic run is an infinite form of planning that does not take into account capacities and can thus cause resource overloads. SNP capacity leveling can be used to clear resource overloads by moving orders or partial order quantities into previous or subsequent buckets (periods) using forward or backward scheduling. The leveling algorithm is focused to one resource only. A movement of an order on resource one does not trigger a movement of an order, which fulfills the dependent demand of the initial order, on a second resource.
Capacity leveling can be run in two modes: interactively and in the background. There are two capacity leveling standard alternatives:
¡ Heuristic method
Deterministic approach to level the capacity consumption by moving orders to other buckets, depending on the scheduling direction and order prioritization.
¡ Optimizer method
Bucket-oriented method by using the SNP optimizer on the basis of a predefined optimizer profile.
Besides the standard alternatives for capacity leveling, a customer specific leveling algorithm can be defined and activated by implementing a BADI method. This method can be assigned to the capacity leveling profile. For more information, see the SAP Library under mySAP Business Suite ® SAP Supply Chain Management (SAP SCM) ® SAP Advanced Planning and Optimization (SAP APO) ® Supply Network Planning ® Supply Network Planning Run ® Heuristic-Based Planning ® Capacity Leveling.
Both the key figures upon which the heuristic is based and the planning horizon are determined by the planning book. Macros can also be used to define how you want to calculate general key figures such as Total Demand and Stock on Hand, or product-specific key figures such as Safety Stock, Reorder Point, and Target Stock Level.
To run the heuristic, you can maintain incoming quota arrangements when you model the supply chain.
The heuristic planning sequence is governed by the low-level codes of the location products. For more information, see the SAP Library under mySAP Business Suite ® SAP Supply Chain Management (SAP SCM) ® SAP Advanced Planning and Optimization (SAP APO) ® Supply Network Planning ® Supply Network Planning Run ® Heuristic-Based Planning ® Low-Level Code Determination.
5. Hand over SNP plan.
The SNP planning run results in planned production orders, stock transfer orders, and purchasing requisitions. These results are used as input for further processes. Depending on the system settings, the results of the SNP planning run are transferred automatically or the results released for further processing. These results are mainly used in one or more of the following processes:
¡ Consensus Demand Planning
¡ Supply Network Planning
¡ Production Planning and Detailed Scheduling
¡ Manufacturing Execution
¡ Distribution Planning
The SNP plan is released to Consensus Demand Planning as so called constrained demand plan. On that basis a comparison with the original forecast is possible and adoption can be performed. For further information about releasing SNP to DP see the SAP Library under mySAP Business Suite ® SAP Supply Chain Management (SAP SCM) ® SAP Advanced Planning and Optimization (SAP APO) ® Supply Network Planning ® Transfer of the .SNP Planning Results ® Releasing the Supply Network Plan to Demand Planning.
The supply network planning run is often embedded within a rolling planning process. This means that the output or the results of a previous SNP planning run are coupled with new independent requirements (forecasts and sales orders) for a future supply network planning run.
Due to the mid-term to long-term character of the supply network planning, the planning run should be concentrated on key resources, finished goods, and their critical components. Short-term planning requires a more detailed view of the planning situation, but should be based on the results of the mid-term to long-term planning. Therefore, the results of the supply network planning run are released to the Production Planning and Detailed Scheduling process as inputs and prerequisites. On this basis, short-term planning is performed. For more information, see the SAP Library under mySAP Business Suite ® SAP Supply Chain Management (SAP SCM) ® SAP Advanced Planning and Optimization (SAP APO) ® Supply Network Planning ® Transfer of the SNP Planning Results ® Conversion of SNP and CTM Orders into PP/DS Orders.
Within a special scenario, the mid-term planning results can be used directly as input for Manufacturing Execution. This can be done, if the supply network planning run is performed at the lowest level of aggregation and thus detailed scheduling not mandatory.
Whereas the task of Supply Network Planning consists in propagation of demands through the network to the node where they can be fulfilled, the task of Distribution Planning is to distribute available supply elements through the network to the point of original (independent) demand by using push and pull, heuristics, and optimization methods. Thus, the results of the supply planning run are the input elements on which the distribution planning run can be based.