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Background documentation Deployment Heuristic 

Purpose

The deployment heuristic creates a distribution plan for one product at one location of the supply chain model. Once production is complete, the system first checks what product quantities are actually available at the source locations (locations where there is stock). The sum of these product quantities is known as the available-to-deploy (ATD) quantity. The system then determines how the ATD quantity is to be distributed to destination locations (locations where there is demand).  The system considers the various distribution rules if the available product quantities exceed or fall below the demand (fair share and push rules). You can set these rules in the SNP deployment profile or on the SNP 2 tab page of the location product master. Deployment takes into account a number of deployment horizons that you also define in the location product master.

Distribution Rules

Fair Share Rules

If demand exceeds supply, the system can use fair share rules to calculate deployment using the available-to-deploy (ATD) quantity. Various methods use fair share rules to assign a limited amount of available product to sources of demand. The following rules are available:

·  Fair Share Rule A: Proportional Distribution Based on Demands

The objective of fair share rule A is to distribute the stock proportionally to all demand locations according to planned distribution demand.

This graphic is explained in the accompanying text

·  Fair Share Rule B: Proportional Distribution Based on Target Stock

The objective of fair share rule B is to raise the stock levels at all demand locations to approximately the same percentage of target stock level. The percentage at each destination location is defined as the deployment-relevant stock (=stock on hand – SNP stock transfers) divided by the target stock level. If the deployment-relevant stock, is negative the system first attempts to raise the stock level at all destination locations up to zero. The system then attempts to raise the stock level at all destination locations to the same target stock level percentage.

This graphic is explained in the accompanying text

·  Fair Share Rule C: Percentage Distribution Based on Quota Arrangements

The objective of fair share rule C is to distribute the stock according to quota arrangements at the demand locations. To apply rule C, you have to define outbound quota arrangements for source location products in the Supply Chain Engineer.

This graphic is explained in the accompanying text

·  Fair Share Rule D: Distribution Based on Distribution Priority

The objective of fair share rule D is to distribute stock according to priorities that you defined for the outbound transportation lanes of the source location (distribution priority). At the onset of a fair share situation, the system attempts to fulfill all of the current date’s demands until the ATD quantity is exhausted. For example, you have three outbound transportation lanes to your destination locations (A, B, and C), each with corresponding priorities (1, 2, and 3). Your ATD quantity is 150 pieces and the required quantity in each location is 100 pieces. If you choose fair share rule D, destination location A receives a quantity of 100 pieces over the transportation lane with priority 1. Destination location B receives a quantity of 50 pieces over the transportation lane with priority 2, and destination location C receives nothing over the transportation lane with priority 3.

Push Rules

SNP only uses push rules to calculate deployment if the ATD quantity covers the demand. The following rules are available:

·  Pull Distribution

Deployment fulfills all of the demand within the pull deployment horizon (for definition, see below). Products are distributed according to the due date specified at the demand locations. The system does not distribute any supply to the demand source in advance of the demand date.

·  Pull/Push Distribution

The system immediately distributes all supply to the demand locations (ignoring the demand dates specified at the demand locations) to fulfill all demands within the pull deployment horizon.

·  Push Distribution by Demand

The system immediately distributes the entire supply for the entire planning horizon to the demand locations to fulfill all demands. The pull deployment horizon is ignored.

·  Push Distribution by Quota Arrangement

The system immediately distributes the supply according to the quota arrangements defined for the demand location. The demand situation at destination locations is ignored.

·  Push Distribution Taking the Safety Stock Horizon into Account

The system confirms planned issues that are to be covered by safety stock at the source location if the difference between the demand and deploy date is smaller than the safety stock horizon (see below). This means, the system will only fall below the safety stock level that you defined on the Lot Size tab page of the location product master if the demand to be fulfilled is in the safety stock horizon. Note that the safety stock horizon moves forward (rolls) with planning.

Example

The following example illustrates the three push rules: Pull distribution, pull/push distribution, and push distribution by demands.

This graphic is explained in the accompanying text

Pull distribution - A quantity of 200 is distributed to the distribution centers on every day within the pull horizon where there is existing demand (four days into the future).

Pull/Push - A quantity of 200 pieces is distributed on the first day, when supply amounts to 200 pieces. On the second day, a quantity of 600 pieces is distributed. Although supply is 1000 pieces, the demand within the pull horizon is for only 600 pieces, so only 600 pieces are distributed.

Push distribution by demands - 200 pieces are distributed on the first day when supply amounts to 200 pieces; on the second day, when the supply is 1000, 1000 pieces are distributed. Since the demand in the system is 1400, all the supply can be distributed. A demand of 200 at the end of the planning horizon is left unfulfilled due to insufficient supply within the push horizon. If the demand in the system had been 800, only 800 would be distributed on the second day.

Note

If you set the Push not allowed indicator on the SNP tab page of the location master (only possible in active version), the available supply is distributed according to the daily demand at the demand locations only.

Deployment Horizons

The deployment heuristic takes into account the following four different deployment horizons (that you define on the SNP2 tab page of the location product master):

·  Pull deployment horizon: This horizon refers to the period of time over which deployment takes into account the planned distribution demand. The horizon starts from today’s date.

During the deployment run, the system attempts to fulfill all distribution demands within this horizon. Distribution begins on the first day for which distribution demands exist in the system and ends on the last day of the pull deployment horizon.

The pull deployment horizon is also used during push distribution. In this instance, it specifies whether the demand is to be fulfilled immediately (pull/push distribution) or according to the due date (pull distribution). It puts a limitation on the date by which SNP stock transfers are to be considered as relevant for deployment. Within this horizon, deployment only fulfills planned demand that has been confirmed.

·  Push deployment horizon: This horizon refers to the period of time over which deployment takes into account the receipts defined in the ATD receipt category group of the location master. The horizon starts from today’s date.

If push distribution has been specified (if the distribution demand is smaller than the supply and stock on hand), this horizon determines whether stock on hand is to be distributed before the distribution demand due date according to the push rule specified. Only stock on hand within the push deployment horizon is taken into account for push deployment (deployment before the actual demand date).

·  Safety stock horizon: This horizon is only used during push rule Push distribution taking the safety stock horizon into account (for an explanation, see below).

·  SNP checking horizon: Deployment uses this horizon to calculate the quantity available for distributing to demand locations. It puts a limitation on the quantity that is available within the push deployment horizon. Within the SNP checking horizon, deployment calculates the ATD quantity for a period by adding up the ATD receipts from the current and preceding periods, and subtracting all the ATD issues within the SNP checking horizon.

See also:

Running the Deployment Heuristic

Source Determination in Supply Network Planning (for information regarding determination of destination locations, transportation lanes, and means of transport)