Product Group Procurement
The aim of product group procurement is to optimize the total costs of ordering and storing goods. Since suppliers calculate the setup costs for products in a product group per purchase order and not per product, it can be beneficial to order products together in one purchase order rather than individually. For this reason, you can group products into product groups. The system then only considers all products of a product group when ordering. However, a product can only be assigned to one product group.
Note
The system does not execute a repair or buy function during product group procurement.
Note
When procuring product groups, the system does not take account of location products that you plan in reorder-point-based planning mode.
Prerequisites
During product group procurement, the system only considers products that belong to the product group type that you specified in Customizing in the Product Group Type for Product Group Procurement
field. For more information, see the Implementation Guide for Advanced Planning and Optimization
under 
Supply Chain Planning
Service Parts Planning (SPP)
Distribution Requirements Planning (DRP)
Make General Settings for DRP
.
Process
The system performs normal DRP for each product. If DRP comes across demand for a product that is part of a product group, it executes the product group procurement process.
During product group procurement, the system considers a period of 12 months that begins with the first demand of a product.
As of this first demand, the system creates demand periods of one month.
The system performs 12 simulations.
In the first simulation, the system calculates the ordering and stockholding costs that occur if you always order enough of each product in the product group to cover the demand for one demand period.
The system calculates the ordering costs by multiplying the number of purchase orders by the setup costs. You can specify the setup costs in the master data for the external procurement relationship in the
Setup Costs
field.You can specify the stockholding costs per base unit of measure and the time unit, which you have defined, in the product master data. If you have not specified stockholding costs, the system calculates the stockholding costs as the procurement costs multiplied by the cost factor for stockholding costs. You can specify this cost factor for stockholding costs in the location product master data on the
SPP DRP
tab page in theHolding Cost Factor
field.
In the second simulation, the system calculates the ordering and stockholding costs that occur if you always order enough of each product in the product group to cover the demand of the next 12 demand periods, and so on.
The system performs each simulation until the whole 12 month period is covered. If the system covers more than 12 months, it converts the costs to 12 months. (This can be the case for three times five demand periods, for example.) DRP thus receives 12 different results for possible total costs.
The system chooses the simulation with the lowest total costs and suggests scheduling agreement releases for all products in the product group according to the chosen simulation.
The system continues with normal DRP but leaves out all products that belong to the product group that has already been processed.
Example
Products A and B belong to your product group.
Product A has demand and thus triggers the product group procurement process. The system then performs 12 simulations. In each of these simulations the system calculates the costs that would occur to cover the demands of all products in the product group for the next 12 periods. The system varies the ordering frequency, as shown in this table:
Planned Demand Days’Supply |
Number of Purchase Order Schedule Lines |
Conversion |
|
1st Simulation |
1 Period |
12 |
- |
2nd Simulation |
2 Periods |
6 |
- |
3rd Simulation |
3 Periods |
4 |
- |
4th Simulation |
4 Periods |
3 |
- |
5th Simulation |
5 Periods |
3 |
Conversion of costs from 15 to 12 periods |
6th Simulation |
6 Periods |
2 |
- |
7th Simulation |
7 Periods |
2 |
Conversion of costs from 14 to 12 periods |
8th Simulation |
8 Periods |
2 |
Conversion of costs from 16 to 12 periods |
9th Simulation |
9 Periods |
2 |
Conversion of costs from 18 to 12 periods |
10th Simulation |
10 Periods |
2 |
Conversion of costs from 20 to 12 periods |
11th Simulation |
11 Periods |
2 |
Conversion of costs from 22 to 12 periods |
12th Simulation |
12 Periods |
1 |
- |
The following figure shows the fourth simulation at which the system presumes three purchase order schedule lines and a demand days’ supply of four periods each:
According to this simulation, DRP would generate three purchase order schedule lines for product A and two for product B, since the demand of product B is covered over the first four periods. Setup costs would only occur three times, since product A and B are ordered together.