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Process documentationPlanning Demand Fulfillment According to Two-Level Tier Processing

 

In two-level tier processing the system considers the priority of demands at the entry location and its direct child locations.

Prerequisites

You have defined priority tiers and arranged them in a hierarchy in Customizing for Advanced Planning and Optimization (APO), by choosing Start of the navigation path Supply Chain Planning Next navigation step Service Parts Planning (SPP) Next navigation step Deployment Next navigation step Define Priority Tiers and Sequence Rules End of the navigation path.

In Customizing for Advanced Planning and Optimization, you have selected Two-Level as the tier processing mode by choosing Start of the navigation path Supply Chain Planning Next navigation step Service Parts Planning (SPP) Next navigation step Deployment Next navigation step Define Service Profile for Deployment End of the navigation path.

Process

  1. The system calculates the gross demand of the individual priority tiers of the parent location and its direct child locations

    Note Note

    The system always defines a priority tier zero, independent of the settings you made in Customizing. Priority tier zero contains outgoing demand, which is already planned but not yet executed, minus the stock and receipts during the replenishment lead time. The system considers the demand of priority tier zero during an express shipment decision before all other demands.

    End of the note.

    Note Note

    If you have planned your products using reorder-point-based planning, the demand over replenishment lead time is calculated from the reorder point minus the planned minimum safety stock level.

    End of the note.

  2. The system calculates the cumulative net demand per priority tier for the parent location and it’s direct child location

  3. The system rounds the cumulative net demand of each priority tier and each location to the next biggest multiple of the smallest permissible pack size.

  4. The system calculates the sum of the rounded net demand as the rounded cumulative total net demand.

  5. The system checks up to which priority tier the available quantity can cover the demand.

Result

The system has determined the last priority tier whose demand it can completely or partially cover. Fair share distribution and sequence rules define how the system distributes the remaining stock within the priority tier.

Example

  • In this example the smallest permissible pack size for each location is one, and the quantity to be distributed is 38.

  • The outgoing demand minus the stock and receipts during the replenishment lead time of the parent location is -10, in other words the parent location has an unplanned stock of 10. Child location one does not have unplanned stock. The outgoing demand of location two minus the stock and receipts during the replenishment lead time is –1. These values result in the demand of priority tier zero, which is 0.

  • The parent location does not have demand in priority tier one, in other words, once the demand of priority tier one is covered, the available stock is still 10, a cumulated net demand is not yet available.

    Child location one has a demand of two at priority tier one; this means that the cumulative demand is two and the rounded net demand is also two.

    Child location two has a demand in priority tier one of five; this means that the cumulative demand is four and the rounded net demand is also four.

    Since the parent location has no net demand, yet child location one has a net demand of two and child location two a net demand of four, the cumulative rounded total net demand of priority tier one is six.

  • The system continues in the same way for all priority tiers and at the end has a total net demand to cover all priority tiers of 63.

  • With a distributable quantity of 38, the system can cover the demand of all locations up to priority tier two, and can only partially cover the demand of priority tier three. Deployment distributes the remaining quantity of 29 (38 minus 9) to the three locations using fair-share distribution.

More Information

For more information about how the system determines quantities to be deployed to virtual locations of consolidated ordering, see Determining Quantities to be Deployed to Locations of the VLCO on Level Two of the BOD.