Source Determination (Optimizer) (SAP Library

Source Determination (Optimizer)

Purpose

If your company has alternative source of supply options with different costs, you can use the optimizer in Supply Network Planning (SNP) to solve the following issues:

· Where to produce, procure, store, and deliver (for example, it can decide whether to use in-house production or external procurement)

· Which products and product quantities to produce, transport, procure, store, and deliver (product mix)

· Which resources and which production process models (PPMs) or production data structures (PDSs) to use (technology mix)

· The dates and times for production, transportation, procurement, storage, and delivery

· Which locations to transport from and to (for example, production plant-> distribution center or distribution center -> customer)

The SNP optimizer bases its decisions about sources of supply on costs. The optimizer uses the following as possible sources:

· Transportation lanes

· PPMs/PDSs

Moreover, you can define that the SNP optimizer is to taken into account incoming, time-dependent quota arrangements. You define penalty costs for the violation of quota arrangement values that the optimizer also takes into account during source of supply determination. For more information, see Consideration of Incoming Quota Arrangements.

The main purpose of optimized source determination using the SNP optimizer is to define the production locations in such a way as to reduce the number of stock transfers and associated stock transfer costs.

Constraints

The optimizer does not take into account external procurement relationships as sources of supply; that is, no scheduling agreements, contracts, nor purchasing info records. If you have assigned a means of transport to the transportation lane generated from the external procurement relationship, the optimizer takes this transportation lane into account. However, the optimizer does not create any orders for scheduling agreements or contracts during planning (it only takes into account existing orders as fixed orders).

Prerequisites

The prerequisites for source determination are the same as those for general optimization-based planning:

· Set Up of Planning Area

· Set up of Master Data for the Optimizer

· Creation of Model Name and Version

· Set Up of Supply Chain Model

· Release of Demand Plan to Supply Network Planning

Using Costs to Control Source Determination

Since the SNP optimizer simultaneously takes into account all the conditions of a model to determine an optimal (most cost-effective) solution, it is generally only possible to influence its choice of sources by using costs. For example, you can use costs to prioritize sources by reducing the production costs at your preferred location. However, remember that the optimizer always takes all influencing factors into account:

· Using Production Costs to Prioritize Production Resources

You can influence the optimizer’s decision regarding which location and resources to use for production by defining corresponding production costs in the PPM/PDS. For example, if you want to define priorities for three different PPMs/PDSs, you can specify the lowest production costs for your highest priority PPM/PDS, higher costs for the PPM/PDS with medium priority, and the highest costs for the PPM/PDS with lowest priority. To do this, define single-level production costs or a cost function in the PPM/PDS.

Note however that in addition to taking into account production costs when making its decision, the optimizer considers the costs for storing the PPM/PDS products and the available capacity of the resources required for the PPM/PDS.

· Using Transportation Costs to Prioritize the Procurement Location

You can influence the optimizer’s decision regarding which locations to procure from, by defining corresponding costs in the transportation lane. For example, if you want to define the priorities of two different procurement locations, enter lower transportation costs for the transportation lane of your preferred location than those for the other transportation lane. Transportation costs consist of the means of transport costs (costs from the Means of Transport section of the transportation lane) and the product-specific means of transport costs (from the Product-Specific Means of Transport section).

Note however that in addition to taking into account transportation costs when making its decision, the optimizer also considers other influencing factors, such as the storage costs and production costs of the location.

System Action if Source Cannot Be Found

If there is no valid transportation lane for procurement type F (external procurement), the system creates an SNP stock transfer with no reference to a source of supply. If there is no valid PPM/PDS for procurement type E (in-house production), the system’s behavior is governed by whether or not the SNP: No Planned Order indicator has been set in the planning version. If this indicator is set, the SNP optimizer does not create any planned orders; if it is not set, the SNP optimizer creates planned orders with no reference to a PPM/PDS.