Supply Chain Management and Advanced Planning ... - TU Berlin

Supply Chain Management and 

Advanced Advanced Planning Systems 

Systems 

A Tutorial 

SCM Workshop, TU Berlin, October 17-18, 2005 

H. H.-O. O. Günther 

Dept Dept. of Production Management 

Management 

Technical University of Berlin

Outline 

�� Introduction: The concept of SCM and APS 

�� APS modules 

Strategic Network Design 

Supply Network Planning 

Production 

External Planning / 

Procurement Detailed 

Scheduling 

Transportation 

Planning / 

Vehicle 

Scheduling 

Demand 

Pl Planning i 

Order 

Fulfilment 

ATP / CTP

Lesson 1 

There is an ongoing 

g g 

change of paradigm 

from ERP / MRP 

towards APS.

Generations of PPC software 

1960s • Predecessors of PPC systems 

Focus on inventory control 

Basic order processing 

1970s 

• Material requirements q planning p g (MRP) ( ) 

Bill of material files 

Calculation of net requirements 

1980s • Manufacturing resources planning (MRP II) 

Enhanced planning functions 

Integration g of financial accounting g and management g functions 

1990s 

2000s 

• Integrated systems 

CIM: Integration of manufacturing 

ERP systems covering the whole enterprise 

• Advanced Planning and Scheduling systems 

Integration into Supply chain management concept 

Use of true optimization techniques

Lesson 2 

SCM needs d 

sophisticated 

planning l i systems. 

t

Plant specific view 

Holistic view 

Change of view 

More efficient network network-wide wide planning planning needed 

needed 

�� Development of APS

Definition 

“A supply chain 

consists of all parties 

involved, directly or 

indirectly, in fulfilling 

a customer request…. 

… the supply chain 

includes all functions 

involved in receiving 

and filling a customer 

request.” 

(Chopra and Meindl, 2004) 

Supply chain management 

Demand element 

(customer order or forecast) 

Transportation order 

Production order 

Replenishment order 

Customers, 

distribution centres 

Transporters 

Manufacturing 

stages 

Tiers of 

suppliers

Types of supply chains (networks) 

�� Inter Inter-company company 

s supply ppl chains 

�� Internal supply 

chains 

h i

Lesson 3 

APS employ hierarchical 

planning, consider the 

availability of resources, 

and apply optimization.

Characteristics of Advanced Planning 

Procurement Production Distribution Sales 

�� Integral planning of the entire supply chain 

Analysis of the 

decision problem 

problem 

Definition of the 

objectives 

�� True optimization Forecasting future 

developments 

�� Hierarchical planning 

�� e.g. APS from from SAP, i2 i2 technologies, 

technologies, 

Manugistics, Oracle, Aspen Tech 

(Fleischmann et al. 2002) 

Feasible 

alternatives 

Selection of 

solution

long-term 

mid-term 

Architecture of Advanced Planning Systems 

Procurement Production Distribution Sales 


Supply Network Planning 


Planning 

Production Transportation 

short-term 

External 

Procurement 


Detailed 

Scheduling 


Vehicle 

Scheduling 

Order 

Fulfilment 

ATP / CTP 

� Companies rarely use the entire suite of modules. 

� Even APS from different software vendors are used in a company. 

� Various industry specific solutions offered

S 

C 

M3 

P 

Routing 

A1 

A2 

A3 

M1 

M2 

A4 

Classical MRP systems 

Customer 

orders 

Material 

requirements 

q 

Capacity 

requirements 

Scheduling

Lesson 4 

FForget t BOMs BOM 

and routings. 

LLearn PPM PPM.

S 

C 

M3 

P 

M1 

M2 

Production-process-model 

Operation: Operation: 

Component C Sub-assembly Sub assembly S 

act. C1 

act. S1 

mat. M3 

mat. M2 

res res. a comp comp. C 

res. b 

act. P1 

act. P2 

Operation: 

Product P 

mat. M1 

res. c 

res res. d 

sub-a. S 

C S 

P 

M3 

act. P3 

C M2 

S M1 

res. e 

res res. f 

� Assign resources and materials to each activity 

Assign resources and materials to each activity. 

� Alternative modes (resources, routings) can be defined for an activity.

Transportation planning / 

vehicle scheduling 

APS planning cycle 

Strategic network design 

Demand planning 

Supply network planning 

Order fulfilment 

and ATP / CTP 

External 

procurement 

Production planning / 

detailed scheduling 

� The APS planning cycle represents the logical order of planning tasks 

The APS planning cycle represents the logical order of planning tasks. 

� Planning tasks differ by the frequency by which they are called up.

Outline 

�� Introduction: The concept of SCM and APS 

�� APS modules 

St Strategic t i network t k design d i 



External procurement 

Production Planning / Detailed Scheduling 

TTransportation t ti Planning Pl i / Vehicle V hi l SScheduling h d li 

Order Fulfilment and ATP / CTP

Lesson 5 

St Strategic t i network t k design d i iis 

a powerful, but the least 

utilized tili d module d l of f APS APS.



� Decisions 

Number of plants and DCs 

Locations and capacities 

Assignment of products to plants 

Assignment of locations to each other 

e.g. customers to DCs 

Determination of transportation links 

� Mathematical methods 

He Heuristics, ristics MILP MILP, Cl Clustering stering techniq techniques 

es

Planning frequency 

Planning horizon 

DDegree of f aggregation ti 

Management level 


low high 

long 

high 

high 

short 

low 

low


� Exercise: Modelling Nutricia’s supply network design 

by use of SAP APO 33.1 1 (based on Wouda et al al., 2003) 

Supplier 

Plant 

Customer 

Distribution 

centre

Lesson 6 

Forecasting is essential at 

all planning levels. Pure 

forecasts can cause ampli 

fication of demand.

� Use of forecast 


Strategic level: design of the supply network 

Operational level: production, distribution, 

and procurement decisions 

Short-term: update of production orders 

� Demand planning 

Most essential in make-to-stock environment, 

e.g. in the consumer goods industry 


Planning 

Collaborative forecasting between partners in the supply chain 


Statistical forecasting techniques 

Tools for incorporating human judgement

Lesson 7 


is a core module of SCM. 

Huge cost savings 

can be gained.


LP and MILP, MILP heuristics 

� Decisions 


Supply pp y Network Planningg 

Allocation of production quantities between plants 

Supply from the plants to DCs and from the DCs to customers 

Smoothing out seasonal cycles in demand 

Consideration of production, transportation, and handling capacities 

as hard constraints 

Consideration of demand d e dates and safet stocks 

Consideration of demand, due dates, and safety stocks 

as soft constraints






year day 

year 

high 

high 

day 

low 

low


� Supply chain engineer in SAP APO 3.1 

SSet-up t of fth the network t kconfiguration fi ti 

Integration of suppliers and transporters 

Assign and modify master data, e.g. product portfolio and capacities, 

costs, safety stocks, demand figures, modes of transportation etc

Lesson 8 

Generic model formulations 

show pros and cons.


� Generic model formulation 

Storage and handling capacity at DCs 

α ⋅ y ≤ SC 

∑ 

p∈P(i) 

p 

pjt 

∑ ∑ α ⋅ x + ∑ ∑ α 

p pijt 

p∈P( 

i) 

i∈I 

( j) 

p∈P( 

i) 

k∈K( 

j) 

Transportation capacity per link 

∑ 

p 

p∈P(i) 

⋅ x pijt ijt ≤ TC ijt 

j 

p 

⋅ z 

pjkt 

≤ 

HC 

j 

Production capacity p y at pplants 

a ⋅ x ≤ PC 

∑ ∑ 

p∈P( 

i) 

j∈J( 

i) 

pi 

pijt 

Storage and handling costs per DC 

αα ∑ ∑ ∑ h p y pjt + ∑ ∑ ∑ ∑ 

y 

Aggregate demand per DC 

z = 

∑ 

j∈J 

(k) 

pjkt bpkt 

⋅ c pjk ⋅ z pjkt 

p∈Pj∈J t∈T 

p∈Pj∈J k∈K( 

j ) t∈T 

Production costs per plants 

c ⋅ x 

∑ ∑ ∑ ∑ 

p∈P( i) 

i∈I 

j∈J 

( i) 

t∈T 

� Assigning attributes to pre-defined entities 

pij 

pijt 

it


� Planning books offer user-defined views of the solution 

� Additional features of SAP APO 3.1 

Safety stock planning 

Lot-sizing and production campaign planning

Lesson 9 

PP/DS is the module 

most difficult to adapt to the 

application-specific 

application specific 

features.

� Decisions 


Generation of production orders 

Allocation of resources according 

to a finite scheduling policy 

Production 


Detailed 

SScheduling h d li 

Lot-sizing, sequencing, and procurement proposals 


Genetic algorithms 

Constraint programming 

Rules and heuristics 

Application specific 

algorithms 

Consideration of the availability of resources as hard constraints 

Consideration of due dates, time windows etc. as soft constraints






year day 

year 

high 

high 

day 

low 

low


� Case study: Production of hair dyes 

Dye Cream 

Cream Liquid 

Cream 

Processing Chemicals line 

cream 

Tube 

Processing line 

dispersion 

Processing line 

shampoo 

Final Product 

Dispersion 

Dispersion 

Li Liquid id 

Dispersion 

Chemicals 

Bottle 

Filling shampoo 

Box 

Shampoo 

Shampoo 

Li Liquid id 

Shampoo 

Chemicals 

Tube 

Filling cream and dispersion 

and packaging final product

Lesson 10 

Most scheduling problems 

are NP-hard. 

However, practical solutions 

are often easy to obtain.


� Case study: Production of hair dyes 

SSolutions l ti obtained bt i d ffrom th the PP/DS module d l of f SAP APO 33.1 1 

within 2 minutes 

GA superior i tto CP 

Alternative solvers can be 

iintegrated t t d via i “O “Optimization ti i ti 

extended workbench” 

� Additional features 

of SAP APO 3.1 

Characteristics based planning 

Shelf-life consideration 

Model mix planning


� Complete pegging (dynamic or fixed) 

Customer orders 10 20 10 40 60 

TTransportation t ti orders d 

Production orders 

Purchase orders 

10 

20 10 40 50 

30 100 

30 20 50 30 

50 50 50 

50 30 20 50 

80 80 

+10 

+20 

Surplus 

Surplus 

-10 

Deficit

Lesson 11 

Procurement requires a 

high degree of collaboration 

between partners in the 

supply chain.

External procurement 

� Decisions 

Determination of the purchase quantity 

Selection of the supplier 

External 

Procurement 

In-house or external supply? 

Release of deliveries for JIT goods 


Rule-based and heuristic 

procedures d 

MILP

Lesson 12 

ATP / CTP provide simple, 

but very y 

effective tools.

� Decisions 

Order fulfilment and ATP / CTP 

Matching customer orders 

against available quantities 

Quick response to customer requests 

(Available to Promise: ATP) 

Capacity check for new or enhanced 

production orders in response to 

customer requests 

Order 

(C (Capable bl tto PPromise: i CTP) Fulfilment 


Rule-based ATP 

Batch mode ATP (MILP) 

ATP / CTP


� Rule-based ATP: Bayer AG, Germany 

Query from customer EXC1, for 

product P1, amount Q1, date T1 

Query for commitment 

from inventory for 

EXC1, P1, Q1, T1 

No 

Earliest date available for P1, 1⌫ T2 

EXC1 satisfied? 

No 

Query for commitment 

from inventory or 

production for EXC1, 

P1, ,Q Q1, , T1 

No 

Yes 

Yes 

Yes 

Preliminary quick check with 

availability chart for P1, T1 

Commit order for 

EXC1, P1, Q1, T1 

Commit order for EXC1, P1, Q1, T2 

using query for commitment from 

inventory 

Commit order for EXC1, P1, Q1, T1; 

create campaign(s) for production 

Place order for EXC1, P1, Q1, T1; 

commitment after optimization run if 

capable to produce


� ATP decision cube of SAP APO 3.1 

Alternative 

product 

Original 

order d 

Alternative component 

Customer order / 

end item 

Same product/ 

alternative location 

Alternative product/ 

alternative location 

Production 

Change of location

Lesson 13 

Customer satisfaction 

finally depends on the 

timely y execution of 

transportation activities.

� Decisions 

Transportation planning and vehicle scheduling 

Choice of the transportation mode (e (e.g. g truck or rail) 

Integration of external logistics service providers 

and offering of own logistics services (e.g. VMI) 

Determination of regular freight 

frequencies between locations and 

of the unit transportation size 

Vehicle loading and scheduling 

considering g time windows for delivery y 

Collaboration between locations and 

with external logistics service providers 


Heuristics 

Local Search 

Transportation 


Vehicle 

Scheduling

Concluding remarks 

Huge cost savings can be gained through efficient use of APS. 

APS have been adopted in many industries. 

Collaboration between partners in the supply chain including 

share of information and transparency of business processes 

is seen as a major driver of SCM performance. 

No global “optimize SCM” button provided by APS. 

Expertise needed. 

Optimization models often require large computational effort. 

APS, especially at the detailed scheduling level, do not 

sufficiently consider application specific features. 

APS are most successful for intra company supply chains 

APS are most successful for intra-company supply chains 

with centralized logistics control.

Supply Chain Management and Advanced Planning ... - TU Berlin

Create successful ePaper yourself

Delete template?

Save as template?