Sap planning

SAP supply chain Planning in wholesale
/distribution industry
Jalil mousavi
SAP Logistic &MM Consultant
https://ir.linkedin.com/in/jalil-mousavi-b1564756

© 2011 SAP AG. All rights reserved. 2
Agenda:
Wholesale & dist.
Aggregate planning
SOP
RRP
Sale forecast
Demand management
DRP
MRP for logistics
MD
MPS
RCCP
MRP
CRP
Detailed scheduling
PAC
SAP Planning and best practice for FMCG

Wholesale Distribution are those companies acting as intermediaries between Manufacturers and consumers.
The wholesale distribution industry includes companies that sell products to retailers, merchants, contractors,
and /or industrial,institutional,and commercial users ,however ,do not sell in significant amounts to ultimate
household consumers. Specific sub industries represented in this segment are divided into durable goods (60%)
and nondurable goods (40%) distribution.
Wholesale Distribution

Wholesale/distribution industry types:
Large ASSORTMENT
Distributors sell a Varity (broad-line) of products , allowing customers
minimize the number of faces-to-customer , transactions , and deliveries .
Small Quantities
Distributors sell a small number of units very frequently . Customers want to
hold little inventory and purchase only in useable quantities.
Short lead times
Distributors sell products that need to found and obtained quickly with low
customers sourcing costs. The times between ordering and delivering can be
measured in hours
Value added services
Distributors provide special unique services that include , sorting , packaging
, labeling , kitting , assembly , installation service , etc

SAP(ERP,SCM,…)
High Performance Reporting and analytic
platform
High Performance(Demand Planning ,
Distribution Planning , etc)
Sale and operation planning
Financial
Planning
Strategic
Operational
Tactical
Execution
What?
•Supply policies (service levels)
•Network design
•Strategic sourcing
Daily
planning
Now–2
weeks out
Quarterly or yearly planning
1–10 years out
Weekly planning
Up to 3 months out
Monthly or quarterly planning
3 months–1 year out
Planning Timeframe Objectives
When? Where?
•Schedule, monitor, and adjust
plan
•Order and inventory tracking
Execute
•Order fulfillment
•Material
transport
Strategic
planning
Supply chain integrity and strategy levels with sap
How?

Sap best practice for FMCG & WH & Dis
Demand planning
MRP
Strategic sourcing
Purchase order mgt
Investment buying
Supplier rebates
Cross docking
Master data management
Invoice verification
Commissions
Inventory management
Profitability analysis
Credit management
Free goods
Mass price maintenance
Price protection
DRP & Deployment
Inbound logistics Outbound logistics
internal processing

supply SaleDistributionproduction
Long
Range
MediumrangeShortrange
 Strategic planning
 Sale forecasting
 Material
Requirement
Planning
 Contract
management
 MPS
 CRP
 RCCP
DRP
Demand
Planning
Available To
Promise
 Inventory
Replenishm
ent
Transportation
management
 Safety stock
 Production
planning
 Production
activity control
Planned order
SCOR & SAP planning
 Aggregate planning
 SOP

Figure 6.1
Demand
Management
Material
Requirement
Planning(MRP)
Distribution
Requirement
Planning(DRP)Master
Production
Scheduling(MPS
)
SOP
Capacity
Requirement
Planning(CRP)
Rough-Cut
Capacity
Planning(RCC
P)
Resource
Requirement
Planning(RRP)
Purchase &
planning
control
BOM
Long Range (More
than 1 year)
Medium range(6 to
18 month)
Short
range(Days/Week)
Production
activity control
Capacity level Material planPlanning horizon
SAP Planning level in FMCG & WH & Dis

sop
Demand
management
Sale
forecasting Capacity
leveling
Master
production
schedule
RCCP
Planned
Production
order
Planned
PR.
Capacity
Req.
Planning
Detailed
Scheduling
Production
activity control
Distributio
n Req.
Planning
Capacity
req.
planning
Purchasing
MRP
WH/SL.
SDMRP or MD
SAP Planning
Updated

Aggregate Production Plan
Hierarchical planning - process that translates annual business &
marketing plans & demand forecasts into a production plan for a product
family (products that share similar characteristics) in a plant or facility
leading to the Aggregate Production Plan (APP)
Planning horizon of APP is at least one year & is usually rolled forward by
three months every quarter
Includes costs relevant to the aggregate planning decision include
inventory, setup, machine operation, hiring, firing, training, & overtime
costs

Aggregate Production Plan
Three basic production strategies :
1. Chase Strategy - Adjusts capacity to match demand. Firm hires & lays
off workers to match demand. Finished goods inventory remains constant.
Works well for make-to-order firms
2. Level Strategy - Relies on a constant output rate while varying inventory
& backlog according to fluctuating demand. Firm relies on fluctuating
finished goods & backlogs to meet demand. Works well for make-to-stock
firms
3. Mixed Production Strategy - Maintains stable core workforce while
using other short-term means, such as overtime, subcontracting & part
time helpers to manage short-term demand

Sales and Operations Planning
Sales and operations planning (SOP):
Input: sales forecast provided by Marketing
Output: production plan designed to balance market demand with
production capacity
Production plan is the input to the next step, demand management
Disaggregating the sales and operations plan
Companies typically develop sales and operations plans for product groups
SAP ERP system allows any number of products to be assigned to a product group
Sales and operation plan disaggregated
Production plan quantities specified for the group are transferred to the individual
products that make up the group
Sales & Operations Planning (SOP) is a universal planning and forecasting tool that
you can use to plan any area of logistics (for example, sales and distribution, production,
purchasing)

Sales and Operations Planning
In SAP ERP, sales forecast can be made using:
• Historical sales data from the Sales and Distribution (SD) module
• Input from plans developed in Controlling (CO) module
• CO module Profit goals for company can be set Sales levels needed to
meet the profit goals can be estimated

14-14
Sales and Operations Planning Process
Sales&
operations
planning
Capacity
constraints
Demand
forecasts
Company
policies
Strategic
objectives
Financial
/CO
MPS
Backlogs ,
backorder
Workforce and
inventory level
Customer service level
Demand management
Sales per month by
product family
Sales
Plan
Operation
plan
Monthly update

Resource Requirements Planning (RRP)
Rough-cut planning profiles are used in resource leveling. In a rough-cut plannin
profile, you plan the requirements of one or more of the following resources:
• Work center capacities
• Materials (typically, raw materials)
• Production resources/tools
• Costs
Capacity leveling is an important tool for creating realistic plans. It helps you
ensure that your targets are within capacity constraints. The following topic
describes how to use capacity leveling from the point of view of SOP.
SOP supports planning at any level of your organizational hierarchy from high-
level planning across national boundaries to the detailed planning of finished
products.

Demand Management
The function of Demand Management is to determine requirement quantities and
delivery dates for finished products assemblies. Customer requirements are
created in sales order management. To create a demand program, Demand
Management uses planned independent requirements and customer
requirements.
To create the demand program, you must define the planning strategy for a
product. Planning strategies represent the methods of production for planning
and manufacturing or procuring a product.
Using these strategies, you can decide if production is triggered by sales orders
(make-to-order production), or if it is not triggered by sales orders (make-to-
stock production).You can have sales orders and stock orders in the demand
program.

DM & SOP
You can pass on data planned in Flexible Planning or Standard SOP to Demand
Management.
Demand Management determines the requirement dates and requirement quantities for
important assemblies and specifies the strategies for planning and producing/procuring
finished
products. The result of Demand Management is the demand program. The demand
program
differentiates planned independent requirements and customer independent
requirements.

Demand Management & MPS
Links the sales and operations planning process with detailed scheduling and
materials requirements planning processes
Output: master production schedule (MPS)
Production plan for all finished goods

Improvements with SAP FSCM:
 Improve efficiency in credit & collection
processes
 Ensure consistent company-wide credit
policy and process
 Manage proactive credit risk management
 Forecast cash levels more accurately
 Increase transparency in dispute
handling and accounting
 Gain insights to avoid future credit &
collection issues & disputes
 Optimize the financial supply chain not only
within the company but also with external
business partners
Credit
Management
Biller
Direct
Dispute
Management
Collections
Management
Cash &
Liquidity
Management
In-House
Cash
Bank
Communication
Management
Treasury &
Risk
Management
SAP FINANCIAL
SUPPLY CHAIN
MANAGEMENT
Treasury
Mgt. of receivables
FSCM

For the optimization of receivables most benefits can be reached by
implementing credit, collections and dispute management.
20
Cross department dispute resolution and integration of
workflows
Automated correspondence activities and internal
escalation
Support of various communication channels
Provision of daily collection work lists
Functions to process and view open receivables
Broad support of the collections procedure
Integration of dispute & credit management
Control and monitor customers credit limit and exposure
Uniform credit rules and automatic credit limit
adjustments
Use of external information about credit ratings
Source: SAP
The functionalities …… and benefits
Dispute
Management
Collections
Management
Credit
Management
All related information is within
the system
Resolve issues before invoice
due date
35% efficiency increase in
dispute management
Identify automatically customers
to be called
Efficient and comprehensive
information provided
40% efficiency increase in
collections management
Focus sales on “good” customers
Comprehensive and up-to-date
information for credit checks
Apply company-wide credit policy
automatically
Overview of the credit, collections and dispute management

Sales Forecasting
With the forecast, you can estimate the future progression of values in a time series on the
basis of past history. You do this either online or in the background.
In standard SOP, you can forecast the sales quantities of a product group or material. The
system bases the forecast on the historical consumption of materials. It then aggregates
these results to the product group level. Consumption data includes every kind of goods
issue, even goods that have been written off as scrap.

Sales Forecasting (cont’d.)
 SAP’s ERP system takes an integrated approach
 Whenever a sale is recorded in Sales and Distribution (SD)
module, quantity sold is recorded as a consumption value for that
material
 Simple forecasting technique
 Use a prior period’s sales and then adjust those figures for current
conditions

Figure 6.1
Demand
Management
SOP
Resource
Requirement
Planning(RRP)
Long Range (More
than 1 year)
Level 0_planning

Evolution of DC-Inventory Management
 Traditional Replenishment Inventory:
 Lot Size/ Order Point Logic
 Single item focus
 Emphasis on cost optimization
 Long run, steady state approach
 The MRP / DRP Approach:
 Scheduling emphasis
 Focus on quantities and times, not cost
 Multiple, inter-related items and locations
 Simple heuristic rules
MIT Center for Transportation & Logistics - ESD.260 17 © Chris Caplice, MIT

Evolution cont.
MRP / DRP have limited ability to deal with:
 Capacity restrictions in production and distribution
“set-up” costs
fixed and variable shipping costs
alternative sources of supply
network transshipment alternatives
expediting opportunities
Next Steps in MRP/DRP
Establish a time-phased MRP/MPS/DRP network
Apply optimization tools to the network
Consider cost trade-offs across items, locations, and
time periods
Deal with shortcomings listed above

DRP?
DRP provides the basis for integrating supply chain inventory information and physical
distribution activities with the Manufacturing Planning and Control system.
Managing the flow of materials between firms, warehouses, distribution centers.
DRP helps manage these material flows. Just like MRP did in Manufacturing.
Links firms in the supply chain by providing planning records that carry demand
information from receiving points to supply points and vice versa.

DRP Role
DRP coordinates material flows through the physical distribution system
Effectively managing the flow of goods and inventories between the
firm and the market
Planned timings and quantities for replenishing inventories throughout the
physical distribution system
Provides information to the master scheduler in a format consistent with
MRP records

DRP in the Supply Chain
DRP links firms in the supply chain
Planning records carry demand information from receiving points to
supply points and returns supply information to the receiving points
DRP integrates key linkages in the supply network
DRP can be linked to the MPC systems of the manufacturer, customers,
and suppliers
Spans the boundary from internal to external MPC

Distribution requirements planning and the logistic
system
Vehicle loading
Vehicle capacity
planning
Warehouse
receipt planning
Vehicle
dispatching
Distribution
requirement
planning
Master Production
Scheduling
Demand
Management

A Multi-Echelon Inventory System
plant
RDC1
RDC2
LDC3
LDC4LDC1 LDC2
R7 R8R6 R5R4R3R2R1
Higher than expected demand Lower than expected demand
SHORTAGES EXCESS

DRP & Demand Management
Demand management is the connection between mfg. and the marketplace.
Plans derived from the DRP information and shipping requirements are the basis
for managing the logistics system.
Continually adjusts changes in the demand, sending inventories from central
warehouse to distribution centers where they are needed.
DRP is connected to the logistics system
By helping determine vehicle capacity planning.
Helping loading.
Developing vehicle dispatching.
Determining warehouse capacity.
Provides the data to accurately say when availability will be improved and
delivery can be expected.

DRP and MPS
DRP greatest payoff is from integrating records and information.
Crossing the area of inter firm MPC systems means negotiating with supply chain
partners for sharing costs and benefits.
DRP permits evaluation of current conditions to determine if mfg. priorities need to
revised.
Provides the master scheduler better info to match mfg. output with shipment needs.

MRP / DRP Integration
Purchase Orders
MRP
MPS
DRP
Product
CDC
RDC
Retail Retail Retail Retail
Sales/Marketing Plan

34
DRP Benefits
 Helps improve customer service
 Provides a better and faster understanding of the impact of shortages
and/or promotions
 Helps reduce costs
 Inventory
 Freight
 Production
 Provides integration between the stages in the supply chain

35
Master Production Scheduling
Controls the timing and quantity of production for products or product families
Primary interface point for actual customer orders
Coordinates forecasted demand and actual orders with production activity
Serves as tool for agreement between marketing and operations (but at a
different level than SOP)
More detailed than SOP
 weekly versus monthly
 specific products versus “average”
 must satisfy the needs of marketing
 must be feasible for operations

36
Master Scheduling Process
Master
Scheduling
Beginning inventory
Forecast
Committed
Customer orders
Inputs Outputs
Projected inventory
Master production schedule
ATP: Uncommitted inventory

37
A Final View of Master Scheduling
SOP
MPS
Marketing Operations
Rough-Cut Capacity Plan

Rough Cut Capacity Planning (RCCP)
Compares the master production scheduling resource requirements to the capacity
available in critical work centers. You use RCCP to determine if you should revise
the master schedule to create feasible work loads or improve utilization of limited
resources.
Use output from master production scheduler (quantity and due dates)
Use a bill of resources which has times for each part type on each resource
Compare with resource time capacity over planning period
Quick check on capacity of key resources
• Use Bill of Resource (BOR) for each item in MPS
• Generates usage of resources by exploding MPS against BOR
(offset by lead times)
• Infeasibilities addressed by altering MPS or adding capacity (e.g.,
overtime)

Demand
Management
Distribution
Requirement
Planning(DRP)Master
Production
Scheduling(MPS
)
SOP
Rough-Cut
Capacity
Planning(RCC
P)
Resource
Requirement
Planning(RRP)
Long Range (More
than 1 year)
Medium range(6 to
18 month)
Level 1_planning

Material Requirements Planning (MRP)
Uses the master production schedule, open
orders, the bill of materials, and inventory
records to Calculate time-phased net
requirements for every item,and creates a plan
for covering material requirements.
EnditemComponentRawmaterial
R
Time
Time
Time
The MRP approach

MRP inputs and outputs

MRP COMPONENT
Component Description
Bills of material •The components and relationships required to produce a parent item. Use
bills of material to: Maintain many configurations for an item without creating
additional part numbers
•Define quantities of intermediate products in any unit of measure as they
progress through the manufacturing process
•Enter similar items by copying bills of material, routings, and processes
Routings •The operations required to produce the parent item. Use routings to: Define
each step of the manufacturing process with allowances for anticipated yield
and scrap
•Add alternate operations to routings
Work centers •The facilities on the shop floor where the routing operations occur. Use work
centers to: Define work center number and description
•Define the number of operators or machines
•Define setup, labor, machine, and overhead rates
•Define information for Capacity Planning
Engineering change
orders (ECOs)
•The document that you use to define and implement changes to your
products structure. Use engineering change orders to: Control item changes
from a single source
•Incorporate approved changes to bills of material

Lot Sizing in MRP Systems
• Lot-for-lot (L4L) ordering policy
• Minimum order quantity (Ex: Min 250)
• Multiple order quantity (Ex: X100)
• Economic order quantity (Ex: 350; annual demand: 4 200)
• Periodic order quantity (Ex: 2 months)

Capacity Requirements Planning (CRP)
Compares the material requirements plans to the capacity available in all work
centers. You use CRP to determine if you should revise the material requirements
plan to create feasible work loads or improve utilization of limited resources
• Uses routing data (work centers and times) for all items
• Explodes orders against routing information
• Generates usage profile of all work centers
• Identifies overload conditions
• More detailed than RCCP
• No provision for fixing problems
• Lead times remain fixed despite queuing

PP: detailed scheduling
Detailed plan of what is to be produced, considering machine capacity and
available labor
One key decision in detailed production scheduling How long to make the
production runs for each product Production run length requires a balance
between setup costs and holding costs to minimize total costs to the company

Production Activity Control
Responsible for executing the:
• Master Production Schedule (MPS)
• Materials Requirements Plan (MRP)
At the same time:
• Make good use of labour , machines and materials
• Minimize work-in-process inventory
• Maintain customer service
• Manage day-to-day activity and provide support

PAC Input / Output Control
Input Rate
Control
Output Rate
Control
Queue
(Load, WIP)
• Control the work going into and out of a work
center: Input/output control
• Set the priority of orders to run at each work
center

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