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Enterprise Systems
Optimization
Introduction
EGN 5623
Enterprise Systems Optimization
(Professional MSEM)
Fall, 2012
Course Objective


Supply chain management (SCM) concepts,
modeling, configuration, integration, data
transfer, and supply network planning and
optimization.
With a focus on SAP implementation
SCM Scope

Single facility SCM
◦ Increased planning capabilities for a single
facility
◦ Finite-capacity scheduling

Multiple facility SCM
◦ Integrated planning for the entire supply chain
network
◦ Multiple plants and distribution centers
◦ Multiple vendors
◦ Multiple customers
◦ Multiple transportation options
ERP Operations related to SCM

Related ERP Modules
◦ Materials Management (MM) and Production
Planning (PP) modules
◦ Sales and Operations Planning (SOP)
◦ Forecasting
◦ Master Scheduling
◦ Material Requirements Planning (MRP)
◦ Capacity Requirements Planning (CRP)
◦ Order release and receipt
ERP & SCM Basics (SAP View)

SAP ERP:
◦ Holds master data for materials, plants, customers, vendors,
purchasing information records
◦ Holds transactional data (e.g., sales orders, planned orders)
◦ Is where plans get executed

SAP SCM:
◦ Is where “advanced planning” happens
◦ Imports master and transactional data from ERP
◦ Sends plans back to ERP for execution
ERP
Core Interface (CIF)
SCM
SCM Exercises Plan with GBI v 1.0
◦ Review Master data
◦ APO Demand planning
◦ Planning in SCM



Supply Network Planning (SNP) Heuristics
Deployment and Transport Load Builder (TLB)
Capable to Match (CTM)
Modules related to ECC and SCM

The products and modules involved in the SCM exercises
are:
◦
ERP (ECC 6.0):



◦
MM,
PP,
SD
SCM 7.0:



DP (Demand Planning),
SNP, and
Deployment
Work Flow in SAP SCM
Work Flow for our Exercises
Introduction to SCM
and SAP APO
Theories & Concepts
EGN 5623
Enterprise Systems Optimization
(Professional MSEM)
Fall, 2012
The APICS-Standard Planning
Framework
Intro to Supply Chain

Materials
◦ Any commodities used directly or indirectly in
producing a product or service.
 Raw materials, component parts, assemblies,
finished goods, and supplies

Supply chain
◦ Flow of materials through various organizations
from the raw material supplier to the finished
goods consumer.
Supply Chain Management

Definition
◦ All management functions related to the flow of
materials from the company’s direct suppliers to
its direct customers.

Functions included:
◦ purchasing, traffic, production control, inventory
control, warehousing, and shipping.

Two alternative names:
◦ Materials management
◦ Logistics management
Supply Chains Definition
•
Supply Chain
– A supply chain is the network of organizations, people,
technology, activities, information and resources involved
in the production of a product or a service
– Includes suppliers, manufacturers, transporters,
warehouses, retailers and customers
•
Production System
– A manufacturing subsystem that includes all functions
required to design, produce, distribute, and service a
manufactured product.
A Supply Chain consists of one or many production
systems that work together in the fulfillment of a
customer order
• Best viewed as a network
•
Supply Chain for Steel in an Automobile Door
MINING
COMPANY
Mines iron ore
Iron
ore
STEEL
MILL
Forms steel ingot
Steel
ingots
STEEL
COMPANY
Forms sheet metal
Sheet
metal
AUTOMOTIVE
SUPPLIER
Makes door
Car
door
AUTOMOBILE
MANUFACTURER
Car
Does preparation
Makes automobile
Prepared
car
FINAL
CONSUMER
Drives automobile
CAR
DEALERSHIP
Receiving
and
Inspection
Raw
Materials,
Parts, and
In-process
WareHousing
Production
Finished
Goods
Warehousing
Inspection,
Packaging,
And
Shipping
Materials Management
Purchasing
Production
Control
Physical materials flow
Information flow
Warehousing and Shipping
Inventory Control and Traffic
Customers
Suppliers
Supply Chain Management
in a Manufacturing Plant
Logistics

Logistics usually refers to management
of:
◦ the movement of materials within the factory
◦ the shipment of incoming materials from
suppliers
◦ the shipment of outgoing products to
customers
Movement of Materials within
Factories
The typical locations from/to which material is moved:
Incoming
Vehicles
Receiving
Dock
Quality
Control
Warehouse
Work
Center
Other Work
Centers
Packaging
Finished
Goods
Shipping
Shipping
Dock
Outgoing
Vehicles
Shipments To and From Factories
l
Distribution Resource Planning
Distribution resource planning extends DRP so
that the key resources of warehouse space,
workers, cash, and vehicles are provided in the
correct quantities at the correct times.
l
Analyzing Shipping Decisions

The “Transportation Problem”
◦ Problem involves shipping a product from
several sources (ex. factories) with limited
supply to several destinations (ex. warehouses)
with demand to be satisfied
◦ Per-unit cost of shipping from each source to
each destination is specified
◦ Optimal solution minimizes total shipping cost
and specifies the quantity of product to be
shipped from each source to each destination
Warehousing

Definition
◦ Warehousing is the management of materials
while they are in storage.
◦ Viewed as distribution center (DC)

Warehousing activities:
◦
◦
◦
◦
Accounting
Ordering
Storing
Dispersing
Warehousing
Record keeping within warehousing
requires a stock record for each item that
is carried in inventories.
 The individual item is called a stockkeeping unit (SKU).
 Stock records are running accounts that
show:

◦ On-hand balance
◦ Receipts and expected receipts
◦ Disbursements, promises, and allocations
Common Supply Chain Processes
Common Time Horizons for SCM
Processes
Level of Detail and Time Horizon
for SAP APO Modules
SCM Processes in SAP APO Modules
SAP APO System Structure and
Integration with SAP ERP
Characteristics of the SC Network


Each node may consist of a production system of its own
Links in the network represent a business relationship
between two nodes
• e.g. transportation of a product between two nodes


The number of levels in a supply chain varies and depends
on the complexity of the product
Flows can skip levels by that:
• Supplier ships direct to DC
• Manufacturer ships directly to customer

The decoupling point is the shift occurs from make-to-stock
to make-to-order
• The decoupling point is not fixed to one level of the supply chain
and is influenced by postponement strategies (e.g. Dell)
Characteristics of the SC Network
•
•
•
•
•
Multiple Products, each with possibly different Bills of
Material and multiple configurations
Multiple Suppliers for raw materials, parts or subassemblies
Multiple Subcontractors
Multiple Plants possibly containing a wide variety of
equipments
Multiple Warehouses
– Distribution centers, local, regional and factory warehouses
•
•
•
Different means of Transportation (air, sea, rail, FTL, LTL)
either leased, owned or contracted
Different information systems and communication channels
People with various skills at all levels of the organization
Example of Costs and Revenues in
the Supply Chain
•
Costs
•
Revenue
– Production and purchasing costs
– Setup or changeover costs
– Transportation and handling costs
– Hiring and firing costs
– Overtime costs
– Inventory costs
– Promotional and advertising costs
– Renting and leasing costs
– Subcontracting costs
– Overhead
– Capital investments and depreciation
– Taxes and duties
– Customer is the only source of revenue
• From sale of products, spare parts, materials or service
Example of Constraints
•
•
•
•
•
•
•
•
•
•
Productivity constraints
Equipment capacity constraints
Labour availability
Technological constraints
Inventory constraints
Purchasing, manufacturing and distribution
lead times
Demand uncertainties and seasonalities
Service requirements
Budget
Regulations and other constraints
Categories and Attributes of a
Supply Chain
- Reproduced from Fleischmann B., Meyr H, Hierarchy and Advanced Planning Systems,
Handbooks in OR and MS, Chapter 9, Elsevier, 2003, pp 457-523
Types of Production Systems
Pure Inventory Systems
1.
–
–
–
2.
–
–
3.
–
Simplest form of logistic system
Only procurement activities with no production or complex distribution
processes
Example: wholesale or retail operations where items are purchased
Continuous production Systems
Manufacturing of a few families of technologically related products in
large quantities
Example: Assembly lines or fabrication lines
Intermittent production Systems
Batch production of many products which share several processing
centers
Project based systems
4.
–
Production of a unique complex product such as a ship or a bridge
Production Strategies

Make to Stock
◦ Production is based on forecasted amounts for
stocked items

Make to Order
◦ Production of a product is made for a customer
order in the quantity specified by the order
2. Hierarchical Planning
•
Hierarchical planning was first introduced by
Robert Anthony in 1965* as a three level
management framework that consists of:
– Strategic or long-term planning
– Tactical planning (or management control) for mid-term
planning
– Operational planning for short term planning
The results of one each level are considered as an
inputs to the lower level planning
• Effective implementation and control of the plans
requires:
•
– An execution layer that captures the events as they occur
– Feedback loops at all levels
* R.N. Anthony, Planning and Control Systems: A Framework for Analysis, Cambridge. Mass., 1965
Hierarchical Planning Framework
Procurement
Long term
Mid term
Short term
-Material programs
- Supplier selection
- Cooperation
Distribution
Production
- Plant location
- Production systems
- Subcontractors
- Physical distribution
structure
- Transportation strategy
-- Personnel training
-- Contracts
-- Material Requirements
Planning
-- Master production Scheduling
-- Capacity planning
-- Distribution planning
-- Personnel scheduling
-- Material ordering
-- lot-sizing
- operations scheduling
- shop floor control
- Product program
- Strategic sales
planning
-- Mid-term sales planning
- Warehouse replenishment
- Transportation planning -- Mid-term sales planning
EXECUTION
Flow of goods
Sales
Information
Feedback
Differentiating Factors by Planning Levels
Factor- Level
Strategic
Tactical
Operational
Supply chain design,
resource acquisition
Planning resource
utilization
Operation scheduling
and execution
Implementation
instruments
Policies, objectives,
capital investment
Budgets
Schedules,
procedures and
reports
Planning horizon
Long: 3-5 years
Medium: 6-18
months
Short: daily, weekly,
monthly
Scope
Broad
corporate level
Medium
plant level
Short
floor level
Level of
Management
Top
Middle
Low
Frequency of
re-planning
Low: every few
years
Medium: monthly or
quarterly
High: weekly, daily
or as required
Source of
information
Largely external
External and internal
Largely internal
Level of aggregation
- product data
- time
High
Product families
years
Medium
Product groups
Month
Low
individual products
continuous
Degree of
uncertainty
High
Medium
Low
Degree of risk
High
Medium
Low
Purpose
Introduction to SCM
and SAP APO
SAP Implementation
EGN 5623
Enterprise Systems Optimization
(Professional MSEM)
Fall, 2012
SAP Business Suite
SAP PLM
SAP
SRM
SAP
ECC
SAP SCM
SAP NetWeaver
SAP
CRM
Planning with SAP ERP & SCM
Basic Components of SAP SCM
SAP
ECC
SAP SCM
Core Interface (CIF)
(includes SAP BW)
ERP
• Mater data
•Materials
•Locations
•Partner
•Plants
•Info records
• Transactional data
• Customer orders
• Production orders
• Purchasing orders
• Execution
• Demand Planning
• Supply Network Planning and
optimization
• Production Planning with capacity
considerations
• ATP
• CTP
• Detailed Scheduling
• Deployment
• Transportation planning
• Vehicle routing and scheduling
Planning at Supply Chain Level
SAP
ECC 2
Core Interface
SAP
ECC 1
SAP
ECC n
- Each SAP ECC component covers one
or more locations
In the network
SAP
SCM
- Planning may be done
centrally
SAP SCM Functionality
THEORY AND PRACTICE OF ADVANCED PLANNER AND OPTIMIZER IN SUPPLY CHAIN DOMAIN by Sam Bansal
SAP SCM Modules
THEORY AND PRACTICE OF ADVANCED PLANNER AND OPTIMIZER IN SUPPLY CHAIN DOMAIN by Sam Bansal
Two planning Scenarios for SAP
SCM
SCM 5.0
BW
Aggregates data from
varous sources
DP
Forecast based on
data from BW
SNP
Supply Network
Planning
Master Data
Alternative
Scenario
Data from
flat file
Deployment
& Load Building
Transactional Data
Base Scenario
CIF
Controls data transfer
between ERP and SCM
SOP / DM / PP
SAP ERP ECC 6.0
Cost-Based Optimization
Cost or price driven
 Mixed integer programming
 Must define all sourcing, production,
transportation, inventory costs and
constraints

Supply Planning Tasks and Output
for SCM
• Tasks
– Identify sources for
finished products
– Plan and consider
safety levels in any
location
– Distribute production
over plants
– Choose production
resources in plants
– Explode bill of materials
in plants
– Identify sources for
supply of raw materials
and components
• Outputs
– Purchase requisitions
– Stock transport
purchase requisition
– Planned production
orders
SAP APO Architecture
SAP Access through SAPGUI
SAPGUI Download
The latest SAP GUI release posted on SAP
@CSU, Chico web server
http://worker.cob.csuchico.edu
User = sap; Password = sapgui4me.
This GUI works on Windows 7 systems, as
well as Vista and Windows XP.

SAPGUI Download Instruction
SAPGUI Setup SAP SCM
SAP ERP/SCM Clients, Userid,
Password
SAP SCM
Client: 600
Userid: fiu-101 to fiu-130
Initial password: SAP4US
Exercises:
Overview of SCM (APO) Master Data
1)
2)
3)
4)
5)
6)
7)
Location master data in APO
Transportation lanes in APO
Product master data in APO
Resource master in APO
Production Process Model in APO
Quota Arrangement in APO
External Procurement Relationships in APO