EGN 5623 Enterprise Systems Optimization
Fall, 2013

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Supply chain management (SCM) concepts, modeling, configuration, integration, data transfer, and supply network planning and optimization.
Hands-on with SAP

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Single facility SCM
◦ Increased planning capabilities for a single facility
◦ Finite-capacity scheduling
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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
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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

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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 2.11
◦ Review Master data
◦ APO Demand planning
◦ Planning in SCM
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Supply Network Planning (SNP) Heuristics
Deployment and Transport Load Builder (TLB)
Capable to Match (CTM)

Modules related to ECC and SCM
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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

Theories & Concepts
EGN 5623 Enterprise Systems Optimization
Fall, 2013

The APICS-Standard Planning
Framework

Intro to Supply Chain
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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
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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

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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
AUTOMOTIVE
SUPPLIER
Makes door
Iron ore
STEEL
MILL
Forms steel ingot
Steel ingots
STEEL
COMPANY
Forms sheet metal
Sheet metal
Car door
AUTOMOBILE
MANUFACTURER
Makes automobile
Car
Prepared car
FINAL
CONSUMER
Drives automobile
CAR
DEALERSHIP
Does preparation

Supply Chain Management in a Manufacturing Plant
Receiving and
Inspection
Raw
Materials,
Parts, and
In-process
Ware-
Housing
Production
Finished
Goods
Warehousing
Inspection,
Packaging,
And
Shipping
Purchasing
Materials Management
Production
Control
Warehousing and
Inventory Control
Shipping and Traffic
Physical materials flow
Information flow

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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

Analyzing Shipping Decisions
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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

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Definition
◦ Warehousing is the management of materials while they are in storage.
◦ Viewed as distribution center (DC)
Warehousing activities:
◦ Accounting
◦ Ordering
◦ Storing
◦ Dispersing

Warehousing
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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
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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
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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
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Costs
– 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
Revenue
– Customer is the only source of revenue
• From sale of products, spare parts, materials or service

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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

1.
2.
3.
4.
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–
–
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Pure Inventory Systems
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
Production of a unique complex product such as a ship or a bridge

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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

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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 Production Distribution Sales
Long term
-Material programs
- Supplier selection
- Cooperation
- Plant location
- Production systems
- Subcontractors
- Physical distribution structure
- Transportation strategy
- Product program
- Strategic sales planning
Mid term
-- Personnel training
-- Contracts
-- Material Requirements
Planning
-- Master production Scheduling
-- Capacity planning -- Distribution planning -- Mid-term sales planning
Short term
-- Personnel scheduling
-- Material ordering
-- lot-sizing
- operations scheduling
- shop floor control
- Warehouse replenishment
- Transportation planning -- Mid-term sales planning
Flow of goods
EXECUTION
Information Feedback

Differentiating Factors by Planning Levels
Factor- Level
Purpose
Implementation instruments
Planning horizon
Scope
Strategic
Supply chain design, resource acquisition
Policies, objectives, capital investment
Long: 3-5 years
Broad corporate level
Top
Tactical
Planning resource utilization
Budgets
Medium: 6-18 months
Medium plant level
Middle
Operational
Operation scheduling and execution
Schedules, procedures and reports
Short: daily, weekly, monthly
Short floor level
Low Level of
Management
Frequency of re-planning
Source of information
Level of aggregation
- product data
- time
Degree of uncertainty
Degree of risk
Low: every few years
Largely external
High
Product families years
High
High
Medium: monthly or quarterly
External and internal
Medium
Product groups
Month
Medium
Medium
High: weekly, daily or as required
Largely internal
Low individual products continuous
Low
Low

EGN 5623 Enterprise Systems Optimization
Fall, 2013

SAP
SRM
SAP PLM
SAP
ECC
SAP SCM
SAP NetWeaver
SAP
CRM

Basic Components of SAP SCM
SAP
ECC
ERP
•
Mater data
•Materials
•Locations
•Partner
•Plants
•Info records
• Transactional data
• Customer orders
• Production orders
• Purchasing orders
• Execution
Core Interface (CIF)
SAP SCM
(includes SAP BW)
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Demand Planning
• Supply Network Planning and optimization
• Production Planning with capacity considerations
• ATP
• CTP
• Detailed Scheduling
• Deployment
• Transportation planning
• Vehicle routing and scheduling

SAP
ECC 1
SAP
ECC 2
SAP
SCM
SAP
ECC n
- Each SAP ECC component covers one or more locations
In the network
- Planning may be done centrally

THEORY AND PRACTICE OF ADVANCED PLANNER AND OPTIMIZER IN SUPPLY CHAIN DOMAIN by Sam Bansal

THEORY AND PRACTICE OF ADVANCED PLANNER AND OPTIMIZER IN SUPPLY CHAIN DOMAIN by Sam Bansal

Two planning Scenarios for SAP
SCM
BW
Aggregates data from varous sources
Alternative
Scenario
Data from flat file
DP
Forecast based on data from BW
Master Data
SNP
Supply Network
Planning
Deployment
& Load Building
Transactional Data
Base Scenario
CIF
Controls data transfer between ERP and SCM
SOP / DM / PP
SAP ERP ECC 6.0

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If you select Location (heuristic), the system plans the specified products at the specified location.
The system explodes dependent demand for one BOM level at the production location in the planning direction.
However, dependent demand is neither fulfilled nor further propagated through the supply chain.
The system only uses this information to generate planned orders.

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If you select Network (heuristic), the system plans the specified products at all specified locations in the network to which the selected product is assigned.
The system explodes dependent demand for one BOM level at the first production location encountered in the planning direction.
However, dependent demand is neither fulfilled nor further propagated through the supply chain.
The system only uses this information to generate planned orders.

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If you select Multi-level (heuristic), the system plans all products specified at all locations , whether they are finished, intermediary, or purchased goods from the highest level down to the lowest BOM level .
In other words, the system plans all products specified, including all dependent demand.
The multi-level heuristic is performed across all locations to which the selected products are assigned, as well as across all locations to which dependent products are assigned.

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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

Section 1A: Planning and
Execution in ERP
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Emphasis on walking through much of the standard APICS planning framework
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Good “refresher” to get everyone on the same supply chain page
◦ Intermediate-term goal: seamless integration with ERP and SCM labs.

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.
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SAPGUI Download Instruction

SAP ERP/SCM Clients, Userid,
Password
Userid: gbi-001 to gbi-015
Initial password: SAP4US
Userid: gbi-001 to gbi-015
Initial password: SAP4US

Exercises:
(Due date 9/3/2013)
1. Review Global Bike International (GBI) company dataset
2. Change master data in ERP to prepare for SCM
1) Distribution centers
2) Material types
3) Assign transportation zone to customers
3. Add & change master data to prepare for SCM
1) Create production version for materials in ERP
- Define distribution key
- Create production version