Enterprise Systems Enterprise Systems OptimizationOptimization

IntroductionIntroduction

EGN 5623 Enterprise Systems OptimizationEGN 5623 Enterprise Systems Optimization(Professional MSEM) (Professional MSEM)

Fall, 2012 Fall, 2012

Course ObjectiveCourse ObjectiveSupply chain management (SCM) concepts,

modeling, configuration, integration, data transfer, and supply network planning and optimization.

With a focus on SAP implementation

SCM ScopeSCM ScopeSingle 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 SCMERP Operations related to SCMRelated 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)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 SCMCore Interface (CIF)

SCM Exercises Plan with GBI v 1.0SCM 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 SCMModules 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 SCMWork Flow in SAP SCM

Work Flow for our ExercisesWork Flow for our Exercises

Introduction to SCM Introduction to SCM and SAP APO and SAP APO

Theories & ConceptsTheories & Concepts

EGN 5623 Enterprise Systems OptimizationEGN 5623 Enterprise Systems Optimization(Professional MSEM)(Professional MSEM)

Fall, 2012 Fall, 2012

The APICS-Standard Planning The APICS-Standard Planning FrameworkFramework

Intro to Supply ChainIntro to Supply ChainMaterials

◦Any commodities used directly or indirectly in producing a product or service. Raw materials, component parts, assemblies,

finished goods, and suppliesSupply chain

◦Flow of materials through various organizations from the raw material supplier to the finished goods consumer.

Supply Chain ManagementSupply Chain ManagementDefinition

◦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 DefinitionSupply 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 DoorSupply Chain for Steel in an Automobile Door

MININGMININGCOMPANYCOMPANY

Mines iron oreMines iron ore

STEELSTEELMILLMILL

Forms steel ingotForms steel ingot

STEELSTEELCOMPANYCOMPANY

Forms sheet metalForms sheet metal

IronIronoreore

SteelSteelingotsingots

AUTOMOTIVEAUTOMOTIVESUPPLIERSUPPLIER

Makes doorMakes door

AUTOMOBILEAUTOMOBILEMANUFACTURERMANUFACTURER

Makes automobileMakes automobile

CARCARDEALERSHIPDEALERSHIP

Does preparationDoes preparation

CarCardoordoor

CarCar

FINALFINALCONSUMERCONSUMER

Drives automobileDrives automobile

PreparedPreparedcarcar

SheetSheetmetalmetal

Supply Chain ManagementSupply Chain Managementin a Manufacturing Plantin a Manufacturing Plant

ReceivingReceivingandand

InspectionInspection

RawRawMaterials,Materials,Parts, andParts, andIn-processIn-process

Ware-Ware-HousingHousing

ProductionProduction

FinishedFinishedGoodsGoodsWare-Ware-

housinghousing

Inspection,Inspection,Packaging,Packaging,

AndAndShippingShippingSu

pplie

rs

Cus

tom

ers

Materials Management

PurchasingPurchasing ProductionProductionControlControl

Warehousing andWarehousing andInventory ControlInventory Control

ShippingShippingand Trafficand Traffic

Physical materials flowPhysical materials flowInformation flowInformation flow

LogisticsLogistics

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 Movement of Materials within FactoriesFactories

Incoming Incoming VehiclesVehicles

ReceivingReceivingDockDock

QualityQualityControlControl WarehouseWarehouse

Work Work CenterCenter

Other Work Other Work CentersCenters PackagingPackaging FinishedFinished

GoodsGoods

ShippingShipping ShippingShippingDockDock

OutgoingOutgoingVehiclesVehicles

The typical locations from/to which material is moved:The typical locations from/to which material is moved:

Shipments To and From FactoriesShipments To and From Factories

Distribution Resource PlanningDistribution Resource Planning Distribution resource planningDistribution resource planning extends DRP so extends DRP so

that the key resources of warehouse space, that the key resources of warehouse space, workers, cash, and vehicles are provided in the workers, cash, and vehicles are provided in the correct quantities at the correct times.correct quantities at the correct times.

Analyzing Shipping DecisionsAnalyzing 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

WarehousingWarehousing

Definition ◦Warehousing is the management of materials

while they are in storage.◦Viewed as distribution center (DC)

Warehousing activities:◦Accounting◦Ordering◦Storing◦Dispersing

WarehousingWarehousing

Record keeping within warehousing requires a stock record for each item that is carried in inventories.

The individual item is called a stock-keeping unit (SKU).

Stock records are running accounts that show:◦On-hand balance◦Receipts and expected receipts◦Disbursements, promises, and allocations

Common Supply Chain ProcessesCommon Supply Chain Processes

Common Time Horizons for SCM Common Time Horizons for SCM ProcessesProcesses

Level of Detail and Time Horizon Level of Detail and Time Horizon for SAP APO Modulesfor SAP APO Modules

SCM Processes in SAP APO ModulesSCM Processes in SAP APO Modules

SAP APO System Structure and SAP APO System Structure and Integration with SAP ERPIntegration with SAP ERP

Characteristics of the SC NetworkCharacteristics 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 NetworkCharacteristics 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 Example of Costs and Revenues in the Supply Chainthe Supply Chain• 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

Example of ConstraintsExample 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 Categories and Attributes of a Supply ChainSupply 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 SystemsTypes of Production Systems1. 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

2. Continuous production Systems– Manufacturing of a few families of technologically related products in

large quantities– Example: Assembly lines or fabrication lines

3. Intermittent production Systems– Batch production of many products which share several processing

centers4. Project based systems

– Production of a unique complex product such as a ship or a bridge

Production StrategiesProduction StrategiesMake 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 Planning2. 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 FrameworkHierarchical Planning Framework

Long term -Material programs- Supplier selection- Cooperation

- Plant location- Production systems- Subcontractors

- Physical distribution structure- Transportation strategy

- Product program- Strategic sales planning

-- Personnel training-- Contracts-- Material Requirements Planning

-- Master production Scheduling-- Capacity planning -- Distribution planning -- Mid-term sales planning

Mid term

-- Personnel scheduling-- Material ordering

-- lot-sizing- operations scheduling- shop floor control

- Warehouse replenishment- Transportation planning -- Mid-term sales planning

Short term

EXECUTION

Information FeedbackFlow of goods

Differentiating Factors by Planning LevelsDifferentiating Factors by Planning LevelsFactor- Level Strategic Tactical Operational

Purpose Supply chain design, resource acquisition

Planning resource utilization

Operation scheduling and

executionImplementationinstruments

Policies, objectives, capital investment

Budgets Schedules, procedures and

reportsPlanning horizon Long: 3-5 years Medium: 6-18

monthsShort: daily, weekly,

monthlyScope Broad

corporate levelMedium

plant levelShort

floor levelLevel of Management

Top Middle Low

Frequency ofre-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

HighProduct families

years

MediumProduct groups

Month

Lowindividual products

continuousDegree of uncertainty

High Medium Low

Degree of risk High Medium Low

Introduction to SCM Introduction to SCM and SAP APO and SAP APO

SAP Implementation SAP Implementation

EGN 5623 Enterprise Systems OptimizationEGN 5623 Enterprise Systems Optimization (Professional MSEM) (Professional MSEM)

Fall, 2012Fall, 2012

SAP Business SuiteSAP Business Suite

SAP NetWeaverSAP NetWeaver

SAP SCMSAP SCM

SAP PLMSAP PLM

SAP SAP SRMSRM

SAP SAP CRMCRM

SAP SAP ECCECC

Planning with SAP ERP & SCMPlanning with SAP ERP & SCM

SAPECCERP

SAP SCM(includes SAP BW)Core Interface (CIF)

• Demand Planning • Supply Network Planning and optimization• Production Planning with capacity considerations• ATP• CTP• Detailed Scheduling• Deployment• Transportation planning• Vehicle routing and scheduling

• Mater data•Materials•Locations•Partner•Plants•Info records

• Transactional data• Customer orders• Production orders• Purchasing orders

• Execution

Basic Components of SAP SCM

Planning at Supply Chain Planning at Supply Chain LevelLevel

SAPECC 1

SAPSCM

SAPECC 2

SAPECC n

- Each SAP ECC component covers one or more locations In the network

- Planning may be done centrally

SAP SCM FunctionalitySAP SCM Functionality

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

SAP SCM ModulesSAP SCM Modules

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

Two planning Scenarios for SAP Two planning Scenarios for SAP SCMSCM

CIFControls data transfer between ERP and SCM

SAP ERP ECC 6.0

SCM 5.0

Master Data Transactional Data

DPForecast based on

data from BW

SNPSupply Network

Planning

Deployment& Load Building

BW

Aggregates data from varous sources

Data from flat file

SOP / DM / PP

Alternative Scenario Base Scenario

Cost-Based OptimizationCost-Based OptimizationCost or price drivenMixed integer programmingMust define all sourcing, production,

transportation, inventory costs and constraints

Supply Planning Tasks and Output Supply Planning Tasks and Output for SCMfor 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 ArchitectureSAP APO Architecture

SAP Access through SAPGUI SAP Access through SAPGUI SAPGUI DownloadSAPGUI DownloadThe 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 InstructionSAPGUI Download Instruction

SAPGUI Setup SAP SCMSAPGUI Setup SAP SCM

SAP ERP/SCM Clients, Userid, SAP ERP/SCM Clients, Userid, Password Password

SAP SCMClient: 600Userid: fiu-101 to fiu-130Initial password: SAP4US

Exercises:Exercises:Overview of SCM (APO) Master Data

1) Location master data in APO2) Transportation lanes in APO3) Product master data in APO4) Resource master in APO5) Production Process Model in APO6) Quota Arrangement in APO7) External Procurement Relationships in APO