I2 U Intelligent Supply Chain Management Course Module Eight: Master Supply Planning.

i2 UIntelligent Supply Chain Management

Course

Module Eight:Module Eight:Master Supply PlanningMaster Supply Planning

2© 2001 i2 Technologies Inc CONFIDENTIAL

Supply Chain Management Key Processes

Sales & Operations Planning

Demand Planning

Inventory Planning

Supplier Scheduling

Production Scheduling

Inventory Deployment

Transportation Scheduling

Demand Fulfillment

Supply Chain Execution Monitoring

Strategic Supply Chain

Planning

Master Supply Planning

Procurement

Production Distribution

Transportation

Impact of decisions

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Num

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f dec

isio

ns

+

_

Spec

ifici

ties

by in

dust

ries Length of Planning horizon

Fu

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Inte

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to

p-d

ow

n d

irec

tio

ns

Fu

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ted

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Reaction to changing supply conditions


After Completing This Module,You Are Expected to:

Identify the typical weaknesses of the Master Supply Planning process, and their root causes

Identify the key ingredients of an optimal Master Supply Planning process

Understand the difference between a hard and a soft constraint and its implication on the Master Supply Planning process

Understand the logic of product allocation Understand the concept of authority domains and the impact on

the Master Supply Planning process Identify Master Supply Planning key enablers and their resulting

business value Identify Master Supply Planning excellence criteria


Master Supply Planning Process Positioning

hou

rs

days

wee

ks

mon

ths

year

+

buy

make

move

sell

store

operational tactical strategicscheduling


Typical Master Supply Planning Process in a Global Company

Day D: Distribution Centers consolidate

demands from demand regions

Day D + 2 : packaging plants receive

updated requirements

through DRP, and run MPS and RCCP.

Day D + 12 : The bulk plant enters the requirements into

its MPS and runs MRP. Takes 4 days to re-plan

operations

Day D + 5 : packaging plants run MRP and

CRP and re-plan

Day D + 8 : the packaging plants send updated

requirements to the bulk plant via Excel spreadsheet

Day D + 18 : The bulk plant sends updated requirements to its

suppliers


The Problem:Planning Through DRP and MRP II

in Sequential Steps

Loops adjustingproductionplan

Loopsadjusting

masterschedule

YesYes

No

Market demand Master production schedule

Requirements schedules

Production plan

Rough-cut capacity planning

Problems ?

MRP run

Capacity planning

Problems ?YesYes

No

Top down MRP II planning process

Week 2 Week 4Week 1 Week 3 Week 5


MRP II / DRP Major Limitations for Master Supply Planning

Planning Velocity Sequential planning of distribution

and manufacturing Sequential planning of material

and capacity Only soft constraints Unidirectional propagation Long processing time

Planning Validity and Optimality No demand prioritization

No pre-allocation of limited supply (first come, first serve!!)

Fixed lead times

Fixed sourcing

Very limited simulation capabilities

© 2001 i2 Technologies Inc CONFIDENTIAL 9

Key Ingredients of an Optimal Master Supply Planning Process

One integrated environment to represent and manage all supply chain activities

Concurrent consideration of material, capacity and demand constraints

Memory resident architecture Immediate visibility on Demand / Supply imbalances after

updated demand has been propagated Manual and/or automatic re-planning with problem solving

intelligence Distinction between hard and soft constraints and bi-

directional propagation of changes Pre-allocations of limited supply (Allocated ATP)


An Optimal Master Supply Planning Process Requires a Fully Integrated Environment to

Model All Supply Activities

user interfaceuser interfaceuser interfaceuser interface

common databasecommon databasecommon databasecommon database

buybuybuybuy makemakemakemake movemovemovemove storestorestorestore sellsellsellsell


buybuy makemake movemove storestore sellsell

In Order to Achieve Global, Real-Time and Concurrent Planning of ALL Supply Activities

common databasecommon databasecommon databasecommon database

user interfaceuser interfaceuser interfaceuser interface


MATERIALCAPACITY

DEMAND

In real time

Concurrent Consideration of all Types of Constraints


Optimized Master Supply Planning Processes Needs Memory Resident Technology

Up to 100 times faster calculation time compared to I/O processes

Enable quick what-if simulations with immediate response:

– What if I modify a safety stock policy?

– What if I expect the planned maintenance of an equipment?


Immediate Visibility on Demand / Supply Imbalances After a New Demand Plan Has Been Propagated

Capacity related problems

Demand related problems

Material related problems


Problem Oriented Planning

Planner’s agenda for the day : “What can I do to improve the operational performance of the company?”

Focus only on real problems– tolerance filters

– link with time bucket granularity

– unlimited number of problem types (problems with feasibility, problems with targets, ...)

Drill down capabilities to assess the severity of the problem, root causes, and possible solutions

Direct link with interactive replanning and automatic replanning


Problem Solving Capabilities

Manual re-planning

(point & click / drag & drop)

Predefined or customized

problem solving strategies


Configurable Strategies Based on Heuristics

Catalog of predefined or customized

problem solving strategies

Changes that the strategy is authorized to

generate

Problems addressed by the strategy

Problems that the strategy can create


Hard and Soft Constraints

Hard constraint: – no flexibility (e.g., bottleneck machine; constrained supply)– if violated: 1) flags problem

2) delays or stops propagation 3) ‘boomerang effect’

Soft constraint:– some flexibility (e.g., machine operated on 1 shift ; commodity

item) – if violated: 1) flags problem

2) propagation not affected

In reality, any constraint can be either hard, soft or both, depending of the time horizon.


Bi-Directional Change Propagation

CustomerWarehouseDistribution Center

FactorySupplier

Overload resolution


Immediate Visibility of the Effect of thePropagation on ALL Constraints

Real time visibility on

the balanced resource

Real time visibility on

the impact on projected

inventories

Real time visibility on the impact

future purchasing

requirements The PROBLEM WINDOW is automatically updated


Allocation of Limited Supply

10

10

20

10

10

20

The country manager allocates available quantities by customers

5

DAS 1

DC BeNeDe

DC Italy

Plant 1

Global forecast

Other customers

DOs

OEM

Other customers

Volkswagen (scheduled order)

30

10

20

30

10

10

50

30

30

60

40

100

Central DC

30

Propagation of external demand throughout the supply chain

1

40

30

Central planning allocates the available quantities by

Regional DC

3

70

The plant informs that it cannot satisfy

all the demands

2 40

20

20

The DC manager allocates available quantities by country

4

The allocated quantities are used to calculate ATP by

channels / customers

6

EXAMPLE

Supply Chain physical network: request / promise Sales channels:

allocations


An Optimized Master Supply Planning Process in a Global Company

Day D - 8am : Deadline for

regional demand update

Day D - 8 to 10 am : New demand is propagated

throughout the Supply Chain

network

Day D- 11 am :Demand / Supply imbalances across the

whole Supply Chain are analyzed concurrently by all planners in charge

Day D+1 :Updated Master Plan published to all players (includes allocations)


Optimized Master Supply Planning ProcessKey Enablers and Related Business Benefits

Global Visibility

Real Time warnings on future problems

Concurrent planning

Constraint based planning

Formal allocation of limited supply

Customer service

Inventory turns

Industrial and logistics costs

Profitability

Dramatic improvements

in


Example of an Optimized Master Supply Planning Process

“Toshiba's Semiconductor operation in Tokyo, Japan successfully completed implementation of [an APS] solution to manage its domestic semiconductor planning. The division takes in thousands of orders each day from around the globe. Using [this new] Supply Chain Management software, Toshiba's planners are now able to give an accurate response each day to each order, mapping the item, quantity and request date against the priority-driven allocated available-to-promise data provided by the system. The result is accurate and timely delivery to a huge volume of customer orders. The system also manages demand aggregation and prioritization and supply/demand netting. Since implementing [the APS] and the related organizational changes, Toshiba reduced its planning cycle time approximately 66%. The key reason is the system's ability to centralize allocation planning, giving the headquarter planner visibility into each plant's capacity. With this ability to view capacity, production, demand and delivery information across the entire semiconductor operation, the company realized faster and more accurate responses to customer orders and anticipates productivity improvements.”

ERPworld, Friday, September 04, 1998


Roadblocks to Remove To Implement a Best-in-Class Master Supply Planning Process

Inadequate data maintenance procedures– example : Products phase in and phase out in each local

system

Lack of critical data– example : transportation time, alternate sources

Incompatible compensation targets between functions– example :

• asset utilization for plant manager

• inventory turns for distribution manager

• sales quota for sales manager


How to Transition from a Fragmented and Sequential Master Supply Planning Process ...


… To a Centralized, Optimized Master Supply Planning Process?

Just impossible using a « big

bang » approach!


The Solution: Authority Domains

Request

Distributed responsibility with - global visibility- global simulation capabilities

Promise


The Solution: Authority Domains

This grouping of authority domains would imply that the Brazilian subsidiary is no

longer responsible for independently managing its inventory levels

Immediate Reconfiguration => Instantaneous adaptation of the

planning process to the “geopolitical” evolution of the company


Master Supply Planning Process Excellence Criteria (1/3)

Authority domains enforce how planning responsibilities are distributed throughout the Supply Chain. Their structure is based on financial flows considerations rather than functional or geographical considerations. The company actively pursues the reduction of the number of authority domains in order to increase velocity in the replanning process. As much as possible, the domains are organized horizontally (by sub-supply chains) in order to enable real time, concurrent planning from the first to the last activity in the Supply Chain.

There is an appropriate use of safety lead time, and the consequences are well understood across the organization. The quantities or number of days placed in these buffers are reviewed during every Master Planning process. They do not unnecessarily overlap with safety stocks.

The status applied to each Supply Chain constraint (hard, soft or varying over time) accurately reflects its current level of flexibility.

A full Demand and Supply balancing process (or Master Supply Planning) is executed every time a new demand plan is imported.

The propagation of the new demand plan throughout the Supply Chain model uses memory resident calculation (for maximum propagation speed) and simultaneously considers ALL constraints. When violated, hard constraints affect the propagation process, either by anticipating upstream or postponing downstream activities, or by rerouting the overflow onto an alternate resource, or by simply stopping it. The violation of soft constraints does not affect the propagation, but the problem is flagged.



Visibility of all constraints that have been violated is immediate after the propagation, giving the planner a list of all Supply Chain imbalances (e.g., problems) throughout the planning horizon, such as capacity overloads, stockouts, safety stock violation, excess inventory, late customer delivery, forecast satisfied late, etc... Only relevant problems are displayed (considering tolerance filters and problem duration).

Drill down capabilities enable the planner to identify the root cause of the problems, which can then be solved either through manual replanning or by the use of local problem solving algorithms.

Real time what-if simulations (using memory resident calculation for maximum speed) are extensively used in order to evaluate different scenarios on elements like :- preventive maintenance programs- feasibility / profitability of different forecasts- best date for new product introduction, promotions, etc…These simulations use the same Supply Chain model as the official plan to ensure full consistency.

Time fences (e.g., portion of the planning horizon in which the supply plans are firm) cover a period corresponding to the time it takes for the company to be able to modify the availability of its resources. Their use avoids unnecessary planning nervousness, but the company is aggressively pursuing their reduction to a shorter horizon, and a procedure ensures that they are immediately updated when velocity improvements have been achieved.

When Supply Master Plans are feasible and optimized, updated requirements are sent to suppliers for feasibility check. Feedback is obtained with no delay, and the impact of supplier late or short promises is immediately addressed.



When Master Plans are generated at an aggregated level (e.g., not at the SKU level), a process ensures an adequate disaggregation of the master plans down to the detailed level. The horizon over which such disaggregation is performed takes into consideration the detailed planning needs at all level, including customer order fulfillment and procurement planning.

In case of limited supply conditions, the sales organization allocates ATP figures using the Supply Plans (distribution, production, procurement) generated by the Master Planning process. These allocated ATP figures directly drive the order fulfillment process.

Roles and responsibilities to manage the allocation process are clearly defined throughout the sales organization.

The allocations reflect the business priorities and the level of demand uncertainty. When unpredictability is high, hedging quantities are kept centrally or at an intermediate level.

For each sales channel, the sales objectives are equal to the allocated ATP figures. The whole Master Supply Planning process is performed in no more than 5 working

days.

I2 U Intelligent Supply Chain Management Course Module Eight: Master Supply Planning.

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