Planning Strategies in APO

After we discussed Supply Network and Planning Horizon, Planning Strategy is another important subject in APO implementation. At first, we need to map the planning strategies in business term into SAP term. Many companies have implemented MPS/MRP in SAP ECC. The mapping process become even more challenging as not all ECC planning strategies are supported in APO and each planning engine has different treatment to some strategy. This article discussed some alternatives to planning strategies in APO.

Basic Settings

To understand the planning strategies in APO, it is important to understand the basic settings of the planning strategies. The planning strategies in APO contains the following attributes:

  • PIR Segment: PIR Segment defines the planning segment in which forecast (i.e Planned Independent Requirements) is created or released from APO DP. There are 4 segments in APO as of SCM 7.0. The standard net segment 0 is used for Make-To-Stock and Planning with Final Assembly. The PIR Segment 1 to 3 are used for Planning without Final Assembly. The PIR segment is used in defining peg area for the product/locations. The pegging and forecast consumption will occur when orders are in same peg area. It is worth to note that dependent requirements for the product are always generated in the net segment 0.
  • Assignment Mode: The assignment mode determines how forecast consumption will be carried out and whether final assembly is taken into account.
  • Category Group: Category Group defines the ATP categories of the requirements in APO that can consume forecast. Please note that the requirements are not necessarily related to Sales Order.

In summary, the planning strategy is mainly used for forecast consumption and requirement planning. In SCM/APO, the forecast consumption a generic function that is not differ between planning engines (Heuristic, CTM or Optimizer). As for requirement planning, different planning engine will have some major differences for each planning strategy, planning without final assembly in particular.

Strategy Mapping (ECC to APO)

The planning strategy is maintained in MRP View of Material Master or in MRP Group. During CIF transfer, the planning strategy is mapped and saved in Demand tab of APO Product Master. The table below shows the summary of  APO planning strategy with respect to ECC strategies:

Planning Strategy SAP ECC SAP APO
Make-To-Stock 10 10
Planning with Final Assembly 40 20
Planning at Assembly Level 70 20 (Subassembly)
Planning without Final Assembly 50 30
Planning with Planning Material 60 40
Make-To-Order 50 N/A

Limitations

In APO, strategy 10 and 20 are supported by all planning engines. However, SNP Heuristic and Optimizer does not support strategy 30 and 40. PPDS Heuristic supports strategy 30 but PPDS is meant for Supply Network Planning. CTM supports both strategy 30 and 40. Due to other limitations and complexity of CTM, many companies are still prefer to use SNP Heuristic for Supply Network Planning.

As for Make-To-Order, the sales orders are not shown in planning book. It is possible to display the sales orders in planning book using key figure function (2006 and 2008) or implementing BADI /SAPAPO/SDP_INTERACT (Method GET_FIGURE_SPECIALS, Set CV_KEYF_SWITCH to 3). However, the sales orders can only be displayed not planned.

Even for planning engines that supports Planning Without Final Assembly, they does not support multiple level and stock transfers.

Is there any alternatives for SNP Heuristic or Optimizer? The answer is yes. Over the years, I have implemented many alternatives for my clients. The section below will discuss these alternatives focusing on Planning Without Final Assembly.

Planning Without Final Assembly

This strategy is often called Assembly-To-Order in manufacturing environment when components are procured and manufactured to assembly level. The final finished goods is manufactured when there is customer demand (i.e. sales order).

In APO, the PIR for planning without final assembly is a requirement in separate pegging area. That’s means that the PIRs cannot be covered from stocks or production orders. During the next planning, the PIRs will be covered by special forecast planned orders that generate dependent requirement for the components and assemblies. These planned orders are not “convertible” to actual production orders.

When sales orders for finish goods are received, they will consume (i.e. reduce) the PIRs.  In the next planning run, the forecast planned orders are reduced accordingly and new planned orders are created to cover sales orders. The new planned orders are “convertible” to actual production orders.

Please note that sales order can be  a requirement in either make-to-stock or make-to-order segment. This is different from PIR segment. SNP Heuristic and Optimizer do not support sales orders in make-to-order segment and forecasts in without-final-assembly segment. It is important to understand the terms here in order to understand the alternatives.

When we compare APO’s Planning Without Final Assembly strategy and real business requirements, we will find many functional discrepancies not just the limitation on certain planning engines. Therefore, we have to study the business requirements carefully and propose the right alternatives.

Option 1 – Planning using PPDS

APO PPDS supports planning without final assembly as well as make-to-order segment. If forecasts, sales orders and manufacturing are in same location, PPDS become nature choice using this option. For many companies, forecasts and sales orders are at Distribution Center (DC). In this case, we can use manufacturing at alternate location. However, this may not be feasible for complex supply network. As a variation to this option, the forecasts at DC can be released at manufacturing location (through simple BADI enhancement). SNP will plan for sales orders at DC and PPDS will plan for forecasts, components and assembly manufacturing. The forecast can be consumed by Stock Transfer Orders from manufacturing location to DC.

Option 2 – Planning using CTM

CTM supports planning without final assembly since SCM/APO 4.0. CTM can be run in both PPDS and SNP mode. The planned orders created by CTM/PPDS are fully integrated with SAP ECC. In other words, the “convertible” flag in planned orders are transferred to ECC. CTM can plan for sales orders in both make-to-stock and make-to-order segment. To display the sales orders in SNP planning book, we just need to implement BADI /SAPAPO/SDP_INTERACT as described earlier.

CTM (Capable-To-Match) is originally developed for semi-conductor industry. Over the years, it has been improved and can be used in complex supply network planning. However, many companies have not adopted the advanced planning engine such as CTM or Optimizer. In many projects, we have to find alternatives for SNP Heuristic (i.e. MRP in my opinion).

Option 3 – Custom Strategy

This option is suitable for companies using SNP Heuristic. The custom strategy has the similar attributes as strategy 20 (Planning With Final Assembly). In order to plan for make-to-order sales orders in SNP Heuristic, a CIF enhancement will be implemented to remove the special stock segment from sales orders in APO. In addition, the conversion rule will be maintained to check if planned orders or STRs are pegged to sales orders. This option has 3 limitations:

  1. There is no “convertible” flag, The conversion has to be done in APO.
  2. The requirement check in Conversion Rule is based on dynamic pegging. If sales order’s requirement date changes, the pegging relationship may change as well. It may cause additional planned order being converted.
  3. As SNP Heuristic plans in bucket (not by order), there will be separate planned order created for sales order and forecast.

If this option is the choice, it is recommended to forecast horizon that ignore near term forecast. This will eliminate the limitation 3 above. In Planning without Final Assembly, the forecasts should be ignored as sales orders are the demand signal in near terms. However, many planners do not understand the rational behind this type of strategy.

By default, the message type for conversion rule is warning messaging if planned order is pegged to forecast. It is possible to change it to error message through BADI (/SAPAPO/RRP_ORD_CONV). Additional logic may also implemented to avoid problem caused by dynamic pegging (limitation 2).

Stock Transfer

SAP ECC supports planning without final assembly for stock transfer. APO do not support stock transfer. Although it is possible to implement the same logic (conversion rule) for stock transfer, it is in fact not necessary. If there is no production order and stock, there will be nothing to deploy (or transfer).

Conclusion

Although APO has many limitations on Planning Without Final Assembly strategy, it is possible to achieve the same objective using simple enhancements. In this case, the limitations on technology should not be the showstopper in designing business process that improves company’s competitive advantage.

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