Saturday, April 14, 2012

That old SAP ERP 6.0 Sales & Operations Planning... which works very, very well

Very often I come across the opinion that SAP ERP Sales & Operations Planning does not work or can not be used effectively. Nothing could be further from the truth. It is a very powerful, fully functional, bug free planning tool which perfectly integrates into your ERP operational systems. It is just documented very poorly and requires a lot of figuring out. But you own the license… so use it! Even SAP says “we don’t support those info structures anymore” and that’s because they want you to buy APO. And thank you SAP, but I don’t need support anymore, because you did a great job making it run perfectly and without glitches. The only thing that APO can do over and above S&OP is a global ATP check, but if you are ok with the fact that your China plant does not ship immediately to your customer in Nashville when you don’t have the product immediately available there, you should be fine. (besides… if you use the graphical distribution network tool in ERP DRP, and you set your MTS and MTO ATP checks correctly, you should be able to avoid that situation altogether. But more to that later…).

Sometimes I hear the complaint that the planning process with ERP info structures is slow and cumbersome. In all those cases, the client was using flexible planning with their own info structures – because they did not think standard S&OP would work for them, but in all cases it would have. In every single case these newly defined info structures were set up with planning method “consistent planning”. “consistent planning” means that when you have a multi level planning hierarchy and you edit a planning number on the middles level, the system runs off aggregating and disaggregating throughout the entire hierarchy. And it does so every time you call up the planning table. That takes up a lot of resources and takes a long time.

Standard S&OP info structure S076 uses “level-by-level” planning (and so should your own info structures) and you can plan quickly and efficiently on any level before you explicitly aggregate or disaggregate to the level which you want to transfer to demand management. Honestly, do you really want to aggregate and disaggregate constantly while you are planning your 12 months forecast? Or do you want to plan until your done and then disaggregate and transfer the demand to the operational system? As you can see, very often the discontent with the planning system does not derive from a lack of functionality, but rather from inefficient use of the existing tools and functions… and of course, from a lack of education about the use of these tools. Standard ERP S&OP has all the functions for the generation of a forecast based on many inputs inside or outside the SAP system and it does so with very sophisticated parameter profiles.

With planning hierarchies and planning tables you have full control over future events, past consumption smoothing or any other adjustment functions. You can then aggregate or disaggregate from the planning level to the execution level and automatically transfer to ERP demand management. Here, the strategy group comes into play (one of the least understood elements in the SAP supply chain) and automatically sets all parameters necessary to distinguish between MTS, MTO, ETO, CTO or ATO during execution. But before you transfer the demand you can even perform rough-cut capacity checking, which is based on the planned available capacity in the plant, so that the planner already executes some smoothing in the preliminary stages. Big integration going on here! There is much more, but I don’t want to miss out talking about the info structure S075 which is the one used by ERP DRP. It is another standard info structure (this time with “consistent planning”, so the planning structure should not be too big) but this one allows you to combine it with the graphical distribution network in ERP (yes, ERP has very efficient graphical planning tools). Here you can plan on an aggregated level and, as with S076, transfer the result to demand management. In the graphic you are able to maintain lead times and quotas between plants and DC’s, monitor inventory levels in the locations as well as what’s in transit, and deploy superfluous plant stock with a push rule to the warehouse or transfer insufficient inventory with a fair share rule.

All this stuff is usually not touched on, during the implementation. And how many of you have started a exploration program to make better use of SAP ERP functionality? More often, the system is judged to be lacking functionality and either a work-around is developed or an add-on system is purchased to deliver the functionality – with big integrational and monetary sacrifices.