Monday, November 26, 2012

Policy setting as the ultimate tool to optimize the SAP supply chain

In my personal opinion policy setting is at the heart of managing a supply chain. A policy is a set of basic data options that drive a strategy previously defined. PD (plan on demand; the MRP type on the first MRP screen in the material master) is not a policy, but with a range of coverage profile, an availability check that checks with replenishment lead time and a lot sizing indicator FX it becomes one. And that policy supports the strategy to replenish deterministically, maintain a dynamic safety stock which adjusts itself to changing demand, brings in the same fixed quantity every time it is ordered and if there is not enough stock, the availability check will quote availability right after the end of the replenishment lead time.

This policy might be assigned to purchased parts that are classified as 'high value, medium variability, short lead times and small in volume or size. Now there is a common understanding on how materials ought to be set up. An understanding that can be agreed to by management of sales, production and procurement; an understanding that can be communicated to every materials planner in your organization. You have defined a strategy and everybody knows what to do. Even the system, because the system is now executing to that strategy using the policy that was set. And since the world is changing, we must check periodically if the policy is still adequate for the given situation and circumstances. 

This is why you should do 4 dimensional planning, where besides the parameters WHEN, HOW MUCH and WHAT PLACE, you have to add the dimension CIRCUMSTANCE. what is the situation at the time when I need 200 kg in Houston? do I have enough capacity? what's my availability situation? what season is it? what's the likely customer behavior at that time? what constraints do we have in the warehouse? in production?

now the questions arises: how can the material planners stay on top of a workload like this? For a planner who has to manage hundreds or even thousands of items, this becomes indeed a problem. And it is the reason why most planners can't adjust the right policy to the right situation at the right time. The Add-On tool MRP Monitor by SAP Consulting provides a solution. Not only does it give you all the functionality to perform an extensive analysis, bit it also allows you to store a policy - with all its basic data settings - which you can update automatically in the material master for a group of materials )e.g. the AXL segment)



Yes, it is not that easy and actually quite demanding to understand all implications of all these policies and then set them to the right situation... and adjust when the situation asks for it. But what Ernest Rutherford said about Physics is equally true for the SAP supply chain: "All of physics is either impossible or trivial.  It is impossible until you understand it and then it becomes trivial"