Tuesday, January 1, 2013

Fixing the Date after the Availability Check in the Sales Order... or maybe not?

Have you ever wondered whether or not you should fix the quantity and date after the availability check in the Sales Order? Because of the integrated nature of the availability check and because very often SAPs sales aand Distribution modul is implemented by a different team than the one who cares about production scheduling, this is a point of contention and a very possible source of mis-communication.

Usually when a sales representative enters a customer order into the system, an availability check is carried out and a screen that looks like this, pops up.
This screen is the result of the availability check and gives insight on whether a customers desired delivery date can be kept and, if not, what other possibilities there are. In the example above a customer wanted 840 lbs delivered on the 20th of August 2012. However, a full delivery to 8/20 was not possible and the availability check produced three options: first, on time delivery of 840 lbs is not possible (and the customer could decide to go elsewhere). Second, a complete delivery can be made on January 7th or, third, two partial deliveries can be made whereas 240 lbs can be delivered January 3rd and the remaining 600 lbs on January 7th. 

It is now up to the customer what they want to do and up to the customer sales representative to communicate what the customer wants, to the rest of the supply chain. And that must be done using the right settings in your SAP. Following I describe the options you have and what's most important to note is that first and foremost a decision will have to be made whether an item is planned ahead of time (Make to Stock) and therefore is produced to stock driven by a forecast or if we plan the item not at all and wait until a dicrete demand come up. That decision has a profound impact on the availability check and the option that needs to be taken. 

Typically, one analyzes past variation in sales to decide if a product is 'planable' at all but even more important is the replenishment lead time. If a customers accepted wait time to get the product delivered is longer than the time it takes to produce or replenish it, then we can wait until the customer orders before we spring in action. If, however, that is not the case, then we need to plan ahead and put the product in inventory using a forecast.

Once the decision for MTO vs. MTS has been made, we can look at the four options we have for materials that are not planned beforehand - typically MTO.

a (MTO). The delivery proposal is confirmed (to confirm the delivery proposal you click on the check mark) and the field Fix qty/date is checked on. With that option the two lines (one with 240 lbs and the other with 600 lbs) become MRP relevant and the two material availability dates (3rd of January and 7th of January) are displayed in MD04.

b (MTO). The delivery proposal is confirmed and the field Fix qty/date is NOT checked. In that case the delivery proposal is ignored and the required quantity still shows with the required delivery date in MD04. Therefore the original date when the customer wanted it is what's told production to deliver it by. Should that day fall into the past, then the system keeps showing today's date.

c (MTO). The customer request is not confirmed. To do this right one would have to click on [Continue]. If the field Fix qty/date is checked on, the demand disappears and does not show in MD04 anymore

d (MTO). The customer request is not confirmed again (clicking on [Continue], however the field Fix qty/date is left unchecked, which means that the demand remains in the system (in MD04) to the requested delivery date by the customer. A new MRP run will generate a planned order to cover the demand.

what does all of this mean for our customer, the sales rep and the production scheduler? for MTO products option a would mean that the customer accepts two deliveries on dates later than what the customer wanted. This also means that with fixing the dates, the production scheduler is informed about when the goods will have to be delivered and what was agreed upon with the customer. Option b, however, would mean that even though the customer agreed to the new dates, the sales rep tells the production scheduler to make the product immediately and to the old requested delivery date. Options c would mean that the customer does not want the product anymore and option d means that the demand is handed over to MRP which will generate and schedule a planned order to make the requested quantity. As soon as that happened the sales order would fall into 're-scheduling' functionality and the new availability check would promise the customer a date consistent with the planned order's supply date.

now on to the other case where we have a forecast and produce to inventory - MTS:

a (MTS). you click on the check mark to confirm the delivery proposal and fix the quantity and date. This implicates that the customer order schedule line items are displayed in MD04 and are consuming the respective forecasts.

b (MTS). the delivery proposals are confirmed but the fix qty/date indicator is NOT checked on. Therefore, even though the availability check couldn't confirm enough material to the date that was required by the customer, the demand from the customer order will still be displayed to the requested delivery date in MD04 and MRP will try to supply to that demand. A consumption of forecast also takes place, scheduling from the requested delivery date.

c (MTS). The order is NOT confirmed (we click on [Continue] but the fix qty/date indicator is checked on (fixed). No demand will show in MD04 and therefore no consumption of forecast takes place and no planned order is generated. The demand is simply gone.

d (MTS). The order is NOT confirmed and the Fix qty/date indicator is NOT checked on. Even though the demand can currently not be confirmed to the requested date, the demand remains intact to the requested delivery date by the customer and is shown in MD04. Even though the customer order is not confirmed it will still consume the forecast and the new MRP run will generate a planned order to fulfill the demand.

option a would correctly communicate the customer's acceptance of a new delivery schedule, whereas option b would drop a new demand into the production schedule (a new planned order would probably be generated - with exception message 30). Option c again will assume that the customer does not want the product anymore and goes elsewhere. For an MTS item this is a very likely situation since the customer only accepts very short lead times and, even though, we could try to make it as soon as possible, it would probably still take too long for the customer. If you are making to stock with a forecast, you can simply not always deliver. This situation is what degrades your fill rate in MTS. That is why you should probably never use option d in a MTS environment. That option drops demand into production that can mever be fulfilled and isn't even desired by the customer. 

I hope this helps to clarify at least to some degree. There is so much disconnect between the sales order demand and the production program that a focused effort to align the two is necessary in most SAP installations I have seen. Get started with the decision for MTO and MTS but then look into the availability check and its setup and ability to automate. It's an effort worth taking on.