Strategies and Policies in the SAP supply chain

In an earlier post I talked about Strategies in an Enterprise

Breaking down from - and supporting - an enterprise strategy, we can employ three major sets of strategies in standard SAP; these are the replenishment strategies to automate the procurement of components, raw materials and products, the planning strategies to separate the MTS from MTO (and other strategies) and the production scheduling strategies to run the lines according to lean and agile principles.

Each one of these strategy groups contains individual strategies. In replenishment you may, as an example, procure based on past consumption or based on future requirements. As for the planning strategies you may plan for Make to Stock or you may plan on an assembly level for Finish to Order or for the Production Scheduling Strategies you may employ takt-based, repetitive scheduling.

In either case you need to do some work so SAP can support the strategy you decided on. This work usually requires setting up some basic data. The combination of settings that support a certain strategy, I call a policy. Please note that a policy is not an SAP term. SAP didn't pre-set policies; they left it up to you to put the appropriate combination together to retain utmost flexibility. The downside to this is the fact that you need a lot of experience and detailed knowledge to figure out the right combination for the right strategy. But who said that SAP is easy? And your consultant should know how this stuff works out. (in a previous post I pointed out the necessity for a consultant who explains all the options and does NOT simply give you the solution.... you will have to flexibly adjust new solutions to changing requirements. So if the consultant gives you the solution upfront - without you understanding the dependencies - you WILL be screwed once the influencing factors vary.)

Back to policy: a policy can be described in words like :"replenish based on a automatically determined forecast model on past consumption, ordering weekly demand with a minimum of 5 pallets, rounding to a pallet size, keeping safety stock in line with growing demand and at 3 days,  receiving only Tuesdays and Thursdays, sourcing with Quantity Contracts and Quota Arrangements" and then needs to be set up in SAP accordingly. In this example the setup would like something like this:

MRP type:  VV

Lot Size:  WB

Forecast Model:  J

Min Lot Size:  2,500

Rounding:  500

Range Of Coverage Profile:  003

Planning Calendar:  TT

Source List:  YES

As you can see, we need to be clear on what out strategy is first; then we need to define the policy supporting that strategy and finally we need to maintain the master data (this can be quite extensive work to do for an MRP controller and therefore I highly recommend looking into Marc Hoppe's Add-On tools by SAP Consulting - I mention these in another post). The following graphic represents a simple decision tree for replenishment strategies:

I personally consider policy setting and maintenance one of the most important tasks in the SAP supply chain. Most users don't understand that MRP type PD is not a policy! Neither is strategy group 40. But if you combine a PD with a Range of Coverage profile and a Lot Size Procedure EX, you have put together a policy! One that supports the strategy of planning on future demand with a safety stock that dynamically adjusts itself to changing demand. It also makes sure that your safety stock never exceeds a maximum level (EX helps with that). 

Figure out first what what you want the system to do. Then tell it to do just so. SAP has done a wonderful job to provide you with all the levers and switches. They are not easy to handle but that is why we pay the big bucks to our advisers and educators, isn't it?