Tuesday, May 21, 2013

strategy 10 for a Make To Stock policy?

I have no idea where it is coming from, but some people seem to think that when you use strategy 10, it protects your production schedule when you run your lines at full capacity!

Let's take a couple of steps back...

as we all know, the most used strategy is 40... Planning with Final Assembly. 40 allows for the Sales Orders to consume the forecast and if the Sales Orders exceed the VSF forecast, the available inventory is reduced and MRP generates a planned order to cover the additional requirement. most people think that is a problem since a planned order is created that falls right into the production schedule.

Not true if you do the right thing in the availability check !

When Sales Order quantities exceed forecasted quantities (and safety stock), the availability check can not confirm the full quantity to the requested delivery date and provides a delivery proposal. Only if you confirm the delivery proposal and do NOT fix the date, the newly generated planned order disturbs the production program. Would you and your customer have consented to the delivery proposal and fixed the date, the resulting planned order would have been scheduled far enough out. Many companies decide not to fix the date, so that the demand gets transferred to today's date and just in case the production scheduler will be able to produce a miracle, backorder processing would pick it right up. That miracle doesn't happen very often.

So if you run a production line at full capacity and you let - according to above - orders drop in anytime by not fixing dates, your production scheduler goes crazy. 

Then comes the 'fix-it-all' strategy 10. And people wonder why it doesn't fix a thing. All that strategy 10 does is taking sales order demand out of MRP. So if your forecast is exceeded by additional demand, no one will know about it. But you know what? The demand is still there! And it still does not get fulfilled, because no one can see it. No one but the customer of course.

When you use strategy 10, your forecast is of the requirements type LSF. An LSF is not consumed by Sales Orders but by the goods issue of the delivery. Sales Order demand will not reduce available quantity in MD04 and is therefore not MRP relevant. Additional demand does not trigger the generation of a planned order to cover the demand. 

And that is alright if - and only if - you tell your customers that if they are a customer who wanted more product than what was forecasted, they will have to wait until the next receipt based on next month's forecast comes in.

And you know how to tell the customer and make sure everybody in your organization knows about it? You fix the flippin' date ... in which case you might as well stick with strategy 40!

dreaming up great materials planning with SAP...

Today I received an email from Portugal discussing materials planning with SAP and the MRP Monitor. She writes: "I’m implementing MRP policies based on ABC_XYZ classification for our MRP ( production and purchasing). The most part of my colleagues think I’m a dreamer but  I’m pretty sure it will work;"

Of course it will work! Much better than any uncontrolled and random master data maintenance without segmentation or even an understanding of the basic dynamics in the SAP master record.

Be proud of being a dreamer. You are in the best of companies. Hasso was, and still is, one too.

We need more of you, Paula!

Monday, May 20, 2013

Flexibility versus "Rigidity" in SAP - there is more to it than what comes out of the box.

If you decided to manage your operations with SAP, chances are that there are various opinions out there about the effectiveness of your SAP implementation and how well the software performs.

In my humble opinion, the success does not primarily (or even secondarily) depend on new technology or the use of new software like APO (regardless of what's communicated at SapphireNow or other conferences). It depends on how well you are engaging the tool you have.

It is a myth often used, that states, that SAP software is rigid. People say “you have to do it the SAP way”. Nothing could be further from the truth. Ask those people what the “SAP way” is, and chances are they can’t tell you. There is no “SAP way” on how to replenish and order raw materials, so that you achieve high service levels with low inventories. There are many pre-configured replenishment types provided in the respective table in the delivery of SAP’s suite of software, but that is only a start – and not the “rigidizing” package. You will find a PD there, a V1, a VV and the lot size HB. And someone who says that this is all you can use, is plain out wrong. As an example: a reorder point method that takes external requirements during the replenishment lead time into account (V1), works very well with a lot size procedure that increases the order quantity by exactly those requirements in the future, so that we end up with inventory above the reorder point when the stuff comes in. In SAP's standard delivery the 'HB' does not increase the lot size by those requirements! And maybe that is ok. Very often it is not.

But if your adviser claims that it is "the SAP way of doing things" you must get your biggest running back and crush through the defense as hard as you can... otherwise you won't score all season, because that adviser will neither protect you as a quarterback, nor will they open up any lanes for you to run through.

So add another HB (please don't call it ZB - see my blog "When SAP replaces ZAP") and have that one add external requirements. Now you have choices in a flexible (not rigid) tool to manage your operations.

Only when you don’t understand how to customize the SAP software, you will be limited by the delivery that comes out of the box. The real value of using SAP software, lies in the use of a very flexible and sophisticated tool to build your perfect replenishment system (and S&OP strategies, and production scheduling methods, and planning strategies) that stretches from materials planning through purchasing and the eventual availability check in the production order; supported by inventory analysis, exception monitoring and service level measurements that provide you with valuable insight to monitor the performance... and... to change that replenishment system (I call it a policy - see my blog on policy setting) when the situation changes and asks for it.

SAP ERP rocks!

Friday, May 10, 2013

Session 1107 at Sapphirenow. Effective production scheduling in SAP

@uwegoe: See me at my session in Orlando. Effective production scheduling in ERP. Session code 1107. Wed 1:45pm #SAPPHIRENOW/ASUG