Monday, August 4, 2014

setting safety stock levels in line with the supply chain strategy

one of the critical success factors in supply chain management is the correct translation of a supply chain strategy into materials planning policies. Take as an example a directive to provide a certain service level to the customers. Management might say "we want to achieve a 98% fill rate on our most valuable products" (usually A items).

What usually happens then, is that every materials planner figures out how much inventory they need to hold and what replenishment policy to use to achieve that. If you want to standardize this kind of directive and develop a system to have everybody use the same calculation, I suggest you use the field 'service level' in MRP2 and calculate the safety stock setting for each material using the variables lead time, mean absolute deviation and a safety factor. 

You can do this on the forecasting screen of the material master. Depending on how you configured your MRP type, the forecast run can calculate  safety stock level for you. However, you have to kind of doing this for every material and you can only simulate exactly one service level.

A better solution is the SAP Add-On Tool 'Safety Stock and Reorder Point Simulator'. With it you;re also getting a new KPI: safety stock value! You can also simulate many service levels and compare the results in terms of quantity and value. On top of everything else, the safety stock calculation gives you two more - very important - parameters: the variation in replenishment lead time and a variation in demand.

Let's say management desires a service level to the customer of 95%. In that case you would pull all those materials into the simulator, set 95% nd your variation in lead time demand and click the 'calculate button. The simulator then calculates all safety stock individually for each materials and totals the value. This way you can determine what a 95% service levels means compared to your current master data settings or to other service levels. In our example, all materials currently have a service level of 96% which, with the manual calculation the materials planner was using, produced a value of $7,342 in safety stocks. However, the safty stock simulator produces a value that's higher with a lesser service level... and that calculation is using the same variables for each material across the board and therefore probably much more accurate than what the planner ever can come up with - possibly applying different methods and being totally overwhelmed doing this for hundreds, if not thousands of materials.

In the end, you push the save button and safety stock and service level are being updated into the MRP2 screen for each and every material in the list.

Management changes their mind tomorrow? no problem!

Saturday, August 2, 2014

how to use detailed scheduling in SAP-REM for the automated generation of a weekly production program

One of my favorite clients runs a mix of production orders and repetitive manufacturing. As I visited their distribution center last week, I saw that they have a fairly simple assembly and kitting operation going on in the warehouse before the ship bundled spare part kits to the customer or the manufacturing plants.

My suggestion was to use repetitive manufacturing for the scheduling of the assemblies (and kitting) to make it easy and automated. With only little customizing necessary, we put the whole thing together within 3 days. Actually, the only customizing effort that was required was for the layout key and a setup matrix (using setup group category and setup group key), so that we can dispatch a sequence that is build automatically according to 'like' setups.

The first thing we did was switching from reorder planning to the deterministic PD. the previous V1 had the effect that inventory holdings (how much to put into the reorder level) had to be calculated based on the two demand sources:
- Stock transport order requests from Manufacturing Plants
- After Market requests from Customers
With a changing demand situation it was very difficult to find the right reorder point and assembly was only triggered when a reorder point was broken. Since then a forward scheduling is executed, the inventory left, after the reorder point was broken, had to be enough to fulfill the demand. This is a very difficult planning situation and requires a lot of inventory.

That is why we decided to plan these products with PD, where future demands (from STOs or customer orders) result in the generation of supply orders in exactly the quantity and exactly the date, they are demanded. Using safety stock to buffer any variation in lead time and demand, we can now schedule production to exactly meet demand. With a fixed lot size FX that corresponds in quantity to the smallest possible run, the MRP run generates supply proposals into the order pool that are a multiple of the minimum run quantity. In scheduling we can then flexibly sequence run quantities in feasible lot sizes

after the MRP run you can then see all the various demand elements in MD04 and the supply that covers them.
Now we can move onto scheduling and in MF50 we can see - tabular or graphically how MRP, which works without any consideration of capacity, sequence or material component availability, fills the pool of orders.
using the previously customized layout key for sequencing according to 'like' setups, we can now simply select three weeks worth of orders and click the 'dispatch button. The system uses the sequencing profile and first sorts all the orders and builds a sequence, then it distributes the orders within the limits of available capacity defined in the individual work orders.

Note that there are three work centers that can be scheduled. If you define alternative routings and production versions, you can use the dispatching strategy in a way that, in case of missing capacity, the dispatching can resort to another work center and therefore perfectly distribute the orders.

since we are working with repetitive manufacturing, there is no need for a planned order conversion to production orders. The orders you see here are executable. Now you may perform a collective availability check using MDVP on the schedule and expedite missing parts for next week.

All that's left is MF51 where you can prnt the schedule and hand it to the operator who will be happy to receive instructions on a feasible plan that's checked for capacity and materials availability.