Production Planning Optimization (PPO) - Part III

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Introduction

In PP/DS we have been introduced with a Production Planning Optimization (PPO) functionality for a while. In this blog series we are investigating this tool.

This blog is successor of "Production Planning Optimization (PPO) - Part II" (Production Planning Optimization (PPO) - Part II - SAP Community); if you want to know what PPO is, how different it is from MRP, what it offers, when to address it, how to model and customize it, you can check previous blogs.

In this third blog of the series, we will check Automatic Cost Generation (ACG).

In next blog, we will take a look at PPO execution and evaluation.

When to Utilize Automatic Cost Generation (ACG)

You want to implement PPO, you do not have a specific stock positioning within your supply chain, you do not want to raise complexity with cost modeling.

Your main concerns are to:

• fulfill requirements as on-time as possible
• consider capacity constraints
• consider component availability

Or maybe you are simply working on a proof of concept for production planning optimization, and you need a quick win.

In that case, you do not need to worry about all PPO parameters and PPO cost model that are described in Production Planning Optimization (PPO) - Part II - SAP Community. Just maintain your master data accordingly and let automatic cost generation take care of the rest.

Instead of costs and penalties, when automatic cost generation is utilized, PPO works with priorities.

You have the option to define priority between customer requirement (sales orders), demand forecast (planned independent requirements), and safety stock requirements. Besides, you have the option to prioritize materials as A, B, and C. Moreover, you have the option to define priorities for source of supplies (PDS and Transportation Lane).

Based on the priorities, PPO will try to fulfill all requirements on time, considering capacity constraints and lead times, from components to finished goods, for all relevant supply chain locations.

But be aware that, when automatic cost generation is used, you cannot interfere costs and penalties anymore. The projected stock; resulting due to lot sizing, fixed receipts, or current inventory levels will remain at that location-product.

PPO Related Master Data Fields for ACG

Material Master

• Base Unit of Measure
• Procurement Type (material master MRP2 view)
• Planned Delivery Time (material master MRP2 view)
• Safety Stock Level (material master MRP2 view)
• Safety Time (material master MRP2 view)
• Priority (material master Advanced Planning view)

Resource

• Relevant to Finite Scheduling Indicator

PDS

• Discretize PDS Indicator (on PDS header)
• Priority (on PDS header)

Transportation Lane

• Transportation Duration (on means of transport)
• Procurement Priority (on product's transportation lane)

For detailed explanation of these parameters, please check Production Planning Optimization (PPO) - Part II - SAP Community

Customizing PPO with ACG

Optimization Server

Please check Production Planning Optimization (PPO) - Part II - SAP Community

Optimization Profile

Customizing node: SAP Customizing Implementation Guide->Advanced Planning->Production Planning Optimization->Basic Settings->Define PP Optimizer Profiles

Transaction: /N/SAPAPO/PPO_PRFL

Choose "New Entries":

Name the profile and maintain a description, then choose "Maintain Profile":

Set header and General Constraints as seen in the screenshot:

Maintain horizon for Lot Sizes and Fixed Consumptions. In this example all are maintained as 4 weeks, which is last bucket of PPO horizon. For example; you may want to run PPO for 3 weeks, starting from next week; meaning the last bucket will be 4 weeks later than today:

Maintain Automatic Cost Generation tab as seen in the screenshot:

According to recommended customizing in above screenshot; products with priority between 0 and 10 will be classified as A, products with priority between 11 and 50 will be classified as B, and products with priority between 51 and 255 will be classified as C. There is no priority of products over each other within the same class; in other words, priority 0 and priority 10 have the same priority for PPO, as being in class A.

According to recommended customizing in above screenshot; the sequence of fulfillment will be like:

1. Sales orders of class A products
2. Sales orders of class B products
3. Sales orders of class C products
4. Forecasts of class A products
5. Forecasts of class B products
6. Forecasts of class C products
7. Safety Requirements of class A products
8. Safety Requirements of class B products
9. Safety Requirements of class C products

Do not change the rest of the tabs. Leave them as they are.

Before saving, make sure that all available cost multipliers are 1 within the Cost Multipliers tab:

Time Bucket Profile

Please check Production Planning Optimization (PPO) - Part II - SAP Community

Category Groups

Please check Production Planning Optimization (PPO) - Part II - SAP Community

Category Profile

Please check Production Planning Optimization (PPO) - Part II - SAP Community

In this blog; we have covered how to utilize PPO with automatic cost generation. That is all for now. In the next and last blog, we will investigate PPO execution and evaluation.

Previous Blog: Production Planning Optimization (PPO) - Part II - SAP Community

Next Blog: Production Planning Optimization (PPO) - Part IV - SAP Community