Multi-sourcing scenario with SAP S&OP Optimizer

[Former Member]

SAP S&OP Version: 3.0.1.3

Came across an interesting scenario of multi-sourcing in one of our client requirements and intend to share so that it can help members of the forum

Scenario

Final assembly of the finished good is done at a manufacturing location A. One (component X) of the many critical components is also manufactured in-house at location A. The capacity limit of final assembly line is higher than component X’s manufacturing capacity at location A. Final assembly capacity supply is 7500 units per month while available capacity for manufacturing component X is 3500 units per month

The finished good can also be assembled at location B but optimizer prefers location A as it has a lower production costs. Component X is also manufactured at location B at the same costs as location A.

Business Requirement

Once available resources for manufacturing component X at location A is exhausted then location A should procure components from location B and assemble the final good at location A due to cost advantage.

i.e. If we run location A at full capacity (assembly 7500 units), 4000 units (7500 – 3500) of component X should be procured from location B.

Assembly at location A is favourable even if component X is procured by location A from location B (production costs at location B + transport costs from B to A) compared to final assembly of finished good at location B

Solution

We provided multi-sourcing scenario through SAP S&OP on HANA by configuring location source and production source master data

Location Source master data

LOCFR	LOCID	PRDID	LEADTIME	RATIOTS	TMAXLOTSIZE	TMINLOTSIZE	TRATIO
B	A	X

Location source master data configured the transportation lane (T-Rule) from location B to location A.

Production Source master data

SOURCEID	PRDID	LOCID	PRATIO	SOURCETYPE	OUTPUTCOEFFICIENT	……
A_X	X	A	1	P	1
B_X	X	B	1	P	1

Production source master data configured the manufacturing source (P-rule) for component X

SAP S&OP optimizer overwrites the PRATIO and TRATIO while optimizing the overall plan. We initially maintained a P and T rule for component X at location A which did you return the desired results.

Hope this helps.