SAP IBP: Cost-optimized supply plan considering capacities and material constraints and explore co-production using 3rd party

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Dear SAP Friends,

Happy Reading !!!!!!!!

Welcome to one of the Interesting Topic in SAP “Integrated Business Planning”

In this Blog Post we will try to understand the IBP optimizer. It also explains the scenario where 3rd party manufacturing can be compared with internal manufacturing and planner can take the decision of best optimized plan.

Scenario

XXX company received bulk order from customer. It has 2 production plants and are already running in full capacity. How SAP IBP can support planner to take decision about in-house production or use co-manufacturer or skip the order by analyzing the financial impact of the decision and take the best possible decision.

 

Basic Concepts

IBP comes with time-series based planning and order-series based planning.

1. Time series Based Planning is majorly used for long term planning termed as Tactical Planning, commonly using planning area - SAPIBP1

Time series planning is integrated with S/4 using CPI-DS

Supported modules of IBP for time-series planning are:

• Demand Planning


• Demand Sensing


• Inventory Optimization


• Sales & Operations Planning


• Supply Planning

 

Algorithms used as follows:

Infinite Heuristic	Optimizer	Finite Heuristic
Creates an infinite supply plan without shortages, whereas it does not consider capacity and material constraints. Here all demands are fulfilled regardless of available supply	Creates a finite cost-optimized supply plan considering capacities and material constraints	Creates a priority-based finite supply plan in which demands are fulfilled depending on available supply

1. Order Based Planning is used for operations planning, using planning area - SAP7

Order series planning is integrated with S/4 using SDI

Supported applications of IBP Modules are:

• Order Based Planning

Algorithms used as follows:

Rule Based Heuristic	Optimizer
Demand prioritization, it also considers safety stock as secondary demand. This considers capacity and material availability constraints (This can be used for Constrained forecast run, Confirmation run and deployment run)	Cost optimized Supply plan; it also considers safety stock as secondary demand. This considers capacity and material availability constraints. (This engine can be used for Constrained forecast run and / or deployment optimizer)

 

In this blog post we will be discussing Time-series based planning – Optimizer

 

Network Setup

Let’s create the below mentioned network in IBP using best practice from SAP. Where we have one customer, connect DC, on Warehouse connect to 2 manufacturing plants. There is also one sub-contractor connect to the manufacturing plant for co-production.

Network

• 3001 & 3002 are production plants


• Requirement generated on 1000 (Distribution Centre) will split between 3001 & 3002 based on the production available capacity or stock availability


• Cost effectiveness will be considered in requirement split


• Consider Sub contractor V00001 to fulfil the demands in case of capacity constraints


• Stock and production cost to achieve maximum profitability

Alerts are configured and demonstrated using Alert monitoring Fiori App

• Custom Alerts Overview allows to identify that there is a situation with the capacity less than demand on the production plant (capacity of production plant is less than demand received)

Custom alerts in Fiori and dashboard

The planner accessing the Dashboard App to visualize the capacity impact and check on last available stock projections:

• Initial Situation dashboard shows the capacity that reflects the last update and projected stock as of last planning run

• Overview also includes the view of the demand over next few periods

• Chart shows the stock situation and production capacity on multiple production plants, stock available on warehouse and distribution center

Demand vs Supply situation in the network

Capacity utilization of production plants

Planner action:

• In order to check how demand can be covered by the stock available on Plant/Warehouse/Distribution Centre or by producing on production plant, planner copies capacity and stock to the simulation version

• Background job can be configured for simulation of multiple scenarios can be created using excel interface

• Job completion status needs to be checked. This can be done in real time in Excel UI in the Version Section of the IBP ribbon


• Next planner runs the optimizer in Base version

• Quick check will show, that in this scenario demand split on multiple production mills happened and distributed accordingly based on the optimized production/transportation cost.

 

Save the Simulation version to evaluate the stock out situation

 

Planner action:

• Optimizer is run in Optimizer version to see how 3rd party supplier can be utilized to satisfy new demand while production plants are fully used to satisfy the earlier planned customer demands

• Planner runs the S&OP Operator “S&OP Optimizer” in that version

• Planner can see that demand is satisfied by having 3rd party supplier support spot customer requirements

Run Supply Planning Optimizer

 

Planner action:

• Capacity had been copied to main simulation version

• Planner reviews available capacities at own and 3rd party supplier to address the spot customer orders


• Access the template Resource Capacity and demonstrate that in Optimized version there is no capacity on days in own production plants (3001 or 3002). Capacity is available at 3rd party supplier

• Simulation version gives comparison between external supplier, optimized plan for capacity constraints

 

SAP IBP Dashboard for simulation comparison

Benefits achieved

• Understanding the supply distribution based on the cost and profit effectiveness for the demands generated from customers


• Understanding on financial impact about the own and 3rd party manufacturer


• Revenue and profit projection with the various options available with the planner


• Analysis supporting the decision of fulfill the demand of customer using own manufacturing or 3rd party co-manufacturing

This blog post on IBP optimizer provide resourceful information and are an on-the-go way to gain knowledge and upskill about scenario comparisons. Most importantly, you will learn how to respond to new market uncertainties with real-time supply chain planning capabilities – overall helping you to discover how the SAP IBP solutions can best optimize your supply chain planning.

For more information on your SAP IBP solution, please visit the community page. Here you will be able to leverage powerful supply chain analytics, what-if simulations, alerts, SAP news, SAP customer stories and other resources to stay ahead and ensure business continuity.

If you have remaining questions and need further guidance, navigate to SAP’s Ask a Question site to receive answers from SAP IBP experts.

Or to get more details about SAP IBP capability, please refer to the SAP Product portfolio