Set of Questions on SAP IBP Inventory Optimization

[former_member673365]

Dear Experts,

We have come across the following set of questions, which we are unable to find answers to.

Request your help:

• Inputs to supply planning optimizer from IO

• Recommended safety stock is a direct input to the optimizer
• There is a key figure called “Inventory Target” – what data should go here? (Target Inventory Position, On Hand Target or something else)

How is Merchandising Stock calculated?

• It takes input from “Minimum Stock Requirement” for the exposure period (Periods Between Revied + Lead Time)
• What are the other factors? (Since MSR and merchandising stock is not adding up)

Explanation of Stocking Policy

• “F” or FCFS policy does risk pooling. How is risk pooling carried out in IBP?

As Sourcing Ratios are not considered by Optimizer, and in Inventory Optimization, sourcing Ratios are considered, will the Transport receipts fit the IO results?

[lingaiahvanam · Accepted solution]

HiI,

Inputs to supply planning optimizer from IO?

There are many input parameters to run inventory optimization.

The follwing key figures are important to run the inventory optimization.

IOFORECAST (Input forecast (both historical and future) for inventory optimization at the product/location/customer group/week granularity)

IOFORECASTERRORCV (Input forecast coefficient of variation for inventory optimization at the product/location/customer group/week granularity)

IOSALES (Input historical sales quantity at the product/location/customer group/week granularity)

TARGETSERVICELEVEL (Customer service level input at Product-Location-Customer Group level)

Recommended safety stock is a direct input to the optimizer?

No. Recommended Safety Stock output from inventory optimization

There is a key figure called “Inventory Target” – what data should go here? (Target Inventory Position, On Hand Target or something else)?

INVENTORYTARGET (Target inventory of a location product for the end of a period) input to time-series-based supply planning algorithms (heuristics and optimizer).

Target inventory position used as an input into the Expected Lost Demand simulation and Target On Hand Stock key figure target amount of inventory physically available to fill the demand.

Inventory target is calculates based on Safety Stock (SOP).

How is Merchandising Stock calculated?

IOMERCHANDISINGSTOCK Inventory kept as a further cushion at a stocking point to maintain minimum on-hand requirements.

It takes input from “Minimum Stock Requirement” for the exposure period (Periods Between Revied + Lead Time) - minimum inventory kept at a customer or retail location as a safety purpose.

What are the other factors? (Since MSR and merchandising stock is not adding up) - Minimum Stock Requirement and Merchandising Stock both are the additional stock to be placed in different forms but overall purpose to maintain minimum levels at a certain point.

Explanation of Stocking Policy “F” or FCFS policy does risk pooling. How is risk pooling carried out in IBP?

Safety Stock Policy Indicator; F - FCFS (first come first serve); All demand streams get the highest service levels because of inventory optimization runs at the base planning levels and aggregated to customer group level to fulfill service levels. I am not sure about rick pooling can be considered busing IO algorithm.

As Sourcing Ratios are not considered by Optimizer, and in Inventory Optimization, sourcing Ratios are considered, will the Transport receipts fit the IO results?

Sourcing ratios consider calculating the recommended safety stock at each stock node. Transport receipts are not fit into IO results

IO inventory recommends total inventory targets to maximize profit while buffering for uncertainty and maintaining customer service levels.

Best Regards,

Lingaiah