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Enterprise Systems Enterprise Systems OptimizationOptimization
IntroductionIntroduction
EGN 5623 Enterprise Systems OptimizationEGN 5623 Enterprise Systems Optimization(Professional MSEM) (Professional MSEM)
Fall, 2012 Fall, 2012
Course ObjectiveCourse ObjectiveSupply chain management (SCM) concepts,
modeling, configuration, integration, data transfer, and supply network planning and optimization.
With a focus on SAP implementation
SCM ScopeSCM ScopeSingle facility SCM
◦Increased planning capabilities for a single facility
◦Finite-capacity scheduling
Multiple facility SCM◦Integrated planning for the entire supply chain
network◦Multiple plants and distribution centers◦Multiple vendors◦Multiple customers◦Multiple transportation options
ERP Operations related to SCMERP Operations related to SCM
Related ERP Modules◦Materials Management (MM) and Production
Planning (PP) modules◦Sales and Operations Planning (SOP)◦Forecasting◦Master Scheduling◦Material Requirements Planning (MRP)◦Capacity Requirements Planning (CRP)◦Order release and receipt
ERP & SCM Basics (SAP View)ERP & SCM Basics (SAP View) SAP ERP:
◦ Holds master data for materials, plants, customers, vendors, purchasing information records
◦ Holds transactional data (e.g., sales orders, planned orders)◦ Is where plans get executed
SAP SCM:◦ Is where “advanced planning” happens◦ Imports master and transactional data from ERP◦ Sends plans back to ERP for execution
ERP SCMCore Interface (CIF)
SCM Exercises Plan with GBI v 1.0SCM Exercises Plan with GBI v 1.0
◦ Review Master data ◦ APO Demand planning◦ Planning in SCM
Supply Network Planning (SNP) Heuristics Deployment and Transport Load Builder (TLB) Capable to Match (CTM)
Modules related to ECC and SCMModules related to ECC and SCM The products and modules involved in the SCM exercises
are:◦ ERP (ECC 6.0):
MM, PP, SD
◦ SCM 7.0: DP (Demand Planning), SNP, and Deployment
Work Flow in SAP SCMWork Flow in SAP SCM
Work Flow for our ExercisesWork Flow for our Exercises
Introduction to SCM Introduction to SCM and SAP APO and SAP APO
Theories & ConceptsTheories & Concepts
EGN 5623 Enterprise Systems OptimizationEGN 5623 Enterprise Systems Optimization(Professional MSEM)(Professional MSEM)
Fall, 2012 Fall, 2012
The APICS-Standard Planning The APICS-Standard Planning FrameworkFramework
Intro to Supply ChainIntro to Supply Chain
Materials ◦Any commodities used directly or indirectly in
producing a product or service. Raw materials, component parts, assemblies,
finished goods, and suppliesSupply chain
◦Flow of materials through various organizations from the raw material supplier to the finished goods consumer.
Supply Chain ManagementSupply Chain ManagementDefinition
◦All management functions related to the flow of materials from the company’s direct suppliers to its direct customers.
Functions included:◦purchasing, traffic, production control, inventory
control, warehousing, and shipping.Two alternative names:
◦Materials management◦Logistics management
Supply Chains DefinitionSupply Chains Definition• Supply Chain
– A supply chain is the network of organizations, people, technology, activities, information and resources involved in the production of a product or a service
– Includes suppliers, manufacturers, transporters, warehouses, retailers and customers
• Production System– A manufacturing subsystem that includes all functions
required to design, produce, distribute, and service a manufactured product.
• A Supply Chain consists of one or many production systems that work together in the fulfillment of a customer order
• Best viewed as a network
Supply Chain for Steel in an Automobile DoorSupply Chain for Steel in an Automobile Door
MININGMININGCOMPANYCOMPANY
Mines iron oreMines iron ore
STEELSTEELMILLMILL
Forms steel ingotForms steel ingot
STEELSTEELCOMPANYCOMPANY
Forms sheet metalForms sheet metal
IronIron
oreore
SteelSteel
ingotsingots
AUTOMOTIVEAUTOMOTIVESUPPLIERSUPPLIER
Makes doorMakes door
AUTOMOBILEAUTOMOBILEMANUFACTURERMANUFACTURER
Makes automobileMakes automobile
CARCARDEALERSHIPDEALERSHIP
Does preparationDoes preparation
CarCar
doordoor
CarCar
FINALFINALCONSUMERCONSUMER
Drives automobileDrives automobile
PreparedPrepared
carcar
SheetSheet
metalmetal
Supply Chain ManagementSupply Chain Managementin a Manufacturing Plantin a Manufacturing Plant
ReceivingReceivingandand
InspectionInspection
RawRawMaterials,Materials,Parts, andParts, andIn-processIn-process
Ware-Ware-HousingHousing
ProductionProduction
FinishedFinishedGoodsGoodsWare-Ware-
housinghousing
Inspection,Inspection,Packaging,Packaging,
AndAndShippingShippingS
uppl
iers
Cus
tom
ers
Materials Management
PurchasingPurchasing ProductionProductionControlControl
Warehousing andWarehousing andInventory ControlInventory Control
ShippingShippingand Trafficand Traffic
Physical materials flowPhysical materials flowInformation flowInformation flow
LogisticsLogistics
Logistics usually refers to management of:◦the movement of materials within the factory◦the shipment of incoming materials from
suppliers◦the shipment of outgoing products to
customers
Movement of Materials within Movement of Materials within FactoriesFactories
Incoming Incoming VehiclesVehicles
Incoming Incoming VehiclesVehicles
ReceivingReceivingDockDock
ReceivingReceivingDockDock
QualityQualityControlControlQualityQualityControlControl WarehouseWarehouseWarehouseWarehouse
Work Work CenterCenterWork Work CenterCenter
Other Work Other Work CentersCenters
Other Work Other Work CentersCenters PackagingPackagingPackagingPackaging FinishedFinished
GoodsGoodsFinishedFinishedGoodsGoods
ShippingShippingShippingShipping ShippingShippingDockDock
ShippingShippingDockDock
OutgoingOutgoingVehiclesVehiclesOutgoingOutgoingVehiclesVehicles
The typical locations from/to which material is moved:The typical locations from/to which material is moved:
Shipments To and From FactoriesShipments To and From FactoriesShipments To and From FactoriesShipments To and From Factories
Distribution Resource PlanningDistribution Resource Planning Distribution resource planningDistribution resource planning extends DRP so extends DRP so
that the key resources of warehouse space, that the key resources of warehouse space, workers, cash, and vehicles are provided in the workers, cash, and vehicles are provided in the correct quantities at the correct times.correct quantities at the correct times.
Analyzing Shipping DecisionsAnalyzing Shipping Decisions
The “Transportation Problem”◦Problem involves shipping a product from
several sources (ex. factories) with limited supply to several destinations (ex. warehouses) with demand to be satisfied
◦Per-unit cost of shipping from each source to each destination is specified
◦Optimal solution minimizes total shipping cost and specifies the quantity of product to be shipped from each source to each destination
WarehousingWarehousing
Definition ◦Warehousing is the management of materials
while they are in storage.◦Viewed as distribution center (DC)
Warehousing activities:◦Accounting◦Ordering◦Storing◦Dispersing
WarehousingWarehousing
Record keeping within warehousing requires a stock record for each item that is carried in inventories.
The individual item is called a stock-keeping unit (SKU).
Stock records are running accounts that show:◦On-hand balance◦Receipts and expected receipts◦Disbursements, promises, and allocations
Common Supply Chain ProcessesCommon Supply Chain Processes
Common Time Horizons for SCM Common Time Horizons for SCM ProcessesProcesses
Level of Detail and Time Horizon Level of Detail and Time Horizon for SAP APO Modulesfor SAP APO Modules
SCM Processes in SAP APO ModulesSCM Processes in SAP APO Modules
SAP APO System Structure and SAP APO System Structure and Integration with SAP ERPIntegration with SAP ERP
Characteristics of the SC NetworkCharacteristics of the SC Network Each node may consist of a production system of its own Links in the network represent a business relationship
between two nodes• e.g. transportation of a product between two nodes
The number of levels in a supply chain varies and depends on the complexity of the product
Flows can skip levels by that:• Supplier ships direct to DC• Manufacturer ships directly to customer
The decoupling point is the shift occurs from make-to-stock to make-to-order• The decoupling point is not fixed to one level of the supply chain
and is influenced by postponement strategies (e.g. Dell)
Characteristics of the SC NetworkCharacteristics of the SC Network• Multiple Products, each with possibly different Bills of
Material and multiple configurations• Multiple Suppliers for raw materials, parts or subassemblies• Multiple Subcontractors• Multiple Plants possibly containing a wide variety of
equipments• Multiple Warehouses
– Distribution centers, local, regional and factory warehouses• Different means of Transportation (air, sea, rail, FTL, LTL)
either leased, owned or contracted• Different information systems and communication channels• People with various skills at all levels of the organization
Example of Costs and Revenues in Example of Costs and Revenues in the Supply Chainthe Supply Chain• Costs
– Production and purchasing costs– Setup or changeover costs– Transportation and handling costs– Hiring and firing costs– Overtime costs– Inventory costs– Promotional and advertising costs– Renting and leasing costs– Subcontracting costs– Overhead– Capital investments and depreciation– Taxes and duties
• Revenue– Customer is the only source of revenue
• From sale of products, spare parts, materials or service
Example of ConstraintsExample of Constraints• Productivity constraints• Equipment capacity constraints• Labour availability• Technological constraints• Inventory constraints• Purchasing, manufacturing and distribution
lead times• Demand uncertainties and seasonalities• Service requirements• Budget• Regulations and other constraints
Categories and Attributes of a Categories and Attributes of a Supply ChainSupply Chain
- Reproduced from Fleischmann B., Meyr H, Hierarchy and Advanced Planning Systems, Handbooks in OR and MS, Chapter 9, Elsevier, 2003, pp 457-523
Types of Production SystemsTypes of Production Systems
1. Pure Inventory Systems– Simplest form of logistic system– Only procurement activities with no production or complex distribution
processes– Example: wholesale or retail operations where items are purchased
2. Continuous production Systems– Manufacturing of a few families of technologically related products in
large quantities– Example: Assembly lines or fabrication lines
3. Intermittent production Systems– Batch production of many products which share several processing
centers4. Project based systems
– Production of a unique complex product such as a ship or a bridge
Production StrategiesProduction Strategies
Make to Stock◦Production is based on forecasted amounts for
stocked itemsMake to Order
◦Production of a product is made for a customer order in the quantity specified by the order
2. Hierarchical Planning2. Hierarchical Planning• Hierarchical planning was first introduced by
Robert Anthony in 1965* as a three level management framework that consists of:– Strategic or long-term planning– Tactical planning (or management control) for mid-term
planning– Operational planning for short term planning
• The results of one each level are considered as an inputs to the lower level planning
• Effective implementation and control of the plans requires:– An execution layer that captures the events as they occur– Feedback loops at all levels
* R.N. Anthony, Planning and Control Systems: A Framework for Analysis, Cambridge. Mass., 1965
Hierarchical Planning FrameworkHierarchical Planning Framework
Long term-Material programs- Supplier selection- Cooperation
- Plant location- Production systems- Subcontractors
- Physical distribution structure- Transportation strategy
- Product program- Strategic sales planning
-- Personnel training-- Contracts-- Material Requirements Planning
-- Master production Scheduling-- Capacity planning -- Distribution planning -- Mid-term sales planning
Mid term
-- Personnel scheduling-- Material ordering
-- lot-sizing- operations scheduling- shop floor control
- Warehouse replenishment- Transportation planning -- Mid-term sales planning
Short term
EXECUTION
Information FeedbackFlow of goods
Differentiating Factors by Planning LevelsDifferentiating Factors by Planning LevelsFactor- Level Strategic Tactical Operational
Purpose Supply chain design, resource acquisition
Planning resource utilization
Operation scheduling and
execution
Implementationinstruments
Policies, objectives, capital investment
Budgets Schedules, procedures and
reports
Planning horizon Long: 3-5 years Medium: 6-18 months
Short: daily, weekly, monthly
Scope Broadcorporate level
Mediumplant level
Shortfloor level
Level of Management
Top Middle Low
Frequency ofre-planning
Low: every few years Medium: monthly or quarterly
High: weekly, daily or as required
Source of information
Largely external External and internal Largely internal
Level of aggregation- product data- time
HighProduct families
years
MediumProduct groups
Month
Lowindividual products
continuous
Degree of uncertainty
High Medium Low
Degree of risk High Medium Low
Introduction to SCM Introduction to SCM and SAP APO and SAP APO
SAP Implementation SAP Implementation
EGN 5623 Enterprise Systems OptimizationEGN 5623 Enterprise Systems Optimization (Professional MSEM) (Professional MSEM)
Fall, 2012Fall, 2012
SAP Business SuiteSAP Business Suite
SAP NetWeaverSAP NetWeaver
SAP SCMSAP SCM
SAP PLMSAP PLM
SAP SAP SRMSRM
SAP SAP CRMCRM
SAP SAP ECCECC
Planning with SAP ERP & SCMPlanning with SAP ERP & SCM
SAPECCERP
SAP SCM(includes SAP BW)Core Interface (CIF)
• Demand Planning • Supply Network Planning and optimization• Production Planning with capacity considerations• ATP• CTP• Detailed Scheduling• Deployment• Transportation planning• Vehicle routing and scheduling
• Mater data•Materials•Locations•Partner•Plants•Info records
• Transactional data• Customer orders• Production orders• Purchasing orders
• Execution
Basic Components of SAP SCM
Planning at Supply Chain Planning at Supply Chain LevelLevel
SAPECC 1
SAPSCM
SAPECC 2
SAPECC n
- Each SAP ECC component covers one or more locations In the network
- Planning may be done centrally
SAP SCM FunctionalitySAP SCM Functionality
THEORY AND PRACTICE OF ADVANCED PLANNER AND OPTIMIZER IN SUPPLY CHAIN DOMAIN by Sam Bansal
SAP SCM ModulesSAP SCM Modules
THEORY AND PRACTICE OF ADVANCED PLANNER AND OPTIMIZER IN SUPPLY CHAIN DOMAIN by Sam Bansal
Two planning Scenarios for SAP Two planning Scenarios for SAP SCMSCM
CIFControls data transfer between ERP and SCM
SAP ERP ECC 6.0
SCM 5.0
Master Data Transactional Data
DPForecast based on
data from BW
SNPSupply Network
Planning
Deployment& Load Building
BW
Aggregates data from varous sources
Data from flat file
SOP / DM / PP
Alternative Scenario Base Scenario
Cost-Based OptimizationCost-Based OptimizationCost or price drivenMixed integer programmingMust define all sourcing, production,
transportation, inventory costs and constraints
Supply Planning Tasks and Output Supply Planning Tasks and Output for SCMfor SCM• Tasks
– Identify sources for finished products
– Plan and consider safety levels in any location
– Distribute production over plants
– Choose production resources in plants
– Explode bill of materials in plants
– Identify sources for supply of raw materials and components
• Outputs– Purchase requisitions– Stock transport
purchase requisition– Planned production
orders
SAP APO ArchitectureSAP APO Architecture
SAP Access through SAPGUI SAP Access through SAPGUI SAPGUI DownloadSAPGUI DownloadThe latest SAP GUI release posted on SAP
@CSU, Chico web server http://worker.cob.csuchico.edu
User = sap; Password = sapgui4me.
This GUI works on Windows 7 systems, as well as Vista and Windows XP.
SAPGUI Download InstructionSAPGUI Download Instruction
SAPGUI Setup SAP SCMSAPGUI Setup SAP SCM
SAP ERP/SCM Clients, Userid, SAP ERP/SCM Clients, Userid, Password Password
SAP SCM
Client: 600Userid: fiu-101 to fiu-130Initial password: SAP4US
Exercises:Exercises:Overview of SCM (APO) Master Data
1) Location master data in APO2) Transportation lanes in APO3) Product master data in APO4) Resource master in APO5) Production Process Model in APO6) Quota Arrangement in APO7) External Procurement Relationships in APO