Demand Driven MRP: a key ingredient for an intelligent and ...
Transcript of Demand Driven MRP: a key ingredient for an intelligent and ...
PUBLIC
Demand Driven MRP: a key ingredient for an intelligent and resilient Supply Chain
2PUBLIC© 2021 SAP SE or an SAP affiliate company. All rights reserved. ǀ
Today's Speakers
Lorenzo Maggi
Enterprise Architect
SAP Services
Andrea Pagliari
Head of Business Development
SAP Services EMEA South
Andrea Pigozzi
Principal Business Process Architect
SAP Services
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The context
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the new normal
Make
the right decision
Execute
the transformation
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The value
Most innovative projects
Most complex challenges
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Privilege
SAP Customers
SAP Partners
SAP Services
Duty
Real-life experiences
Difficulties
Solutions
Methods
Accelerators
Tools
Witness
and shareMake SAP
innovation
easy to
consume
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Why Demand Driven MRP is needed and what is it?
▪ Typical customer statements and Value Proposition
▪ Supply Chain Challenges
▪ Decoupling the Supply Chain
▪ Demand Driven Approach and Methodology
Where customers can adopt DDMRP methodology
▪ SAP Solution Portfolio Coverage
▪ Possible Approaches and How to Choose
A DDMRP Showcase
▪ The demand-driven applications on SAP S/4HANA
How can SAP Services gives you a five and help
▪ First Touch Point Service
▪ Proof of Concept Service
AgendaS
EQ
UE
NC
E O
F
TO
PIC
S
8PUBLIC© 2021 SAP SE or an SAP affiliate company. All rights reserved. ǀ
Why Demand Driven MRP is needed and what is it?
▪ Typical customer statements and Value Proposition
▪ Supply Chain Challenges
▪ Decoupling the Supply Chain
▪ Demand Driven Approach and Methodology
Where customers can adopt DDMRP methodology
▪ SAP Solution Portfolio Coverage
▪ Possible Approaches and How to Choose
A DDMRP Showcase
▪ The demand-driven applications on SAP S/4HANA
How can SAP Services gives you a five and help
▪ First Touch Point Service
▪ Proof of Concept Service
AgendaS
EQ
UE
NC
E O
F
TO
PIC
S
1
2
3
4
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Motivation: Customers Struggle
AS-IS SITUATION
I HAVE TOO MUCH STOCK OF THE
PRODUCTS I DON’T NEED
I HAVE TOO LITTLE STOCK OF THE
PRODUCTS I NEED
I HAVE HIGH EXPEDITE OR OVER-TIME
EXPENSES
OVERALL I HAVE TOO MUCH STOCK.
NEVERTHELESS, I CANNOT FULFILL MY
CUSTOMER ORDERS (IN TIME AND
QUANTITY)
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Motivation: Customers’ Goal
WHAT CUSTOMERS WANT
No Bullet Points required. One simple thing.
THE BEST POSSIBLE CUSTOMER
SERVICE LEVELS AT THE
LOWEST POSSIBLE COSTS
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• BEST POSSIBLE CUSTOMER
SERVICE LEVELS…
• … AT LOWEST POSSIBLE (TOTAL
SUPPLY CHAIN) COSTS
I HAVE TOO MUCH STOCK OF THE
PRODUCTS I DON’T NEED
I HAVE TOO LITTLE STOCK OF THE
PRODUCTS I NEED
I HAVE HIGH EXPEDITE OR OVER-
TIME EXPENSES
OVERALL I HAVE TOO MUCH STOCK.
NEVERTHELESS, I CANNOT FULFILL
MY CUSTOMER ORDERS (IN TIME
AND QUANTITY)
Why do customers struggle? Inventory, Service & Expenses Challenges
TRADITIONAL PLANNING RESULTING IN A
BI-MODAL DISTRIBUTION DEMAND DRIVEN PLANNING RESULTING IN AN
OPTIMIZED DISTRIBUTION
WARNINGWARNINGOPTIMALLY
STOCKED SKUS
TOO MUCH CASH, CAPACITY AND
SPACE TIED UP IN INVENTORY
STOCK-OUTS, BACKORDERS,
MISSED SALES
UNDERSTOCKED SKUS OVERSTOCKED SKUS
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Supply Chain Challenges
DEMAND IS
VOLATILE
SUPPLY CHAIN
IS RIGID
BY DAMPENING
THE EFFECT OF
VARIATION BY
DECOUPLING
BY DRIVING
REPLENISHMENT ON
ACTUAL DEMAND
BY ACHIEVING
VISIBILITY AND
PRIORITIZATION
THE FLOW IS KEY! But
how can I obtain a better flow?
Driven by promotions,
innovation, shortening
product life cycles,
competition..
Due to long lead-
times, large batches,
capacity constraints..
Material Requirement Planning was born in 1965, when supply chain complexity was
low, product life times were long, customer tolerance time were long, the forecast
accuracy was high and product complexity and variety were very low. The time has
changed.
FLOW IS KEY
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DDMRP Effect
POSITIONING
STRATEGIC
BUFFERS
DECOUPLE THE
SUPPLY CHAIN
DAMPEN THE
BULLWHIP EFFECT
Purchased
Components or
Raw materials
Critical sub-
assemblies
Critical finished
goods
DE
MA
ND
VA
RIA
BIL
ITY
SU
PP
LY
VA
RIA
BIL
ITY
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REDUCTION OF
USERS TIME TO PLAN
AND EXECUTE
DDMRP Proposition
DEMAND
DRIVEN MRP
STOCK ON-HAND
REDUCTION
HIGHER TURNOVER RATE
REDUCED ORDER
FULFILLMENT LEAD TIME
(OFLT)
HIGHER ON TIME DELIVERY TO
REQUEST (OTD-R)
HIGHER ON TIME
DELIVERY TO
COMMIT (OTD-C)
IMPACT ON INVENTORY COST
AROUND -30%
BENEFITS TO BUSINESS
Detailed view by industry
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DDMRP: Demand Driven Approach
SAP is recognized as one of the compliant softwares to implement Demand Driven Material
Requirement Planning in its suite S/4HANA (On-premise and cloud) and SAP Integrated
Business Planning. For further information: https://www.demanddriveninstitute.com/ddmrp-
compliant-software
Founded
by
Demand Driven Institute
(https://www.demanddriveninstit
ute.com/)
When 2013/2014
Covered
processes
• Sales and Operations
Planning
• Material Requirement
Planning
• Production Scheduling
“IT IS BETTER
TO BE
ROUGHLY
RIGHT THAN
PRECISELY
WRONG”cit. John Maynard Keynes
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5STEPS
DDMRP Methodology Steps
1 2 3 4 5BUFFER
POSITIONING
BUFFER
PROFILING
DYNAMIC
ADJUSTMENT
ORDER
RELEASEEXECUTION &
MONITORING
POSITIONING PROTECTING PULLING
YEARLY
QUARTERLY MONTHLY
Determine where
in supply network
to place buffers.
Set up Buffer
Profiles (master
data) and
determine sizing
of each buffer
according to lead
times,
demand, variability.
Adjust buffer
sizes based on
actual lead times
and actual/
projected
demand.
Generate
replenishment
orders at decoupling
points based on
actual demand
(consumption-based).
Generate orders
between decoupling
points using classic
MRP dependent
demand logic.
Prioritize orders in
real time according to
actual buffer
penetration, and
leverage order
priorities in executing
replenishments
(distribution,
production,
procurement).
DAILY
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Step 1: Buffer Positioning
1 2 3 4 5BUFFER
POSITIONING
BUFFER
PROFILING
DYNAMIC
ADJUSTMENTORDER
RELEASEEXECUTION &
MONITORING
POSITIONING PROTECTING PULLING
BUFFER
POSITION
«It has to be decided where inventory buffers should be positioned. This is a primary
question to be answered before sizing the inventory»
MARKET POTENTIAL
LEAD TIME
SALES ORDER
VISIBILITY HORIZON
CRITICAL OPERATION
PROTECTION
CUSTOMER
TOLERANCE TIME
INVENTORY LEVERAGE
AND FLEXIBILITY
EXTERNAL & INTERNAL
VARIABILITY
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BUFFER
POSITIONING
Step 2: Buffer Profiling
1 2 3 4 5BUFFER
PROFILING
DYNAMIC
ADJUSTMENTORDER
RELEASEEXECUTION &
MONITORING
POSITIONING PROTECTING PULLING
Min Saf. Stock
Safety Stock
Reorder Point
Maximum Stock
[MARC-EISLO]
[MARC-EISBE]
[MARC-MINBE]
[MARC-MABST]
Fields
RED
SAFETY
RED
BASE
YELLOW
GREEN
BLUE
OTOG – Over Top of
Green
TOG – Top of Green
TOY – Top of Yellow
TOR – Top of Red
Demand Driven Institute
= Average Daily Usage x
Decoupled Lead Time
= Yellow x Lead Time Factor2
= Red Base x Variability Factor1
= Yellow x Lead Time Factor2 OR
= Min Order Quantity OR
= Average Demand x Cycle Time
(select the greatest one)
1
2
3
4
How am I suppose to calculate them?
(a mix approach considering ADU and
FORECAST is allowed)
1. Variability Factor – LOW (0.3), MEDIUM (0.5), HIGH (0.8) VARIABILITY
2. Lead Time Factor – SHORT (0.8), MEDIUM (0.5), LONG (0.3) LEAD TIME
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BUFFER
POSITIONING
Step 3: Dynamic Adjustment
1 2 3 4 5BUFFER
PROFILING
DYNAMIC
ADJUSTMENTORDER
RELEASEEXECUTION &
MONITORING
POSITIONING PROTECTING PULLING
Dynamic Buffer Adjustments are
automatically proposed by the system
based on Average Daily Usage (ADU)
of the material.
Dynamic Buffer Adjustments may be
driven by manual adjustment done by
the planner due to seasonality or
promotions.
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BUFFER
POSITIONING
Step 4 & 5: Order Release, Execution & Monitoring
1 3 4 5BUFFER
PROFILING
DYNAMIC
ADJUSTMENTORDER
RELEASEEXECUTION &
MONITORING
POSITIONING PROTECTING PULLING
TOG
TOY
TOR NFP
SUPPLY
ORDER
(ONLY IF
NFP < TOY)
NFP = STOCK ON HAND + RELEASED SUPPLY ORDERS – QUALIFIED DEMAND
NO ACTION,
RELAX!4. PLACE NEW ORDER by Planning Priority
(NFP/TOG)
2
5. EXPEDITE SUPPLY ORDERS by Execution
Priority (SoH/TOR)
Max Stock
Reorder Point
Safety Zone
time
Firm Demand
Quantity
Spike HorizonToday
Spike
Spike Threshold = (e.g.) 50% x Safety Stock
(Past) Due SO’s
Qualified Demand,
in particular Spikes
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Why Demand Driven MRP is needed and what is it?
▪ Typical customer statements and Value Proposition
▪ Supply Chain Challenges
▪ Decoupling the Supply Chain
▪ Demand Driven Approach and Methodology
Where customers can adopt DDMRP methodology
▪ SAP Solution Portfolio Coverage
▪ Possible Approaches and How to Choose
A DDMRP Showcase
▪ The demand-driven applications on SAP S/4HANA
How can SAP Services gives you a five and help
▪ First Touch Point Service
▪ Proof of Concept Service
AgendaS
EQ
UE
NC
E O
F
TO
PIC
S
1
2
3
4
23PUBLIC© 2021 SAP SE or an SAP affiliate company. All rights reserved. ǀ
SAP considers DDMRP as a strategic topic in Supply Chain and offers two complementary solutions
SAP IS EMBRACING THE DEMAND-DRIVEN ADAPTIVE ENTERPRISE MODEL VIA:
DECIDING WHICH TO CHOOSE IS INFLUENCED BY
TWO CATEGORIES OF CONSIDERATION: LANDSCAPE
AND USE CASES
SAP INTEGRATED
BUSINESS PLANNING
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Solutions Coverage
INTEGRATED BUSINESS PLANNING
SAP INTEGRATED
BUSINESS PLANNING
SAP ECC
ECC
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How to choose the best approach? Some examples
..has a very large and complex
bills of material (e.g. Automotive,
Aerospace, etc.)
.. has a relatively short and
simple distribution network
which may or may not be
included in the DDMRP process
.. has a S/4HANA landscape
and/or intends to plan per
instance
..is moving to S/4HANA or has
plan to move shortly
S/4HANA ORIENTED
APPROACH
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SAP S/4HANA Oriented Approach
Distribution
Center
Manufacturing
Warehouse
Warehouse
Supplier Customer
SAP S/4HANA
This approach applies where the
customer has
…any S/4HANA landscape
…any scale from flat BOM to very large
and deep bills of material and routings
(think Automotive and Aerospace)
…a relatively short and simple
distribution network which may or may
not be included in the DDMRP process.
Strategic Decoupling Buffer Profiles & Levels Dynamic Adjustments Demand Driven Planning Visible & Collaborative Execution
Manufacturing
SAP S/4HANA
27PUBLIC© 2021 SAP SE or an SAP affiliate company. All rights reserved. ǀ
How to choose the best approach? Some examples
..has a very large and complex
bills of material (e.g. Automotive,
Aerospace, etc.)
.. has a relatively short and
simple distribution network
which may or may not be
included in the DDMRP process
.. has a S/4HANA landscape
and/or intends to plan per
instance
..is moving to S/4HANA or has
plan to move shortly
…has a relatively flat bills of
material
..distribution is managed with
complex supply chains and
distribution networks
…has already IBP in use or is
planning to use it in an industry
where IBP is really relevant (e.g.
CPG, Chemicals, IM&C, etc.)
…has an ECC landscape and is
not moving to S/4HANA at the
moment
S/4HANA ORIENTED
APPROACHSAP INTEGRATED
BUSINESS PLANNING
ORIENTED
APPROACH
SAP INTEGRATED
BUSINESS PLANNING
and SAP ERP
SAP INTEGRATED
BUSINESS PLANNING
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SAP IBP & SAP ECC Combination Landscape Approach
EU
Warehouse
Distribution
Center
(local)
US
Warehouse
Distribution
Center
(regional)
Manufacturing
Warehouse
Manufacturing
Warehouse
Supplier Customer
SAP INTEGRATED BUSINESS PLANNING
This approach applies where the
customer
…has an ECC landscape
…is not a currently on S/4HANA and no
plans to move shortly
…has SAP IBP or is planning to use it
in an industry with relatively flat Bills of
Material but perhaps longer and
broader supply chains and distribution
networks (CPG, Chemicals, IM&C, etc.)
Strategic Decoupling Buffer Profiles & Levels Dynamic Adjustments Demand Driven Planning Visible & Collaborative Execution
SAP ECCSAP IBP
Demand Driven Planning
SAP ECC
29PUBLIC© 2021 SAP SE or an SAP affiliate company. All rights reserved. ǀ
How to choose the best approach? Some examples
..has a very large and complex
bills of material (e.g. Automotive,
Aerospace, etc.)
.. has a relatively short and
simple distribution network
which may or may not be
included in the DDMRP process
.. has a S/4HANA landscape
and/or intends to plan per
instance
..is moving to S/4HANA or has
plan to move shortly
…has a relatively flat bills of
material
..distribution is managed with
complex supply chains and
distribution networks
…has already IBP in use or is
planning to use it in an industry
where IBP is really relevant (e.g.
CPG, Chemicals, IM&C, etc.)
…has an ECC landscape and is
not moving to S/4HANA at the
moment
…wants to run DDMRP
separately for manufacturing and
distribution
…has an S/4HANA landscape
and IBP in use
..has both complexity in
Manufacturing with multilevel
BOMs and in Supply Chain with
many DC levels
S/4HANA ORIENTED
APPROACHSAP INTEGRATED
BUSINESS PLANNING
ORIENTED
APPROACH
HYBRID
APPROACH
SAP INTEGRATED
BUSINESS PLANNING
and SAP ERPSAP INTEGRATED
BUSINESS PLANNING
SAP INTEGRATED
BUSINESS PLANNING
and
SAP INTEGRATED
BUSINESS PLANNING
Roadmap
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SAP IBP & SAP S/4HANA Hybrid Landscape Approach
EU
Warehouse
Distribution
Center (local)
US
Warehouse
Distribution
Center
(regional)
Warehouse
Warehouse
Supplier Customer
SAP S/4HANA
This approach applies where the
customer
…has an S/4HANA landscape
…already has IBP or is planning to
adopt SAP IBP
…wants to run DDMRP separately
for manufacturing and distribution
Manufacturing
Manufacturing
Strategic Decoupling Buffer Profiles & Levels Dynamic Adjustments Demand Driven Planning Visible & Collaborative Execution
Strategic Decoupling Buffer Profiles & Levels Dynamic Adjustments Demand Driven Planning Visible & Collaborative Execution
SAP S/4HANASAP IBP
Manufacturing DDMRP
Distribution DDMRP
Demand Driven Planning
SAP INTEGRATED BUSINESS PLANNING
Roadmap
31PUBLIC© 2021 SAP SE or an SAP affiliate company. All rights reserved. ǀ
32PUBLIC© 2021 SAP SE or an SAP affiliate company. All rights reserved. ǀ
Why Demand Driven MRP is needed and what is it?
▪ Typical customer statements and Value Proposition
▪ Supply Chain Challenges
▪ Decoupling the Supply Chain
▪ Demand Driven Approach and Methodology
Where customers can adopt DDMRP methodology
▪ SAP Solution Portfolio Coverage
▪ Possible Approaches and How to Choose
A DDMRP Showcase
▪ The demand-driven applications on SAP S/4HANA
How can SAP Services gives you a five and help
▪ First Touch Point Service
▪ Proof of Concept Service
AgendaS
EQ
UE
NC
E O
F
TO
PIC
S
1
2
3
4
33PUBLIC© 2021 SAP SE or an SAP affiliate company. All rights reserved. ǀ
Why Demand Driven MRP is needed and what is it?
▪ Typical customer statements and Value Proposition
▪ Supply Chain Challenges
▪ Decoupling the Supply Chain
▪ Demand Driven Approach and Methodology
Where customers can adopt DDMRP methodology
▪ SAP Solution Portfolio Coverage
▪ Possible Approaches and How to Choose
A DDMRP Showcase
▪ The demand-driven applications on SAP S/4HANA
How can SAP Services gives you a five and help
▪ First Touch Point Service
▪ Proof of Concept Service
AgendaS
EQ
UE
NC
E O
F
TO
PIC
S
1
2
3
4
34PUBLIC© 2021 SAP SE or an SAP affiliate company. All rights reserved. ǀ
Demand Driven Planning - First
TouchPoint Service
Enablement Session (0.5 days) with following
main contents:
- Deep dive into DDMRP Methodology
- Demo on SAP S/4HANA or SAP IBP
System
- Brainstorming of possibile applications
within customer Supply Chain
Deliverables:
1. Demand Driven Documentation
2. Summary of Brainstorming and quotation of
Proof of Concept
Total elapsed time: 3 days
Demand Driven Planning – Proof
of Concept Service
POC Service is delivered in 4 phases:
- Envision (2 days): the aim is scoping the
plant and materials subjected to Demand
Driven planning. Also strategic position of
buffers and main parameters are discussed
and agreed.
- Design: realization of the Proof of Concept
in test system.
- Refine (0.5 day): the POC is shared and
refinement is done together with the
customer.
- Finalize (0.5 day): the final POC is
delivered to the customer with all
documentation.
Total elapsed time: 3-5 weeks
How can we move a step forward together?
https://webinars.sap.com/mea/sap-services-emea-south-intelligent-enterprise/en/home
Focus on the Intelligent Enterprise with SAP Services
Contact information:
Lorenzo Maggi
Enterprise Architect, SAP Services, EMEA South
Thank you.
Andrea Pigozzi
Business Process Principal Architect, SAP Services, Italy