Advanced Planning in Supply Chains - Illustrating the Concepts Using an SAP APO Case Study

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Advanced Planning in Supply Chains -

Illustrating the Concepts Using an SAP APO Case Study

2 Hierarchical Planning and the Supply Chain Planning Matrix

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2.1 Principles of Hierarchical Planning

• Def. Hierarchical planning (HP) system:

It comprises a set of decision units (DU) where each DU

• is assigned to a specific planning level,

• has a single superior DU at an upper planning level which controls or limits its potential decisions by imposing instructions

(except for the DU at the top). (see fig 2.1)

• 5 principles of HP:

• Decomposition and hierarchical structure

• Coordination

• Aggregation

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2.1 Principles of Hierarchical Planning

• Hierarchical Planning System

Advanced Planning in Supply Chains 5

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2.1 Principles of Hierarchical Planning

• Decomposition and hierarchical structure

• A monolithic model of all operational planning tasks of a company

would have several drawbacks, namely,

• vast amount of up-to-date data required at the top,

• detailed planning throughout the planning interval of the top level,

• little acceptance of the model´s results by bottom level managers …

• Way out: Decomposition such that each organizational unit possesses its own planning model

• Coordination

• Aim: Align decisions of linked DU (at least achieve overall feasibility)

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2.1 Principles of Hierarchical Planning

• Aggregation

• Aim: Reduce complexity

• Entities: Resource, products, time (examples?)

• Model building, anticipation, and disaggregation

• 1 planning model for each DU (mostly mathematical models)

• Anticipation:

• Takes into account the main characteristics of the subordinate DUs,

• ranges from simple to perfect anticipation

• Disaggregation: Instructions from the superior DU have to be broken down to the level of detail required at the subordinated DU

(e.g. seasonal stock for a product groupseasonal st. for each end product)

• Model solving

• Solvability of models within given time limits

(e.g. by manual planning, simple or meta heuristics, LP …)

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2.2 Rolling Schedules

• Def. Rolling schedules (RS):

Assuming a planning interval consisting of several periods, RS result if re-planning takes place whenever the re-planning interval (usually 1 period) has passed (see Fig. 2.2).

• Advantages of RS:

• Since only decisions in the re-planning interval are implemented, future decisions may be revised (if advantageous in light of latest information)

• A means to cope with uncertainty even when using deterministic models

• Drawbacks of RS:

• Re-planning takes time and causes cost

• Re-planning may result in system nervousness

(to counteract, a frozen horizon is introduced)

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2.2 Rolling Schedules

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2.2 Rolling Schedules

• Note:

• RS are also used in HP.

• RS are trivial, if each planning level uses the same period length (see Fig. 2.3 – however, this is unusual in industrial practice).

• RS become tricky, if the period length of a subordinate planning

level is smaller (then ´some´ periods at the subordinate level may be

without instructions, see Fig. 2.4) . Way out?

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2.2 Rolling Schedules

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2.2 Rolling Schedules

• Hierarchical Planning Levels & Intervals (2)

Figure 2.4: Shorter re-planning intervals on lower hierarchical planning levels, variable planning intervals

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2.3 The Supply Chain Planning Matrix

• The Supply Chain Planning Matrix

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2.3 The Supply Chain Planning Matrix

• Top Level

• Planning interval of several years

• Company-wide strategic planning

• Mid-Level

• Planning interval of 6 – 12 months

• Quantities in “time buckets” (months or weeks), no single operations considered (e.g. vehicle trips)

• Coordination of all SC processes by Master Planning

• Bottom Level

• Planning interval of some days or a few weeks

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2.3 The Supply Chain Planning Matrix

• Decoupling point in a supply chain

• Separates upstream processes (forecast-driven)

from downstream processes (fulfillment of known customer orders)

• Typical decoupling points

• Before the first production stage (Make-to-Order, MTO)

• Before the final assembly (Assemble-to-Order, ATO)

• At the finished product stock (Make-to-Stock, MTS)

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2.4 Planning Tasks in the Frutado Case

• Forecasting

• Weekly for each DC region, for at least 6 months (seasonality!)

• Daily for short-term production scheduling and distribution

• Master Planning

• Allocation of weekly production quantities to plants and FL’s

• Distribution to the DC’s

• Anticipating bottlenecks by combination of building up stocks, overtime and cross-shipping

• Production Scheduling

• Locally in each plant

• Lot-sizing and scheduling for each FL

• Distribution

• Shipping of finished products to the DC’s

• Deliveries of the customer orders, vehicle routing

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• Fleischmann, B.; Meyr, H.; Wagner, M. (2008) Advanced planning, in: H. Stadtler; C. Kilger (Eds.) Supply Chain Management and Advanced

Planning, Springer, Berlin et al., 4th ed., 81–109

• Gebhard, M. (2009) Hierarchische Produktionsplanung bei Unsicherheit, Gabler, Wiesbaden

• Hax, A. C.; Meal, H. C. (1975) Hierarchical integration of production

planning and scheduling, Logistics: TIMS Studies in Management

Sciences, vol. 1, North–Holland, Amsterdam, 53–69

• Rohde, J. (2004) Hierarchical supply chain planning using artificial

neural networks to anticipate base-level outcomes, OR Spectrum, vol.

26, no. 4, 471–492

• Schneeweiss, C. (2003) Distributed Decision Making, Springer, Berlin,

2 Hierarchical Planning and the Supply Chain

Planning Matrix - Bibliography

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• Timm, T. (2008) Ein Verfahren zur hierarchischen Struktur-,

Dimensions- und Materialbedarfsplanung von Fertigungssystemen,

Universität Paderborn,Paderborn

• Volling, T. (2008) Auftragsbezogene Planung bei variantenreicher

Serienproduktion, Technische Universität Braunschweig, Braunschweig

• Zäpfel, G.; Mitter, J. (2010) Hierarchische Planung für industrielle Logistikdienstleister, Zeitschrift für Betriebswirtschaft, vol. 80, no. 12, 1277–1304

Advanced Planning in Supply Chains - Illustrating the Concepts Using an SAP APO Case Study