In our previous Integrated Business Planning (IBP) posts we provided background on IBP along with reviewing different inventory scenarios. Although each post is a great resource on its own, we recognize the value of having all the information in one post. In our last IBP post, we pulled together all three posts to provide an all-in-one picture.

As of 1711 SAP IBP supported two different types of algorithms:

1.)     Supply planning heuristic to create an infinite supply plan

2.)     Supply planning optimizer to create a cost-based optimized supply plan

In 1802 SAP introduced the new algorithm in supply propagation heuristics to overcome some of the issues related to infinite planning. In this blog,  we’ll focus on the difference between supply planning and supply propagation.

Supply planning heuristics calculates the supply based on the assumption that all capacities are infinite and all demand has to be met. To overcome any insufficient supply, the system uses the project stock calculations to identify such supply shortages and it is left to the planner to manage the shortages. This does not produce a feasible plan but does identify the bottlenecks. The planner uses the configured alerts to identify such cases and manually adjusts the quantiles to make the plan.

Supply propagation planning is a variation of the supply planning without shortages while outputting different results when dealing with insufficient supply. This propagates only available supply downstream and as a result not all demand is fulfilled. In this case, the supplier can see the impact on the supply shortages.

With the overview of how the supply propagation is different from the supply planning heuristics, we see how the results vary.

To illustrate the supply propagation the following supply network is used. Two identical products with the same data (Demand and Souring) is referenced, ran across the two algorithms and the results are explained.

The following simple Supply Network is used

Example

Let’s Consider a product (AC1003) with a Constant Demand of 100 quantity/week from all 8 Customers. To explain the results the following Assumptions are observed, Just a demand in the future for 4 weeks and a constant lead time (1 Week) between all location. (So, a total of 4 Weeks from Raw Material to Finished Goods at the customer)

Consensus Demand

Scenario 1: Run Supply Planning Heuristics and results analysis

In our initial Integrating Business Planning (IBP) post we provided an introduction to new features in SAP IBP.  In our first scenario where there are no constraints and total demand is always filled.

Dependent demand from customer to DC

Dependent location demand from plant to DC

Total production receipts in Plant P100

Analysis:

In the simple example a total of 800 qty. is required to be manufactured at plant P100, to cater to three distribution centers in the quantities of 200, 300 and 300. Note, the projected stock is “0” and the qty. has been offset by 3 weeks due to lead time. This is an ideal scenario where there are no constraints and the total net demand is always fulfilled. The result is summarized below.

Scenarios 2: Run Supply Planning Heuristics with a shortage in production and results analysis

Production quantity is adjusted to 600.

Total production receipts in Plant P100

Dependent location demand from plant to DC

Dependent demand from customer to DC

Analysis:

In this scenario you can see the net effect of the production reduction does not have any effect on the end distribution quantities and the end result is the same. The only difference is that projected stock is negative and the supply planner job is to handle such scenarios and adjust other receipts to make sure net Supply Planning is accurate.

Scenarios 3: Run Supply Propagation Heuristics with a shortage in production and results analysis

In scenario 2, we reviewed how reducing the production receipts did not affect the customer demand, while showing how the efficiency of the supply plan is dependent on the planner to make manual adjustments. In scenario 3 we’ll review how Supply Propagation is different.

Total production receipts in Plant P100

Dependent location demand from plant to DC

Dependent demand from customer to DC

Analysis:

Now you can see that the total demand fulfilled to the customers has been reduced to the production quantity. Note: the projected quantity is “0.”

Summary:

Supply Planning utilizing heuristics with infinite capacity and the customer receipts quantities is equal to the demand in all circumstances. This works fine in the case of no constraints, but in a case of constraints or capacity overload it can affect customer receipts. To manage this situation proper alerts and analytics need to be created to predict shortfalls and adjust the entire supply plan.

In contrast, Supply Propagation Heuristics used the same infinite capacity, but any reduction in the receipts quantity will impact customer receipts.  The total proposed/promised quantities to the customer reflects the correct quantities.

It’s also important to remember Supply Propagations uses predefined priorities, which include:

• Demand caused by adjusted min key figures
• Adjusted inventory correction
• Independent demand
• Dependent customer demand
• Dependent location demand and dependent production component