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Introduction
Features
Aut omat i c Cost Model
Gener at i on f or t he
SNP and Depl oyment
Opt i mi zer
ASM SCM
PTU Applications
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I nt r oduc t i on
SNP Optimizer working principle
Implicitly describe all feasible plans
Global search among all feasible plans for one with minimal costs
Compared to other SNP planning methods, optimizer behavior
heavily depends on maintained costs
Elementary plan properties have to be expressed by costs, e.g.
Non-delivery costs to trigger planning
Storage costs to trigger in-time demand satisfaction
Advanced business-logic properties have to be translated into costs
Transport, PPM/PDS costs to model priorities
Sufficient different storage costs to model push logic
Disadvantage compared to other SNP planning methods
High entry-level for using the SNP Optimizer
Expert knowledge required for translating business logic into costs
To use the SNP or Deployment optimizer it is necessary to define cost. For instance, demands
are only satisfied, if penalty cost for non deliveries are maintained.
With the Automatic Cost Generation (ACG) it is not necessary anymore to maintain the cost for
the optimizer. The ACG generates the cost so that demands are fulfilled.
Additionally, the result of the SNP optimizer depends to a high degree on the cost values.
Unfortunately, it is sometimes difficult to maintain the cost in the way that certain business rules
are respected. The ACG can use priorities (e.g. PPM or procurement priorities which are used by
the SNP heuristic, too) to derive cost according to the underlying business rules.
Please note that it is NOT necessary to maintain any properties in order to use the ACG.
As you can see, the advantage of the ACG is twofold:
Demands are satisfied even if no costs are defined -> avoidance of cost master data maintenance
Priorities can be used by the ACG to create cost in the way that the business logic is respected.
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Mi ssi on St at ement
Goal:
Lower entry level for using the SNP/deployment optimizer by
providing functionality to automatically derive a cost model
Target Groups: Customers/Consultants
who want to try/use the optimizers but have insufficient
knowledge to translate the requirements
who quickly want to setup a cost model and possibly want to
refine it afterwards
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Aut omat i c Cost Conf i gur at i on: Requi r ement s
Automatic generation of cost model consisting of
Storage costs
Production (PPM) costs
Product-specific transport costs
Procurement costs
Safety stock penalty
Non-delivery penalty
Late-delivery penalty
while
Allowing expression of business logic
In terms of business, not in terms of optimization
Keep functionality simple
Ensuring certain cost model properties
Avoid anomalies
Stability with respect to small differences in the planning problem
Reasonable cost model (in terms of economical interpretation)
The ACG derives the cost mentioned above. The functionality is kept simple, and the resulting
cost ensure that the model is stable and reasonable. This will be explained at the end of this
document in more detail.
First, let us have a look how the cost are derived.
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Introduction
Features
Aut omat i c Cost
Model Gener at i on
f or t he
SNP and Depl oyment
Opt i mi zer
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Ex pr essi ng Busi ness Logi c
Idea:
Let customer describe planning behavior of optimizer in terms of
business (and not in terms of Operations Research)
Keep functionality simple focus on preferences / priorities
source priorities
transportation priorities (lane)
production priorities (PPM/PDS)
demand priorities
Demand priority classes
Location-product priorities
On the next slides it is explained how the ACG uses the priorities to express certain business
rules.
Please note that the ACG can also be used if no priorities are defined. Then, for example, each
source has the same priority, or each demand has the same importance.
The ACG can use priorities to define the cost values. Regarding sourcing decisions, the
transportation and production priorities are used. For distinguishing between demand classes
(sales orders, corrected forecasts, forecasts, and safety stock), priorities can be defined for these
four categories. Furthermore, it is possible to use the location product priorities to distinguish
between different location products.
Please note that priority 1 is always the highest priority, then priority 2 and so on.
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Ex pr ess Busi ness Logi c : Sour c e Pr i or i t i es
Production:
Use Priority field at
PPM/PDS master data
Transport:
Use priority field of procurement area of
lane master data
lane-product specific priority
Translate source priorities into costs
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Ex pr ess Busi ness Logi c : Sour c e Pr i or i t i es
Resolving Priorities
No global priority space: For a location-product, production priorities
dominate transport priorities (same as for SNP Heuristic)
Time dominates source:
Bucket
Demand
Source1 Prio 1
Source2 Prio 2
1 2 3 4 5
100
Time dominates source
Higher prioritized sources will get lower costs
(for production resp. transport)
In-time fulfillment of
demand is more important
than sourcing from the
higher prioritized source
If we have both, a PPM priority and a lane priority, the cost are derived in the way that the
production priority is more important, i.e. will have lower cost. The same behavior is true for the
SNP heuristic.
Additionally, it is more important to deliver a demand in time than sourcing from the more
preferred source.
The optimizer tries to fulfill all demands in time with receipts of all available sources in this period
(according to the sequence defined in the sourcing priorities). If this is not possible, the optimizer
will use receipts of previous periods, or even later periods, if late deliveries are allowed. Please
note that it cannot be guaranteed that the optimizer keeps the sourcing sequence according to
the priorities, when early or late receipts have to be used.
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Ex pr ess Busi ness Logi c : Demand Pr i or i t i es
Translate location-product and demand priorities into costs
1. Demand Priority Classes
Assign priorities to
Customer demand
Corrected forecast
Forecast
and Safety Stock
Demand and Safety Stock
may have same priority
The ACG derives the non and late delivery cost for the three demand categories customer
demand, corrected forecast, forecast and additionally the safety stock violation cost.
You can define in the ACG Tab of the optimizer profile which demand class has highest priority,
second highest and so on. You can even say that all four classes have the same priority.
Please note that these cost are only derived if there is a demand for the corresponding location
product in the planning horizon for the optimizer.
For example: if you have a sales order for location product A, and a forecast for location product
B in the planning horizon, then only non delivery / delay cost for customer demand for A and non
delivery / delay cost for forecast for B are derived. For all other demand classes, no penalties are
created.
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Ex pr ess Busi ness Logi c : Demand Pr i or i t i es
2. Location-Product Priorities
Use priority field of location-product master
Grouping of location-products (3 partitions)
A location-product (highest priority)
B location-products (medium priority)
C location-products (lowest priority)
-> to be defined by the user
-> reduce complexity
Additionally to the demand classes, the ACG can consider the location product priorities to
derive the non and late delivery penalty cost for the three demand categories customer
demand, corrected forecast, forecast.
In the priority field on the SNP 2 Tab of the location product you can define priorities from 0 to
255 (priority 0 is lowest priority). In the ACG Tab of the optimizer profile you can define which
location product priorities have highest priority (e.g. up to priority 10 you have A products),
second highest priority (e.g. up to priority 50 B products) and the remaining ones (larger than 50)
will have lowest priority.
Now the question is: which is more important the demand priority classes or the location product
priorities?
This can be defined by the user. It is explained on the next two slides.
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Ex pr ess Busi ness Logi c : Demand Pr i or i t i es
Modes of combination for resolving priority:
Demand priority classes dominate location-product priorities
Location-product priorities dominate demand priority classes
Mode is configurable
Example:
Demand
Class 1
A Location-products
P1, P2
Demand
Class 2
Demand
Class 3
B Location-products
P3, P4, P5
C Location-products
P6, P7
Demand class dominates Product Priority
The default setting is that the demand class is more important than the location product priority.
This means that the penalty cost are derived in the way that the cost for demand class 1 for A
products are highest, followed by the B and C products. Then, the cost for demand class 2 and 3
are determined accordingly.
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Ex pr ess Busi ness Logi c : Demand Pr i or i t i es
Modes of combination for resolving priority:
Demand priority classes dominate location-product priorities
Location-product priorities dominate demand priority classes
Mode is configurable
Example:
Demand
Class 1
A Location-products
P1, P2
Demand
Class 2
Demand
Class 3
B Location-products
P3, P4, P5
C Location-products
P6, P7
Demand class dominates Product Priority
Demand
Class 1
A Location-products
P1, P2
Demand
Class 2
Demand
Class 3
B Location-products
P3, P4, P5
C Location-products
P6, P7
Product Priority dominates demand class
If you define that the location product priority is more important than the demand class, then the
penalty cost are derived in the way that the cost A products are highest, followed by B and C
products. If you have defined different priorities for the demand classes, then of course the
demand class with the highest priority will get the highest cost etc.
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Pr i or i t i es Set t i ngs i n Opt i mi zer Pr of i l e (ACG Tab)
Consideration of Priorities
You can define priorities from 1-4 for three different priority classes of the demand and the safety stock. 1 is the
highest,4 the lowest priority. You can also assign the same priorities for two or more priority classes.
The standard setting is that all priority classes and the safety stock have the same priority.
Consideration of Priority of Location Products
If you set this indicator, the system considers not only the priority for the priority classes of the demand, but also the
priority of the location products. You define this priority in the master data of the location product on the SNP 2 tab
page.
You must also subdivide the product priorities into three product classes with A, B and C. Otherwise all products
will have the same importance.
The optimizer can consider the product priority together with the demand priority. You can define which priority is more
important and should be considered by the system first, by setting the Prio.of Loc.Prod. more important than Prio. of
Prio.Classes indicator. Otherwise, the demand class priority is more important than the priority of the location product.
Consideration of Procurement Priority of PPMs/PDS
If you set this indicator, the system considers the procurement priorities of production process models (PPMs) or
production data structures (PDS). You define this priority in the master data for PPMs or PDS.
Consideration of Procurement Prio.of Transportation Lanes
If you set this indicator, the system considers the procurement priorities of transportation lanes. You define this
priority in the transportation lane master data in the Product-Specific Transport section.
Consideration of Costs of Products without Input Products
To calculate the product value, the system automatically accepts the value 1 as the value of raw products (products
without input products). If you set this indicator, the system bases the calculation on the actual storage costs
instead. You define the storage costs in the master data of the location product on the Procurement tab page.
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Cost Model Pr oper t i es
Avoid anomalies
Optimizer should not transport or produce without demand
Ensure supply close to demand date
Prevent non-delivery if demand can be delivered delayed
Safety cost should be higher than storage cost
Stability
Numerical stability
-> avoid big differences in the numbers (in terms of orders of magnitude)
Independence of transactional data
Independence of bucket granularity
Independence of discrete constraints (optimizer profile settings)
The resulting properties of the cost model ensure that anomalies are avoided. This means that
the optimizer should not transport or produce without demand:
No transport should be activated due to cheaper target location cost
No production should be activated due to cheaper output location-product cost
No transport should start to save storage cost on the truck
No production should start to save storage cost by production in progress
Additionally, the supply should be triggered just-in-time, and non deliveries should only
occur if late demand fulfillment is not possible.
Moreover, the resulting cost guarantee that the model is stable.
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Cost Model Pr oper t i es: Reasonabl e Cost Model
Economical interpretation desired
Transport/production costs increase proportionally to their duration
Value of products increase with production depth
Possibility to reflect different location-product values
Derive reasonable location-product values (storage costs)
Two modes are possible
All raw location-products have value 1 (default) (to minimize
configuration)
Respect maintained costs for raw products
Regarding the storage cost. they can either be read from the master data (location product on
the Procurement tab) or they have a value of 1 (as default setting).
Please note that even with the default setting, the storage cost increase with the value of the
input product. For instance, if you need two items of an input product to produce one item of the
output product, the storage cost for the output product are 2 APO-$.
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Aut omat i c Cost Conf i gur at i on: Li mi t at i ons
No cost model completion
No saving of generated costs to master data .
No generation of
Cost functions (production, transport, procurement)
Costs for means of transport
Costs for resource utilization
Costs for increasing resource capacity
Costs for minimum resource utilization
Some limitations are also valid for the ACG.
It is not possible to complete an incomplete cost model. For instance, if you already have
maintained production cost (in some PPM or PDS) and transportation cost (at some lanes), then
the ACG will not consider these cost when the missing cost are derived. The ACG does not
consider any existing cost (except the storage cost, if this is desired).
It is not possible to save the generated cost into the corresponding master data. The cost are
stored in the result log of the optimizer. Thus, they are available on the database in the
corresponding table.
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You w ant t o see
how t he ACG i s
w or k i ng i n t he
syst em?
Pl ease c hec k out
t he SAPTut or s i n
t hi s Lear ni ng Map
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Copyr i ght 2005 SAP AG. Al l Ri ght s Reser ved
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