This blog is fourth in Supply Chain series covering at a high level the different APO functionalities typically used in each of three Supply Chains – Supply Chains in different Industries – Part 1, Supply Chains in different Industries – Part 2 and Supply Chains in different Industries – Part 3 blogged earlier.
The different modules of that are commonly used in implementations are Demand Planning (DP), Supply Network Planning (SNP), Production Planning Detailed Scheduling (PPDS). Global Available to Promise (GATP) is another module having usage especially for Order Fulfillment and Allocation scenarios but not covered in this blog. Transportation Planning and Vehicle Schedule (TPVS) of APO have very few implementations and not being described here.
This module in APO focuses on creation of the Demand Forecast. The major inputs to Demand Forecast process are Field Sales, major customers, Marketing and Product Management department, Statistical Forecast generated based on Historical Sales. Apart from this Promotions and Lifecycle Planning can drive the Demand Forecast. Depending on the industry-specific nuances the different DP functionalities are used in varying degrees.
The Pharmaceutical Industry depends primarily on Statistical Forecasting (Constant, Seasonal and Trend methods) since the demand for medicines is fairly stable except for new drugs. In case of new drugs the Product Management team is responsible for coming up with the demand forecast. The Pharmaceutical company typically manufactures a new drug in large quantities and holds it in stock waiting for the final FDA clearance. The moment FDA clearance comes the drug is shipped from Warehouse to the pharmacies. Distributing a new drug quickly to the market is very important as the market exclusivity is only 180 days (in US) before another company can challenge the patent and market a generic version using different process. Moreover there is practically no usage of Promotion or Lifecycle Planning functionalities in the Pharmaceutical industry.
On the other hand both in Consumer Electronics and Lubricant industries Demand Planning is a very important part of the Sales & Operations Planning process. Unlike the Pharmaceutical industry Statistical Forecasting along with Promotion and Lifecycle Planning have extensive usage in Consumer Electronics while the Lubricant industry uses Lifecycle Planning to a lesser extent. Lifecycle Planning functionalities are important for Consumer Electronics industry due to the short lifecycle of the products. Realignment becomes very important in these scenarios to map product changes (new product codes replacing old product codes) as well as Ship-to changes (due to continuous change in stores of customers to be shipped to).
There is another interesting functionality in Demand Planning having good usage especially in Consumer Electronics industry is Planning with Bill-of-Materials, more commonly termed as DP-BOM. A good example of this is a Home Theatre system which includes among other components a DVD Player which is sold by itself. So when you plan / forecast for the Home Theater there is a Dependent demand for the DVD Player. Simultaneously when you plan / forecast for the same DVD Player you have Independent Demand for the DVD Player itself and Dependent Demand from the Home Theatre(s) both of which need to be combined to get the total Demand. DP-BOM allows you to carry out the planning with minimal master data maintenance. In the Lubricant industry as well as Food industry DP-BOM functionality has been put to use. Example Rebranded Lubricants for other brands which essentially use the same lubricant that the company can sell themselves under their own brand. The other common example from Food industry is Yoghurt and its primary component Milk which can be sold as-is.
Product Allocation is another functionality having usage in certain supply-constrained scenarios mostly in the Consumer Goods industry. Take an example of a Consumer Electronics company distributing its products through a bunch of mom-and-pop stores as well as major Retailers like Wal-Mart, Best Buy, Circuit City (in the US). Of course in a supply-constrained scenario Wal-Mart would not like to have short supply of what it has forecasted as demand. But if the mom-and-pop stores call up the Customer Service Rep of the Consumer Electronics company and put in Sales Order then ATP check will confirm the order from Stock and expected receipts notwithstanding other customers firmed demand. With Product Allocation you allocate stock and certain portion of expected receipts to Wal-Mart so that Sales Orders from mom-and-pop stores does not consume that quantity for fulfillment. Later Wal-Mart will put in the Sales Order and get Delivery simultaneously.
Supply Network Planning
SNP is the next logical module to implement for carrying out the Sales & Operations Planning process. While companies have and can go for more advanced functionalities like Capable to Match and Optimiser this blog will be restricting to Heuristics only. SNP Heuristic based planning provides a very powerful solution across the Supply Chain. It brings the Demand from Customers (can be the DC or retail outlets depending on the Industry) all the way to the Manufacturing Plants, matching the Net Requirements offset by suitable Lead Times with Supply Elements (Procurement Order or Manufacturing Orders). In the process you can use Quotas to split sourcing from multiple manufacturing plants. Heuristic-based Planning is central to Supply Planning in any industry.
Safety Stock Planning is another functionality that has significant usage in Pharmaceutical as well as Lubricant industries. SNP allows dynamic Safety Stock Planning using Days Supply concept rather than fixed quantity-based Safety Stock. The Consumer Electronics industry uses extended methods based on Service Levels.
Subsequent to Replenishment planning Deployment is a key functionality providing advanced functionalities of Pull and Push Deployment depending on the supply scenario(Push in case of excess supply). Transport Load Builder provides functionality to combine different products in a single shipment to a particular customer based on transportation constraints (like number of pallets in a truck or certain volume per tanker). Typically Lubricants and Consumer Electronics companies use the Deployment and Transport Load Builder functionality as shipment consolidation.
Subcontracting is another important functionality that is used in all the three industry scenarios discussed so far. It primarily differs by the degree of usage – for example Pharmaceutical industry is likely to do subcontracting to lesser extent compared to Consumer Electronics industry. In case of Consumer Electronics subcontracting using Third-party provision of components is the order of the day. Even Lubricant industry is going for more third-party subcontracted operations especially for the final filling operations to meet the constraints of geographical distances and market specific brand requirements.
The next blog will cover functionalities of Production Planning and Detailed Scheduling module and we shall see to what degree the different industries we have talked so far use that module. Also an Industry-specific solution used in Oil & Gas sector available in APO will be touched upon.
NOTE: All the links above refer to APO version 4.1 help content