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Load Building Overview

Wholesale Distributors strive to address their procurement challenges to meet the service requirements of their customers.  They have to achieve these results while adhering to cost effective purchasing practices and requirements imposed by their vendors.  Often vendors have weight, unit or value minimums that must be met to place an order.  The wholesale distributor faces the challenge of determining how to meet these “restrictions” without buying inventory that will not be consumed by future sales.

To meet this challenge a wholesale distributor must look at the current and future demand across a vendor product line.  In industry terminology, this is often referred to as “line buying”.  SAP has adapted a solution known as load building to suit this purpose.

The load building functionality in SAP is used to:

  • Minimize the inventory in the warehouse by placing a purchase order based on procurement  and vendor minimums and inventory requirements
  • Achieve the best purchase prices, by accounting for Vendor minimums or ordering complete truck loads.
  • Reduce the number of Stock outs by accounting from small order quantities in advance
  • Optimize the load by accounting for future inventory demand and considering the range of coverage of the extra items

In summary, SAP Load Build optimizes quantities for procurement by accounting for vendor minimums. It converts existing purchase requisitions to purchase orders, selects additional inventory to optimize purchase orders and groups purchase orders together with a collective number when necessary.

Load building can be run automatically or manually. 

Note: Customers can start their implementation with the manual Load Build option and extend the usage easily in a later phase with the automatic capabilities.

 Automatic Load Building

In the automatic load building function, the system combines existing purchase requisitions (PR) and purchase orders (PO) and creates a list of POs to send to a vendor based on vendor/procurement minimums. The entire process is done automatically once the restriction profile is set up.

The system determines all the vendor minimums, open purchase requisitions (PRs) and purchase orders (POs) placed with a vendor and groups them together in a single load. It also considers all maintained material from a vendor to optimize the purchase orders. It determines the total weight, total volume, total units and total value (based on specified location) for each load.  Based on these variables the system determines the optimal order quantity and combines the POs and PRs into one PO which can then be sent to the vendor

Note: The Best practice is to use only purchase requisitions and let the system determine additional materials and turn them into a single purchase order.

Restriction Profile: The restriction profile is the place where the buyer can set up the vendor minimum values and target values so that the Automatic load build can be run against these minimums to identify the optimal order quantity. The buyers have the ability to set up a Load Build Restriction profiles by vendor materials or a sub-segment of vendor materials which enables them to create loads based on the type of materials being purchased. For example if certain groups of materials “cube out”, before “weighing out” then the load can be optimized based on cube. It is also possible to build loads based on any combination of weight, cube, units, and value. The results are displayed in the “list of results”.

Figure: Restriction Profile Overview

 

Three different scenarios can occur after running the automatic load build run :

  • The load meets all the requirements contained in the vendor restrictions profile.
  • The load does not meet the minimum requirements contained in the vendor restrictions profile (for example, because the value is too low).
  • The load does not meet the maximum requirements contained in the vendor restrictions profile (for example, because the load is too heavy).

Based on the scenario that occurs, the buyer can go in manual  mode and modify the load to meet all the requirements. For this the buyer would check the results in the result list and do the necessary rework i.e. displaying, checking, updating and processing the results of automatic load building.

  • The predefined restrictions provide the framework for the decisions the buyer would take within the result list. Three statuses are assigned to the results from the automatic load build run -Green, yellow, red which serve as indicators about the outcome of the load build run and helps the buyer with making the right decision.
  • The buyer can then decide which action to take (e.g. delete existing purchase requisitions or add further items). While doing so the resulting outcome is automatically checked against the applying restrictions
  • When the buyer is satisfied with the (modified) results he can trigger the purchase order generation out of the result list

Manual Load Building

Manual load build allows the buyer to take a group of Purchase orders (POs) and manually combine them to come up with the optimal order quantity to create one PO which can then be sent to the vendor.

Note: Manual load building can only be done with POs and not with PRs.

The Manual Load build function provides the following

  • Combine purchase orders ( POs)  via a collective number Manual Load Build to manually create the optimal order quantity
  • Manual adjustment of a single PO to fulfill vendor restrictions
  • Splitting a big purchase order (PO) into 2 separate purchase orders (POs).

In addition manual load build supports the following:

  • Processing purchase orders generated in automatic load building but not yet released (released in terms of “ready for sending to vendor” or just “finished creation”
  • You can use the manual load building functions for vendors not participating in the automatic load building procedure

Load Build Approaches

Automatic and Manual load build differ in terms of the prerequisites that apply and the functions that are available. The approaches can be used in a combination of ways:

  • Allow the system to simulate automatic load building and then manually convert the result in the results list into an optimized set of purchase orders
  • Always allow the automatic load building module to generate purchase orders. Then optimize purchase orders (achieved by assigning a collective number) further in manual load building.
  • Optimize quantities using the automatic load building program. Only use manual load building in cases where the automatic load building program cannot find an optimal solution.

Business Benefits

The following are the business benefits of using Load build

  • Reduce logistic costs – Load Building and Quantity Optimizing enable you to reduce logistics costs efficiently
  • Lower purchase prices – Order Optimizing enables you to have best purchase conditions
  • Keep proper stock level – Order Optimizing always enables you to keep proper stock level, also provides a vendor “range of cover” to ensure that next purchase stands a better chance of meeting any vendor minimums

Improvements in the Results List with ERP Enhancement Pack 5

The Load Build Results List can now be accessed through the Planning Workbench (transaction WWP1) or you can go directly to the Load Build Results List (transaction WWP4).

 The Load Build Results List is formatted in a tree structure and has green, yellow, and red status indicators.  Both features improve the ease of use.  The display of a selected Load Build document now includes Header information, Restrictions information, as well as the Line Item Data.

 Benefits of the new Result List UI:

  •  The user is able to check a load build result (overview and detail)
  •  The user is able to delete a purchase requisition or an additional item in order to meet the restrictions
  • The user is able to create a purchase order or a purchase requisition

Screenshots of the New Results List are are shown below

Figure: Selection screen for online planning

Figure: New Results List

Info Pack

http://help.sap.com/saphelp_erp60_sp/helpdata/en/4c/420e0b470a11d1894a0000e8323352/frameset.htm

Link to Wholesale Best Practices document on Load Building

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