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Personally I believe that SAP provides for three sets of supply chain strategies. These are replenishment strategies, mainly driven by the MRP type in the MRP1 screen of the material master, the planning strategies, mainly driven by the strategy group on MRP4 and, greatly underutilized, production scheduling strategies. The latter are the ones I’d like to discuss in today’s blog.

Assume I had some discussions at a manufacturing company – a large batch, and therefore, process manufacturer. Naturally the client would have implemented PP-PI with recipes and process orders so that they are able to handle co-products which need to be re-introduced into the process, by-products and quantity calculations so that tolerances in chemical specifications can be set.

The following graphic is a simple representation of a possible value stream. As can be seen, raw materials are batched together as the input into the process. These batches are sprayed, sintered, then sieved and re-sieved before they are screened and classified into various corn sizes. The resulting mixes in certain batch sizes are available to the packing line which fills the powder into different sized bottles and cans for sales and distribution.

Of course there are those products that can be forecasted and planned and those products that are made to customer orders. The question was:”how do we schedule and execute our production so that we have low wip, low finished goods and raw materials inventory and at the same time high availability of raw materials and good service levels to our customers?”. That is a lot these people ask for, you might say. But that is why they purchased the best business software application there is. SAP has all the answers you are looking for, but they didn’t do the greatest job on helping their customers to find where it is hidden and how you make the best use of their software.

Here are my five cents and that, of course, only in a nutshell: lets start at the end and move our way back. I recommended to my client to use the tools of repetitive manufacturing to schedule and plan the packaging line. Within those tools we chose takt-based sequencing and heijunka leveling of a product mix with rate routings. Note that with repetitive you don’t get any process orders but planned orders generated by the MRP run are automatically sequenced and capacity leveled with a heijunka procedure. (I know what you’re thinking now. But the packaging operation is not a process. And as logical as it sounds to you to use a combination of consumption based and deterministic planning strategies for your replenishment; why not using various methods to schedule and level capacity?). In any case, the line can now be scheduled with the graphical scheduling board and heijunka provides an even product mix whereas ATO strategy 81 drops customer order related supply elements right into the 20% capacity availability we reserved for demand driven packaging.

In order to package into different sizes you need a classified powder in the right quantity and that must always available. That part we realized with Kanban control cycles. These mixes will now be available at the line in a certain batch size. Each Kanban quantity can be calculated by SAP depending on the size of the demand (forecast). We also put a touch screen where the mixes are, so that we can display the Kanban board. Whenever a repetitive order asks for 100 5 lb bottles, a 500 lb batch of the mix is picked from this available inventory (of course we had to employ certain lot size procedure which allowed for this solution) and a Kanban container is set to ’empty’. This will automatically generate a process (yes) order, because we used that specific replenishment strategy.

But there is more. The process order which replenishes the mix which is ready to be packaged, has to be on specification. The process which determines the right spec begins before Sintering. So there is a process order for Sintering, another for Screening and finally Mixing the required mix. Three steps to get to the right spec !

What comes to mind now is to have Kanban cycles for each step but that would require inventory, as little as it may be, of each possible spec at each step. And that was impossible to do. So we opted for conWIP (it looks like it’s getting out of control now, doesn’t it?). ConWIP, or constant Work In Process is a method which sends a signal to the beginning of the line and ‘pushes’ Orders through the system with a specification (more about conWIP in a previous post). Special Procurement Type 52 (in standard SAP delivery) for ‘direct production’ allows for this kind of handling. It generates a collective order and schedules those, starting from Sintering, going to Screening and finally Mixing. And the lot sizing has to be right again. All these levels are manufactured using PP-PI process orders and they have to be, since there are by-products, remelts and batches to be managed.

Now for the first step in the process, Spraying, we can use all kinds of methods. Starting from re-order points to Kanban or a deterministic planning process. In this case I recommended a forecast on component level – strategy 70. Now the plant looks at the global S&OP and determines their own forecast for what the need for that intermediate will be. Put that forecast – VSFB – onto the intermediate and let MRP generate planned orders which a planner converts on an as-needed basis. The raw material based mixes / batches are pulled form warehouse inventory which is replenished mostly by consumption based planning strategies. But note that deterministic methods can be used as well, since Kanban and direct production allows for the generation of dependent requirements through explosion of the Bill of Material.

So what’s the use of this? As I see so often, people usually take the “we need to do A or we need to do B” approach. Not true… You have options. From above description we can see that using the right application for the right situation works much better than the ‘one shoe fits all’ approach. Takt-based heijunka sequencing with repetitive orders for packaging, Kanban for the final mixes, a conWIP cycle with direct production for the production of bulk and deterministic forecasting and scheduling on intermediates. On top of that, we employ all possibilities in consumption based and deterministic replenishment for raw materials.

Yes, it requires a solid understanding on how all of this stuff works… But what’s the alternative?

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  1. John Oomens

    Hi Uwe,

    I agree with your suggestion to apply more than one scheduling strategy. There is only my concern when the manufacturer in former East Germany would ask you for batch traceability in SAP ECC through all production steps from spraying to packaging. In that case you would be challenged to get it done when applying collective orders and repetitive orders. What do you think?

    Best regards, John

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