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Demand Driven Replenishment in SAP S/4 HANA-Buffer Determination and Execution

Demand Driven Replenishment DDMRP in S/4 HANA

Dear Readers, back once again to share about the next components of Demand Driven Replenishment (DDR). As we know, S/4HANA Demand Driven Replenishment comes with Five Components suggested by DDI.In my previous blog I have covered first component (Strategic Inventory Positioning). In this Blog, I will explain the remaining Four components of DDR. The Blog clearly covers the Need of Buffers in Demand Driven Replenishment and the necessary inputs required to determine the Buffer Zones, the replenishment planning methodology to refill the Buffers and finally the execution part with the Functionalities in SAP S/4 HANA.

 “An amount of inventory kept between entities in a manufacturing or distribution network to create independence between processes or entities. The Objective of decoupling inventory is to disconnect the rate of use from the rate of supply of the item.”

  – APICS Dictionary

Need of Buffers

Buffers act as Heart of DDMRP. As defined by APICS, Buffer helps to create an Independence between demand and supply. This in-turn reduce the variability in demand and supply, compress the lead time, Supply Order generation thereby improving customer service level. To Understand more about the need of Buffer in DDMRP please visit my below Blog.

https://www.linkedin.com/pulse/ddmrp-supply-chain-strategy-new-era-venkadesh-seetharaman/

 

Inputs to Buffer

The Key Inputs for Determining a DDMRP Buffers are Average Daily Usage (ADU), Decoupled Lead Time (DLT). Average Daily Usage is formed using the Material consumption on each day for the demand driven identified products, the total number of days on which the material is consumed. This can be obtained by classifying the products using the ABC Technique. To understand more about classification in DDMRP, please refer my previous blog.

https://blogs.sap.com/2019/03/19/demand-driven-replenishment-ddmrp-in-s4-hana-configuration-setup/

 

Average Daily Usage: Average Usage of Part, Component, or good on a daily basis.

                                                                                                        – Demand Driven MRP Dictionary

Average Daily Usage acts as a key for Buffer Equations. Any change in the ADU will Impact the calculated Buffer Zones.

Decoupled Lead Time: A Qualified Cumulative Lead time defined as the longest un-protected or unbuffered sequence in a Bill of Material.

                                                                                                        – Demand Driven MRP Dictionary

Decoupled Lead time is derived by cumulating the individual lead time of the part or component.

Similar to Average Daily Usage, any change in the Decoupled lead time will have a significant change in the calculated Buffer zones.

Apart from determining Buffers the Decoupled Lead time have significance in determining the spike horizon which is the horizon for the demand driven replenishment to generate procurement proposals.

Spike Horizon helps in determining the Qualified spike demand for which the procurement proposal must be generated.

 

Buffer Profile: A globally managed group of parts with similar lead time, variability, control, and order management characteristics.

                                                                                                    –  Demand Driven MRP Dictionary

 

Buffer Profile is another Important Input for the Buffer level determination, since the Buffer Profile has the Information about the Variability Factor, Lead Time Factor based on the procurement type, variability indicator, lead time indicator, whether a minimum order quantity is considered.

Buffer Profile Maintenance APP

Buffer profile maintenance APP has been introduced in 1809 version to maintain Buffer profile and Plant assignment.

Set Buffer Profile

Maintain Buffer Profile Details

Plant settings :Buffer Profile

Buffer Zone Determination

Buffer Zones are simply a partition point within a buffer, in order to bifurcate the stocks to be placed as safety stock, re-order point, maximum stock level within the inventory.

 

A Stratification layer within a stock buffer. Typically, buffer zones are color coded with red, yellow and green assignments.

                                                                                                  – Demand Driven MRP Dictionary

 

Buffer zone determination starts at the Yellow zone, which calculates the number of quantities that must lie in that zone. This is based on the Average Daily Usage and the Decoupled Lead Time.

Yellow Zone: Average Daily Usage * Decoupled Lead Time

The Top of Yellow Zone is the re-order point which signifies that reduction in buffer level from the Top of Yellow zone would cause the planning run to trigger and the buffers are replenished.

Top of Yellow: The Top of Yellow zone is obtained by summing the Quantities in the red and yellow zones.

Once the Yellow zone is determined next the calculation for Red Zone starts which uses the Lead Time Factor to determine the Red Base with the below Formulae .

Red Base: Yellow * Lead Time Factor

Red Safety: Red Base * Variability Factor

 The Top of Red Zone determines the safety stock which must be maintained for the demand driven identified product.

Top of Red (Safety Stock): Red Base + Red Safety

The Green zone determines the Maximum stock level to be maintained for the product, it is calculated by finding the maximum of the below Equations.

  1. Red Base
  2. Minimum Order Quantity
  3. Average Daily Usage * Order Cycle

Top of Green (Maximum Stock Level): The Top of Green is calculated by summing the red, yellow and green zones of the buffer.

Buffer Proposal calculation app

The Buffer Proposal Calculation APP in SAP Perform the above computations to determine the Buffer Zones for the Demand Driven Identified Products.

Once the APP is Executed, the proposals are generated, the APP has a feasibility for a planner to either Adopt or Not to Adopt the Buffers to the Material Master after comparing with the previous Buffer levels.

A Tolerance can be set for the Buffers which help to have a certain Tolerance to be either added or subtracted from the buffers.

Mass Adopt/Ignore to Product Buffers

Mass Adopt Buffers is a New APP Introduced in S/4 HANA 1809. The APP allows planner to have an extensive selection criterion comparing to the Manage Buffer levels and with this APP also Proposed Buffers can either be Adopted or Ignored.

Parameters

Selection criterion in choosing Mass Adopt Buffers.

Manage Buffer level

Manage buffer level is outcome after Manage buffer calculation with `Do not Adapt Proposals’. It will display the buffer levels of Demand driven products for planner’s decision whether to adapt or Ignore.

In this enhanced APP we can see current and proposed Buffer levels of Net flow position. Historical and Future ADU, Change in DLT and variability.

Enhanced Planning view of Buffer positions for a paricular DDR Material.

We have planning ,performance  and comparison view in graphical and table formats.

Average Daily Usage(ADU)

In this view we can see the Historical an Future ADU with un-adjusted ADU quantitiy based on the selection.

Classifications(Current Vs Proposed).This will help planner to decide whether to adopt this changes or to ignore.

Planner Overview APP

Planner overview APP will help to show Buffer level deviations(Current vs proposed),Planning(Below Reorder point),Execution(Below Safety Stock) for ABC,EFG,PQR and Procurement type.

Buffer Positioning APP

We can identify the products which needs to be buffered by analyzing the upstream and downstream of Buffered products in supply chain.

In the below example,you can see longest path of Buffered product .Similarly we can see entire BOM in Upstream.

Immediate Parent, Finished product and Next buffers details can be seen in Downstream.

To know more about this APP,Please read :- https://blogs.sap.com/2018/12/07/ddmrp-buffer-positioning-in-s4hana-1809/

Replenishment Planning APP

In this app planning priority sorted based on the stock shortages.For example,If we have a DDR product with shortage of 0% or less from net flow position.More and more negative will become the 1st priority than others and planners can take MRP run by `create supply’ icon.

If planners want to see more details about the shortages they can go inside and check which demand(s) causing this shortage of particular product.

Replenishment Execution APP

This app will display each product’s on-hand status as on Today. If the status is out-of stock,then planner can expedite the supply by calling the supplier or inform the shop-floor.

If we select particular product as we see in the previous app,here also we can expedite the orders by edit them as shown below.

With this, I have covered the complete Demand Driven Replenishment offerings in SAP S/4 HANA. Hoping to come up again with SAP Demand Driven MRP in IBP-Inventory(1905) with Five components of DDI. Please post your queries in comments.

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