Lot Sizes in Time Series Supply Planning – SAP IBP Explainer Video Series
SAP IBP Time Series Supply Planning has several advanced features. Lot Sizes is one such topic. Lot Sizing Procedures enable bundling of demand across periods to balance customer service and inventory investment goals. Multiple lot sizing procedures are available with varying degrees of coverage across Time Series Supply Planning Algorithms.
GitaCloud has launched an SAP IBP Explainer Video Series. We will cover multiple topics in Time Series Supply Planning as part of this series. This post is to introduce the Lot Sizes topic. This is a 6-part video series to explain all the lot sizes procedures and parameters relevant to time series supply planning process in SAP IBP.
You can see a quick introduction of the Lot Sizes video series here: Introduction to Lot Sizes Series
This blog showcases Part 5 of this lot sizes series. It explains the Dynamic Periods of Supply lot sizing procedure. Static Periods of Supply plans receipts too often. This is sub-optimal from cost and risk perspective. Dynamic periods of Supply bundles demands for subsequent periods. This reduces number of production or transportation events.
We will focus back on the Finished Good IBP-100 and its supply chain network for EMEA region customers.
Plant 1010 replenishes Distribution Center 3710, which ships product to customers in the EMEA region.
We planned with Lot for Lot at both the DC and the Plant in this Initial State. Note the Consensus Demand at the bottom of the screen. It shifts 2 weeks to the left as it propagates to the DC 3710, given 2 weeks customer transportation lead time. Note that the target subperiods of supply key figure (coverage span) is maintained as 2 weeks in the DC, but this is ignored, given lot for lot-based setting. As a result, Net Demand in the DC is the same as Dependent Demand and the Additional Lot Sizing Procedure Demand is blank. This net demand at the DC, propagates further upstream to Plant 1010, and moves left by a week given one week transportation lead time from Plant to DC. Plant also has no additional lot-sizing procedure demand, given lot for lot.
See the planning results with lot sizing procedure at the DC changed to 1: Static Periods of Supply. We left the Plant with the same lot sizing procedure 0: Lot for Lot. Let’s review results in week 33. IBP plans for the additional lot sizing demand of 30 units in week 33, to cover for dependent demands in week 34 and 35. This is due to the 2 week coverage span. IBP plans 7 transportation events from Plant to DC, each time it has a net demand to fulfill. This is not optimal, given the excessive back-to-back shipments. This is the challenge with static periods of supply, that dynamic periods of supply resolves.
You can see Part-2 video of the Lot Sizes topic to fully understand the Static Periods of Supply lot sizing procedure.
See the planning results with lot sizing procedure at the DC changed to 2: Dynamic Periods of Supply. We left the Plant with the same lot sizing procedure 0: Lot for Lot. IBP now plans for only 3 transportation events from Plant to DC. It consolidates net demand of adjacent periods to minimize the total number of transportation events, every time net demand is greater than zero. For example, week 41 net demand is inflated to 270 to cover for the demands in week 42 and 43 as well. Plant 1010 gets this consolidated demand and continues to plan it lot for lot. There are three production events planned with lot for lot at the plant per the Receipts key figure. This is in-sync with the three transportation events from the plant per the Supply key figure.
See the planning results with lot sizing procedure as 2: Dynamic Periods of Supply, at both the DC and the Plant. IBP now only plans for 2 production events at the Plant. This is due to the 3-week coverage span at the plant. In week 37, IBP covers for demands across the next 3 weeks: week 38 to 40. Note that the Plant still ships to the DC per the three transportation events, as planned earlier. You can see this in the Supply key figure at the Plant.
Dynamic Periods of Supply with Safety Stock further improves the planning results. This procedure allows for a safety stock coverage span, to determine safety stock demand, in addition to the coverage span for additional lot sizing demand. This approach combines the best of both worlds: it minimizes back-to-back transportation events and it also helps build safety stock in a dynamic manner. Planners can specify an inventory target, and let IBP choose the greater of the two: inventory target, and the demand in the safety stock coverage span.
See the planning results with lot sizing procedure changed to 5: Dynamic Periods of Supply with Safety Stock. Note the key figure called Dynamic Sub-Periods of Supply with Safety Stock. This is used to specify an incremental coverage span for safety stock demands. This incremental coverage span is considered post the primary coverage span for additional lot size demands (as defined in the Target Sub-periods of Supply key figure). We maintained number of subperiods as 7 to split our weeks into days. This makes the coverage span for additional lot sizing demand) and coverage span for safety stock both as 2 weeks, given the value of 14 periods throughout. Let’s review results in Week 34. Additional lot sizing demand is 20 across the two subsequent weeks: weeks 35 and 36. Safety stock demand is 50 across the two further subsequent weeks: weeks 37 and 38. IBP now compares Inventory Target in Week 34, which is 80, with the safety stock demand, which is 50. IBP proceeds with the greater of the two: in this case, the inventory target of 80. Net demand is calculated as before: dependent demand of 10, plus additional lot sizing demand of 20, plus inventory target of 80, minus projected stock in week 33 of 80. This computes to 30 units of net demand in week 34.
Let’s review results in Week 40 to see how the inventory target is ignored in this case. Additional lot sizing demand is 190 across the two subsequent weeks: weeks 41 and 42. Safety stock demand is 100 across the two further subsequent weeks: weeks 43 and 44. IBP now compares Inventory Target in Week 40, which is 80, with the safety stock demand, which is 100. IBP proceeds with the greater of the two: in this case, the safety stock demand of 100. Net demand is calculated as before: dependent demand of 0, plus additional lot sizing demand of 170, plus safety stock demand of 100, minus projected stock in week 39 of 80 units. This computes to 190 units of net demand in week 40.
In conclusion, Dynamic Periods of Supply helps reduce the frequency of production or transportation events to mitigate cost and risk. Planners can combine dynamic periods of supply with safety stock planning, for best of both worlds. You can find this Part-5 and all the other IBP Explainer series videos, at GitaCloud Website or GitaCloud YouTube Channel.
SAP IBP has a wide range of demand or supply planning features that your planners may be interested in. GitaCloud can help you understand how IBP can model your specific planning problems and how that adds value to your planners. You can reach us with a quick email to email@example.com.
As always, good luck with your endeavors in delivering exceptional customer success and value through your SAP IBP or S/4HANA powered supply chain transformation engagements.