Allocation planning in today’s constrained world
Allocations are becoming more important in today’s manufacturing climate, even for industries where this wasn’t a focus historically. This is being driven by many reasons, ultimately caused by the shortage of raw materials. This in turn can constrain what and how much of certain products can be produced, then which customers get those products.
Let’s first take a step back to define what “allocation” means in SAP terms. It acts as a cap \ max quantity, in a defined period of time, that a certain customer or group can purchase, even if they want more! This self imposed limitation is put in place for good cause though. Enforcing that one or a few customers don’t take all the product, leaving everyone else with nothing.
Sometimes people think “allocation” means a minimum amount of a product that’s being held in reserve for a certain customer or group. Also important, but is the other end of the spectrum and SAP calls that “Supply Protection”. This is a feature within ATP, but a topic for another time though.
These allocations can be utilized during sales order checks in the ATP process, or also as part of planning within IBP for response and supply. It’s a fairly basic concept, if a sales order requests more than is allowed in that period, then cut the quantity to what’s open for that allocation and confirm the rest in the subsequent period that has allocation remaining.
The question becomes though, how to best create the allocation quantity? Historically, many customers used the forecast and adjusted the #’s a bit based upon planner knowledge. This is fine, but a bit rudimentary. In today’s current situation when all finished products can’t always be made, there needs to be a more advanced technique.
Enter SAP’s Integrated Business Planning (IBP) for response and supply, which has a purpose built capability to generate allocations while taking into consideration all modeled constraints in your supply chain. This includes resource capacity, transportation lead times, supplier commits, raw material purchasing, etc. Within the confines of modeled constraints, IBP can use fair share techniques during planning to determine what the allocation quantity should be by time period.
After they are automatically created, these allocations can be adjusted by the planner as they see fit. As mentioned earlier 2 options exist: use within IBP to re-confirm sales orders, or sent to ATP for use in the live sale order promising checks.
Once in ATP, they will be utilized in various live sales order confirmation checks (or back order processing) to provide an accurate date. An ability to monitor and manage the allocation quantities directly in a web based view exists as well. Consumption of the allocations are captured as sales orders are fulfilled. That information resides within ATP, but is also passed back to IBP for consistency. The quantities remain up to date until the next planning cycle, where any changes in the current planning situation is reflected in the newly calculated quantities.
In summary, these examples are how SAP solutions can assist in planning for Allocations in a constrained environment. Let me know your thoughts by providing your comments below.