Advanced Planning in Supply Chains - Illustrating the Concepts Using an SAP APO Case Study
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1 Advanced Planning in Supply Chains - Illustrating the Concepts Using an SAP APO Case Study 2 Hierarchical Planning and the Supply Chain Planning Matrix
2 Contents 2 Hierarchical Planning and the Supply Chain Planning Matrix 2.1 Principles of Hierarchical Planning 2.2 Rolling Schedules 2.3 The Supply Chain Planning Matrix 2.4 Planning Tasks in the Frutado Case Advanced Planning in Supply Chains 2
3 Contents 2 Hierarchical Planning and the Supply Chain Planning Matrix 2.1 Principles of Hierarchical Planning 2.2 Rolling Schedules 2.3 The Supply Chain Planning Matrix 2.4 Planning Tasks in the Frutado Case Advanced Planning in Supply Chains 3
4 2.1 Principles of Hierarchical Planning Def. Hierarchical planning (HP) system: It comprises a set of decision units (DU) where each DU is assigned to a specific planning level, has a single superior DU at an upper planning level which controls or limits its potential decisions by imposing instructions (except for the DU at the top). (see fig 2.1) 5 principles of HP: Decomposition and hierarchical structure Coordination Aggregation Model building, anticipation, and disaggregation Model solving First HP system was created by Hax & Meal (1975) for a tire company. Advanced Planning in Supply Chains 4
5 2.1 Principles of Hierarchical Planning Hierarchical Planning System Figure 2.1 Advanced Planning in Supply Chains 5
6 2.1 Principles of Hierarchical Planning Decomposition and hierarchical structure A monolithic model of all operational planning tasks of a company would have several drawbacks, namely, vast amount of up-to-date data required at the top, detailed planning throughout the planning interval of the top level, little acceptance of the model s results by bottom level managers Way out: Decomposition such that each organizational unit possesses its own planning model Coordination Aim: Align decisions of linked DU (at least achieve overall feasibility) Means: Instructions and feedback ( a few iterations) Advanced Planning in Supply Chains 6
7 2.1 Principles of Hierarchical Planning Aggregation Aim: Reduce complexity Entities: Resource, products, time (examples?) Model building, anticipation, and disaggregation 1 planning model for each DU (mostly mathematical models) Anticipation: Takes into account the main characteristics of the subordinate DUs, ranges from simple to perfect anticipation Disaggregation: Instructions from the superior DU have to be broken down to the level of detail required at the subordinated DU (e.g. seasonal stock for a product group seasonal st. for each end product) Model solving Solvability of models within given time limits (e.g. by manual planning, simple or meta heuristics, LP ) Advanced Planning in Supply Chains 7
8 Contents 2 Hierarchical Planning and the Supply Chain Planning Matrix 2.1 Principles of Hierarchical Planning 2.2 Rolling Schedules 2.3 The Supply Chain Planning Matrix 2.4 Planning Tasks in the Frutado Case Advanced Planning in Supply Chains 8
9 2.2 Rolling Schedules Def. Rolling schedules (RS): Assuming a planning interval consisting of several periods, RS result if re-planning takes place whenever the re-planning interval (usually 1 period) has passed (see Fig. 2.2). Advantages of RS: Since only decisions in the re-planning interval are implemented, future decisions may be revised (if advantageous in light of latest information) A means to cope with uncertainty even when using deterministic models Drawbacks of RS: Re-planning takes time and causes cost Re-planning may result in system nervousness (to counteract, a frozen horizon is introduced) Advanced Planning in Supply Chains 9
10 2.2 Rolling Schedules Rolling Schedules Figure 2.2: Rolling schedules with a planning interval of T periods Advanced Planning in Supply Chains 10
11 2.2 Rolling Schedules Note: RS are also used in HP. RS are trivial, if each planning level uses the same period length (see Fig. 2.3 however, this is unusual in industrial practice). RS become tricky, if the period length of a subordinate planning level is smaller (then some periods at the subordinate level may be without instructions, see Fig. 2.4). Way out? Advanced Planning in Supply Chains 11
12 2.2 Rolling Schedules Hierarchical Planning Levels & Intervals (1) Figure 2.3: Equal length of periods for all hierarchical planning levels, fixed planning intervals Advanced Planning in Supply Chains 12
13 2.2 Rolling Schedules Hierarchical Planning Levels & Intervals (2) Figure 2.4: Shorter re-planning intervals on lower hierarchical planning levels, variable planning intervals Advanced Planning in Supply Chains 13
14 Contents 2 Hierarchical Planning and the Supply Chain Planning Matrix 2.1 Principles of Hierarchical Planning 2.2 Rolling Schedules 2.3 The Supply Chain Planning Matrix 2.4 Planning Tasks in the Frutado Case Advanced Planning in Supply Chains 14
15 2.3 The Supply Chain Planning Matrix The Supply Chain Planning Matrix Figure 2.5: Supply chain planning tasks (see Fleischmann et al. 2008) Advanced Planning in Supply Chains 15
16 2.3 The Supply Chain Planning Matrix Top Level Planning interval of several years Company-wide strategic planning Mid-Level Planning interval of 6 12 months Quantities in time buckets (months or weeks), no single operations considered (e.g. vehicle trips) Coordination of all SC processes by Master Planning Bottom Level Planning interval of some days or a few weeks Scheduling detailed operations Advanced Planning in Supply Chains 16
17 2.3 The Supply Chain Planning Matrix Decoupling point in a supply chain Separates upstream processes (forecast-driven) from downstream processes (fulfillment of known customer orders) Typical decoupling points Before the first production stage (Make-to-Order, MTO) Before the final assembly (Assemble-to-Order, ATO) At the finished product stock (Make-to-Stock, MTS) Advanced Planning in Supply Chains 17
18 Contents 2 Hierarchical Planning and the Supply Chain Planning Matrix 2.1 Principles of Hierarchical Planning 2.2 Rolling Schedules 2.3 The Supply Chain Planning Matrix 2.4 Planning Tasks in the Frutado Case Advanced Planning in Supply Chains 18
19 2.4 Planning Tasks in the Frutado Case Forecasting Weekly for each DC region, for at least 6 months (seasonality!) Daily for short-term production scheduling and distribution Master Planning Allocation of weekly production quantities to plants and FL s Distribution to the DC s Anticipating bottlenecks by combination of building up stocks, overtime and cross-shipping Production Scheduling Locally in each plant Lot-sizing and scheduling for each FL Distribution Shipping of finished products to the DC s Deliveries of the customer orders, vehicle routing Advanced Planning in Supply Chains 19
20 2 Hierarchical Planning and the Supply Chain Planning Matrix - Bibliography Fleischmann, B.; Meyr, H.; Wagner, M. (2008) Advanced planning, in: H. Stadtler; C. Kilger (Eds.) Supply Chain Management and Advanced Planning, Springer, Berlin et al., 4th ed., Gebhard, M. (2009) Hierarchische Produktionsplanung bei Unsicherheit, Gabler, Wiesbaden Hax, A. C.; Meal, H. C. (1975) Hierarchical integration of production planning and scheduling, Logistics: TIMS Studies in Management Sciences, vol. 1, North Holland, Amsterdam, Rohde, J. (2004) Hierarchical supply chain planning using artificial neural networks to anticipate base-level outcomes, OR Spectrum, vol. 26, no. 4, Schneeweiss, C. (2003) Distributed Decision Making, Springer, Berlin, 2 nd ed. Advanced Planning in Supply Chains 20
21 2 Hierarchical Planning and the Supply Chain Planning Matrix - Bibliography Timm, T. (2008) Ein Verfahren zur hierarchischen Struktur-, Dimensions- und Materialbedarfsplanung von Fertigungssystemen, Universität Paderborn,Paderborn Volling, T. (2008) Auftragsbezogene Planung bei variantenreicher Serienproduktion, Technische Universität Braunschweig, Braunschweig Zäpfel, G.; Mitter, J. (2010) Hierarchische Planung für industrielle Logistikdienstleister, Zeitschrift für Betriebswirtschaft, vol. 80, no. 12, Advanced Planning in Supply Chains 21
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