Undertanding SNP Optimizer 2 0

IBM Global Business Services
Understanding SNP Optimizer
Date: 04 Oct 2012

Ravindra Deokule
Chandan Dubey
Nikhil Kalkar
© Copyright IBM Corporation 2007

Objective
 The objective of this session is to provide insight on the basics of

optimization.
 Provide overview on the standard SNP optimizations features & its
usability.
 Discuss few SNP Optimizer scenarios and their setup
Target Audience
 All SAP APO practitioners
2 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Contents
1. What is Optimization?
2. What is Business Optimization?
3. Optimization Methods & Architecture
4. About SNP Optimizer
- Optimizer Logic
- Optimizer Master Data
- Optimizer Setup
- Optimizer Run & Log Interpretation
5. SNP Optimization Scenario- Case Studies
Scenario 1: Choice of plant (more than one plant supplying a customer)
Scenario 2: Choice of PDS within a plant

What is Optimization?

Some background
Electromagnetic
Emission
Reduce
Payload
Instability of
Design
Designer Considerations
Reduce Thermal emission from
thrust
Aerodynamic Reduce Radar detection
Limitation Reducing radar detection when
the aircraft opens its weapons
bays

Optimization Process
 Optimization is the process of finding the greatest or least value of a function
for some constraint, which must be true regardless of the solution.
How to arrive at the objective function is illustrated in the below farmer issue
example;
John Doe has area A sq. m of farm land
- Can plant Rice or Wheat
- Selling Price of Rice is Sr and Sw of wheat
- Amount he can spend on fertilizer is F (usage rate is Fr & Fw)
- Amount he can spend on pesticide is P (usage rate is Pr & Pw)
Constraints: Total Area

 Simplex method the equation becomes; cannot exceed A
- Ar ≥ 0; Aw ≥0; X1 ≥ 0; X2 ≥0; X3 ≥ 0; X4 ≥0 Amount for Pesticides &
Fertilizer Cannot
exceed P& F resp.
- Ar + Aw + X1 = A
- FrAr + FwAw + X2 = F
Farmer need to maximize the
- PrAr +PwAw + X3 = P selling price to maximize the
profit!
- SrAr +SwAw +X4 = S He needs to decide the area Ar
for rice and area Aw for wheat??

Optimization-Based Planning Models

In constraint-based planning, production processes can be represented as optimization
models.
A production model based on optimization consists of Objective Function (s), Decision
Variables and Constraints based on market conditions, physical processes and
resources/capacity.
Objective Function: The Objective Function is the single benchmark for evaluating all
combinations of decisions that satisfy the constraints. It usually represents a quantifiable goal,
and sometimes two or more goals e.g Farmer need to maximize the selling price to maximize
the profit!
Decision Variables: Decisions variable are the independent variables of the problem.
Typically, decisions take the form of Production lot sizes, Transport lot sizes, Purchase of
additional capacities and so on .E.g. What is the area for Rice & Wheat plantation needs to be
decided?
Constraints: Constraints represent limitations on which decision can be made and how
decisions can be made. e.g. Total Area cannot exceed A Sq Meters e.g. Total expenses on
Fertilizers & Pesticides cannot exceed F & P?’
Constraints are also used to apply business rules when solving a problem.

Optimization- Methods & Architecture
Linear Programming
Continuous Linear Optimization Problems
Primal Simplex Method
Dual Simplex Method
Interior Point Method
Discrete Linear Optimization Problems
Mixed Integer Linear Programming
Prioritization
Decomposition
Vertical Aggregated Planning
APO Optimization Architecture
Horizontal Aggregated Planning

About SNP Optimizer

SNP Optimizer Logic

Objective:
The objective of the SNP Optimiser is to produce a plan that minimises the
overall supply chain cost whilst meeting the constraints.
Total supply chain cost = Storage cost + Transportation cost + Production
cost + Penalty for violating Safety Stock + Penalty for delayed deliveries +
Penalty for non-delivery
Two types of constraints considered by Optimizer.

Hard constraints:
These are constraints that may under no circumstances be violated -
Lot sizes (Minimum and Rounding value) in case Discretization is used.
Resource capacities in case it is selected in optimizer profile.
Transportation lead times

SNP Optimizer Logic (2)
Soft constraints:
These are constraints that may be violated if required to reach a feasible
plan: -
Optimiser cost settings
Safety stock levels
Example:
An example is provided in the next slide to illustrate the optimiser logic.
The optimiser does not work through a step by step process as shown
here, but this is done to make the example easier to understand.

Optimiser Logic – Example

Step 1: Take note of (a) Forecast and stock in PDC, (b) Alternative packing lines in SU - Line 1 is the
preferred line, (c) Alternative routes – preferred route via SU-DC
Step 2:
Store 20 for 1 week (W3) Cheapest route selected
Transportation Demand propagated to SU (taking
Lead time = 0 days SU-DC cost = 0 1 week lead time into account)
Transportation Storage cost = 1 Lead time
cost = 0
Step 3:
W3 Ship 20 = 7 days
Production cost and free capacity
W4 Ship 80 W4 W4 of alternative lines considered to
W4 Demand 100 Demand 100 Ship 100 determine how much to produce on
(Received each line and when.
W5)
Step 4:
W3 production shipped immediately
SU Transportation PDC and kept in SU-DC for one week
Storage cost = 7 cost = 999 Storage cost = 4 where it will incur the lowest
storage cost
Line Cost Capacity Capacity W4 W5 Forecast 110
W3 W5 Safety Stock 30 Step 5:
1 0 10 60 W4 Closing stock 40 W4 production shipped to SU-DC
2 1 20 20 Step 6:
Stock shipped from SU-DC to PDC
in W4 to meet demand in W5
Produce Line 1: 60 in W4, 10 in W3
Produce Line 2: 20 in W4, 10 in W3
SNP Optimizer Master Data

Optimizer Costs
Penalty costs are used to ensure the correct planning behaviour.
Costs are only required where a choice needs to be made. Example: if there is
only one possible transportation route, no transportation cost is required.
Non Delivery Penalty
Late Delivery Penalty
Max days Late Delivery
Safety Stock Penalty
Storage Cost
Transportation Cost
Production Cost
Procurement Cost
Cost of Increasing Capacities

Delay and Non Delivery Penalty
Maintained on SNP1 tab of location-product master

Maximum Delay: Maximum number of days that a product is allowed to be
delivered after the demand date.
Delay Penalty: Penalty incurred (per Unit per Day) in case the product is
delivered late (applicable only up to the Maximum Delay).
Non Delivery: Penalty (per Unit) of product that cannot be delivered within the
period specified by the Maximum Delay.
Generally Non Delivery Penalty is set as a very high value as Non Delivery of
product means direct business loss.

Delay and Non Delivery Penalty (2)

Example: In case if 5 Units of the product can be delivered only after 6 days after
the demand date, penalty = 5*3000*6= 90000
For the same example: if 5 Unit cannot be delivered within 7 days,
penalty = 5*3000000 = 15000000

Storage and Target Stock Penalty
Maintained on Procurement tab of location-product master

Storage cost: Cost (per Unit per day) to keep product in stock on a location.
Example storage costs:
Factory = 9 Factory DC = 7 Primary DC = 5 Secondary DC = 7
Example Safety Stock Penalty: 150
Total storage cost at Primary DC for the week 31.2012 in example below =
608*5*7 = 21280
Safety Stock violation for same example = (1600 - 608)*150*7 = 1041600

Transportation Cost
Maintained on Transportation Lane
Transportation cost: cost of using this lane (per Unit)
Example Settings:
Do not maintain cost where there is no choice of lane.
Cost of 10 for non-preferred T Lane.
Cost of 0 for preferred T Lane.

Production Cost
Maintained on SNP PPM

Single level variable cost: Cost per PPM output quantity
Example settings:
Preferred PPM = 0/Unit
Alternative 1 = 1/Unit, Alternative 2 = 2/Unit etc.
Production cost per Unit =

200/100 = 2

Lot Size
 Maintained in ECC material master, integrated to APO location-product
 Minimum Lot Size should be a multiple of the Rounding Value.
 Rounding value will only work if the ‘Discretization’ check box is set in
the SNP PPM.

Optimizer Settings

Optimizer Settings
 The planning result is influenced by:
- Master data (as described before)
- Optimiser Profile
- Cost Profile
- Priority Profile
 This section describes the settings in the Profiles. These normally do not
require regular changes, but it is important to understand the influence of
certain parameters.
Optimiser Cost
profile profile

Optimizer Profile
• Optimization method can be selected here.

• Select Capacities and Lot Sizes that you
want optimizer to respect. These are Hard
Constraints.
• Absolute Deviation means SS short fall
quantity (Not the percentage value of short fall
quantity) will be multiplied with the penalty to
get an absolute value.
• Shelf life planning can be done with
Optimizer.

Optimizer Profile (2)
• Quota arrangements can be considered in optimizer. You need to define cost

of falling below or exceeding the quota. It can be modified to get an optimized
Quota Value, if selected in the background optimizer run.
•Product interchangeability is supported with Optimizer.

• Constraints on this Tab are

respected in case of Discrete
Planning. Number of Periods
maintained here are periods by
which Optimizer will respect
these constraints. It is used for
problem simplification.
• Linear Planning is
unconstrained planning.

• Runtime is split down

between the number of sub
problems within the
selection by the optimiser.
• Number of iterations –
Number of times optimiser
will try to improve the first
solution it finds.
• Whichever is reached fist
will stop that solution. If all 6
improvements are reached
first then it will give an
Optimal Solution.
• Heuristic first solution –
Reduces runtimes. Runs
Heuristics internally to get
first solution. Then
Optimizer tries to improve
26 SCM SOQ| 12-Aug-14
the first solution.
© Copyright IBM Corporation 2007
Time Allocation
 Product decomposition – this is used to split up the products in logical sub

problems.
 The total time is then shared across all the problems using an internal formula
within the optimiser recognising how many problems and how many elements
are there to the calculation.
- This time is allocated to problem 1
- After problem 1 completed then time is re-allocated (time left divided by no

of problems left using the same dynamic calculation) – this is repeated until
all problems have been solved.
 So optimiser calculates solutions within 120 mins, if it finds 6 feasible solutions

each better than the last then the optimiser stops when it reaches 6 – even if it
has only used half time allocated.

• Select all the

horizons you want
Optimizer to
respect.


Optimizer Run

Interactive Run
Points to remember when running the optimiser on-line:

• Select the product across the full supply chain (i.e. include all relevant
locations).
• If the product is produced on a constrained resource, include all products
on this line.
• In case you want to see results and not wish to save them then after
running optimizer and analyzing results you can press refresh and do not
save the result. It will however generate optimizer log which can be
accessed though transaction /SAPAPO/SNPOPLOG.

Interactive Run (2)
Load your network in planning book and use Optimizer Button which will take you
to the next screen shown below:

Background Run
You can schedule your Optimizer

Jobs in background. It will create
and save orders in Live Cache.

Optimizer Log

Optimizer Log
 A detailed log is created for every optimiser run – For both background as
well as interactive runs.
 The log contains a lot of information
- Inputs utilised for the calculation

- Outputs from the calculations
- Error Messages from the run
- Trace File: It is the detail of what happened in the Optimiser server
 Transaction /SAPAPO/SNPOPLOG: Here you will see details about

Optimizer runs like runtimes, Selection ID, User etc.

Optimizer Log (2)

 Optimizer work in 3 steps and related runtimes can be seen here: -
Runtime1. Read and delete orders, model creation and populating input log.
Runtime2. Model consistency check and computation at ILOG server.
Runtime3. Order creation in Live Cache, Output Log generation.
 Message log will contain summary of master data consistency check and
Solution result – Optimal or Feasible.
 Tables in Optimizer Log are mentioned below:
Input Parameters: Info about Planning Book, Data View, Cost Profile,
Optimizer Profile etc.
Location Products: List of location product given to optimizer as input.

Optimizer Log (3)

Deletion Time Period: Complete horizon in which deletion happened for
each location product.
Input Log: Below mentioned are few important tables:
ET_BUCKDF – Bucket Definitions
ET_LOCMAT – Location Products
 ET_QTAHEAD – Quota Arrangement (Header Data)

 ET_QTAITEM – Quota Arrangement (Item Data)
 ET_RESOURCE – Production Resources

Optimizer Log (3)

ET_ARC – T Lane MOT
ET_ARCMAT – Product specific MOT
ET_RESC – Available capacity of Production resources
ET_PROMO – PPMs
ET_PRORES – Resource consumption in PPMs

ET_DEMAND – Demands

Optimizer Log (4)

Results Log: Below mentioned are few important tables:
IT_LOCMAT – Location Products
IT_RESOURC – Production Resources (Standard capacity)
IT_ARCMAT – Stock Transfers
IT_PROMO – Planned Orders
IT_PROCUR – Purchase Requisitions

IT_DEMAND – Fulfilled Demands
IT_NOTDELI – Unfulfilled Demands
Message Log: It contains Stepwise details of the Optimizer run.

Optimizer Log (5)

Trace File: This is a large file containing details of the optimizer run at the
server. This lists the sub problems the optimiser has used product
decomposition for to break up the problems. It also states success of that
sub problem.
 Optimum Solution Found
- This is where the optimiser has found solutions that cannot be improved
within the number of iterations maintained in the optimizer profile.
 Feasible solution found for this sub problem, but time-out

- This is where the optimiser has found a solution, however it has not had
time to complete improvements.
 No Solution Found
- This is where the problem the optimiser is trying to solve cannot be
solved in the time allocated. No results will be seen in the planning book
for these products. Optimizer patch upgrade should be considered.
Planning Scenarios

SNP Optimizer Scenarios
Scenario 1: Choice of plant (more than one plant supplying to the customer)
Scenario 3: Choice of source of supply - internal production vs sub-contractor

Planning Scenarios 1

Scenario 1: Choice of plant (more than one plant supplying a

customer)
Mfg Plant 1
DC
Mfg Plant 2
 Demand forecast at DC
 Plant 1 is the preferred source, Plant 2 is 2nd option
 Plant 1 is loaded 100% before loading Plant 2

Scenario 1: Choice of plant (more than one plant
supplying a customer) – Master Data
Product S100001
DC 10001
Mfg Plants BP0Y ( P) BP01
Source of Supply PPM_S100001_BP0Y PPM_S100001_BP01
PPM Single level cost 1 99
Procurement cost
Resources WPP_ROL_BP0Y_001 WCM_HRM_BP01_001
Prod storage cost 0.05
Procurement type E E
Safety stock penalty 0.01
S100001 @ BP0Y
Transportation Mode Duration Transport
Lane ation cost
Mfg Plant
BP0Y -> 10001 Truck 24 H 0.01
BP01 -> 10001 Truck 48H 0.1 DC
Mfg Plant
S100001 @ BP01
Procurement cost
Prod storage cost 0.01
Safety stock penalty 0.01

S1 Material Master data

Material (S100001) @ DC (10001) – SNP1 tab and Procurement tab
Material (S100001) @ Primary plant (BP0Y) – SNP1 tab and Procurement tab
Material (S100001) @ Secondary plant (BP01) – SNP1 tab and Procurement tab

S1 Transportation data
Transportation Lane
BP0Y -> 10001
BP01 -> 10001

S1 Resource data
Resource capacity @ BP0Y
Resource capacity @ BP01

S1 PPM data
PPM @ BP0Y PPM @ BP01
Cheaper
plant

Planning situation before run

Planning Book – Forecast @ DC 10001
Planning Book – Production (planned) @ plant BP0Y
Planning Book – Production (planned) @ plant BP01


Resource load at resource 1

Planning situation after run
DC 10001
Cheaper plant Plant1

Cheaper plant loaded to
loaded to 100% BP0Y
100% capacity
capacity
Plant1
BP01
Remaining demand
is fulfilled by
alternate
plant



Planning Scenarios 2

Mfg Plant
PDS1 PDS2
 Same product can be manufactured via multiple methods

 PDS1 is the preferred options, PDS2 is the 2nd option
 PDS1 is fully loaded before loading PDS2

Scenario 2: Choice of PDS within a plant – Master Data
Mfg Plant
PDS1 PDS2
S200001 @ BP0Y
Product S200001
Mfg Plants BP0Y
Source of Supply PPM_S200001_P_BP0Y PPM_S200001_BP0Y
PPM Single level cost 1 2
Resources WPP_ROLA_BP0Y_001 WBFIN_JSM_BP0Y_001
Non Delay Max

Requirement Type
delivery penalty Delay
Regard as customer demand 0 0 0
Regard as corrected demand forecast 0 0 0
Regard as demand forecast 21 1 20
Regard as demand forecast 1,000 1 10

S2 Material Master data
Material (S200001) @ Plant (BP0Y) – SNP1 tab and Procurement tab

S2 Resource data
Resource capacity 1
WPP_ROLA_BP0Y_001
Resource capacity 2
WBFIN_JSM_BP0Y_001

S2 PPM data
PPM 1 - Primary PPM 2 - Secondary


Planning Book – Forecast @ Plant BP0Y


Resource load at resource 1 WPP_ROLA_BP0Y_001
Resource load at resource 2 - WBFIN_JSM_BP0Y_001

Plant
BP0Y
Demand is fulfilled by
preferred
resource
First preferred resource

s is loaded 100%
and remaining
demand is
fulfilled by
another resource


Preffered resource is
utilized t0
100% capacity

First Preferred resource
is loaded 100%
and remaining
demand is
fulfilled by
another resource

Questions!!

Thanks You!!

Undertanding SNP Optimizer 2 0

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IBM Global Business Services

Understanding SNP Optimizer

Date: 04 Oct 2012

© Copyright IBM Corporation 2007

 The objective of this session is to provide insight on the basics of

 All SAP APO practitioners

2 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

3 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

4 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

5 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Constraints: Total Area

6 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Optimization-Based Planning Models

7 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Optimization- Methods & Architecture

8 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

About SNP Optimizer

9 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

SNP Optimizer Logic

Two types of constraints considered by Optimizer.

10 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

SNP Optimizer Logic (2)

11 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Optimiser Logic – Example

SNP Optimizer Master Data

13 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

14 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Delay and Non Delivery Penalty

Maintained on SNP1 tab of location-product master

15 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Delay and Non Delivery Penalty (2)

16 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Storage and Target Stock Penalty

Maintained on Procurement tab of location-product master

17 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

18 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Maintained on SNP PPM

Production cost per Unit =

19 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

 Minimum Lot Size should be a multiple of the Rounding Value.

20 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

21 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

22 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

• Optimization method can be selected here.

23 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Optimizer Profile (2)

• Quota arrangements can be considered in optimizer. You need to define cost

24 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Optimizer Profile (3)

• Constraints on this Tab are

25 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Optimizer Profile (4)

• Runtime is split down

 Product decomposition – this is used to split up the products in logical sub

- After problem 1 completed then time is re-allocated (time left divided by no

 So optimiser calculates solutions within 120 mins, if it finds 6 feasible solutions

27 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Optimizer Profile (5)

• Select all the

28 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

Optimizer Profile (6)

29 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007

30 SCM SOQ| 12-Aug-14 © Copyright IBM Corporation 2007