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SAP APO Overview

Contents
SCM Overview
APO Overview
SAP R/3 Vs APO

Contents
SCM Overview
APO Overview
SAP R/3 Vs APO

Supply Chain Planning


Supply Chain Planning is the process of balancing available supply against demand

Companies do this by predicting customer demand and


fulfilling it by the most efficient allocation of inventory and
production capacity.
Demand

Supply

The right product

At the lowest total cost

At the right time and place

With the lowest asset investment

Delivered to the right customer

SCM Planning and Execution


Supply Chain Management starts with a completed Business Plan:
Strategic Planning

How are we going to increase the value of the company?


What businesses are we going to get in/out?
How are we going to accomplish? (acquisitions, mergers, joint ventures, divestiture, etc.)

Financial Planning

What are the financial implications of the strategic plan?


What are the financial resource requirements?
Which financial vehicles should be used in meeting these resource requirements?

Business Planning

Sales & Operations


Planning

How does projected demand compare to projected supply?


What are the projected resource requirements to meet both service and cost targets?
What actions are required to insure the appropriate levels of resources are available when needed?

What will it take to make the business more profitable?


What events / trends are taking place in the markets served which may impact our business?
How are we going to respond to these events / trends?
What are the appropriate service and cost targets to gain competitive advantage?

Functional Planning
Demand
Planning

Customer
Service

Distribution
Requirements
Planning

Production
Planning &
Scheduling

Material
Requirements
Planning

Execution
Warehousing

Transportation

Manufacturing

Procurement

SCM Impact on Business Goals


Revenue

Increased customer service


rates
Reduced lost sales / stock-outs
Increased market share

Gross Profit Margin

Operating Expenses

Reduced supply chain costs:


Transportation costs
Material costs
Warehouse costs
Production costs
Labor costs
Handling/expediting costs

Working Capital

Fixed Asset Utilization

Improved production plan


adherence
Increased Return on Assets
Employed
Optimized equipment utilization,
less downtime

Shareholder Value

Competitive Advantage

Lower overall cost structure


Adaptive, responsive supply
chain
Strong collaborative
partnerships

Improved inbound logistics


efficiencies
Improved manufacturing
efficiencies
Lower cost of goods sold

Reduced RM, WIP and FG


inventory investment
Reduced supply chain and cashto-cash cycle times
Reduced obsolete inventory
Postponement strategies

Economic Value Add (EVA)


Return on Assets exceeds Cost
of Capital
Enterprise Market Value exceeds
Book Value
Strong, predictable Cash Flows

Supply Chain Planning Benefits


Supply Chain Impacts

Revenue

Improved customer service


(greater market share, higher
prices)

Lower cost of goods sold


(including material,
manufacturing, handling,
warehousing, distribution, and
general overhead costs)

Profitability
Costs
Shareholder
Value
Working
Capital
Invested
Capital
Fixed Capital

Lower raw materials and


finished goods inventory

Shorter order-to-cash cycles

Fewer physical assets


(manufacturing plants,
warehouses, material handling
equipment, trucks, etc.)

Typical Benefits

2-5% sales

5-10%
conversion
costs
10-30%
transport
costs
10-20%
inventory

10-30%
assets

Supply Chain Complexity


Critical role
of raw
material
suppliers
Shortened lead
times for
product
development

Outsourced
manufacturing
operations

Outsource
d logistics
services

Global
supply
chain
operations

Increasingly
demanding
customers

PLAN

Suppliers

MAKE & MOVE

DESIGN

BUY

SELL

Customers

Supply Chain Planning Space


A range of solutions exist to assist companies effectively plan, manage, and execute their
supply chains in collaboration with other trading partners
Core SCP Process
BUY
YEARS
QUARTERS

P
P
L
WEEKS

DAYS

I
E
R

HOURS

MAKE

New Product Development

Negotiations

O
L
L
A Material
B Materials
Supply
Planning
O Planning
R
A
T Procurement
I
OMaterial Inventory Tracking /
N Warehouse Management

MOVE

HOLD

SELL

Logistics Network Design

Strategic Network
Network
Modeling

Sales
Demand
Forecasting
C
Sourcing
Planning O
Territory Planning
L
Supply
Network Planning /
Supply
Chain Planning,
L
Master Planning
Master
Production Planning
Supply Demand
Product
A
Matching
Allocation
B
Material Requirements
Inventory Order
O
Transport
Planning
Planning
Promising
R
Planning
Detailed
Production Planning
A
Distribution
Scheduling
Available to
Transportation
Requirements
T
Promise
Planning
Planning
Load
I
Detailed / Line Scheduling
Planning
O
N
In-transit &

Supply Contract

U C
MONTHS

DESIGN

Aligned SCP Process

B2B Exchanges

Manufacturing Execution System,


Production Activity Control

Contract
Manufacturers

Customer Service

On-hand Inventory
Tracking

3PLs / 4PLs

Inventory
Target
Setting

Order Management

Channel Partners
B2B Exchanges

C
U
S
T
O
M
E
R

From Supply Chains to


Communities
Business
Scope

Internal

Extended

Partnership

Community

Collaboration
Scope

Agents
B-Web
Marketplace
XML
Network
CNO
EDI

Chain

CIF
APS
Enterprise
ERP

SCM Objective

Optimization

Integration

Collaboration Synchronization

Technologies

Contents
SCM Overview
APO Overview
SAP R/3 Vs APO

Historical Development
SAP APO (Advanced Planner & Optimizer) emerged as an entrant into APS market in the late
nineties. It now forms part of a suite of products called SAP SCM, covering the whole Supply
Chain Management process footprint.
SAP SCOPE
Initiative

MRP II for Planning


SAP R/3 MM/PP
Transportation Mgmt
Warehouse Mgmt
Strategic partnership with
ILOG

1997
1997

SAP APO 2.0


Collaborative
Planning

Collaborative Scenarios
SAP APO available
in mySAP.com

1998
1998
SAP APO 1.1

Source: SAP

SAP enters APS


market with stand-alone
solution
Decentralized Warehouse
Mgmt System

1999
1999

ASCN Vision announced


SAP is Market Leader in Q2
Strategic Partnership with
Bios Group

2000
2000
mySAP SCM

SAP SCM 4.0

mySAP SCM

SAP APO 3.0 SCM Content


Workplace
SAP LES R/3 4.6 C
Transportation Planning
Radio Frequency

2001
2001

SAP APO 4.0


SAP ICH 4.0
SAP EM 4.0
SAP NetWeaver
Integration

2002
2002
mySAP SCM

SAP APO 3.1


Industry Release
Supply Chain Event
Management
CRM SCM
Integration

2003
2004

SCM 5.0
Planning - APO

Execution R/3

APO
APO

SCM 5.0
4.1

EM

Coordination - EM

Lieferant

Collaboration - ICH

SCM 5.0 Planning


Planning - APO

APO
APO

Demand Planning (DP)


Supply Network Planning (SNP)
Production Planning (PP/DS)
Distribution Planning (Deployment)
Transportation Planning
(TP/VS)

SCM 5.0
4.0

SCM 5.0 Coordination

SCM 5.0
4.0

EM

Coordination - EM

Event Management (EM)


Performance Management

SCM 5.0 Collaboration

SCM 5.0
4.0

Supplier Managed Inventory

Lieferant

(SMI)

Collaboration - ICH

SAP-APO Overview
Global
Availableto- Promise

Supply
Network
Planning

Demand
Planning

Production
Planning

Detailed
Scheduling

BW
Transportation
Planning

SC Cockpit
Infocubes

liveCache
APO

Connectivity Layer

ERP

CRM

SCM

Private
Exchange

Portal

Solvers

SAP-APO Planning and


Capabilities
Supplier

Material
Planning

Production
Planning

Inventory
Planning

Demand
Planning

Customer

Yearly

Demand Planning (DP)

Monthly

Supply Network Planning (SNP)

Will my inventory cover demand next month?

Weekly

Production Planning (PP)

In the following weeks, will I have capacity in


plant to fit demand?

Detailed Scheduling (DS)

Which is the optimal sequence for my


production lines?

Daily

Available To Promise (GATP)

What is the expected impact of salesforce


actions?

Will I be able to ensure a date of delivery?

SAP-APO Modules
SAP Advanced Planner & Optimizer
SAP application used to enable real time decision support, advanced
constraint based planning and optimization
Covers the planning requirements (optimization, finite capacity, what-if
simulation...) not covered by the R/3 system:
Sales forecasting
Production orders planning and
Production
Demand

APO
runs
on
an
independent
server
from
the
R/3
one
sequencing
Planning/
Planning
Advanced statistical methods
Detailed

(DP)

Multiple criteria for planning and


Graphical views
SAP provides
standard software to interface
R/3 (stocks,
SchedulingAPO and
sequencing
Alert monitoring
Finite capacity
purchase orders, production orders,)(PPDS)

Supply
Network
Planning
(SNP)

Network needs planning


Delivery, Production and Purchase
Planning
Approximate finite capacity
Optimal solution for the entire
network based on configurable
criteria

Available
to Promise
(ATP)

Dynamic calculation on the available


to promise orders
Ability to define material
searching rules based on
alternative centres, alternative
products and production

Demand Planning

Statistical Forecasting
Selection of advanced statistical tools (Univariable, Multilinear, Composite, etc.)

Capabilities

Collaborative Forecasting and Consensus Planning


Ability to conduct intra and cross-company Demand Planning collaboration via
Internet

Flexible Multi Level Planning


Ability to plan at various levels of data hierarchy (product, region)

Promotion Planning
Planning, managing and evaluation of the impact of promotions on demand

Product Life Cycle


Ability to use phase-in and phase-out profiles and like modeling to manage new
products and obsolescence

Planning by Exception
Use of Alerts to report exceptions

Simulation
Ability to use what-if scenario simulation

Integration with the Planning and Execution systems


Tight integration with other planning capability (Supply Planning, Production
Planning, etc.) and the Execution system (R/3, etc.)

Supply Network Planning

Supply Chain Model

Capabilities

Ability to model the entire supply network and all of its constraints such as
resource capacities, storage limits, transportation capacities, material
availability, safety and target stock levels, etc.

Concurrent Planning
Produces Distribution/Production/Inventory/Procurement plan concurrently

SNP Heuristic

Performs requirements planning (infinite capacity) for the whole, or a subset


of the supply chain.

Capacity leveling capability is used to balance resource loads.

Capable-to-Match (CTM)
Creates a feasible plan, using finite production capacities.

Matches a large set of prioritized customer demands and forecasts to a set


of categorized supplies.

SNP Optimizer

It is a one step generation of an optimized finite capacity plan in which all


defined costs are minimized.

Deployment
Dynamically determine how and when to distribute inventory

Transport Load Builder

Uses the results of the deployment run, groups stock transfers and create
transport orders for multiple products

Planning by Exception
Use of Alerts to report exceptions

Production Planning Detailed


Scheduling

PPDS is used for short term to-the-minute planning (both for in-house
production and and external procurement) in the production plant. It is tightly
integrated with the execution system transfers planning results to R/3.

Concurrent Planning

Capabilities

Detailed capacity planning and material planning simultaneously

Schedule changes and synchronization at multiple levels of the bill of


materials (BOM)

Sequence optimization using genetic algorithm or constraint propagation

Dynamic or Fixed Pegging

Constraint Based Capacity Planning

Interactive Planning

Over multiple production facilities based on constraints in Supply Network


Planner (such as setup times, fixed orders, alternative resources)

Strong graphical capabilities allow the users to perform interactive


scheduling and optimization using a Gantt Chart (Pegging network assigns
receipt elements to requirements of BOM structure)

Scenario Running

What-if Scenarios can be used to simulate actual conditions and consider


the effects of various constraints.

Global Available To Promise


Capabilities

Provides an on-line search to verify across the network that the requested
product can be provided in the quantity and date requested

Multilevel stock, component and capacity checks in real time and in


simulation mode to ensure that supply and demand can be matched

Key Components
Basic methods Inventory availability check (SNP)
Rules-based ATP Location and/or product substitution (SNP)
Capable To Promise (CTP) Production plan check, and automatic
planning in PPDS to trigger production if necessary & feasible (PPDS)
Product Allocation Allows management of scarce products

Transportation Planning and


Vehicle Scheduling
Capabilities

Transportation planning and consolidation


Optimization and processing of transportation orders
Mid-term and bucket oriented planning

Vehicle scheduling and route determination


Automatic determination of distance and transportation costs
Transportation mode and carrier selection
Multi-pick and multi-drop functionality

Exception management through Alerts

Supports short term and long term decisions

Tightly integrated with R/3 - Logistic Execution System (LES) for execution,
and BW for reporting

Supply Chain Cockpit


Capabilities

Supply Chain Engineer


A graphical instrument panel to model and navigate the entire
supply chain and all its links

Exception Management
Alert monitors and event triggers for problems, material, capacity,
transportation and storage constraints

Supply Chain Engineer


Handles adhoc queries on stock information and capacity utilization

APO Computational Solvers


APO Solvers
A wide variety of computational solvers
applied to specific planning functions with
industry-specific variations

Flow Algorithms

Branch & Bound Algorithm


Exponential Smoothing
Holt Winters
Multiple Linear Regression

Distribution Production
Planning &
Planning
Deployment Scheduling

Linear Programming /
Mixed Integer Linear
Programming

Genetic Algorithms,
Constraint-based Programming

Demand
Planning

Heuristic Methods

SAP R/3 and APO Integration


Master Data Integration
Execution (SAP R/3)

Planning (APO)

Plant
Location
Vendor
Info Record

Transportation Lane

Material Master

Product Master

Bill of Material
Routing
Work Center

Production Process Model

Resource

APO Core Interface

Add-on component to R/3 system


Supply APO with planning and optimization relevant
data from R/3
Return APO planning results to R/3
Initial and incremental data transfer (automatic switch)

Contents
SCM Overview
APO Overview
SAP R/3 Vs APO

What Are They?


SAP R/3 is an Enterprise Resource Planning (ERP)
system. It is a suite of modules designed to integrate
an organization. Its main purpose is to integrate data
throughout the organization and support the execution
of business processes.
SAPs Advanced Planner Optimizer (APO) is an
Advanced Planning System (APS). An APS supports
any form of planning activities to manage the supply
chain and is a substitute to any planning modules
found in a ERP or legacy system.

Advanced Planner and


Optimizer
APO is:
A planning tool
A decision support tool for managing
throughout, inventory, and order/demand
management
A modeling technology that enables the
supply chain planning process by:
Modeling what if scenarios to solve problems
Incorporating resource and capacity
constraints
Optimizing plans and schedules around those
constraints

Advanced Planner and


Optimizer
APO does not:
Manage entire Bill of Materials
Replace financial functions
Maintain inventory
movements and position
Operate as an execution
system

APS Vs ERP
5 key enablers that distinguish the functionality and capabilities of an APS to those of an ERP system:
Calculation Speed

Memory Resident Architecture.~ 300 times faster than a typical MRPII/DRP system

Creates Capability for continuous process where replanning can be executed every time a change occurs

Consider Supply Chain constraints concurrently

MRPII/DRP is a sequential logic, checking one level in the supply chain at a time

APS can check impact on all constraints in the supply chain simultaneously

Constraint Based Planning

APS has the ability to consider hard and soft constraints

Upstream and Downstream propagation

Using APS, the impact of a supply side constraint can be reflected in terms of downstream effects in the supply chain

Problem Solving/Optimization features embedded in an Interactive Planning environment

APS presents opportunities for sophisticated planning methods, such as profitability optimization, not available
through MRPII.

SAP R/3 Vs SAP-APO


SAP R/3
Initiatives

Capabilities

4.6C
Budget Planning

Long-term demand req. planning

Demand
Forecasting

Demand forecasting

Customer demand collaboration

Safety stock calculations

S&OP

Sales &
Operations
Planning

SAP APO

DP SNP PP/DS GATP

: Fully coverage

: No coverage

DP : Demand Planning

PP/DS : Production Planning and Detailed Scheduling

: Partly coverage

: Not applicable

SNP : Supply Network Planning

GATP : Global Available-to-Promise

SAP R/3 Vs SAP-APO


Initiatives

Production
Planning

Capacity
Planning

Capabilities

Master Production Scheduling

Materials Requirements Planning

Cycle stock calculations

Balancing changeover costs

Optimizing product run lengths

Rough cut capacity planning

Finite capacity scheduling

SAP R/3

4.6C

SAP APO

DP

SNP PP/DS GATP

: Fully coverage

: No coverage

DP : Demand Planning

PP/DS : Production Planning and Detailed Scheduling

: Partly coverage

: Not applicable

SNP : Supply Network Planning

GATP : Global Available-to-Promise

SAP R/3 Vs SAP-APO


Initiatives

Order
Fulfillment &
Distribution

Transportation
& Fleet
Management

Capabilities

Distribution network optimization

Integrated transportation planning

SAP R/3

4.6C

SAP APO

DP

SNP PP/DSTP/VS

/ route optimization

Active fleet management / tracking

Freight payment optimization

: Fully coverage

: No coverage

DP : Demand Planning

PP/DS : Production Planning and Detailed Scheduling

: Partly coverage

: Not applicable

SNP : Supply Network Planning

TP/VS : Transportation Planning and Vehicle Scheduling

Thank You