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i2 UIntelligent Supply Chain Management
Course
Module Eight:Module Eight:Master Supply PlanningMaster Supply Planning
2© 2001 i2 Technologies Inc CONFIDENTIAL
Supply Chain Management Key Processes
Sales & Operations Planning
Demand Planning
Inventory Planning
Supplier Scheduling
Production Scheduling
Inventory Deployment
Transportation Scheduling
Demand Fulfillment
Supply Chain Execution Monitoring
Strategic Supply Chain
Planning
Master Supply Planning
Procurement
Production Distribution
Transportation
Impact of decisions
_
+
Num
ber o
f dec
isio
ns
+
_
Spec
ifici
ties
by in
dust
ries Length of Planning horizon
Fu
lly
Inte
gra
ted
to
p-d
ow
n d
irec
tio
ns
Fu
lly
Inte
gra
ted
bo
tto
m-u
p f
eed
bac
k
Reaction to changing supply conditions
3© 2001 i2 Technologies Inc CONFIDENTIAL
After Completing This Module,You Are Expected to:
Identify the typical weaknesses of the Master Supply Planning process, and their root causes
Identify the key ingredients of an optimal Master Supply Planning process
Understand the difference between a hard and a soft constraint and its implication on the Master Supply Planning process
Understand the logic of product allocation Understand the concept of authority domains and the impact on
the Master Supply Planning process Identify Master Supply Planning key enablers and their resulting
business value Identify Master Supply Planning excellence criteria
4© 2001 i2 Technologies Inc CONFIDENTIAL
Master Supply Planning Process Positioning
hou
rs
days
wee
ks
mon
ths
year
+
buy
make
move
sell
store
operational tactical strategicscheduling
5© 2001 i2 Technologies Inc CONFIDENTIAL
Typical Master Supply Planning Process in a Global Company
Day D: Distribution Centers consolidate
demands from demand regions
Day D + 2 : packaging plants receive
updated requirements
through DRP, and run MPS and RCCP.
Day D + 12 : The bulk plant enters the requirements into
its MPS and runs MRP. Takes 4 days to re-plan
operations
Day D + 5 : packaging plants run MRP and
CRP and re-plan
Day D + 8 : the packaging plants send updated
requirements to the bulk plant via Excel spreadsheet
Day D + 18 : The bulk plant sends updated requirements to its
suppliers
6© 2001 i2 Technologies Inc CONFIDENTIAL
7© 2001 i2 Technologies Inc CONFIDENTIAL
The Problem:Planning Through DRP and MRP II
in Sequential Steps
Loops adjustingproductionplan
Loopsadjusting
masterschedule
YesYes
No
Market demand Master production schedule
Requirements schedules
Production plan
Rough-cut capacity planning
Problems ?
MRP run
Capacity planning
Problems ?YesYes
No
Top down MRP II planning process
Week 2 Week 4Week 1 Week 3 Week 5
8© 2001 i2 Technologies Inc CONFIDENTIAL
MRP II / DRP Major Limitations for Master Supply Planning
Planning Velocity Sequential planning of distribution
and manufacturing Sequential planning of material
and capacity Only soft constraints Unidirectional propagation Long processing time
Planning Validity and Optimality No demand prioritization
No pre-allocation of limited supply (first come, first serve!!)
Fixed lead times
Fixed sourcing
Very limited simulation capabilities
© 2001 i2 Technologies Inc CONFIDENTIAL 9
Key Ingredients of an Optimal Master Supply Planning Process
One integrated environment to represent and manage all supply chain activities
Concurrent consideration of material, capacity and demand constraints
Memory resident architecture Immediate visibility on Demand / Supply imbalances after
updated demand has been propagated Manual and/or automatic re-planning with problem solving
intelligence Distinction between hard and soft constraints and bi-
directional propagation of changes Pre-allocations of limited supply (Allocated ATP)
10© 2001 i2 Technologies Inc CONFIDENTIAL
An Optimal Master Supply Planning Process Requires a Fully Integrated Environment to
Model All Supply Activities
user interfaceuser interfaceuser interfaceuser interface
common databasecommon databasecommon databasecommon database
buybuybuybuy makemakemakemake movemovemovemove storestorestorestore sellsellsellsell
11© 2001 i2 Technologies Inc CONFIDENTIAL
buybuy makemake movemove storestore sellsell
In Order to Achieve Global, Real-Time and Concurrent Planning of ALL Supply Activities
common databasecommon databasecommon databasecommon database
user interfaceuser interfaceuser interfaceuser interface
12© 2001 i2 Technologies Inc CONFIDENTIAL
MATERIALCAPACITY
DEMAND
In real time
Concurrent Consideration of all Types of Constraints
13© 2001 i2 Technologies Inc CONFIDENTIAL
Optimized Master Supply Planning Processes Needs Memory Resident Technology
Up to 100 times faster calculation time compared to I/O processes
Enable quick what-if simulations with immediate response:
– What if I modify a safety stock policy?
– What if I expect the planned maintenance of an equipment?
14© 2001 i2 Technologies Inc CONFIDENTIAL
Immediate Visibility on Demand / Supply Imbalances After a New Demand Plan Has Been Propagated
Capacity related problems
Demand related problems
Material related problems
15© 2001 i2 Technologies Inc CONFIDENTIAL
Problem Oriented Planning
Planner’s agenda for the day : “What can I do to improve the operational performance of the company?”
Focus only on real problems– tolerance filters
– link with time bucket granularity
– unlimited number of problem types (problems with feasibility, problems with targets, ...)
Drill down capabilities to assess the severity of the problem, root causes, and possible solutions
Direct link with interactive replanning and automatic replanning
16© 2001 i2 Technologies Inc CONFIDENTIAL
17© 2001 i2 Technologies Inc CONFIDENTIAL
Problem Solving Capabilities
Manual re-planning
(point & click / drag & drop)
Predefined or customized
problem solving strategies
18© 2001 i2 Technologies Inc CONFIDENTIAL
Configurable Strategies Based on Heuristics
Catalog of predefined or customized
problem solving strategies
Changes that the strategy is authorized to
generate
Problems addressed by the strategy
Problems that the strategy can create
19© 2001 i2 Technologies Inc CONFIDENTIAL
Hard and Soft Constraints
Hard constraint: – no flexibility (e.g., bottleneck machine; constrained supply)– if violated: 1) flags problem
2) delays or stops propagation 3) ‘boomerang effect’
Soft constraint:– some flexibility (e.g., machine operated on 1 shift ; commodity
item) – if violated: 1) flags problem
2) propagation not affected
In reality, any constraint can be either hard, soft or both, depending of the time horizon.
20© 2001 i2 Technologies Inc CONFIDENTIAL
21© 2001 i2 Technologies Inc CONFIDENTIAL
Bi-Directional Change Propagation
CustomerWarehouseDistribution Center
FactorySupplier
Overload resolution
22© 2001 i2 Technologies Inc CONFIDENTIAL
Immediate Visibility of the Effect of thePropagation on ALL Constraints
Real time visibility on
the balanced resource
Real time visibility on
the impact on projected
inventories
Real time visibility on the impact
future purchasing
requirements The PROBLEM WINDOW is automatically updated
23© 2001 i2 Technologies Inc CONFIDENTIAL
Allocation of Limited Supply
10
10
20
10
10
20
The country manager allocates available quantities by customers
5
DAS 1
DC BeNeDe
DC Italy
Plant 1
Global forecast
Other customers
DOs
OEM
Other customers
Volkswagen (scheduled order)
30
10
20
30
10
10
50
30
30
60
40
100
Central DC
30
Propagation of external demand throughout the supply chain
1
40
30
Central planning allocates the available quantities by
Regional DC
3
70
The plant informs that it cannot satisfy
all the demands
2 40
20
20
The DC manager allocates available quantities by country
4
The allocated quantities are used to calculate ATP by
channels / customers
6
EXAMPLE
Supply Chain physical network: request / promise Sales channels:
allocations
24© 2001 i2 Technologies Inc CONFIDENTIAL
An Optimized Master Supply Planning Process in a Global Company
Day D - 8am : Deadline for
regional demand update
Day D - 8 to 10 am : New demand is propagated
throughout the Supply Chain
network
Day D- 11 am :Demand / Supply imbalances across the
whole Supply Chain are analyzed concurrently by all planners in charge
Day D+1 :Updated Master Plan published to all players (includes allocations)
25© 2001 i2 Technologies Inc CONFIDENTIAL
Optimized Master Supply Planning ProcessKey Enablers and Related Business Benefits
Global Visibility
Real Time warnings on future problems
Concurrent planning
Constraint based planning
Formal allocation of limited supply
Customer service
Inventory turns
Industrial and logistics costs
Profitability
Dramatic improvements
in
26© 2001 i2 Technologies Inc CONFIDENTIAL
Example of an Optimized Master Supply Planning Process
“Toshiba's Semiconductor operation in Tokyo, Japan successfully completed implementation of [an APS] solution to manage its domestic semiconductor planning. The division takes in thousands of orders each day from around the globe. Using [this new] Supply Chain Management software, Toshiba's planners are now able to give an accurate response each day to each order, mapping the item, quantity and request date against the priority-driven allocated available-to-promise data provided by the system. The result is accurate and timely delivery to a huge volume of customer orders. The system also manages demand aggregation and prioritization and supply/demand netting. Since implementing [the APS] and the related organizational changes, Toshiba reduced its planning cycle time approximately 66%. The key reason is the system's ability to centralize allocation planning, giving the headquarter planner visibility into each plant's capacity. With this ability to view capacity, production, demand and delivery information across the entire semiconductor operation, the company realized faster and more accurate responses to customer orders and anticipates productivity improvements.”
ERPworld, Friday, September 04, 1998
27© 2001 i2 Technologies Inc CONFIDENTIAL
Roadblocks to Remove To Implement a Best-in-Class Master Supply Planning Process
Inadequate data maintenance procedures– example : Products phase in and phase out in each local
system
Lack of critical data– example : transportation time, alternate sources
Incompatible compensation targets between functions– example :
• asset utilization for plant manager
• inventory turns for distribution manager
• sales quota for sales manager
28© 2001 i2 Technologies Inc CONFIDENTIAL
How to Transition from a Fragmented and Sequential Master Supply Planning Process ...
29© 2001 i2 Technologies Inc CONFIDENTIAL
… To a Centralized, Optimized Master Supply Planning Process?
Just impossible using a « big
bang » approach!
30© 2001 i2 Technologies Inc CONFIDENTIAL
The Solution: Authority Domains
Request
Distributed responsibility with - global visibility- global simulation capabilities
Promise
31© 2001 i2 Technologies Inc CONFIDENTIAL
The Solution: Authority Domains
This grouping of authority domains would imply that the Brazilian subsidiary is no
longer responsible for independently managing its inventory levels
Immediate Reconfiguration => Instantaneous adaptation of the
planning process to the “geopolitical” evolution of the company
32© 2001 i2 Technologies Inc CONFIDENTIAL
Master Supply Planning Process Excellence Criteria (1/3)
Authority domains enforce how planning responsibilities are distributed throughout the Supply Chain. Their structure is based on financial flows considerations rather than functional or geographical considerations. The company actively pursues the reduction of the number of authority domains in order to increase velocity in the replanning process. As much as possible, the domains are organized horizontally (by sub-supply chains) in order to enable real time, concurrent planning from the first to the last activity in the Supply Chain.
There is an appropriate use of safety lead time, and the consequences are well understood across the organization. The quantities or number of days placed in these buffers are reviewed during every Master Planning process. They do not unnecessarily overlap with safety stocks.
The status applied to each Supply Chain constraint (hard, soft or varying over time) accurately reflects its current level of flexibility.
A full Demand and Supply balancing process (or Master Supply Planning) is executed every time a new demand plan is imported.
The propagation of the new demand plan throughout the Supply Chain model uses memory resident calculation (for maximum propagation speed) and simultaneously considers ALL constraints. When violated, hard constraints affect the propagation process, either by anticipating upstream or postponing downstream activities, or by rerouting the overflow onto an alternate resource, or by simply stopping it. The violation of soft constraints does not affect the propagation, but the problem is flagged.
33© 2001 i2 Technologies Inc CONFIDENTIAL
Master Supply Planning Process Excellence Criteria (2/3)
Visibility of all constraints that have been violated is immediate after the propagation, giving the planner a list of all Supply Chain imbalances (e.g., problems) throughout the planning horizon, such as capacity overloads, stockouts, safety stock violation, excess inventory, late customer delivery, forecast satisfied late, etc... Only relevant problems are displayed (considering tolerance filters and problem duration).
Drill down capabilities enable the planner to identify the root cause of the problems, which can then be solved either through manual replanning or by the use of local problem solving algorithms.
Real time what-if simulations (using memory resident calculation for maximum speed) are extensively used in order to evaluate different scenarios on elements like :- preventive maintenance programs- feasibility / profitability of different forecasts- best date for new product introduction, promotions, etc…These simulations use the same Supply Chain model as the official plan to ensure full consistency.
Time fences (e.g., portion of the planning horizon in which the supply plans are firm) cover a period corresponding to the time it takes for the company to be able to modify the availability of its resources. Their use avoids unnecessary planning nervousness, but the company is aggressively pursuing their reduction to a shorter horizon, and a procedure ensures that they are immediately updated when velocity improvements have been achieved.
When Supply Master Plans are feasible and optimized, updated requirements are sent to suppliers for feasibility check. Feedback is obtained with no delay, and the impact of supplier late or short promises is immediately addressed.
34© 2001 i2 Technologies Inc CONFIDENTIAL
Master Supply Planning Process Excellence Criteria (3/3)
When Master Plans are generated at an aggregated level (e.g., not at the SKU level), a process ensures an adequate disaggregation of the master plans down to the detailed level. The horizon over which such disaggregation is performed takes into consideration the detailed planning needs at all level, including customer order fulfillment and procurement planning.
In case of limited supply conditions, the sales organization allocates ATP figures using the Supply Plans (distribution, production, procurement) generated by the Master Planning process. These allocated ATP figures directly drive the order fulfillment process.
Roles and responsibilities to manage the allocation process are clearly defined throughout the sales organization.
The allocations reflect the business priorities and the level of demand uncertainty. When unpredictability is high, hedging quantities are kept centrally or at an intermediate level.
For each sales channel, the sales objectives are equal to the allocated ATP figures. The whole Master Supply Planning process is performed in no more than 5 working
days.
35© 2001 i2 Technologies Inc CONFIDENTIAL