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S/4HANA Demand-Driven Replenishment

Overview

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2
Introduction to the Topic of DDMRP
Motivation
Typical Customer Statements

As-Is Situation
 I have too little stock of the products I need.
 I have too much stock of the products I don’t need.
 Overall I have too much stock.
 Nevertheless, I cannot fulfill my customer orders (in time and quantity)

What I want
 Best possible customer service levels …
 … at lowest possible (inventory) costs

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Motivation
DDMRP Philosophy (as defined by the Demand Driven Institute)

Challenges
 Short Sales Order Visibility Horizon, long end-to-end Lead Times
 Demand Variability, Disruption in Supply

Work with Forecast, classic MRP – risk of Bullwhip effect Promote Material Flow
 Buffer to decouple dependencies and to dampen variability
 Plan only against real demand
 Prioritize in execution by inventory (buffer) status
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DDMRP Philosophy (as defined by the Demand Driven Institute)
The FLOW Approach

The primary objective of DDMRP is to enable material FLOW.

FLOW is key where …

 demand is volatile (driven by promotions, innovation, shortening product life cycles, competition…) and
 there are rigidities in supply (long lead-times, large batches, capacity constraints, …) which result in challenges in
service, inventory, speed to market, and ultimately cost.

FLOW is based on these core principles:

 Dampening the effect of variation on the supply chain by decoupling lead-times. This is done through buffers.
Identifying where to buffer, and how much to buffer to ensure a) the shortest possible lead-time and b) the most optimum
amount of inventory to deal with variation at minimum cost across the chain.
 Driving replenishment on actual demand, not forecasts. The best use of our assets is to make what is needed (i.e. what
sells). Increasing volatility in demand makes accurate forecasting challenging, even where we have good customer
collaboration.
 Achieving visibility and prioritization by exposing downstream inventory and demand status to upstream sources to
facilitate demand-driven prioritization of supply.

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SAP Solution Overview
SAP S/4HANA Demand-Driven Replenishment
The End-to-End Process Flow

Analytics Buffer Positioning Individualized

(including basis for feedback) (strategic)
DD with buffer
Se
Average Daily Usage tu
p Ad hoc production

5 1
Lead time
Classification

4
Replenishment 2
Execution Buffer Sizing
(operational)
Op
er
at
3
e
Stock/ Stock+ Propos e d
Material Stock Le ve l Orde re d orde r qty
FIO-NAV-0815 3 13 30 Average daily usage
FIO-PST-1501 6 16 15
Lead time
FIO-MST-3006
FIO-PRD-0807
55
22
135
56
0
0
Replenishment
…
FIO-NAV-0101
FIO-NAV-0404
23
44
23
44
127
26
Planning
FIO-MST-0821 25 25 0
FIO-PRD-0822 88 88 0

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SAP Demand-Driven Replenishment
Solution Overview: Mapping the End-to-End Process to the Fiori Launchpad

Buffer
Analytics
Se
Positioning
tu
p
5 1

4
Replenish 2
ment
Execution Op
3
er
at Buffer
e
Sizing
Replenishment
Planning

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SAP Demand-Driven Replenishment
Solution Overview: Mapping the End-to-End Process to the Fiori Launchpad
DDMRP
*********
Master Data:
-----------------
1. Material Master
2. BOM
3. Routing
4. Prod Version (C223/SE38-CS_BOM_PRODVER_MIGRATION02)
5. Purchasing Master data for Ext Proc

GI and PIR Data : to help ADU calculation

-------------------------------------------------------
5. GR to build stock for Buffer Mtl - MIGO 561 MVT (Eg.)
6. GI for Buffer material past horizon -MIGO 201 MVT (Eg)(ADU calculation)
7. PIR future horizon(Planned independent requirement) (ADU calculation)

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SAP Demand-Driven Replenishment
Solution Overview: Mapping the End-to-End Process to the Fiori Launchpad

DDMRP steps
-------------------
1. Product Classification (ABC,XYZ,PQR) ABC (Eg.70,20,10), Variability XYZ (Eg.0.1,0.2) ,
BOM Usage PQR (Eg.3,2)
Typically, products with the highest goods issue value (type A), longest lead times (type G), highest BOM
usage (type P) and highest variability (type Z) are relevant for Demand-Driven Replenishment. It is however a
business decision (Table PPH_DD_PRODUCT)

2. Buffer Positioning (Define D1,Safety Stock-Eg 20 ,Reorder Point - Eg50,Max Stock-Eg.100,Lot size
procedure H1 Replenish to Max stock level- Recommended)

3 Mass Maintenance of Products(Horizon past, Future, ILT calculation method, Classification change)

4. Schedule DLT Classification DD( here the DLT calculation and Lead Time optimization happen)EFG
Eg.M 3,5..TR 4,7..Buy 1,2 and horizon evaluation interval Eg.7 . DLT calculation is only for DD Materials

5. Buffer Proposal Calculation (Buffer Sizing).

6. Manage Buffer Levels(Buffer Sizing)

7. Replenishment Planning and execution

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 SAP Demand-Driven Replenishment
Solution Overview: Mapping the End-to-End Process to the Fiori Launchpad
Position buffers on level of product
plant combination guided by
classification and other considerations Buffer
Analytics
Se
Positioning
tu
Main Process 1 2
Review and adopt the system’s
buffer level proposals
p
Flow, 5 1
Business
Review the current planning
Applications with situation
User Interaction
based on the net flow position

Review the current execution 4

situation Replenish 2
based on the on-hand stock status ment
3 4
Execution Op
3
er
at Buffer
e
Sizing
Replenishment
Planning
Configuration &
Support 1,2 2,5 2 2 2
5
Classify products Review classification, Calculate Influence Buffer Calculate buffer
set DD-relevant decoupled lead time Level Calculation level proposals
to support
product attributes for and LT classification through parameters
identification of for manual (and
lead time calculation based on product
possible decoupling to prepare buffer automated) adoption
etc. attributes
points calculation
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 1

Insights
Buffer Positioning
Objective
Define Decoupling Points, Decoupled Areas of Planning

Individualized
DDR with (strategic) buffer
Ad-hoc Prod.
Decoupling
through strategic buffer positioning

Time-dependent buffer levels

for shock absorption

2 Individual Lead Time

8 Decoupled (Buffer) Lead Time

Example of DDMRP in an MTS environment. Example of DDMRP in an MTO environment.

Buffers used along the whole supply chain, Buffers used up to a certain low level code,
including the finished goods. enabling the shift from MTO to CTO or ATO.

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Prepare Buffer Positioning
Look at certain Product Attributes which might suggest to buffer it

Considerations
 Is the product a candidate for consumption-based planning?  Look at the ABC-XYZ-matrix (value & variability)
 Is the product used in many BOMs?  Evaluate the BOM usage
 How reliable is the source?
 How long is my customer willing to wait?
 Or simply rely on your experience / best practice in the following definition

Classification Details
Lead Time (by Source) Lead Time
+ Proc. Type
(EFG)

Analytics Variability
(XYZ)
Include this classification
Goods Issues + Deviation
Value in your considerations,
+ Price
(ABC) whether to define the
product to be buffered
Usage in BOM’s BOM Usage
(PQR)

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Buffer Positioning: Filter Candidates for Decoupling
Use-Case-specific Considerations (additionally to the classifications)

Bottleneck Protection
Objective: Components which are consumed at
a bottleneck work center should be available
Procedure
 Select by bottleneck work centers
 Derive buffer candidates (component products) via
production version

Outbound Protection
Objective: Ensure to meet response time
expected by the customer
Procedure
 Select sold products by sales organization
 Check the calculated decoupled lead time

Inbound Protection
Objective: Stabilize the material flow within my
company through protection against supply
variability
Procedure
 Select by purchase organization & supplier

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Buffer Positioning
Worklist: Review the candidates, identify and define decoupling points

1 2

On demand, re-calculate
1 certain key attributes

Take the action to buffer by

2
assigning MRP Type = D1
(demand-driven)

Or drill down into more details …

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Buffer Positioning
Analyze a potential Decoupling Point in Detail (Table Format)

Review key attributes like

4 1
classification, DLT, Buffer Profile

1
Review the Upstream incl. BOM Usage,
2
achievable Lead Time Compression …

Review the Downstream –

3
 which following buffers could be
reduced if WT_SKELETON_ALM was
buffered which finished goods would
3 benefit

4 Take the action to (un-)buffer here

Or drill down into further details of
the supply chain / multi level BOM…

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Buffer Positioning
Analyze a potential Decoupling Point in Detail (Network Graph)

3
1 Toggle between tree table and network graphics

Graphic supports Buffer Analysis by …

2
 setting scope (longest path, full flow, BOM)
1  highlight by selected attributes
2  (partial) collapse and expand of network
 navigation into next product(s)

3 Take the action to (un-)buffer

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 2
Insights
Buffer Sizing
Objective
Determine time-dependent Buffer Levels (based on: Lead Time, Average Daily Usage, Classification)

2
Individualized
ATO Production

2
6 Individualized
9 2 DDR with (strategic) buffer
Ad-hoc Prod.
8 Decoupling
8 4
4 3 8 through strategic buffer positioning

Demand-Driven
Replenishment
3 Time-dependent buffer levels
3 4
for shock absorption

3 7
6
6 2 Individual Lead Time
4 3
8 Decoupled (Buffer) Lead Time

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Buffer Sizing
Calculation Rules

SAP Material Master Demand Driven Institute

BLUE
Maximum Stock
[MARC-MABST]
TOG – Top of Green 4.
Yellow x Lead Time Factor (100-20%)
GREEN = MAX of { Min Order Quantity }
Average Daily Usage x Cycle Time
Reorder Point TOY – Top of Yellow
[MARC-MINBE]

= Average Daily Usage x Decoupled Lead Time

YELLOW
1.
Safety Stock TOR – Top of Red
[MARC-EISBE]
RED
= Red Base x Variability Factor (20-100%)
SAFETY 3.
RED
BASE
= Yellow x Lead Time Factor (100-20%) 2.

Lead Time Factor determined based on EFG Lead Time Classification

Variability Factor determined based on XYZ Variability Classification
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Example

Zone sizes values

Green 20
Yellow 50
Red safety 12
Red base 20

Zone limits values

TOG 102
TOY 82
TOR 32

parameters values
ADU 10
DLT 5
lead time factor 0.4
variability factor 0.6
MOQ 0

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Buffer Level Update
Proposal Run

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Buffer Level Update
“Forward Looking ADU”, (also) based on Planned Independent Requirements

Define ADU evaluation horizon

in the “Mass Maintenance of Products (DD)”
1

Averaging Time Window

Review the ADU calculation result
in “Buffer Level Management”
2

Goods Issues Planned Independent Requirements

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Buffer Sizing
Worklist: Review and Adopt Buffer Level Proposals

Take action
here …

… or navigate
into details and
decide there

Buffer ID Proposed Change Drivers for Change

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Buffer Sizing
Object Page: Review the resulting Time-Dependent Buffer Levels

Buffer Level Details

and the main Decision whether
input parameters to adopt

More Views
available

Possibility to maintain
Zone Adjustment Factors
(in “Edit” mode)

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Buffer Sizing
Usage of Predictive MRP (PMRP), which supports Time-dependent Buffer Levels

Average Daily Usage

The forecast for the buffered component
WT_CUSHIONSET_DBR was derived from
the finished goods’ forecast.
The Average Daily Usage ( ) is a
moving average based on historic goods
issues and forecast.

Buffer Levels
As the buffer levels depend linearly on the
Average daily usage, they rise and decline in
the same pattern.

Note that the time-dependent “Demand Adjustment Factor (DAF)” is still available as an alternative to model seasonality, promotion etc.
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 Buffer Sizing supported by PMRP
Integrated Process Flow

DP PMRP DDMRP
For finished goods (FGs) …

Maintain PIR On a regular basis in a job …

in S4
On Event (e.g. promotion) …

Alternative: Pick up
Define PMRP PMRP PMRP Release PIR Update Buffer Level Adopt
Upload PIR component (& FG)
Context Simulation for DDMRP for DD components (Re-)Determination (or discard)
from Excel PIRs

Alternative:
Receive PIR
from IBP

Creation of PIRs for DD

components when releasing
a pMRP simulation

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Buffer Sizing
Zone Adjustment Factors

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Insights 3
Replenishment Planning
Objective
Demand-Driven Planning, embedded in the context of the MRP Run

2
Individualized P
MR
ATO Production

2
6 Individualized
9 2 DDR with (strategic) buffer
Ad-hoc Prod.
P
l ”) MR 8 Decoupling
8 4 Lo c a 3 P
4 (“ 8 MR through strategic buffer positioning
c al ” )
Demand-Driven ( “ Lo
Replenishment RP
)M
3 ( “ Lo c al ” 4
3 Time-dependent buffer levels
for shock absorption

3 7
6 RP
)M
MR
P c al ” 2 Individual Lead Time
6
l ”) “ Lo
oc a 4( 3
(“L 8 Decoupled (Buffer) Lead Time

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Replenishment Planning
MRP Run, considering Net Flow Position, Spike Handling

On-Hand Stock
Replenishment Proposal  Quantity being physically in stock

Open Supply
BLUE
 Total of all outstanding replenishment orders
Max
Stock 10.000
Qualified Demand
GREEN
Proposal (3.128)  Firm Demands past-due or due today +
Reorder 7.500  Qualified spikes
Point
Net Flow Position (6.872)
Open Supply (3.358) Firm Demand Qualified Demand,
YELLOW Quantity
Qualified Demand (540) in particular Spikes
On-Hand Stock (4.054) Max Stock
Safety
3.200 Spike Threshold = (e.g.) 50% x Safety Stock
Stock Reorder Point

RED Safety Stock

Spike

0
time
(Past) Due SO’s Today Spike Horizon

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Net Flow Position
 What do I have?

 What is coming to me?

 What demand do I fulfill immediately?

 What future demand is relevant?

Net Flow Position = On-hand + On-Order – Qualified Sales Order Demand

6412 + 2468 – (312 +807) = 7761

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Order Spike Threshold & Order Spike Horizon

 Setting of the Spike Threshold involves determining a level of

daily demand that jeopardizes the integrity of the buffer.

 Option 1  50 % of the Red zone

 Option 2  Top of Red Safety

 Option 3  Average Daily Usage

 Guiding principle  The Spike Threshold should be less than the

total red zone value

 Order Spike Horizon = DLT of the Part

 Spike Horizon Multiplier

 Spike Horizon Constant

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DDMRP – Supply Order Generation & Planning Priority

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 DDMRP – Supply Order Generation & Planning Priority

Top of Green = 157 Top of Green = 157

Top of Yellow = 122 Top of Yellow = 122
NFP = 97 [65 + 72 – (10 + 30)] NFP = 139 [55 + 132 – (18 + 30)]
Order = 60 Order = Nil

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DDMRP – Supply Order Generation & Planning Priority

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DDMRP – Supply Order Generation & Planning Priority

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MRP Planning
Demand-Driven Planning, fully embedded in the context of the MRP Run

Buffered products are defined through the

assigned MRP type = D1 (MRP Procedure = C)

They participate in the MRP Run (both classic

MRP and MRP Live)

Their net requirement logic is demand-driven,

defined through this MRP Type / MRP Procedure

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 Insight to Action
Worklist: Monitor the Planning Priority and Net Flow Position, Option to Create Supply

Dynamically determined number of buffers

1 with planning status red or yellow

Navigate into the planning worklist

2
Buffers to be replenished,
sorted by Planning Priority:
Net Flow Position / Max Stock
… or navigate
into object page
4 for detailed
planning by
clicking on a line

3
Quick action to create
supply here …

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 4
Insights
Replenishment Execution
Objective
Ensure Flow, Execute based on the Buffers’ Demand-Driven Priorities

Individualized
ATO Production

Individualized

W ! W ! DDR with (strategic) buffer

FLO FLO
ure re Ad-hoc Prod.
Ens E nsu Decoupling
through strategic buffer positioning

Demand-Driven !
W
Replenishment FLO
r e
E nsu Time-dependent buffer levels
for shock absorption

W !
FLO
ns ure
E

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Run Chart

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Replenishment Execution
Thresholds, Warnings, Alerts

Usually the On-Hand Stock oscillates between

On-Hand Stock (and Net Flow Position)
 <Safety Stock> and
 <Safety Stock + Green Zone>
Max
Stock 10.000

GREEN Net Flow Position

If it falls below the safety stock level, the system raises a
Reorder 7.500 WARNING that the actual material flow is endangered.
Point
If it falls below 50% of the safety stock, the system raises an
YELLOW ALERT that the actual material flow is severely endangered.
On-Hand Stock Okay

Safety
3.200
Stock
On-Hand Stock WARNING Note: The Net Flow Position might still look OK. But inbound
RED
50% supply is of little or no help if there is no actual stock at hand
On-Hand Stock ALERT in the shop floor.
0

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Execution – Alerts

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 Insight to Action
Worklist: Monitor the On-Hand Buffer Status …

Dynamically determined number of buffers with

1 execution status red or yellow

Navigate into the execution worklist

2 Buffers with critical fill level, i.e.

physical stock below a certain
threshold, sorted by
On-Hand Buffer Status =
Physical Stock / Safety Stock

… or navigate
into object page
by clicking on a
line
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Insight to (Quick) Action
Expedite Dialogue Evolution

In the context of the Replenishment Worklist screen, reuse the new popovers and streamline the contact info

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Demand-Driven Execution
Object Page, also supporting Execution

On-Hand Stock Status

… PLUS …
all the features
already highlight in
section “DD Planning”

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DDR Analytics Historical Buffer Performance

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Thank you.