Standard S&OP uses information structure S076 which is delivered with level-by-level planning and some standard characteristics and macros. It is also based on a product group hierarchy which you can set up to your liking, however, you can only use product groups in the hierarchy and material master records with their plant code on the lowest level of the hierarchy. Should you desire anything different from these defaults, you should opt for Flexible Planning where, as the name implies, there are many flexible options.
The product group hierarchy is maintained in MC84, MC85 and MC86 and contains all products which need to be forecasted. You can maintain a product group hierarchy and the planning figures are aggregated and disaggregated throughout the hierarchy using proportional percentage values. These proportional values may be set manually or automatically using past historical data.
Typically a product group represents all MTS and FTO members produced on one given production line. This will eventually ensure a smoothing of the production program for this line. Note that there will be MTO products as well to be scheduled on the line. Therefore, and for a number of other reasons, the line should never be planned to 100% of its capacity.
After the hierarchy is setup, the plan can be put together. Planning with product groups happens in MC82 for the active version.
In the planning table for information structure S076, you can generate a sales forecast based on historical consumption, any characteristic from the SIS, a budget from COPA or maintain your own figures manually. Another option is to import that sales figure from a spreadsheet or other external system.
Next you should maintain ‘Target Days of Supply’. This is the number of days of inventory coverage your plan wants to have in inventory as a safety over and above your planned sales. Since your sales will never be the same as what your forecasted them to be, this inventory coverage will cover the variability in your sales process. Should you maintain 5 days of supply for the end of every period, then you can cover additional sales for an extra 5 days. You may also just simply set a target stock level to be in safety inventory at the end of the period.
Once you run the macro to create the production program based on Target Day’s of Supply, the system calculates what needs to be produced in order to cover the projected sales and still have some safety in inventory to counter any variability.
Now you can see your projected production program – still within the planning part; we can’t execute on this yet - that needs to be executed to make sure we can produce all product group MTS member’s forecast and carry some safety stock. This production program should now be checked against available capacity on the line. As mentioned above, it makes sense to set up product groups which contain all MTS members that are run on one particular production line. This gives us the ability to now check on that line’s capability to execute the production requests and meet the projected sales.
As you can see in figure ??, there is a display for the capacity balance in every period at the bottom half of the screen. The available capacity (in this example, hours) are taken from a statistical work center which was maintained for this production line and the capacity load comes from the orders that were created using a rough-cut planning profile (acts like a routing) and the figures in the line ‘Production’. Using these two values, the utilization is calculated and displayed for every period in question. Since the production schedulers maintained their future available capacity in the statistical work center, the planner can now see the feasibility of her plan, given the planned available capacity. Here is where sales planning must come to a consensus with the production planners.
Should there be over utilization, one can discuss moving production quantities into earlier periods with under capacity or the possible addition of capacity (more workers or another line) to meet growing sales. In case of under capacity, you might consider using the line for partial production of products from another product group.
Note that one should never plan for 100% utilization. Variability in form of a difference between forecast and actual sales or a line being down and even preventive maintenance can be buffered by open capacity. Also consider that not all products that are manufactured at this line are included in the product group. There might be some MTO items which are naturally not planned with a forecast. These MTOs should be planned by reserving some capacity, so that any sales order dropping in for any MTO product can be included in the weekly schedule. More about that when we discuss ‘Product Wheel’ scheduling.
After the plan is smoothed in its first iteration, we need to hand it over to operational scheduling. This is done via ‘Transfer of Demand’ where further smoothing happens and actual orders are generated by MRP using lot sizing procedures, lead times and detailed or finite available capacity. During the transfer of demand, the strategy group[1] plays an important role.
When demand is transferred, through a forecast or a sales order, the strategy which is set in the material master’s MRP3 screen, determines the requirements type. And the requirements type controls the actions executed in operational planning and execution. As an example it may call for consumption of a forecast when a sales order is entered. Or it may generate a customer specific section in the stock / requirements list, so that product inventory can be managed for each customer separately. Another strategy, 50 and 52, governs that any planned orders generated by MRP to fulfill a forecast requirement, is of a statistical nature and may only be executed (turned into a committed order) when a sales order comes in[2].
In either case, after demand is transferred into operational planning, the MRP run determines net requirements, explodes the Bill of Material, places secondary requirements and generates all necessary supply elements (order proposals) using lot sizing rules and lead times from the material master. Sales &Operations Planning has ended. The plan is actuated and material planners and production schedulers take over.
All this happens on a periodic basis, meaning that there is agreement on what period the S&OP planner looks at. Most likely there is a short term plan, a middle term and a long term plan. The short term plan is transferred to MRP and the S&OP planner continues working with the long and middle term plans which, at some point in time, will turn into the short term plan and eventually become operational.
[1] I call it the strategy group because that is what SAP labels it on the MRP3 screen. And what is maintained there is a actually a group of strategies. During demand transfer the system picks the main strategy from the strategy group. Therefore what actually is being used is the strategy.
[2] The statistical order transfers secondary demand down to the raw material so that the procurement of such can be executed ahead of time
