KFs definition in Inventory Planning

[Former Member]

Hi,

Need help in understanding what is the flow of input/output KFs between Inventory and Demand planning and between Inventory and Supply Planning.

Particularly want to understand if the consensus demand KF generated in demand planning mapped as the IO forecast KF which is the input in the inventory planning. Also the output KFs such as recommended safety stock, target inventory position etc. go as the inputs to the supply planning?

Can someone plz suggest where to find the definitions of the inventory KFs?

Regards,

Shwetank

[former_member185660 · Accepted solution]

Hi Shwetank,

For IBP for inventory input and output key figures, please refer to the notes below.

Input Key Figures:

http://help.sap.com/saphelp_ibp40fp01/helpdata/en/c0/046454cdeee530e10000000a44538d/frameset.htm

Output Key Figures:

Output Key Figures for Inventory - SAP Integrated Business Planning - SAP Library

When working in a single planning area with demand and supply, inventory takes the consensus demand KF and convert it to the IOFORECAST KF as an input to the optimization.

As an output, IBP for supply can take the inventory KFs RECOMMENDEDSAFETYSTOCK and TARGETINVENTORYPOSITION as inputs as target inventory values, not projected, because supply generates its own projected inventory values that are more related to the replenishment supply cycle.

Let me know of any additional questions.

Regards,

Alexis Lozada

Senior Product Specialist

[Former Member · Accepted solution]

Hi Alexis,

Thanks for your response. It enhanced our understanding. Currently I am working on inventory planning.

I made an advance copy of SAP3 planning area into our planning area. Then uploaded the time periods data, master data, key figures and then I ran the inventory optimizer. It calculated the propagated demand, recommended safety stock, target inventory position.

But dont understand for the propagated demand of 24000, it is generating safety stock of 40577 and target inventory position of 88577 . That looks unrealistic. Could you plz help us in knowing if the calculations are correct or not.

Also I am not getting the dependent demand figures like Dependent Demand Mean, Dependent Demand Mean (Component), Dependent Customer Demand Mean etc. We have already defined the location, production ratios etc. Could you plz help in this.

Regards,

Shwetank

[former_member185660 · Accepted solution]

Hi Shwetank,

I apologize for the delayed response.  I was out of the office enjoying the U.S. Thanksgiving Holidays.

The safety stock and target inventory position results are not unrealistic.  Recall that demand is one of several variables impacting our safety stock optimization recommendations.  Forecast error estimated as CV, lot size, service level, replenishment frequency, lead time variability also contribute to our optimization results.  More specifically, the 40,577 safety stock quantity is equivalent to 11.8 days of supply while the target inventory position is 25.8 days; your lead time of the model looks to be averaging a week and a half.

As for the dependent demand mean not showing, I would have to look into your model into more detail.  This is the propagated demand on a transportation lane, so I am not sure if you already defined that in your model.  If so, I would recommend to re-load the data and re-run the optimization.

Let me know of further questions.

Regards,

Alexis Lozada

[Former Member · Accepted solution]

Hi Alexis,

No problem .Hope you enjoyed well. Thanks a lot for your inputs.

You were right, there was something wrong in the data model. We changed that and now all the KFs data is getting populated including the dependent demand data.

As for the 1st point, we have taken the lead time as 1, lead time variability as 0.2, CV in IO forecast 0.5, Min. Lot Size - 100, PBR - 1, Incremental Lot size - 50 etc.

There are some follow-up questions after the data has been populated:

1. Data is coming on running single stage not multi stage optimization - Is it due to model issues or something else. I read in your article that it will run single stage optimization if the data is incomplete on some nodes.

2. Our IO Forecast is a constant value across the planning horizon but the optimizer is calculating high value of recommended safety stock, target inventory position and dependent demands in initial periods then low values in the subsequent months

3. How to make sense of the results as in we are not aware of the proportional change in output KFs on changing input KFs

Regards,

Shwetank

[former_member185660 · Accepted solution]

Hi Shwetank,

1.- You can generate safety stock inventory data by running single-stage optimization.  Multi-stage optimization should be able to run.  What IBP version are you using?

2.-  and 3.- Can we walk through inputs and results?  It's hard to explain without seeing the data.

Regards,

Alexis

[Former Member · Accepted solution]

Hi Alexis,

I am using the IBP 5.0 version. I am attaching the images for the inputs and outputs for your reference.

We have taken 4 customer groups defined - Retailer, Ecommerce, Strategic Customer, Distributor and have defined the IO Forecast and IO forecast CV as the inputs along with the Target Service Level. Customer Demand is for the finished product P1000  fulfilled by the DC which is then supplied from 2 plants MFG and CMFG in equal % i.e both supplies 50%.

At both plants, BOM structure is the same

P1000 is the FG

PT100 and PT200 are the WIP

PT11, PT22, PT33, PT44 are the RM which are supplied by the supplier SUPPLIER101

2 units of PT100 and 1 unit of PT200 will give 1 unit of P1000

2 units of PT11 and 1 unit of PT22 will give 1 unit of PT100

3 units of PT33 and 1 unit of PT44 will give 1 unit of PT200

Attached is the input data below in the image.

Now after running the single stage optimization run, these are the output results: (There are total 116 lines in excel which I have broken down into 3 images).

Thanks in advance.

Regards,

Shwetank

[former_member185660 · Accepted solution]

Hi Shwetank,

These numbers look reasonable.  The safety recommendation quantities decline for the upstream nodes only because of declining demand.

Let me validate why demand declines.

Alexis

[former_member185660 · Accepted solution]

Shwetank,

Another additional question:  What is the Planning Horizon on your model?  The model tends to decrease the values after the planning horizon timeline defined.

Alexis

[Former Member · Accepted solution]

Hi Alexis,

Thanks for your inputs.

The planning horizon in our model is taken to be:

Time period is taken to be weeks

and the planning horizon is -12 to 12 rolling plan

Attached is the screenshot of the planning horizon in planning area.

Regards,

Shwetank

[former_member185660 · Accepted solution]

Hi Shwetank,

I have a couple of suggestions.

Running the multi-stage inventory optimization batch mode is a pre-requisite to running single-stage optimization batch mode.  Please try doing so and let me know the results.

If results are the same, please open a ticket.

Regards,

Alexis Lozada

[Former Member · Accepted solution]

Hi Alexis,

As per your advice, we ran the multi-stage inventory optimization algorithm then got the results attached in the screenshot below:

In this case, we changed the IO forecast from 8000 to 6000 (for all product-cust-loc combinations) and reduced IO forecast error to 0.1 from 0.5 earlier to see the impact on safety stock and target inventory positions. I think multi -stage is working now.

After that we ran the single stage inventory optimization, then the values got changed for the safety stock and target inventory. Attached is the screenshot:

There are some follow-up questions on this:

1. Why is it needed to run in this sequence  -  first multi-stage inventory opt. and then single-stage inventory opt.

2. I read about the single stage algorithm on sap help as "Ideal for running simulations where you want to determine the impact on recommended safety stock for local changes to input key figures after multi-stage inventory optimization has been run". What is meant by local changes? how do we know that only a particular product-location combinated will be impacted by single stage run

3. Do you have any sample wireframe from which you can please elaborate the inventory output KFs and how are those impacted

4. What is the propagated demand? Can I say is it Net Demand at a product-location?

Thanks in advance.

Regards,

Shwetank

[former_member185660 · Accepted solution]

Hi Shwetank,

Please see my responses below.

1. Why is it needed to run in this sequence  -  first multi-stage inventory opt. and then single-stage inventory opt.

IBP for inventory needs this sequence so the application can produce a view of the total supply chain network and its parts and develop baseline values for each product-location combination..

2. I read about the single stage algorithm on sap help as "Ideal for running simulations where you want to determine the impact on recommended safety stock for local changes to input key figures after multi-stage inventory optimization has been run". What is meant by local changes? how do we know that only a particular product-location combinated will be impacted by single stage run

Local changes include changes in the input KFs such as demand, demand variability, lead time, lead time error, etc., for selected product-locations within the supply chain network.

You can determine such because your inputting such changes.

3. Do you have any sample wireframe from which you can please elaborate the inventory output KFs and how are those impacted

Not sure what you mean by "sample wireframe", but if you are interested in how drivers impact optimization of safety stock inventory, please send me your e-mail so I can share key documentation.

4. What is the propagated demand? Can I say is it Net Demand at a product-location?

In general and conceptually, propagated demand for each product-location combination is equal to the forecast input sent back to upstream nodes of the supply chain and broken into bill of materials when needed.  The objective is for each product-location to have a demand signal and its variability.

[Former Member · Accepted solution]

Hi Alexis,

Thanks for your reply. It was very helpful. My email id is shwetank.k@hcl.com. Could you plz share that documentation on how drivers impact optimization of safety stock inventory as mentioned by you.

Thanks in advance.

Regards,

Shwetank

[Former Member · Accepted solution]

Hi Alexis,

We made an advance copy of the SAP3 planning area and ran the multi-stage optimization and then the expected lost demand algorithm. Attached is the screenshot for the values generated for the expected lost demand and the non-stock out probability. Just wanted to know what is the concept behind the calculation of the Avg. Expedites (Expected lost demand)? Actually for the IO forecast and independent demand mean of 127 we are getting the lost demand of 1016. As per our understanding, Lost demand for that period can only be less than or equal to IO forecast. Is that our understanding correct? Target service level and non-stockout probability is 0.95 (rounded off to 1 in the attached snashot).

Lead time to convert RM into final FG (product ID 100001) is 8 weeks. IO forecast error CV is 0.1

Plz reply on this.

Thanks,

Shwetank

[Former Member · Accepted solution]

Hi Alexis - Would you be able to share the Key documentation with me as well? My mail ID is mbhagav@us.ibm.com.

We are also trying to do some modeling in IBP for Inventory and it will help me as well.

Thanks in Advance.

Thanks and regards,

Murali Bhagavathula

[Former Member · Accepted solution]

Hi Alexis,

Thank you for sharing this useful information.

Could you please share the key documentation with me?

My email id isvlase.radu@westernacher.com.

Thanks and regards,

Vlase Radu

[former_member185660 · Accepted solution]

The Expected Lost Demand, described as Average Expedite, relates to the quantities not covered by the target service level of 95%, in this case the 5%.  That is, the opportunity cost of not having 100% target service level versus 95%.

Alexis

[former_member185660 · Accepted solution]

Hi,

I have shared the document via e-mail.

Regards,

Alexis Lozada

[former_member185660 · Accepted solution]

Hi,

I have shared the document via e-mail.

Regards,

Alexis Lozada

[Former Member · Accepted solution]

Hi Alexis,

Are you still able to share the document?

thhe@implement.dk

Thanks!

[former_member185660 · Accepted solution]

Thomas,

I shared all the information to Shwetank.  What specific information are you looking for?

Regards,

Alexis

[Former Member · Accepted solution]

Hi Alexis,

You shared some "key documentation" by mail to Shwetank. If you could share this, that would be great. If it is similar to these slides, then fair enough.

I am looking for any detailed documentation on the SAP3 sample area in IBP (5) on Inventory Optimization, e.g. descriptions on master data, key figures and attributes.

This is highly appreciated. Thanks.

[Alecsandra]

Hi Shwetank,

Here is my understanding so far on how these modules should easily be integrated:

Supply run is triggered by Consensus Demand which should be the outcome of Demand Review step of S&OP process, reconciliation between statistical and financial driven demand.

Inventory has as input key figure the Inventory Forecast, which can hold a sensed demand (based current realities of a supply chain - like sales orders) or the demand planning qty. Recommended safety stock is one of the output key figures of Inventory modules which goes as input in the Supply run.

These points should be more clarified with the release of the new planning area which will provide E2E visibility...so looking forward to it

Input Key Figures for Inventory - SAP Integrated Business Planning - SAP Library

Regards

Alecsandra

[Former Member]

Thanks a lot Alecsandra for your inputs.

Regards,

Shwetank

[Former Member]

Hi Alecsandra,

Is there any SAP note on IBP inventory planning related to key figures etc.

Thanks,

Shwetank

[Alecsandra]

Hi Shwetank,

Unfortunately, I am not aware of any note.

Regards

Alecsandra