Table of Contents

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PART I Materials Planning Basics
15
1 Materials Planning Basics
17
1.1 The Process of Materials Planning
18
1.2 The Materials Controller
21
1.3 Strategic and Tactical Materials Planning
23
1.3.1 The Role of a Strategic Materials Planner
24
1.3.2 The Tasks of a Tactical Materials Planner
26
1.4 Portfolio Segmentation for Decision Making
29
1.4.1 Portfolio Management Example
31
1.4.2 Strategies in an Enterprise
32
1.4.3 Segmentation for Replenishment Strategies
36
1.5 Lean and Agile Supply Chains
37
1.5.1 Pushing, Pulling, or Both?
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1.5.2 A Lean Supply Chain Flows
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1.5.3 An Agile Supply Chain Flows, Too
43
1.6 Summary
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2 The Past and the Future of Materials Planning
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2.1 Past Problems with Materials Requirements Planning
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2.2 Today’s Problems with Material Requirements Planning
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2.3 A Word on Customizing
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2.4 The Old Paradigm and the New
55
2.4.1 Using SAP ERP as a Control Mechanism
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2.4.2 Using SAP APO as a Planning Instrument
59
2.4.3 Combining SAP ERP with SAP APO Successfully and Efficiently
60
2.5 Future Potential in Operations, Supply Chain, and Materials Management
60
2.5.1 The Science of Operations Management
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2.6 Planning the Future with an Unconstrained Supply Plan
64
2.6.1 Shaping a Better Future Using the Right Side of Our Brain a Bit More Often
66
2.7 Summary
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3 Building Blocks of Materials Planning
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3.1 Modeling
74
3.1.1 Demand and Supply Profiles
75
3.1.2 Gate Control
79
3.1.3 Strategies to Connect Sales with Production
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3.2 Strategic and Tactical Materials Planning
90
3.2.1 Organizational Considerations
91
3.2.2 Designing Standard Processes for Strategic and Tactical Materials Planning
92
3.3 Scientific Theories and Global Integration
94
3.3.1 Systems Thinking
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3.3.2 Factory Physics and Supply Chain Science
97
3.3.3 SAP Value Stream Mapping and Lean Dynamics
98
3.4 Summary
99
PART II Materials Planning in SAP ERP
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4 Principles of Effective Materials Planning
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4.1 Supply Chain Strategy and Performance Boundaries
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4.1.1 Establishing a Solid Framework of Reference
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4.1.2 Leadership Roles
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4.1.3 Set Goals and Measure Results
107
4.1.4 Materials Portfolio Segmentation
110
4.1.5 Performance Boundaries Examples
112
4.2 Developing User Guidelines and a Policy Playbook
115
4.3 Setting Control Limits
117
4.4 The Competent Materials Controller
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4.4.1 Overall Setting of Strategy and Periodic Fine-Tuning of Policy
121
4.4.2 Tools for Decision Making
121
4.4.3 The SAP Add-On Tools
123
4.5 Summary
124
5 Prioritized Portfolio Management
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5.1 Portfolio Basics in SAP
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5.1.1 ABC Analysis
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5.1.2 Groupings and Priorities
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5.2 Responsibilities and Accountability
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5.2.1 Outdated Elements
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5.2.2 Housecleaning Materials Portfolios
134
5.3 Using Buckets
137
5.4 Monitoring Your Portfolio
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5.4.1 Transaction MD07 Setup
139
5.4.2 Portfolio Management with the MRP Monitor
142
5.5 Summary
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6 Automated and Periodic Policy Setting
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6.1 Employing Strategies and Policies in an Enterprise
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6.2 Segmenting a Materials Portfolio
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6.2.1 Performing an ABC Analysis
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6.2.2 Determining a Coefficient of Variation for the XYZ Analysis
158
6.2.3 Combining ABC with XYZ
159
6.2.4 Adding an EFG Classification for Long and Short Lead Times
159
6.2.5 UVW Classification for Purchase Price Segmentation
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6.2.6 LMN Classification for Volume or Size
160
6.2.7 Lifecycle Analysis
160
6.2.8 Putting It All Together for Policy Setting
161
6.3 Replenishment Policies
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6.3.1 MRP Types
162
6.3.2 Lot-Sizing Procedures
191
6.3.3 Safety Stock Strategies
199
6.3.4 Developing a Playbook for Replenishment Policies
206
6.4 Planning Policies
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6.4.1 Forecast and Order-Based Fulfillment Practices
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6.4.2 Strategy Groups and Strategy
210
6.4.3 Availability Check and Transfer of Demand
231
6.4.4 Consumption Procedures
235
6.4.5 Developing a Playbook for Planning Policies
237
6.5 Setting Policy
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6.6 Using the SAP Add-On Tools for Segmentation and Policy Setting
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6.6.1 MRP Monitor
245
6.6.2 Safety Stock and Reorder Point Simulator
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6.6.3 Lot Size Simulator
249
6.7 Summary
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7 Intelligent Exception Monitoring
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7.1 Exception Monitoring in SAP ERP
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7.1.1 Exception Groups and Exception Messages
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7.1.2 Prioritization of Exception Groups and Exception Messages
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7.1.3 Fixing the Root Cause Instead of Expediting the Problem
273
7.2 Building a Monitoring System for Exceptional Situations
274
7.2.1 How to Initiate the MRP Run
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7.2.2 Exception Cards
280
7.2.3 Monitoring Exception Messages
282
7.2.4 Putting It All Together
291
7.3 Using the SAP Add-On Tool MRP Exception Monitor
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7.4 Summary
302
8 Sustainable Inventory Optimization
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8.1 Performing Inventory Analysis
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8.1.1 SAP ERP’s Logistics Information System
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8.1.2 Analyzing and Monitoring Stocks with Document Evaluations
337
8.2 Employing Inventory Strategies with Meaningful Key Performance Indicators
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8.2.1 Strategic and Tactical Inventory Key Performance Indicators
352
8.2.2 Parameter Controlling with Dual Classification
356
8.3 Making Inventory Optimization Sustainable
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8.3.1 Fine-Tuning the Policy
360
8.3.2 Performing Daily Exception Monitoring for Continuous Attainment of Good Results
361
8.3.3 Keeping the Basic Data and Supply and Demand Elements Clean
361
8.3.4 Getting Management to Sign Off on Meaningful Supply Chain Strategies
362
8.3.5 Performing Capacity Sequencing, Leveling, and Scheduling
362
8.3.6 Respecting the Planning Horizons
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8.4 SAP Add-On Tools for Inventory Optimization
365
8.4.1 Analyzing Stocks with the Inventory Cockpit
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8.4.2 Simulating Lot-Size Procedures, Safety Stock Levels, and Reorder Points
369
8.4.3 Simulating the Effects of a Policy
372
8.5 Summary
372
PART III Evaluating, Measuring, and Improving Materials Planning
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9 Key Performance and Supply Chain Indicators
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9.1 The Balanced Scorecard
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9.2 The Supply Chain Performance Index Framework
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9.2.1 The Supply Chain Performance Index Spider Graph
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9.2.2 Inventory Performance
386
9.2.3 Service
388
9.2.4 Automation/Integration
390
9.2.5 Flexibility/Agility/Responsiveness
393
9.2.6 Lean Six Sigma
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9.2.7 Cost/Profitability
395
9.2.8 Visibility/Transparency/Communication
396
9.2.9 Information Maturity
398
9.2.10 Competence
398
9.2.11 Organizational Support
399
9.3 Putting It All Together
399
9.4 SAP Add-On Tools for Performance Measurement
402
9.4.1 Service Level Monitor
402
9.4.2 Supply Chain Performance Cockpit
404
9.5 Summary
406
10 Traditional Inefficiencies
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10.1 Dealing with an Unmanageable Amount of Exception Messages
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10.1.1 Using Exception Messages
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10.1.2 Using the Right Transaction Codes
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10.1.3 Lack of Good Policy
413
10.2 An Isolated Sales Department
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10.2.1 Possible Sales Interface Mental Model 1: Not Fixing the Date in the Delivery Proposal of the Sales Availability Check
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10.2.2 Possible Sales Interface Mental Model 2: Forecast Reduction
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10.2.3 Possible Sales Interface Mental Model 3: The Make-to-Stock/Make-to-Order Decision
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10.2.4 Possible Sales Order Interface Mental Model 4: Checking With or Without Replenishment Lead Time
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10.3 A Buyer without a Cause
421
10.4 Fiddling with Policy
421
10.5 Capacity Planning
422
10.6 Using Sales Orders for Intercompany Stock Transfers
423
10.7 Chasing Demand
426
10.8 Hiding the Buffer
427
10.9 The Reorder Point Dilemma When Sourcing from Another Plant
428
10.10 The Hang-from-the-Ceiling Strategy
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10.11 Summary
430
11 Improvement and Optimization Programs
433
11.1 Benchmarking the Current State
434
11.1.1 Inventory Performance
435
11.1.2 Service
438
11.1.3 Automation and Integration
438
11.1.4 Flexibility and Responsiveness
439
11.1.5 Transparency, Visibility, Communication
440
11.1.6 Measuring Information Maturity
442
11.1.7 Competence
442
11.1.8 Organizational Support
443
11.2 Developing Improvement Initiatives
443
11.3 Measuring Progress
446
11.4 Summary
449
PART IV Modeling Materials Planning
451
12 Scientific Modeling of the SAP Supply Chain
453
12.1 Operations Management and Science
455
12.1.1 Science and Technology in Operations Management
458
12.2 Systems Thinking
460
12.2.1 Causal Loop Diagrams
462
12.2.2 Stock and Flow Diagrams
464
12.2.3 Behavior-over-Time Diagrams
466
12.2.4 Mental Models in Materials Planning and How to Break Them
468
12.3 Factory Physics
469
12.3.1 Operations Science within a Framework of Demand and Transformation
471
12.3.2 Performance Boundaries
472
12.3.3 Management Control
475
12.3.4 Some Basic Factory Physics Principles
477
12.4 SAP Value Stream Mapping
477
12.5 Summary
484
13 Examples from Industry
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13.1 Continuous and Sustainable Optimization at Tennant Company
487
13.2 Plant Transformation at ASEA Brown Boveri
496
13.3 A Model for the Process Industry from Bellisio Foods
501
13.4 Lean Materials Planning with SAP at Kraft Foods
504
13.5 Summary
505
14 Conclusion and Outlook
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Appendices
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A Bibliography
509
B The Author
511
Index
513