Interchangeability in APO 06/01/2011

Optimizing inventory using Interchangeability in SNP

ISU: Retail Jignesh Gandhi js.gandhi@tcs.com

Summary

This article provides useful insights on how inventory can be optimized across the supply chain using product interchangeability. The following article focuses mainly on supersession and deployment functionality of product interchangeability. The article is also supported by a business case describing how inventory can be optimized by the supply chain.

Product Interchangeability

In Supply Network planning, demand can be transferred from one product to another product using product interchangeability functionality in SAP APO. Product interchangeability is supported in heuristics and optimizer.

SNP supports the following product interchangeability methods:

• Product discontinuation

• Supersession chain

• Form Fit Function Class

Short Description on each of the methods of product interchangeability

• Product Discontinuation: as the name suggests, this method is typically used when a new product is to be introduced and/or an discontinued product needs to be removed from the Inventory. This method can be effectively used to manage product obsolescence.

• Supersession chain: This functionality is an enhancement of product discontinuation. Supersession is used to transfer demand from one product to another till the system finds suitable receipts. If no receipts exist for any product in the supersession chain, system creates receipt elements for the last product in the supersession chain.

• Form Fit Function class: as the name implies, this functionality is used when the products in consideration are identical in form, fit and function. That is, in case of stock out of one product, another product can be used. However as against in supersession, demand is created on the main product if there no suitable receipt elements for the child products.

Product Interchangeability in SNP

SAP offers standard planning book 9ASNP_PS with data view PROD_SUBST. This data view contains 2 key figures:

• Substitution demand (Associated Info object : 9APSUBAB )

• Substitution receipt (Associated Info object : 9APSUBZU ) Else if your own planning area is to be used, these key figures need to be included in the planning area and then subsequently in the data view. The standard SAP provides 2 order categories which are associated with the above key figures.

• EN

• EO In case, standard info objects are not being used, these order categories can be assigned while defining the planning area. Similarly, the same key figures may be added to the Actual Stock macro in cases where copy of standard planning book 9ASNP94 is being Since planning book 9ASNP94 does not offer substitution key figures, these key figures also need to be added in the total demand and total receipts key figures in the data view. In order that heuristics considers substitution elements in the back ground, option “Add products from supersession chain” needs to be selected in the back ground job.

Product interchangeability is not supported by net change planning. Hence, in case, a new substitution rule is maintained, it is advisable that complete heuristics is taken on the products under consideration.

Integration with R/3

Product substitution orders (demands and receipts) are not transferred to SAP R/3.

Product Interchangeability in Deployment

SAP offers standard planning book 9ASNP_PS with data view PROD_SUBST. Based on the APO version, the below Key figures may be present or may not be present in the Planning area. Please refer the SAP note 1132594- Missing key figures in planning areas: 9ASNP02, 9ASNP04 and implement if needed.

• Substitution demand confirmed (Associated Info object : 9AFSUBAB )

• Substitution receipt confirmed (Associated Info object : 9AFSUBZU ) Else if your own planning area is to be used, these key figures need to be included in the planning area and then subsequently in the data view. The standard SAP provides 2 order categories which are associated with the above key figures.

• DN

• DO In case, standard info objects are not being used, these order categories can be assigned while defining the planning area. Similarly, the same key figures may be added to the Actual Stock macro in cases where copy of standard planning book 9ASNP94 is being Since planning book 9ASNP94 does not offer substitution key figures, these key figures also need to be added in the total demand and total receipts key figures in the data view. Incase standard planning book is not used and if the planning book is not a copy of 9ASNP_PS, one should update table /SAPAPO/PBMVWOBJ with the entries for deployment against info object 016 I DEMSUBST 017 I RECSUBST 018 I DEMSUBSTC 019 I RECSUBSTC If this is not done, the deployment won’t work. With our experience, we did face technical errors during the deployment. The same was fixed with the implementation of notes 1359733 and 1493497. Please refer these notes during implementation. In order that Deployment considers substitution elements in the back ground, option “Add products from supersession chain” needs to be selected in the back ground job.

Business Case for implementing Supersession of product interchangeability

Consider an organization where SNP heuristic/ Optimizer is implemented. There may be a situation where we are discontinuing the product from supply chain but we still have stock of that product across the levels of supply chain. One should exhaust the inventory of discontinued product before procuring/ producing new product.

Without interchangeability, heuristic will keep on procuring/ producing new product since the forecast will only be on new Product. Deployment will confirm the receipts of only new product. At the same time we have inventory for discontinued product. In order to exhaust the inventory, one may have to manually manage the forecast for the discontinued product and deploy the same to required location to sell the stuff. Since its handle manually, its quiet possible one may ignore the inventory of discontinued product and this will result in dead stock.

With interchangeability, we build a link between discontinued product and new product with sets of rules (as explained in the next section) to actually allow the system to recognize the stock/ anticipated firm receipts of discontinued product and consider that stock as available to deploy. When heuristic is triggered for either of the product, it will check for the stock of discontinued product. Based on the requirement of new product, heuristic will create substitution order for new product to procure discontinued product. For the balance qty, heuristic will create the requirement order for new product at the next level of supply chain. At the next level of supply chain, again heuristic will check for the stock of discontinued product and if exist, will create substitution order for new product @ 2nd level to procure the discontinued product @ 2nd level. This process will continue till the time we run heuristic @ different levels of supply chain (Provided these locations are relevant for supersession Group). Once the planning is complete, deployment will take care of confirming the available qty for deployment both for discontinued and new products. With this the stocks of discontinued product will be allocated for deployment and will be exhausted from supply chain.

Process Flow

Please find below example to understand how supersession can be used to optimize inventory in the supply chain model.

SKU: 1925969 Loc: 30RUSCOMX (DC)

SKU: 1926568 Loc: 30RUSCOMX (DC)

SKU: 1925969 Loc: PPLA (DC)

SKU: 1926568 Loc: PPLA (DC)

SKU: 1926568 Loc: PPL1 (Plant)

SKU: 1925969 Loc: PPL1 (Plant)

• The above tree diagram shows the flow of Demand across the supply chain. Discontinued SKU in this case is 1925969 and New SKU is 1926568.

• 30RUSCOMX and PPLA are Distribution centres where as PPL1 is manufacturing plant in Supply chain.

• The flow of demand is from 30RUSCOMX to PPLA and PPLA to PPL1. This is guided by the rules set up in Quota Arrangement and Transportation lane.

• Forecast is maintained for the new product 1926568 @ 30RUSCOMX.

Situation with out Product Interchangeability

Without supersession, against the forecast of new material 1926568, heuristics will check for the stock/ anticipated receipts @ 30RUSCOMX. Based on the availability, net requirement is passed on to the next level of supply chain i.e. Location PPLA. This process will continue till the last leg of supply chain. For the give case it will be manufacturing plant PPL1. Based on the requirement generated from PPLA, the heuristics will check for the stock availability @ PPL1 and will generate the plan order for the balance qty. After which the deployment will confirm the requirements @ PPL1 and PPLA.

During the entire process the stock/ anticipated receipts of discontinued material (1925969) will not be considered while planning at individual levels of Supply chain. Due to which, even though we have stock of old material (1925969) heuristic will keep on generating Preqs/ Plan orders for the new material. This may result in to dead stock of old material.

Situation with Product Interchangeability With supersession in place, if planner maintains the supersession rule at 30RUSCOMX, PPLA, PPL1, such that,

Predecessor product: 1925969

Successor Product: 1926568

Against the forecast of new material 1926568 @ 30RUSCOMX, heuristics will first check for the stock/ anticipated receipts of old material 1925969 and will consider that as receipts. For the balance requirement, purchase reqs./ Plan orders are created for the new materials depending on the level of supply chain.

Before moving further let us try and understand the different attributes that SAP offers in product interchangeability. Let us also see how these attributes are applicable to the business case discussed above.

The values to relevant attributes are maintained using the transaction: /INCMD/UI - Maintain Interchangeability Group

1 3 4 5 6 7 9 10 12 14 171615131182

The description and the use of each of the attributes is described below.

1. Group Item Number: Identifies a unique step. It is automatically populated.

2. Replacement Type: Defines the replacement is between which members, e.g. : product – product, assembly – assembly, etc. The combinations need to be defined in customizing before we can select the same in the drop down.

• For the discussed business case, product – product replacement type shall be used since one product is being replaced by another.

3. Preceding Member type: Based on the replacement type defined above, the member type needs to be selected here. e.g : product, assembly, etc.

• For the business case, the preceding member type is product.

4. Preceding Product: the product which will be replaced with the new product or the product which is being phased out.

• For the case it is the old product 1925969.

5. Preceding Product Description: The description of the preceding product. It is automatically picked up from the product master. ZCAL_FCST1

6. Preceding Quantity Factor: In case, there is a proportional relationship between the preceding and the succeeding product, then the quantity of the preceding product is maintained in preceding quantity factor. For example, 2 pieces of preceding product is to be replaced by 4 pieces of succeeding product, then 2 needs to be maintained in the preceding quantity factor and 4 needs to be maintained in the succeeding quantity factor.

• For the case, the relationship between the preceding and the succeeding product is 1:1.

7. Succeeding Member type: Based on the replacement type defined above, the member type needs to be selected here. Eg : product, assembly, etc

• For the case, one active ingredient is being replaced by another active ingredient so that the successor member type is also product.

8. Successor Product: The product which will replace the old product.

• For the case, it the case actual product, 1926568, which is present in the BOM of the selling unit.

9. Successor Product Description: The description of the succeeding product.

10. Successor Quantity Factor: as explained above in the preceding quantity factor.

• The successor quantity factor is also 1 since the relationship between the two products is 1:1.

11. Valid From: This date specifies the date from which the rule will be effective in the system. That is, only after this date, will the stock & receipts of the alternate product will be considered as valid receipts.

12. Direction: Full or Forward: Full indicates that the products are interchangeable while forward indicates that the preceding product cannot replace the succeeding product.

• For the case under consideration, the direction needs to be full since the future receipts (Purchase orders, etc) of the preceding product also need to be taken up as valid receipts.

13. Use up

Yes: indicates that the system should only start creating receipts for the successor product once stock of the predecessor product is exhausted.

No: indicates that the system should start planning for the successor product from the ‘valid from’ date

Restricted: stock of the predecessor product is used only till the use-up date or the use up quantity.

• For the above case, the selection needs to be ‘Use up’ since the inventory of the alternate product needs to be utilized.

14. Use Up Date: reflects the date to which the stock/receipts of the predecessor product are considered valid. This gets activated only when the restricted option is selected in the previous filed.

• Not relevant to the business case since Yes has been selected in the previous option.

15. Reason Code: A preset code in customizing which represents a reason for maintain the substitution rule.

16. Additional Information: This represents the additional information that the planner may want to maintain.

After the rule is maintained, then it is necessary that the rule is checked for consistency. Consistency check ensures that there is no discrepancy in maintaining the substitution rule.

After the consistency check, substitution rule needs to be assigned to the model.

Assignment to model can be done through the same transaction, else can be done using transaction tx : /SAPAPO/INCMD_MODEL - Assign Interchangeability Group to a Model

Once the rule is assigned to the active model, heuristics need to run interactively on either of the product at individual location based on the structure of supply chain. If heuristics is to be run in the background, then option ’Add products from supersession chain’ needs to be selected in the back ground job as shown below.

Process Flow in detail

1. Stock situation of old product 1925969 @ 30RUSCOMX before Heuristics.

2. Availability situation of old product 1925969 @ PPLA before Heuristics.

3. Availability situation of old product 1925969 @ PPL1 before Heuristics.

4. Situation of old product 1925969 and new product 1926568 @ 30RUSCOMX after Heuristics.

Against the forecast of new material 1926568 @ 30RUSCOMX, Heuristic is driving to first procure the old material 1925969 @ 30RUSCOMX by creating Substitution order. For the balance requirement, stock transfer requisition is created to procure the material from the next leg of supply chain i.e. location PPLA

5. Situation of old product 1925969 and new product 1926568 @ PPLA after Heuristics.

Against the requirement of new material 1926568 @ PPLA, Heuristic is driving to first procure the old material 1925969 @ PPLA by creating Substitution order. For the balance requirement, stock transfer requisition is created to procure the material from the next leg of supply chain i.e. location PPL1

6. Situation of old product 1925969 and new product 1926568 @ PPL1 after Heuristics.

Against the requirement of new material 1926568 @ PPL1, Heuristic is driving to first procure the old material 1925969 @ PPL1 by creating Substitution order. For the balance requirement, Plan order is created to produce the new material 1926568 @ PPL1.

7. Situation of old product 1925969 and new product 1926568 @ PPL1 before Deployment.

There are distribution requirement (Planned) available only for the new material 1925969 @ PPL1 and not for old material. The only order available is substitution order between old product and new product @ PPL1.

8. Situation of old product 1925969 and new product 1926568 @ PPL1 after Deployment.

Deployment first confirms the stock available for the old material 1925969 @ PPL1 and then confirms the availability of new material 1926568 @ PPL1

One can see the same order as substitution Demand Confirmed for the old material 1925969 @ PPLA

The same situation will work for the deployment of both old product 1925969 and new product 1926568 @ PPLA.