The Problem with Cost Optimization and Supply Network Flow Control (in SAP SNP)

January 3, 2012

http://www.scmfocus.com/sapplanning/2009/08/30/snp-deployment-optimizer-profile-configuration/ …this article began as a write up on the deployment optimizer, but became more generalized and was moved here. Problematic Outcomes for The SNP Deployment Optimizer Interestingly, costs control the flow of product throughout the supply network when the cost optimizer is used. However, SNP does not have a “tie breaking” logic which can [...]

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Optimization Solution Procedures

October 30, 2011

Background The solution procedure is the optimization method that is applied. I often describe and differentiate optimizers based upon their objective function. Therefore, optimizers with an objective function of minimize costs, I call cost optimizers. Those that attempt to minimize inventory at a set service level, or maximize service level at a set inventory level [...]

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Common Complexities with Optimization

October 25, 2011

Background The complexities involved with cost optimization tends to be greatly underestimated. Two areas of complexity are listed below: A Global Versus Local Optimum http://www.scmfocus.com/supplychainsimulation/2011/10/27/local-versus-global-optimum-solutions/ When the Optimizer Takes Too Long to Finish and Times Out http://www.scmfocus.com/supplychainsimulation/2011/10/27/feasible-solutions-and-optimizer-time-outs/ These are just two of many, which I will be adding links to as I publish more articles [...]

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Planning Sophistication by Industry

October 16, 2011

Background Different industries often differ in their relative sophistication in their planning. This has been evident in my personal work experience and in the relative success that various supply chain software vendors have had in different industries. For instance, I can recall working for Texas Instruments in the late 1990s. This was an i2 Technologies [...]

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The Four Factors that Make Up the MPS

October 2, 2011

Background Different companies use the term Master Product Schedule (MPS). However, in the vast majority of cases it is not the official definition of the term. In many cases it is used interchangeably with the term MRP, which is incorrect. An MPS run is really a combination of four things that relate to product, timing, constraining and [...]

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Commonly Used and Unused Constraints for Supply Planning

October 2, 2011

Background The ability to constrain the plan is a very big draw to using either allocation or cost optimization software for supply planning. (Presently these are the only methods that constrain the plan). While there is frequent discussion about constraining the supply plan with respect to non-production resources such as storage or transportation, in fact, [...]

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What Supports Inventory Carrying Costs?

September 27, 2011

Background I always find it interesting to come across a quote of something I have been dealing with for years and then I re-read a book and come to find that the author has clearly delineated the entire conversation on the topic years earlier. Inventory carrying cost is an estimation of the percentage of the product cost [...]

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What If You Paid Nothing for SAP Software: How SAP’s TCO Compares for Supply Planning

September 17, 2011

Background and Motivation for the Research When I am often told about the reasons for decisions to go with software that I am familiar with, the logic often does not seem to make sense. In fact the entire process for repeatedly selecting expensive and lower functionality software from the major monopoly vendors turns out not [...]

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Plossl on When EOQ Applies

September 17, 2011

Background EOQ is discussed as an important consumption based parameter to set. However, as George Plossl points out in the book Production and Inventory Control, there are some important assumptions which make the use of EOQ valid. The right quantity to order is that which best balances the costs related to the number of orders [...]

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Why The Cost of Missed Demand Must Always Be Set So Much Higher Than the Profit Margin

July 24, 2011

The decision of what the unmet demand should be set to in a cost optimizer should be based, at least partially on the types of products that they make. One example of a product which could have a lower unmet demand cost set for it is the iPad 2. In all those months where the [...]

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