advanced subcontracting tips and techniques to model...

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Advanced Subcontracting Tips and Techniques to Model Vendor Capacity (and Material Constraints)

Matt CampbellK2 Professional Services

What We’ll Cover …

• The subcontracting scenario• Master data setup• Subcontracting process flow• Options for modeling subcontracting in SAP APO SNP• Modeling vendor capacity and material constraints• Tips and tricks for solving challenging design issues• Wrap-up

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A Standard Subcontracting Process

Plant for A Subcontractor for B

A

B

A

B

Packaging

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A Standard Subcontracting Process (cont.)


A

B

A

B

ExternalProcurementOrder – ItemCategory “L”

A

B In-HouseProduction

Order

Stock Transfer

Reservation

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Subcontracting — Provision of Materials by a Third Party

Plant Subcontractor for B

A

B

B

Packaging

Vendor for A

A

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Subcontracting — Provision of Materials by a Third Party (cont.)

Plant Subcontractor for B

A

B

B

Packaging

Vendor for AA

ExternalProcurementOrder – ItemCategory “L”

ExternalProcurement

Order



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Master Data Setup: Example

• Example:


A

B

A

B

Label (SAP R/3 Planned)

36082CF – 8 Count Pack Markers (12)

43042C – 96 Count Promotional Pack Markers

Small Bin (SAP R/3 Planned)

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Master Data Setup: Example (cont.)

• Header material master set up for subcontracting• Transaction MM03

Procurement Type is “F” and the special procurement key set to “30” (subcontracting)

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Master Data Setup: Example (cont.)

• SAP R/3 BOM exists• Transaction CS03

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Subcontracting Master Data Setup

1) Create work center for sub-contracting plant (created at the plant where subcontracting is performed — one for each plant)

2) Create routing for subcontract material at the plant

3) Create production version (PV) for subcontract material at plant

4) Add the production version to the subcontract purchasing info record (PIR)

5) Generated and activated the Integration Models to send over the required master data to SAP Advanced Planner and Optimizer (APO)

6) Verify that all relevant APO Master Data is created via the Core Interface (CIF)

7) Add the means of transport to the transportation lanes in APO

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1. Subcontracting Master Data Setup: Work Center

• Create work center SUBC for sub-con plant (created at the plant where subcontracting is performed — one for each plant)

• SAP ERP transaction CR01

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1. Subcontracting Master Data Setup: Work Center (cont.)

• Create Work Center (Transaction – CR01)• Can create one work center for all subcontractors if same

formulas are used

Enter formula for “duration” if you want all routings to have a generic duration not based on

quantity producedEnter “DAY” to default unit in routing

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2. Subcontracting Master Data Setup: Routing

• Create routing for subcontract material at plant• SAP ERP transaction CA01

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2. Subcontracting Master Data Setup: Routing (cont.)

• Create routing for subcontract material at plant• SAP ERP transaction CA01

Enter the number of days that it takes to produce at the subcontractor. The formula duration does not consider

base quantity.

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3. Subcontracting Master Data Setup: Production Version

• Create production version for subcontract material at plant• SAP ERP transaction C223• Must check the production version to successfully create Product

Data Structures (PDS) or Production Process Models (PPM) when activating the Integration Models

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3. Subcontracting Master Data Setup: Production Version (cont.)• If you have multiple vendors that subcontract a material, you will

need to create a separate production version for each vendor• Best to use a naming convention that will allow you to create an

Integration Model that pulls in only subcontracting production versions

• Production version “S001” for vendor 1• Production version “S002” for vendor 2

4. Subcontracting Master Data Setup: Purchasing Info Record• Add the production version to the subcontract purchasing info

record (PIR)• SAP ERP transaction ME12

Enter the production version number. Make sure to use a naming convention to filter all subcontracting PVs

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5. Master Data Setup: Generate and Activate the Integration Models• Generate and activate each Integration Model and then validate

that the APO master data has been successfully created• SAP ERP transactions CFM1 (Generate), CFM2 (Activate)

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5. Master Data Setup: Generate and Activate the Integration Models (cont.)• Separate Integration Models are generally created for each of the

following:Purchasing Info Records (including vendors)SAP APO SNP subcontracting PDSPP/DS subcontracting PDS

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5. Master Data Setup: Generate and Activate the Integration Models (cont.)• Integration Model for Subcontracting Purchasing Info Records

Check “Include Dependent Vendors and Issuing Plants”and all vendors from subcontracting PIRs will be created as locations in APO

Select PIR

Select Subcontracting PIRs

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5. Master Data Setup: Generate and Activate the Integration Models (cont.)• Integration Model for SNP Subcontracting PDS

Check “SNP Subcontracting”

Select PDS ([SAP] R/3)

In the Production Version field, enter S* to only select subcontracting PVs 23

5. Master Data Setup: Generate and Activate the Integration Models (cont.)• Integration Model for PP/DS Subcontracting PDS

Check “PP/DS Subcontracting”

Select PDS (SAP R/3)

In the Production Version field, enter S* to only select subcontracting PVs

6. Master Data Setup: Verify That All APO Master Data Is Created• Verify that all of the following have been automatically created

via CIF:The vendor is created as a location in APO The subcontract product is extended in APO to the vendor location The input components are extended in APO to the vendor location The transportation lane from the vendor to the plant is created and the subcontract product is assigned to the T-laneThe transportation lane from the plant to the vendor is created and the input components are assigned to the T-laneBoth the SNP and PP/DS PDS have been created

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6. Master Data Setup: Verify That All APO Master Data Is Created (cont.)• Verify that the vendor is created as a location in APO • APO transaction SAPAPO/LOC3 • Location type will be 1011 (Vendor)

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6. Master Data Setup: Verify That All APO Master Data Is Created (cont.)• Verify that the subcontract header product is extended in APO to

the vendor location • APO transaction SAPAPO/MAT1

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6. Master Data Setup: Verify That All APO Master Data Is Created (cont.)• Verify that the subcontract input component products are

extended in APO to the vendor location • APO transaction SAPAPO/MAT1

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6. Master Data Setup: Verify That All APO Master Data Is Created (cont.)• Verify that the transportation lane from the vendor

to the plant is created and the subcontract product is assigned to the transportation lane

• APO transaction SAPAPO/SCC_TL1

The header subcontract product will be assigned to the transportation lane, but there will not be a means of transport assigned yet

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6. Master Data Setup: Verify That All APO Master Data Is Created (cont.)• Verify that the transportation lane from the

plant to the vendor is created and the input components are assigned to the transportation lane

• APO transaction SAPAPO/SCC_TL1

The input components will be assigned to the transportation lane, but there will not be a means of transport assigned yet

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6. Master Data Setup: Verify That All APO Master Data Is Created (cont.)• Verify that the SNP PDS is created in APO• APO transaction SAPAPO/CURTO_SIMU

PDS is created at the vendor location in APO

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6. Master Data Setup: Verify That All APO Master Data Is Created (cont.)• APO transaction SAPAPO/CURTO_SIMU

Fixed Duration set to 21 Days

Resource Consumption

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6. Master Data Setup: Verify That All APO Master Data Is Created (cont.)• Verify that the PP/DS PDS is created in APO• APO transaction SAPAPO/CURTO_SIMU

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7. Master Data Setup: Add the Means of Transport to the Transportation Lanes in APO• APO transaction SAPAPO/SCC_TL1

Create the means of transport and include a duration to move products to and from your plant to the subcontractor



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Subcontracting Process

• Demand for the Subcontracted Product at our own plant or DC

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Subcontracting Process (cont.) • Planning run generates a distribution receipt (subcontracting

planned)

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Subcontracting Process (cont.)

• At the Subcontract Plant, there is a distribution Demand (subcontracting)

• The Demand is met with a Production (Subcontracting Planned)

SNP order takes 21 days to produce

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• At the Subcontract Plant, there is dependent Demand for the components (12 inputs for 1 output)

• Demand date is aligned with the start date for the production• Stock Transfer Reservation created to meet demand

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• At our plant or DC, there is distribution Demand for the component that is meet with a Requisition (or Planned Order)

• Receipt Date is 1/8, in time for shipping it to the subcontractor

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• In SAP ERP, the subcontracting Purchase Requisition will be created

Item Category is set to “L” for subcontracting

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• Component requirements for SAP ERP planned materials added to the requisition

Click on the component button to see the dependent requirements for the components in SAP ERP

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Subcontracting Process

• In SAP ERP, Requisitions converted into a Purchase Order (PO)

The Distribution Receipt (planned) moves to (TLB- Confirmed)

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• In APO, the Planned Order at the Subcontractor has moved to the Production (Confirmed) key figure

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• Components are transferred to the Subcontractor• SAP ERP transaction ME2O

Component availability can be checked and the Quantity required at the subcontract vendor can be Post Goods Issued

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• Once the subcontractor completes the production, the subcontracted product is send to our plant or DC

• The product is Goods Receipted into inventory


A

B

A

B

Label (SAP R/3 Planned)

36082CF – 8 Count Pack Markers (12)

43042C – 96 Count Promotional Pack Markers

Small Bin (SAP R/3 Planned)



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Modeling Options in SNP

• SNP heuristics without Capacity Leveling• Capable-to-Match (CTM)• Optimizer

SAP SCM Version Comparison for Subcontracting

SAP SCM 4.0 SAP SCM 4.1 SAP SCM 5.0 SAP SCM 2007 (5.1)

SAP SNP Planning Engines Supported

Only SAP SNP Heuristic and CTM supported with integration to R/3

SAP SNP Heuristic, CTM and the SNP Optimizer

Same as 4.1 Same as 4.1

Processes Not Supported

Capacity Leveling, Deployment and TLB (from subcontractor)

Same as 4.0 Same as 4.0 Same as 4.0

Master Data Set-Up for Subcontracting with Source Location in SAP SNP

T-lane from plant to subcontractor manually created and components manually assigned

If PPMs used, T-lane from plant to subcontractor manually created and components manually assigned


Master Data Set-Up for Subcontracting with Third-Party Provision in SAP SNP

T-lane from plant to subcontractor manually created and components manually assigned

Same as 4.0 Same as 4.0 Same as 4.0

Optimizer Constraints

Production capacity at the subcontractor or the transport capacity can be a constraint but not both




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Constraints in Subcontracting

• Can be difficult to obtain accurate capacity information at subcontractor plants

Plant configuration may not be known to plannerAlternate lines may be availableAlternate plants may be available

Workload may not be known to plannerSubcontractor could also be manufacturing for other customers

Capacity information may be withheldCould be treated as commercially sensitive information

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Modeling Vendor Capacity

• If capacity information is obtained, can use the following planning engines using standard SAP subcontracting processes:

CTMOptimizer

• Or set up subcontractor as a dummy plant and use heuristics and Capacity Leveling

If you want integration to SAP ERP, this approach will result in some CIF modifications to generate subcontract orders in SAP ERP

Constraints in Subcontracting

• Constraint information passed as material availabilityStandard Rosetta Net confirmation

Confirmed supply per time periodConfirmed by Material Code

• A material constraint is usually a capacity constraint somewhereBut you may not control the relevant part of the supply chain

Real constraint could be at subcontractor’s supplier

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Challenges in Modeling Material Constraints in SAP SNP

• All SAP SNP planning engines will plan the net requirements for components

Create Stock Transfer Requisitions from plants modeled in the network, or Purchase Requisitions for the required quantity

• If insufficient supply is found, more will be plannedStandard lead time is used to plan deliveries

Unlike capacity, system does not have concept that supply is limited

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Approaches to Modeling Material Constraints

• Change master data for planning runChange lead timeUse GI time

• Model materials as resourcesUse capacity profile to model material availability

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Change Master Data for Planning Run

• ScenarioExisting POs for materialConfirmations/Supplier Response/ASNs are for constrained amount

• For CTM, modify lead time for receipt of materialBAdI/SAPAPO/IF_EX_CTM_MATLOC-MATLOC_MODIFY

• For optimizerModify data when reading and writingBAdI/SAPAPO/SDP_OPT_LOG

• Planning run can only use materials that are actually availableWill create receipts for shortfall, but in far future

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Considerations for Modifying Material Master Data

• Receipts will be generated for shortage materialWill need to be removed eventually from system

• SAP SNP heuristics not constrained by materialMust use constrained planning engine to model constraints

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Model Material as Resource

• Create resource to represent material supplyMaintain capacity as available supply

This will require manual entry or custom maintenance• Constraint will be recognized only by CTM and Optimizer planning

enginesHeuristics will indicate material shortage as “overloads”

Must be corrected manually for heuristicsHard to handle multiple constraints with heuristicsCapacity leveling not supported at subcontractors

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Considerations for Modeling Materials as Capacity

• Allows materials with true shared capacity to be modeled If this information is available

• Must create “dummy” master data objectsResourcesIf using PDS, must create in SAP R/3 as well

Issue to create work centers at vendors• Must build mechanism to maintain capacity

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• Difficult to substitute components on the fly (one-time substitution) when converting subcontract requisitions into a PO

• If a component is not in the BOM, it will not be extended to thevendor location in SAP APO

• As a result, the PO will fail in CIF and the requisition will bedriving demand on the wrong component

Component Substitution Issue

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Component Substitution Potential Solutions

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• Can manually extend the component to the vendor location and add it to the transportation lane (plant to subcontractor)

This is a lot of work• Can create a dummy subcontracting BOM that contains all

potential components that could be used (maintain a validity date on the BOM that will not come into effect)

This is also a lot of initial setup and it still does not automatically add new components to the super-BOMs

• Create a custom program to allow the user to enter the plant, vendor, and component, and the system will automatically extend the component to the vendor location in SAP APO and add it to the transportation lane

Small development worth the effort if lots of on-the-fly substitution occurs

Other Enhancements — Multiple Production Versions per Subcontractor• As of SAP SCM 5.1, it is possible to have more than one

production version at the location of the subcontractor Available with SAP ERP 7.0 (at least SAP ERP 2005 with EhP03)

• Can assign the source of supply for the subcontracting planned order via order processing or the Detailed Scheduling Planning Board

• New indicator set in customizing “Transfer multiple selection of PDS”

• Transaction CMPDS1 (in SAP ERP) is used to assign the relevant production versions to the purchasing info records

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Resources

• Subcontracting Release Restrictions for SAP SCMSAP Note 654312 (4.0)SAP Note 713429 (4.1)SAP Note 832393 (5.0)SAP Note 1021662 (SAP SCM 2007)

• CTM Planning FAQSAP Note 855229

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7 Key Points to Take Home

• You can use SNP functionality to model subcontracting with source location or subcontracting with third-party provision processes

• If using PDS, subcontracting Master Data in SAP ERP will CIF to SAP APO and automatically create transportation lanes and assign products to the lanes

• The SAP APO planning run will generate external procurement orders in SAP R/3 with item category “L” for subcontracting

• As of SAP SCM 4.1, Heuristics, CTM, and the SNP Optimizer support the subcontracting process

• CTM and the Optimizer can be used to plan with subcontractor capacity constraints

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7 Key Points to Take Home (cont.)

• Material capacity constraints can be modeled using a BAdI to change planned delivery lead times to prevent the CTM or Optimizer planning engines from creating replenishments

• Manual component substitutions to purchase orders in SAP ERP can cause issues if components are not extended to the vendor location in SAP APO

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Your Turn!

How to contact me:Matt Campbell

[email protected]

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