rough cut capacity planning in scm ein 5346 logistics engineering fall 2014 n.
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Rough-Cut Capacity Planning in SCM EIN 5346 Logistics Engineering Fall, 2014. Rough-Cut Capacity Planning in SCM Theories & Concepts. Material programs Supplier selection Cooperation. Plant location Production systems - Subcontractors.

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hierarchical planning framework

Material programs

  • Supplier selection
  • Cooperation
  • Plant location
  • Production systems- Subcontractors
  • Physical distribution structure- Transportation strategy
  • Product program- Strategic sales planning

Long term

  • - Personnel training
  • - Contracts
  • - Material Requirements Planning
  • - Master production Scheduling
  • - Capacity planning
  • - Distribution planning
  • - Mid-term sales planning

Mid term

  • - Personnel scheduling-- Material ordering
  • - lot-sizing- operations scheduling- shop floor control

- Warehouse replenishment- Transportation planning

  • - Mid-term sales planning
Hierarchical Planning Framework

Short term


Flow of goods



production process review

Requirements for Production Planning:

  • to meet the demand
  • to consider the resource capacities and the material availabilities
  • to improve utilisation of the resources
  • to lower the setup time
  • to minimize the stock, and
  • to minimize the work in process (WIP)
  • to improve stability of the plan
Production Process (review)
rough cut capacity planning

Main goal in rough-cut capacity planning is to identify where overloading or under-loading of production capacity occurs and revise the MPS as required.

  • Overloading means that too much production of products has been planned in the facility and insufficient capacity exists to produce planned quantities of products required in MPS.
  • Under-loading means that not enough production of products has been planned to fully load the facility.
Rough-cut Capacity Planning
forecast consumption mode and horizon
Forecast Consumption Mode and Horizon

(Backword consumption of 4 days and a forward consumption of 3 days)

transactional data for transferring

Starting from a demand plan, SNP checks the resource capacities and delivers a medium/long-term plan for the estimated sales volumes.

  • The plan includes the quantities to be transported between locations (e.g., DC-customer, or plant-DC) and the quantities to be produced (and procured), taking available capacity into consideration.
  • SNP creates planned orders, purchase requisitions, and stock transfers that can be transferred directly to the connected OLTP systems.
Transactional Data for Transferring
capacity levelling

Capacity leveling supports the following resource categories:

  • Production resources
  • Transportation resources

Capacity leveling supports the following resource types:

  • Bucket resources
  • Single-mixed resources
  • Multi-mixed resources
  • Transportation resources
Capacity Levelling
capacity levelling1

The planner can use the following methods to adjust the plan:

  • Backward scheduling of the capacity load to fulfill demand using high priorities without due date violations. This rescheduling does not create any orders in the production horizon.
  • Forward scheduling of the capacity load for lower priority demand and use of demand priorities to minimize due date violations
  • A combination of backward and forward scheduling of the capacity load.
Capacity Levelling
capacity levelling profile

The main settings in the capacity leveling profile are scheduling direction, prioritization, and method.

  • Scheduling Direction controls whether Forward, Backward or Combined scheduling is used.
  • Prioritization for the heuristic run defines how leveling determines the sequence of orders. The two possible choices for prioritization (to be sorted by ascending or descending order) are
    • by order size or
    • by product priority.
  • The three Method choices are
    • Heuristic,
    • Optimizer or
    • Badi (Business Aided-in).
Capacity Levelling Profile
heuristics based capacity levelling

Heuristic-based capacity leveling compares, period by period, the capacity load on a resource with the requested load, either from the beginning or from the end of the planning horizon – depending on which scheduling direction is selected (forward or backward scheduling).

  • If the resource is found overloaded, the system first selects all the activities or orders that cause the overload in this period. It then sorts these orders according to the priority that is defined and shifts orders or partial orders, one by one into subsequent or previous periods until the required maximum resource utilization is reached.
Heuristics-based Capacity Levelling
heuristics based capacity levelling1

For forward scheduling, the system moves the orders so far that the first activity using the resource to be leveled only begins after the overloaded period.

  • For backward scheduling, the system moves the orders so far that the last activity using the resource to be leveled actually ends before the overloaded period.
  • The system takes the lot sizes and rounding values defined in the master data into account when moving the orders.
Heuristics-based Capacity Levelling
heuristics based capacity levelling2

Only orders that cause overloads are changed.

  • This proves advantageous when a lot of orders exist but only some of them overload the resource.
  • Prioritization is done by product or by product quantity.
  • Select “Capacity Leveling” from the menu to balance the required work loads.
Heuristics-based Capacity Levelling
benefits of snp with scm

The benefits of Supply Network Planning with SAP SCM are as follows:

  • Cross-plant medium-term rough-cut planning
  • Cross-plant optimization of resource utilization
    • Simultaneous planning of procurement, production and distribution
    • Simultaneous material planning and finite capacity scheduling of production, storage, and transportation resources
  • Planning of critical components and bottleneck resources
  • Prioritization of demands and receipts
  • Collaborative supply planning over the Internet
Benefits of SNP with SCM
overload in capacity check
Overload in Capacity Check

Now switch to the CAPACITY CHECK view. In the Selection profile

section double click on ## RESOURCES. Double click on the work center (plant ##A1). Switch the TB Profile to 12MONTH. We appear to have enough capacity in the work center at the aggregated monthly level.

Now change the TB Profile to 180 DAYS. We are overloaded in the first couple days as SCM has tried to produce all that is needed to satisfy safety stock in those days.

operation research or

Operation research refers to the application of quantitative methods and techniques to business problems in order to best utilize a company’s resources.

OR is used by many leading companies in recent years to optimize their limited resources in order to maximize their profits or minimize their costs.

Linear programming (LP) is one of the most important tools of operation research.

Operation Research (OR)
linear programming lp1

Five common types of LP problems:

  • Product mixed
  • Ingredient mix
  • Transportation
  • Production plan
  • Assignment
Linear Programming (LP)
steps in formulating lp problems

Define the objective

  • Define the decision variables
  • Write the mathematical function for the objective (objective function)
  • Write a one- or two-word description of each constraints
  • Write the right-hand side (RHS) of each constraint, including the unit of measure.
  • Write<=, =, or >= for each equation
  • Write all the decision variables on the left-hand side of each constraints
  • Write the coefficient for each decision variable in each constraint.
Steps in Formulating LP Problems
transportation problem modeling

Any problems (whether involving transportation or not) fits the model for a transportation problem if it can be described completely in term of a parameter table like Table 8.5 and it satisfies both the requirements assumption and cost assumption.

The objective is to minimize the total cost of distributing the units. All the parameters of the model are included in this parameter table.

Transportation Problem Modeling
software for solving lp programs

Lingo: to download software and access user menu at

  • 2. Excel with Add-ins
Software for Solving LP Programs
Lab 5: Exercises: (Due date: 10/17/14)Questions 1 and 5 by team, Questions 6 and 7 for LP problem by individual.
  • Create transportation lanes in SCM system
    • Create transportation lane from plant to DCs and assign materials
    • Mass generate transportation lanes with start locations for plant and DCs and destination locations for customers
    • Create transportation lane from MI## to SD##
  • Assign materials to transportation lanes
    • Assign materials for transportation lanes from plant to customers
    • Assign materials for transportation lanes from DCs to customers
    • Assign materials for transportation lane from MI## to SD##
  • Create quota arrangement in SCM system
    • Create inbound quota arrangement for vendor 0000102000
    • Create inbound quota arrangement for vendor 0000108000
  • Master Product settings
  • Model Consistency check

Questions 6 and 7 by individual

6. Please solve the following LP problem.

Objective: Min Z = 10,000 X1 + 15,000 X2

S.T. X1 + 2X2 >= 4

X 1+ X2 >= 2.5

1) Draw a graph

2) Plot the constraint function

3) Outline the feasible solution

4) Circle the optimal solution point.


Questions 6 and 7 by individual

7. The Green Up Fertilizer Company ships fertilizer from three manufacturing plants to four distribution centers (DC). The shipping cost per truckload of fertilizer from each plant to each DC is:

PlantDistribution Center (DC)


1 $464 $513 $654 $867

2 $352 $416 $690 $791

3 $995 $682 $388 $685

Plant 1 has a monthly capacity of 75 truckload, Plant 2 has a monthly capacity of 125 truckload, and the Plant 3 has a monthly capacity of 100 truckload. The monthly DC demand is A = 80 truckload, B = 65 truckload, C = 70 truckload, and D = 85 truckload. Please formulate an LP problem to determine how much truckload of fertilizer should be shipped from each plant to each DC per month to minimize monthly shipping cost.

1) Define the objective.

2) Define the decision variables.

3) Write the mathematical function for the objective.

4) Write the constraints.

5) Solve the LP problem using Lingo or Excel Addin.