ASCP Fundamentals Chapter 01 Advanced Supply Chain Planning

Advanced Supply Chain
Planning
Chapter 1
Copyright Oracle Corporation, 2005. All rights reserved.
Advanced Supply Chain Planning
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O!ectives
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#odule Overvie$% &opics
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&opic Overvie$% Planning (usiness )ssues )
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&opic Overvie$% Planning (usiness )ssues ))
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&oday% &ough +cono,ic Conditions
Today: Tough Economic Conditions
Todays tough economic conditions are forcing you to adapt new strategies. Business trends
like higher degrees of uncertainty, increased global competition, mass customization, brand
loyalty focus, and less money to invest in technology force you to adapt and strategies to deal
with these trends are managing to uncertainty by postponing inventory, focusing on your core
competition and outsource where needed, moving the point of differentiation closer to your
customers and providing them with more reliable and accurate commitments (even when you
are operating (or part of) a global supply chain, and buying applications that are easier and
faster to deploy to ensure lower cost of ownership. racle !dvanced "lanning will help you
e#ecute these strategies to deal with the global business trends.
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&raditional Approach
Traditional Approach
To understand racles !dvanced "lanning offering, we need to first understand how supply
chains have evolved. $n the past, supply chains were built as vertical silos%
&our planning process is typically a multi'step process, where demand and forecast is
communicated in different ways
(upply planning is cumbersome because it first of all starts with the wrong demand number
and then typically takes weeks to e#ecute plan after plan
$n addition, there is limited to no visibility to changes from your customers (demand) or
suppliers (supply capacity), or it takes a long time to get their responses
The usual response to this situation is%
)eeps lots of inventory * +ust in case
,old back on production capacity' +ust in case
-#pedite everything
$n essence, supply chains are built on inventory
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(usiness ),pacts ),plications o/ the &raditional Planning #odel
Business Impacts Implications of the Traditional Planning Model
These planning business issues impact your top and bottom line%
o!er revenue
$naccurate forecast and order promising, and poor order tracking drive service level down
$naccurate order promise dates drive service level down
$ncorrect product mi# drives opportunities down
"igher cost
,igh inventory levels, e#pediting cost and premium purchase cost drive inventory cost up
$dle resources and poor supplier utilization drive asset utilization down
.ong planning cycles and manual processes drive efficiency down
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#ove &o A #ore Co,petitive #odel
Move To A More Competitive Model
To fi# this and to become more agile and adapt /uicker to the business trends, and become
more competitive, you need an e'business planning solution that is based on zero latency and
real'time collaboration%
&ou can collaborate with your customers and internal organizations on a consensus forecast *
everyone works of the same demand number
(upply planning is based on this accurate number
&our overall planning cycle time is reduced by e#ecuting a single holistic plan ' that takes
hours instead of weeks to e#ecute
(trong e#ception management signals disruptions in your supply strategies
&ou can automate the collaboration with your suppliers and pull them much closer into your
planning process.
This closed'loop planning process allows you therefore to make better decisions, react
immediately to changes in the supply chain, and achieve total supply chain visibility, because it
is built on $0123!T$0 instead of inventory, and it allows you for all these reason to
become more competitive.
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Oracle Advanced Planning Co,plete +-(usiness Planning
Solution
#racle Advanced Planning $ Complete E%Business Planning Solution
This diagram lists the racle !dvanced "lanning suite licensable products.
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Solution
#racle Advanced Planning Complete E%Business Planning Solution
4ithin the conte#t of the overall collaborative -'Business (uite, racle provides a complete e'
business planning system that allows you to collaborate on all aspects of planning. racle has a
fle#ible, component based solution that can help solve a broad range of problems. &ou can, for
e#ample, solve a specific demand planning problem, a broader overall planning problem, or an
even broader supply chain management or e'business problem. racle !dvanced "lanning
offers a solution that spans operational to tactical and strategic planning, and spans all time
horizons of your planning cycle.
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Solution
#racle Advanced Planning Complete E%Business Planning Solution
! key point to our planning solution is the seamless integration between the individual
components, as illustrated in this slide. $n 5ollaborative "lannings case, the customer and
supplier information flows through 5ollaborative "lanning into the 6emand "lanning and
(upply "lanning applications and the results of the demand and supply planning process can
seamlessly flow back to the customers and suppliers, while generating the e#ceptions as
modeled as part of the collaboration process.
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APS (usiness 1lo$% Plan
Planning Information &lo!
5ollaborative "lanning serves as a collaboration platform for suppliers and planners. $t can be
used to flag mismatches between supply and demand, change demand forecasts and supplier
schedules, publish planned orders to suppliers, and receive supplier capacity information into
!(5".
racle 6emand "lanning $nternet'based collaboration is used to collect information about
future demand from supply chain partners and internal sources. The consensus demand forecast
is input to the demand schedule for the !(5" engine.
4hen the optional $nventory ptimization component is installed, the demand forecast is input
to $ as well. The safety stock demand output from $nventory ptimization is input to !(5",
along with the demand forecast and other sources of demand, such as sales orders and
interplant transfers.
5ollection programs obtain source instance data for planning, such as sales orders, on'hand
inventory, open purchase orders, supply chain sourcing rules, product structure and production
resource capacity. !(5" generates replenishment plans optimized to business ob+ectives that
are consistent with the key performance indicator targets you have established.
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APS (usiness 1lo$% +2ecute
E'ecuting Plans
!(5" creates an optimized replenishment supply plan consisting of planned orders and
purchase re/uisitions. The advanced supply chain plan output forms the basis for 7lobal rder
"romising calculations.
!(5" also suggests sourcing and date changes to sales orders based on global forecast
calculations.
(hop floor +ob, operation, and resource rescheduling decisions are implemented in the !"(
3anufacturing (cheduling module and automatically integrated to the 4ork'$n'"rocess
module. These changes to the 4$" supply information are collected during the ne#t planning
cycle.
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APS (usiness 1lo$% Co,pare Per/or,ance to &argets
Measuring Performance( Comparison to Targets( and &eed)ac*
$ntegrated performance management compares measured performance to key indicator targets.
4hen the difference e#ceeds user'defined tolerances, racle 4orkflow is used to send
notifications that corrective actions are re/uired.
(upplier performance and 4$" completions are measures of on'time delivery and resource
utilization. $nventory investment is reflected in inventory turnover ratio. 5ost is an important
component of profit margin.
The "lanner 4orkbench user interface provides graphical comparisons of e#ceptions and key
performance indicators associated with alternative plans.
)ey performance indicators%
8 $nventory turns
8 n'time delivery
8 3argin percentage
8 9tilization
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APS (usiness 1lo$% Corrective Action
Ta*ing Corrective Action
The "lanner 4orkbench also provides the ability to view e#ception message details and to
/uickly simulate alternative plans.
The planning control loop is closed by%
8 !uto5reate orders% this concurrent program implements a user'controlled range of
planned orders
8 $ndividually processing e#ception messages, such as e#pediting an order or changing an
order /uantity
8 2e'planning% this process recalculates order suggestions and 7lobal !T" promise
information based on ad+usted data.
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Oracle Advanced Planning 3ey Capailities
#racle Advanced Planning $ +ey Capa)ilities
racle !dvanced "lanning provides many key capabilities, of which the most important ones
are%
6emand "lanning
' !chieve a consensus forecast through a collaborative demand planning engine
$nventory ptimization
' 6etermine where to hold which inventory in your supply chain, at what level in the bill of
material (postponement optimization)
(upply 5hain and 3anufacturing "lanning
' 6etermine a optimal supply plan using a single holistic plan for all facilities. &ou can run
unconstrained, constrained, and optimized plans.
7lobal rder "romising
' "romise accurate (sales order) dates while taking into account available material,
manufacturing capacity, supplier capacity, and transportation capacity
' !llocate (short) supply to (key) demand
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Oracle Advanced Planning 3ey Capailities
#racle Advanced Planning $ +ey Capa)ilities
racle !dvanced "lanning provides many key capabilities, of which the most important ones
are%
3anufacturing (cheduling
' 6etermine optimal resource schedules for your plant or shop floor operations
Transportation "lanning
' .oad consolidation
' 5ontinuous moves
' 3ode selection
5ollaborative "lanning
' 5ollaborative demand and supply planning% receive order forecasts from your customers,
send supply commits to your customers: send order forecasts to your suppliers, receive supply
commits from your suppliers
' ;endor managed inventory (;3$)
' (upply chain e#ception management% user'definable e#ceptions to monitor supply'demand
discrepancies while planning with involvement of your trading partners
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(upply 5hain $ntelligence integration
' 6rive continuous improvement
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Oracle Advanced Planning Co,ponent Architecture
#racle Advanced Planning Component Architecture
ur database'centric architecture allows for high performance deployments, reliability (as all
planning information and even the order promising engine reside in the database * you can
leverage core database technology like hot backup and recovery), and is open and standards
based to facilitate integration with your -2" system.
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&opic Overvie$% Oracle Advanced Supply Chain Planning
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Oracle Advanced Supply Chain Planning
#racle Advanced Supply Chain Planning
9se planning to balance supply and demand.
9se supply chain planning to balance supply and demand across your supply chain.
9se racle !dvanced (upply 5hain "lanning to balance supply and demand across your
supply chain with%
8 ! plan that respects constraints
8 ! schedule that meets your organizations ob+ectives
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Oracle Advanced Supply Chain Planning 1eatures
#racle Advanced Supply Chain Planning &eatures: "olistic Planning and
Scheduling
racle !(5" has capability to plan, schedule, and optimize an entire supply chain within a
single plan. The term coined to describe this key differentiator for racle is% holistic planning
and scheduling. (upply chain partners have real'time access to view their supply and demand
positions across every facility and location, whether internal or e#ternal.
! constraint'based, optimized plan for all planning horizons, materials, resources, supply chain
partners, and manufacturing modes is enabled by%
8 ! common data model for planning and e#ecution enables companies to aggregate data at
multiple levels
8 1le#ible controls to define the granularity of the plan
8 (upport for mi#ed'mode manufacturing, enabling a company to create a single plan
consolidating re/uirements across the company, regardless of production method
8 $ntegrated planning and e#ecution to create a single closed'loop plan
8 (upported integration with legacy systems and previous racle application releases
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8 $ntegrated performance management, enabling companies not only to create a single plan,
but to use it to effectively manage their business by integrating business intelligence and
workflow to create a plan'e#ecute'measure'improve framework
8 Tight integration of all pieces instead of treating them as a collection of components
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#racle Advanced Supply Chain Planning &eatures: #ptimi,ation
The racle !dvanced "lanning (ystem employs advanced solver and optimization techni/ues
built with components supplied by $.7.
Optimization Benefits:
&ou can optimize your plans to financial and other enterprise strategic ob+ectives. The
memory'based planner creates coordinated production and distribution plans for each
organization. $n addition, a constraint'based scheduling engine ensures that the plan is feasible
and respects all of your constraints.
8 (imultaneously plan material and capacity while considering the constraints of each
8 5reate plans that achieve selected goals%
' 3inimize inventory costs
' 3a#imize on'time delivery
' 3a#imize overall plan profit
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#racle Advanced Supply Chain Planning &eatures: #ptimi,ation
6uring plan definition, !(5" provides a method for the user to weight the importance of
optimization ob+ectives on a scale from zero to one.
8 4hen product life cycles are short, the risk of obsolescence plan should maintain low
inventories, (high inventory turnover ratio).
8 4hen some demand is not profitable and corporate policy allows some demand to go
unfulfilled, then plan profit determines whether to work overtime to fulfill marginally
profitable demand.
8 $n an environment where on'time delivery is a competitive advantage, the third ob+ective
should be weighted heavily.
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#racle Advanced Supply Chain Planning &eatures: Planner -or*)ench
racle !(5" introduces a completely redesigned version of the "lanner 4orkbench. -#tensive
discussions and design reviews with customers have led to many changes to make the "lanner
4orkbench more fle#ible, more intuitive, and easier to use.
Planner Workbench Features:
8 "lan performance indicators
8 1le#ible tree navigation
8 5ustomizable data display
8 9ser'definable graphics
8 7raphical supply chain display
8 1ull graphical pegging display
8 !bility to zoom to related information
8 ,orizontal plan pivot tables display plans by period, by week and by day
Planner Workbench Benefits:
The "lanner 4orkbench is organized to streamline the common activities of planners. The
fle#ible, intuitive and easy'to'use user interface has been redesigned and updated to streamline
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the common activities of planners. &ou can use zoom, resize, and right'mouse menu features to
tailor the display to emphasize information that is important to you and to provide /uick and
easy access to fre/uently used information.
The "lanner 4orkbench provides information to help you diagnose problems. &ou can run
what'if simulations and then compare the results against other simulations and against
performance targets before you decide which alternative to implement.
8 $ncrease system efficiency
8 $mprove user productivity
8 9se fewer keystrokes for common actions
8 !chieve higher customer satisfaction
8 !chieve lower cost to the organization
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#racle Advanced Supply Chain Planning &eatures: Simulation
9sing advanced simulation capabilities, plans /uickly generated by racle !(5" can be
reviewed and compared to other plans. )"$s provided with !(5" include inventory turnover,
on'time delivery, plan profit, and resource utilization.
Simulation Benefits:
By integrating performance management capabilities, supply chain plan performance can be
measured and evaluated based upon graphical display of key performance indicator
information.
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#racle Advanced Supply Chain Planning &eatures: Integration !ith Performance
Management System
The planning system is integrated with the racle Business $ntelligence (ystem (B$(). &ou can
set targets to drive improvement in your key performance measures. racle !dvanced (upply
5hain "lanning will optimize your plans to help you achieve your targets. !lternative plans can
be evaluated based on their impact on your key performance measures. 3ultiple simulations
can be compared to help you choose the tactical and operations plans that best meet your
strategic ob+ectives.
Integrated Performance Management Benefits:
8 (et organizational ob+ectives to drive continuous improvement.
8 <uickly and easily and evaluate a plan based on its impact on target )"$s.
8 3anage by e#ception: receive notifications when corrective actions are re/uired.
8 ptimize to performance targets%
' $ndustry standards
' 5orporate
' "ersonal
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#racle Advanced Supply Chain Planning &eatures: Mi'ed Mode Planning
racle !(5" supports mi#ed mode manufacturing which lets you plan distribution and
manufacturing operations for hybrid environments. &ou can plan for the full range of discrete,
repetitive, process, pro+ect, and flow manufacturing environments. &ou can also plan to make
to stock, make to order, assemble to order, and configure to order products simultaneously,
using a single plan across all methods. This features enables you to use the most efficient
process to build each product.
3i#ed mode manufacturing is supported by the following combination of racle !pplications%
racle B3 (for discrete manufacturing), racle 1low 3anufacturing, racle "ro+ect
3anufacturing, and racle "rocess 3anufacturing. These serve primarily to provide process
plan (routing) data to the racle !(5" engine. They also provide the user interfaces with
which users of the different manufacturing modes view the output of the planning process.
#racle Pro.ect Manufacturing
racle "ro+ect 3anufacturing is designed to support companies that manufacture products for
pro+ects or contracts. $t provides robust pro+ect tracking, billing, and budgeting. &ou can plan
in a pro+ect or contract environment by segmenting all sources of supply and demand by
pro+ect. This allows the planning process to identify components as shared or pro+ect specific,
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track e#isting inventories by pro+ect, and provide visibility to all supply and demand associated
with the pro+ect.
racle "ro+ect 3anufacturing also supports (eiban production. (eiban is a =apanese
management practice. The word sei means production, and the word ban means number, thus
implying a production number. ! manufacturing plan is therefore managed by a (eiban
number. !ll demand and supply for the manufacturing plan is associated with the (eiban
number (via its pro+ect number).
racle "ro+ect 3anufacturing is also designed for engineer'to'order (-T) environment and a
assemble'to'order environment. This enables a manufacturer to track supply and demand with
a particular product, pro+ect, or customer.
racle !(5" supports racle "ro+ect 3anufacturing through "ro+ect "lanning.
#racle &lo! Manufacturing
racle 1low 3anufacturing is a demand driven production system with balanced production
lines and processes designed to produce a constantly changing mi# of products at a steady rate.
1low manufacturing uses schedules for mi#ed model production instead of work orders to
drive production. The mi#ed model schedules are se/uenced based on scheduling rules and
material is replenished, or pulled through the se/uence, using kanbans.
This is in contrast to a traditional discrete environment where the 3aster "roduction (chedule
and 32" are used to e#plode re/uirements and create planned orders that are converted into
purchase orders and work orders. There are some cases in which racle !(5" may be used
effectively. 1or e#ample ' you have a seasonal business, and you use racle !(5" to create
planned orders during your slow period to build up inventory to satisfy your peaks in demand.
$n these cases, planned orders may be converted into flow schedules.
4hen there is a hybrid of manufacturing methods, for e#ample if a flow manufacturing system
feeds to a discrete manufacturing plant, racle !(5" may be used effectively, because racle
!(5" can consider a flow schedule as a supply.
#racle Process Manufacturing
The racle "rocess 3anufacturing ("3) user is fully integrated with racle !(5" and can
plan based on plan ob+ectives and use the materials and resources optimally. There is no need
to e#ecute "3 ">32".
racle !(5" provides an integrated plan for multiple modes of process manufacturing
including batch, continuous, and packaging operations. $t incorporates a formula'based,
process uni/ue re/uirements including co'products, and scaling.
The data used to plan materials and capacity e#ists in the "3 schema. This data is used by
the racle !(5" "lanning (erver. racle !(5" uses $nventory, "roduction, 1ormula,
"lanning, and (ales data from "3 and purchasing data from racle !pplications. The user
can run multiple plans and manage materials and resources. nce satisfied with the plan, it can
be e#ecuted in the "roduction 3odule.
#racle Shopfloor Management /#S&M0
racle (hop 1loor 3anagement is a module which bridges planning and e#ecution systems. $t
provides the following capabilities%
8 3anage 5omple# shop floor lot transactions
' .ot split and merge
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' 9pdate of lot name, product, routing, /uantity
' Bonus lots creation
8 -nable dynamic routings
' 2outing determined on the fly
' 2outing movements enforced based on legal ne#t operations
' =umps allowed to any operation
8 "rovide end'to'end genealogy of your products
' "roduct tracking all the way back to raw material
' 1orward and backward genealogy surfing
8 3odel and track operation yield based cost for your products.
' peration level yields
' &ielded cost of product
' 5ost variance at operations
8 -nable integration of -2" with third'party 3-( systems% (eamless integration with
racle !pplications
8 5o'"roduct modeling
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&opic Overvie$% Plan &ypes
Plan Types
! plan type is a way of performing material and capacity planning. -ach way meets certain
outcomes of racle !dvanced (upply 5hain "lanning and may not meet others.
!n important implementation task is to determine the level of planning outcomes appropriate
for your organization and to use the appropriate plan type. !s needed, you can work to move
your organization towards achieving more of the outcomes.
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4nconstrained
1nconstrained
The planning run generates an unfeasible plan that overloads manufacturing, supplier, and
transportation capacity.
!n iterative process follows: the planner manually shifts orders and reruns the material plan
until it is feasible.
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Constrained
Constrained
The planning run generates a plan that does not violate the manufacturing, supplier, and
transportation constraints that you select.
&ou instruct the planning engine how to resolve difficult situations by specifying an enforced
constraint%
8 -nforce capacity constraints% ;iolate demand due dates if necessary to respect capacity
constraints. 2esources are loaded to their limit to satisfy demand due dates. 9nsatisfied
demands are pushed to later dates that miss their due dates. The planning engine issues
e#ception messages indicating which demands will be filled after their due dates.
8 -nforce demand due dates% ;iolate capacity constraints if necessary to respect demand
due dates. 2esources are overloaded to satisfy demand due dates. The planning engine issues
e#ception messages indicating the overloaded resources.
6ecision rules are additional instructions to the planning engine to use substitute items and
alternate bills of material and routings to produce the supply with fewer constraint violations.
They apply under either enforced constraint.
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&ou can enforce only one of these two constraints in a plan: the other constraint is the non'
enforced constraint. 0on'enforced constraints do not restrict the solution, they result in
e#ception messages if the planning engine needs to violate them.
Typically, we refer to enforce capacity constraints plans as feasible plans because they are
plans that%
8 ,ave the detail to schedule the shop floor
8 &ou can e#ecute without overloading resource, supplier, and transportation capacities
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Opti,i5ed
#ptimi,ed
The planning run generates a constrained plan with either enforced constraint. 3any solutions
can satisfy the constraints: optimized planning chooses the solution that results in the most
desirable cost outcome for your organization.
4e sometimes refer to the optimized plan type as performing cost'based optimized planning.
The cost outcomes are%
8 Best customer service
8 3inimum inventory investment
8 7reatest profit
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Plan Class +2a,ple% 4nconstrained
Plan Type E'ample: 1nconstrained
9nconstrained planning is the traditional material re/uirements planning and capacity
re/uirements planning (32">52") e#plosion of the master production schedule (3"(). 32"
aligns supply /uantities and due dates with demand /uantities and need dates. 32" calculates
time'phased net re/uirements for every part and generates a replenishment plan based on
assumed infinite material and resource availability.
9nconstrained plans generate supply (planned orders) due at the same time period that demand
occurs. -#ception messages report when material and resource capacity have been e#ceeded,
but orders are not automatically realigned to satisfy these constraints.
$n the figure, the machine capacity paces production for the first three time periods. 3achine
resource capacity is increased at the end of the third period. Then in the fourth and later time
periods, labor becomes the limiting resource.
4ith unconstrained planning, planned production in each time period is matched with demand,
unless a production lot sizing rule or a planning time fence causes a temporary imbalance. $n
the third time period, planned production e#ceeds capacity. 32">52" e#ception messages
would indicate this condition. The planner probably would consider manually shifting some
orders to a later production period to reduce the workload in period ?, and perhaps rerun the
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32">52" calculation to see whether the change causes an overload elsewhere in the
production system.
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Plan &ype +2a,ple% Constrained
Plan Type E'ample: Constrained
5onstrained planning creates a feasible, though not necessarily optimal, production plan.
8 $n the first time period, the demand and supply are e/ual to the machine capacity.
8 $n the second time period, production continues to be paced by the machine capacity
constraint. (upply in this period e#ceeds demand, because 5B" is accumulating
inventory for use during the ne#t time period, in which demand substantially e#ceeds
supply.
8 $n the third time period, production is again limited by the machine constraint. 0ot
enough inventory was built up during the second period to completely cover the e#cess
demand. (ince it is impossible to meet this demand within the constraints, an order
backlog occurs.
8 !dditional machine resources become available in the fourth time period. "roduction is
now limited by labor availability. 6emand is less than supply. (o some of the backlog is
worked off, but not all of it.
8 $n the fifth time period, the remainder of the order backlog is worked off. "roduction is
not constrained by either labor or machine constraints. To produce at capacity in this time
period would create inventory that might not ever be sold. The figure does not show
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enough planning horizon to see whether inventory should be accumulated for a future
peak of demand.
$n this situation, avoiding any backlog would be difficult, because it would re/uire increasing
machine capacity in the short term. That is unlikely to be feasible. By working overtime in the
fourth period, production could be increased to work off the backlog more /uickly. This is a
what'if alternative that could be simulated by increasing the work hours for the labor resource.
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Plan &ype +2a,ple% Opti,i5ed $ith #a2i,u, On-&i,e 6elivery
Plan Type E'ample: #ptimi,ed !ith Ma'imum #n%Time 2elivery
ptimization seeks the production plan that best meets the ob+ective criteria. 1or this e#ample,
say that on'time delivery is a heavily weighted, important ob+ective. !lso assume that the
penalty for late supply (backorders) is higher than the penalty for e#ceeding resource capacity
(overtime). ptimization evaluates these and other trade'off costs.
1or the first three periods in this e#ample, there is no difference between the optimized plan
and the constraint'based plan. ! backlog occurs in the third period because the hard machine
constraint makes it impossible to meet the peak demand in period ?.
,owever, production in the fourth time period is greater than that shown in the 5B" e#ample.
2ecall that in the 5B" e#ample, some of the period ? demand was backordered and not filled
until period @. ptimization weighs the cost of overtime labor in the fourth period against the
cost of carrying the backorder into period @. $f the backorder /uantity is large, and if the
customer is likely to balk at a two'time'period delay, and if the cost of overtime is relatively
low, then optimization would suggest the solution shown in the figure. $n other words, work
overtime in the fourth period to reduce the backlog as soon as possible.
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Plan &ype +2a,ple% Opti,i5ed $ith #ini,i5e )nventory Carrying
Costs
Plan Type E'ample: #ptimi,ed !ith Minimi,e Inventory Carrying Costs
The figure shows what would happen if the optimization ob+ective were changed from
ma#imize on'time delivery to ma#imize inventory turns. $nstead of producing inventory in the
second time period, optimization would delay that production until the fifth time period. This
would ensure that inventory was not stored. $t would ma#imize inventory turnover ratio, but
on'time delivery and customer service would suffer.
There is only one optimal solution for each given set of ob+ectives and penalty factors.
,owever, you can simulate alternate plans using an almost infinite number of combinations of
ob+ectives and penalty factors.
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Plan &ype Scenario
Plan Type Scenario: #vervie!
This set of e#amples uses simplified data to draw out the differences between unconstrained,
constrained, and optimized planning.
!ssume that the sales orders are for the same items and that material and resource capacity is
e#pressed in units per day for the item ordered. !n unusual situation is assumed where the
higher priority sales order (priority A) has a lower sales price per unit (BA.CC).
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Plan &ype Scenario
Plan Type Scenario: 1nconstrained
9nconstrained plans will generate supply (planned orders) due at the same time as the demand
need date. &ou will, however, receive e#ception messages alerting you when material and
resource capacity have been e#ceeded. This e#ample shows that the planned supply /uantities
and due dates are aligned with the demand /uantities and need dates.
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Plan &ype Scenario
Plan Type Scenario: Constrained % Enforce demand due dates
! plan can be constrained by material only by setting the drop'down list in the capacity
constraints section of the !ggregation tab on the "lan ptions form to &es for material
constraints and by setting the drop'down list in the resource constraints section to 0o.
$n this e#ample, daily production is limited by the material constraint to @C units per day.
0ote that constrained but non optimized plans respect order priorities, even though plan profit
could be increased by filling the higher'revenue but lower'priority order first.
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Plan &ype Scenario
Plan Type Scenario: Constrained % Enforce capacity constraints
! plan can be constrained by resources only by setting the drop'down list in the capacity
constraints section of the !ggregation tab on the "lan ptions form to 0o for material
constraints and by setting the drop'down list in the resource constraints section to &es.
$n this e#ample, daily production is limited by the resource constraint to DC units per day.
0ote that in this e#ample, you will receive e#ception messages notifying you that material
capacity has been e#ceeded. &ou will also receive e#ception messages notifying you that the
priority E sales orders are backordered.
Chapter 2 - Page '0
Plan &ype Scenario
Plan Type Scenario: #ptimi,ed
$n this e#ample, we assume that both 3aterial 5onstraints and 2esource 5onstraints are set to
&es, the ptimization check bo# is checked, and the ma#imize plan profit ob+ective is heavily
weighted.
6aily production in this e#ample is limited by material to @C units, because material capacity is
less than resource capacity. 4ith optimization, the priority of the orders can be overridden if
optimization sees a way to come closer to meeting the optimization ob+ectives. $n this e#ample,
order priority is violated because plan profit can be increased by filling the priority E orders
before the priority A orders.
Chapter 2 - Page 50
&opic Overvie$% ),ple,entation Progression
Chapter 2 - Page 51
),ple,entation Progression
Implementation Progression
9nconstrained plans ' verify setup
8 6uplicate results of legacy 32" system
8 $ncrease familiarity and confidence
5onstraint'based plans ' /uick benefits
8 7enerate feasible production plans
8 0o additional transaction source instance setup is needed
6ecision rules ' consider alternates
8 !utomate selection of alternate items, routings, sources
ptimization ' continuous improvement
8 -stablish plan ob+ectives
8 (et up default penalty factors
8 7enerate optimized plans
8 2efine model based on e#pected costs and benefits
8 (et up penalty factors at detailed hierarchy level
Chapter 2 - Page 52
8 (imulate and evaluate multiple plans
Chapter 2 - Page 5"
),ple,entation Progression% 4nconstrained
Implementation Progression: 1nconstrained
!n unconstrained supply chain plan does not account for e#isting capacity limits for material
or production resources. The result is a statement of what resources would needed throughout
the supply chain to completely fulfill a given master production schedule. This approach
produces the same result as the traditional master production schedule, material re/uirements
planning, capacity re/uirements planning se/uence. $t is useful for medium and long range
resource re/uirements planning decision support.
$mplementing an unconstrained supply chain plan involves establishing communication links
with the transaction source database instances, copying the source setup information to the
!"( server, and launching the !(5" programs to generate the supply chain plan.
8 5reate database links to establish communication between the transaction source
instances and the advanced planning and scheduling planning server
8 (et up collection programs to specify which instances and information types to collect
8 2un collection programs to copy supply chain models from the transaction source
instances to the advanced planning and scheduling (!"() server
8 6efine a supply chain plan name and options for an unconstrained supply chain plan
8 .aunch the named supply chain plan
Chapter 2 - Page 5'
9nconstrained planning is designed to produce identical results as that of a legacy -2" system.
This is useful in verifying implementation and in building user confidence with the !(5"
product.
Note: 9nconstrained plans generate messages noting the supplier and resource constraints that
are e#ceeded by the plan if%
8 The "lan 5apacity checkbo# located on the !ggregation tab of the "lan ptions window
is selected, and
8 The violation is sufficient to pass the message filter values specified on the applicable
-#ception (et.
Chapter 2 - Page 55
),ple,entation Progression% 4nconstrained
Implementation Progression: 1nconstrained
!n unconstrained supply chain plan does not account for e#isting capacity limits for material
or production resources. The result is a statement of what resources would needed throughout
the supply chain to completely fulfill a given master production schedule. This approach
produces the same result as the traditional master production schedule, material re/uirements
planning, capacity re/uirements planning se/uence. $t is useful for medium and long range
resource re/uirements planning decision support.
$mplementing an unconstrained supply chain plan involves establishing communication links
with the transaction source database instances, copying the source setup information to the
!"( server, and launching the !(5" programs to generate the supply chain plan.
8 5reate database links to establish communication between the transaction source
instances and the advanced planning and scheduling planning server
8 (et up collection programs to specify which instances and information types to collect
8 2un collection programs to copy supply chain models from the transaction source
instances to the advanced planning and scheduling (!"() server
8 6efine a supply chain plan name and options for an unconstrained supply chain plan
8 .aunch the named supply chain plan
Chapter 2 - Page 5*
9nconstrained planning is designed to produce identical results as that of a legacy -2" system.
This is useful in verifying implementation and in building user confidence with the !(5"
product.
Note: 9nconstrained plans generate messages noting the supplier and resource constraints that
are e#ceeded by the plan if%
8 The "lan 5apacity checkbo# located on the !ggregation tab of the "lan ptions window
is selected, and
8 The violation is sufficient to pass the message filter values specified on the applicable
-#ception (et.
Chapter 2 - Page 5-
),ple,entation Progression% Constrained
Implementation Progression: Constrained
5onstrained'based supply chain plans are bound by limits on material and resource availability.
3aterial and capacity constraints can be considered individually or simultaneously.
$mplementation for constraint'based planning is the same as implementation for unconstrained
planning, plus a small number of additional plan options need to be selected. racle constraint'
based planning is designed to produce feasible plans with minimal implementation effort.
(ome e#amples of constraints are%
8 3aterial constraint% ! supplier can provide up to @CC units of a component item for each
day during the time period between =une A and !ugust ?A.
8 3aterial constraint% ! supplier makes deliveries only on 3ondays.
8 2esource constraint% ! work center department has two identical machines that are
available every workday from F%CC am to ?%CC p.m. 2outings state how much machine time is
consumed during the setup and production of items routed through the work center.
8 2esource constraint% Transportation of wheat to a seaport is limited by the availability of
railroad cars during =uly
&ou can set some constraints as non'enforced''the planning engine tries to respect them but
can violate them, if necessary, and create an unfeasible plan. This capability, can be very useful
Chapter 2 - Page 5.
for implementations because you can selectively enforce constraints. 1or e#ample, if your
routing resource usages are not currently e#act enough to support accurate planning results and
you launch an enforce capacity constraints plan, either the plan would not be e#ecutable or
would under'utilize shop floor capacity, all because the resource usage in the routings are
higher or lower than what the shop floor can really do. $n this case, you can still enable
constrained planning but not respect resource constraints since your data cannot support it.
Chapter 2 - Page 50
),ple,entation Progression% 6ecision 7ules
Implementation Progression: 2ecision 3ules
6ecision rules are additional instructions to the planning engine to use substitute items and
alternate bills of material and routings to produce the supply with fewer constraint violations.
They apply under either enforced constraint.
Chapter 2 - Page *0
),ple,entation Progression% Opti,i5ed
Implementation Progression: #ptimi,ed
The source instance setup for optimized planning is the initially the same as the setup for
unconstrained planning. 4hen the implementation progresses to the point of modeling penalty
factors at a detailed level of the hierarchy, then some additional setup needs to be made in the
source instances. (imilarly, the $nventory ptimization component uses service level
information that is initially set up at a default level and can later be refined with detail level
data set up in the source instances.
3odeling transportation capacity constraints uses item attribute data that might not have been
originally set up, but this is a matter of going back and completing e#isting fields.
5ompared to constraint'based planning, some additional plan options, such as weights for plan
ob+ectives and plan'level penalty factors need to be specified. racle optimized planning is
designed to continually improve plans with ongoing implementation effort.
Penalty Costs
&ou can enter penalty cost information in a multi'level hierarchy. The figure shows the five
hierarchy levels where you can set up penalty costs for e#ceeding resource capacity.
"enalty costs set up at a detailed level of the hierarchy override penalty costs set up at more
general levels. $mplementations typically begin with penalty costs set up at the general level. $n
Chapter 2 - Page *1
this way the model can be /uickly set up to begin return on investment. !s time permits, costs
can be entered at more detailed levels of the hierarchy to provide a more precise model for the
optimization engine.
7enerating optimized plans with certain costs set to zero will yield unpredictable results.
ptimization re/uires, as a minimum, that a default cost value is set at the top level for every
penalty cost hierarchy.
Chapter 2 - Page *2
),ple,entation Progression
Implementation Progression: #ptimi,ed and Plan Profit
!(5" is not a financial application. 6uring advanced phases of implementing the !(5"
optimization option you will set penalty factors at increasing levels of detail. This tends to
improve the precision of the production operations model.
Plan Profit is not the bottom line !s you refine your models, the effect of implementing
additional penalty factors might appear to decrease Gplan profitH. $t would be wrong to
conclude that by increasing the precision of your planning model you will decrease the
financial profitability of your enterprise.
Penalt! costs are relati"e The optimization algorithm drives high cost alternatives out of the
solution. By setting penalty costs to reflect social and business priorities, you can motivate the
solution to avoid undesirable strategies. !s a side'effect of this practice, the reported Gplan
profitH is decreased by a collection of artificial penalty costs. Therefore Gplan profitH bears
little relationship to financial profits reported to stockholders
1or e#ample, let $tem ( represent a substitute for $tem !. !ssume the costs for these items are
e/ual. By attaching an artificial penalty to substitute items, the planning solution will be driven
to use up $tem ! before employing the substitute $tem (. ,owever, when $tem ( is used, the
Gplan profitH will decrease by the cost of $tem ( plus the artificial penalty cost.
Chapter 2 - Page *"
(ene/its o/ ),ple,enting in Phases
Benefits of Implementing in Phases
!dvanced (upply 5hain "lanning can be implemented in a low risk progression. &ou do not
need to invest in new manufacturing applications before implementing !(5". &ou can do a
fast implementation and /uickly realize some benefits. &ou can use the savings to fund the
ne#t implementation phase. -ach implementation pro+ect phase presents an opportunity to
evaluate costs and benefits of proceeding with the ne#t level of detailed implementation.
Chapter 2 - Page *'
&opic Overvie$% Planning (usiness 1lo$
Chapter 2 - Page *5
ASCP (usiness 1lo$
Chapter 2 - Page **
ASCP (usiness 1lo$% Prepare
Specify Sources of 2emand
3aintain forecasts either in%
8 racle 6emand "lanning
8 racle 3aster (cheduling>32"
5alculate safety stock level in racle $nventory ptimization.
$n this step, you can determine postponement and time'phased safety stock levels.
Chapter 2 - Page *-
ASCP (usiness 1lo$% +2ecute
3un Production Plan
.aunch the planning engine.
Chapter 2 - Page *.
ASCP (usiness 1lo$% Analy5e
Analy,e Plan
Before releasing orders from the plan, analyze%
8 )ey performance indicators
8 -#ception messages
Ad.ust Plan
3ake manual ad+ustments to the plan based on plan review and new information.
1or all plan types, change%
8 (upply and demand levels
8 3anufacturing, supplier, and transportation capacity
1or optimized plans, change your optimization ob+ectives.
Simulate !ith 3evised Constraints
2un the plan in simulation mode with revised constraints to model potential solutions to
limitations.
Colla)orate on 3evised Constraints
5ollaborate with internal and e#ternal parties to agree on revised constraints.
Chapter 2 - Page *0
ASCP (usiness 1lo$% ),ple,ent
Implement 3evised Constraints
$mplement the revised constraints based on the collaboration results. $mplementing the revised
constraints by changing information at its source%
8 Transaction data, for e#ample, resource hours or routing assigned units
8 1orecast /uantities in the planning data, for e#ample, sourcing rules or forecast /uantities
3elease Schedule
The planning engine produces a schedule for your production, procurement, and transportation:
the schedule consists of planned orders (suggested new supply) and recommendations
(suggested changes to supplies). 2elease them into the transaction data for action.
!fter release, you may use other functionality to schedule the shop floor, for e#ample, racle
3anufacturing (cheduling.
Chapter 2 - Page -0
&opic Overvie$% Planning 6ata 1lo$
Chapter 2 - Page -1
Planning 6ata 1lo$
Planning 2ata &lo!
racle !dvanced (upply 5hain "lanning uses two sets of data%
8 Transaction data% The transaction systems in your facilities. The transaction systems are
those that your workers use to duplicate your actual GsystemH, for e#ample, entering sales
orders and recording inventory receipts.
1or most users of racle !dvanced (upply 5hain "lanning, the transaction data is the
collection of racle e'Business (uite tables that store data for the racle (upply
5hain 3anagement e#ecution modules, for e#ample, racle rder 3anagement,
racle "urchasing, racle 4ork in "rocess, racle Bills of 3aterial, racle
$nventory, and racle 5osting.
8 "lanning data% The planning system. The system that plans what the transaction systems
need to do to meet demand.
1rom a technical perspective, the planning data as a whole resides in two data stores''
the planning data store ("6() and the operational data store (6(). The term
planning data refers to the data in the planning data store and the operational data
store.
Chapter 2 - Page -2
To perform planning, data must move from the transaction data to the planning data. !fter
planning and evaluation by the planners, changed data moves back to the transaction data.
Chapter 2 - Page -"
Planning 6ata 1lo$
Planning 2ata &lo!
$n some cases, your organization may make a technical decision to have the transaction data
and the planning data on separate instances. !n instance is a group of data tables or a schema
on a particular computer server.
;ery large organizations may use multiple instances because%
8 The planning engine is a heavy user of computer processing
8 They re'plan fre/uently
8 They have multi'time zone, round'the'clock transaction processing
8 They do not want to risk impacting the performance of the transaction systems during
planning
8 The transaction data may be on a legacy system
Chapter 2 - Page -'
Planning 6ata 1lo$
Planning 2ata &lo!
$n some cases, your organization may make a technical decision to have the transaction data
store and the planning data store on the same instance.
rganizations may use a single instance because%
8 $t is less complicated to maintain technically
8 They do not have the same concerns about performance as organizations who decide to
use two instances. They believe that one instance should provide proper performance for the
organization.
Chapter 2 - Page -5
Planning 6ata 1lo$
Planning 2ata &lo!
6ata 5ollection% Between launches of the planning engine, you collect the data. 5ollecting data
makes a copy of all or part the transaction data store in the planning data store.
!s a planner, you need to be aware of the timing issues involved in data collection. 5ertain
data in the planning data store will or will not match data in the transaction data store
depending on your organizations data collection schedules.
5ollections 4orkbench% "lanners use a collections workbench to review and prepare the
collected data for the planning process.
(upply 5hain "lan "rocess% Balances supply and demand.
"lanner 4orkbench% "lanners use a planner workbench to%
8 (ee the recommendations of the planning engine
8 (ee the supporting data used in the planning engine
8 !nalyze and ad+ust the results of the planning engine
8 $mplement the recommendations of the planning engine
2elease "lanned rders>2ecommendations% !s the planners implement recommendations in
the planning data, they move to the transaction data to be acted upon.
Chapter 2 - Page -*
Su,,ary
Chapter 2 - Page --

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