Overview of Oracle ASCP

Supply-Demand Pegging
Sajeev Nair
Managing Principal Consultant,
Oracle VCP
Rapidflow Apps Inc.
Information
About the Author
This document is prepared by Sajeev Nair, from RapidflowApps Inc. Sajeev Nair has
14 years of industry experience in the Supply Chain and Manufacturing domain,
having worked as a consultant in many complex supply chain IT projects involving
Oracle VCP and related products. Sajeev has also worked as a supply chain manager
in the auto industry and is certified by APICS CSCP.
About the Company
Rapidflow Apps was founded with the sole objective of providing high quality,
innovative and practical solutions to the real world business problems of our clients in
the areas of Supply Chain Planning, Product Lifecycle Management, Master Data
Management and Business Intelligence.
Why look at Pegging ?
Supply-Demand pegging is a central and important feature of the ASCP Planning
engine, which links each individual supply and demand in the plan
Pegging feature enables business to:
Ensure limited material and capacity resources are allocated to higher priority
demands
View supply status from bottom level purchased part linked to multiple demand
levels up to the top independent demand
Understanding pegging is critical for business users who need to analyze and take
decisions based on the ASCP plan output
Configuring the optimal pegging behavior becomes very important in business
scenarios where the ASCP pegging information is directly used to take decisions on
material/resource allocation or when used in critical reports
Pegging Overview
ASCP selects demands and locates supplies to peg those demands
Pegging is done all the way up to the top-level independent demand, and all the way
down to the bottom-level purchased component supply.
Pegging process involves:
Grouping supplies and demands into time windows
Sorting supplies by type
Pegging by demand priority or randomly within time windows
Oracle allows four pegging options:
Standard pegging
Priority pegging
FIFO pegging
Priority/FIFO pegging
Settings for Pegging
Pegging feature needs to be enabled at
Item Master MRP Planning tab
ASCP Plan Options
MSC: Use FIFO Pegging : For all demands and supplies, it proceeds item by
item and pegs supplies to demands on a daily basis. When supplies or
demands on a given date are used up, it picks from supplies or demands on
the next date. The unpegged supplies are pegged to excess.
MSO: Demand Window Size: During priority pegging, demands are sorted
based on the demand priority within the demand window. After these
demands are fully pegged, ASCP sorts all demands in the next window by
priority. This is specified as the number of working days. With a value of 05,
the first demand window is between the start date of the plan or the first
demand date +05 days.
MSO: Supply Window Size: During priority pegging, supplies are sorted based
on supply type, then smallest quantity, then by schedule date. The highest
priority demands from the first demand window will peg to the sorted
supplies in the first window if possible. When the supplies from one window
are all pegged, the demand will peg to the highest sorted supply in the next
window until all demands are pegged. This is specified in the number of
working days.
Settings for Pegging Profile Options
Settings for Pegging Profile Options
MSO: Firm Supply Allocation Window (Backwards Days) : The allocation of
firm supplies to demands is based on demand priorities within the Firm Supply
Allocation window. This window is derived dynamically for each demand; it
starts with the demand due date and goes backwards to the window size.
MSO: Firm Supply Allocation Window (Forwards Days) : This window is
derived dynamically for each demand; it starts with the demand due date and
moves forwards to the window size. This pegs demands to firm supplies that
are scheduled after the demand date. After searching backward, it searches
forward by the number of days set by this profile option, pegging the supply
with the nearest (earliest) schedule to the unallocated demand quantity.
MSO: Net all Firm Supplies Before Creating Planned Orders : Nets all firmed
supply available in any future period before creating new planned orders. The
values are:
No: Does not net firm supplies before creating planned orders.
All Supply Types: Net all firm supplies before creating planned orders. This includes
work orders, purchase orders, transfer supplies and firm planned orders for these
supplies.
Only for Work Orders: Net only firm discrete jobs before creating planned orders.
Only for Purchase and Transfer Supplies: Net all firm purchased and transfer
supplies before creating planned orders.
MSO: Multiplier to Derive Supply Allocation Window : ASCP derives a firm
supply allocation window (backwards) for each item based on its item
attributes as follows:
Make item: Cumulative manufacturing lead time * MSO: Multiplier to derive supply
allocation window
Buy item: Processing lead time * MSO: Multiplier to derive supply allocation window
Settings for Pegging Profile Options
Pegging Process
The planning engine pegs each item after the netting process. It begins with all of
the items in the highest bill of material level and proceeds level by level to the
lowest bill of material level.
Demand and supply are grouped based on the window size selected
Demands in each window are sorted by demand priority in ascending order.
Supplies in each window are sorted by type using the following order:
1. Firm supplies : On-hand, Receipt & Intransit shipment, Firm work order & firm PO, Firm
Purchase requisition
2. Existing supplies: Non firm Work order, PO, Purchase requisition
3. Planned supplies: Unreleased planned orders
The supplies in each type are sorted as follows:
On-hand: Lot expiration date and then quantity in ascending order to use expiring
lots first.
Firm: By date in ascending order within each type.
Non-firm: By quantity in ascending order within each type.
Pegging Process
ASCP gives the option to choose between these pegging modes:
Standard pegging: Standard pegging groups demands into windows and supplies by
type, then pegs by priority within window. It provides a limited amount of
prioritization at the day level (the window size is always one day).
Priority pegging: Priority pegging pegs high priority demands first to on-hand and
firm supplies then continues with other existing and non-firm supplies. It controls the
trade-off between holding inventory or satisfying lower priority demands.
FIFO pegging: FIFO pegging pegs demands to supplies on a day-by-day basis. It is the
pegging process with the least load on the system.
Priority/FIFO pegging: The planning engine uses a combination of priority pegging
and FIFO pegging methods where it does not prioritize beyond the firm supplies. The
load on the system is less than the load from priority pegging.
Pegging Modes
The four pegging modes are chose based on the combination of Peg supplies by
Demand Priority checkbox in Plan options, and values of profile option MSC: Use
FIFO Pegging
Pegging Mode Peg by priority checkbox MSC: Use FIFO Pegging
Standard Not selected No
Priority Selected No
FIFO Not selected Yes
Priority/FIFO Selected Yes
Pegging Modes
Standard Pegging
Standard pegging involves the following steps:
1. The planning engine groups demands and supplies into daily windows by demand
priority and supply sorting sequence
2. The planning engine begins from the first demand window and pegs demands by
demand priority to supplies of the first supply window. If necessary, it continues
the pegging process with the next supply window.
3. As all demands in the each demand window are pegged, it moves to the next
demand window and pegs as it did in the first demand window. Unpegged
supplies are posted to excess.
1 2 3 4 5
Purchase
Order
On
Hand
Planned
Order
Sales
Order
15
10
05
10
10
20
40
15
20
20
Standard Pegging Example
Demand and supply has been grouped in daily windows. Sales order demand has
been sorted based on priority, and supplies based on supply type.
Pegging begins from the 1
st
demand window, with Sales order of 10, and pegs it to
first supply available, a On hand qty of 5, and remaining 5 then with a planned
purchase order.
Once the sales order with highest priority is fully pegged, the 2
nd
sales order of qty 15
is pegged with the first available supply of 15 nos. of planned purchase order.
When the 1
st
demand window is fully pegged, it moves to the next demand window,
the 3
rd
and searches for available supply from the earliest supply window. As supply
window 1 is exhausted, it starts pegging from supply window 2, starting with firm
purchase order qty of 10, and then planned purchase order of 10.
When the supply window 2 is fully pegged, it moves forward to the next available
supply window and comes to window 4.
Standard Pegging Example
Priority Pegging
Priority pegging involves the following steps:
1. The planning engine starts with the demand of highest priority as specified by the
plan's demand priority rule. It scans backwards the number of days in the site or
item-specific firm supply allocation window, profile option Firm Supply Allocation
Window (Backward days) and finds the first firm supply quantity to peg the
demand to.
2. If it cannot find enough firm supply quantity to satisfy the entire demand
quantity, it scans forwards the number of days in the site or item-specific firm
supply allocation window, profile option Firm Supply Allocation Window (Forward
days) to find supplies to peg the demand to.
3. The above steps end when the demand is completely pegged to firm supplies or
all firm supplies in the firm supply allocation windows are exhausted.
Priority pegging involves the following steps:
4. For the remaining demands and supplies, the planning engine groups all
demands and supplies into windows of days by using profile option
Demand/Supply Window Size, in demand priority and supply sorting sequence
5. Similar to standard pegging, the planning engine begins from the first demand
window and pegs demands by demand priority to supplies of the first supply
window. If necessary, it continues the pegging process with the next supply
window.
Priority Pegging
1 2 3 4 5 6
15
20
15
15
05
15
10
50
10
10
25
20
Purchase
Order
On Hand
Planned
Order
Sales
Order
Priority Pegging Example - A
Priority Pegging Example - A
Pegging begins from the demand of highest priority, Sales order of 20 on day 2, and
searches backwards for a firm supply (based on profile option Firm Supply Allocation
Window (Backward days) =1).It can look back up to 1 day back, and finds a firm
supply, Onhand qty 15 on Day1 to peg to.
If the demand is not met, then it next scans forward for a firm supply (based on
profile option Firm Supply Allocation Window (Forward days) =1).It can look forward
up to 1 day, and finds a firm supply, Purchase order qty 05 on Day 3 to peg to. Here
supply of day 2, is not a firm supply, so pegging in this phase ignores it.
Pegging takes up the next highest priority demand, Sales order on day 4 of qty 50.
Since there is no firm supply by searching backwards, it searches forward and pegs to
firm purchase order, qty 25 on day 5.
This pegging phase ends when all the firm supplies have been pegged
1 2 3 4 5 6
15
20
15
15
05
15
10
50
10
10
25
20
Purchase
Order
On Hand
Planned
Order
Sales
Order
Priority Pegging Example - B
The planning engine next groups supplies and demands to windows based on using
profile option Demand/Supply Window Size.
The demand window starts at first demand date, day 2 and ends on day 3 based on
the profile option demand window size, kept at 2. From here on each demand
window is of 2 days each till the end of planning horizon
The supply window starts at first supply date, day 1 and ends on day 3 based on the
profile option supply window size, kept at 3. From here on each supply window is of
3 days each till the end of planning horizon.
After grouping into windows, the supplies and demands are pegged as per sorting
order and priority respectively
Priority Pegging Example - B
Pegging starts with highest priority demand in the 1
st
demand window, i.e. sales
order on day 2 with qty 15. Supply is found in the 1
st
demand window on day 2 in the
form of a planned order. Here unlike the 1
st
phase of pegging, even if sales order on
day 4 has higher priority than sales order on day 2 with qty 15, it has to wait before
all demand in the previous demand window has been pegged.
This phase of pegging is similar to standard pegging, but with variable demand and
supply windows, instead of fixed window size of 1, as in standard pegging
Priority Pegging Example - B
FIFO Pegging
FIFO pegging involves the following steps:
1. The planning engine pegs demands to supplies day by day. It does not sort each
days supplies and demands.
2. When there are no more supplies or demands on one day, uses supplies or
demands from the next day
3. At the end of the planning horizon, posts unpegged supplies to excess.
1 2 3 4 5 6
15
20 15
15
05 15
10
50
10
10
25
20
15 05
10
10
05 10
10
Purchase
Order
On Hand
Planned
Order
Sales
Order
FIFO Pegging Example
No sorting of demand or supply is done. There are no sales order priority sorting or
supply type sorting.
Pegging is done on a day to day basis, starting with day 1. When the supply of qty 15
finds no demand to peg to on day 1, it moves to day 2 and pegs to demand of 20.
On day 2, remaining demand of 05 and 15 are pegged to supply of day 2, and
remaining 5 from day 3.
In this way each supply and demand for a day are pegged in the same day or the next
day(s).
FIFO Pegging Example
Priority/FIFO Pegging
Priority/FIFO pegging involves the following steps:
1. The planning engine pegs demands to supplies based on the priority pegging
method of allocating firm supplies
2. For the remaining demands and supplies, the planning engine pegs demands to
supplies day by day based on the FIFO method and does not sort each days
supplies and demands
1 2 3 4 5 6
15
20
15
15
05
15
10
50
10
10
25
20
Purchase
Order
On Hand
Planned
Order
Sales
Order
Priority/FIFO Pegging Example - A
Priority/FIFO Pegging Example- A
The 1
st
phase of pegging is similar to Priority pegging, where highest priority sales
order on day 2 is pegged to firm supplies on day 1 and day 3, while the next highest
priority demand on day 4 is pegged to firm supply on day 5. The 1
st
phase ends when
all the firm supplies have been pegged.
1 2 3 4 5 6
15
15 15
10 25
10
10
20
Purchase
Order
On Hand
Planned
Order
Sales
Order
Priority/FIFO Pegging Example - B
Priority/FIFO Pegging Example - B
For the remaining supply and demands, FIFO pegging logic is followed.
Pegging is done on a day to day basis, starting with day 2 supply and demand, day 3
supply is matched to earliest available demand, on day 3.
In this way each supply and demand for a day are pegged in the same day or the next
day(s).
Demand & Supply Window Sizing
Advantages of small window size:
1. Lower inventory and inventory carrying cost: Earlier demands are pegged to on-
hand instead of higher priority later demands pegging to on-hand.
2. Decrease in total demand lateness: It is more likely that early demands are
satisfied before later demands.
Disadvantages of small window size:
1. A disadvantage of small demand window size is more late higher priority
demands. Lower priority demands are satisfied before higher priority demands
and low priority demands for safety stock peg to on-hand.
Advantages of large window size:
1. A benefit of large demand window size is higher priority demands having a higher
probability of being satisfied earlier.
Disadvantages of large window size:
1. Increased overall demand lateness. selecting a large window size can result in the
planning engine's pegging early demands to firm supplies or non-firm supplies at
the end of the window
2. Increased inventory carrying cost as more inventory is held.
Demand & Supply Window Sizing
Conclusion
The ASCP pegging logic can be difficult to comprehend in many cases, but it need not
be a black box
The pegging logic has multiple setups/controls for modification and fine tuning for
the many business scenarios
If properly understood and implemented, the supply demand pegging is a great asset
to the supply chain users in getting the maximum benefit out of their ASCP
implementation
Feedback
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For consulting services, please contact us at info@rapidlfowapps.com
or visit us at www.rapidflowapps.com
Disclaimer
The information contained in this presentation is for information purpose only and is
based on the personal experience of the presenter and publicly available material on
the subject.
The presenter is not responsible for the claims made about the product benefits by
the product vendor.