SAP Press – Inventory Optimization with SAP (2ed)

Inventory Optimization with SAP (2nd Edition)

How can you reduce expensive warehouse stock without risking your customer satisfaction, ability to deliver, and market position? This book teaches you how by providing clear, straightforward details about the SAP system options for implementing efficient inventory management.

You’ll learn about all of the different functions of SAP ERP and SAP SCM (SAP APO) that are needed to master inventory optimization. In addition, you’ll learn about the critical factors that affect your inventory, from inventory analysis, demand planning, and MRP, to service level, lot size, production, and inventory monitoring.

This completely updated and expanded second edition includes new sections on MRP and inventory controlling, and is based on SAP ERP 6.0 and SAP SCM 5.1.

Highlights

• Why Is Inventory Necessary?
• Inventory Analysis Options: ABC and XYZ Analysis
• Demand Planning and Forecasting: Overview of Forecast Methods, Running a Forecast
• Material Requirements Planning: Make-to-Stock Production, Maketo- Order Production, Consumption- Based MRP, VMI, and SMI
• Safety Stocks and Service Level: Safety Stock Planning in SAP ERP, Global ATP, SAP APO PP/DS and DP/SNP
• Lot Size Optimization: Lot-Sizing Procedures in SAP ERP and SAP APO
• Production: Backlog and Missing Part Reduction, MRP II, and SAP APS
• Controlling and Inventory Monitoring: Analyses using SAP APO, SAP LIS, and SAP NetWeaver BI

About the Author(s)

Marc Hoppe holds a degree in business administration and has many years of experience as a management consultant in the SAP environment. He currently works as a senior consultant with a focus on logistic issues at the consulting firm SAP Deutschland.

Table of Contents

1 … Why Inventory is Necessary … 25
… 1.1 … Inventory Concepts … 26
… 1.2 … How to Deal With Uncertainties … 38

2 … Factors Influencing Inventory … 43
… 2.1 … Five Instruments … 43
… 2.2 … Controlling by Inventory Monitoring … 50

3 … Inventory Analysis … 51
… 3.1 … Inventory Analysis Options … 51
… 3.2 … ABC Analysis with SAP … 60
… 3.3 … XYZ Analysis in the SAP System … 81
… 3.4 … Combining ABC and XYZ Analyses … 83
… 3.5 … Summary … 98

4 Demand Planning and Forecasting … 99
… 4.1 … The Influence of Demand Planning on Inventories … 99
… 4.2 … The Bullwhip Effect … 102
… 4.3 … Optimization Potentials for the Forecast … 104
… 4.4 … Selecting the Forecast Method … 140
… 4.5 … Details of the Individual Forecast Methods … 157
… 4.6 … Running a Forecast … 189
… 4.7 … Forecast Accuracy and Alert Functions … 206
… 4.8 … Summary … 231

5 Material Requirements Planning … 233
… 5.1 … Objectives of MRP … 233
… 5.2 … Requirements Calculation … 235
… 5.3 … Accumulated Balances … 239
… 5.4 … Order Calculation … 241
… 5.5 … Impact of MRP on Inventory … 249
… 5.6 … Tools for Selecting the Optimal MRP Parameter … 258
… 5.7 … Strategic vs. Operative MRP … 260
… 5.8 … Strategies for Make-to-Stock Production in SAP ERP … 266
… 5.10 … Strategies for Make-to-Order Production in SAP ERP … 289
… 5.11 … Consumption-Based Material Requirements Planning
Using SAP ERP … 294
… 5.12 … Requirements Strategies in SAP APO … 303
… 5.13 … VMI and SMI MRP Procedures … 305
… 5.14 … Potential for Optimization in Material Requirements Planning … 327
… 5.15 … Summary … 334

6 Service Level and Safety Stocks … 335
… 6.1 … Relationship Between Stock and Service Level … 335
… 6.2 … Service Level … 338
… 6.3 … Replenishment Lead Time … 366
… 6.4 … Forecast Quality … 373
… 6.5 … Safety Stock … 378
… 6.6 … Safety Stock Planning in SAP APO SNP … 404
… 6.7 … Safety Stock Planning Using SAP APO CTM … 436
… 6.8 … Safety and Target Stock Planning in SAP APO PP/DS … 440
… 6.9 … Parameter-Dependent Safety Stock in SAP APO DP and GATP … 446
… 6.10 … Summary … 449

7 Lot Sizes … 451
… 7.1 … How Do Lot Sizes Affect Stocks? … 451
… 7.2 … Stochastic (Static) Lot-Sizing Procedures in SAP ERP and
SAP APO … 453
… 7.3 … Deterministic (Periodic) Lot-Sizing Procedures in SAP ERP
and SAP APO … 463
… 7.4 … Optimal Lot-Sizing Procedures in SAP ERP and SAP APO … 481
… 7.5 … Restrictions in the Lot-Size Calculation … 501
… 7.6 … Selecting Lot-Sizing Procedures … 503
… 7.7 … Summary … 506

8 Production … 507
… 8.1 … How Do Backlogs in Production Affect Stocks? … 508
… 8.2 … Why Do Backlogs Occur in Production Planning? … 514
… 8.3 … Reducing of Backlogs … 519
… 8.4 … Missing Parts Management in Production … 535
… 8.5 … Finite Planning and Optimization in SAP APO … 547
… 8.6 … Heuristics for Inventory Optimization … 596
… 8.7 … Alerts and Their Processing … 607
… 8.8 … Simulation and Comparison of Planning Results … 610
… 8.9 … Capable to Promise (CTP) … 616
… 8.10 … Embedding Superordinate and Subordinate Planning Levels … 618
… 8.11 … Best Practices for Using SAP APO PP/DS … 622
… 8.12 … Summary … 623

9 Inventory Controlling … 625
… 9.1 … Why Inventory Monitoring? … 625
… 9.2 … Introduction to Logistics Controlling … 626
… 9.3 … The Information System According to Ehrmann … 628
… 9.4 … The Information System of the SCC … 632
… 9.5 … Problems with Data Collection … 637
… 9.6 … Important Inventory Key Figures … 638
… 9.7 … Tools for Inventory Analysis … 652
… 9.8 … Inventory Monitoring in SAP ERP … 656
… 9.9 … Inventory Controlling with SAP APO and SAP NetWeaver BI … 660
… 9.10 … Summary … 678

Appendix … 681
… A … Literature … 683
… B … Author … 691
… C … SAP ERP Add-ons … 693
… C.1 … Forecast Monitor … 693
… C.2 … MRP Monitor … 693
… C.3 … Replenishment Lead Time Monitor … 693
… C.4 … Backlog Monitor … 693
… C.5 … Service Level Monitor … 693
… C.6 … Missing Parts Monitor … 694