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Supply Chain Management (SCM) is effectively managing flow of materials, information, and finances as they move in a process from vendor to manufacturer to dealer to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies.

The main goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available at the right time and at the right place).

Supply chain management flows can be divided into three main flows:

  The product flow
  The information flow
  The finances flow

The product flow includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs. The information flow involves transmitting orders and updating the status of delivery. The financial flow consists of credit terms, payment schedulesand consignment and title ownership arrangements.

There are two main types of SCM software: planning applications and execution applications. Planning applications use advanced algorithms to determine the best way to fill an order. Execution applications track the physical status of goods, the management of materialsand financial information involving all parties.

SAP Advanced Planner & Optimizer (APO):

SAP APO is a planning application. SAP APO uses a library of advanced optimization algorithms and a high performance, memory resident data processor to perform planning and optimization. SAP APO offers wide range of solutions which can be customized as per the business need. There are different modules available in SAP APO to cater to various process needs with in SCM.

SAP APO can be configured to provide task-specific, industry specific and company-specific optimization, automated decisionand real-time event notification to the underlying business processes.

Main advantages of SAP APO:

  Easily integrated with SAP R/3.
  Central database for planning.
  Configurable as per business needs.
  Performance in data processing.
  Increase ROI on the original SAP investment.


The Demand Planning component offers statistical forecasting techniques and demand planning features that helps you create accurate forecasts and plans. Demand planning provides an interface where in users can view and modified data at various level. Demand Planning is tightly linked to the SAP Business Information Warehouse (BIW). BIW provides capabilities of Online Analytical Processing (OLAP) techniques that can be used to analyze data at various levels.

(1.1) Consensus Based Forecasting

Forecast relevant data can be collected from various sources and stored in Demand Planning. Consensus can be achieved between various business users in terms of finalizing the demand plan.

(1.2) Statistical Forecasting

Demand Planning provides various in-built forecasting models e.g. Moving Average, Exponential Smoothing, Seasonal, Trend Model etc. These models are used before firming the demand plan. These models are carefully selected based on characteristics of individual product or product family.

(1.3) Life Cycle Planning

Life Cycle Planning can be performed using Demand Planning. Life Cycle Planning manages the life cycles of products according to such factors as product supercession, substitutionand cannibalization. Forecasting can also be performed for new products for which there is no sales history available.

(1.4) Promotion Planning

Fluctuations in demand can be counteract using promotions that are based on historical patterns and profitability goals.

(1.5) Realignment

Sales data can be realigned using Demand Planning.



Global Available to Promise can be used to improve service levels in terms of promising the customers about the quantity and date by which product will be available. Availability check is mainly used for sales. This can also be used for distribution and production.

(2.1) Methods of availability check

Following methods are available for availability check:

  Forecast Check
  Product Check
  Product Allocation Check

Availability check can be performed against the forecast, product allocation, product check or the combinations of the three.

(2.2) Ruled Based ATP

Rules based ATP can be used to substitute product or location or combination of product and location during availability check.

(2.3) Back Order Processing

Back order processing can be used to reschedule the orders based of their priority. Product check and allocation check can be used along with BOP. Substitution can also be performed while performing BOP.

(2.4) Capable to Promise (CTP)

Capable to Promise can be used to trigger production e.g. planned orders during an availability check. Production can be triggered before or after checking availability using basis methods.

(2.5) Multi Level ATP

Multi Level ATP can be used to check availability of components to confirm header product. As CTP, this can also be used in combinations with basic methods.



Supply network planning can be used to model entire supply network and all its constraints. Feasible plans can be made related to procurement, production, inventory stock transfer, transportation and to match demand and supply. Deployment functionality can be used to plan the distribution.

(3.1) Heuristics

Heuristics can be used for infinite planning related to production and distribution. Levels by level procedures are performed to achieve the desire results.

(3.2) Capable to Match (CTM)

Capable to Match can be used to match demand and supply. Demand elements are prioritized, supply elements are categorizedand demands are matched with the supplies. Supply limits can be defined to keep certain level of inventory.

(3.3) Optimizer

Optimizer can be used to plan production, distribution and procurement. The objective of the optimizer is to either maximize the profit or minimize the cost. Linear programming is used for this purpose. Costs related to transportation, storage, production and handling can be taken care while finalizing optimal solution.

(3.4) Deployment

Deployment can be used to determine distribution of available supply to various demand elements. Methods such as fair share rule can be used to optimize distribution using deployment. Deployment strategies pull, pull/push, push by demands, etc. can be used to determine point in time of the stock transfer.

(3.5) Transport Load Builder (TLB)

Transport Load Builder component of Supply Network Planning optimizes transport loads by grouping available products based on the Deployment recommendations. It creates loads of multiple products and ensures that vehicles are filled to maximum capacity.

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