Effect of constrained demand in DP

[Former Member]

Hi all

I am facing a problem now. It will be helpful if you answer for the following questions.

DP will generate unconstrained forecast with the help of historical sales data.After that it is released to SNP for SNP planning run.

SNP planning run generate the constrained demand, taking into account the stock and capacity.

There is a new project planned for getting this constrained demand released from SNP to DP. This will be named as constrained forecast in DP.

Folks could you please explain :

1. What is the use of doing this?

2. Will it be released form DP to SNP again?

3. Will it be released to R/3?

Thank you.

Edited by: jithjames on Dec 7, 2011 7:25 AM

[former_member209769 · Accepted solution]

Hi Jithjames,

Rishi already gave you a good reply. Let me also try to explain from my side.

When we do demand forecasting, we are basically looking at history and trying to predict the future. In this forecasting exercise, we don't consider our capacity for production, transportation or possibility to procure to meet the demand. Hence the result of Demand Planning is unconstrained forecast.

In SNP, we are trying to identify ways to meet the demand. The demand would comprise of Forecast, incoming Sales Orders, deliveries, etc. In the SNP planning, we would get to know whether we should produce, transport or procure to meet the demands. In SNP, we would be considering the constraints for our capacities of transportation, production or procurement, hence this is a constrained planning (Exception: SNP Heuristics will not consider capacity constraints, but at higher level, I can still make the comment as above for SNP).

Business might want to have this constrained plan sent to DP e.g. to compare how the capacity looks in relation to the generated forecast. Demand Planners might also finetune the forecast based on capacity constraints, as forecast might be used for various reporting requirements, sales target settings, etc.

Releasing forecast again from DP to SNP might make some sense if it's a MTS scenario, and there are major changes in the forecast (e.g. due to capacity constraints). Releasing to R/3 could be relevant for some business users as an info, otherwise if SNP or PPDS planning happens in APO, this is not really relevant.

Thanks - Pawan

[thamizhchelvan_gunasekara]

Hi ,

To add further points,

You can release the constrain demand(supply) from SNP to DP and can be treated as the allocation against the customers or customer group and ATP can check the allocation. By doing this you can control the supply to the each customer level.

Thanks and regards

Thamizh

[Former Member]

Hi Jithjames

This is a typical S&OP cycle using SAP APO -

1. Generate a statistical forecast based on history.

2. Generate a unconstrained demand plan using statistical forecast and other adjustments (marketing inputs/ customer or account inputs/ etc)

3. Unconstrained Demand Plan is released to SNP.

4. SNP generates a constrained plan.

5. SNP constrained plan is released back to DP. Note that this is constrained supply, not constrained demand.

6. In DP adjust the unconstrained demand plan based on the constrained supply plan to generate the constrained demand plan.

To answer your questions -

1. The use of releasing the constrained supply plan to DP is that during the S&OP meeting, Sales, Manufacturing and other teams can see the unconstrained demand and constrained supply in one place - the planning book. Note that the constrained supply plan is an important input to developing the constrained demand plan. But it is not the only input. The most important aspect of the S&OP process is the discussion and consensus planning across multiple functions.

2. Depends. You might release the constrained/ consensus demand plan to SNP again. One reason could be if you run SNP at a higher frequency than your S&OP cycle (typically monthly). For example, if you run SNP weekly to account for changes in stock/ orders/ etc. Another option is to release the unconstrained demand plan to SNP in a simulation version and release the constrained demand plan to active version.

3. Depends on where you do Production Planning. If you use MRP for creating planned orders, then you would release constrained demand plan to R/3. If you use PPDS for production planning, then you need not release to R/3.

Rishi Menon