SNP Optimizer and Shelf Life Planning

[Former Member]

Hi

I am trying to make Shelf life Planning work with SNP Optimizer but facing some issues. The output of SNP Optimizer seems like it is disposing off the inventory immediately though the expiration date is far out in future. Has anyone tried this option before? Please advise.

Thanks and Regards

[Former Member]

Hi Anand,

Do you want to keep "Shelf Life" constraint as a hard constraint (can't be violated) or soft constraint (can be violated with some penalty) ? Check in the optimizer profile, what options you have selected for modeling the shelf life.

HARD CONSTRAINT : To ensure shelf life is considered as a hard constraint by the optimizer, select the Dispose of Expired Product option in the shelf life section of the optimizer profile  Note that the "Use Penalty Costs that are not Prod-Dep".option should not be checked as it would produce unexpected results,

The optimizer uses the procurement cost as the disposal cost when this option is not checked, which produces the optimum results. The optimizer tries to minimize the disposal of the expired product. It would not produce anything that can result in products expiring without being used, as the optimizer would incur disposal costs for disposing of the expired product.

SOFT CONSTRAINT: If you want shelf life restrictions to be able to be violated (i.e.,if an expired product can still be used), then you can model this as a soft constraint in SNP optimizer. Select the Continue Using Expired Product option in the shelf life section of the optimizer profile to allow this to happen. You should select the Use Penalty Costs that are not Prod-Dep. option so that the optimizer uses this cost as a penalty cost for shelf life condition violations instead of the product procurement cost. Therefore, when

shelf life is modelled as a soft constraint, the optimizer might use the expired products (if

required), but would incur the penalty costs maintained in the optimization profile. Due

to the penalty costs, the optimizer would avoid using the expired products. Try to keep this penalty cost as high as possible.

Regards,

Mitesh

[Former Member]

Hi Mitesh

Thanks for replying. I am using shelf life as hard constraint and it is checked as "Dispose of expired product". I dont think it is working the way you explained. All system is doing is adding the procurement cost to the storage cost. There is no optimization here. So that means it disposes off immediately.

Thanks

[Former Member]

Hi Anand,

The optimizer would like to minimize the total costs. The only reason it will dispose the product even though it is not expired is because there is no demand for it and by keeping the product till its expiry, it will be  incurring the storage costs.

Is this the scenario happening in your case  or do you have some unfulfilled demand and still the optimizer is disposing unexpired product ?

Regards,

Mitesh

[Former Member]

Thanks again Mitesh.

I have unfulfilled demand as well. Its a very simple scenario. I have a batch of 1000 which is expiring on 12/15/2014. It has minimum remaining shelf life of 30 days. I have forecast for this product in 03/15/2014 of 1000. I have no other demand or no other receipt or stock. The storage cost maintained is 0.001 and procurement cost is 4.00.

In this situation the expected result is that optimizer doesn't plan any additional quantity. What it actually does is that it disposes off complete 1000 and makes a new 1000 in 03/15/2014. The procurement cost is calcualted as 4x1000 and added to the storage cost which comes 59.76. So the total storage cost 4059.76. There is no optimization here.

Did you try this in your environment before? What was the behavior?

Thanks

[Former Member]

Hi Anand,

What is the total cost you see after the optimization run ? As per the output which you have mentioned, it should be the cost of disposing the batch + storage cost + cost of producing/procuring the new supply. But what you have mentioned is only the cost of disposing the batch (4*1000) + the storage cost (59*1000*0.001).

How are you getting the new supply ? Is it procured or produced in house ? Looks like in your scenario, it is not incurring any cost to get the new supply.

You can also test  by making this change in the optimization profile.Select "Dispose of Expired Product" and "Use penalty costs that are not prod dependent" and put very big number in the "Penalty costs:Not Product Dependent".

Mitesh

[Former Member]

Hi Mitesh

Thats the total cost. There is no production cost. This product is produced inhouse. I tried various different ways to make it work but all failed, including Product independent penalty cost.

I havent seen much note on this so I gather not many organization have implemented it.

Thanks

[Former Member]

Anand,

Maintain production costs in the PPM and then run the optimizer.

Since the production costs is 0, optimizer is able to get the supply without incurring any costs and hence disposing the existing supply since it will incur the storage cost if it doesn't dispose it.

Regards,

Mitesh

[Former Member]

Optimizer still proposes to make it inhouse. I just tried with 500,000. But it doesnt work. It just added to the overall cost but no change in the behavior.

Thanks

[Former Member]

Try one last thing. Create a firm order for today or tomorrow and see if the optimizer still  creates a new order. Just wanted to check if it is having some issues with the existing batch.

Also refer the note 579556 - Taking shelf life into account with SNP optimizer which explains what all the optimizer can support for shelf life planning.

[Former Member]

I did that and optimizer does not create a new order