The document provides comprehensive guidelines for optimizing production planning, inventory management, and demand fulfillment within a business context. It outlines the classifications and key figures related to open-ended planning constraints, cost modeling, and demand prioritization patterns, emphasising best practices such as starting costs at reasonable levels and ensuring existing inventory meets customer demands first. Additionally, it discusses the importance of proper resource utilization and effective fair share strategies across products and time buckets within distribution networks.

1. Classification: General Business Use
Optimizer

2. Classification: General Business Use
Criteria for “Constrained based Planning”

3. Classification: General Business Use
Time-Series VS Order-Based Planning

4. Classification: General Business Use
Role of Optimizer

5. Classification: General Business Use
Overview of Optimizer Constraints

6. Classification: General Business Use
SAP Recommendations
Delivery maximization is very rarely used by customers as it tends to assign very large costs
internally, making the solution potentially non-optimal
Start with smaller costs – very high values such as 1,000,000 result in issues with enginer later – range
overflow, insensitivity to other costs etc. – Start in the range of 10,000 instead.
Inventory costs are often modeling costs rather than true costs – make it easier to model.
For Push production, it is necessary to model Max. inventory – otherwise optimizer would plan in lopsided
manner for qty above and beyond Target Inventory
Approached for Max. Inventory. Set as x factor for Target Inventory; e.g 3 times Target Inv.
For fast moving product as higher than Target Inv. ; for other products we may set max Inv = Target Inv.

7. Classification: General Business Use
PRODUCTION
General Guidelines for Optimizer with its Key-figures ; Master Data

8. Classification: General Business Use
Production

9. Classification: General Business Use
Capacity constraints & Alternative Production lines
Priority is determined by production cost - this allows you to switch from the main production
line to an alternate production line by modeling one production source header for each line.

10. Classification: General Business Use
Production Planning: Key-figures

11. Classification: General Business Use
Production Planning: Key-figures
The following are the two types of planner adjustments:
Fixed: This is made possible by the “Adjusted Production Interactive” key figure.
Minimum: The planner wants the minimum quantity to be planned even if there is no
demand in that period. Additional quantity may be planned on top, if the demand exceeds
the minimum specified.
Within FROZEN HORIZON, “Adjusted Production” is copied from “Minimum Production” key-figure.
Outside FROZEN HORIZON, , “Adjusted Production” is taken from “Adjusted Production Interactive”
key-figure.
Note: Both types of adjustments are specific to the periods they are entered. System does NOT shift unmet
quantity to other time buckets.

12. Classification: General Business Use
Production Planning: Key-figures (Contd.)
Using a “Max Production” of 0 will ensure that there is no production for that product in that
period.
It is not possible to model changeover and sequence dependent changeover costs
- hence model average capacity as available capacity.
Min Capacity Utilization can be used to achieve capacity leveling.
“Set Capacity Supply Expansion
Cost Rate as higher than Non-
Delivery Cost Rates” –
resulting in use of capacity
expansion for only adjusted
production (which carry very high
internal costs) and not for customer
demands or target inventory.

13. Classification: General Business Use
Production Planning: Master Data
Min and Incremental Lot Size - enabled for horizons specified globally in the optimizer profile.
Production Lead Time - controls when capacity or components are consumed, if not on finish date
- in the production source header.

14. Classification: General Business Use
Demand
General Guidelines for Optimizer with its Key-figures ; Master Data

15. Classification: General Business Use
Forecast Consumption
Forecast consumption is executed typically as a pre-step to the supply optimizer - the same
results may be input to response as well.

16. Classification: General Business Use
Consensus Demand: Demand Prioritization
Z Pattern - goes across first. In this pattern, the top layer is completely fulfilled across the
entire horizon before any demand is met for the next lower layer.
Inverted N-Pattern - goes vertically, that is, fulfills all demands in a time bucket before
advancing to the next time bucket. This method is most common due to its simplicity.
Hybrid - Mix of the two patterns - Crossover can be varied with modeling costs.

17. Classification: General Business Use
Key-figures
Customer Demand: Demand and Fulfillment Key Figures

18. Classification: General Business Use
Key-figures (Contd.)
Independent Demand: Independent Demand and Fulfillment Key Figures

19. Classification: General Business Use
Inventory
General Guidelines for Optimizer with its Key-figures ; Master Data

20. Classification: General Business Use
Guidelines for Inventory Cost Modeling
Existing Inventory should always be used to meet customer demand rather than holding onto it as long
as possible in order to meet target inventory, and then getting rid of it in the very last time bucket.
Scenario# 01 Scenario# 02
Always first model non-delivery costs, then discounts and lateness, and only then set inventory target
violation cost rates

21. Classification: General Business Use
Key-figures & Master Data
Modeling Considerations for the Additional Lot Size Key Figure
Additional Lot Size is an output key figure from supply planning for visibility and reporting.
Fair share is performed for target inventory only and not for additional lot size.

22. Classification: General Business Use
Distribution
General Guidelines for Optimizer with its Key-figures ; Master Data

23. Classification: General Business Use
Distribution
Modeling Storage Resources
The storage capacity are bit different to Production resources.
Capacity cannot be aggregated across time buckets, we need to configure separate storage usage key
figures similar to Projected Stock.

24. Classification: General Business Use
Distribution(Contd.)
Minimum resource utilization is possible for a production resource only and not for a storage
resource.
Minimum Capacity Utilization vs Min. Capacity Violation Cost:
- Set Min. Capacity Violation Cost > Target Inventory Violation Cost Rate
- Must be significantly lower than Non-Delivery Cost Rate

25. Classification: General Business Use
Distribution(Contd.)
Key-figures

26. Classification: General Business Use
Fair share
General Guidelines for Optimizer with its Key-figures ; Master Data

27. Classification: General Business Use
Fair share
Fair share occurs across products, locations, customers, and time buckets in the network -
not one product at a time - resulting in the right product mix when common constraints exist,
such as shared production lines or BOM components
A maximum of 10 segments is allowed. It is recommended that you use 4-5 segments, if fair
share is desired.

28. Classification: General Business Use
Fair Share(Contd.)
Fair Share for Non-delivery Example
With four tiers or segments, the engine will attempt to meet the demands incrementally by
25%. There is an internal parameter which specifies additional cost.
If the non-delivery cost is modeled as 11000, the four segments are added additional cost,
resulting in 12100 to 11275. Discounting by each time bucket is performed on top as usual, to
prioritize the near-term demands across the planning horizon.

29. Classification: General Business Use
QUOTAs

30. Classification: General Business Use
Quota consideration by Optimizer
Use of ranges is better as exact quotas can make it difficult to find a solution.
Quota Coverage is activated for each time bucket with a value of 1.