05 May Considering Shelf Life Whilst Planning Supply in SAP SCM (APO)
It took a while for me to come up with the title. The debate in my head was whether I should use the word “whilst”. Predominantly a British term, I was worried that some of my American friends may need to look it up. But then I figured it is a part of my “heritage” and may actually make it more interesting. I do have to confess that I occasionally turn on the UK English dictionary to get around the default US English grammar suggestions from Word. Now that I feel like I have made some progress, let’s talk about Shelf Life Planning.
As the title suggests, the scope of this article is restricted to how shelf life can be factored into the planning process. It does not cover how shelf life is considered during demand management and execution processes. Regulatory agencies and laws ensure that companies have processes in place to monitor shelf expiration and prevent expired products from getting out into the market. These processes have been automated for the most part from an execution standpoint. However, companies are still struggling to incorporate automated procedures within their shelf life planning processes in a way that will minimize wastage whilst replenishing inventory in a timely manner.
The importance of shelf life planning rises exponentially as shelf life duration decreases. It is critical for the fresh food industry where product segments such as dairy, meats and bakery have a shelf life of just a few weeks. A natural outcome of this short shelf life is lower inventory levels along with higher setup times. There is definitely a competitive advantage for companies in these industries that can provide a longer shelf life both for customers and retailers.
Here are a few things to consider for Shelf Life Planning with the SAP SCM suite:
– What is the planning horizon that should be used for Shelf Life Planning?
– How do we provide enough shelf life when pre-builds need to occur?
– Do the supply planning solutions need to consider transit time within the distribution network?
– Should the expiration be based on final expiration? Or, should it be based on an earlier date that is nearing final expiration date to allow for pulling inventory out of the internal distribution network?
– What part of supply planning needs to consider shelf life è Distribution Planning? Rough Cut Capacity Planning? Master Production Schedule? Capacity Leveling? Deployment?
– What SAP SCM supply planning solution considers Shelf Life and which one should I use è SNP Optimizer? Heuristics? Capable-to-Match? Deployment? PP/DS?
– Are materials set up to be batch managed with batch classification? And, is inventory being posted with expiration dates at the time of goods receipt?
Given these considerations, along with limitations of the standard SAP SCM shelf-life planning solutions, the following problem statement was presented to me at a CPG client and I am paraphrasing: Is there a way for the system to generate additional demand to offset inventory that is about to expire and can this demand be considered by SNP Optimizer and Heuristics both in interactive and batch modes? And, oh by the way, could you also treat this inventory as non-deployable during Deployment? After several weeks of discussions, prototyping, adjustments to planning books and some sophisticated macros, a solution was proposed. Needless to say it took months of testing and tons of documentation to meet the rigors of a regulated industry. This seemingly simplistic approach does have its limitations but the business looked at it as a big improvement over what they currently had … which was nothing.
Blogging laws and etiquette prevent me from providing additional detail. However, there will be a follow-up session in the form of a webinar that will provide additional details on this topic including an opportunity to ask questions and to discuss the topic further. You can register here for that webinar.
All of the information provided here is based on solutions that have been implemented successfully and utilized in a productive manner by large corporations in the Consumer Packaged Goods (CPG) and Life Sciences industries. These solutions were a combination of standard SAP SCM functionality combined with some custom development and macros.
For additional insight and information, please watch the accompanying webinar recording here.