Configuring the Planning Horizon Parameter for Inventory Optimization
Standard planning areas have planning horizons defined. You may want to do the following:
Use planning horizons different than the standard planning area planning horizons
Apply different planning horizons at the planning unit level
To use different planning horizons than the standard, you can define planning horizon parameters for inventory optimization planning operators. The planning horizon parameter value is equal to calendar weeks. The following operators support the planning horizon parameter:
Multistage Inventory Opt
Calculate Inventory Components
Single-Stage Inventory Opt
The following table details the planning horizon parameter:
| Parameter | Description |
|---|---|
| PLANNING_HORIZON | Positive integer value that represents calendar weeks. |
Note
For detailed information about configuring inventory optimization operators, see Inventory Optimization (IO) Operator in the model configuration guide.
Operator Running Sequence
For the most accurate calculation results, there is a suggested running sequence for the operators. The sequence is the same for both batch and simulation modes, and is as follows:
- Run the Manage Forecast Error Calculations Inventory Optimization app.
- Run the Global (multistage) inventory optimization operator.
- Run the Calculate Target Inventory Components operator or run the Decomposed (single-stage) inventory optimization operator.
The following figure illustrates the run sequence:
Note
When you run inventory operators, if output key figure data does not display for certain time periods but displays for others, verify that week level time periods are seven days long. If you’re using a week level time profile, weeks must contain seven days. If you need to break weeks that cross months, use technical week time profile.
Key Figure Dependencies
The unified planning area delivered as sample content has built in logic where one key figure requires the existence of other key figures. These key figure dependencies that can cause some operators to run incorrectly or fail to run.
For the Global (multistage) inventory optimization operator, the dependencies are as follows:
If the key figure SAFETYSTOCKDEMANDVAR exists in the planning area, the following key figures must also exist in the planning area:
SAFETYSTOCKSUPPLYVAR
SAFETYSTOCKSERVICEVAR
SAFETYSTOCKLOTSIZE
AVERAGESERVICELEVEL
If the key figure CALCTLEADTIME exists in the planning area, the following key figures must also exist in the planning area:
CALCTLEADTIMEVARIABILITY
CALCTMINLOTSIZE
CALCTINCLOTSIZE
If the key figure CALCPLEADTIME exists in the planning area, the following key figures must also exist in the planning area:
CALCPLEADTIMEVARIABILITY
CALCPMINLOTSIZE
CALCPINCLOTSIZE
Attributes as Key Figures and Time Period Ranges
We recommend that you set the time period range for attributes as key figures to be from 0 (zero) to at least 13 weeks.
You will need to reload data at the frequency you use for the range. That is, if you set the range to 13 weeks, you will need to reload data every 13 weeks.
The best practice is to set the time period range to 13 weeks (or fewer), but if you choose not to update that frequently, we suggest you update every 26 weeks.
Global (Multistage) Inventory Optimization Operator
You use the Global (multistage) inventory optimization operator to recommend safety stock across all products and locations of the supply chain. The optimization minimizes your total safety stock holding cost while ensuring that all customer service level targets are met. The operator performs the following:
Optimizes safety stock globally and simultaneously across all products and locations of a supply chain while considering demand uncertainties, supply uncertainties, supply quantity, lead times, costs, and service levels.
Propagates forecast and forecast variability to stocking nodes that have customer demand.
Propagates forecast and forecast variability to internal (upstream) nodes of a supply chain network.
Optimizes internal service levels between internal (upstream) nodes of the supply chain network.
Calculates safety stock targets, backorders, and average expedited quantities.
Calculates values for the whole supply chain network.
Supports subnetwork/planning unit (PLUNITID) filters in batch mode.
Supports unit of measure conversion for input and output key figures.
The Global (multistage) inventory optimization operator considers the aggregated demand and outgoing backlog when recommending safety stock in a time-varying binary sourcing environment (that is when the lead time at one supplier is extensively longer than the lead time of the other supplier).
The operator also considers smoothing for continuous binary sourcing. Spikes and dips in supply are detected based on the sum of the incoming supply ratios offset by their respective lead times. A spike in a period is removed using the maximum arc’s recommended safety stock for that period. A dip is removed using the average of the recommended safety stock before and after that period. Binary sourcing input data must exist in each period of the planning area’s planning horizon configuration for smoothing to work.
The operator uses the following push logic for non-stocking nodes: for the relationship Stocking Node A → Non-Stocking Node B → Stocking Node C, Lead Time and Lead Time Variability between Stocking Node A and Non-Stocking Node B is pushed to Stocking Node C. The higher the Lead Time or Lead Time Variability, the higher the Recommended Safety Stock at Stocking Node C. The Recommended Safety Stock at Stocking Node C is aligned with pure push logic (that is, cumulative lead time is considered).
Note
Stocking Node A can be an internal or external (vendor) node, and supports BOM in non-stocking components. If the non-stocking node is multi-sourced or multiple components in a bill of material, then the lead time is not pushed.
The Global (multistage) inventory optimization operator rounds the fractional exposure period up to a multiple of weeks in the calculation of the recommended safety stock due to service variability. For example, if periods between replenishment (PBR) = 1 day and lead time = 1 week, the exposure period of 1.14 is rounded up to 2 weeks. The recommended safety stock due to service variability is then calculated based on the demand over the past two weeks.
The following figure shows the stages of the Global (multistage) inventory optimization operator and what inputs are used:
The following table lists the policy parameter inputs to the Global (multistage) inventory optimization operator:
Inputs Type PBR Attribute as key figure PLUNITID Master data type attribute MININTERNALSERVICELEVEL Attribute as key figure MAXINTERNALSERVICELEVEL Attribute as key figure INVENTORYHOLDINGCOSTRATE Key figure MAXINVENTORYVIOLATIONCOSTRATE Key figure IOMAXINVENTORY Key figure SERVICELEVELTYPE Master data type attribute SAFETYSTOCKPOLICY Master data type attribute STOCKINGNODETYPE Master data type attribute SOURCETYPE Master data type attribute TDELIVERYTYPE Master data type attribute PDELIVERYTYPE Master data type attribute DISTRIBUTIONTYPE Master data type attribute UOMCONVERSIONFACTOR Attribute as key figure PLOTSIZECOVERAGE Attribute as key figure TLOTSIZECOVERAGE Attribute as key figure IOCFROZENWINDOW Attribute as key figure IOTFROZENWINDOW Attribute as key figure IOPFROZENWINDOW Attribute as key figure The following table lists the demand inputs to the Global (multistage) inventory optimization operator:
Inputs Type IOFORECAST Key figure IOFORECASTERRORCV Key figure IOLAGFORECASTERRORCV Key figure IOLAGFORECASTERRORCVTYPE Key figure TARGETSERVICELEVEL Attribute as key figure The following table lists the lot size and lead time inputs to the Global (multistage) inventory optimization operator:
Inputs Type TLEADTIME Attribute as key figure TMINLOTSIZE Attribute as key figure TINCLOTSIZE
or
TROUNDING
Attribute as key figure
or
Master data type attribute
PLEADTIME Attribute as key figure PMINLOTSIZE Attribute as key figure PINCLOTSIZE
or
PROUNDING
Attribute as key figure
or
Master data type attribute
TLEADTIMEVARIABILITY Attribute as key figure PLEADTIMEVARIABILITY Attribute as key figure The following table lists the sourcing quotas and BOM inputs to the Global (multistage) inventory optimization operator:
Inputs Type RATIOTS Master data type attribute PRATIOTS Master data type attribute OUTPUTCOEFFICIENTTTS Master data type attribute COMPONENTCOEFFICIENTTS Master data type attribute LOCATIONRATIO
or
TRATIO
Key figure
or
Attribute as key figure
PRODUCTIONRATIO
or
PRATIO
Key figure
or
Attribute as key figure
OUTPUTCOEFFICIENT Key figure COMPONENTCOEFFICIENT Key figure The following figure shows the stages of the Global (multistage) inventory optimization operator and what outputs result:
The following table lists the key figure outputs for the Global (multistage) inventory optimization operator:
Outputs Base Planning Level RECOMMENDEDSAFETYSTOCK WKPRODLOC SAFETYSTOCKDEMANDVAR WKPRODLOC SAFETYSTOCKSUPPLYVAR WKPRODLOC SAFETYSTOCKSERVICEVAR WKPRODLOC SAFETYSTOCKLOTSIZE WKPRODLOC IOMERCHANDISINGSTOCK WKPRODLOC PROPAGATEDDEMANDSTDDEV WKPRODLOC AVERAGESERVICELEVEL WKPRODLOC DEMANDRAMPDOWNIND WKPRODLOC DEMANDPHASEOUTIND WKPRODLOC DEPENDENTSRCTOLOCDEMANDMEAN WKPRODLOCSRC DEPENDENTSRCTOLOCDEMANDSTDDEV WKPRODLOCSRC OUTGOINGSRCTOLOCBACKLOGMEAN WKPRODLOCSRC OUTGOINGSRCTOLOCBACKLOGSTDDEV WKPRODLOCSRC CALCPLEADTIME WKPRODLOCSRC CALCPLEADTIMEVARIABILITY WKPRODLOCSRC CALCPMINLOTSIZE WKPRODLOCSRC CALCPINCLOTSIZE WKPRODLOCSRC INTERNALLOCTOPRDAIF WKPRODLOCCOMPSRC DEPENDENTLOCTOPRDDEMANDMEAN WKPRODLOCCOMPSRC DEPENDENTLOCTOPRDDEMANDSTDDEV WKPRODLOCCOMPSRC AVAILABLEINFULL WKPRODLOCCUSTGROUP DEPENDENTCUSTOMERDEMANDMEAN WKPRODLOCCUSTGROUP DEPENDENTCUSTOMERDEMANDSTDDEV WKPRODLOCCUSTGROUP LOSTCUSTOMERDEMANDMEAN WKPRODLOCCUSTGROUP DEPENDENTLOCATIONDEMANDMEAN WKPRODLOCLOCFR DEPENDENTLOCATIONDEMANDSTDDEV WKPRODLOCLOCFR INTERNALAVAILABLEINFULL WKPRODLOCLOCFR OUTGOINGBACKLOGMEAN WKPRODLOCLOCFR OUTGOINGBACKLOGSTDDEV WKPRODLOCLOCFR CALCTLEADTIME WKPRODLOCLOCFR CALCTLEADTIMEVARIABILITY WKPRODLOCLOCFR CALCTMINLOTSIZE WKPRODLOCLOCFR CALCTINCLOTSIZE WKPRODLOCLOCFR INTERNALLOCTOPRDAIF WKPRODLOCCOMPSRC DEPENDENTLOCTOPRDDEMANDMEAN WKPRODLOCCOMPSRC DEPENDENTLOCTOPRDDEMANDSTDDEV WKPRODLOCCOMPSRC The following table lists the Location Product master data type attribute outputs for the Global (multistage) inventory optimization operator:
Mater Data Type Attribute NETWORKID IOECHELONID
Note
To run the inventory operators, specific technical IDs defined by SAP must be used for the relevant master data types, attributes, and key figures. If these technical IDs are not used, the inventory operators will fail.
 S3 Process and Distribution Supply Chains _image.png "The figure describes the Supply Chains.")
 S5 Supply Chain Network Inventory model Representation_image.png "The figure describes the Inventory Model.")
 S6 Multi Stage Dilemma(1)_image.png "The figure describes the Multi-stage dilemma.")
 S9 Capturing Interactions Between Stages_image.png "The figure describes the Interactions Between Stages.")
 S14 Optimal Internal SErvice Levels Versus Holding Costs.png "The figure describes the Service Levels and Holding Costs.")
 S15 Multi Stage Logic for complex supply chains_image (2).png "The figure describes the Complex Supply Chain.")
 S16 Safety Stock buffers for all the forms of uncertainty_image.png "The figure describes the Safety Stock Buffers for All Forms of Uncertainty in the Supply Chain.")