In the first step of the process, make sure all the parameters are set correctly for the inventory planning run. This step of the process starts a few days before the algorithms are activated, typically in a batch run, to calculate all aspects of the supply network.
If you’re using SAP IBP for the sales and operations process or SAP IBP for response and supply, it’s possible to leverage the supply network consistency checking algorithms delivered with those applications. The check network algorithm allows the system to validate internally if the full network is complete, which means every product and location has a source of supply for customers and at every stage. The algorithm produces a log that can be leveraged to identify and resolve gaps in your supply network.
Our examples focus on identifying exceptions. When identifying such exceptions, given that most supply networks are established via interfaces, it’s important to trace the root cause of the error. Upon identification of the root cause, you should ensure that the data integration model establishes a consistent supply network model in the SAP IBP system.
Once the supply network is validated, you need to make sure that key parameters are available to run the inventory planning algorithms:
- Target service level: Target service levels are assigned to customer groups, so for this step you need to check that all customers have a customer group assigned and that all groups have a target service level assigned.
- Periods between review: Every location product should have the periods between review populated. Periods between review refers to the frequency at which the ordering cycle can be executed for these products at these locations, for example, every week.
- Lead times and their variability: Lead time is described in depth in this chapter and should be updated at the beginning of the inventory planning and optimization cycle.
- Forecast and its variability: The forecast comes from the demand planning side of SAP IBP and the variability can be calculated by leveraging the coefficient of variation from the forecast error. In most cases, the review of the inventory planning parameters will be performed in a management-by-exception way. The most logical way of managing exceptions is by creating custom alerts. The functionality of customer alerting is embedded in SAP Supply Chain Control Tower, but is very valuable in inventory planning and optimization. Some examples of custom alerts that might help you check the parameters for inventory planning and optimization include the following:
- Identification of big spikes in demand: Compare the current cycle’s demand signal with a snapshot of the previous cycle to determine why demands have shifted drastically. For example, more than 100% or more than 10 units.
- Identification of strong increases in variability in lead times as well as forecast, compared to previous cycles: Another approach that can be leveraged is working with Excel workbook lists. In this case, you can define a key figure that gives a value only if the condition you’re trying to check for is true. For example, if the target service level is null, the key figure would have a value of 1 in the current bucket. This allows you to suppress null and zero results in the Excel planning view and get a list of only those product-customer-group combinations with no target service level assigned.
