Running Replenishment Planning

Objectives
After completing this lesson, you will be able to:

After completing this lesson, you will be able to:

  • Explain the basic principles of the Replenishment and Store Order functions
  • Run Replenishment Planning
  • Distinguish between the two inventory management types in replenishment planning

Replenishment in General

Replenishment is a procedure for the demand-oriented merchandise supply of recipients (stores or external customers). When executing replenishment, the requirements are determined using the stock situation and then follow-on documents (purchase requisitions, purchase orders, sales orders, or outbound deliveries) are generated automatically for the merchandise supply. Store replenishment in SAP Retail is executed using the Rapid Replenishment function.

Replenishment for customers is executed within the framework of Vendor Managed Inventory (VMI), to carry out the requirements planning as a service. In that case, the retailer must have access to the customer's stock and sales data. Customer replenishment in SAP Retail is executed using the Customer Replenishment (VMI) function.

For store replenishment, you should use the detailed inventory management in Materials Management (MM), where each goods movement is recorded in an article document. This requires stocks to be managed on article basis. In this scenario, the full replenishment functionality is available - for example, both static (for instance, manual) and dynamic target stock determination (forecast using requirements planning function) can be used. This is referred to as the standard procedure.

If (parts of) a store's stocks are managed on merchandise-category basis (value-only inventory management), meaning the MM-Inventory Management stock quantity of the article itself always remains at zero, you can use Replenishment-Based Inventory Management as a basis for replenishment planning.

This is referred to as the simplified procedure. It has been designed for a simplified system environment, and is based solely on the sales quantities recorded at POS and can therefore be used without involving additional goods movements. The POS sales quantities reduce the Replenishment-Based Inventory Management, and to increase the same, you can activate corrections using document quantities in the replenishment article master data (Correct RS indicator). These are considered as expected goods receipts. It makes sense to set this indicator if the only information you have as the basis for replenishment is store sales information. Manual corrections to the Replenishment-Based Inventory Management can be made using the replenishment parameter overview. Forecast is not supported, that is, only static target stock determination is used.

For customer replenishment (VMI scenario), only the simplified procedure is available, as the full MM inventory management option is only available for sites, not for customer master records. The replenishment parameter settings for customers are defined in the Logistics: Store view of the article master.

The master data needed for the replenishment run is maintained in the logistics store view of the article master, and is displayed in the replenishment parameter overview.

Enter a replenishment requirements planning type (such as RP or RF). The replenishment requirements planning procedure was developed specifically for replenishment planning purposes in the store and for external customers. You can use the replenishment functions to create follow-on documents (purchase requisitions, purchase orders, sales orders and deliveries) automatically. RP is used with static (manual) target stock maintenance (standard and simplified procedure); RF requires a forecast run (standard procedure only), which calculates a dynamic target stock depending on the target range of coverage.

To maintain replenishment master data (target stock, reorder point, safety stock, minimum target stock, maximum target stock, and forecast parameters) more easily for a large number of articles and stores, you can use requirement groups in the SAP Retail application. The values for the requirement groups (for example, you defined a group each for large, medium, small demand) are maintained article-specific, and the relevant requirement group can then be assigned at store / merchandise category level. Example: Several stores have requirements group "small demand" assigned for merchandise category dairy. For a bottle of milk, "small demand" may mean 50 EA target stock, for flavored yoghurt it may mean 20 EA target stock. Both articles belong to merchandise category dairy.

The target stock for an article in a store (or for a customer), which is used as a basis for calculating the replenishment requirement, can be maintained in two ways:

  • Static
  • Dynamic
Note

A static target stock level for stores can be used for articles with a delivery time within the same or next day (to avoid out-of-stock situations). If the delivery time is beyond one day, typically the dynamic target stock determination through forecast is used.

Static target stock determination means, that an empirical value is maintained manually as the target stock in the logistics store view in the article master for the article and the store or customer in question. The static target stock requirements planning type for replenishment is RP. The replenishment procedure can be combined with time-phased planning: in case of time-phased replenishment planning (requirements planning type RS), the planning (and delivery) cycle is additionally considered. It is important to remember the following: static target stock determination can be used for both the standard procedure for stores, and for the simplified procedure for stores and customers.

With dynamic target stock determination (requirements planning type RF)sales forecast (using the MRP forecast function) has to be executed prior to the replenishment run. For the dynamic target stock calculation, the target range of coverage — in a number of days — has to be specified in the article master (logistics store view). The safety stock data defined for the relevant article and store is added to the total consumption based on customizing settings for the requirements planning type. Optionally, the calculated dynamic target stock can be increased or decreased by the system using a minimum and maximum target stock figure which can be defined manually.

Note
The calculated dynamic target stock value is used for the procurement transactions, but it is neither saved in the article master, nor displayed in the parameter overview. Dynamic target stock determination can only be used with the standard procedure for stores.

With time-phased replenishment planning with a dynamic target stock (requirements planning type RR), the planning (and delivery) cycle is additionally considered for replenishment.

Perform Replenishment Planning

You can start replenishment planning manually (online) or in the background. If replenishment is run online, users specify the store (or store group), as well as article number(s) (or merchandise categories, or MRP types), and an overall procurement period for the merchandise (default planning date: current day, default replenishment lead time: 5 days).

During the standard procedure, this process first reads the current stocks for all articles involved from MM Inventory Management and the anticipated receipts or issues during the replenishment lead time: with the Determine Receipts/Issues indicator set, the system uses an ATP (Available-To-Promise) check to determine the planned receipts and issues (for example, from purchase orders, planned returns). The expected stock at the end of the replenishment lead time is then calculated using the following formula: Expected stock = current stock + expected receipts - expected issues. If forecast data should be considered, set the indicator Include Forecasted Issues.

If the expected stock is less than the target stock and the reorder point (if this has been defined) for the relevant store and article, the system calculates the replenishment requirement using the following formula:

Replenishment requirement = target stock - expected stock

In the simplified procedure, the current stock is the expected stock (no ATP, no forecast data). The system then calculates the replenishment requirement in the same way as in the standard method.

The net replenishment quantity, calculated using the before mentioned formula, is then transferred to the Store Order function for further processing, that is to generate follow-on documents, including supply source determination, quantity optimization, and so on.

The store order function is used by several applications in SAP Retail, and it can generate different types of documents, depending on the system settings.

These documents are normally as follows:

  • Purchase requisitions if the vendor cannot be determined uniquely.

  • Purchase orders for procuring merchandise from an external vendor for a distribution center or for a store.

  • Stock transport orders or outbound deliveries for procuring merchandise from a distribution center.

  • Sales orders for external customers, possibly also for stores.

The following documents are exceptions but can be used nonetheless:

Purchase order copies - if the store has placed an order directly with the vendor. Attempt a stock transport order; if there is insufficient merchandise available in the DC to fulfill a stock transport order, the order can be sent to a different DC (if several supplying sites were maintained for the store in question), or to a specific external vendor (third-party purchase order).

SAP Forecasting and Replenishment Solutions for Retail

The SAP for Retail solution portfolio offers several state-of-the-art, retail-specific forecasting and replenishment solutions, that allow you to respond quickly to consumer demand and synchronize the store and distribution center through multi-level replenishment plans. In this course, the Material Requirements Planning function (MRP live), and the Replenishment function in the SAP Retail system were already covered in detail.

On top of these, SAP offers additional, alternative replenishment solutions for retailers:

  • SAP Forecasting and Replenishment
  • SAP Replenishment Planning
  • Industry Cloud: SAP Predictive Replenishment

SAP Forecasting and Replenishment is a component of SAP Supply Chain Management (SAP SCM). It can be used for both store and DC forecasting and replenishment. The main features are as follows:

  • Sophisticated demand forecasting refer to the forecast calculations that include automated consideration of trends, seasonality, and demand influencing factors such as promotions or specific holidays that can have a significant impact on the sales curve.

  • Automated replenishment with flexible safety stock policy and optimization features for orders, such as Truck Load Building or Economic Order Quantity.

  • Possibility to use efficient DC replenishment driven by rolling store order forecasts up to the DC level for the most precise consideration of future demand, in a multi-echelon replenishment (MER) approach. This also supports Collaborative Planning, Forecasting and Replenishment (CPFR) by making the data available to external vendors for a collaboration.

  • Alert-driven manual interventions (Exception Handling) to support a high degree of automation across all processes.

  • Standard analytical content within the SAP Business Warehouse to enable quality process monitoring.

  • Scalability to support very high data volumes.

  • Add-ons for fresh products requirements, such as fresh product forecasting, projected waste, and intraday replenishment.

In order to use SAP Forecasting and Replenishment, input data such as master data, stock levels, and so on, has to be provided - typically by an ERP system. If you are using SAP Retail, standard interfaces are available. Details can be found in SAP Notes 1658548 and 1657947. SAP Forecasting and Replenishment, as it is based on the SAP SCM system, uses different names for master data objects: articles or materials are called products, and both vendors/suppliers and sites/plants (stores or distribution centers) are called locations. The site-specific logistics view data of an article in SAP Retail is called a location product.

POS data is also required as a basis for the store sales forecast calculation. Many different connection options are available. In terms of performance, SAP recommends loading the POS data to SAP Forecasting and Replenishment using the POS DTA component of SAP Customer Activity Repository, so that data does not first have to be updated in the SAP Retail system. However, it is also possible to reference sales figures from the SAP Retail system.

In case SAP Customer Activity Repository is used by the retailer, it is also possible to use the Unified Demand Forecasting component as alternative forecast tool for the SAP Forecasting and Replenishment solution. SAP note 2367172 contains an integration guide.

The previous figure, SAP Forecasting and Replenishment — Process Overview, shows the way in which the core process within the Forecasting & Replenishment Processor (FRP), which comprises forecast, requirements calculation, and quantity optimization, is incorporated in the overall scenario. Order proposals are generated for calculated requirements, which are then transferred to the SAP Retail system or a non-SAP ERP system, where they are converted to purchase orders. Oder proposals without exceptions can be released and transferred automatically. In case exceptions occur, the affected order proposals are processed, and then released manually for the transfer.

A specific feature of the forecast are demand influencing factors (DIF). These represent external events with a significant influence on sales or on the demand for an article in a site. The following are a few examples of demand influencing factors:

  • Public holidays, such as Easter or Christmas

  • School holidays or the start of term

  • Retail promotions

  • Sales prices (and their changes)

  • Local events, such as sports events

  • Unusual weather, such as hurricanes or heat waves

A DIF occurrence is an actual occurrence of a DIF, such as Easter this year. Various assignments are made for this: time periods, sites, articles, last year and this year, or a promotion for a specific product took place in a past time period and is planned again in the future. In multi-echelon replenishment (MER), the aggregated (store) order forecasts can be used indirectly via DIFs, to influence the DC forecast result, or they can be used directly to replace the own DC forecast.

More Information on SAP Forecasting and Replenishment can be found on the SAP Help Portal:

SAP Forecasting and Replenishment (for use with SAP merchandising software) | SAP Help Portal

SAP Replenishment Planning is a new and innovative planning solution that addresses automated retail store replenishment scenarios with cost-optimized ordering and simulation. It is part of the SAP Customer Activity Repository 5.0 application bundle. It has a special focus on fresh products by considering spoilage and intraday planning but can also be used to plan other reorderable products.

The solution offers the following main features:

  • Consideration of predicted demands and its likelihood based on the unified demand forecast component of SAP CAR
  • Cost optimal ordering by considering shelf life, lost sales, shelf capacity and presentation stock holistically for a product
  • Prediction and consideration of expected spoilage
  • Intraday replenishment, flexible planning horizon and usage of real-time inventory of SAP Customer Activity Repository
  • Alerting to support proactive and targeted intervention by users
  • Simulation of key parameter changes on relevant business KPI’s
  • Replenishment-related analytics combined with SAP Analytics Cloud

SAP Replenishment Planning uses SAP Fiori technology to deliver modern and intuitive user interfaces. Apps are available to review order plan items, to simulate replenishment, to manage alerts, and for configuration. Analytical content is provided by monitoring relevant KPI’s using SAP Analytics Cloud (SAC).

The solution provides integration to SAP Merchandising for Retail, SAP Fashion Management, S/4HANA Retail for merchandise management and SAP S/4HANA for fashion and vertical business as well as to SAP Order and Delivery Scheduling, a new cloud based solution for scheduling data.

More Information on SAP Replenishment Planning can be found on the SAP Help Portal:

https://help.sap.com/docs/CARAB/788e85e3518642bbb7929944d6ac243b/120eeddb2ccb420c856ef8c1696018f7.html?locale=en-US

This Wiki page provides further information on SAP Forecasting and Replenishment, and on SAP Replenishment Planning:

https://wiki.scn.sap.com/wiki/pages/viewpage.action?pageId=72843498

The native SAP Industry Cloud solution SAP Predictive Replenishment (PRP) is part of the Predictive Planning and Inventory Optimization area, and was first released in September 2022. At this early stage, it focuses on DC replenishment, and integrates with SAP Order and Delivery Scheduling (ODS), which is also part of Predictive Planning and Inventory Optimization. Further enhancements regarding functionality and integration options are planned (status Q1 2023), as per the official roadmap: SAP Road Map Explorer.

More Information on SAP Predictive Replenishment can be found on the SAP Help Portal:

SAP Predictive Replenishment | SAP Help Portal

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