Outlining Supply Chain Planning at a Glance

After completing this lesson, you will be able to:

After completing this lesson, you will be able to:

  • Understand the basics of supply chain planning

Supply Chain Planning Introduction


To illustrate the production processes in a company, we use the example of the Bike Company. The company produces its own bicycles and maps the production processes in SAP S/4HANA.

The Learning Journey is divided into two parts. The first part is about production planning and the second part is about production execution. Let's start and get an understanding of production planning!

Supply Chain Planning at a Glance

You may be wondering why production planning is necessary. Consider a scenario where the Bike Company simply manufactures bicycles based on incoming orders. However, customers generally prefer to receive their bikes promptly, rather than waiting for weeks. If the company solely relied on this approach, it would be unable to meet the immediate demands of its customers. This is where production planning becomes crucial.

To get an introduction to the topic, watch the following video:

Supply Chain Planning Scenario Overview

By implementing effective production planning strategies, the Bike Company can anticipate customer needs, forecast demand, and optimize its manufacturing processes accordingly. The production planning process involves four main steps: Forecasting, demand management, material requirements planning, and capacity planning. Let's delve into an example to illustrate how these steps are executed and interact:

  1. Forecasting

    Based on sales figures from the previous periods and market observations, the Bike Company determines that it will need 200 bicycles of a specific model in the upcoming period.

  2. Demand Management

    Planned independent requirements (PIRs) are the result of the forecasting phase. They act as placeholders for future customer orders.

  3. Material Requirements Planning (MRP)

    During this step, the exact quantities of materials required for production are calculated based on the PIRs, existing stock levels, and long-term sales orders. In our example, the Bike Company has 100 bikes in stock, but the demand is for 200 bikes. The material requirements planning (MRP) system takes this information into account and determines that additional 100 bikes need to be produced.

  4. Capacity Planning

    Capacity planning ensures that the production can be executed within the available resources and timelines. It considers machine capacities, labor capacities, and production lead times. For example, capacity planning checks whether the work centers responsible for painting the bicycles are available on the requested dates.

In conclusion, the combination of forecasting, demand management, material requirements planning, and capacity planning in SAP S/4HANA empowers the Bike Company to streamline its production operations. It enables the company to meet the expected demand, minimize stock shortages, and maximize production efficiency, ultimately leading to customer satisfaction and business success.

Tools in Supply Chain Planning

In SAP S/4HANA, there are various tools available for planning. These include SAP Integrated Business Planning (IBP) as well as the option to utilize SAP Supply Chain Management (SCM).

Additionally, for sales and operations (SOP) planning tasks, SAP S/4HANA offers the following planning tools:

  • Flexible Planning
  • Standard SOP

However, it is important to note that these tools are not strategic for SAP S/4HANA and have been replaced by the functionality of SAP IBP.

Demand Management is the management of independent requirements and sales orders. Therefore, you can use the MRP.

Sales orders can be created in the Sales and Distribution (SD) module.

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