Applicable Process Steps
This process step shows you how to calculate three kinds of classification to make strategic buffer positioning for demand-driven replenishment materials. In other words, we could check the classification results to decide whether a material shall be positioned as a buffered product.
|Schedule Product Classification||This process step shows you how to classify your products by systematically evaluating them based on their goods issue value (ABC classification), usage across BOMs (PQR classification) and variation in actual demand (XYZ classification) across a specified evaluation interval. Classifying your products helps identify whether they are relevant for Demand-Driven Replenishment, and define inputs for their buffer settings. Additionally, you can schedule runs to reclassify your products periodically to keep their classifications up-to-date, so that you get accurate results as you proceed with Demand-Driven Replenishment.|
|Mass Maintenance of Products||This process step shows you how to display and change product details (master data records) relevant to Demand-Driven Replenishment. After you have classified or reclassified your products, you can view the results of the classifications in this app, decide whether the material is relevant for strategic stock positioning. You can use the mass change feature to change the master data records for several products simultaneously.|
ABC Classification: Classifying a product or component into type A, B or C based on its goods issue value, with products classified as type A having the largest goods issue value and products classified as type C having the smallest goods issue value.
XYZ Classification: Classifying a product or component into type X, Y or Z based on the variation in its goods issue value, with products classified as type X having the lowest variation and products classified as type Z having the highest variation.
PQR Classification: Classifying a product or component into type P, Q or R based on its usage in BOMs, with products classified as type P being used in the highest number of BOMs and products classified as type R being used in the lowest number of BOMs.
|Check Buffer Positioning||This process step shows you how to monitor and decide which products to buffer and unbuffer by checking buffer analysis.|
|Buffer Positioning - Inbound Protection (Optional)||This process step shows you how to make strategic buffer positioning and adjust buffered or unbuffered product based on business requirements.|
In real business, you can adjust buffer positioning with different strategies. In our standard scenario, we introduce inbound protection, which can compress lead time.
This process step shows you how to calculate buffer levels – maximum stock level, reorder point and safety stock for buffered products.
- Maximum stock - the cumulative sum of the quantities of the red, yellow and green zones, denoting the suggested stock buffer level above which the stored inventory quantity can be considered as excessive
- Reorder point - the cumulative sum of the quantities of the red and yellow zones, which indicates a need for replenishment of the stock buffer, that is, creation of a supply order, whenever the available stock falls below this point
- Safety stock - the minimum recommended stock buffer level that should be maintained, denoted by the buffer value at the top of the red zone
After buffer sizing execution, you could proceed with the scenario Demand-Driven Replenishment Planning and Execution (2QI) for detailed replenishment process.
|Schedule Lead Time Classification of Products||This process step shows you how to classify your Demand-Driven Replenishment-relevant products by evaluating them based on their Decoupled Lead Time (EFG classification) across a specified evaluation interval. Classifying your products based on their Decoupled Lead Time (DLT) will help define inputs for their buffer settings. Additionally, you can schedule runs to reclassify your products periodically to keep their classifications up-to-date, so that you get accurate results as you proceed with Demand-Driven Replenishment.|
Lead time (also called individual lead time) is defined as the total time required to receive a product in your inventory after placing an order, whether via manufacture, purchase or transfer from another location.
Decoupled lead time is calculated for buffered product (DD-relevant product) by considering the longest path in the BOM chain. In other words, decoupled lead time is a sum of the longest lead times of non-buffered products in a sequence headed by a buffered product in a BOM, adding up to a cumulative lead time for the buffered product.
Classification type 4: Lead Time (EFG, E for short, F for medium, G for long)
Classifying a product or component into type E, F or G based on its decoupled lead time, with products classified as type E having the shortest decoupled lead time and products classified as type G having the longest decoupled lead time. An EFG classification is typically used together with the procurement type for a product or component.
If there is transactional data (production order or purchase order) for buffered products, then the lead time is calculated as below:
If there is no transactional data for buffered products, then the lead time is derived from material master data.
|Buffer Profile Maintenance (Optional)||This process step shows you how to execute to maintain a buffer profile, which is a set of buffer control parameters. They are assigned to DD-relevant products based on their classification with respect to lead time, variability, and procurement type.|
In our pre-delivered scenario, we have the created buffer profile DEFAULT. You can review or change the detailed control parameters and plant assignment of the buffer profile DEFAULT.
You can also create a new buffer profile and make plant assignment in this activity.
Only one buffer profile can be assigned to one plant.
|Schedule Buffer Proposal Calculation||This process step shows you how to generate buffer (stock) level proposals for your Demand-Driven Replenishment-relevant products based on their average daily usage, decoupled lead time, buffer profiles, and several other factors. Additionally, you can schedule runs to recalculate the buffer proposals periodically to keep them up-to-date, so that you maintain appropriate levels of inventory while using Demand-Driven Replenishment.|
|Manage Buffer Levels||This process step shows you how to ensure that products are available when needed by managing the safety stock, reorder point, and maximum stock through buffer proposals for optimized Demand-Driven Replenishment. Buffer level proposals are necessary to adjust the buffer levels to the ever changing reality and thereby ensure that a product is sufficiently stocked to meet average demand, but in low enough quantities to prevent excessive storage costs or losses due to expiry.|