Explaining the Sourcing Concept

Our purpose is to find the optimal Site(s) where to fulfill an order from.

In order to do so, we define five goals and respective goal values and, optionally, upper constraints which will determine which combination of Sites is "optimal".

The Goals are:

• Utilized Capacity: The extent to which the available number or percentage of orders that a site can handle as a queue is used.
• Delivery Time: The preferred time it should take in days to transport the ordered products to a consumer.
• Cost to Ship: The internal costs that a specific sourcing causes.
• Shipment per orders: The number of shipments needed to deliver a specific order to the consumer.
• Cost to Pick and Pack: The costs for picking and packing in your sourcing strategy.

For each goal used in the Sourcing Strategy the user need to define the following parameters:

Weight

Relative importance of each goal by assigning it a weight out of 100 - they must add up to 100.

Goal Value

Directly affects the score that sites achieve, because the score is calculated in relation to the goal value.

Constrain

Threshold value up to which a site is eligible for sourcing at all. It is optional.

We aim to optimize our solution across all Goals at the same time.

A site's capacity in SAP Order Management for sourcing and availability is defined as the number of shipments (SHs) a certain Site can handle as a queue. The Utilized Capacity goal is defined as the average percentage of utilized capacity across all sites.

An order's Delivery Time is the amount of time, in days, that an order takes to be delivered to the consumer starting from when the order is made.

If an order is split into different shipments, the order's delivery time equals the delivery time of the shipment that arrives last. It is calculated based on the delivery time attribute of the various transportation lanes.

The Delivery Time goal is defined as the average Delivery Time per Order across all Sites.

An order's Cost to Ship is the average amount of money, in the system's currency, that the company spends to ship an order from a specific Site to the TZ which contains the delivery address, as indicated in the transportation lanes.

If the order is split into different shipments, the Cost to Ship is the sum of the Costs to Ship of each shipment.

The Cost to Ship goal is defined as the average Cost to Ship per order across all Sites.

When a customer order (i.e. the order made by the consumer) is fulfilled from more than one Site and/or at different times from the same Site, it becomes a split order. Each "partial" order into which an order is split is called a shipment.

The number of Shipments per Order equals the number of shipments a customer order is split into.

The Shipments per Order Goal is defined as the average number of Shipments per Order.

An order's Cost to Pick and Pack is the average amount of money, in the system's currency, that the company spends to pick and pack and order at a specific site. The Cost to Pick and Pack goal is defined as the average Cost to Pick and Pack per order across all Sites.