Modeling Co-Products

Objective

After completing this lesson, you will be able to model co-products

Co-Products

Modeling Co-products in SAP Integrated Business Planning (IBP) for Supply Chain

Co-production occurs when the manufacturing process creates two or more desirable products which can be sold. Typically, with co-products, one output product cannot be produced without producing all output products. This is common in many industries, for example, in oil and gas refining, crude oil (the input) produces gasoline, diesel, jet fuel, kerosene, and so on. All of these products can be sold and are produced in the same process, and so are considered co-products.

List of Co-Products

Example of Co-Product Master Data

The relationship of each co-product’s output quantity to the output quantity of the main product is specified by a corresponding relationship of the output coefficients of the main and co-products in the production source. You can define this relationship as time-phased, meaning that the output coefficients of the main output product, one or several co-products, and the component coefficients may vary over time. This time dependency allows you, for example, to model different output relations in summer and winter.

Planning Algorithms

The time series based heuristics planning algorithms (heuristic and optimizer) behave differently when it comes to co-products.

Co Products and Planning Algorithms

Heuristic

The heuristic (both Finite and Infinite) satisfies demand for a co-product only from stock. A co-product is available in stock if the heuristic planned production receipts for the main output product (if there was net demand for the main output product), as shown in the following example:

  • The net demand for output product O1 is 50. O1 produces co-products C1 and C2 and they have output coefficients of 2, 3, and 0.7 respectively, meaning that for each 2 units of O1, 3 units of C1 and 0.7 units of C2 are produced simultaneously.

  • The heuristic calculates that 50 units of O1 need to be produced, leading to a production quantity for co-product C1 of (50/2)*3 = 75 units and for co-product C2 of (50/2)*0.7 = 17.5 units.

Even if there was a net demand of 100 units for co-product C1, this wouldn't change the heuristic's calculation.

Optimizer

The optimizer calculates a cost-optimal production plan. Due to this purely cost-based approach, the optimizer doesn’t distinguish between the main output product and co-products. If overall costs allow, the production source for the main product will also be used to satisfy the demand for co-products.

Demonstration: How to Plan Co-Products

Plan Co-Products

Steps

  1. If you had not done this at the end of the previous exercise, In the SAP IBP, add-in for Microsoft Excel, use the supply planning operator to run planning to establish a baseline heuristic run.

    1. In Microsoft Excel, ensure that you are on the SAP IBP tab. In the Application Jobs section, choose Run → SOP Operator.

    2. Choose Time-Series-Based Supply Planning Heuristic. Choose Next.

    3. You can also select a reason code and enter a comment.

    4. Choose Run.

    5. To view the status of the run, choose SOP Operator → Status

    6. When the job has completed, proceed to the next step.

  2. Display your current production situation for your T-F4## product and its components T-B4## and T-T4## at location 1000 in the SAP IBP, add-in for Microsoft Excel planning view.

    1. In the SAP IBP, add-in for Microsoft Excel, open your Supply Planning favorite and choose the Production tab.

    2. Make note of the production quantities for T-F4## and its components T-B4## and T-T4##.

  3. Create a co-product called T-C## using the data in the table below. Additionally, copy the other product field values from product T-F4## to your new product to ensure all necessary product data is available, including the Base Unit of Measure.

    FieldValue
    Product IDT-C##
    Product DescriptionT-C## Co Product
    Product FamilyPump ##

    1. In the Master Data section of the SAP IBP ribbon, choose Manage → Single and choose Product from the list.

    2. Enter the product ID from the table and choose Add icon.

    3. Enter the rest of the data from the table and choose Add and Continue.

  4. Create a location-product combination for your new product T-C## at location 1000.

    1. Choose Location Product from the list.

    2. Enter product T-C## and location 1000 and choose Add.

    3. Choose Add and Continue.

  5. Create a unit of measure conversion factor for your new product T-C##.

    1. Choose UoM Conversion Factor from the list.

    2. Enter product T-C## and target UoM EA and choose Add.

    3. Enter a conversion factor of 1.

    4. Choose Add and Continue.

  6. Create a production source header for your product T-C## at location 1000 using your source T-F4##_1000_0001. Use the data in the table to create the production source header.

    FieldValue
    Product IDT-C##
    Location ID1000
    Source IDT-F4##_1000_0001
    Output Product Coefficient2
    Production Sourcing Ratio1
    Production Source Type IndicatorC

    1. Choose Production Source Header from the list.

    2. Enter the product ID, location ID, and source ID from the table and choose Add icon.

    3. Enter the remaining data from the table and choose Add.

  7. Execute a heuristic planning run.

    1. In the SAP IBP, add-in for Microsoft Excel, choose Run → SOP Operator.

    2. Choose Time-Series-Based Supply Planning Heuristic and choose Run.

    3. When the planning run has completed successfully, move on to the next step.

  8. View the results of the planning run for your co-product T-C## on the Production tab of your favorite.

    1. On the Production tab add product T-C## to the filter. You may want to filter for Location ID 1000 as well.

    2. Refresh the view and analyze the results (check for values in the Production Receipts key figure).

    3. Notice the values of your co-product are twice that of the T-F4## product because the output coefficient was 2 for the co-product.

    4. Also notice the values of the T-B4## and T-T4## components remain the same. Because this is a co-product it does not take additional input of components to produce.

Log in to track your progress & complete quizzes

Learning

SAP FacebookSAP YoutubeSAP LinkedIn