Production Planning for Today’s Supply Chain

Today’s customer desire for more individualized products is demanding more of manufacturers. Building and assembling customized products leads to extreme variability in the production process, a burdensome change for manufacturers that have long relied on repetition for mass production. Moreover, innovation cycles are speeding up — companies cannot continue to produce the same product year after year when customer expectations for technology, style, and utility change by the minute.

To serve the “market of one,” manufacturers can’t be beholden to antiquated, byzantine processes at giant plants, or they will be beaten to the punch by smaller competitors that can jump into e-commerce easily. They need to be able to operate nimbly across more regions, and be able to take into account the individual preferences and requirements of every customer. They need more efficient, more effective manufacturing processes that can offer short delivery times without holding too many components in their production cycle or too much inventory in their warehouses. These sorts of processes require planning — and a lot of it.

This is why SAP brought advanced production planning and scheduling (PP/DS) functionality directly into SAP S/4HANA. This functionality goes well beyond the basic planning features that were present in classical ERP systems, and allows manufacturers to build constraint-based production plans and harness data from across the organization to produce the right products at the right times with optimal efficiency — and work within an end-to-end logistics scenario.

Constraint-Based Production Planning

Advanced constraint-based production planning functionality has been around for a while in the form of advanced solutions such as SAP Advanced Planning and Optimization (SAP APO), but it’s been out of reach for many companies that didn’t want to put in the time and expense required to implement additional technology. These companies stuck with basic planning and scheduling functionality that came in their standard ERP systems, or cobbled together error-ridden, disconnected Microsoft Excel sheets or costly third-party systems — but these options are not suitable for today’s supply chain.

The problem with basic planning is that it can result in infeasible plans and schedules. This is because material requirements planning (MRP) was developed decades ago as a concept that assumed infinite capacity requirements and generated plans that assumed the availability of all resources that you need to utilize to build products. But to use MRP in capacity-constrained production environments results in infeasible plans — and ends up generating orders on resources that are not executable.

Let’s look at some examples of capacity-constrained planning demands of today across different industries. In automotive planning, production is based on customer orders and forecasting, keeping in mind production restrictions. The plan is broken down into a short-term schedule of individual orders that are then executed on the production line in a “lot-size-of-one” fashion, taking into account specific customer requirements in addition to production needs. Better yet, the company can anticipate problems through better part sourcing or predictive maintenance on mechanical elements, avoiding any potential bottleneck or downtime whatsoever. One automotive SAP customer transformed its supply chain and manufacturing processes with SAP S/4HANA, and in doing so was able to better plan its production to cut down on delivery times from months to days — and this was while accounting for customized products and lot-size-of-one production.

Or consider a company in a process manufacturing-based industry where liquids stored in tanks need to be accounted for in the production schedule. When producing different beverages, for example, the company needs to plan for tank constraint volumes — it can’t get the recipe right if the tank is overflowing, and it can’t move the beverage from production to bottling if the beverage is not properly produced. The company needs to know various tank capacities, the time and schedule needed to drain and fill tanks, how to drain and clean lines that lead to and from the tanks, and then how this all ties to bottling. And for beverages that take time to mature, there are even more complications to consider for sequencing and scheduling.

A similar issue touches life science and food companies in the form of shelf-life planning. If a pharmaceutical company produces a pill with a limited shelf life, it needs to be available to the customer for as much of that time as possible. If a medicine is supposed to be taken by a customer for a month, but it expires a week after they buy it off the shelf, it leaves them with a poor customer experience. With more efficient planning and scheduling features in SAP S/4HANA, pharmaceutical companies can produce medicine more efficiently so it will have a longer time of viability in stores, resulting both in higher profitability and a better customer experience.

In all these situations, and many others, companies could use basic planning functionality and end up with infeasible production plans that don’t factor in elements from space constraints to available machinery to proper sequencing.

Behind Simplified Production, Simplified Technology

SAP S/4HANA supports constraint-based planning because SAP simplified the underlying data model, so companies can now use functionality directly inside it that used to require complicated integration to other solutions. The removal of data redundancies increases speed and efficiency while giving users more direct access to the data they need.

In the past, users had to work with daily packets of data, but in today’s real-time world, they need more timely information. By being able to pull real-time information directly from SAP S/4HANA, companies can find significant benefits throughout the supply chain. For example, think about how better information sharing between warehouse management and production planning could improve the overall logistics operation. With a production plan, it’s important to know how much component consumption is taking place over a given time, say in two hours. With the former ERP set-up, there just wasn’t timely enough information. But now by having production planning and warehouse management data both within SAP S/4HANA, companies can know this information in real time, and improve material handling processes on the production line that in turn improves material handling in the warehouse. While looking at planning data, companies can trigger processes down on the production line. This leads to better, more efficient, end-to-end logistics.

Simplicity is also found in the user experience. The classic user interface (UI) could be cumbersome, but the SAP Fiori-based UI in SAP S/4HANA facilitates a more intuitive, logical experience. And this is only going to increase in importance moving forward, as design thinking and ease of use are top of mind for SAP in all developments.

Advanced Planning for All

With supply chain disruption happening everywhere, companies need to be able to innovate quickly, and effective production planning and scheduling is paramount. Because of the technical simplification and easier adoption of SAP S/4HANA — which no longer requires the assembly of a complicated landscape of point solutions for each piece of the logistics puzzle — constraint-based production planning is now available to many more types of companies than ever before. It’s democratizing advanced planning, bringing it to small and midsize manufacturing companies. With SAP S/4HANA, companies from small start-ups to large enterprises can optimize production and save costs to remain competitive.