Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 1 Logistical applications and optimizations

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 2 overview Introduction October 28 - definition of business processes November 11 - overview of logistical business processes December 02 - functionality of production processes January 20 - special problems within the supply chain handling December 16 - functionality of sales and distribution processes November 18 - functionality of purchase and supply processes

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 3 Review on the last session You have learned about tools to integrate and control process, such as supply chain event manager You have learned about the structure of supply chain processes 1.Sales and distribution 2.Production planning and sceduling 3.purchasing You have learned about the main business support processes 1.Controlling 2.Budgeting 3.Reporting You have seen an overview on supply chain planning You have learned about sequential and network supply chains You have developed a supply chain planning model You have seen QM as an example for an logistical crossover process You have discussed reactions on disturbences within the supply chain

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 4 About this lecture All sessions are split into 2 blocks: from 08:30 to 10:00 and from 10:15 to 11:45 Each session starts with a short review of the last lectures subjects Next I will give you a short theoretical overview of the days subject Each group will then present the results of their discussions I will present theoretical explanations for the discussed subjects Then I will show a example solution for a potential written test question Finally I will give a summary of the key messages for this session Next you probably will develop 3 different subjects in a brainstorming session in 3 groups

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 5 overview Introduction October 28 - definition of business processes November 11 - overview of logistical business processes December 02 - functionality of production processes January 20 - special problems within the supply chain handling December 16 - functionality of sales and distribution processes November 18 - functionality of purchase and supply processes

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 6 Functionality of purchase and supply processes Purchase support Purchase execution Short break Part 1 Disposition processes Supply optimization Part 2

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 7 Purchase support Purchase execution Short break Part 1 Disposition processes Supply optimization Part 2 Functionality of purchase and supply processes

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 8 Functionality of purchase and supply processes, Part 1 Integration of purchase processes into the supply chain results in lower costs by reducing stocks and delivery time Problems and potentials Delivery „just in time“ is one major demand for an optimal supply chain. This is only possible with the integration of purchase processes into the total supply chain process in order to provide appropriate informations

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 9 Functionality of purchase and supply processes, Part 1 Understand the difference between purchase support processes and purchase execution processes Understand the important inputs and outputs of each component Understand the main functionality of purchase applications system Learning targets Understand the involved acting logical business units Understand the calculation of purchase quantities

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 10 Plant CustomerStoreTransport Supplier Supply chain processes Supply chain processes represent all main logistical activities for creation of value according to the business definition

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 11 Sales Production planning and scheduling Shipment and distribution Purchasing Logistical crossover processes Business support processes Supply chain processes

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 12 Purchase support Purchase execution Short break Part 1 Disposition processes Supply optimization Part 2 Functionality of purchase and supply processes

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 13 Order Management ERP System Customer X Supplier A Purchase order Catalog Supplier A Catalog Supplier B WEB-Browser Business Connector Purchase support processes Catalog Supplier C Supplier B Supplier C ERP System Customer Y

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 14 Purchase support processes Supplier relationship management Vendor evaluation Market places and e-procurement

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 15 Purchase support Purchase execution Short break Part 1 Disposition processes Supply optimization Part 2 Functionality of purchase and supply processes

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 16 Materials requirements planning (MRP) Materials requirements planning (MRP) Purchase requirements Bidding Purchase order Delivery QM on delivered material MRP lists Goods Receipt Purchase execution processes Payment Material & Quantity Delivery schedule Release Certificate Supplier Invoices

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 17 Purchase execution processes Generated automatically by the MRP Internal planned purchase according to disposition needs Purchase requirements Material, due date and quantities are known Supplier is still not named at this phase Quantities are calculated according to the given demand and the lot sizes in the master data Lot sizes can be customized by giving a fixed size or by calculating a dynamic lot according to defined rules Purchase requirements are transfered to purchase orders by decision of the purchase department

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 18 Purchase execution processes Potential suppliers are requested to place an offer for a certain potential purchase order Bidding Material, due date and quantities are known (usually equal to the purchase requirement) Potential supplier offer a certain price and certain conditions An offer usually has a period af validity If an offer is accepted by the customer, the supplier is bound to that offer Purchase requirements and offerd conditions are jointly transfered to purchase orders

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 19 Purchase execution processes Generated in the purchasing department by transferring the purchase requirement Purchase orders Material, due date and quantities are clear according to the purchase requirement The actual supplier has to be named according to the best offer or other restrictions ( Availability, „A-Supplier“ or contingents) Material availability at favoured suppliers might lead to splitted purchase orders Supplier‘s lot sizes or delivery schedules might lead to a change in the purchase order Purchase orders are transfered to the choosen supplier by different ways of communication

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 20 Purchase execution processes The ordered material is physically delivered to the requested point of receipt Delivery The received amount - if still subject to an incoming goods inspection - is booked into a special check inventory The received amount - if accepted - is booked into the customers inventory The material will become customers property with the booking into the inventory The purchase order will be closed or partly closed depending on the received amount an the rules to accept variations

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 21 Purchase execution processes This step is only needed, if no agreements are made with the supplier that quality checks are done at the suppliers plant Quality checks on delivered material Normally the customer only receives a certificate together with the delivered material Quality ckecks can be done permantly for each delivery, at random according to a check plan in the master data or only in certain cases (e.g. damaged package) If a quality check is required, the delivered material will only be taken into the customers stock and property, if all requirements are fullfilled according to the customized check plan

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 22 Purchase execution processes After the material was accepted by the customer, the supllier gets a material receipt Payment The supplier than sends his invoice to the customer The invoice is compared with the purchase order data and the results of the quality checks If the invoice is accepted, payment will be activated Material receipts and invoices are transfered to the choosen supplier and to the customer by different ways of communication The purchase process than is completed

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 23 Practical part: developing the subjects Group A:A customer needs 100 pieces of a certain material. 50 pieces today and 50 pieces in 10 days. Supplier A: minimum lot 100 pieces, Price: 50 ct/p. Available immediately. Supplier B: minimum lot 50, steps of 50, Price: 60 ct/p, Available immediately Supplier C: no minimum lot, steps of 10, Price: 50 ct/p, Available in 5 days Each day on stock costs 20 ct/p. Each day delay costs 20 ct/p. What is your supply plan ? What are the overall costs ? 1.you have 20 minutes for group discussion and writing down your ideas 2.afterwards each group has 5 minutes for the presentation of your ideas 3.your are free to use any presentation medium Group B:A customer needs 200 pieces of a certain material. 100 pieces today and 100 pieces in 5 days. Supplier A: minimum lot 50, steps of 50, Price: 80 ct/p, Available immediately Supplier B: no minimum lot, steps of 10, Price: 50 ct/p, Available in 5 days Supplier C: minimum lot 200 pieces, Price: 50 ct/p. Available immediately. Each day on stock costs 10 ct/p. Each day delay costs 10 ct/p. What is your supply plan ? What are the overall costs ?

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 24 Example solution for a potential test task, Part 1 A customer needs 100 pieces of a certain material. 50 pieces today and 50 pieces in 10 days. Supplier A: minimum lot 100 pieces, Price: 50 ct/p. Available immediately. Supplier B: minimum lot 50, steps of 50, Price: 60 ct/p, Available immediately Supplier C: no minimum lot, steps of 10, Price: 50 ct/p, Available in 5 days Each day on stock costs 10 ct/p. Each day delay costs 30 ct/p. 1.What is your supply plan 2.What are the overall costs SupplierAmount today FormulaCosts today Amount in 10 days FormulaCosts in 10 days Total A100100*50+10*50* B5050* * C050*5* * Mix50 ( B )50* ( C )50*

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 25 Summary and key messages, Part 1 The purchase execution components are purchase requirement, bidding, purchase order, dilivery and payment Literature 1.Stadtler, Kilger – Supply chain management and advanced planning, Springer Verlag, Berlin Heidelberg, Dangelmaier, Busch (Hrsg.) – (in german) Integriertes Supply Chain Management, Gabler Verlag, Wiesbaden, 5/ Silver, Pyke, Petersen – inventory management and production planning and scheduling, New york et al. Examples for purchase support functionality are SRM, e-procurement and marketplaces A supply plan is the result of considering all customized suppliers restrictions The entry for purchase demand is the MRP

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 26 purchase support Purchase execution Short break Part 1 Disposition processes Supply optimization Part 2 Functionality of purchase and supply processes

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 27 purchase support Purchase execution Short break Part 1 Disposition processes Supply optimization Part 2 Functionality of purchase and supply processes

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 28 Functionality of purchase and supply processes, Part 2 Disposition is the main part of supply calculation and timing Problems and potentials The usage of all SC modules within an application system is mandatory to achieve a reasonable disposition results Distribution of information in case of disturbances is a challenge a high potential Disposition in application system is done by the MRP

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 29 Functionality of purchase and supply processes, Part 2 Understand the important inputs and outputs of each component Understand the needed components for a MRP Learning targets Understand the involved acting logical business units Understand the importance to customize the actual restrictions

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 30 Purchase support Purchase execution Short break Part 1 Disposition processes Supply optimization Part 2 Functionality of purchase and supply processes

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 31 Materials requirements planning (MRP) Materials requirements planning (MRP) MRP list per material Disposition processes Forcast Sales orders Stock minus Production orders Purchase orders Stock plus Development of stock on the timeline Reservation

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 32 Disposition processes DateTypeAmountStock todayStock Sales order Production order Purchase order Sales order Forecast Production order Purchase order Reservation for production of material Production order2000

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 33 Purchase support Purchase execution Short break Part 1 Disposition processes Supply optimization Part 2 Functionality of purchase and supply processes

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 34  Collaboration  One-to-many Communication  Synchronous/asynchronous Communication  Synchronized Planning Cycles  Automated Decisions  Tracking and Tracing Supplier networked Supply Chains. 2 nd Supplier Carrier 3 rd Supplier 1st Supplier

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 35 Settlement FP Consignment Collaboration t–1 montht+x dayst+1 month t+1 year time StepTime HorizionRemarks/Tools Collaboration1 yearAPS DP Tool Consignment1 month+APS or Core ERP Frozen Period Picking, Packing and Transit Lead Time Core ERP Settlement1 monthCore ERP A typical vendor managed inventory szenario T = today

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 36 Advantages of Collaboration CustomerSupplier No safety stockMore precise demand planning No purchase orders Automated consignment fill-up and consignment issue orders No quality inspectionNo printing of CofA‘s „Pay only what you have used“No printing of invoices No incoming invoiceNo invoice verification

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 37 Practical part: developing the subjects Group A:Stock today (1.6.) is 50 pieces Forecasts 50 pieces on each first of the month beginning 1.8. ending Reservations on and pieces each for material x Sales orders on and pieces each Purchase orders take 5 days and have min 50 pieces and max 100 pieces Production orders take 10 days and have fixed 10 pieces Please develop the MRP list !! MRP Period is 4 month 1.you have 20 minutes for group discussion and writing down your ideas 2.afterwards each group has 5 minutes for the presentation of your ideas 3.your are free to use any presentation medium 4.group A starts the presentation Group B:Stock today (1.6.) is 100 pieces Forecasts 200 pieces on each first of the month beginning 1.8. ending Reservations on and pieces each for material x Sales orders on and pieces each Purchase orders take 5 days and have min 100 pieces and max 200 pieces Production orders take 10 days and have fixed 50 pieces Please develop the MRP list !!

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 38 Example solution for a potential test task, Part 2 Stock today (1.6.) is 100 pieces Forecasts 100 pieces on each first of the month beginning 1.8. ending Reservations on and pieces each for material x Sales orders on and pieces each Purchase orders take 5 days and have min 50 pieces and max 100 pieces Production orders take 10 days and have fixed 20 pieces Please develop the MRP list !! MRP period is 4 month

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 39 DateTypeAmountStock Stock Sales order Production order Production order Purchase order Sales order Production order Production order Purchase order Forecast Reservation Forecast Purchase order Reservation Forecast Forecast Forecast Example solution for a potential test task, Part 2

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 40 Summary and key messages, Part 2 Literature 1.Stadtler, Kilger – Supply chain management and advanced planning, Springer Verlag, Berlin Heidelberg, Dangelmaier, Busch (Hrsg.) – (in german) Integriertes Supply Chain Management, Gabler Verlag, Wiesbaden, 5/2004 MRP Disposition lists are the main elements of SC Planning Collaborative planning optimizes purchase processes Vendor managed inventory is a collaborative planning method

Matthias Mekschrat h_DA WS 2011Logistical applications and optimizationsSlide 41 Thank you very much for your participation …… and see you on Friday, 2nd of December