Adapt Shipments to Production Variance with Dynamic Transport Load Building

  • by Srinivas Krishnamoorthy, Principal APO Consultant, SCM Practice, Infosys
  • August 25, 2015
Learn how a transportation planner at a production facility can leverage a custom tool in SAP Advanced Planning and Optimization (SAP APO) to be able to accurately match up shipments that are planned for arrival from out of the facility with the actual production output.
Learning Objectives

Reading this article, you’ll learn how:

  • Production schedule attainment, which is the ability of production to execute a plan, is negatively affected by short-term demand volatility
  • Production schedule variance disrupts downstream activities, such as outbound shipment schedules, if they are not managed appropriately
  • A custom transport load building tool within SAP Advanced Planning and Optimization (SAP APO) Supply Network Planning can help adapt shipment schedules from the manufacturing plant to production variances
Key Concept

Stock transport orders (STOs) represent the shipments planned from the source plant to the destination distribution centers.

Production and transportation form two important parameters for supply chain efficiency of a consumer packaged goods company. Production constantly reacts to changing demand conditions across different nodes in a supply chain network, factoring various parameters such as inventory levels, production and transportation lead times, changeovers, and production lot size requirements into consideration. In today’s scenario, demand volatility is highly pronounced due to a variety of reasons. Therefore, production schedules are constantly changing even within the short term, to keep up with different supply chain objectives.

The two important aspects of transportation planning include lane and mode. The transportation lane is a supply chain construct that connects a source location with a destination. The mode represents the means of transport, such as truck, rail, ship, air or multi-modal. From a planning perspective, it is important to lock on to a specific lane and mode early, based on inventory positions, production volume, and mix, for greater price flexibility.

While transportation management is not pliable at the last minute, it is possible to project a certain number of trucks based on a production forecast, both in terms of volume and mix. I explain how a dummy stock keeping unit (SKU) can be used to raise requirements of transportation load in terms of mode and lane. The requirements can eventually be replaced with a set of SKUs that is finally produced, thereby making optimal use of available transportation resources. This approach works in the specific context of low production schedule adherence. Although I do not address the causes of low adherence, it could be intrinsic to the industry or organization. I describe how to factor this parameter into the overall transition process from planning to execution. SAP APO provides a platform to align shipment planning with the production planning process.

Srinivas Krishnamoorthy

Srinivas Krishnamoorthy is a mechanical engineer from IIT Delhi. He holds a master’s of business administration degree from IIM Lucknow (India). He has more than 13 years of experience in supply chain planning applications and has executed several end-to-end Demand Planning, Supply Network Planning, and Global Available-to-Promise projects. He has contributed to the APO forum in SDN and has also written several blogs and papers on supply chain topics. 

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