Implement Minimum Production Lot Sizes within CTM Planning While Maximizing Capacity Usage and Demand Fulfillment

  • by Suhail Jaffari, President, JCG Inc.
  • March 5, 2014
The Capable-to-Match (CTM) engine in SAP Advanced Planning and Optimization executes planning per individual demand. When using minimum lot sizes, CTM applies the minimum lot size consideration individually to each demand within a time bucket. This can lead to underutilized capacity in the factory and unfulfilled customer demands. Learn about an approach you can use to address this limitation using the example of implementing minimum lot size functionality in CTM for a Distribution Requirements Planning (DRP) scenario.
Learning Objectives

By reading this article you will learn how to:

  • Use CTM constrained-based planning to address the production requirements for minimum lot sizes
  • Ensure that minimum production lot sizes are leveraged while ensuring that capacity is fully utilized and  demand is fulfilled
  • Leverage  multiple CTM runs to generate an optimal production plan while still adhering to minimum lot size requirements
Key Concept
Capable-to-Match (CTM) is a demand or supply matching algorithm that matches individual demands against supply. Because of this logic the implementation of a minimum production run or lot size in CTM may result in a suboptimal production schedule.

Applying minimum lot size in the product location master and executing Capable-to-Match (CTM) can lead to wrong results. The system typically overproduces if some type of demand aggregation is not performed. I discuss the limitations of implementing minimum lot size with CTM for a Distribution Requirements Planning (DRP) scenario and explain a step-by-step approach to address this limitation.

Overview of the CTM Process

Consider a simple supply chain with three distribution centers all placing a stock transfer demand on a production facility for a single product (Figure 1). For simplicity, the following assumptions are made:

  • The transport time to each distribution center is the same
  • The production capacity is 7,000 tonnes (To) per month
  • The minimum lot size for the SKU ordered by the distribution centers is 4,000 To
  • The forecast demand at the distribution centers DC1, DC2, and DC3 is 4,000, 2,000, and 1,500 TOs, respectively, all for the same SKU. The forecast is placed on the 15th of the month at all the distribution centers.
  • The priority of demand is DC3 (priority 1), DC2 (priority 2), and DC1 (priority 3)
  • The stock of the ordered SKUs at the distribution center and manufacturing plant is 0
Note
A tonne is a metric weight equaling 1,000 kilograms.


Figure 1
A theoretical supply chain model

 

Suhail Jaffari

Suhail Jaffari has been involved in SAP consulting and Supply Chain Re-Engineering projects since 1993. Working as a platinum-level consultant, Suhail has and continues to engage with clients worldwide, helping them to realize innovative SAP solutions to support complex supply chain operations.

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