Make Your Product Allocation Model More Versatile with Product Allocation Sequence

  • by Ranjan Sinha, Senior Managing Consultant, IBM
  • August 17, 2010
In an environment where product allocations are used to constrain the confirmation of sales orders, the use of a single product allocation procedure can make the check against product allocations inflexible and restrictive. The product allocation sequence functionality can help surmount such challenges.
Key Concept

The product allocation sequence limits the confirmation of sales orders based on product allocations. Generally, product allocations are used when a supply is limited to ensure that the total supply is distributed among customers, regions, and distribution channels. You can use multiple product allocation procedures in a product allocation sequence so that if the entire quantity cannot be confirmed based on the first allocation procedure, the system can check for product allocations with the next product allocation procedure that has been defined in the product allocation sequence.

Many times in a project implementation, companies rely on simple workarounds and quick fixes based on what has already been implemented rather than finding a new concept or solution available within the SAP system. This often leads to implementations that underutilize the SAP solution.

In one example, when the product closeout scenario was being discussed in the project implementation, the simple solution suggested was to use such manual workarounds. It was proposed to create another logical plant (plant B) that would be separate from where the inventory would reside when the products are received in the warehouse (plant A). When the sales orders come into the system they would have plant B as the delivering plant. However, by default there is no inventory in plant B. Inventory would be transferred to plant B from plant A depending on which sales orders the inventory planners chose to confirm.

After the inventory is transferred for the sales order quantity, a manual available-to-promise (ATP) check would be performed to confirm the specific sales order. This would have been a very manual process to handle product allocations, and would have created unnecessary master data due to using a new, fictitious plant.

Using a product allocation sequence allows an automated and flexible way to handle this process. The product allocation sequence functionality in SAP Advanced Planning & Optimization (SAP APO) allows the use of two or more product allocation procedures in determining the confirmed quantity within a sales order. I’ll describe the use of a product allocation sequence in a business context and how it is used to manage product allocations for models that are at the end of their product life cycle with the use of two product allocation procedures. You’ll see how to configure the product allocation sequence and see how the configuration relates to the demand planning books used for planning product allocations.

Ranjan Sinha

Ranjan Sinha is a senior managing consultant at IBM. He has vast experience implementing SAP APO functionality in various industries, including electronic and chemical.

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