One example is the production of pectin, which is a gelling agent in jams. Pectin is produced from citrus peels. The strength of the pectin is partially influenced by the physical condition of the peels, which can differ based on humidity, season, precipitation, or soil conditions where the citrus was grown. For each production run, the peels are slightly different, which results in pectin that has varying strengths.

This is where you can use active ingredient management. A common scenario in active ingredient management is that you carry out physical actions, such as stock movements, in physical quantities (e.g., weight), but you plan based on the active ingredient quantity instead (e.g., potency, strength, or activity).

In R/3, you can account for the varying potencies of the batches by increasing or decreasing the demand during the planning run in Material Requirements Planning (MRP). In short, you do this by calculating an inventory correction factor that the system uses to correct the stock based on the actual average potency of all batches.

In Advanced Planning and Optimization (APO), no standard functionality exists to take the inventory correction factor into account during planning. I will show you a solution to overcome this. First I’ll explain how to set up the inventory correction factor in R/3, and then I’ll describe a workaround to apply it to APO so you can use active ingredient management.

Material Master Setup

I’ll use the example of an aroma substance (i.e., flavor). When adding flavor to a product, the resulting taste must always be the same. Therefore, the amount of flavor molecules you add to the product must always be the same. In my example, I measure the flavor strength from 0% to 100%. The actual weight of the flavor is not important from a planning perspective.

Figure 1 shows the material master in R/3 (transaction MM02) with the flavor- strength data. The flavor has a base unit in kilograms (KG), but I measure the flavor strength using unit KI1 (to represent the flavor molecules) instead.

Figure 1

Material master in R/3 with the planned flavor strength

Notice that the planned factor between the base unit KG and the flavor strength unit KI1 is 50%. This means that only half of the product produced consists of flavor molecules and the rest is an inactive substance. A 100 KG bag of flavor contains only 50% (50 KI1) of real flavor molecules. In this example, the quality department determined the planned strength (potency) of 50% as the normal average flavor strength.

Each time you produce a batch of flavor, the quality department takes a sample and measures the actual strength. You then store the actual strength for each batch in the system directly on the batch, which could differ from the planned strength of 50%.

Batches in R/3

To show how R/3 handles the planning, I added two batches with different actual values. Figure 2 shows the stock overview (transaction MMBE) with two batches: 410 and 411 in their base unit of measure KG. To understand the rest of the process it is important to know that batch 410 has a strength of 45% and batch 411 has a strength of 53% instead of the planned 50% strength.

Figure 2

Stock overview that shows two batches in stock

First let’s look at the stock requirement situation (transaction MD04) in R/3 before the inventory correction (Figure 3). The material has a safety stock requirement of 10,000 KGs. I have only 6,400 KGs in stock, which means that the system is short 3,600 KGs. I ran an MRP for the material and the system generated the expected planned order for 3,600 KGs to cover the deficit. However, knowing that the average actual potency of the batches on hand is higher than the planned value, I could decrease my order and still cover my safety stock requirement.

Figure 3

The stock requirement list in R/3 before inventory correction

To adjust my available stock based on the actual strength of my flavor material, I need to calculate the inventory correction factor in R/3. The inventory correction factor increases or decreases my available stock for planning based on the strength of the actual batches in the system. The inventory correction does not affect the actual physical stock.

The system calculates the inventory correction factor for each material, plant, and storage location in report RVBWSCOR. It stores the factor in the MARD table in field BSKRF (Figure 4).

Figure 4

The result of the inventory correction report RVBWSCOR

Here you can see that I have 2.5% more in stock than planned as a result of the higher potency. When I re- run the MRP and check the stock requirement situation in R/3 after the inventory correction, the stock requirement list looks like the one shown in Figure 5. I increased the available stock for planning by the calculated 2.5% from 6,400 KGs to 6,560 KGs, so the MRP decreases the planned order to cover the safety stock requirement.

Figure 5

The stock requirement list in R/3 after inventory correction

Situation in APO

This is all great until you realize that APO does not support active ingredient management. The degree of complexity for this situation depends on how detailed the planning is that you carry out in APO. The actual variations of the potency in the different batches might be negligible if you only use Supply Network Planning (SNP) for medium- or long- term planning and the potency of the batches doesn’t vary much. However, this could be a problem if you use Production Planning/Detailed Scheduling (PP/DS) to create and schedule a detailed production plan and the potency of the batches varies significantly.

The example from R/3 (Figure 3) looks like the screen shown in Figure 6 in APO (transaction /SAPAPO/RRP3). In Figure 6, you can see the two batches that total 6,400 KGs. This total matches the R/3 screen before the inventory correction run. I have a forecast requirement for 10,000 KGs, which means that the system is short 3,600 KGs. After a heuristic run (MRP) in APO, the system creates a purchase requisition for 3,600 KGs.

Figure 6

The product view in APO for the batches in the base unit KG

In Figure 7 you can see the same product view for the unit KI1. Instead of two batches totaling 6,400 KGs, they now total 3,200 KI1. This means that the system uses the planned value of 50% from the material master in R/3 for planning in APO and not the calculated inventory correction factor from R/3.

Figure 7

The product view in APO for the batches in the alternative unit KI1

It’s impossible to see the actual values for strength in the batches in APO, which means that the planning result in APO differs from the result you get in R/3. In APO, the planning run creates an order for 3,600 KGs while in R/3, the system shows 3,440 KGs. The difference in the planning result between APO and R/3 may seem negligible, but the example shown here only has deviation of 2.5%. I have seen actual deviations of 10% or higher at different client sites. If you are managing a production that runs close to the capacity limit, a 10% decrease in production for a certain order is very important.

The Solution

You can use two methods to solve this challenge and get a planning result in APO that accounts for the varying potencies of the batches:

• Use the R/3 inventory correction factor to modify stocks (batches) when you transfer them to APO
  
  
• Purchase a custom SAP solution. In this situation, all objects are modified through the Core Interface (CIF) to work with the planned or actual correction factor.

Use the R/3 Inventory Correction Factor

This approach applies the inventory correction factor calculated in R/3 to APO. When the system transfers the batch information to APO via the CIF, you modify all the batches with this factor. You create this modification in user exit CIFSTK01, component EXIT_SAPLCSTK_001. Figure 8 shows a sample code. Figure 9 shows the result of this enhancement in APO when you go back into the product view (transaction /SAPAPO/RRP3).

Figure 8

User exit to modify the transferred batches with the inventory correction factor

Figure 9

The product view in APO for base unit KG after you’ve corrected the batches

Compare the product view in APO after you have corrected the batches (Figure 9) with the view before the correction (Figure 6). The system reduced the purchase requisition from 3,600 KGs to 3,440 KGs. This matches the planning result in R/3 after the inventory correction shown in Figure 5.

Finally, look at the product view in APO for the flavor strength unit KI1 (Figure 10). Notice that the system still uses the planned value of 50% to calculate between the base unit and the alternative unit. So you can only compare the total sum of the batches between APO and R/3 — you cannot compare a single batch between APO and R/3. However, the system modified the batch stock for the base unit, so the planning result is the same when executed in APO.

Figure 10

The product view in APO in the alternative unit KI1

There is one catch with using the R/3 inventory correction factor. When the system recalculates the inventory correction factor in R/3, you must resend all the batches to APO to reflect the new average potency. Just calculating the inventory correction factor does not trigger the normal process of replicating stock to APO.

You need to schedule an initial load of all your affected stock after you calculate the inventory correction factor. To reduce the load on your system, it is a good idea to keep two different CIF models for your stock:

• One for active ingredient management products that you reloaded with an initial load several times a day (preferably synchronized with the calculation of the inventory correction factors)
  
  
• One model for no active ingredient management products in which a standard delta load is sufficient

To make this easy to maintain, you should have some way to distinguish the different materials, such as by MRP controller, material type, or ABC indicator. You can check which options you have to select active ingredient management or non-active ingredient management products in transaction CFM1 in R/3. I usually prefer to distinguish the materials by MRP controller and therefore create an extra set of MRP controllers just for the active ingredient management materials I need to transfer with an initial load.

Purchase a Custom SAP Solution

If using the R/3 inventory correction factor is too simple, you can investigate using a custom solution that SAP developed for a large chemical company in Germany. For an additional cost, the solution covers a much broader scope than the simple solution in which you modify only the batches. The system recalculates most of the objects transferred to APO to the alternative unit. You then execute the planning in APO in the alternative unit instead.

You must fulfill several requirements to use the custom development. For example, one requirement is that the unit of measure used in the bill of material (BOM) must be the alternative unit used to calculate the potency and not the base unit. Either contact your SAP account representative or open a customer message in the support portal for more details about the requirements.