The safety stock calculations standard in all releases of Advanced Planner and Optimizer (APO) are, in most cases, sufficient to cover most business requirements. In specific scenarios, however, these methods should be refined to increase user satisfaction. I'll look at specific requirements for companies that use safety days' supply definitions or one of the extended safety stock methods for their safety stock calculations.

Companies, such as those in the fast moving consumer goods (FMCG) sector, frequently use the safety stock method SZ, which is based on a user-defined safety days' supply value. Using this safety days' supply value (expressed in days), the safety stock calculations ensure that a safety stock requirement is calculated per period based on this value and the known future demand.

For detailed explanations of safety stock calculation methods, see my previous articles: "Are Your Safety Stock Levels Optimal? Match Your Method with APO Supply Planning Methodology to Be Sure," "Improve Safety Stock Accuracy with APO's Extended Method," and "Demystify Safety Stock Calculation Methods in PP/DS."

If, for example, the safety days' supply is set to three (i.e., three days) and the accumulated demand for the next three days is 500, then the result of this calculation is a safety stock requirement of 500. The known future demand can be based on sales orders, forecast demand, dependent requirements, or combinations thereof. Since most demands vary from one day to the next, the resulting safety stock requirements change accordingly (Figure 1). The same relationship exists when using extended safety stock methods in combination with daily granularity (AS, AT, BS, and BT).

Having a different safety stock requirement every day is accurate, but in most cases rather difficult to work with. Why is this so? Safety stock requirements may fluctuate only slightly. For example, requirements of approximately 1,000 pieces per day may range from 950 to 1,050, due to smaller changes in demand (Figure 1). While the display in the SNP Interactive Planning table looks tidy, the Product View transaction in Production Planning and Detailed Scheduling (SAP APO PP/DS) appears a bit messy. It displays the current day's safety stock requirement and then, for each subsequent day, the delta amount, which can be positive or negative. Figure 2 displays the Product View transaction for a product with safety stock method AS. The same result would be visible when using any of the other extended safety stock methods.

Figure 1

Day-to-day safety stock requirement fluctuations

Most production planners can ignore these insignificant fluctuations, but would probably prefer if they did not affect safety stock requirements at all. Use one of two methods to ensure that safety stock requirements do not change by minute amounts from one day to the next. Both solutions actually change the calculated result of the safety stock determination in a subsequent step, using a macro.

• Stepping. The safety stock requirements of two consecutive days are compared. If the change is less than a predefined value, the second day's safety stock requirement is changed to equal that of the first day. In the next iteration, that second day is compared with the subsequent day and so on. The result is less frequent changes in safety stock requirements.

• Averaging. The daily safety stock requirements over a certain period are averaged. The result is that the same safety stock requirement is valid for an entire period (e.g., one week). Changes become effective only on a predefined day of the week.

Create Macros to Adjust Calculations

The flow diagram in Figure 3 displays the order in which the macros must be executed. You need to define four macros in the planning book as "default" macros, which means they are carried out anytime you enter or exit the planning book and when you change data interactively or in the background.

Figure 3

Process flow for macro execution Click the image above for a larger version

Use transaction /SAPAPO/ADVM or follow Supply Network Planning> Environment>Current Settings>Macro Builder. Then, select the planning book and data view for which you want to change the macros.

The macros are:

Macro 1: Determine workdays. The standard macro to calculate workdays is part of the SNP planning books delivered with the system.

Macro 2: Safety stock. The standard system comes with a macro in which the demand used by the safety stock calculations is the total of sales order/forecast and dependent demand. Replace the macro step with the one shown in Figure 4 if only sales order demand should be used.

Figure 4

Safety stock based on sales order demand only

Macro 3: Averaging. Shown in Figure 5 on the next page, this macro first checks whether the service level defined in the product master lot size tab is greater than 90 percent. Any other value would do as well, but, when using the extended safety stock methods, it is common to define service levels above 90 percent. The macro also checks for the safety stock method (equal to method BS). Include other methods if required.

Figure 5

Safety stock averaging

The calculation of the average safety stock is carried out only on Mondays and then for the next seven days, providing a weekly average. On all other days, the macro simply copies the previous day's safety stock to the current day.

The start-up correction is required for the first one to six days, depending on the day of the week when the macro is run. It populates the safety stock key figure for all days that are before the first Monday.

You must copy the result of the safety stock calculation back into the safety stock (planned) key figure, as this is the key figure used by PP/DS. Not doing so would lead to PP/DS using the initial-not averaged-safety stock. This task is done in the Copy Back step.

Macro 4: Stepping. Define this new macro to apply the suggested functionality.

The stepping macro is more complex, since APO macros do not allow the calculation of a key figure to be followed by a check using an "if" statement in the same macro step. You must therefore carry out the same calculations day by day for as many days as required. My suggestion is to limit the number of days for which you do calculations, for example, for the period of PP/DS planning horizon.

This macro first checks whether the service level defined in the product master lot size tab is equal to 50 percent. The macro in Figure 6 does not check for the safety stock method, but you could incorporate this using the same logic as shown above.

Figure 6

Stepping calculation for the second day

The macro first calculates the percentage difference between two consecutive days and stores the result in the auxiliary key figure Safety Stock Delta. Auxiliary key figures are not saved and have an initial value of zero.

Figure 6 shows the calculation for the second day. Note that it only runs on the first day of the planning horizon (one iteration) and potentially changes the safety stock for day two.

Figure 7 shows the calculation for the third day. Note that it runs only on the first day of the planning horizon (one iteration) and potentially changes the safety stock for day three.

As is the case with the averaging method, the result of the stepping calculation must be copied back into the safety stock (planned) key figure as the last step of the macro. Refer to Figure 6 for details.

Once the macros are created, ensure that they are all defined as Default macros by dragging them into the Events section of the macro builder screen. Figure 8 shows this screen with the correct sequence of macros.

Figure 8

The final macro sequence

Once these changes have been made, all that is left is to update the product master, so that the safety stock corrections are carried out as needed. Based on these definitions, the safety stock levels are adjusted every time the SNP planning book is accessed interactively or used in a batch-planning run. The safety stock levels visible in the PP/DS Product View are also aligned.

Wolfgang Eddigehausen

Wolfgang Eddigehausen is a highly experienced expert in the areas of business process design, re-engineering, and user adaption, as well as process realization in complex SAP-centric environments. He has experience in solution and enterprise architecture and project management (PRINCE2 certified) domains defining enterprise capabilities with a focus on delivering effective and efficient solutions to organizations. Wolfgang's industry knowledge includes public sector, utilities, mining, distribution, general manufacturing, process and steel industries, and consumer goods.

In most roles his task is not only to architect a solution but also to evaluate and define strategic options with a focus on end-to-end solutions rather than systems. This also includes strong emphasis on the user acceptance through an innovative user experience and mobility enablement.

His career includes successful participation and management of projects in Australia, Europe, India, Japan, Singapore, South Africa, Taiwan, and the US. These projects required interaction with all levels of an organization, from the shop floor or office through to the CxO level. Throughout his career, Wolfgang has put emphasis on a holistic approach bringing together people, processes, information, and systems in project management, architecture, and implementation roles.

You may contact the author at we@avox.com.au.

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