What is "Dependent Demand" ?

[Former Member]

Hi Gurus,

We are working on a S&OP Demo, we understand that Cost Per Unit Key Figure shows the cost of an end-product, but it's only updated when Dependent Demand exists for the concrete time-period.

What is the definition of Dependent Demand Key Figure?  and Which is the relation with Cost Per Unit?

Thanks in advance!

[satish_waghmare3]

Hi Albert

Dependent Demand Qty(DEPENDENTDEMAND) with Base Planning Level as PERPRODLOC. Description from SAP2 model says - "Editable and Equal to Consensus Demand Plan qty times the Sourcing Ratio pct at Product#Location  or Product#Customer#Location if pegging!"

It is a output keyfigure which stores sum of all dependent demands including Outbound Customer Demand, Outbound Location Demand and Outbound Production Demand for location-product. It is important keyfigure as it is used during Supply Planning Run(Heuristics) to calculate Net Demand Keyfigure.

Regarding it is relation with Cost Per Unit Keyfigure, please refer Calculation Definition Table or Graph.

Hope this will help.

Thank you

Satish Waghmare

[Former Member]

Hi Satish,

Thanks for the answer.

I attach the Graph with the relation between Cost per Unit and Dependent Demand and it's not clarifier for me.

Thanks in advance for your help!

[Alecsandra]

Hello Albert,

COSTPERUNIT is a stored Key Figure at its base planning level, but if you check the request level you will see that is defined using the following calculation DEPENDENDDEMANDCOST / DEPENDENTDEMAND. This calculation which is on top of the storage will provide a weighted average.

Imagine that you have:

Prod A, Loc1

COSTPERUNIT: 2

DEPENDENTDEMAND: 10

Prod A, Loc2

COSTPERUNIT: 5

DEPENDENTDEMAND: 5

If COSTPERUNIT at request would be a simply average, you would have (2+5)/2 = 3.5

But using the calculation, the cost on aggregated level will result into: (20 + 25) / (10 + 5) = 3

This is the reason why in the calculation graph you see all related KFs.

Hope this helps,

Alecsandra

[Former Member]

Hi Alecsandra!

Many thanks for your answer!

We have Demand Qty only in one bucket (Month). We can't define Cost Per Unit in other months, because they don't have Dependent Demand, so Cost Per Unit is 0. The same for Dependent Demand Cost, which definition includes Cost Per Unit again.

With this situation we can't understand when is the best month to produce, and how cost Per Unit is calculated. We are always working at PRODLOC Level.

I think we are misunderstanding Cost Per Unit definition, can you help us with this?

Many thanks in advance!

[Alecsandra]

Hi Albert,

Cost per Unit is a stored KF. Without having it loaded / manually input via excel Dependent Demand Cost will not get calculated even if you have a Dependent Demand Qty.

In your example, you can define the cost per unit (e.g: you can load it, type a new value and save) in other periods but the calculation that is on top of the storage will always return zero if there is no Dependent Demand Qty. If you ask me, I would say this is ok as usually cost per unit is total cost / units produced. If there are no units, then there are no costs (making abstraction of the fixed costs).

Now coming to your latter question, it looks like your target is an optimization by minimizing the total costs. Then, Cost per Unit is not the right KF as it is not input into the Optimizer Supply Algorithm.

There are several cost KFs that are considered by the optimizer (e.g: non delivery cost rate, inventory hold or violation cost, transportation cost etc). You can find them all listed in the application help.

Supply Planning Optimizer - SAP Integrated Business Planning - SAP Library

Regards

Alecsandra

[Former Member]

Hi Alecsandra!

Many thanks for your answer, It was so helpful for us.

If we understand it well, Cost Per Unit is not an Input for the Profit Optimization, so the Supply Plan will not change even if we change Cost Per Unit value. But we see that Cost Per Unit value is used for Gross Profit Calculation as follows. And, also Inventory Target Cost, Projected Inventory are using Cost Per Unit.

Gross Profit = Constrained Qty * Nondelivery Cost - Constrained Qty * Cost Per Unit

Also, after doing some tests, we see that Inventory Holding Cost and Inventory Target Violation Cost are only used by the system to decide the optimal plan, but never as a cost for Gross Profit calculation

Many thanks in advance again!

[Alecsandra]

Hi Albert,

Yes, that`s right, Cost per Unit is not supply algorithm related. There will be no impact on Optimizer`s output if you decide to maintain or not this key figure.

Cost per unit is needed when you integrate also finance into your model. For example, Gross Profit is calculated by deducting the costs of goods sold from the revenue.

Regards

Alecsandra