Excess inventory issue in Deployment

[Former Member]

Hello Everyone,

We are currently implementing Deployment optimizer for our client and we are now stuck up with a Excess inventory issue.

The issue is Deployment Optimizer is deploying the Deployment Purch Reqs in proportional to the demand when we have ATD stock less than the Demand at the DC's, but when we have excess inventory as ATD stock its not following the Demand proportions of the DC's.

Has anyone ever faced this issue in the past, If so then please let me know how did you resolve the issue.

We are currently using SCM 5.0 version and ECC 6.0.

Best Regards,

Chandrakanth Tatavarthi

Consultant-Supply Chain Planning,

Member-SCN Focus group,

Hotline:+ 917-475-5664,

Mobile:+91 9959816699.

[Former Member]

Hi Chandrakanth,

For surplus ATD stocks than the demands situation, we have 3 possible rules to be set in the SNP deployment profile, which system considers in deployment optimizer run. We define costs and constraints inside the SNP deployment optimization profile and the SNP cost profile.

1. Distribution Based on Lowest Costs

2. Push Distribution by Demand

3. Earliest Delivery

Please check if these setting are maintained appropriately.

The objective of the deployment optimizer is to determine distribution plan with overall lowest costs. In your situation, we can conclude that, system keeps excess inventories instead of deploying the same, because it finds overall costs lower, in keeping rather than deploying.

The deployment optimizer considers the following costs defined in the supply chain model:

u2022 Storage and transportation costs

u2022 Costs for increasing storage, transportation and handling capacity

u2022 Safety stock penalty

u2022 Late delivery penalty

u2022 Non-delivery penalty

Please review these costs. For example if you increase the storage costs, then, system will

Deploy more ( as keeping stocks will cost more).

I do not know your SCM 5.0 system current Service pack

If it lower than SP 15, then please check if the note 1266418( Deployment Optimizer : Incorrect fair share results) is applicable.

In summary , you will have to check the SNP deployment optimization profile and the SNP cost profile settings. With the given costs, try to interpret the deployment results.

I hope this helps you.

Regards

Datta

Edited by: Datta Kadam on Apr 7, 2010 7:19 PM

[Former Member]

Hi Datta,

Thanks for your quick reply,These are the settings which we are using in optmizer profile:

1)Supply shortage-Fair share distribution by demands

2)Supply surpulus-Push distribution by demands

We are maintaining storage costs in the plants and so it is not keeping any stock in the plant but when its distributing to the DC's it is not doing it in Demand proportions of the DC's.

We are already on SP 16-SAPKY50016 of SCM 5.0 which is the highest patch support available.

But still the Deployment optimizer is not deploying as per our expectations in Excess inventory situation.

Please let me know what else do I need to do to acheive this.

Best Regards,

Chandrakanth Tatavarthi

Consultant-Supply Chain Planning,

[Former Member]

Hi Chandrakanth,

Thanks for the update.

You are using Push distribution by demands rule for the supply surplus situation.

Your system is also on highest SP, so, we may conclude that applciation is bug free.

You will expect that the excess stocks should get evenly distributed as per the demands at the DCs.

However, here again, we have costs coming in to picture. There are transportation costs and constraints violations costs.

We also have SNP lot size profiles with lot sizes which may affect the deployment quantity decided for a DC.

I think you also have followed SAP recommendation of not changing the default settings in SNP cost profile.

You may please test simple scenario in quality system :

Create demands on same dates at different DCs in different periods and keep SNP Lot size simple ( like lot for lot) just for testig.

Keep costs simliar ( respective to DC) , for example, transportation costs . This is only for testing and understanding the results.

Interpretation of Deployment optmizer results, some times do take lot of time and energy and most of the times, finally we admit system behaviour as logical. I know one instance of client stopping Deployment optimizer and going back to deployment heuristics, because of difficulties in correct intrepretations .

I hope this helps.

Regards

Datta

[Former Member]

Hi Datta,

Regarding Transportation costs and other penalty costs we have made sure that we have maintained equal costs for all the DC's .

Yeah we have not changed the SNP cost profile which is default, we are following Lot for lot size for ordering quantity.

I did test the simple scenario with Two DC's and one Plant and gave equal demand to both the DC's.

Deployment optimizer gave good results when the ATD quantity was below the Net demand at the DC's( i.e following Fair Share Distribution) but when i increased the ATD quantity, it Deployed quantity that which was not proportionate to Net Demand at DC's.

Looks like the Optimizer is not following Push distribution by demand setting in the Optimizer profile.

Thanks for your follow up of the thread.

Best Regards,

Chandrakanth Tatavarthi

Consultant-Supply Chain Planning.

[Former Member]

Hi Chandrakanth,

There is an OSS note 1413544 SCM 5.0 Implementation recommnedations.

This note contains some explanation relating Deployment optimizer.

I could make that, deployment optimizer focus in on costs and in log results explanations will not be given for push distribution.

Regards

Datta