While SAP ERP Central Component offers a host of features, companies with production capacity constraints may find...
they need additional controls.
A tool that offers fine-tuned control for delivering materials or products is SAP Capable-to-Match (SAP CTM), available in SAP Advanced Planning and Optimization (APO) as part of the SAP Supply Chain Management component.
Here are four SAP CTM functions from SAP APO that can enable you to balance demand with supply for improved supply chain efficiency.
Early/late demand fulfillment
While a smoother supply chain is reflected when all customer orders are fulfilled on time and completely, often, there's a need to deliver a product a little late or a bit early. Knowing the variances here is critical, and goes a long way in ensuring a greater demand-supply harmonization.
Examples include how late an order can be delivered to a customer, how late a vendor can deliver goods without affecting its vendor evaluation scores and how early a product can be delivered to different warehouses to account for planned maintenance shutdown.
Dynamic and fixed pegging
Pegging is a process in which SAP CTM links a material's demand elements, such as sales orders, outstanding deliveries or a forecast, with supply elements, such as a production or process order or a purchase order.
In dynamic pegging, the system reshuffles supply elements each time there's a change to a demand element. In fixed pegging, no automatic changes are made between the two element types (supply and demand).
Fixed pegging works well in business scenarios where the company does not want to keep readjusting its production or procurement plans due to changes in a customer's order or a product's demand forecast. But if the company is able to accommodate demand changes with a revised supply plan, then dynamic pegging is certainly worth implementing.
Competing demand for a product requires you to prioritize which customer or which region will get the product first. Such demands include orders that are requested for specific dates, those that must meet demands from different geographical regions using stock transport orders and meeting forecast for an impending demand surge.
It is also possible to simulate demand prioritization scenarios in SAP Capable-to-Match to decide if the demand meets the supply or if it needs reprioritization based on predefined business rules.
Just in case the available and standard demand prioritization options in SAP CTM aren't able to fulfill a company's business needs, there's a user exit available to define priority logic. A user exit is an ABAP program (custom coding) that the ABAP programmer uses to define company-specific demand prioritization logic.
At first, SAP Capable-to-Match considers the supply elements, such as available inventory, expected material receipts from production or expected material receipts from interplant receipts, and categorizes them as excess or normal inventory. It then uses the predefined business rules -- such as which region or product (or which combination of the two) or the target days of stock at an individual location -- to allocate supply elements with demand elements.
SAP CTM uses quota arrangement to balance supply with demand. Simulating supply plans and creating new supply elements, such as production or purchase orders, are both possible in CTM.
Note that demand and supply plans created in SAP CTM are eventually transferred to SAP ERP Central Component for execution and monitoring.
Learn about an SAP APO tool that can improve supply chain efficiency
Here's what you need to do to upgrade SAP APO successfully
Learn about the implementation options and modules available in SAP Supply Chain Management
Dig Deeper on SAP SCM software
Related Q&A from Jawad Akhtar
Implementing SAP Material Ledger in a manufacturing environment expedites the month-end financial closing process through inventory valuation at ...continue reading
Checking and validating each step of product development helps ensure greater success and detects potential failure. Here's a look at how SAP PLM ...continue reading
Connecting scientific approaches to supply chain management with the technology tool of SAP ECC can help ensure a smoother flow of information and ...continue reading
Have a question for an expert?
Please add a title for your question
Get answers from a TechTarget expert on whatever's puzzling you.