The SAP Advanced Planning and Optimizer – APO

Business Owner using The SAP Advanced Planning and Optimizer

PeopleImages/Getty Images

SAP is the number one vendor of standard business application software and the third-largest software supplier in the world. SAP is constantly developing new products to help their customers respond to dynamic market conditions and help them maintain their competitive advantage. One of those products is the Supply Chain Management (SCM) business suite.

An important component of SAP's supply chain management system is the Advanced Planning and Optimizer (APO) application. APO is a suite of supply chain planner applications that increase overall knowledge of the supply chain and provide forecasting, planning, and optimization.

There are eight application levels within SAP APO: network design, supply network planning, demand planning, production planning, and detailed scheduling, transportation planning and vehicle scheduling, global availability, and supply chain collaboration or CPFR.

Components of the SAP APO

SAP APO is not a standalone product but integrates with SAP ERP which supplies master and the transaction production, sales and material data in the real-time to the APO application.

Demand Planning

The demand planning component of APO can create a forecast of market demand for a company's products. Demand planning is a flexible tool that supports the demand planning process in a company. Using the demand planning library of statistical forecasting and advanced macro techniques it is possible to create forecasts based on demand history as well as any number of causal factors, carry out predefined and self-defined tests on forecast models and forecast results, and adopt a consensus-based approach to reconcile the demand plans of different departments. Promotions and forecast overrides can be used to add marketing intelligence and make management adjustments.

Supply Network Planning

This component integrates purchasing, manufacturing, distribution, and transportation allowing tactical planning and sourcing decisions to be simulated and implemented using a single consistent model. Supply network planning uses advanced optimization techniques, based on constraints and penalties, to plan product flow along the supply chain. The result is optimal purchasing, production, and distribution decisions; reduced order fulfillment times and inventory levels; and improved customer service. This component is used to calculate quantities to be delivered to a location in order to match customer demand and maintain the desired service level. It includes both heuristics and mathematical optimization methods to ensure that demand is covered and transportation, production, and warehousing resources are operating within the specified capacities.

Production Planning and Detailed Scheduling (PP/DS)

This component allows the planning and optimization of multi-site production while taking into account product and capacity availability. PP/DS is designed to plan critical products, such as those with a long replenishment lead time or those that are produced on bottleneck resources. With the plans generated through PP/DS, it is possible to reduce lead times, increase on-time delivery, increase throughput due to better management and planning of resources, and reduce inventory costs.

Global Availability to Promise

This functionality is required by companies as they manufacture and sell items in the global marketplace. A basic method of availability check is to perform an availability check on the items required, check any existing product allocations, and to perform a forecast check. An availability check on the items required is performed on the available to promise (ATP) quantity. This quantity is calculated from the current stock, planned receipts, and planned requirements. The system dynamically checks stock and planned goods movements. The global ATP will also check any existing product allocations which may have already been made to specific customers or for a certain region that requires a longer shipping time. The forecast check is important as it allows users to identify if enough planned independent requirements are available for the incoming sales orders.

Supply Chain Cockpit

An important function of SAP APO is the Supply Chain Cockpit (SCC). It provides users with a graphical instrument panel for managing and controlling the supply chain. It is possible to configure the SCC so that it reflects the requirements needed of the business.

The SCC can be used by a number of different areas within a company, such as strategic planners, demand planners, and production planners.

The SCC is divided into three areas: the upper display (which shows the current settings, which consist of a model, planning work area, planning period, and view), the tree structure on the left of the screen, and the specific model which is shown on the right.

Updated by Gary Marion, Logistics and Supply Chain Expert.