3. Location product substitution now works with finite heuristic enabling even better satisfaction of customer demands
The new upgrade for SAP IBP 2111 offers an enhancement to the location product substitution functionality. The feature is now also relevant for the finite heuristic ensuring that the customers are satisfied with an alternative product when aiming for creating a feasible and constrained supply plan.
Location product substitution is not a new functionality as we wrote about this in our article “New Features of SAP IBP 2008” where we briefly presented the functionality and how it works. For the ones that did not read that article, we will in this section introduce both the location product substitution functionality and the finite heuristic. At the end, we will introduce the benefits of using this together with the finite heuristic and what you must do to get started with this.
The finite heuristic is a heuristic that can provide a finite demand and supply plan, which is based on a prioritisation of demand while still considering the supply and resource constraints that are maintained in the system. The prioritisation for the demand is performed by adding the costs to the demand where the higher cost of non-delivery/late delivery results in a higher priority for the demand. Similarly, the costs added to the sources of supply works in the way that the finite heuristic will go for the lowest cost source of supply. Thus, it seeks to provide the cheapest option for producing/delivering the product. By doing this, you can as a planner create a supply plan based on priorities for demand and thus directing your available capacity towards the products that generate the highest revenue.
Now that we have knowledge of the finite heuristic, we can start digging into the location product substitution, which is a cool feature when demand for customers can be fulfilled by multiple products.
Location product substitution is a functionality that enables you as a company to substitute any leading product where a supply shortage is present with another substitution product. This could be relevant when promoting a product series or introducing or discontinuing a product. By using the functionality you can ensure a smooth discontinuation of an “old” product and introduction of the “new” product. This feature can both be used for customer demands and for dependent location demands. The location product substitution functionality is now available for all heuristics in the SAP IBP suite, but of course with different settings for the master data and key figures needed to be maintained.
Now that we both have the knowledge of the finite heuristic and the location product substitution, we can introduce the functionality and how this can help us in satisfying the demands of our customers in the future.
For the location product substitution to work we need to maintain some substitution master data, which is simple to maintain. One thing to bear in mind is the reason codes which are predefined from SAP and which have to be maintained for the substitution to work. Furthermore, it is important to maintain a “valid to date” if we do not use HARDSTOP as a reason code for the substitution.