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Multi-Level Vendor planning in APO: Your means to control the extended supplier network

One of the grave challenges companies, specifically in the area of consumer electronics and Hi-tech, face today is the reality of diverse and multi-echelon supplier network. The different tiers in the network are core competent in different aspects of manufacturing the product, and usually are driven by their own set of KPIs which may or may not be in alignment with network level. OEMs of today's world thus have to grapple with co-coordinating the right supply of materials and capacity to cater to a fluctuating set of demands in the customer side of the network. They have to balance with two counteracting objectives of controlling inventory/obsolescence cost on one hand and fill rate of demands to the customer on the other.

APO SCM, the supply chain planning tool, of SAP can potentially be configured to help OEMs or other middle-tier supply chain entities to control supplies in the network through a process called Component Authorization. Using technical configuration planners can setup planning books and data views to authorize the purchase of supplies/components to its immediate suppliers from their suppliers. The quantity of the procurement proposal can be arrived by running a supply network planning tool in the network that arrives at net requirement at all levels of bill of material based on lead-times in the network, lot sizes (procurement and production), capacity, quota arrangements, procurement relationships, multi-modal transportation lanes and other master data parameters. Component or semi-finished requirement along with existing stock levels can thus be used to determine what one can authorize to the immediate supplier to buy from its own supplier.

The configuration as described above can also be used to plan for long-term capacity. Under situation of a perennial shortage of capacity in the network as an example, the OEM can negotiate for further capacity with its suppliers. The negotiation can be parameterized not only on the quantity of capacity but also any time-phased requirements, if applicable. In very unique cases, OEMs can even do analysis based on dollarized data if it makes financial sense to be a component manufacturer itself.

A multi-level vendor planning configuration in SAP SCM is thus a very powerful tool for companies to manage and control demand and supply through their extended network.


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