Dilemma of Supply Chain Planning in an Allotment scenario - 1
The Supply Chain tool of SAP is being implemented in one of the leading CPG organizations of the world by Infosys. While most of the capabilities of this tool meets business requirements, there are a few critical business requirements that have not been met and this is a first hand account of what the issue is and where we can potentially go from here.
The Planning organization at our client is nimble and reactive. Most of the CPG products in the portfolio are made up of short-leadtime rawmaterials. Most of the producing plants can react to variations in demand almost at will by sub-contracting capacity or running multiple shifts in the plant. The great thing about CPG products is that almost 95 % of the products have a reasonably long life-cycle - which means inventory carrying is not that detrimental in terms of product obsoloscence. Excess inventory can always be sold later.
The 5 % of the product portfolio different from the rest consists of displays, customizations pack-to-order and bundle-packs. These products are useful for doing promotions. And with promotions come a host of other supporting structures/frames very specific to such events - example templates of displays. The market organization managing the promotion event would want to manufacure such products in moderation due to a supply-constraint scenario or for doing test-marketing or due to non-reusability of such products for subsequent events. It is costly to manufacture promotional products and hence the financial guideline for this CPG leader is to make sure the products are pro-rated to different demand streams and customers.
In such a scenario where products are on allotment, the requirement from the tool is to make sure that the "alloted" demand drive the supply plan instead of the unconstrained customer orders. While the demand should be reflective of the customer orders, it should be capped by allotment quantity if the demand exceeds such a limit. Customers, who are essentially the retailers, tend to order more of promotional products than regular products due to value for money.(eg. they go for a shampoo+conditioner if this pack costs the same as a shampoo pack) The Planning organization wants to make sure that this pent-up demand not mess up with their production schedules.
This unique business requirement of showing a "virtual capped" demand instead of the pure customer demand, is not being met by the tool and the project team has been contemplating multiple options to meet this requirement.
In the next blog, we will discuss one such more interesting challenge in the project .
