MTO Planning Strategy in SAP IBP? Why not?!

We all know how important is the planning strategy in preparing the Supply and Production plans based on demands. One can argue the different strengths and weaknesses of each and it also vary per industry. Not everyone can use and not all scenarios can be applied on the same planning strategy, of course.

According to our "AI friend" (a.k.a. chatGPT), below is the basic definition of Planning Strategy from SAP PP point of view.

In SAP PP (Production Planning), the planning strategy defines the method used for determining how the system calculates requirements for a material. Different planning strategies are used depending on factors such as the production process, demand patterns, and inventory management policies. Here are some common planning strategies in SAP PP:

1. Make-to-Stock (MTS): This strategy is used for products with relatively stable demand where production is based on forecasted or historical sales data. The system creates planned orders or production orders based on the forecasted demand.
2. Make-to-Order (MTO): With this strategy, production only begins once a customer order is received. Planned orders or production orders are created directly from sales orders, ensuring that production is aligned with actual demand.
3. Assemble-to-Order (ATO): Similar to MTO, but here the components are pre-produced or stocked. When an order is received, the final product is assembled using these pre-produced components.
4. Configure-to-Order (CTO): This strategy involves configuring a product based on customer specifications. Production doesn't start until an order is received, and the final product is assembled or manufactured according to the customer's specific requirements.
5. Engineer-to-Order (ETO): Products are highly customized based on specific customer requirements. Production processes are designed and initiated based on the unique specifications of each order.
6. Repetitive Manufacturing (REM): Suitable for products with high-volume repetitive production. Production takes place in predefined quantities over regular intervals, often with fixed production lines or cells.
7. Kanban: This strategy uses a pull-based system where production is triggered by demand from downstream processes or customers. Kanban cards or electronic signals indicate when more parts or components need to be produced to replenish inventory.

Each planning strategy has its advantages and is suited to different manufacturing scenarios. SAP PP allows businesses to configure and utilize these strategies according to their specific production requirements and business objectives.

In SAP Integrated Business Planning, several MTO strategies can also be modelled and adapted. This means that the planning can still be done especially when we deal with various characteristics of the materials. Below is an example on how to deal with characteristics-based planning using the several characteristics available or attached in the materials.

Depending on the goal or practice in the company, a planner can select the characteristics that they would want to use as a factor or multiplier to come up with some ratios for each material. Then, this will be used as reference to explode the requirements from the planning material. See below output regarding the 3 selected characteristics (1, 2 and 4).

Disclaimer: this is not as per standard IBP process but for sure one can model it in a different way. As IBP, really is a flexible planning solution, tons of ways our available to handle this planning strategy.

Another very good article describing CDP in PP/DS has been written here. Please have a look and you can for sure get valuable information from the topic.

https://community.sap.com/t5/supply-chain-management-blogs-by-sap/a-use-case-of-characteristic-dependent-planning-cdp-in-pp-ds-for-sap-s/ba-p/13404357

Any question or concern, as usual, feel free to contact me.

#integratedbusinessplanning #salesandoperationsplanning #digitalsupplychain #digitalbusinesstransformation #characteristicsbasedplanning #maketoorder #sap