“Infinite Supply Propagation Heuristic”

of
IBP for Sales & Operations Planning
September, 2018
Dr. Volkmar Soehner (SAP SE), Dr. Stefan Wedner (SAP SE)

1. Introduction
IBP for Sales & Operations Planning (S&OP) offers as of its first release the “S&OP
Heuristic - infinite with no shortages”, the standard heuristic of S&OP. As of release
IBP 1802 there will be a new variant of this standard heuristic which is called the
“Infinite time-series-based Supply Planning Heuristic” or shorter “(infinite) Supply
Propagation”.

The main purpose of the Supply Propagation Heuristic is to handle situations of

insufficient supply, i.e. situations in which one or several location products do not
have enough supply to fulfill their entire demand. As “demand” we consider in this
context the sum of Dependent and Independent Demand plus the demand caused by
Inventory Target. The “available supply” of a period t is the sum of the Projected
Inventory of the previous planning period (t-1) plus Total Receipts in t which is the
sum of Transport Receipts, Production and External Receipts.

The supply is insufficient if the available supply is smaller than the demand.

In contrast to the standard heuristic of S&OP, the heuristic infinite with no shortages,
the Supply Propagation Heuristic does not fulfill the entire demand in situations of
insufficient supply. In such cases, the Supply Propagation Heuristic propagates only
the available supply in downstream direction.

Situations of insufficient supply can be caused by:

a) the usage of Adjusted Key Figures. So, for instance, the Production Receipts
can be fixed via key figure Adjusted Production Receipts to a certain value
which can be lower than the required supply.
b) If no source of supply is defined for a location product its Net Demand will not
be satisfied by any receipts.
c) If receipts are expected within the lead time horizon of a location or production
source of supply and no transport or production was planned by a previous
planning run for periods in the past, i.e. before the start of the current planning
horizon.

Page 1
The infinite Supply Propagation Heuristic does not consider cases in which
insufficient resource capacities are the root cause of insufficient supply as resource’s
capacities are not treated as limiting constraints. Resource capacities are considered
as infinite – as indicated in the heuristic’s name.

2. Supply Planning vs. Supply Propagation

The addition “no shortages” in S&OP’s standard heuristic emphasizes that this
heuristic (usually) generates supply plans in which key figure Shortage is equal to
zero in all periods. This key figure is computed as follows:

Shortage(t) = ( Dependent Demand(t) – Supply(t) ) for t = 1, …, T.

Therefore, “no shortages” means that (for each location product) the Supply equals
the sum of Dependent Demand in each period. Even if there is not enough stock on-
hand or Total Receipts available to cover the required Supply, the heuristic satisfies
the entire Dependent Demand which results in a negative Projected Inventory in such
cases.

This behavior is explained by the following two figures. Figure 1 depicts as a starting
point a supply plan generated by the heuristic infinite with no shortages.

Note: We assume a transportation lead between Plant and Distribution Center and
between Distribution Center and Customer of zero periods.

In Figure 1, the Consensus Demands (CD) of both periods, i.e. 10 and 12 pieces, are
propagated by the heuristic to the Distribution Center, where a Net Demand (N) of
again 10 and 12 un pieces is computed. These Net Demands are passed to the
Plant. At the Plant both quantities trigger Production Receipts of 10 and 12 pieces.
As there are no limiting constraints the heuristic computes adequate Supply
(Transport Receipts) for the Distribution Center which therefore can satisfy both
Consensus Demands. The resulting supply plan is ideal as no negative Projected
Inventory arises and all Consensus Demands are fully satisfied.

Page 2
 Heuristic “Infinite / no shortages”: No Supply Constraints

Distribution
Center Plant

Customer D: 10 12 D: 10 12
DCD: 10 | 12 I: 00 00 DLD: 10 | 12 I: 00 00
CD: 10 12 N: 10 12
N: 10 12
TCR: 10 12 CR: 10 | 12 TR: 10 | 12 S: 10 12
S: 10 12
R: 10 12 R: 10 12

P: 10 12
AP:

Production
Source S1

No supply constraint:
➢ sufficient supply
➢ no shortages, no negative Projected Inventory
➢ supply = demand => no need for supply propagation

CD: Customer Demand D: Dependent Demand R: Total Receipts AP: Adjusted Production Receipts
TCR: Tot. Customer Receipts I: Projected Inventory DLD: Dep. Locat. Demand
DCD: Depend. Cust. Demand N: Net Demand TR: Transport Receipts
CR: Customer Receipts S: Supply P: Production Receipts
© 2017 SAP SE All rights reserved. 1

Figure 1: Supply Plan, generated by heuristic infinite with no shortages

The situation changes in Figure 2 which shows the same example with the only
difference that now the user adjusted the Production Receipts of period 1 to zero.
(Key figure Adjusted Production Receipts (AP) is set to zero.)

Page 3
 Heuristic “Infinite / no shortages” with Insufficient Supply

Distribution
Center Plant

Customer D: 10 12 D: 10 12 negative
DCD: 10 | 12 I: 00 00 DLD: 10 | 12 I: -10 00 Projected
CD: 10 12 N: 10 12 Inventory
N: 10 12
TCR: 10 12 CR: 10 | 12 TR: 10 | 12 S: 10 12
S: 10 12
R: 10 12 R: 0 12

full satisfaction of P: 0 12
customer demand constrained /
AP: 0
full transport supply limited Supply
(no shortage)
Production
Source S1

Constrained supply:
➢ insufficient supply at „bottlenecks“ only
➢ no shortages, but negative Projected Inventory
➢ full satisfaction of customer demand

CD: Customer Demand D: Dependent Demand R: Total Receipts AP: Adjusted Production Receipts
TCR: Tot. Customer Receipts I: Projected Inventory DLD: Dep. Locat. Demand
DCD: Depend. Cust. Demand N: Net Demand TR: Transport Receipts
CR: Customer Receipts S: Supply P: Production Receipts
© 2017 SAP SE All rights reserved. 2

Figure 2: Supply Plan with limited (production) supply

As Adjusted Production Receipts is set to zero in period 1 the Plant does not get
enough supply to satisfy the Dependent Demand of 10 pieces. Nevertheless, the
heuristic with no shortages supplies 10 pieces to the Distribution Center. Hence, the
Projected Inventory (at the Plant) in period 1 is -10. As the Dependent Demand of the
Distribution Center is covered completely it can satisfy the Consensus Demand. The
problem of limited supply “stays” at the Plant. The planner could realize this issue by
an alert defined on the negative Projected Inventory. But, the impact of the
constrained supply is not propagated downstream to the customer.

The Time-series-based Supply Propagation Heuristic, in contrast, propagates the

available supply in downstream direction – as shown by Figure 3. The “available
supply” in a period t is the sum of the Projected Inventory of the previous period t-1
(which is for the first planning period the Stock on-hand) plus the Total Receipts in
period t.

Page 4
 Supply Propagation

Distribution
Center Plant
no negative
Customer D: 10 12 D: 10 12 Projected
DCD: 10 | 12 I: 00 00 DLD: 10 | 12 I: 0 00
CD: 10 12 Inventory
N: 10 12 N: 10 12
TCR: 0 12 CR: 0 | 12 TR: 0 | 12 S: 0 12
S: 0 12
R: 0 12 constrained
R: 0 12
supply

unsatisfied P: 0 12
customer demand constrained /
AP: 0
limited supply
Production
Source S1
Constrained supply:
➢ supply deficits are propagated along the entire downstream
➢ shortages > 0 as a consequence of limited supply
➢ customer demands might be (partially) unsatisfied
➢ negative Projected Inventories are avoided – if possible (see next slide)
CD: Customer Demand D: Dependent Demand R: Total Receipts AP: Adjusted Production Receipts
TCR: Tot. Customer Receipts I: Projected Inventory DLD: Dep. Locat. Demand
DCD: Depend. Cust. Demand N: Net Demand TR: Transport Receipts
CR: Customer Receipts S: Supply P: Production Receipts
© 2017 SAP SE All rights reserved. 3
Figure 3: Supply Propagation in case of limited supply

As the Plant of Figure 3 has no Stock on-hand and no Receipts in period 1 it cannot
satisfy the Dependent Demand in that period. Hence, the Supply Propagation
Heuristic does not plan any Supply and therefore no Transport Receipts from the
Plant to the Distribution Center in period 1. As a consequence, the Total Receipts (R)
at the Distribution Center are equal to zero, so that the Distribution Center cannot
satisfy its Dependent Demand in period 1. Analogously, the Supply Propagation
Heuristic does not plan any Customer Receipts for the Customer so that the
Consensus Demand of period 1 will not be satisfied. In contrast to Figure 2, now the
impact of adjusting the production to zero is propagated downstream to the customer.
A planer now can realize the impact of such a constraint at customer level.

In addition, the Supply Propagation Heuristic does not compute negative Projected
Inventory – if negative Projected Inventories are not enforced by the user via
Adjusted and Minimum Key Figures, as illustrated by Figure 4:

Page 5
 Supply Propagation: Enforced Negative Projected Inventory

Distribution
Center Plant

Customer D: 10 12 D: 04 12
DCD: 10 | 12 I: -1 00 DLD: 04 | 12 I: 00 00
CD: 10 12 N: 04 12
N: 10 12
TCR: 05 12 CR: 05 | 12 TR: 04 | 12 S: 04 12
S: 05 12
MCR: 05 R: 04 12 AT: 04 R: 04 12

P: 04 12
AP:

Production
Source S1

Negative Projected Inventory:

➢ can be enforced by Adjusted and / or Minimum Key Figures
➢ in periods where are user adjustes supply higher than receipts
➢ are avoided by the heuristic with Supply Propagation - if not enforced by adjusted values

CD: Customer Demand D: Dependent Demand R: Total Receipts AP: Adjusted Production Receipts
TCR: Tot. Customer Receipts I: Projected Inventory DLD: Dep. Locat. Demand AT: Adjusted Transport Receipts
DCD: Depend. Cust. Demand N: Net Demand TR: Transport Receipts MCR: Minimum Customer Receipts
CR: Customer Receipts S: Supply P: Production Receipts
© 2017 SAP SE All rights reserved. 4
Figure 4: Negative Projected Inventory enforced via Adjusted Key Figures

In Figure 4, the Adjusted Transport Receipts of only 4 pieces limits the supply to the
Distribution Center. Instead of the required 10 pieces, the Distribution Center
receives only 4 pieces in period 1. The Minimum Customer Receipts of 5 pieces
enforces even the Supply Propagation Heuristic to supply 5 pieces to the customer.
As the available quantity is only 4, the Projected Inventory becomes negative (-1).
Figure 5 shows the supply plan which is generated by the Time-series-based Supply
Planning Heuristic (i.e. infinite with no shortages).

The difference between Figure 4 and 5, i.e. between the Supply Planning and the
Supply Propagation is that in Figure 5 the heuristic satisfies the entire Consensus
Demand of 10 pieces (in period 1), disregarding that the Distribution Center has only
4 pieces available. As a result, the Projected Inventory is -6 (in Figure 4 it was
-1).

Page 6
 Supply Planning: Enforced Negative Projected Inventory

Distribution
Center Plant

Customer D: 10 12 D: 04 12
DCD: 10 | 12 I: -6 00 DLD: 04 | 12 I: 00 00
CD: 10 12 N: 04 12
N: 10 12
TCR: 10 12 CR: 10 | 12 TR: 04 | 12 S: 04 12
S: 10 12
MCR: 05 R: 04 12 AT: 04 R: 04 12

P: 04 12
AP:

Production
Source S1

CD: Customer Demand D: Dependent Demand R: Total Receipts AP: Adjusted Production Receipts
TCR: Tot. Customer Receipts I: Projected Inventory DLD: Dep. Locat. Demand AT: Adjusted Transport Receipts
DCD: Depend. Cust. Demand N: Net Demand TR: Transport Receipts MCR: Minimum Customer Receipts
CR: Customer Receipts S: Supply P: Production Receipts
© 2017 SAP SE All rights reserved. 5
Figure 5: Result of the Heuristic “infinite with no shortages”

3. Limitations of the Supply Propagation Heuristic

Computing a supply plan for an entire supply network is quite a complex and difficult
algorithmic exercise. The complexity is based on a lot of dependencies and the fact
that a planner usually faces several, partially conflicting objectives. In general, the
best approach is to use the Time-series-based Supply Planning Optimizer which
transforms the supply planning problem into a corresponding mathematical problem
which then is solved by a Mixed-Integer-Linear-Program (MILP) solver, i.e. a
standardized method known from Operations Research. As any heuristic, also the
Time-series-based Supply Propagation Heuristic has certain limitations which are
inherent and which are explained in the sequel:

3.1 Sub-Optimal Supply Plans

The Supply Propagation Heuristic is definitely not a substitute for the Time-series-
based Supply Planning Optimizer as it does not optimize revenue, costs or deliveries.
The Supply Propagation is merely a variant of the heuristic infinite with no shortages.
It cannot, like the optimizer, take decisions based on costs. This means, the Supply
Propagation Heuristic, in general, is not able to compute “perfect” supply plans, i.e.

Page 7
plans with minimal costs and maximum revenues, optimal Projected Inventory or
maximum delivery of Consensus Demands.

Figure 6 shows an example in which the Supply Propagation Heuristic does not
compute an optimal solution but where the optimizer easily generates an ideal supply
plan.

Based on the quotas of 50% of each of the Customer Sources the heuristic
propagates 20 pieces of the Consensus Demand to both Distribution Centers, DC1
and DC2. As the planner has specified an Adjusted Transport Receipts equal to zero,
DC1 has no Receipts. Hence, the Supply Propagation Heuristic computes a
Customer Receipts of zero from DC1. Consequently, only DC2 delivers 20 pieces to
satisfy the Consensus Demand so that the Total Customer Receipts are only 20
pieces.

Sub-optimal Solutions with Supply Propagation

DC1 / P1
D: 20
I: 0
DLD: 0
N: 20
S: 0 TR: 0
R: 0 AT: 0

C1 / P1
CD: 40
TCR: 20

DC2 / P1
D: 20
I: 0 DLD: 20
N: 20
S: 20 TR: 20
R: 20

CD: Consensus Demand D: Dependent Demand R: Total Receipts

TCR: Tot. Cust. Receipts I: Projected Inventory AT: Adjusted Trans. Receipts
DCD: Dep. Cust. Demand N: Net Demand
CR: Customer Receipts S: Supply
© 2017 SAP SE All rights reserved. 6

Figure 6: Sub-optimal solution computed by the Supply Propagation Heuristic

Assuming DC2 could get Receipts of 40 pieces the optimizer of S&OP would
disregard the quotas and would therefore compute a Customer Receipts of 40 pieces
from DC2 to satisfy the entire Consensus Demand. The essence of this example is

Page 8
that the Supply Propagation Heuristic is not able to take sourcing decisions – like the
standard heuristic of S&OP, i.e. the heuristic infinite with no shortages.

There are other or similar situations in which the Time-series based Supply
Propagation Heuristic might compute obviously sub-optimal solutions, i.e. solutions
which are not as good as the those computed by the optimizer – as the following
sections will show.

3.2 Insufficient Net Demand

The Supply Propagation Heuristic can lead to another kind of sub-optimality which is
that Net Demand is computed as too low and out of sync with the Dependent
Demand. This problem is explained by the two following figures. Figure 7 shows an
initial situation with two location products. Location product DC1 / P1 receives its
demand as Dependent Customer Demand of 10 pieces in both periods. The planner
requested an Inventory Target of 10 pieces for period 1 and zero for period 2 and he
entered an Adjusted Transport (Receipts) of 5 pieces for period 1.

Supply Propagation Heuristic: Insufficient Net Demand /1

Input Data

DC1 / P1 DC2 / P1
D: D:
I: I:
DCD: 10 10 DLD: DLD:
IT: 10 00 N:
N: S:
CR: TR: TR:
S: R: AT: 05
R:

DCD: Depend. Cust. Demand D: Dependent Demand R: Total Receipts

CR: Customer Receipts I: Projected Inventory DLD: Dep. Locat. Demand
IT: Inventory Target N: Net Demand TR: Transport Receipts
S: Supply AT: Adjusted Transport
© 2017 SAP SE All rights reserved. 7

Figure 7: Example of Supply Propagation computing too low Net Demand

Page 9
The Supply Propagation Heuristic is performed in two steps. In step 1 the heuristic
“infinite / no shortages” is performed to create an initial supply plan – as shown by
Figure 8 (upper area). The heuristic “infinite / no shortages” computes demand and
supply key figures for all customer and location products in upstream direction. This
means, it computes first all demand and all supply key figures for location product D1
/ P1 and then for D2 / P1.

In a sub-sequent step (step 2) the Supply Propagation Heuristic propagates the

available supply in downstream direction (see lower area of Figure 8):

Supply Propagation Heuristic: Insufficient Net Demand /2

Step 1: Heuristic infinite / no shortages

DC1 / P1 DC2 / P1
D: 10 10 D: 20 00
I: 10 00 I: -15 00
DCD: 10 10 DLD: 20 00 DLD: 05 00
IT: 10 00 N: 20 00
N: 20 00 S: 20 00
CR: 10 10 TR: 20 00 TR: 05 00
S: 10 10 R: 05 00 AT: 05
R: 20 00

Step 2: Supply Propagation

DC1 / P1 DC2 / P1
D: 10 10 D: 20 00
I: 00 00 I: 00 00
DCD: 10 10 DLD: 20 00 DLD: 05 00
IT: 10 00 N: 20 00
N: 20 00 S: 05 00
CR: 05 00 TR: 05 00 TR: 05 00
S: 05 00 R: 05 00 AT: 05
R: 05 00
Out-dated
net demand
DCD: Depend. Cust. Demand D: Dependent Demand R: Total Receipts
CR: Customer Receipts I: Projected Inventory DLD: Dep. Locat. Demand
IT: Inventory Target N: Net Demand TR: Transport Receipts
S: Supply AT: Adjusted Transport
© 2017 SAP SE All rights reserved. 8

Figure 8: Example of Supply Propagation computing too low Net Demand

When during step 1 demand and supply is computed for DC1 / P1 the heuristic
assumes to get supply to cover the entire Net Demand, i.e. 20 pieces in period 1. At
this point, the heuristic does not look ahead (in upstream direction) and therefore it
does not realize that the Adjusted Transport Receipts will limit the supply to only 5
pieces. For that reason, it assumes Receipts of 20 pieces in period 1 to build up
inventory of 10. In period 2, as Inventory Target drops to 10 the inventory of 10
pieces can be used to satisfy the Dependent Demand without the need to get
Receipts in period 2.

Page 10
In its second step the Supply Propagation distributes the available supply in
downstream direction. As soon as the heuristic reaches the location product DC2 /
P1 it realizes the Adjusted Transport Receipts, i.e. the limited supply of DC 2 / P1 of
only 5 pieces and it continues to propagate this limited supply as Transport Receipts
to DC1 / P1. At DC1 / P1 the heuristic then adjusts the Receipts from 20 to 5 pieces
as the actual Receipts. Therefore, the intended Inventory Target of 20 pieces cannot
be built; the Projected Inventory stays at zero. The consequences are: first, the
Dependent Demand of 10 pieces in period 1 cannot be met. The Supply Propagation
Heuristic delivers only the available supply of 5 pieces to the customer. Second, in
period 2 there is not stock on-hand available to satisfy the Dependent Demand. For
that reason, the Net Demand would have to be recomputed – which is not done.

3.3 Mismatch of Supply and Quotas

As already shown along with Figure 6, the computed supply quantities might not be in
accordance with the quotas. In the example of Figure 6, the quotas are set to 50% for
both sources of supply. However, the supply quantities shown in key figure Customer
Receipts do not match with the quotas, as 100% of the supply comes from DC2 and
0% from DC1. Of course, also the S&OP standard heuristic (infinite / no shortages)
might compute supply plans in which the supply quantities do not match the defined
quotas. But, with the Supply Propagation Heuristic, such mismatches might occur
even more often – which is not an issue, but a planner should be aware of.

3.4 CARRY_OVER_NEGATIVE_PROJECTEDINVENTORY and Late Deliveries

Parameter CARRY_OVER_NEGATIVE_PROJECTEDINVENTORY is not supported
by the Supply Propagation Heuristic.

As explained around Figure 3 the Supply Propagation Heuristic does not satisfy
Customer Demands entirely if there is not enough supply available. The Customer
Demand then stays unfulfilled in such periods. The Optimizer of S&OP offers the
feature Late Delivery which enables the Optimizer to fulfill such an unsatisfied
demand in a sub-sequent period. This Late Delivery-functionality, however, is not
supported neither by the S&OP standard nor by the Supply Propagation Heuristic.

3.5 Periods of Coverage

With Periods of Coverage (lot size policy = 3) a special lot size procedure is available
for the S&OP standard heuristic. The Supply Propagation Heuristic does not support
this lot size policy.

Page 11
3.6 Limitations of the Infinite times-series-based Supply Planning Heuristic
There are several features of IBP for S&OP which are available for the optimizer
only, i.e. which are not supported by the Time-series-based Supply Planning
Heuristic. Such features are:

o Maximum lot sizes

o Maximum key figures (Maximum Production Receipts, etc.)
o Finite resource capacities
o Aggregated Constraints
o Late Delivery
o Maximize capacity utilization
o … (list might not be complete)

Such optimizer-only features are also not supported by the Supply Propagation
Heuristic.

In contrast to the above-mentioned limitations, the Supply Propagation Heuristic

supports (as of IBP 1811) key figure Maximum External Receipts which allows a
planner to limit external receipts.

4. Supply Propagation per Demand Type Priorities

The demand of a location product can originate from one or several different sources
which are:

1. Adjusted and Minimum Key Figures

2. Inventory Correction
3. Independent Demand
4. Dependent Customer Demand
5. Dependent Location and Dependent Production Demand.

Each of these demand types has a certain priority whereas Adjusted and Minimum
Key Figures have the highest and Dependent Location and Dependent Production
Demand have the lowest priority, as indicated by the list above.

As the demand caused by Adjusted and Minimum Key Figures must be fulfilled in any
case, even in cases of insufficient supply, the Supply Propagation Heuristic will
always satisfy this demand type, even if this results in a negative Projected Inventory
– as illustrated already by Figure 4. All other demand types are satisfied in the
sequence of their priority, until no more supply is available.

Figure 9 illustrates the priority based propagation of the available supply for an
example in which location product Plant A / Product P1 must satisfy two demands of
priority 1 (Adjusted Transport Receipts) and one demand of priority 5 (Dependent

Page 12
Location Demand). We will see that first the priority-1-demand is satisfied and then
the left-over-supply is used to satisfy the priority-5-demand.

Supply Propagation Related to Demand Type Priorities

DC1 / P1
D: 15
DLD: 15 I: 5
N: 15
TR: 15 S: 15 Negative Projected
R: 20 Inventory caused by
Prio 1 Adjusted Transports

DC2 / P1 Plant A / P1
D: 30 D: 50
I: -10
DLD: 30 I: 0 DLD: 20 DLD: 30
N: 50
N: 30
TR: 20 TR: 20 S: 40 TR: 30
S: 20
AT: 20 R: 30 AT: 30
R: 20

DC3 / P1
Prio 5
D: 10
DLD: 10 I: 0
N: 10
TR: 0 S: 0
R: 0

D: Dependent Demand R: Total Receipts

I: Projected Inventory DLD: Dep. Locat. Demand
N: Net Demand TR: Transport Receipts
S: Supply AT: Adjusted Transport Receipts
© 2017 SAP SE All rights reserved. 10

Figure 9: Supply Propagation along demand priorities 1 and 5

In Figure 9, key figure Adjusted Transport Receipts fixes a transport of 20 pieces

from Plant A to DC1 and from Plant A to DC2. The resulting Dependent Demand at
Plant A is 40 pieces. This demand has priority 1. In addition, Plant A receives a
Dependent Location Demand of 10 pieces from DC3 – which has demand priority 5.

As the Total Receipts at Plant A are 30 pieces the available supply at Plant A is 30
pieces only. The Supply Propagation Heuristic covers at first the demand priority 1
and as this demand priority must be fulfilled even in cases where the supply is short,
it covers both Adjusted Transport Receipts, i.e. in total 40 pieces. Thus, the Projected
Inventory is below zero (i.e. -10) and there is no more supply available to satisfy the
Dependent Location Demand coming from DC3. Key figure Transport Receipts
therefore is set to zero.

Figure 10 shows another example with different demand priorities. Location Product
DC2 / P1 receives demands from an Independent Demand (priority 3), a customer
Page 13
demand from customer X (as a Customer Dependent Demand) which is priority 4 and
a Dependent Location Demand (Priority 4) from DC1.

Supply Propagation Related to Demand Type Priorities

Customer X / P1

CD: 10 Prio 4
TCR: 10

Customer DC2 / P1 Prio 3

Source D: 20
ID: 10
IDS: 10
I: 00
N: 30
S: 15
DC1 / P1
R: 25
D: 10
I: 00
N: 10 Prio 5
S:
R: 05

Transport
Sources

CD: Customer Demand D: Dependent Demand R: Total Receipts ID: Independent Demand
TCR: Tot. Customer Receipts I: Projected Inventory DLD: Dep. Locat. Demand IDS: Indep. Demand Supply
DCD: Depend. Cust. Demand N: Net Demand TR: Transport Receipts
CR: Customer Receipts S: Supply MT: Min. Transp. Receipts
© 2017 SAP SE All rights reserved. 11

Figure 10: Supply Propagation along demand priorities 1, 3, 4 and 5

At DC3 the Dependent Demand is 20 and the Independent Demand is 10 so that we

have altogether a demand of 30. The available supply is 25 only. In a first step the
Supply Propagation Heuristic satisfies the demand of priority 1 which are the 10
pieces caused by the Independent Demand (priority 3) so that the remaining supply
after demand priority 3 is 15 pieces only. The heuristic then assigns 10 pieces to the
priority 4 demand which is the Dependent Customer Demand of 10 so that the
remaining available supply after demand priority 4 is only 5 pieces. These 5 are then
assigned the priority 5 demand, which is the Dependent Location Demand from DC1.

5. Proportional Fair Share Policy with Demand Types

In the previous chapter, we explained that limited supply first is distributed among
different demand types. In a second step the Supply Propagation Heuristic might
need to distribute limited supply within demand types if there are several requestors
causing demands of the same type.
Page 14
Figure 11 illustrates such an example in which the location product DC2 / P1 receives
two demands of the same type, i.e. two Dependent Customer Demands.

Supply Propagation: Fair Share Related to Demand Quantities

5 = 15 * (10/30)
Customer 1 / P1
CD: 20
TCR: 15 DC2 / P1
D: 30
I: 00 DLD: 15
Supply propagated due N: 30
S: 15 TR: 15
to demand (and not due AT: 15
R: 15
to quotas)

Customer 2 / P1
CD: 40 10 = 15 * (20/30)
TCR: 30

CD: Customer Demand D: Dependent Demand R: Total Receipts

TCR: Tot. Customer Receipts I: Projected Inventory DLD: Dep. Locat. Demand
DCD: Depend. Cust. Demand N: Net Demand TR: Transport Receipts
CR: Customer Receipts S: Supply AT: Adj. Transport Receipts
© 2017 SAP SE All rights reserved. 12
Figure 11: Supply Propagation per Proportional Fair Share within Demand Types

The Dependent Demand at DC2 is 30 pieces, 10 are requested from Customer 1 and
20 from Customer 2. The available supply, however, is only 15 as Total Receipts are
fixed to 15 by the Adjusted Transport Receipts. The Supply Propagation Heuristic
now propagates the available supply in relation to the Dependent Customer
Demands in downstream direction, i.e. towards the two customers. As explained by
Figure 11, Customer 1 gets 15 * (10 / 30) = 5 pieces and Customer 2 gets 15 * (20 /
30) = 10 pieces.

6. Supply Propagation at Production Sources

Production Sources need to be handled specifically by the Supply Propagation
Heuristic. The first important aspect is explained by Figure 12.

Page 15
 Supply Propagation along Production Sources

DC1 P2

D: 10
I: 00 DLD: 08
N: 10
S: 08 TR: 08
DC1 P1 DC1 P1 S1 R: 08 AT: 08
D: 10
I: 00
N: 10 P: 08
R: 08
DC1 P3

D: 10
I: 02 DLD: 10
N: 10
S: 08 TR: 10
R: 10
Minimum Product
Component defines
Production Receipts

D: Dependent Demand R: Total Receipts P: Production Receipts

I: Projected Inventory DLD: Dep. Locat. Demand PC: Product Component
N: Net Demand TR: Transport AT: Adjusted Transport Receipts
S: Supply DPD: Dep. Product. Dem.
© 2017 SAP SE All rights reserved. 13

Figure 12: Supply Propagation at limited components

Figure 12 shows the location product of the output product, which is DC1 / P1, the
production source (DC1 / P1 / S1) which requires two components P2 and P3 with a
component coefficient of 1. In the example of Figure 12 we see that the Net Demand
of P1 is 10, however the heuristic can plan Production Receipts of only 8 pieces. The
root cause is that component P2 is limited by an Adjusted Transport Receipts to 8
pieces. So, even with no limit on component P3 the Supply Propagation Heuristic
must reduce the production quantity to 8 because there is not enough supply
available for components P2 to satisfy the entire Dependent Production Demand of
10 pieces.

Another interesting aspect is how the Supply Propagation Heuristic handles Adjusted
Production Receipts, which is shown by Figure 13.

Page 16
 Supply Propagation and Adjusted Production

DC1 / P1
D: 50
I: 0
N: 50
S: 25
R: 25

DC2 / P1 Plant A / P1 Plant A

D: 30 D: 100 P1 S1
I: 0 I: 0 P: 50
DLD: 30
N: 30 N: 100 AP: 50
S: 15 TR: 15 S: 50
R: 15 R: 50

DC3 / P1
D: 20
I: 0
N: 20
S: 10
R: 10

D: Dependent Demand R: Total Receipts P: Production Receipts

I: Projected Inventory DLD: Dep. Locat. Demand PC: Product Component
N: Net Demand TR: Transport Receipts AP: Adjusted Production Receipts
S: Supply DPD: Dep. Product. Dem.
© 2017 SAP SE All rights reserved. 16
Figure 13: Supply Propagation in conjunction with Adjusted Production

Product P1 is requested by three locations (DC1, DC2 and DC3) from Plant A at
which we have a Production Source S1 (Plant A / P1 / S1). The Dependent Demand
at Plant A is 100. The user has entered an Adjusted Production Receipts of only 50
which limits the supply at Plant A so that Plant A can deliver only 50% of the
requested demand. Thus, each of the three requesting DCs gets only 50% of its
requested Dependent Location Demand. The corresponding Transport Receipts are
25 for DC1 (and not the requested 50), 15 for DC2 (instead of 30) and for DC3 10
(instead of 20) pieces.

Page 17