Co-product and By-product Planning

2. Co-product and By-product Planning Bob May senior product manager

3. Agenda • What is co-product/by-product planning? • Co-product definitions and planning assumptions • Configuring co-product relationships • Examples • Wrap-up

4. What is Co-product and By-product Planning? • Parts that are produced together in the same production process but have different physical or performance characteristics • Product grading (“binning”) • Co-product • Real production parts • Have real demand • By-product • Cannot be produced alone • Can be seen as “scrap with value” • Can have negative value

5. Supported Co-product Configurations • Making supply of one part produces supply for one or more other parts • The relationship can be one-way or two-way • One-way • Making H, produces H, M and L • Making M, produces M, L • Making L, only produces L H M L 20% 50% 30% Components • Two-way • Making H, produces H, M and L • Making M, produces H, M, L • Making L, produces M, L L M 70% 30% Components

6. Primary Part Definition • Part that has demand and triggers new production • Making H, produces H, M and L; H is primary product • Making M, also produces L; M is the primary product • The primary part • Explodes demand to components • Determines the order lot size rules • Determines the assembly yield • Consumes resources (“constraints”) • Considers sourcing rules

7. Characteristics of Co/By-product Supply • Supply created on co/by-products • Pegs to the planned orders or current supply on the primary part • Does not explode • Does not consume any constraint or generate CRP load • Availability is dependent on the primary product’s availability • Co-product supply life cycle • Planned orders: co-product supply always created • Current primary part supply • Optionally create co-product supply • Optionally explode demand to components • Optionally consider assembly yield • Optionally consume constraint

8. Configuring Co-product Relationships • Leverage BillOfMaterial table • Primary part is the assembly; co-product or by-product is the component • BOMType field indicates co-product/by-product relationship • Primary part’s ratio is modeled on the PartSource record, co/by-product ratios are modeled as negative QuantityPer values H M L by-product 20% 50% 20% 10% BillOfMaterial BOMType Components Assembly Part Component Part H CoProductYield = 0.2 - 2.5 M - 1 QtyPer L PartSource - 0.5 Components by-product

9. Configuration Example – One-way • Distribution: • H:20% • M:50% • L:20% • ByProduct:10% • Distribution: • M:50% • L:50% Calculation example: • Need 12,000 H • Order quantity H = 12,000/0.2 = 60,000 • M supply = 12,000 x 2.5 = 30,000 • L supply = 12,000 x 1.0 = 12,000 • By-product = 12,000 x 0.5 = 6,000 H PartSource.CoProductYield = 0.2 M PartSource.CoProductYield = 0.5 - 2.5 - 1.0 M - 1.0 L QtyPer QtyPer L - 0.5 Components by-product Components

10. Configuration Example – Two-way Distribution: M: 50% H:20% L:30% • Distribution: • H: 20% • M:50% • L:30% H PartSource.CoProductYield = 0.2 M PartSource.CoProductYield = 0.5 - 2.5 - 0.4 M H QtyPer - 1.5 QtyPer - 0.6 L L Components Components • Demo

11. Multiple Sourcing Example • One primary part can have more than one co-product relationship • Example: There may be more than one way to way to make the primary product. Using different components may yield different proportions of primary and co-products • Use multiple sourcing with alternate BOMs to achieve this H M L 20% 50% 30% . Component set 1 H M L 20% 35% 45% . Component set 2

12. Reducing Excess - Substitution Example • Planning inputs • Demand of 100 for L • No current supply on L or M • Process yields 80% L, 20% M • M can be substituted for L • Planning result • L and M are planned as a group • Plan will produce 80 units of L and 20 units of co-product supply on M to satisfy remaining demand on L • Without co-product knowledge of substitution, there would be 25 “excess” units of M

13. Reducing Excess – Managing Priorities • Two-way relationship • A produces B (A-20%, B-80%), B produces A (B-80%, A-20%) • Netting by priority results in 140 units of excess • Netting by date results in 40 units of excess H 30 30 A Excess = 20 units Excess = 0 units 20 30 10 M 80 B Excess = 40 units Excess = 120 units 80 120 40 Demand Primary Supply Co-product Supply

14. Reducing Excess – Planning Interval • One way relationship • A produces B (A-20%, B-80%) • Netting with no planning interval results in 120 units of excess • Netting with planning interval results in 40 units of excess 30 A 30 30 80 B Excess = 40 units Excess = 120 units 80 120 120 Demand Primary Supply Co-product Supply Planning Interval

15. Unsupported Configurations • Real product structure between two associated co-products • Co-product is also a component of its primary part • Substitution between co-product and common components • Blow-through acting as a primary part Blow-through H H H H M L L L Components Component 1 L Components L Component 1 L Components Co-product Standard BOM

16. Wrap-up • RapidResponse 10.0 supports configurable co-product and by-product planning • One- and two-way configurations are supported • Co/by-product relationships are modeled in a way that is consistent with large ERP systems • Compatible with all other RapidResponse analytics including CTP, full-level-pegging, multi-sourcing, part substitution and supply expiry

17. Thank You!