Demand Planning with SAP APO – Execution

2.1 DM Consumer Appliances, Inc. business scenario

DM Consumer Appliances, Inc. is a consumer products company and has sold medium size high definition television [HDTV] sets for the last eight years, with its head office at Atlanta, GA in the United States of America. DM Consumer Appliances, Inc. has a supply chain network with following entities:

• Atlanta Manufacturing Plant
• Frankfort Distribution Center
• Columbus Retail Store
• Philadelphia Retail Store

DM Consumer Appliances, Inc. sells its products through two distribution channels as follows:

Direct Sales:

• Direct sales to consumers through its Columbus Retail Store, or through its Philadelphia Retail Store
• Direct sales to consumers over web

Indirect Sales:

• Sales through the Frankfort Distribution Center to its commercial customers like wholesalers or retailers
• Sales through the Atlanta Manufacturing Plant to its commercial customers located in the vicinity of the manufacturing plant

The flow of demand from end customers, commercial customers, and their corresponding dependent demand is illustrated in the Figure 2.1.

Figure 2.1: Demand flow in supply chain network of DM Consumer Appliances, Inc.

DM Consumer Appliances, Inc. manufactures, distributes, and sells LCD (Liquid Crystal Display) high definition television [HDTV] ranging in size from 32-40 inches in two different resolutions, e.g. 720 pixels (abbreviated as 720p) and 1080 pixels (abbreviated as 1080p). The target market segment of DM Consumer Appliances, Inc. is household customers and sells its products using the brand name DM. DM Consumer Appliances, Inc. sells the following products that belong to the product group LCD TVs:

• 32" DM LCD 720p HDTV
• 32" DM LCD 1080p HDTV
• 39" DM LCD 1080p HDTV

DM Consumer Appliances, Inc. launches a 40 inch LED (Light Emitting Diode) technology-based HDTV with a resolution of 1080 pixels under the same brand name DM for a new product group LED TVs as follows: 40" DM LED 1080p HDTV

The product 40" DM LED 1080p HDTV has a lifecycle of two years. DM Consumer Appliances, Inc. promotes the new product by offering discounts to its customer for the initial six months of the product launch. During the promotional period, the new product 40" DM LED 1080p HDTV affects the sales of the product 39" DM LCD 1080p HDTV.

DM Consumer Appliances, Inc. uses SAP ERP (Enterprise Resource Planning) for supply chain execution and forms the main logistics system. The demand plan for all of the LCD TVs and LED TVs individual products at the Atlanta Manufacturing Plant get transferred to ERP for production planning. The network demand plan for all of the individual products for LCD TVs and LED TVs at non-manufacturing plants gets released to the supply planning system.

We describe the demand planning scenario at DM Consumer Appliances, Inc. in the next section.