S/4HANA Demand Driven MRP (DDMRP)

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This blog gives you an understanding of demand-driven MRP and how it works in SAP S/4HANA environment.

Material requirements planning (MRP) is a well-known planning tool. Material planning is a very critical and complex
process due to complex supply chain networks and it is not easy to fulfill the requirements based on classical planning
all the times.

MRP is a planning tool and available in SAP ERP (ECC) and Advanced Planning Optimization (APO) interface with
Core Interface (CIF). SAP material requirements planning brings efficiency and optimization to production and
procurement plans. Every planner dream to accurately plan materials timely available across the logistics and entire
supply chain. Planner main goal is to ensure that enough stock available for sale to customers without escalating the
inventory carrying cost or facing a shortage of raw or packing materials needed for production processes.

MRP planning runs generate purchase requisition or planned order is a proposal that a planner can interactively
convert to purchase order or production order for external procurement or in-house production. SAP MRP creates a
planned order or purchase requisitions based on a material’s net requirement quantity and its needed availability. The
net requirement calculation takes into account existing warehouse stock, the quality of stock, existing or open
purchase orders, or production orders to calculate the material’s shortage quantity. If the system finds that there is a
material shortage, it creates a planned order or purchase requisition for the shortage quantity. MRP is not restricted
to quantity planning it also takes timelines into account, such as the time it takes to procure a material (known as
replenishment lead time or planned delivery time), the time required to process goods receipt in the warehouse or the
quality inspection times (goods receipt processing time).

SAP Business Suite 4 SAP HANA is a business suite that is built on SAP’s proprietary operational database system
and in-memory computing platform called SAP HANA. SAP S/4HANA is being called SAP’s biggest update to its ERP
strategy and platform in over two decades that means S/4HANA is just a new transformation to an ERP system.

DDMRP available in the S/4HANA product offering consists of two editions: SAP S/4HANA On-Premise and SAP
S/4HANA Cloud and Integrated Business Planning (IBP). If you look at the high-level earlier ECC and APO and now
S/4HANA and IBP.
Demand Driven Material Requirements Planning (DDMRP) is an innovative multi-echelon pull methodology to plan
inventories and materials. It enables a company to build more closely to actual market requirements and promotes
better and quicker decisions and actions at the planning and execution level. DDMRP was introduced to the world in
the book Orlicky’s Material Requirements Planning, Third Revised Edition by Carol Ptak and Chad Smith.

I am mainly focused on S/4HANA 1709 on-promise version Demand-Driven Replenishment process. Demand-Driven
Replenishment helps you plan and manage supply chains efficiently based on customer demand, rather than through
traditional MRP procedures. You do this by strategically decoupling material flows, becoming less vulnerable to
disruptions in the supply chain, and by protecting the flow through dynamically-managed buffer (stock) levels for
relevant products.

DDMRP uses strategic decoupling points to drive supply order generation and management throughout a supply
chain.

1. Strategic decoupling: De-coupling the supply chain creates independence between processes or entities
and is the only way to stop the bullwhip effect, mitigate variability and compress lead times.
2. Buffer sizing: Buffer sizing is the shock absorber to ease both supply and demand variability and reduce or
eliminate the bullwhip effect.
3. Dynamic adjustments: A dynamic adjustment of the buffer profiles further calms the supply chain and
smooths operating for all variabilities within a set period.
4. Demand-driven planning: Demand-driving planning comprises generating supply orders by evaluating
actual inventory, stock that has been ordered but not received, and qualified sales order demand.
5. Visible and collaborative execution: When users have visibility into inventory through alerts that track
usage, ordering lead times and material delivery can be synchronized.

To implement the DDMRP process following are the two steps.

1. Configuration and setup in fiori applications

2. Operational fiori applications
The first steps to identify the materials which are relevant for DDMRP planning (critical and long lead time) and update
the MRP type D1 (planning procedure C) in material master MRP 1 view.
Schedule Product Classification (DD):

With this app, you can classify your products by systematically evaluating them based on their goods issue value
(ABC classification), usage across BOMs (PQR classification) and variation in actual demand (XYZ classification)
across a specified evaluation interval. Classifying your products will help identify whether they are relevant for
Demand-Driven Replenishment, and will help define inputs for their buffer settings.

Once the application job opens click on “New” and classifies products and schedule job as below.
After job completed products classified and additional information messages also displayed.

Mass Maintenance of Products (DD)

With this app, you can display and change product details (master data records) relevant to Demand-Driven
Replenishment. After you have classified or re-classified your products, you can view the results of the classifications
in this app, and based on the results, select products that are relevant to Demand-Driven Replenishment. You can
use the mass change feature to change the master data records for several products simultaneously. This is the
second app that you’ll use when you start with Demand-Driven Replenishment.

Once the application job opens select materials and which you want to do mass change and click on “Mass change”
new popup window displayed and do the changes based on requirement (this step is optional in this case).

Schedule Lead Time Classification of Products (DD)

With this app, you can classify your Demand-Driven Replenishment-relevant products by evaluating them based on
their Decoupled Lead Time (EFG classification) across a specified evaluation interval. Classifying your products based
on their Decoupled Lead Time (DLT) will help define inputs for their buffer settings. Additionally, you can schedule
runs to re-classify your products periodically to keep their classifications up-to-date, so that you get accurate results
as you proceed with Demand-Driven Replenishment. This is the third app that you’ll use when you start with Demand-
Driven Replenishment.

Once the application job opens click on “New” and classifies products and schedule job as below.

After job completed products classified and additional information messages also displayed.

Schedule Buffer Proposal Calculation

With this app, you can generate buffer (stock) level proposals for your Demand-Driven Replenishment-relevant
products based on their average daily usage, decoupled lead time, buffer profiles and several other factors.
Additionally, you can schedule runs to re-calculate the buffer proposals periodically to keep them up-to-date, so that
you maintain appropriate levels of inventory while using Demand-Driven Replenishment. This is the fourth app that
you’ll use when you start with Demand-Driven Replenishment.

Once the application job opens click on “New” and calculates buffers and schedule job as below.
After job completed products buffer calculation completed and additional information messages also displayed.

Buffer calculation

Buffer (stock) level proposals help you manage the safety stock, reorder point and maximum stock for your products
through the Manage Buffer Levels app. Several factors are taken under consideration when calculating buffer
proposals for your Demand-Driven Replenishment-relevant products.

A buffer profile is one of the several factors taken under consideration when calculating buffer proposals for Demand-
Driven Replenishment-relevant products.
SAP not provided the standard transaction code to maintain the buffer parameters. You can manage buffer profiles
using the cluster table “PPH_DD_PROFILE_ASG_VC” in SM30 transaction code in S/4HANA 1709 on-premise
version.
Manage Buffer Levels

With this app, you can ensure products are available when needed by managing the safety stock, reorder point and
maximum stock through buffer proposals for optimized Demand-Driven Replenishment.
Based on Schedule Buffer Proposal Calculation job material R-100-100 Red Zone value 323 PC, Yellow Zone 599
PC and Green Zone 179 PC classified.

Now looking at the R-100-100 detailed analysis.

Buffer zones

Buffer Levels
Average Daily Usage

Decouple Lead Time

Classifications

Stock requirement list (MD04)

Replenishment Planning by Planning Priority

With this app you have an overview of the buffer information sorted by the planning priority. Using this information,
you can trigger replenishment on time to avoid stock shortages and possible delays in the completion of production
or sales orders as a result of insufficient stock.

Replenishment Execution by On-Hand Status

With this app you can view today’s stock situation for each product and check that sufficient on-hand stock is available
for production. Using this information, the planner can try to speed up replenishment by contacting the supplier of a
purchase order or the production supervisor of the component production order, for example.
Please refer to the following link for additional documentation.

https://www.demanddriveninstitute.com/ddmrp

https://help.sap.com/viewer/e93a1ed5d8d9422faa3acd132b27e7ba/1709%20000/en-
US/4694a223d18b4f648ea0b2872cf1d2c5.html

What is the difference between MRP algorithm in S4 HANA & the MRP algorithm in IBP S&OP or S&R. Which one
is superior, in terms of scalability, performance, planning results?
S/4HANA MRP two type classical MRP and Live MRP:
Classical MRP application server calls the database server multiple times to read the lots of data. This data is then
transferred from the database server to the application server. All tables are read sequentially one after another.
Live MRP many tables are read parallel using the parallelization capabilities of SAP HANA. The data is not
transferred back to the application server but used to compute material shortages directly in the database server.
Both the MRP contains the best user experience and simulation capabilities.
IBP MRP:
IBP Sales and Operations Planning offers a set of planning algorithms to compute a complete plan for the supply
chain network. S&OP allows you to generate supply plan using two algorithms types: Heuristics and Optimization.
Heuristics: The heuristic algorithm supports Unconstrained Demand and Supply Planning mode. In Unconstrained
Heuristic, resource capacities are not taken into account to compute supply. Unconstrained planning mode does not
compute a feasible plan.
Heuristic offers multiple algorithms like Infinite Without Shortage, Infinite Demand and Supply Planning, Finite
Demand & Supply Planning.
Optimizer: The objective of the Optimizer is to minimize the total costs of the supply plan. Optimization is performed
via a transformation of the S&OP-model into a mathematical model (Mixed Integer Linear Programming (MILP)-
model). The output is an optimal and feasible production, distribution and procurement plan for the entire supply
chain network taking into account the constraints.
Optimizer offers two different algorithms like Profit Maximization and Cost Minimization for Full Delivery.
Scalability: S/4HANA and IBP have its own capabilities to consider the multiple inputs and provide the results at
multiple lengths. IBP has more overlook the supply network perspective and provides proposals.
Performance: The Innovation in MRP live (transaction MD01N) is designed to perform MRP for a large set of
materials in one or even multiple locations with the fast runtime. It is observed that real performance improvements
with MRP live happens when planning is done for more than 100 materials. Classic MRP if the number of materials
for planning is low (<100), then classic MRP provides better speed and performance.
IBP runs considering the planning objects and generates optimal plan quickly for the low volume of data.
Overall performance wise MRP lives generated receipts quickly.
Planning results: S/4HANA MRP results are mover over operations based for certain buckets. IBP results are short
to mind and long-term planning considering the supply chain networks.
Demand-Driven MRP – Part I: Over View
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Dear All,

Demand-Driven MRP in Short (DD MRP) has been introduced into SAP S/4 HANA with its 1709 Release. and there
is a lot of Buzz regarding DD MRP, so I have decided to Share knowledge based on my understanding and
experience.

Will plan this in 2 parts one with DD MRP overview and second with how to use DD MRP Tool

let’s jump into the topic

What is DD MRP

 DD MRP is Not an SAP Product its Delivered by Demand Driven Institute

 Its therein Market in from 10 years
 It’s a tool which reduces shortages and overloads
 Its secret is maintaining of Buffers

People are in assumption that DD MRP improves Forecasting but it’s a tool which works against Forecasting

Because 70~80 % can be only achieved and even in some cases it’s 40~60%

Key Points about DD MRP

 It’s Available in SAP From 1709

 DD MRP works on Buffer level Stock.
 It captures Spikes in Demand
 It’s only for selected Materials (high variability)
 Stock-outs & overstock will be controlled
 It supports MTS, MTO & ATO
 It’s a Combination of Pull & Push
 It’s not order based planning
 It’s not an auto driven tool requires manual interventions.
 It requires a lot of calculations and trails.
 At the moment it won’t support Fashion, Retail, VC Model
Variability in Supply Chain causes our forecast failure

when you see the Forecast accuracy at Finished goods Level it’s around 70 ~80 % but when Low-level Materials
are used in multiple BOM’s then the accuracy of low-level forecast becomes 200 ~ 300 % inaccurate

MRP Type VB vs PD
Below are the Key parameters

Key Parameters

 Identification of material
 Maintaining Buffers
 Adoption of Sudden Spikes
 Manual Interventions
 Visible and Collaborative Execution

Identification of materials: –

Tools -> Material Classification

the material gets classified based on below points

 Lead time
 Bom usage
 Value $
 Variability
Manual Interventions

Year End Sales / Peak Seasons of sales

Special Promotions

Visible and Collaborative Execution

Tools to Monitor buffers

Reports

Decuple Lead Time

Which Materials are planned in DD MRP Lead time won’t be calculated

Above are the Key Points which we need to understand before we go further.

the rest of the Tools usage and how to Activate DD MRP will see in next Part.

For better Understanding of DD MRP use this link to know in detail and more about DD MRP concept so in my nest
part when I show how to use tools it will be understandable in better way