Consumption-based Planning 2: Forecast-based

When consumption-based planning is configured using reorder-point planning, the SAP system
creates a planned order or purchase requisition whenever the inventory level for the material falls
below the reorder point, and the reorder point must be determined by the user. In addition to
requiring the user to determine the reorder point manually, the reorder point method will not
perform particularly well when there is a change in the demand for the material—for example if
there is seasonal variation in the material demand, or demand for the material is increasing or
decreasing over time. To address this problem, consumption-based planning can be configured
to use forecasts of material demand to estimate consumption, and this estimated demand can be
used to create planned orders.

2.1 Create Forecasting View for Material ## Grocery Pallet

To use forecast-based planning, it is first necessary to create the forecasting view for the
material. To do this, follow the menu path:

Logistics Production Master Data Material Master Material Create

(Special) Packaging

which will produce the following screen:

Enter ##P700 for material and

select Retail for Industry Sector
then click on Select view(s)

The material ##P700 already exists, and we want to add the Forecasting view for this material.
In the SAP system, we do this by creating the view rather than changing the material. When we
enter ##P700 for material, the system will find this (existing) material, then create the new views
we select.

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Enter ##P700 for material, select Retail for Industry Sector, then click on the Select view(s) icon
( ), which will call up the following pop-up window:

Select the Forecasting view:

Then click on enter

Select the Forecasting view, then click on enter icon ( ) and another pop-up window will
appear:

Enter ##PT for plant, then click on enter

Enter ##PT for Plant, then click on enter icon ( ) and the SAP system will create a Forecasting
view for your material:

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Note this message, which confirms that you are

adding the Forecasting view to an existing material Click on Consumption vals

Click on Consumption vals icon ( ), which will produce the

following screen:

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Note that usage of 330 pallets from the

first consumption-based planning
exercise have been recorded. Note
that monthly data is being recorded.

Note that the use (consumption) of 330 pallets from the first consumption-based planning
exercise have been recorded. An advantage of an integrated information system like SAP is that
material usage is automatically recorded for forecasting purposes. Not that the figure under
Total consumption is presented with a grey background. This figure is updated by the SAP
system as material is issued. As a result, SAP does not want the user to adjust this figure.
However, in forecasting it is common to want to make an adjustment to historical sales figures to
produce a better forecast. It may be that sales were low in a particular period because of a
random occurrence like bad weather. In this case, a better forecast could probably be obtained
by correcting the sales value that was low due to an event that was unlikely to occur in the future.
To accommodate this, SAP provides a Corrected value column where the user can enter a value
other than the actual usage (consumption) for forecasting purposes.

Click on the Main data icon ( ) icon to return to the Forecasting view.

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Enter J for Forecast model (automatic model

selection) and change the Period Indicator to
W (weekly), then click on the Enter icon

Enter J for the Forecast model. This choice will let the SAP system select the forecasting
model after it analyzes the historical data to determine whether trend or seasonal patterns exist.
Our consumption data is currently being collected on a monthly basis. This choice was made
because of a default setting on the MRP 2 view of the material master when we created the
material in the first consumption-based planning exercise. Monthly data is probably not a
sufficiently small time increment for our purposes. Change the entry from M (monthly) to W
(weekly) so that data is collected on a weekly basis. Click on the enter icon ( ), which will
send these new values to the SAP server and produce the following message:

Click on the exclamation mark icon

Click on the exclamation mark icon to get more information:

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Read the error message, then

close the Performance Assistant

Messages with an exclamation mark ( ) are warnings, which means we can ignore them if we
choose. That doesn’t mean that we aren’t making a mistake, but the SAP system will let us
proceed. In this case, the warning message lets us know that we are changing the time period for
consumption data AND consumption data already exists. It also lets us know that we can correct
consumption values—that is, we can enter manually correct the consumption values. Close the
Performance Assistant, then click on the Consumption vals icon ( )
again. This will produce another error message about existing consumption values:

Click on the enter icon ( ), which will produce the following screen:

Click on Yes

Click on Yes to save the forecasting view, and you will get the following message:

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This isn’t quite correct—the material wasn’t just created, but the forecasting view for the
material was created.

Next, we need to add historical usage values—which are called consumption values in the SAP
system. To do this, follow the menu path:

Logistics Production Master Data Material Master Material Create

(Special) Packaging

which will produce the following screen:

Enter ##P700 for material and

then click on Select view(s)

Enter ##P700 for material, then click on the Select view(s) icon ( ), which will call
up the following pop-up window:

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Select the Forecasting view:

Then click on enter

Select the Forecasting view, then click on enter icon ( ) and another pop-up window will
appear:

Enter ##PT for plant, then click on enter

Enter ##PT for Plant, then click on enter icon ( ) and the SAP system will take you to the
Forecasting view for your material:

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Click on Consumption vals

Click on Consumption vals icon ( ), which will produce the

following screen:

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The period gives the week

and year. The current
period is the first listed.

Enter the Total consumption values shown. Be

Careful—you only get one chance to do this

Enter 10 weeks of Total consumption values as shown above, then click on the save icon ( ).
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2.2 Change Planning Method

To change from reorder-point planning to forecast-based planning, we need to change planning

parameters that were set on the MRP 1 view of the material. To do this, follow the menu path:

Logistics Production Master Data Material Master Material Change

Immediately

which will produce the following screen:

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Enter ##P700 for material,

then click on Select view(s)

Enter ##P700 for Material, then click on the Select view(s) icon ( ). This will
produce the following pop-up window:

Select the MRP 1 view

Select the MRP 1 view, then click on enter icon ( ) and another pop-up window will appear:

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Enter ##PT for plant, then click on enter

Enter ##PT for plant, then click on the enter icon and the MRP 1 view will appear:

Change MRP type to VV,

then click on the enter icon

We want to change the MRP Type from VB (Manual reorder point planning) to VV (Forecast-
based planning). Enter VV in the MRP Type and click on the enter icon ( ) and the following
message will be displayed:

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The system highlights the

Reorder point entry and
informs us that this value is
not used in Forecast-based
planning

The warning message reminds us that the reorder-point is not used with forecast-based planning.
While we could leave the value for the reorder-point in the material master, it is a better practice
to delete this value (Why? Do you agree?). Click on the save icon ( ) to save the change to the
planning method.

2.3 Stock/Requirements List

We can review the status of our material by following the menu path:

Logistics Materials Management Inventory Management Environment

Stock Stock/Requirements List

which will bring up the following screen:

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Material ##P700 and plant ##PT

should be entered automatically.
If not, enter them, then click on the
enter icon

The material we just created should be entered by default. If not, enter material ##P700 and
plant ##PT, then click on the enter icon ( ) and the following screen will appear:

Click on the detail icon for the Purchase Requisition

Note the following information message at the bottom of the screen:

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Because we want to use forecast-based planning, we need to have a forecast. We will do that
after we delete the existing purchase requisition so that we can clearly see how forecast-based
planning works. Click on the detail icon ( ) for the Purchase Requisition, which will produce
the following pop-up window:

Click on the change icon

Click on the change icon ( ) to get the following screen:

Click on the Item overview icon

to open the Item overview panel

If the item overview panel is not open, click on the Item overview icon ( ) to open it:

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Click on the row selection icon, then click on the

delete icon to delete this purchase requisition

Select the row with the grocery pallet, then click on the delete icon ( ). You will get the
following warning:

Select Yes

Click on Yes, then click on the save icon ( ) and you will return to the Stock/requirements list.
Click on the refresh icon ( ) and the purchase requisition will be removed:

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2.4 Run Forecast

Leave the Stock/Requirements list open and create a new session by clicking on the new session
icon ( ). We will use the new session to generate a forecast for our material. To do this, follow
the menu path:

Logistics Production Production Planning Materials Forecast Forecast

Individual Forecast Execute

which will produce the following screen:

Enter ##P700 for

Material and ##PT
for Plant, then click
on the enter icon

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Enter ##P700 for Material and ##PT for Plant, then click on the enter icon ( ). This will
produce the following screen:

Click on the Execute icon

to execute the forecast

This screen shows us the forecast values that

were entered in the material master, and also
informs us that we don’t have any forecast yet

Click on the Execute icon ( ) to execute the forecast. This will produce the following
pop-up:

Don’t worry about the date selection.

Click on the enter icon

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Don’t worry about the Last forecast date. Click on the enter icon ( ) and the forecast results
will be displayed:

Click on the save icon ( ) to save these results, then switch to the Stock/Requirements list and
click on the refresh icon ( ). The forecast demand for the material will now be displayed:

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Note that forecast

requirement for first week is
adjusted based on time left
in the week

2.4 Run MRP Planning

Now that the forecast has created “demand” for the material, we can generate planned orders
using the MRP process. To run the MRP planning process, switch to the other session and
follow the menu path:

Logistics Production MRP Planning Single-Level Single-Item Planning

This will call up the following screen:

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Use the default planning values, select

Display results before they are saved,
then click on the enter icon

Select Display results before they are saved so we can see the planning results immediately,
then click on the enter icon ( ) and the following message will appear at the bottom of the
screen:

Depending on the situation, production planning can take a lot of computer resources, so SAP is
just reminding you to make sure that you have everything set correctly. Click on the enter icon (
) a second time, and a screen very similar to the Stock/Requirements screen will be displayed:

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Note that planned orders

have been created to keep
the available quantity
positive

Click on the save icon ( ) to save these results, then switch to the Stock/Requirements list and
click on the refresh icon ( ):

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Note that safety stock is

now considered in
determining material
requirements. In reorder-
point planning, it is just
provided for information.

With forecast-based planning, material requirements and production/purchase orders are handled
in essentially the same manner as finished products planned using MRP. Demand is forecast,
then planned orders are generated to meet this demand.

Forecast-based planning can be made to run automatically by grouping all materials together that
are planned using this method, then generating forecasts and then running MRP for all materials
in this group on a regular basis (e.g. weekly).

Print a copy of this Stock/Requirements List.

Put you name on it, and hand it in.

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