Consumption-based Planning 3: Automatic ROP

The SAP system can be configured to calculate a reorder point automatically if forecast
information is available. This reorder point will include a safety stock amount based on the
Mean Absolute Deviation (MAD) from the forecast and a service level specified in the material
master.

3.1 Change MRP Type to Automatic Reorder Point planning

To tell the SAP system that we want to user Automatic Reorder Point planning, we need to
change the MRP type in the material master. In addition, we must also specify the (customer)
service level we desire for this material so the safety stock can be calculated automatically. To
change the MRP type, follow the menu path:

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

Immediately

which will produce the following screen:

Enter ##P700 for material,

then click on Select view(s)

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

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Make sure the MRP 1 and

MRP 2 views are selected,
then click on the enter icon

Select the MRP 1 and MRP 2 views, then click on the enter icon ( ) and the following pop-up
window will appear:

Enter ##PT for Plant,

then click on enter

Enter ##PT for plant, then click on the enter icon ( ) and you will be at the MRP 1 view of the
material master in change mode:

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Enter VM for MRP Type,

then click on the enter icon

Enter VM (Automatic Reorder Point) for MRP Type, then click on the enter icon ( ) and you
will get the following warning message:

This seems a bit strange, given that we are going to have SAP set the reorder point for us. Click
on the exclamation mark ( ) in the message to get more detail:

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If a value is not entered manually, this could

result in no order until a forecast is executed

This warning message is telling us that, while the SAP system will calculate a reorder point for
us, it won’t do this until a forecast is executed again. If a forecast is not executed before MRP
planning is run, then an order for zero items might be created unless you specify a value
manually. If you do specify a reorder point at this time, the system will override this value at the
next forecast. In this case, we’ll leave the reorder point blank. Click on the cancel icon ( ) to
close the Performance Assistant window. Click on the MRP 2 tab and the warning message will
be redisplayed. Click on the enter icon ( ) to ignore the warning message and move to the
MRP 2 view:

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Enter 95 for Service level (%),

then click on save icon

Note that you can specify a minimum safety

stock amount in case the SAP calculation
would result in an unacceptably low level

Enter 95 for Service level (%), then click on the save icon ( ). Note that we did not change the
Safety stock of 30. Use the exit icon ( ) to return to the SAP Easy Access screen.

3.2 Review Material in Stock/Requirements List

To see the impact of these changes on material ##P700, we will open a session to display the
Stock/Requirements List. We can do this in one step using the command line:

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Enter /omd04 (letter o, m d zero 4) in

the command line, then return or click
on the enter icon

The command line can be used to create a new session and start that session in one step. By
starting with /0 (letter o) we tell the system to create a new session. Adding the transaction code
md04 (m d zero 4) tells the system to start this new session at the Stock/Requirements List:

Enter material ##P700 and plant

##PT, then click on the enter icon

Enter material ##P700 and plant ##PT, then click on the enter icon ( ) and the following screen
will appear:

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The forecast quantities are no longer displayed, but

the purchase orders and requisitions still exist

3.3 Execute Forecast to Calculate Reorder Point

Now we need to execute a forecast for the SAP system to calculate the reorder point and safety
stock level. Switch to the first session, then follow the menu path:

Logistics Production Production Planning Material Forecast Forecast

Individual Forecast Execute

which will produce the following screen:

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Enter ##P700 for Material and

##PT for Plant, then click on enter

Enter ##P700 for Material and ##PT for Plant, then click on enter icon ( ) to get the following
screen:

Click on the execute icon

Click on the execute icon ( ) to execute another forecast. You’ll get the following pop-up
window about the forecast date:

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Ignore the date selection

and click on the enter icon

Don’t worry about the date and click on the enter icon ( ) to execute the forecast:

Click on the save icon

to save the forecast

Click on the save icon ( ) to save the forecast. Switch back to the session with the
Stock/Requirements list:

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Double-click on the
material field to display
the material master

From the Stock/Requirements List you can display the material master by double-clicking on the
material field:

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Click on the MRP 1 tab, then look at

the newly-calculated Reorder point.
Now switch to the MRP 2 tab

Note that SAP has now calculated a Reorder point. Switch to the MRP 2 tab to see the safety
stock that has been calculated:

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Note the Planned

delivery time = 2

Note the newly-calculated Safety stock

(your result may be slightly different).
Click on the forecasting tab.

Due to variations in calendar dates, your results may be very slightly different. To see how the
Reorder point and Safety stock were calculated, we must first gather some data. One piece of
data we need is the Planned delivery time, which is 2. The rest of the data is available on the
Forecasting tab:.

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Note the Period

Indicator is W
(weekly)

Click on the Forecast values icon to

see details on the forecast results

Click on the Forecast values icon ( ) to see details on the

forecast results:

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The forecast estimates a

demand of 99 units per
week, with a MAD of 23.

Given the demand forecast and MAD, it is possible to confirm the SAP calculation of the
Reorder Point. The Reorder Point (ROP) is calculated as:

ROP  DDLT  SS
where DDLT is the demand during lead time and SS is the safety stock.

To calculate the DDLT, we can use the following formula:

DDLT  W Demand 

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Where

Lead Time
W
Demand Period

In SAP’s consumption-based planning, the demand period is the given by the Period indicator in
the Forecasting view. For material ##P700, this is W (weekly). The Lead Time depends on
whether the material is Externally or Internally procured. For Externally Procured Material, the
Lead Time is:

Lead Time = Purchasing Processing Time + Planned Delivery Time +

Goods Receipt Processing Time
Where:

Purchasing Processing Time: # Days for purchasing to convert a purchase requisition

into a purchase order—configured in Plant Parameters

Planned Delivery Time: # Days required for supplier to deliver item upon receipt of
purchase order—entered in the Material Master, MRP 2 View

Goods Receipt (GR) Processing Time: Number of workdays required after receiving
the material for inspection and placement into storage—entered in Material Master, MRP
2 View

In our example, we assume a very efficient purchasing organization so that the Purchasing
Processing time is zero. The planned delivery time is 2 days, and we assume a quality supplier
so that incoming inspection is not required and the goods receipt processing time is also zero
days. Therefore, we have a lead time of 2 days and:

2
W  0.2857
7
And the DDLT is then:

DDLT  W Forecast 
 0.2857 99  28

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For internally procured material, experimentation has shown that:

Lead Time = in-house production

where the Lead Time is specified on the MRP 2 View of the material master. Note that this
differs from what is given in help.sap.com, which states that the lead time is opening period + in-
house production time + goods receipt processing time.

The safety stock is calculated as:

SS  R W MAD

Values for R can be determined from the following table:

Cumulative
Probability R
0.50 0.0000
0.55 0.1571
0.60 0.3167
0.65 0.4817
0.70 0.6555
0.75 0.8431
0.80 1.0520
0.85 1.2955
0.90 1.6019
0.95 2.0561
0.98 2.5672
0.99 2.9079
0.995 3.2198
0.998 3.5977

So for the material ##P700 we have:

SS  R W MAD
 2.0561 0.2857 23
 25.277  25
Finally, we can calculate the Reorder Point as:

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ROP  DDLT  MAD  28  25  53

Use the exit icon ( ) to return to the Stock/Requirements List.

3.4 Run MRP

To finish this exercise will run MRP to see the impact of the Automatic Reorder Point on the
plans for material ##P700. 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:

Use the default planning values,

then click on the enter icon

Use the default planning results, then click on the enter icon ( ) and the following message will
appear at the bottom of the screen:

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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 the following message will be displayed at the bottom of the screen:

Switch to the Stock/Requirements list and click on the refresh icon ( ):

Note that all planned orders and purchase

requisitions have been deleted. Notice the
new safety stock is now displayed

Print a copy of this Stock/Requirements List.

Put you name on it, and hand it in.

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