MRP

PROCEDURES
~ASHISH GARG
 • Materials’ planning is one of the key of good
inventory control systems.
• The objective of materials planning is to monitor the
stocks to ensure material availability with materials
planning in SAP we can determine automatically
MATERIAL which material is required, the quantity required and
when it is required. We can therefore prevent lacking
PLANNING materials if needed.
OVERVIEW • Materials planning in SAP can automatically create
procurement proposals for purchasing and
production (planned orders, purchase requisitions or
delivery schedules). This target is achieved by using
various materials planning methods which each
cover different procedures.
 • Sales and Distribution module of SAP
receives demand from customer. Sales
department will create a sales order or a
sales forecast which contain the information
of what, how many, and when Finished
Goods are needed by the customer.
MATERIAL PLANNING • The Sales Order or the Sales Forecast will
OVERVIEW be considered as an independent
requirement and this requirement will
trigger materials planning process for
finished goods.
How it works • SAP will compare the requirements with
finished goods current stock and if the
requirement fulfilment will result in shortage
of stocks (according to determined
calculation rule for the finished goods),
materials planning will automatically create
procurement proposal, like a planned order.
 • Planned order can be converted into
production order (if finished goods are
produced internally) or purchase requisition
(if finished goods are procured externally). In
addition, materials planning can also create
purchase requisition directly as a
MATERIAL PLANNING procurement proposal (no planned order).
OVERVIEW
• If the finished goods are produced internally,
the production or planned order created
will be considered as dependent
How it works requirement. SAP will determine these
dependent requirements by using the
information from Bill of Materials (BOM) of
finished goods. These dependent
requirements will also trigger materials
planning for the components or raw
materials.
 • If the finished goods/components/raw
materials are procured externally, the
procurement department will process the
purchase requisition into Purchase Order.
• The prerequisites for implementing all
MATERIAL PLANNING materials planning procedures is the
OVERVIEW Inventory Management must always be up-
to-date; if this prerequisite will be not
maintained, then materials planning will fail
to achieve its goal to monitor stocks in
How it works order to ensure material availability.
 • We will use the MRP type in order to assign
the procedure to be used to plan a material
and to control which MRP parameters will
be maintained in the material master record.

MATERIAL PLANNING • It follows a picture about the section MRP1

OVERVIEW in material master we will use in order to
set our relevant parameter:

MRP Procedures
 • The key MRP Type determines how
the material will be planned,
according to following options:
• Deterministic Planning MRP
MATERIAL PLANNING • Reorder Point + Time-phased +
OVERVIEW Forecast-based = Consumption-based
Planning
• Master Production Schedule MPS
MRP Procedures
• In traditional MRP system, sales order, independent
requirements, reservations, dependent requirements that
comes from BOM explosion are planned directly as
requirements.
• The materials planning procedure will create
procurement proposal only if these requirements will
result from shortage of material stocks at a certain time. TRADITIONAL
There are no other requirements that can trigger a M AT E R I A L
procurement proposal. This procedure is used for REQUIREMENT
example, in PD MRP Type (customizing procedure code PLANNING(MRP)
D).
• The traditional MRP Procedure is especially useful for
the planning of finished products and important
assemblies or components.
• Consumption-based planning is a materials planning
procedure based on past consumption values that
determine future requirements by using forecast or
other statistical procedures.
• Originally, in CBP, planned independent requirements or
dependent requirement will not be considered in the net
requirements calculation. Instead, it is triggered when CONSUMPTION
stock levels fall below a predefined reorder point or by BASED
forecast requirements calculated using past consumption PLANNING(CBP)
values. So, all the planned independent or dependent
requirements in a certain period of time should have
been considered before.
• Consumption-based planning procedure is substantially a
simple materials planning procedure which we can use with
little effort: therefore is used typically in areas without in-
house production.

• We are able to define 3 different procedures in

Consumption Based Planning: CONSUMPTION
BASED
• Re-order Point Planning PLANNING(CBP)
• Forecast Based Planning

• Time Phased Material Planning

• In reorder point planning, SAP checks whether the available
stocks are below the reorder point that has been set for the
material. If they are, will be create procurement proposal. We
can determine the reorder point manually (VB) or, it can also
be calculated automatically using the material forecast (VM).

• The reorder point should cover the average material RE-ORDER

requirement expected during the replenishment lead time. POINT
Besides the average consumption, we also should consider PLANNING
safety stock. The safety stock exists to cover both excess
material consumption within the replenishment lead time and
any additional requirements that may occur due to delivery
delays. Therefore, the safety stock is included in the reorder
level.
• In order to define the correct level of safety stock it will be
necessary to consider the following elements:

• past consumption values (historical data)

• vendor and production delivery timelines

• service level to be achieved

RE-ORDER
• forecast error POINT
• Besides the MRP type VB (manual reorder point) and VM (automatic PLANNING
reorder point) there are also other types that use reorder point as
basis to calculate requirement with additional procedure which take
into consideration external requirement (like sales order and manual
reservation): these types are: V1 (manual reorder point with external
requirements) and V2 (automatic reorder point with external
requirements). In any case the customizing procedure code is B
• In forecast-based planning, historical data are used in the
material forecast to estimate future requirements. These
requirements are known as forecast requirements and are
immediately available in planning.
FORECAST
• The forecast is carried out at regular time intervals: this BASED
offers the advantage that requirements, which are
PLANNING
automatically determined, are continually readapted to suit
current consumption needs.
• In time-phased planning, historical data is also used to
estimate future requirements but the planning run is only
carried out according to predefined time intervals. If a
vendor always delivers a material on a particular day of the
week, it makes sense to plan this material according to the TIME PHASED
same cycle in which it is delivered. PLANNING

• This procedure is used in R1, R2 and VS MRP Type in

standard SAP (customizing procedure code R).
• Master Production Schedule is simply a form of MRP
based on the same procedures, that concentrates planning
on parts or materials that strongly influence the company
profits or required critical resources. Materials marked as
master schedule items can be finished goods or even raw
materials. MASTER
P RO D U C T I O N
• These items are selected for separate MPS run that takes SCHEDULE (MPS)
place before the MRP planning run. MPS run is executed
without any BOM explosion: this make able the MRP
controller to ensure that the master schedule items are
correctly planned before any detailed MRP run take place.
• If we compare MRP and MPS, there are no differences in the
logical process; what is really relevant to say is that MPS only
acts on materials with an MRP type MPS (M0, M1, etc...), and
MRP acts on materials with an MRP type MRP (PD). How the
materials are processed is exactly the same, the algorithm are
the same, both work with the Plan Time Fences and Fixation
types and the use of rescheduling is comparable.
MASTER
• So, in order to summarize the aim of MPS, we can say that P RO D U C T I O N
the idea is to "separate" the requirements planning of different
kind of materials: for example, for some strategically finished SCHEDULE (MPS)
goods we will run MPS once per week, and for other
components we will plan a daily MRP run.

• The procedure is used in M0 MRP Type in standard SAP

(customizing procedure code M).
 CUSTOMI Z ING
SE T T I NGS

• We will select a particular MRP Type

to assign the procedure we intend to use
in order to plan a material and to
control which MRP parameters we will
have to maintain in the material master
data.

• It follows a short description about

the meaning of all the relevant fields we
can combine in customizing starting from
a given Planning procedure; performing
the transaction OMDQ we will find this
picture:
• It determines how procurement proposals are firmed and scheduled
within the planning time fence.We have at disposal the following options:

0 No firming takes place with this firming type.

1 Procurement proposals within the planning time fence are firmed

automatically as soon as their date is at least one day before the end date of
the planning time fence

2 No new procurement proposals are created automatically within the

planning time fence; that is, the shortage situation is not adjusted within the FIRMING TYPE
planning time fence.

3 Procurement proposals within the planning time fence are not firmed
automatically. All procurement proposals required to cover the
requirements are moved to the end of the planning time fence.

4 No procurement proposals are created automatically within the planning

time fence.
• In order to adjust the production planning to a new
modified requirements situation, it will be possible
use this code to delete obsolete planned orders. This
RO L L F O RWA R D
makes it possible to define that the Master
TYPE(MPS)
Production Schedule will be updated into a specific
period.
• This group of selections instructs the system to
include component requirements that have been
provided to the subcontractor, stock transfer order, INCLUDE
order reservations, stock transfer requisition and EXTERNAL
other type of reservations, for production as external REQUIREMENTS(
requirements in the calculation for Reorder Point CBP-RPP)
Planning.
• The indicator specifies whether the forecast results
have to be used in material planning and therefore
taken into consideration during the MRP run.
Obligatory forecast is typically mandatory, for
FORECAST
example, in Time phased planning R1, R2, RR, Reorder I N D I C ATO R
point V2,VV and Forecast-based S0 procedures. (CBP)

• About the rest of the Planning procedures the

indicator can be optional or simply not activated.
• We will use this indicator to define whether the
system will calculate safety stock and reorder point
AU TO M AT I C
automatically. The safety stock can be calculated C A L C U L AT I O N
automatically for materials planned using traditional OF SAFETY
MRP or using Reorder point procedures if historical S TO C K A N D
REORDER POINT
data exists and if the forecast has been carried out.