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Document on Material Requirement Planning

 

1.  Process Overview

 

The main function of material requirements planning is to guarantee material availability, that is, it is used to procure or produce the requirement quantities on time both for internal purposes and for sales and distribution. This process involves the monitoring of stocks and, in particular, the automatic creation of procurement proposals for purchasing and production.

 

1.1 Purpose

 

Create material replenishments to offset current and future demands.

 

Demands are of two basic types:

·         Independent Demand: Customer requirements or Forecast.

·         Dependent Demand: Requirements for components in the Bill of Material.

                                                                         

Independent demand

Independent Demand is not dependent upon a bill of material explosion. It is not driven by the requirements of another higher level assembly.

 

The two basic kinds of independent demand are:

·         Customer requirements (Make to Stock , Make to Order)

·         Forecast.

 

     Dependent demand

Dependent demand is demand for a component item used in a Bill of Material. It may be a purchased raw material or a sub-assembly.

 

1.2 Prerequisites

 

Master Data:  Material Master, BOM, Routing and Work Center.

 

Specific Material Master Fields

·         MRP type

·         MRP controller

·         Procurement type & Special Procurement Type

·         Lot-Size

·         Strategy Group (For Materials requiring Planned Independent requirement feeding)

·         Production version (For repetitive manufacturing Material)

·         REM profile (For repetitive mfg Material)

 

1.3 Process Steps for Material Requirements Planning

 

·         Feed Independent Requirements

·         MRP Run: Parameter setting & Execution

·         Evaluate MRP statistics

·         Evaluate MRP results

2.  MRP Concepts

 

Process Flow

 

1. Sales and Distribution take requirements as concrete customer requirements from the market.

 

2. In Demand Management, sales are planned in advance via a sales forecast.

The result is the independent requirement, that is, the requirement for the finished product, tradable assemblies, trading goods and replacement parts. This result triggers material requirements planning.

 

3. In order to cover these requirements, MRP calculates procurement quantities and dates as well as plans the corresponding procurement elements. The procurement element in the planning run is the planned order or, for external procurement, the purchase requisition. Both procurement elements are internal planning elements that can be changed, rescheduled or deleted at any time.

 

4. If a material is produced in-house, the system also calculates the dependent requirements, that is, the quantity of components required to produce the finished product or the assembly, by exploding the BOM. If a material shortage exists, planned orders are created at every BOM level to cover requirements.

 

5. The system then converts these planned procurement elements into exact procurement elements: production orders for in-house production and purchase orders for external procurement.

 

6. The progress of the order for materials produced in-house is controlled by using the production order. The production order contains its own scheduling procedures, capacity planning and status management. Cost accounting is also carried out via the individual production order.

 

7. Materials that are procured externally trigger the purchasing procedure. In this case, you must have chosen suitable vendors or you must have drawn up outline agreements.

 

8. The quantities made available by production or by external procurement are placed in stock and are managed by Inventory Management.

Various functions in the SAP System are planned, controlled and coordinated centrally for several areas.

 

                       

 

2.1 MRP Procedures

 

MRP procedures are controlled by the MRP type maintained in the MRP view. It decides the basis for planning.

 

Material requirement planning is carried out using Independent / Dependent Requirements. System uses BOM to trigger planning of below level components. The requirement accuracy is better as compared to Consumption based planning. MRP type “PD” belongs to this category.

 

2.2 Technical Procedure in MRP cycle

 

2.2.1     Check Planning file Entry

The system checks the planning file. During this process, the system checks whether a material is to be planned due to a change relevant to MRP, and how to proceed if there are already existing procurement proposals.

                                                                             

2.2.2     Calculate Net Requirements

The system calculates net requirements for every material. For this calculation, the system checks whether the requirements are covered by the warehouse stock and dispatched receipts from Purchasing or Production. If the requirements cannot be covered, the system creates a procurement proposal.

 

2.2.3     Calculate Procurement Quantity

The system calculates procurement quantities. When doing this, the system takes into account the selected lot-sizing procedure and, if necessary, scrap and rounding values.

 

2.2.4     Scheduling based on Procurement type

During scheduling, the system determines start and finish dates for the procurement elements of materials that are produced in-house and for materials that are procured externally.

 

2.1.1.    Determining the Procurement Proposal

The system determines the type of procurement proposal. Dependent upon the defined setting, planned orders, purchase requisitions or delivery schedules are created by the system for a material..

In the case of in-house production, the system always creates planned orders. These planned orders are used to plan production quantities. In the case of external procurement, the system creates either planned orders or directly creates purchase requisitions.

 

2.1.2.    BOM Explosion and Determining Dependent Requirements

Based on the procurement proposals, for in-house made and subcontracted assemblies, BOM is exploded and the dependent requirements are determined within MRP during the planning run. The system determines the date for the dependent requirements on which the components are to be available for production. These newly created dependent requirements set NETCH/NETPL indicator in planning file.

 

2.2 How Net Requirements Calculation occurs?

 

The net requirements calculation is carried out in MRP in the planning run after the planning file check and at plant level. The system checks whether it is possible to cover requirements with the plant stock and fixed receipts already planned. In the case of a shortage the system creates a procurement proposal.

 

Process Flow

 

1. The system calculates plant stock. For all storage locations which belong to this plant and which are not excluded from materials planning or are planned separately, the following stocks are grouped together to form plant stock:

- Unrestricted-use stock

- Stock in quality inspection

- Unrestricted-use consignment stock

- Consignment warehouse stock in quality inspection

 

In Customizing for MRP in the IMG activity Availability of Stock in Transfer/Blocked Stock/ Restricted Stock, you can also determine whether stock in transfer, blocked stock and restricted-use stock are included in the plant.

 

2. The system also takes into account all the goods issues and receipts for a material. Receipts are, for example, planned orders or purchase requisitions and issues are, for example, customer requirements, planned independent requirements, or reservations.

 

3. Therefore, the system checks to make sure that for each issue date the requirement is covered by one or several receipts or by warehouse stock. If this is not the case, the system then calculates the shortage quantity and creates a procurement proposal. The lot-sizing procedure, scrap and rounding determine the quantity in the procurement proposal.

 

Available stock is calculated as follows:

 

 

 

A shortage occurs if available stock is negative, that is, the requirement quantities are greater than expected receipts and stock quantity.

The system specifies the date of the issue (for example, customer requirement, planned independent requirement, reservation, forecast requirement) as the requirements date.

 

 

 

 

 

 

 

 

 

 

 

 

2.3 How system Calculates Procurement Quantity?

 

Calculation of Lot Sizes for the Procurement Proposals

 

After analysing the shortage quantities (in the last step), SAP MRP run starts the process of creation of the requirement proposal/procurement proposal for the shortage quantity (where the available quantity is short).

 

When creating the procurement proposal, it has to be adhering to the lot sizing procedure set in the material master MRP 1 view. This step explains the criteria on which the planning run creates lot sizes for the created procurement proposals. Along with adhering to the lot sizing, the MRP run also takes in to consideration all the other factors involved in the lot sizing procedures such as minimum lot size, maximum lot size, rounding values, fixed lot sizes, safety stocks, dynamic safety stocks, service levels, scrap percentages, etc etc.

 

The Lot sizing procedures in SAP are categorized as static lot sizing procedures, periodic lot sizing procedures and optimum lot sizing procedures. The most famous lot sizing procedures are the static lot sizing procedures and periodic lot sizing procedures.

 

2.3.1 Static Lot Sizing Procedures

 

The static lot sizing procedures are namely – the ‘exact lot sizing’, fixed lot sizing and ‘replenish to maximum stock level’.

 

When the lot size is “EX” or exact lot size, the system creates planned orders or procurement proposals to cover the exact shortage requirement. The lot size is the whole shortage quantity required to satisfy the demand. That is, if the requirement is for a quantity of 112 units, the proposal will be created for an exact 112 units.       

 

Fixed Order Quantity (FX)

For Fixed lot size, you need to always enter FIXED LOT SIZE Quantity

 

2.3.2 Periodic Lot Sizing Procedures

 

Periodic lot sizing procedures are namely - the ‘daily lot sizing’, ‘monthly lot sizing’ and ‘weekly lot sizing’ (in fact you can decide the period of the lot size in lot sizing customizing). The requirements that lie in a given period are clubbed together and the availability date for the procurement proposals would be the start date of the first requirement in the period. The standard configuration of lot sizes puts the requirements for periodic lot sizing at the start of the first requirement in the period, but you can have it set to the end of the period also.

 

Availability Date = Start of the period or

Availability Date = End of the period

 

And if the lot sizing procedure is “weekly”, SAP MRP will consider all the demands for the week and all the receipts for the week and place a weekly proposal (planned order or purchase requisition). The weekly proposal can be put at the start of the week or at the end of the week as the configuration in the lot sizing procedure.

 

 

You have the choice between:

Daily lot size (TB)

All requirements that fall within a day or within a specific number of days (which you have determined) are grouped together to form a lot.

Weekly lot size (WB)

All requirements that fall within a week or within a specific number of weeks (which you have determined) are grouped together to form a lot.

Monthly lot size (MB)

All requirements that fall within a month or within a specific number of months (which you have determined) are grouped together to form a lot.

Monthly Lot Size (MB)

MB is monthly lot size, it is period based lot size, where system will consider all requirements of one month, create a planned order for the month

 

 

3.  Executing MRP

MRP can be run at:

 

-   Single Item single level

-   Single Item multi level

-   Plant level

-   Multiple plants in defined sequence

5.1 Single Item Single level:

Single Item Single level MRP system runs MRP only for the material that is entered in the initial screen. System does not plan for lower level materials. Since, MRP does not plan for lower level materials, it runs all too quickly. This is useful for quick analysis of problems. 

Call transaction MD03 and enter following data in the initial screen:

      -  Material

      -  Plant

      -  Processing key: NETCH

      -  Create Purchase Request: 2

      -  Delivery Schedules: 2

      -  Create MRP List: 1

      -  Planning Mode: 2

      -  Scheduling: 2

      -  Planning date: Current date

 

 

5.2 Single Item Multi Level Planning:

 

Single Item Multi level MRP system runs MRP for the material entered in the initial screen and all the dependent requirements for that material. This is useful when some changes are made to the requirements of some materials such as forecast changes, new Sales orders entered etc. and results are required urgently. 

 

Call transaction MD02 and enter following data in the initial screen:

- Material

- Plant

- Processing key: NETCH

- Create Purchase Request: 2

- Delivery Schedules: 2

- Create MRP List: 1

- Planning Mode: 2

- Scheduling: 2

Check the box “Also plan unchanged components”

After entering data as above, press Enter threetimes.

After the MRP is executed system displays the statistics of the MRP run.

 

5.3 Plant Level:

 

When MRP is executed at Plant Level, the MRP plans all the materials in the plant that are relevant to MRP. Depending on the Processing key selected, MRP is executed for either all the materials or only for the materials that have undergone changes that impact procurement proposals after the last MRP run.

Call transaction MD01 and enter values in the following fields:

 

- Plant

- Processing key:

- NETCH – for executing MRP on materials that have under gone    changes after the last MRP

- NETPL – for executing MRP within a defined Planning Horizon

- NEUPL – for executing MRP for all the materials in the plant irrespective of changes

- Create purchase request: 2

- Schedule lines: 2

- Create MRP list: 1

- Planning Mode: 2

- Scheduling: 2

- Planning date: Current date

 

After entering data as above, press Enter threetimes.

After the MRP is executed system displays the statistics of the MRP run.

 

5.4 Multiple Plants in a defined Sequence.

 

MRP can be run for multiple plants in a defined sequence. This is useful in situations where there is interdependence of supply of material between numbers of plants.

 

MRP must be run first on the receiving plant and then on supplying plant.

 

Call transaction MD01 and enter values in the following fields:

 

- Scope of Planning: USC

- Processing key:

- NETCH – for executing MRP on materials that have under gone changes after the last MRP

- NETPL – for executing MRP within a defined Planning Horizon

- NEUPL – for executing MRP for all the materials in the plant irrespective of changes

- Create purchase request: 2

- Schedule lines: 2

- Create MRP list: 1

- Planning Mode: 2

- Scheduling: 2

- Planning date: Current date

- Select check box “Parallel processing”

 

 

After entering values as above, press Enter three times and that will trigger MRP run.

 

After the MRP is executed system displays the statistical result of MRP run.

 

 

4.  Evaluation of MRP Results

Evaluation of MRP results can be done using transactions

MD04 or MD05 for individual materials.

MD06 or MD07 for collective evaluation.

MD05 and MD06 show the static results as prevalent at the time of lat MRP run.

MD04 and MD07 show the current stock / requirement list.

 

5.  Summary

 

1.    Purpose of MRP is to create material replenishments to offset current and future demands.

 

2.    MRP procedures : Consumption based Planning & Material Requirement Planning

 

3.    MRP With “Basic date scheduling”:Planned orders for in house manufactured component take In-house manufacturing time from MRP view.

 

4.    For purchased components, lead time between Order start & Order finish dates cover Planned delivery time + PR to PO conversion timecustomized for the plant.

 

5.    Evaluation of MRP run statistics / MRP list enables to identify materials with exception messages. (e.g. Planning Terminated , exceptions in BOM explosion

 

 

 

6.  FAQ

                                                                   

1.    MRP control parameters: What is the purpose of Processing key?

 

Processing keys has three possible types: NETCH, NETPL, NEUPL

NETCH: Net change planning. Plans materials which have undergone MRP relevant change after last MRP run

NETPL: Net Change in Planning Horizon. Plans materials where system has recorded MRP relevant changes applicable within planning horizon. Planning horizon is a period specified in customization.

NEUPL: Regenerative Planning. Plan all materials in planning file.

                                                                   

2.    MRP control parameters: What is the effect of “Create Purchase Request in opening period”?

 

This setting is applicable only for purchased components. Opening period is specified in Scheduling Margin key.

During MRP run, system calculates Order start date for each procurement proposal. If difference between MRP run date and Order start date is greater than Opening period, then system creates Purchase Request instead of planned order.

 

3.    For in house manufactured component planned order, how does system schedule the order dates when order start date is in the past?

 

System considers order start date as current (MRP) date and does forward scheduling by considering Floats & routing lead times.

                                                                   

4.    For in house manufactured component planned order, what is the requirement date for next (lower) level components?

 

If order is scheduled using Lead time scheduling, then requirement date for next level components will fall on Production start date.

 

If order is scheduled using Basic date scheduling, then requirement date for next level components will fall on Order Start date. (Here Production                 start date will be blank).

 

5.    What effect will MRP run have on firmed up planned orders, PRs, Production Orders..?

 

No change on the firmed up procurement Orders. MRP will create new       procurement      proposals for balance requirements which are not covered by these orders.

 

6.    What is MRP List?

 

The MRP list represents result of last planning run and is therefore static. Changes made after last MRP are not visible. In MRP control parameter setting, we can define whether or not the planning run is to generate an MRP list, or as a result of which exception conditions the MRP list is generated for a given material.

 

 

7.  Frequently used Transaction Codes

 

Process

 

Transaction   Codes

 

Planned   Independent Reqmt

 

MD61, MD62, MD63,

MD79(For PIR Download)

 

Reorganization   for PIR

 

MD74

 

MRP   Run

 

MDBT,   MD01, MD02, MD03,

 

 

MRP   Evaluation

 

MD04,   MD05

 

 

 

 

 

 

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