MTO Production Forecast for Raw Material

[Former Member]

Dear Experts,

We are a packaging company and each semi finished and finished goods that we produce is unique. All we produce is MTO and based on customer's order. Further to it, each customer's needs are different right from the beginning step which is at raw material level; a different recepie for a film to later design and print on but for some orders the raw materials are same as used in previous customer's orders. Some chemicals and addatives are always kept in stock, some might need to be ordered at the time of the order.

Based on the above description, our issue is at material planning and forecasting level. The understanding between production and the customer is that we give them our dates when we can provide them with the finished product but often we are late due to no clear requirement shown to purchasing to order the raw materials in time in SAP and production being unaware of our vendor lead times quote the customer wrong dates.

At the moment, we are using an excel sheet with 100's of formulas that was developed sometime ago which somehow tells production to purchase some materials and keep them stocked.

What type of planning or forecasting should be used in such production environment? If not in SAP, is there any other tool that can be purchased and implemented with an interface to SAP?

The suggestion was to implement SAP APO to overcome this GAP but it was rejected by our Kernel team due to high costs. Is APO a solution for this? If not, then what is APO used for?

Need help. Thanks.

[Caetano · Accepted solution]

Hi Sam

Since all your finished products are make-to-order, I suggest you to define the planning strategy 20 for these products. This way, system will only start the assembly of the finished product when you receive a sales order.

You can find more details about the MTO strategies on the following link:

Strategies for Make-to-Order (MTO) Production - Demand Management (PP-MP-DEM) - SAP Library

For the raw materials, you may use a simple reorder point MRP type (such as MRP type VB), where MRP triggers the procurement of the components when the stock reaches the reorder level.

A more complex alternative to plant the raw materials is to use a forecast based MRP type (such as VV) where MRP consider forecast requirements to purchase the components. These forecast requirements are determined automatically using historical consumption data.

See more details about these MRP types on the following link:

Material Requirements Planning (PP-MRP) - SAP Library

Regards

Caetano

[marianoc · Accepted solution]

Hi Sam,

The response sent by Caetano is perfect.

Just one comment, you don't need APO. Based on your description, there is no complexity in planning and with APO you would be adding complexity in your applications (more master data to be maintained, more consultancy, system resources, etc..).

For your finished product you have to use planning strategy 20 - Make to Order

For your components I think you have three main options:

- MRP Type VB: Reorder point

- MRP Type VV: Consumption based planning

- MRP Type PD: I would try to use this option for those components that have a quick replenishment time.

Kind Regards,

Mariano