2 Pp Chapter

© 2008 by SAP AG. All rights reserved. SAP University Alliance

Production Planningand

Material Requirements Planning(MRP)

Production Planningand

Material Requirements Planning(MRP)


Material Requirements Planning MRP MRP

Primary FunctionPrimary Function– To guarantee To guarantee material availabilitymaterial availability

Manages Manages production or procurement production or procurement of the of the required quantities of material on time both for required quantities of material on time both for internal purposesinternal purposes and for and for sales and distributionsales and distribution

– System System monitors stocksmonitors stocks and automatically and automatically creates creates proposalsproposals for for purchasing and/or purchasing and/or productionproduction

– MRP initially MRP initially “proposes” but human must “proposes” but human must “convert”“convert” proposal to concrete action proposal to concrete action


MRPMRP ““Locations” for MRPLocations” for MRP

– PlantPlant Determines requirements for Determines requirements for entire plantentire plant

on planning runon planning run Can exclude specified storage locationsCan exclude specified storage locations

– MRP AreaMRP Area Can set up a Can set up a specific “area”specific “area” for which for which

planning will be carried outplanning will be carried out Example: inventory maintained in Example: inventory maintained in

Assembly operations areaAssembly operations area Only this area is planned by MRP runOnly this area is planned by MRP run


MRPMRP

Net requirements calculationNet requirements calculation– Calculates Calculates “plant stock”“plant stock”

UnrestrictedUnrestricted use stock use stock Stock in Stock in qualityquality inspection inspection Unrestricted consignmentUnrestricted consignment stock stock Consignment stock in qualityConsignment stock in quality inspection inspection

– Incorporates Incorporates Goods receiptsGoods receipts – planned orders and purchase – planned orders and purchase

requisitionsrequisitions Goods issuesGoods issues – customer requirements, planned – customer requirements, planned

independent requirements, and reservationsindependent requirements, and reservations


MRPMRP

ATP- Available to promise quantityATP- Available to promise quantityATP = warehouse stock + planned receipts – planned ATP = warehouse stock + planned receipts – planned

issuesissues Inventory Management:Inventory Management: when when creating/changing creating/changing

reservationsreservations to ensure goods movement to ensure goods movement will not will not jeopardize availability status of other issue elementsjeopardize availability status of other issue elements already created and checked by systemalready created and checked by system

SD:SD: whether material is whether material is available on desired delivery available on desired delivery datedate for for sales orderssales orders

MRP:MRP: planned order processing and production order planned order processing and production order processingprocessing, to make sure material components are , to make sure material components are available for productionavailable for production of finished product of finished product


MRPMRP Quota arrangementsQuota arrangements

– For For multiple sourcemultiple source materials materials InternalInternal productionproduction or or external external procurementprocurement

– System System determines the sources of supply determines the sources of supply according to a according to a quota filequota file and assigns and assigns procurement proposals to sourcesprocurement proposals to sources Allocation quotaAllocation quota arrangement: arrangement: every lotevery lot

assigned to rotating sources of supplyassigned to rotating sources of supply Splitting quotaSplitting quota arrangement: a arrangement: a lot is lot is

splitsplit among various sources of supply among various sources of supply


MRP - ProcessMRP - Process

MRPprocess

MRPprocessInputs

current inventory

current inventory

on orderstatus

on orderstatus

forecastsforecasts

master schedule

master schedule

bills of material

bills of material

planningrules

planningrules

recommendedprocurement

actions

recommendedprocurement

actions

recommendedproduction

actions

recommendedproduction

actions

Outputs


Plant specific Plant specific organizational unitsorganizational units– MRP controller MRP controller – Production controller / production Production controller / production

schedulerscheduler / / planner group planner group – Person responsible (financially)Person responsible (financially)

Non-plant-specific organizational unitsNon-plant-specific organizational units– Capacity plannerCapacity planner

Organizational StructureOrganizational Structure


Bill of Material (BOM)Bill of Material (BOM) A complete list of the A complete list of the

components components (inputs) that (inputs) that are are required to assemblerequired to assemble a a completed unit of goods completed unit of goods (e.g., finished good)(e.g., finished good)

Could be for an Could be for an intermediate intermediate production good production good (e.g., (e.g., engines for engines for car manufacturer) car manufacturer)


Where is the BOM used?Where is the BOM used?– MRP uses the BOM to determine MRP uses the BOM to determine

dependent requirementsdependent requirements (exploding the (exploding the BOM to identify raw material and BOM to identify raw material and subcomponent quantities required to subcomponent quantities required to complete production of a planned order)complete production of a planned order)

– Controlling uses the BOM to Controlling uses the BOM to calculate calculate product costsproduct costs

– Production (PP) uses the BOM to Production (PP) uses the BOM to issueissue the proper quantities of components the proper quantities of components and raw materials to the shop floorand raw materials to the shop floor

Master Data - Bill of Material


Work CenterWork Center Location where value-added work is Location where value-added work is

preformedpreformed Contains one or more of the Contains one or more of the

following resourcesfollowing resources– EquipmentEquipment– OperationsOperations– PeoplePeople


Master Data - Work CenterMaster Data - Work Center CapacitiesCapacities are defined by the user are defined by the user

– Labor / machine / emissions / energy Labor / machine / emissions / energy consumptionconsumption

– Used for capacity requirements planning, Used for capacity requirements planning, detailed scheduling and costingdetailed scheduling and costing

– Capacity is assigned to a cost centerCapacity is assigned to a cost center– HR assignments could include ...HR assignments could include ...

Qualifications, Positions, PeopleQualifications, Positions, People


Routing SheetRouting Sheet RecipeRecipe (plan) (plan) for activitiesfor activities Ordered sequence of proceduresOrdered sequence of procedures required required

to assemble a completed unit of goods to assemble a completed unit of goods Contains the Contains the resourcesresources required to required to

complete each step in the manufacturing complete each step in the manufacturing process for a particular product or item.process for a particular product or item.

ElementsElements of a routing are ... of a routing are ... – OperationsOperations – Material components used by each Material components used by each

operationoperation– Production resources and toolsProduction resources and tools– Inspection characteristicsInspection characteristics


RoutingRouting Routings will be used inRoutings will be used in

– SchedulingScheduling– CostingCosting– Capacity planningCapacity planning– Production ordersProduction orders

Components to be used in the Components to be used in the individual operations are assigned to individual operations are assigned to the individual operationsthe individual operations


MRP - Planned OrdersMRP - Planned Orders

Planned OrderPlanned Order - replenishment elements - replenishment elements created by MRPcreated by MRP– Dependent demand based on BOMDependent demand based on BOM– can be ...can be ...

Firmed: changes only recommendedFirmed: changes only recommended Changed by the planner Changed by the planner Converted Converted into a production orderinto a production order

– System assumes recommendations System assumes recommendations have been acted upon have been acted upon


Production OrdersProduction Orders PlannedPlanned orders are orders are convertedconverted into into productionproduction orders orders

Used to specifyUsed to specify–What What is to be producedis to be produced–WhenWhen production is to take place production is to take place–Which capacityWhich capacity is to process the order is to process the order–How much production How much production costcost will be will be


Production Orders Production Orders

When a When a production order is createdproduction order is created–A A routing routing is is selectedselected, operations and sequences , operations and sequences are transferred to the orderare transferred to the order

–BOM BOM explodedexploded and the items are transferred to and the items are transferred to the orderthe order

–Reservations Reservations are createdare created to hold items in stock to hold items in stock–Planned costsPlanned costs of order are of order are generatedgenerated–Capacity requirementsCapacity requirements are are generated generated in work in work centerscenters

–Purchase requisitionsPurchase requisitions generatedgenerated for non-stock for non-stock items and externally-processed operationsitems and externally-processed operations


Costs - $$Costs - $$ PlannedPlanned cost of order ... cost of order ...

– Uses bill of materialUses bill of material– Uses routingUses routing– Based on material master price Based on material master price

for each componentfor each component– Allocated to cost elementsAllocated to cost elements


Costs - $$ Costs - $$ ActualActual costs of order costs of order

– Uses bill of materialUses bill of material– Uses routingUses routing– Gets updated when goods are issued Gets updated when goods are issued

to order or when purchased to order or when purchased materials are receivedmaterials are received

– May include activity costs May include activity costs – Updated at completion confirmationUpdated at completion confirmation


Flya Kite PP Transactions Flya Kite PP Transactions EXERCISE PP01: CREATE MRP EXERCISE PP01: CREATE MRP

VIEWS FOR RAW MATERIALSVIEWS FOR RAW MATERIALS – Before raw materials can be used in

manufacturing, the MRP views must be added to the material master record

If material master already created, MRP views are added to extend the record

– The MRP views contain the data necessary to Determine the lot size of the order Set the production time required Set the safety stock Set the availability check Set the replenishment lead time for the material


Flya Kite PP Transactions Flya Kite PP Transactions

EXERCISE PP02: CREATE MRP EXERCISE PP02: CREATE MRP VIEWS FOR TRADING GOODSVIEWS FOR TRADING GOODS – In some cases, trading goods are not only sold

outright but they are used in the manufacturing process to create finished goods

For example: string is sold as a trading good but is also used in making a kite

– Before a trading good can be used in manufacturing, the MRP views must be added to the material master record

If material master already created, MRP views are added to extend the record



EXERCISE PP03: CREATE MRP & EXERCISE PP03: CREATE MRP & WORK SCHEDULING VIEWS FOR WORK SCHEDULING VIEWS FOR FINISHED GOODSFINISHED GOODS – The MRP views are necessary to set the

production data in the finished good master record

– Because finished goods are produced, there must be a work scheduling view included in the record to permit the system to schedule the production of this material



EXERCISE PP04: CREATE BILLS EXERCISE PP04: CREATE BILLS OF MATERIALOF MATERIAL– The BOM specifies what components are needed

in order to produce the particular finished product

For example: to make a kite, one needs paper, wood, and string

– The BOM also includes the quantities of each material needed to create the finished product

For example: to make a kite one needs 1 unit of paper, 1 unit of wood, and 150 units of string


Flya Kite PP Transactions Flya Kite PP Transactions EXERCISE PP05: CREATE A EXERCISE PP05: CREATE A

ROUTING FOR FINISHED ROUTING FOR FINISHED PRODUCTSPRODUCTS– The routing indicates which operations must be

performed to build the product and their order– The routing specifies how much time will be

required in each of the operations both for set up in order to get ready for production of one unit of product as well as the labor time required (it can also include machine time if machines are part of the operation)

– The materials to be used at each operation are also assigned to the routing so that the materials will be present for use when required


Flya Kite PP Transactions Flya Kite PP Transactions EXERCISE PP06: DISPLAY LIST EXERCISE PP06: DISPLAY LIST

OF ROUTINGSOF ROUTINGS The routing created and the components

assigned to each step are displayed in order to ensure they are correct


Flya Kite PP Transactions Flya Kite PP Transactions EXERCISE PP07: RUN MRP – EXERCISE PP07: RUN MRP –

SINGLE ITEM, MULTI LEVELSINGLE ITEM, MULTI LEVEL The MRP system is executed (run) so that it

will plan the production of the finished good

Documents

2 Pp Chapter