MRP

Inventory PlanningFriday, 19th June 2015MRP and Consumption-based planning are two fundamental SAP planning types that can be used to determine a products requirements.MRPWhen you plan a material according to MRP logic it means that its requirements (i.e. how much of this product do I need in the future) are dependent on:independent requirements determined by a Sales and Operations Planning process (S&OP or SOP), or;dependent requirements coming from another material of which the material in question is a component (part of BOM).The key-word here really is: dependency. The dependency of one materials future demand to requirements determined else where. MRP is commonly used in a production environment.

Consumption-based planningWhen you plan a material according to Consumption-based planning logic, the future demand of the product is always determined by its historical demand. In SAP there are two ways to approach this:Forecast-based planning: on the basis of historical demand you estimate future requirements and you procure according to this estimate. This is suitable for materials that are sold or produced with higher volume. Only then a decent statistical forecast makes sense.Re-order point procedure: when your stock falls below a pre-determined stock level the system issues a procurement proposal. This is generally applied to low-volume or bulk materials. Forecasting on low-volume materials is too error-prone. Forecasting low-volume materials will result in unreasonably high safety stocks The key-word here is: independency. The materials requirements are determined independent of another material or process. Consumption-based planning is commonly used in a wholesale environment, but also in a production environment for some raw materials, additives and bulk materials.

4GeneralReorder point planning should be used with relatively constant consumption materialsIf the materials consumption is not constant over time, this method might result in excess stock (the need to keep high safety stock) or stock shortage (fluctuations)procedures in Consumption Based Planning (CBP).Reorder point 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, SAP will create procurement proposal.We can determine the reorder point manually (VB-Manual reorder point planning MRP Type in standard SAP R/3) or, it can also be calculated automatically using the material forecast (VM-Automatic reorder point planning MRP Type in standard SAP R/3).The reorder point should cover the average material requirement/consumption expected during the replenishment lead time.Formula= (procurement processing time + planned delivery time + GR Processing time) + Safety stock Besides the average consumption, we also should consider 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.

6Methodology

Reorder point quantity includes safety stock. The PO quantity depends on the lot size (e.g., fixed).67Calculation

MRP compares the quantity in stock + PRs + POs to the reorder point. There is a shortage if the total quantity is lower than the reorder point.78Add External Requirements to MRP calculation

89Forward Scheduling

CBP calculates the availability date depending on lead times from todays date9b. Forecast-based planning

In forecast-based planning, historical data is used in the material forecast to estimate future requirements. These requirements are known as forecast requirements and are immediately available in planning.The forecast, which calculates future requirements using historical data, is carried out at regular intervals. This offers the advantage that requirements, which are automatically determined, are continually adapted to suit current consumption needs.This procedure is used in VV-Forecast-based planning MRP Type in standard SAP R/3.

11Backward Scheduling

Forecasting calculates the date when we should start purchasing according to the requirement date11c. Time-phased materials planning

In time-phased planning, historical data is also used in the material forecast to estimate future requirements. However, in this procedure, the planning run is only carried out according to predefined 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 same cycle, in which it is delivered.This procedure is used in R1-Time-phased planning MRP Type in standard SAP R/3.13GeneralTime-phased planning should be used for materials that are delivered on specific datesThis method works similarly to reorder point planning the difference is that specific delivery dates are taken as parameterTo run this method, a specific calendar must be created and maintained14Planning Based on Past ConsumptionPlanning based on past consumption should be used for materials whose future behavior can be predicted by their past consumptionMaterials with short life cycle would therefore probably not be a good choice for planning using this methodGood candidates for planning using this method might be materials with relatively many consumption periods15NOTE 1: Planning Based on Past ConsumptionPlanning based on past consumption should be used for materials whose future behavior can be predicted by their past consumptionMaterials with short life cycle would therefore probably not be a good choice for planning using this methodGood candidates for planning using this method might be materials with relatively many consumption periods16NOTE 2: Planning Based on Past ConsumptionPlanning based on past consumption should be used for materials whose future behavior can be predicted by their past consumptionMaterials with short life cycle would therefore probably not be a good choice for planning using this methodGood candidates for planning using this method might be materials with relatively long consumption periodsMaster Data Settings

MRP 1MRP 2MRP 3MRP 4MRP Types:

MRP TypesVB (manual reorder point planning)Reorder Point: for example 100 ( the level of stock at which u want to trigger replenishment)MRP type VB just works based on stock levels with reference to Reorder point. If the stock falls below the reorder point then only the next procurement proposal is created.2. VM: automatic reorder point planning3. V1: Automatic reorder point planning including external requirements4. V2: Automatic reorder point planning without external requirements5. ND: no MRP

MRP Planning FileThe planning file contains a list of all materials relevant to the planning run. As soon as a material master record is created with MRP data and a valid MRP type, this material is then automatically included in the planning file.During MRP run at plant level system checks for the materials which are having indicator activated in planning file and plans those materials and will not plan the materials for which this indicator is not activated.this reduces the run time of the MRP..Entry in planning file is deleted immediately after MRP run.Entry in planning file is again activated when there is change to material with respect to MRP like below.Change in stockChange in requirementChange in MRP data in material masterChange in receipt elements like Planned orders or purchase requisitionsHow to see the planning file indicatorgo to transaction MD21

For a planning file entry existing or being updated at all, it is essential that the material requirements planning is active in the corresponding plant (Transaction OMDU).If you want to set up the planning file later, you can execute this via Transaction OMDO.You can execute a consistency check of the planning file entry using Transaction MDRE.MRP Processing KeysOne of the main settings for the MRP planning run within SAP is the Processing Key. This setting is the main indicator for which the MRP planning run will execute. There are three processing keys to choose from are net change planning (NETCH), net change planning in the planning horizon (NETPL), and online regenerative planning (NEUPL). So the usual question on this option is when is it best to utilize each of the options?

Net change planning (NETCH)This is where the MRP planning run checks the planning file and executes for only those materials with the net change indicator. This is used on your more frequent planning runs as it only runs on planning file entries with the net change indicator, thus being a very efficient planning run. Typically this is used as your nightly planning run so that it runs quickly to afford other programs within your organization to also complete in off hours.Net change planning run in the planning horizon (NETPL) works the same way as the net change planning but it is limited to the planning horizon. The planning horizon is configured at the plant level, or if you are using MRP Groups, then it can be set there as well. The planning horizon is the number of days for which MRP will consider requirements for planned replenishments. Therefore this type of planning run should execute faster than the net change for it is limited to those materials to be planned within that planning horizon range. For any long cycle time products, this is not a recommended setting.The final processing key is the online regenerative planning (NEUPL). This is usually known as a regen, meaning a regeneration planning run. This is useful to run periodically, weekly or monthly, so that all planned orders are replaced with a more up to date planning situation. Regeneration planning will ignore the net change indicators and run against the entire planning file. One of the best reasons for this processing type is that it will eliminate those planned orders that have aged in place. Aging in place is where planned orders that had not had any further net change indicators being set after it had been planned.These explanations for the processing keys should help clarify the differences a little better than is found in the standard SAP F1 help. This is additional information you can utilize for own organizations documentation of the MRP planning run.

23MRP Process

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Richard Opiyo

MM consultant:ricd2002@gmail.com