Split Quota in Procurement

Split Quota in Procurement

Applies to:

SAP ECC6.0 For more information, visit the Enterprise Resource Planning homepage

Summary

This document explains the P2P consultants how to setup a realistic Quota arrangement in procurement that will take care of the practical business considerations.

Author(s): Prabhu Sundararaman

Company: Larsen & Toubro Infotech Ltd.,

Created on: 23rd March 2012

Author Bio

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© 2011 SAP AG 1

Prabhu Sundararaman is an associate consultant at Larsen & Toubro Infotech Ltd., Chennai, India. He has totally 15 yrs. experience implementing ERP and IT systems for the manufacturing industry. He has around 5 years of SAP experience in the area of MM, CIN & WM.


Table of Contents

1. Introduction to Quota Arrangement: 3

2. Default Quota Arrangement in SAP: 3

3. Practical considerations while implementing default SAP quota arrangement: 5

4. Alternate solution through “Split Quota” in SAP: 5

5. Split Quota - Solution in detail: 6

6. Validation of Split Quota: 12

7. Conclusions: 13

Related Content 14


© 2011 SAP AG 2


1. Introduction to Quota Arrangement:

The term “Quota arrangement” in SAP MM denotes the “Share of Business” scenario in procurement of materials, that is quite common in many industries. Take for example the automotive industry where dual / multiple suppliers per material are the norm for many of the materials procured externally. For such materials, the requirements generated by MRP have to be split between these multiple suppliers as per a fixed share of business also known as Quota.

In traditional legacy systems, this splitting of requirements is manually done by adjusting the proposals after MRP run. Otherwise, special programs are written to split the MRP generated procurement proposals as per the pre-defined quotas – these programs are run after the regular MRP run.

SAP offers solution for share of business in procurement in the form of Quota arrangement functionality.

2. Default Quota Arrangement in SAP:

The default SAP way of calculating quotas for individual requirements works as per the below formula:

Quota allocated quantity + Quota base quantityQuota rating = --------------------------------------------------------------------- Quota

Where

Quota-allocated quantity = Total quantity from all planned orders, purchase requisitions, purchase orders, release orders, and scheduling agreement schedules allocated to a given source of supply.

Quota base quantity = Quantity used to control the quota arrangement when new sources of supply are included.

Quota = A number specifying which portion of a total requirement should be obtained from a certain source.

The source with the lowest quota rating represents the valid source, even if it has a quota rating of 0 (that is, the quota-allocated quantity and the quota base quantity have the value 0). If more than one source of supply has a quota rating of 0, the item with the highest quota is the valid source of supply.

According to the formula, the following applies: The higher the quota, the lower the quota rating and the higher the likelihood that the relevant source will be determined as the valid source

Let us understand what this means through the following example:

There are three approved vendors X,Y & Z for a material having quotas of 20%, 30% and 50% respectively. Further, all the 3 vendors have been previously allocated 200 nos. each for the material in the past.


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Quota arrangement for vendors A, B, and C

Vendor Quota Quota-allocatedquantity

Quota base quantity

A 2 200 0

B 3 200 0

C 5 200 0

Where 2,3 & 5 are the quotas assigned to the sources (representing 20%, 30% and 50% quotas); Quota base qty is zero to start with.

System calculates the quota rating as follows:

Quota rating for vendor A = (200+0)/2 = 100

Quota rating for vendor B = (200+0)/3 = 66.67

Quota rating for vendor C = (200+0)/5 = 40

As per system, the vendor with lowest quota rating i.e vendor C, will be the valid source for the next requirement.

Let us say there is a requirement of 150 nos for the material. The entire requirement is assigned to the vendor C. i.e when MRP is run, system generates procurement proposal of 150 nos on vendor C.

Now the changed quota position is as follows:

Vendor Quota Quota-allocatedquantity

Quota base quantity

A 2 200 0

B 3 200 0

C 5 350 0

The quota allocated qty for Vendor C has become 350 while that of the other 2 vendors is the same.

Now the quota ratings for the 3 vendors will be as below:

Quota rating for vendor A = (200+0)/2 = 100

Quota rating for vendor B = (200+0)/3 = 66.67

Quota rating for vendor C = (350+0)/5 = 70

As we can see, vendor B is now the valid source for the material because it has got the lowest quota rating of 66.67. Therefore, the next requirement for the material will be entirely allocated to vendor B.

Thus, we can understand that there is a round robin method of allocating the material requirements to the 3 vendors viz., only one vendor gets the entire share of the requirement at any given time, depending upon its quota rating and the other vendors have to “wait for their turn” for getting their quota.


© 2011 SAP AG 4


3. Practical considerations while implementing default SAP quota arrangement:

In actual scenarios, organizations actually look for splitting of each material requirement among the multiple vendors based on pre-defined quota. This is quite common in many industries. For example, packing materials required by automotive ancillary manufacturing industries are normally procured from 2 or more vendors and the total schedule for the month is usually split between these vendors as per the share of business.

Let us understand this through the below illustration:

Again, consider there are 3 vendors A,B & C for a given material, having quotas 20%, 30% and 50%.

Let us suppose there is a requirement of 1000 nos for the material, then MRP should generate 3 procurement proposals of 200nos., 300 nos., and 500nos. respectively for vendors A,B & C. This type of splitting should happen for every requirement of the material. However, the standard SAP quota arrangement, as explained in section 2 above, will not be a solution to this scenario.

An alternate solution is required to handle this.

4. Alternate solution through “Split Quota” in SAP:

Fortunately, SAP offers an alternative to the above by way of “Split Quota” system that involves configuration but does not necessitate an ABAP enhancement.

The proposed SAP solution consists of the following steps:

Defining a Z lot sizing procedure to accommodate split quota (configuration). Assigning the Z lot sizing procedure and appropriate Quota usage to the material master (master data). Maintaining info records for each vendor of the material (master data) Maintaining source list for the material with appropriate MRP indicator (master data). Defining quota arrangement with quota(%) for the material (master data) Running MRP to generate schedule lines/PRs

5. Split Quota - Solution in detail:

Step1:

Define a new lot sizing procedure for eg. ZQ by copying the existing procedure EX, using the SPRO path: IMG >> Production >> Material Requirements Planning >> Planning >> Lot-Size Calculation >> Check Lot-Sizing procedure. Select the checkbox “Splitting Quota” in the tab “Lot size for short term period”. This will ensure that each requirement is split among the multiple vendors.


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If this indicator is set, then the lot is split up in the planning run according to the following formula:

quota for source Quantity for source = ------------------------- * requirement sum of all quotas

Step2:

Assign quota arrangement usage (for eg. 4) to the material master Purchasing View.

The quota arrangement usage “4” includes all relevant MRP elements like POs, Schedule Lines, Planned orders, Purchase requisitions etc.


© 2011 SAP AG 6


Step3:

Assign the newly created Z lot sizing procedure (ZQ) to the material in MRP1 view.

Step4:

Maintain Info-records for the material and each of the vendors in ME11. For example consider that the material number is 166296 and there are 2 approved vendors 102735 and 102738, standard info-records have to be maintained for both these vendors for the material. Please note that the existence of info-records for the concerned vendors is a pre-requisite for quota arrangement to work.


© 2011 SAP AG 7


Step 5:

Maintain source list for the material, with the relevant scheduling agreement items & MRP indicator “2. This

setting will ensure that there is automatic generation of schedule lines through MRP.

Please note that if only purchase requisitions are to be generated for the material (in place of schedule lines), then the inputs for scheduling agreement and item are not to be filled in and the MRP indicator will have to be set to “1”.

Step 6:

Define quota arrangement using tcode MEQ1. It involves the following:

6 a. Quota Arrangement Header:

Specify a validity period for the quota. Also specify the minimum quantity of the requirement from which quota arrangement is to be active; Usually this is 1.0 meaning splitting should be active even for a requirement of 1 unit of the material.


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6 b Quota Arrangement Item Overview:

Assign the quota to each of the vendors among whom requirement is to be split. This quota is to be given as a number which represents the share of business. For example, a quota of 6 & 4 for 2 vendors would be recognized by the system as 60% and 40% quota.

Also specify the procurement type (= “F” for external procurement.)

With the above steps 1 to 6, the solution design is complete and we are ready to test the split quota functionality in SAP.

6. Validation of Split Quota:

In order to validate the outcome of the split quota functionality that we just designed, the following steps are to be carried out. The assumption is that MRP is used as the planning engine.

Step1: View stock/requirements list before MRP run, using tcode MD04:

The below scenario shows two order reservations on the material 166296, one for 1000 nos. and the other for 3000 nos., both due to production order of the parent material 90000196.


© 2011 SAP AG 9


Step2: MRP run to generate split quota procurement proposals (MD01/MD02/MD03):

MRP is usually run at the plant level using tcode MD01. However, for illustration purpose, below screenshot shows MRP run at the material level using MD03 with control parameters NETCH, 2,3,1,1. Display the results before saving so that we can verify the results before saving them.

Step 3: View planning results during MRP:

During MRP run, the planning results can be checked before they are saved.


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From the planning results, we can see that system has generated 2 sets of schedule lines. Click on Vendor button at the bottom of the screen to see which vendor (vendor code and name) has actually bagged the procurement proposal. System shows the vendors from the quota arrangement.

For eg., the 1st order reservation for 1000 nos. dated 31.10.2011 has generated 2 schedule lines for 600 nos and 400 nos for vendors 102738 and 102735 respectively and the 2nd reservation for 3000 nos. dated 08.11.2011 has generated 2 schedule lines for 1800 nos and 1200 nos. on the 2 vendors. This splitting is as per the quota arrangement that we have defined.

If the MRP indicator has been set to “1” in the source list, then system would have generated Purchase Requisitions instead of schedule lines during MRP.

Save the planning results of MRP run for further processing.

7. Conclusions:

Share of business in procurement can be handled by using Quota arrangement functionality in SAP with the help of minor configurations and without having to go for ABAP enhancements.

Practical business scenarios require the design and use of Split Quota system in SAP.

However, a successful implementation of Quota system in SAP requires discipline from the user community in maintaining all the necessary master data required.

Related Content

http://scn.sap.com/thread/2103997

http://help.sap.com/saphelp_ides/helpdata/en/fd/45bdde9d6411d189b60000e829fbbd/content.htm

http://help.sap.com/saphelp_46c/helpdata/en/75/ee117955c811d189900000e8322d00/content.htm


© 2011 SAP AG 11

http://help.sap.com/saphelp_46c/helpdata/en/75/ee117955c811d189900000e8322d00/content.htm

http://help.sap.com/saphelp_ides/helpdata/en/fd/45bdde9d6411d189b60000e829fbbd/content.htm

http://scn.sap.com/thread/2103997

Documents

Split Quota in Procurement