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5 Tips for Planners and Buyers in SAP Material Management

Matt Johnson

Martin-Baker America, Inc.

Introduction

• Material buyers and planners are at the front line of materials management

• SAP provides the necessary tools to allow buyers and planners to make a significant impact on lowering the cost of goods sold

• This is accomplished by properly managing the SAP Material Master and supporting functions

• Here are 5 tips that will help you succeed!

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But first….. a question for the attendees!

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• How many of you have authorization to make changes to the material master?

5 Great Materials Management Tips

• Buyers• Tip #1 PO Unit of Measure Conversion – Economies of Scale• Tip #2 Quota Arrangements – Split Material Sourcing

• Planners• Tip #3 Reorder Point Planning – Lead Time Reduction• Tip #4 Lot Sizing – Accurate Cost Estimates

• Team Environment• Tip #5 Materials Management as a Team

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Buyers: Tip #1 Buying on Economies of Scale

• The Order Unit field is used to buy materials in UoM that differ from the Base UoM

• A great tool for buying in bulk to reduce inventory costs• Set the Order Unit field in the Material Master to your supplier’s

UoM where price breaks are given

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Buyers: Tip #1 Buying on Economies of Scale (cont.)

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• A conversion factor between the Base UoM and the Order UoM must be set

• Upon entering any alternative unit of measure, like the Order UoM, a pop-up screen will appear for you to complete the conversion factor

5 Great Materials Management Tips

• Buyers• Tip #1 PO Unit of Measure Conversion – Economies of Scale• Tip #2 Quota Arrangements – Split Material Sourcing

• Planners• Tip #3 Reorder Point Planning – Lead Time Reduction• Tip #4 Lot Sizing – Accurate Cost Estimates

• Team Environment• Tip #5 Materials Management as a Team

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Buyers: Tip #2 Split Material Sourcing

• A quota arrangement is a way of allocating work among several sources of supply for the same material

• You must select which business processes are to be considered for quota arrangements in the Purchasing screen of the Material Master (for example: planned orders and purchase requisitions)

• You must also maintain a source list of vendors to be included in the quota arrangement

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Buyers: Tip #2 Split Material Sourcing (cont.)

• In the quota arrangement, you must define the percentage to be allocated to each vendor

• There are refinements available to customize lot sizing

Buyer / Planner Question

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• How many of you are performing a joint buyer / planner role?

5 Great Materials Management Tips

• Buyers• Tip #1 PO Unit of Measure Conversion – Economies of Scale• Tip #2 Quota Arrangements – Split Material Sourcing

• Planners• Tip #3 Reorder Point Planning – Lead Time Reduction• Tip #4 Lot Sizing – Accurate Cost Estimates

• Team Environment• Tip #5 Materials Management as a Team

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Planners: Tip #3 Lead time reduction

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• Reorder point planning is a method of ensuring continuous inventory supply

• You must use one of the Reorder point planning MRP Types in the MRP 1 screen of the material master

• If you are using a manual reorder point, you must calculate your reorder point based on consumption during the vendor’s lead time

Planners: Tip #3 Lead time reduction (cont.)

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• There are two significant benefits to reorder point planning• 1) You can reduce the overall lead time of an assembly by

placing long lead time components of the critical path on reorder point planning

• 2) By placing common hardware, such as nuts, bolts and rivets on reorder point planning, and allowing production technicians to make material reservations from inventory, you will provide employee empowerment to the shop floor

5 Great Materials Management Tips

• Buyers• Tip #1 PO Unit of Measure Conversion – Economies of Scale

• Tip #2 Quota Arrangements – Split Material Sourcing• Planners

• Tip #3 Reorder Point Planning – Lead Time Reduction• Tip #4 Lot Sizing – Accurate Cost Estimates

• Team Environment• Tip #5 Materials Management as a Team

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Planners: Tip #4 Accurate Costing

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• The costing lot size, defined in the Costing 1 screen of the Material Master, is the lot size used as a basis for your cost estimates

• Setting this lot size equal to your normal production lot size will help you to provide accurate cost estimates

• This is particularly critical when using standard setup times in your production routers

5 Great Materials Management Tips

• Buyers• Tip #1 PO Unit of Measure Conversion – Economies of Scale

• Tip #2 Quota Arrangements – Split Material Sourcing• Planners

• Tip #3 Reorder Point Planning – Lead Time Reduction• Tip #4 Lot Sizing – Accurate Cost Estimates

• Team Environment• Tip #5 Materials Management as a Team

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Buyers / Planners: Tip #5 Teamwork

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• The SAP Material Master requires inputs from both buyers and planners

• Make sure that responsibilities are clearly defined• Educate one another on the various settings for each party’s

responsibilities• Communicate openly with each other, as well as inventory

control personnel, on Material Master settings and activities

Buyers / Planners: Tip #5 Teamwork (cont.)

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• Example: The planned delivery time is maintained in the MRP 2 screen

• This screen is traditionally maintained by a material planner• However, I recommend that buyers maintain the planned

delivery time field, as they are more in sync with lead times in the vendor source list

Five Key Ideas

• Material buyers should use a PO unit of measure that is aligned with the most economic lot size that is available or allowed

• Quota arrangements facilitate long term and strategic partnerships at the buyer level

• Reorder point planning is an excellent source for lead time reduction and employee empowerment

• Aligning procurement and production lot sizes with costing lot sizes will help to make cost estimates more accurate and meaningful

• Team work is critical amongst buyer / planner / inventory management roles

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A gift for the attendees

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• All attendees of today’s webinar are entitled to a $5 voucher towards my book, SAP Material Master – A Practical Guide

• Please visit the following link: https://www.createspace.com/4548187

• Apply the discount code: DBSM3T3M to receive $5 off of your purchase

Resources

• Matthew Johnson, SAP Material Master – A Practical Guide (Espresso Tutorials, 2013).• ISBN-10: 1-4943-1859-8 ISBN-13: 978-1-4943-1859-8• www.amazon.com/SAP-Material-Master-Practical-Guide/dp/

1494318598/ref=sr_1_1?ie=UTF8&qid=1388430123&sr=8-1&keywords=sap+material+master

• www.amazon.com/SAP-Material-Master-Practical-Guide-ebook/dp/B00H8SPI8G/ref=sr_1_2?ie=UTF8&qid=1388430419&sr=8-2&keywords=sap+material+master

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Questions

• Now:• Ask questions now for immediate answers

• Later:• mjohnson122@verizon.net

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Q&A

Disclaimer

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