Supply Chain Planning

a. Demand Planning
b. Production Planning
c. Supply Planning
SAP SCM consists of two different applications.
1. Enterprise Resource Planning (R/3)
2. Advanced Planner and Optimizer (APO)
ERP
-

Integration of financial, manufacturing, & human resources on a single system

( a cross functional team)
High initial $
Future upgrades
Training
Long implementation time

Factory Calendar under Plant section determines the normal work days.
UNIT 03 MATERIAL MASTER
A material that is built in more than one plant will have a different material master.

Three Data types:

a. Organization data
b. Master data
c. Transaction data
Organizational elements of SAP
a.
b.
c.
d.
e.
f.

Client
Company code
Plant
Sales organization
Division
Storage locations

Material Master
A material that can be used in a manufacturing process, something that can be consumed, produced.
The material Master is the building block of all supply chain management activity.
Material masters are always defined by a Material # and a Plant.
The same material can be produced at one plant and stored at various plants. Thus there would be
multiple material numbers due to different plant storage locations.
Organizational Levels for Material Master Record:

a. Client level data

b. Plant level
c. Storage location level a storage location will typically but may not always store:
Raw materials
Component materials
Maintenance and Repair materials (MRO)
Engineering/design data is managed mainly on a Client level.
Material master records are grouped according to industry sector and material type.
a. The industry sector determines which industry-specific data appears in the material master
record. It also determines the order in which the screen appears.
b. The material type determines which departments can enter data and whether quantities and/or
values are updated in the inventory management.
- A material type groups together materials that are in common.
The material type controls:
a.
b.
c.
d.

Which departments (views) are able to maintain material data.

Whether and how quantities and values are updated in the system.
Whether the material is procured internally or externally.
Which G/L accounts (for example, material stock account) are updated.

Material type codes

FERT finished product
HALB Semi-finished product
????? - Raw materials
The industry sector determines which branch of industry the material is assigned to.
The industry sector determines:
a. Which screens appear and in which order.
b. Which industry-specific data appears.

Material Master Data Views

a.
b.
c.
d.
e.

Basic data
MRP
Plant/storage location
Accounting
Marketing etc.

Important MRP Data views

a.
b.
c.
d.

MRP1
MRP2
MRP3
MRP4

BASIC DATA VIEW The basic data views contain Client Level Data. The data is common across all the
plants.
MRP1:
MRP Type data view the method by which this material will be planned for replenishment. Ex: PD
MRP (Material Requirement Planning).
Lot Size to determine the quantity of any replenishment orders produced by MRP.
Eg: EX Lot for lot-order quantity.

MRP2:
Procurement type E (in-house production) (ego)
F external procurement (far away)
X both procurement types
-

No procurement.

Schedule Margin Key

MRP3:
Strategy Group allows us to plan for forecasts and customer orders.
MRP4:
Prod/Versions checkbox Forecasting view:
Period indicator. Eg: T trend model.
Work Scheduling View:
Information for in-house production.
Setup time, Processing time, Interoperation and Base Quantity. Interoperation time is the time when
material moves between various stages of production.
The setup time and interoperation time are not dependent upon the base quantity. The processing time
is dependent on the base quantity.
CONFIGURATIONS IN THE MATERIAL MASTER
The following configurations are available for the material master
-

Define new material types

Define display for data views by user-id
Re-organization of data views
Determination of required fields
Definition of warning/error messages (companion messages)

Maintenance of the MM:

-

Use of profiles to populate default values. A profile may be defined that will
automatically populate certain MM fields with specific data.
Mass maintenance allows mass changes to the MM by material type.
Engineering change control essential to document the history of changes to the MM.

BUSINESS PROCESS DIFFICULTIES:

a. Inventory Management determining the best inventory policy and managing the inventory
balance.
b. Material selection different material numbers that describe the same material.
c. Material Sourcing too many sources for the same material. Thus, cant get the best pricing.
d. Inactive materials:
1. Purging inventory of inactive materials.
2. Identifying the replacement material.
e. Maintaining data in SAP
. Centralized vs de-centralized data maintenance responsibility
. Inadequate IT security for data maintenance.
BILL OF MATERIAL UNIT-04
A bill of material is a complete, formally structured list of the components that make up a product or
assembly. The list contains a description and object number for each component, together with the
quantity and unit of measure.
The BOM masters must be integrated with many areas of SAP such as Sales (sales order), Production
(MRP, Planned orders, production orders), Accounting (Cost), Materials mgmt. (Purchasing, Warehouse)
etc.

BOM CATEGORIES
a.
b.
c.
d.
e.
f.

Material BOM material reqd. for a BOM

Sales order BOM
WBS BOM Work Breakdown Structure
Document BOM
Equipment BOM
Function Location BOM

BOM USAGE
Material BOM
a.
b.
c.
d.

Production (operations)
Costing (price)
Sales (order quantity)
Plant Maintenance (Location data)

e. Engineering (Technical data)

Area of Validity
-

It defines the valid uses of BOM

It helps to decide which plants would be utilized to produce the material. It can be one or
more plants. When a BOM is created, the SAP system will assign a numerical identifier
to that BOM. It is called as a Internal number. All BOMs will have a unique number.
A special case where a BOM is shared common among a number of different plants is a
Group BOM. A group of plants share this common BOM.
There can be reasons for which a plant wants to change BOM. It can create a new BOM
by copying from the original BOM and make the changes that needs to be made. When
that BOM is stored or saved, SAP assigns a new internal number for it.
Effectivity dates of BOM Valid-to-date. If an engineering or mktg. dept. has a target,
we can determine that this material is not valid after the validity date.

BOMs are structured. Low level code structure. Low level codes are stored on the MM. The
low level codes are used for Material Requirements Planning (MRP) purposes.
BOM STRUCTURE
a. Header level Status, text, Internal # and effectivity dates
b. Item
- Sub-items
The item level has different categories
a.
b.
c.
d.
e.
f.
g.
h.

Stock item
Non-stock item
Variable-size item
Text item
Document item
Class item
PM structure element
Intra material

Each item has alternative items that can be used.

For ex. The item K1 could be substituted with K1a. If K1 is not available, we can use the supply of K1a
through SAP substitution. The assumption is that any alternative item would have the same form, fit or
exactly equivalent to the item that is replaced.
BOM MASTER DATA
BOM TECHNICAL TYPES
There are 3 types of BOMs in SAP
a. Simple BOM 1 product with fixed set of material items
b. Alternative BOM 1 product with multiple sets of material items
c. Variant BOM multiple products with multiple sets of material items
The BOM technical type is stored in the BOM Header.

WHY USE ENGINEERING CHANGE MGMT?

-

It can be used for monitoring and documentation of changes.

Planning and execution at a specific point in time
Saving of several change states of the same object
Integration in the supply chain
Collation of changes that belong together

Engineering change mgmt. is significantly used to observe the History of changes.

BOM Reporting Functions
-

BOM Explosion
Structural display
Where-used lists
BOM comparisons
Mass Changes
Product structure
BOM browser

BOM Explosion it describes the level by level report of the quantities required for each material.
Where-used lists if a particular material that is considered by engineering for obsoleting, we need to
analyze where this material is used.
BOM Comparison it is used to compare two BOMs to see what is common
Mass Change in BOMs
SAP provides some functionality to maintain BOM in a cost effective way. When a component XY is
replaced with a component Z, we can check for XY usages and replace with Z. Mass changes are effective
when compared to changing each BOM.
BOM deletion
-

Delete function
Delete indicator

Entire BOM can be deleted or an item specified can be deleted. BOMs can be deleted without history.
BOMs can also be deleted with history using Engineering Change Management (ECH).
The Authorization groups control who can perform a deletion.

PURCHASING MASTER DATA UNIT 05

Purchasing Master data objects

a. Vendor master the vendor master contains the data of all vendors that a company conducts
business with. It is a building block for all the purchasing data objects.
b. Purchasing Information Record (PIR) source of information on the procurement of a certain
material from a certain vendor like price, delivery etc.

c. Contract
d. Scheduling agreement
e. Quota arrangement which source of supply is to be assigned to a requirement
VENDOR MASTER
It consists of 3 levels of data
-

General Data data that applies equally to each company code within your enterprise
(address, phone, language etc.)
Company code data company code level (payment transactions, number of control
account etc.)
Purchasing data data of importance with regard to your enterprises purchasing
activities and which is kept at purchasing organization level (contact person, terms of
delivery etc.)

Vendor Master Data (pulled from database when creating purchasing orders)
-

Master records must be created for every vendor

Contains centralized data for both MM and Financial Accounting (FI)

Purchasing Information Record it will build upon the vendor master. We have to know what materials
this vendor is going to supply.
-

Data such as prices and conditions that you can store for the relevant purchasing
organization or plant.
No. of last purchase order
Tolerance limits for under-deliveries or over-deliveries
The planned delivery time
Vender evaluation data

Contracts - A contract is a type of outline purchase agreement against which release orders (releases)
can be issued for agreed materials when required during a certain overall time-frame. Contracts may also
be used for services.
A purchase order is produced for each release order.
Scheduling Agreement can shorten processing times and reduce the amount of paperwork required
for a material or services delivery. One delivery schedule can replace a large number of discrete purchase
orders or contract release orders. Scheduling agreements are used primarily for higher volume
production when frequent deliveries are made by suppliers.
Quota arrangements: It is an instrument used in sourcing administration.
A quota arrangement divides the total requirement of a material over a period among certain sources of
supply by assigning a quota to each source.
Vendor (Supplier) Evaluation:
Vendor evaluation is the process of analyzing and assessing the performance of your external suppliers.

It also constitutes a basis for vendor selection. Vendors are awarded scores for a number of different
criteria. Vendors overall scores can be used to determine whether they are retained in or eliminated from
your vendor base.
Purchasing Cycle: Everything depends on demand. We need to see if the demand can be supplied from
our inventory. Else, we create a purchase requisition. Purchase requisition is a request that an SAP system
will make to purchase an item.
Purchase order is a legal contract between an entity and its supplier. A PO is a binding contract.
Once the order is received we create a goods receipt and the vendor orders an Invoice receipt. The
invoice is processed through the accounts payable system.
PR is a request by a user or a process such as MRP to the purchasing dept. for purchasing a material or
service.
A purchase requisition can be created
a. Manually
b. MRP
c. Production
Purchase requisitions must be converted to purchase orders.
UNIT 06 PRODUCTION DEFINITION PROCESS
Once the product is designed and the materials are defined, the production definition process may begin.
Leading edge companies use Concurrent Engineering as a tool to reduce the overall product and
production definition time.
A manufacturing company must first define its production process type before it can define more
production details.
The primary process types are:
a. Job Shop low volume, high variety, flexible equipment, intermittent production (if the volume
is low, we need not produce the product every day. This is defined as intermittent production).
b. Process medium volume, lower variety, flexible equipment, intermittent production.
c. Repetitive high volume, low variety, specialized equipment. Ex: Automobiles (few types and
the equipment used are very customized).
d. Continuous very high volume, low variety, specialized equipment, continuous production. Ex:
Oil, gas products. Steel industry.
The master data needed for the product definition process are:
a. Work center
b. Routing
c. Production Resource Tool (PRT tool that supports the production but not used in the process).
Only for Sub-Contracted services
d. Purchasing information record.
e. Contracts
f. Scheduling agreements

g. Quota arrangements
The organizational data used in the production definition process are
a. Company code
b. Plant
c. Purchasing organization
d. Storage location
e. Warehouse
The Production Definition Process STEPS
Select the process type the volume, the variety, equipment that we have and choosing the
process type accordingly.
Create Work Center Masters what resources we have within our facility.
Creating Routing masters sequential flow of how the material needs to flow
Create PRT Masters tools that are necessary to support the production.
Link BOM to routing to show what materials are needed in each step of routing.
Link PRT to Routing Linking production resource to routing.

WORK CENTER MASTER

An organizational unit that defines where a production activity should be carried out.
They include
-

Machines
People
Production lines

Work centers have the following:

-

Defined capacity
Shift start/end times
Target utilization

Ex: Kitchen would have a number of work centers such as Oven, Dish washer etc.

Work center categories

Production Work Center
Work Center Usages:
a. Scheduling formulae and wait times.
b. Costing center
Work Center Data:

a.
b.
c.
d.
e.

General data
Default values of routing
Capacity data
Scheduling data
Costing and HR data

The work center is integrated in a number of ways. Scheduling working time formulae. Capacity
planning, Work center (financial purposes, cost accounting, inspection criteria through quality mgmt.),
Routings (default values, standard value key).

Standard Value Key A std. value is an activity that we typically perform at a work center. We need
to prepare the WC for a production activity to perform. This is called as Setup. A processing is done
thus machine time. For each defined WC, we setup up to 6 different std. values. Once the std. values are
defined, then std. value key is a combination of any of the std. values. This key indicates what std.
activities are performed at that WC.
Default values in WC:
Backflushing we reduce the inventory after we have completed the units. It comes under basic data.
CONTROL KEY defines what are the reqd. elements for a particular WC. Can this WC be used for
scheduling? Must we perform confirmations at this WC? A confirmation is the number of units that has
completed processing at this WC.
CTRL key is the selection of those activities that have to be performed at this WC. It defines the control
elements for an operation performed at that work center.
Standard Text Operations
A template is a standard text.
Use: frequently repeated description of a production lifecycle.
Application Work center (default) and Work operation.

Available Capacity maintenance using central shift sequence

Once the shifts are determined, we can define the factory calendar. We first define the holidays. Public
holidays are country-specific. The holiday calendar is assigned to a factory calendar and then the
factory calendar is assigned to a plant.
Factory calendar contains company specific dates such as alternate working Saturdays and holidays.
Production Costing WC are used for costing.
WORK CENTER HIERARCHY
CAPACITY CATEGORIES OF A WORK CENTER
a. Energy
b. Processing unit
c. Machinery

d. Transport
e. Labor
f. Storage

Work center/capacity
a. Mass changes change std. value and default values.
b. Evaluations list of WCs, cost center assignments, work center capacities, work center
hierarchies, work center/capacity usage, change documents.
BUSINESS PROCESS ISSUES RELATED TO WORK CENTERS
a.
b.
c.
d.
e.

How to define your plants work centers? Define WC as a single one or as a group
Definition of alternate work centers equipment can be processed on more than one WC.
Capacity planning
Setup time
Sequencing orders

ROUTING MASTER DATA UNIT 07

SAP defines a Task list as a series of steps or process flow that will complete a task.

Routings are integrated into financial accounting and capacity planning.

Some examples of task list in SCM are:
a. Production of materials
b. Inspections of materials
c. Maintenance of equipment
SAP TASK LISTS
SAP R/3 supports the following types of task lists.
-

Routing (standard routing) used for job shop production.

Reference operation set we identify an operation through a reference number.
Rate Routing (automotive industry) used for repetitive production
Maintenance task list
Inspection plan
Standard network
Master recipe used for process industry

a task list that enables you to plan the production of a material.

ROUTING

The various activities involved in completing a task are referred to as Operations.

A routing must have at least 1 operation (activity) and as many as needed to describe the
production process. The operations must be assigned in a correct sequence. Each
operation is assigned a number.
In any SAP software system, there is no intelligence in the system to detect any errors that
you may have introduced by not listing the operations in sequence.
Each operation on a routing must reference:
a. the work center where the activity will take place
b. How much time is required to complete the activity at that work center
ROUTING USAGE
a.
b.
c.
d.

Scheduling start and finish date

Capacity planning how much work needs to be performed on a particular day or week.
Production/Assembly calculating time, control data, PRTs, Material, Quality assurance
Costing Production costs, production overhead costs
ROUTING STRUCTURE

Each routing is associated with a material and a plant. Each routing is assigned with a routing group
number (similar to the BOM internal number).
MATERIAL ROUTING GROUP SEQUENCE (each sequence will have operations defined)
each operation will have work center, text, control data and times defined.

Each operation will have certain tools defined to perform the operation. Ex: PRT _ Production
Resource Tools. If there is an inspection operation, we analyze the inspection criteria. Material
components and trigger points are also other tools.
GROUP COUNTER similar to the alternative number. If there is more than one sequence that
produces a particular material, then the sequence is differentiated with a group counter number. They
all will have a common ROUTING GROUP NUMBER. (same material but more than one
sequence).

Assigning a component to a BOM is optional. However, if there is not assignment of components to a

particular routing, then the general assumption is that all of the materials would be required to
perform the first operation. Scheduling gives us more accurate results.

BUSINESS PROCESS ISSUES RELATED TO ROUTINGS

a.
b.
c.
d.
e.

Accuracy of the operation times (setup, machining time, labor time)

Identification of alternate sequences
Confirmation steps
Planning for yield losses
Planning for rework
ROUTING MASTER part B

PRT CATEGORIES
-

Material Master
PRT master
Document
Equipment

SCRAP CATEGORIES and their effects

a. Component Scrap Increases required quantity of a component. Maintained in BOM or
material master of a component. Yield losses can be a component scrap.
b. Assembly Scrap increases reqd. quantity of all components. Maintained in material master of
assembly.
c. Operation Scrap reduces operation quantity of subsequent operations. Maintained in routing.

PRODUCTION VERSION - UNIT 8

Production Version
Production version is a method of defining acceptable BOM/routing combinations and under what
circumstances which should be used.
They are a hard requirement for several SCM solution areas:
-

APO
Process solution (R/3)
Repetitive manufacturing (R/3)

The production version is not required for a job shop production.

The Prodversion determines the various production techniques that can be used to produce a material.
It specifies
-

The BOM alternative for a BOM explosion

The task list type, the task list group and the group counter for the allocation to task lists.
Lot-size restrictions and area of validity

If there is a production version for a master data, the versionindicator checkbox is checked.
Part 2
Material Planning Process
The MRP is critical for those industries where products contain many sub-assemblies and components.
Ex: aerospace, defense, computer, automobile, durable goods/

Ex of industries that are less dependent on MRP:

-

Metals (steel and aluminum)

Semiconductor
Requirements for good Material Planning

Accurate BOM
Accurate Inventory balances
Accurate open order due dates we have placed an order to a supplier in the past and
there is some due date associated to that material. That material has not yet been
received. The due date that is associated with it is in future. If the due date of this order is
in future, then it is current. If the due date of an order was in the past, then it is not
current. If a past order is not received, then SAP assumes that material is to be received
today ( but it is wrong). Open orders for many companies are bad.
Accurate configuration management Mktg. and engineering make small
enhancements to the configuration of the product. The configuration mgmt. defines when
these changes in the BOM and it should be made sure if all these changes are correct.
Accurate forecasts

The primary objective of material planning is to identify and resolve material shortages
before they impact production.
Master data used in PD process
a. Material Master
b. Bill of Material Master
Organizational Data used in the Material Definition process
a.
b.
c.
d.
e.

Company code
Plant
Purchasing organization
Storage location
Warehouse
Process for Material Planning

1. Select the planning horizon how far are we going to do this process the material
planning horizon should be at least as long as the cumulative product lead time of the
products that we are planning for.
2. Determine demand they can come in the format of forecast or in the form of a sales
order.
3. Run Replenishment Planning looking at the inventory balances, looking at the
demands and determine whether we have sufficient inventories to meet those demands. If
not, then replenishment orders are done through planned orders and purchase
requisitions.
4. Identity material shortages - are required to find the shortages in advance to take
corrective actions necessary at reasonable expenses to operations.
5. Resolve shortages - can place new order to suppliers

DEMAND MANAGEMENT OVERVIEW UNIT 09

There are several different types of independent demand that may or may not be relevant to Material
Requirements Planning:
-

Customer demand (sales orders)

Planned Independent Requirements (forecasts)
Stock transport request

Demand management acts as a funnel to translate requirements or forecasts from a number of different
sources to which Material Requirements Planning (MRP) and Master Production Scheduling (PS) can
plan.
The result or output of Demand Management is a Net Requirement to MRP.
Demand Management is directed and governed by fields in the Material Master, primarily the
Requirement Strategy field.
Planning of requirement quantities and requirement dates for finished products and important assemblies,
and definition of the strategy for producing or procuring a particular finished product.
Production types
Make to stock in a make-to-stock strategy, inventories must be on-hand before the demand arrives.
The retail industry and many other industries use this strategy
Make to order inventories are not planned until an order arrives. Ex: aerospace and defense
industry uses this strategy.
Assemble to order semi-finished and raw material inventories must be on hand prior to the
arrival of actual demand. However, the finished product inventories are not planned until demand
arrives. Ex: the computer industry.

PLANNING
STRATEGIES
The planning strategy represents the procedure for what triggers quantity and timing of production of a
material.
A material production may be triggered by
-

A forecast only
A combination of a forecast and a customer order
A customer order only

Forecast consumption also known as forecast netting is the process of automatically adjusting the
forecast to reflect actual customer orders that have been received.
The objective of forecast consumption is to reduce the possibility of over-producing.
Planning uses planned independent requirements.
Deliveries for sales orders are taken from the warehouse stock.

Make-to-stock requirements strategy

-

Make-to-stock production 10
Planning with final assembly 40
Planning at assembly level 70

MAKE TO STOCK PLANNING includes strategy 10 (make to stock) and strategy 40 (planning with
final assembly).
Strategy 10
-

Product cycle time > time customer is willing to wait.

Production volume is high and repetitive.

STRATEGY 10 within the demand mgmt. does not consume the forecast. Whatever forecast is there
for the product, any customer requests already for the product are ignored and it allows the full forecast to
be passed to MRP as net demand.
One of the limitations of Strategy 10 is that if customer orders exceed your forecast, then we cant build
according to customer orders.
STRATEGY 40 will consume forecasts
MRP 3 DATA VIEW Strategy group is where these strategies are defined.
Demand Management strategies are defined on the Material Master.
Consumption mode is also done during the strategy.
-

Consumption mode 1 backward consumption only

Consumption mode 2 backward/forward consumption
Consumption mode 3 forward consumption only
Consumption mode 4 forward/backward consumption
SALES ORDER

SALES ORDER a type of independent demand. It is a contractual agreement between a company and a
customer to deliver material or services at an agreed price at a specific time.
Demand Mgmt. will never consume a sales order.
Available to Promise
-

One of the potential checks that can be performed during a sales order entry
ATP is the calculated warehouse stock that is available to promise to any future customer
(sales order)
ATP is a highly configurable function within SAP
Stock/Requirements LIST (MD04)
-It is a very important transaction for SCM. It will display in ascending
time sequence all the demands(requirements) and supplies(stocks) for a material.

MATERIAL REQUIREMENTS PLANNING UNIT 10

Replenishment planning is a major activity in any supply chain mgmt. business function.
Basic techniques
a.
b.
c.
d.
e.
f.

Visual
Re-order point the economic order quantity
Master Production schedule finished product level
MRP
Distribution Requirements Planning multi-tier distribution center level
Kanban

Advanced techniques
-linear programming
-other heuristic techniques
Two different types of demand
Independent demand (forecasts, customer orders)
a. Generated by customer orders for finished product
b. Fairly stable after allowances for seasonal variations
c. Requires inventory to be carried continually
Dependent demand
a. Generated from higher level items
Producing 1000 bicycles wheels needed for producing needed to be categorized under dependent
demand. It tends to be lumpy certain quantities may be needed on a date and then the requirement
changes for other date.

History handling of dependent demand

a. Difficulty of ordering and scheduling assembled products.
b. Enormous task of
- Setting up schedules
- Keeping track of large numbers of parts and components
- Coping with schedule and order changes
Using inventory techniques for independent demand excessive inventories
MRP
Computer-based information system that translates master schedule requirements for end items
into time-phased requirements for subassemblies, components and raw materials.
MRP supplies the answers for:
What is needed ?

How much is needed ?

When is it needed?
Producing or purchasing the right materials at the right time and having them available at the right places.
Assumptions in MRP:
a. Infinite capacity
b. Fixed lead times
MRP uses LEVEL-by-LEVEL planning. Also called as BACKWARD SCHEDULING.
Ordering, fabrication and assembly schedules for
a. Timely completion of end items
b. Keeping inventory levels reasonably low
Product Structure tree: Visual depiction of the requirements in a BOM, where all components are listed
by levels.
Inventory Records include information on status of each item by time period.
-Gross Requirements
-Schedules receipts
. Make & buy parts
-Amount on hand
-Lead Times
-Lot sizes.
MRP PROCESSING
a. Gross requirements
b. Schedule receipts an order that has been placed. Not yet completed but scheduled for some
future date.
c. Projected on hand inventory balance of that item projected out in future
d. Net requirements requirements order that needs to be met.
e. Planned-order receipts when that order must arrive to fulfil the demand
f. Planned-order releases when the order needs to be started to fulfil the demand.
ASSEMBLY TIME CHART
a. Projected on-hand inventory expected amount of inventory that will be on hand at the end of
each period.
b. Gross requirements total expected demand for item or raw material in a time period without
regard to amount on hand.
Projected on-hand in period t = projected on-hand in period t-1 - gross req in period t
scheduled receipts in period t

Planned order receipts created only when projected inv. balance becomes a negative number. It is the
qty. expected to be received by beginning of the period in which it is shown.

Planned order releases planned amount to order in each time period (procurement or production)
-

Multiple of specific qty. (batch size)

Qty. needed at that time

PART B
MRP CONTROLLING MASTER DATA
PD MRP
MRP1
MRP type
a. PD based on independent requirements, additional control using requirement strategies (MRP3)

b. Consumption based planning VB (Reorder point planning), VV Forecast based planning, R1

time based planning

Planning time fence is the no. of days into the future towards which MRP has control of the order.
Any planned order that are inside the time fence MRP doesnt have control, manage or change.
MRP2
Procurement type
E, F, X

MRP 2
Schedule Margin key able to determine certain amount of administrative planning days ( float before
production and float after production).
MRP NET CALCULATION
LOT SIZING
-

A technique that will determine the qty. to be produced or procured.

The lot sizing technique should take into consideration the trade-offs of the costs of
excess inventory against the efficiency of economies of scale and packaging
requirements.

LOT SIZING PROCEDURES

a. Static procedures

Lot-for lot-order The most commonly used. What u need is what u get. Produces exactly
the net reqd. qty. Lowest inventory cost.
- Fixed order qty. always produces or procures a fixed qty. regardless of the net reqd.
qty. It produces surplus inventory.
- Replenish to maximum stock level produces or procures a qty. that will bring
inventory to a max. stock level as defined in the MM.
b. Periodic lot-sizing procedures:
a. The system groups several requirement quantities within a time interval together to form a
lot.
b. The time period lengths can be either days, weeks, or months.
Optimizing lot sizing procedures EOQ
TC = Storage costs + Ordering costs

LOT SIZING INFLUENCERS

-

Lot size rounding: we can adjust the procurement quantities of delivery, packing and
transport units of measure. Making the product to fit in packing.
Min/Max lot size.

When using rounding and min/max, SAP first determines the lot size using min/max, then adjusts it to
comply with rounding requirements.

RUNNING MRP
The two possible outcomes of MRP are
a. Planned order it is created if the procurement type is E.
b. Purchase Requisition if the procurement type is F.
One of the transactions for running MRP is MD02.

PART C
MRP SCHEDULING
MRP will never create a date that is in the past. If the current date is scheduled, then MRP uses
forward date to establish scheduling.
2 basic approaches:
a. Basic scheduling
b. Lead time scheduling
Plant factory holidays and other non-work days are skipped during the scheduling process.
Goods receipt processing time time taken for putting the material in the warehouse (MRP2)
In-house production time

Scheduling margin key to get any materials ready for the production.

LEAD TIME SCHEDULING the data reqd. comes from routing.

a. Float after production
b. Operations (from the routing)
c. Float before production
Stock Requirement List
The first line always shows the available inventory
-

Each line goes in ascending order

RECEIVED REQD QTY negative side on RHS of number indicates a demand.
If a number doesnt have a negative number, it is a supply.

Exception messages shows materials where schedules are not ok.

Updating the MRP Planning run
a. MRP attempts to make reconcile and make many other changes by performing a net change
planning run. The principle tool for managing the net change is the PLANNING FILE.

Planning time fence it specifies a period within which no automatic changes are to be made to the
master plan. The planning time fence is maintained in workdays.
FIRM PLANNED ORDERS
- even if an order is out of the time fence, a user can take
control of it eliminating the MRP control. This is called as Firm Planned Orders.
a. Firming a planned order will essentially freeze the order quantity and scheduling dates.
b. A MRP run will not reschedule a firm planned order. It will produce reschedule exception
messages.