Running Materials Requirements Planning

The procurement process can be simplified by automating individual steps. This begins with the determination of requirements. You can create purchase requisitions automatically using the Material Requirements Planning (MRP) instead of entering them manually in the system. This requires specific configuration activities and the maintenance of MRP relevant material master data.

The central function of material planning is to ensure material availability, that is, the timely procurement of the required requirement quantities for production and sales. MRP is used to monitor stock levels, identify shortages, and automatically generate procurement proposals for purchasing and production.

Possible procurement elements in MRP are planned orders, purchase requisitions, and delivery schedule lines.

For materials produced in-house, the system creates planned orders to plan the production quantities. Once planning is complete, the planned orders can be converted into production orders.

For externally procured materials, you must distinguish between MRP Live and classic MRP:

• MRP live always creates delivery schedule lines for externally procured material with valid scheduling agreement and it creates purchase requisitions for all other externally procured material.

• With classic MRP, you decide whether the system creates a planned order or directly a purchase requisition for planning the externally procured quantity. Planned orders and purchase requisitions are internal planning elements that can be changed, rescheduled, or deleted at almost any time. When a planned order is created, a buyer can only order the material after the MRP controller has checked the planned order and converted it into a purchase requisition. A purchase requisition is immediately available to Purchasing.

  If a scheduling agreement exists for a material, it is also possible to generate delivery schedule lines directly in the classic requirements planning run. In contrast to planned orders and purchase requisitions, delivery schedule lines are fixed elements with a binding character.

The organizational level relevant for MRP is the MRP area. MRP areas can only be defined within a plant, not across plants. Basically there are three types of MRP area:

• Plant: The system automatically creates a plant MRP area for each plant. The number of a plant MRP area corresponds to the plant numbers. If no other MRP areas exist, the plant MRP area covers the entire plant. If you carry out MRP at plant level, you do not need any further configuration.

• Storage location: MRP areas for storage locations consist of one or more storage locations within a plant. If you want to plan storage locations separately within a plant, you must configure the MRP areas according to your requirements.

• Subcontractor: Subcontracting MRP areas are used to plan the provision requirement for a subcontractor separately and are defined by the assignment of this subcontractor.

This lesson shows important differences between consumption-based and demand-driven planning. This course focuses on consumption-based planning procedures and in particular on reorder point planning.

The procedures of consumption-based planning are based on the previous consumption of the material. External requirements such as sales orders and planned independent requirements and reservations are not considered in consumption-based planning.

However, to ensure that MRP controllers have all the information needed, the sales orders, reservations, and so on, are displayed in the current requirements and stock lists.

Consumption-based planning procedures are preferably used in areas without own production or in production plants for the planning of the B and C parts and the auxiliary and operating materials.

In demand-oriented requirements planning, external requirements such as sales orders are planned directly as requirements. Demand-driven planning is suitable for planning end products and important assemblies and components.

Reorder point planning

The system calculates the net requirements by checking whether the existing stock at MRP area level (total of available stock and fixed receipts) is below the reorder level.

The reorder point is defined for a material in the master record.

If the available stock falls below the reorder point, procurement must be triggered.

In reorder point planning, a distinction is made between manual and automatic reorder point planning. In manual reorder point planning, the MRP controller defines the reorder point. In automatic reorder point planning, the system automatically calculates the reorder point on the basis of the forecast.

Forecast-based planning

The system calculates future requirements using the forecast program based on consumption values.

Time-phased planning

As in forecast-based planning, the system calculates future requirements using the forecast program based on consumption values. In this procedure, however, planning is only carried out at fixed times in a particular planning cycle (rhythmic planning).

During the planning run, the system performs the net requirements calculation.

The procurement quantity results from the lot-sizing procedure stored in the material master record.

There are three different groups of lot-sizing procedures:

• Static

• Periodic

• Optimizing

Only the static lot-sizing procedures are presented in this lesson.

In the static lot-sizing procedures, future shortfalls are not considered, that is, if there is a shortage an order proposal is created for the amount of the static lot size without checking when a future shortfall occurs.

For the lot-for-lot order quantity, an order proposal is created for the amount of the shortage. If there are several issues for one day that lead to the shortage, only one order proposal is created for the shortage quantity on this date.

In the case of a fixed lot size, an order proposal is created for the fixed lot size if there is a shortage. If this is not sufficient to cover requirements, the system generates several order proposals for the same date.

When replenished to maximum stock level, the system creates an order proposal for the amount required to reach the maximum stock level as defined in the material master record.

After the net requirements calculation and the lot size calculation, the system schedules the procurement proposal during the planning run.

It calculates the date on which the purchase order must be sent, the date on which the vendor must deliver the ordered quantity, and the date on which the quantity will be available.

Starting from the creation date of a purchase requisition, the availability date of the material is calculated by the system considering the following time components: processing time by purchasing, planned delivery time, and goods receipt processing time.

This lesson gives you an overview of the important MRP data in the material master record.

The following categories of MRP data are found in the material master record:

• General data that you can or must define for a material to be planned (MRP controller for example).

• Data that depends on the MRP procedure.

• Data that is required for lot-size calculation.

On the MRP 2 tab in the material master record, you can maintain, among other things, the following data:

• The procurement type, which controls whether a material is produced or procured externally in a specific plant.

• A value for special procurement if you want to define the procurement type more precisely. For example, If you procure a material externally, you may want to choose the special procurement type consignment or subcontracting.

• The goods receipt processing time

• The planned delivery time
  Note

  The supplier-specific delivery time for a material can be maintained in the purchasing info record and/or a contract.

• The safety stock

MRP-relevant data is stored in the material master record at plant level. This data applies to the default MRP area that corresponds to the plant.

If you also work with storage location MRP areas or with subcontracting MRP areas, you can maintain certain material master data at these levels. MRP-area-specific planning data overrules the plant planning parameters.

You can automate various steps in the procurement process. This begins with the determination of material requirements using MRP. To simplify the procurement process, you can then use the automatic conversion of purchase requisitions into purchase orders. So that the system can automatically convert a purchase requisition item into a purchase order item, the system must be able to uniquely determine from which supplier and at what price the material is to be procured.

During the MRP run, the system calculates the quantities to be procured (requirement quantity/lot size) and the delivery dates. In addition, the source determination process in MRP tries to assign a source of supply to purchase requisition items.

For externally procured stock material (procurement type = "F" in the material master record), the following sources of supply exist:

• Purchasing information record:

  The purchasing information record (info record for short) is part of the master data of Purchasing.

  It contains data on the relationship between a material or material group and a supplier, such as price, delivery time, special agreements, and so on. The info record data is maintained at purchasing organization level or purchasing organization/plant level. The conditions and other data stored in the info record are used as default values in purchasing documents such as purchase orders.

• Outline agreement item:

  An outline purchase agreement is a long-term agreement between a purchasing organization and a supplier covering the supply of materials or the provision of services subject to predetermined conditions. These apply for a predefined period and a predefined total purchase quantity or a certain total purchase value. There are two types of outline agreement: contract and scheduling agreement.

• Plant:

  An external procurement can be made by stock transfer from another plant. In this case, you do not need to maintain any special data in Purchasing, because normally an internal settlement will take place. However, it is also possible to create plants as vendors. To do this, a plant assignment must be entered when maintaining the business partner (additional general data).

MRP determines material shortages, then determines lot sizes, and then sources of supply. After the lot-size calculation, the planned material receipts with requirements date and quantity are known. Supply source determination then determines whether the required quantity is produced or purchased and, if procured externally, from which supplier.