The third step in the MTO process for The Bike Company is to perform Material Requirements Planning (MRP) for the customer-ordered bikes.
The main function of MRP is to guarantee material availability. It is used to procure or produce the required quantities on time, both for internal purposes and for sales and distribution. This process involves the monitoring of stocks and, in particular, the automatic creation of procurement proposals for purchasing and production.
In general, MRP takes place based on the requirement quantities, the requirement date, and the planned supply situation. In MRP, the requirement elements include, for example, customer requirements (resulting from sales orders), planned independent requirements (resulting from a sales forecast), and any dependent requirements created by exploding the BOM of finished products. Requirements must be covered on the requirement date, which is, for example, the requested delivery date in a sales order in sales-order-related production. This is the date when the material needs to be ready for starting the delivery process.
SAP S/4HANA checks whether the ordered material quantity will be available at the requirement date. Requirements are matched with the planned supply situation on the requirement day, taking into account material in the inventory, planned stock transfers, purchase orders, and goods receipts from manufacturing. Supply and demand requirements are location-specific. MRP matching is performed to ensure that the materials are in the right location at the right time to fulfill customer demand.
If a material shortage is detected, the coverage of the identified demand can be handled either via external procurement or internal production. For that, in the MRP run, procurement proposals are created, which include purchase requisitions and planned orders. A planned order is a request created in the planning run for a plant to start the production of a product (material), in a specific quantity, at a specific date. A planned order creates a receipt. A purchase requisition is a request to procure a quantity of a material externally so that it is available at a certain point in time. A purchase requisition creates a receipt.
Note
Purchase requisitions and planned orders are internal planning elements that can be changed, rescheduled, or deleted at almost any time.
The procurement proposals are also scheduled. This means that, for materials procured externally, the delivery and release dates are determined, and for materials produced in-house, the production dates are calculated.
When planning is complete, a planned order can be converted into a manufacturing order and a purchase requisition can be converted into a purchase order in a subsequent step.
In MTO production, material is produced specifically for an individual sales order. Therefore, a separate individual customer segment (which is the sales order stock) is created in the MRP list for the material ordered in a sales order. For this individual customer segment, the MRP run always detects a shortage in supply regarding the specific customer requirement from the sales order. This results in the creation of one or several purchase requisitions or planned orders to externally procure or produce the ordered quantity for the respective sales order.
Note
For more detailed information regarding the planning strategies in MTO, refer to the learning journey: Exploring Production Planning in SAP S/4HANA (https://learning.sap.com/learning-journeys/exploring-production-planning-in-sap-s-4hana).
In the Monitor External Requirements app, you can perform an MRP run and display the results in the stock/requirements list. The MRP run in this app is performed for the selected material, in the selected plant, using the MRP run parameters you defined in the user actions menu. You can see the results immediately in the stock/requirements list.
Note
When you start an MRP app for the first time, you have to specify your area of responsibility by selecting a combination of plant and MRP controller. In the app, you can change the area of responsibility in the MRP settings for your user.
So, when a customer orders bikes from The Bike Company that are only produced upon customer order, the MRP run is carried out for the ordered bikes and a planned order is created to manufacture the ordered quantity in-house.
