Exploring the Steps of Supply Chain Planning


After completing this lesson, you will be able to Describe the steps of supply chain planning.

Exploring the Steps of Supply Chain Planning

From the global point of view the Supply Chain Planning can be divided in three major steps:

  1. Forecasting
  2. Demand Management
  3. Material Requirements Planning

Forecasting Overview

Forecasting is one aspect of supply chain planning. Requirements from the past sales order quantities provide the basis to forecast future demands. Start the video to see the integration of these and other processes into the demand planning cycle.

In the Bike Company example, past sales order quantities are used to predict the future demand of 200 bikes. Market intelligence and events like trade fairs also contribute to the forecast. The demand plan is then derived into planned independent requirements, which guide procurement and production planning. These requirements can be consumed by current sales orders. By integrating forecasting into the demand planning cycle, the Bike Company can efficiently meet customer needs.

Demand Management Overview

Demand Management is the management of planned independent requirements and their interaction with real customer requirements. The demand program serves as input for material requirements planning.

The effects of independent requirements, whether they are planned independent requirements or sales orders, on material requirements planning are determined by their requirement types derived from the planning strategy defined in customizing.

In the context of the Bike Company's make-to-stock production, there may be situations where you need to start procurement of materials without waiting for specific customer requirements, such as sales orders. In these cases, you can use planned independent requirements, resulting in reduced delivery times. Moreover, you can use forecast planning to spread the burden evenly across your production resources. You can even trigger production without any customer requirement.

The following methods are available for including customer requirements into planning:

  • Make-to-Order Production: Various make-to-order planning strategies support producing specifically for a sales order item, ensuring the production aligns with customer demands.
  • Make-to-Stock Production: Make-to-stock production facilitates combining planned independent requirements and sales orders into a consolidated total requirement.
  • Dynamic Consumption: In several planning strategies, it is possible to dynamically consume planned independent requirements with sales orders.

Material Requirements Planning Overview

Material Requirements Planning (MRP) is the first step of production planning within a short-term horizon. It usually follows the demand management during a (nightly) background job in case of a shortage.

It involves determining the procurement dates for the necessary assemblies and components based on the requirement dates for the finished product. For example, these requirement dates could be derived from a sales order.

Watch the video to learn more.

Material Requirements Planning

During MRP execution, the system creates a coverage element (planned orders or purchase requisitions) based on the assigned procurement type (see previous section). Therefore, a hard-coded planning algorithm is used.In addition to the conventional MRP planning procedure, there is a further solution approach in SAP S/4HANA, the so-called MRP Live. As part of the MRP live, which is described in more detail in unit 3, MRP planning uses completely new source code in SAP S/4HANA.

Capacity Requirements Planning Overview

Capacity requirements planning (CRP) involves evaluating the available capacity of work centers or resources and matching it with the production requirements. It ensures that the necessary resources, such as equipment, labor, and time, are adequately allocated to meet the production schedule and fulfill customer demand. Watch the video to learn more about capacity requirements planning.

Let’s use the example of painting bicycles in the Bike Company to illustrate the steps of capacity requirements planning. In material requirements planning, you can use the routing to determine the capacity needed for painting bicycles. This helps in planning the required resources for the painting process, which is a crucial step before capacity requirements planning.

To ensure the feasibility of the plan, it is important to check if the work centers responsible for painting the bicycles are available on the requested dates. This verification is done through capacity requirements planning. capacity requirements planning focuses on a specific work center, often the bottleneck resource, to ensure that the capacity is sufficient to meet the production requirements.

The goal of capacity planning is to schedule all the operations involved in painting the bicycles, considering the planned or manufacturing orders. This ensures that the production plan can be successfully executed, and the bikes can be painted according to the required schedule.

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