Explaining Material Requirements Planning (MRP)

Your company is selling fashion goods across various sales channels. The goods are either bought externally from vendors or manufactured in their own manufacturing plants.

Since the lead time for procurement is long, you entered planning figures in order to trigger the buying and/or manufacturing. Some of your order channels may have started with order entry already.

Now you need to consolidate the total requirements and generate respective purchase orders or production orders in order to issue them to your vendors or to your own plants.

The Material Requirement Planning (MRP) function will generate procurement proposals for you.

The MRP is capable of planning generic material variants, single materials and structured materials using a Sales Bill of Material (ERLA).

The main task of MRP is to compare the total demand requirements with the total of existing stock and/or fixed future receipts. If there is a shortage for the material / material variant / material variant per segment, the MRP then generates the required procurement proposals in order to purchase or produce the missing quantities. The procurement proposals can then be converted into Purchase Orders or Production Orders either manually or with relevant system settings - automatically.

Sources of supply maintained on level of generic material as source list, outline agreements or purchasing info records are considered by MRP.

The segmentation strategy defines in detail, how requirements defined on segment level should be covered by stock or procurement proposals. The generated procurement proposals include the required segmentation values accordingly.

There are several parameters that define the detailed procedure of MRP. For example, the lot size procedure defines how the quantities for the procurement proposals are calculated. Lot Size Procedure 'EX' means, that exactly the quantity calculated at time of the MRP run will be procured. There are other Lot Size Procedures such as Weekly or Monthly, which bundle the requirements along the defined time period.

The material requirements planning process has now been enhanced to guarantee material availability at segment level.

Prerequisites: segmented materials use an MRP planning procedure for example, PD.

For materials with segmentation, the system executes the planning processes based on the mapping rules defined in the segmentation strategy as explained in unit 3. MRP takes into consideration:

• ARun/MRP/ATP: Requirement/Stock Allocation
• Dependent Requirements/Stock Transfer
• Requirement to Stock Conversion
• Planned Ind. Requirements Consumption

The system considers available stock and future receipts based on the settings in the ARun/MRP/ATP. The system determines the stock segment to be procured.

Explanations about relevant settings:

• MRP Type / Lot size: MRP Type PD determines how requirements will be transferred into stock segments. In contrast to consumption-based planning no historical data is taken into consideration but current and future demand. Lot Size Procedure EX means, that exactly the quantity calculated at time of the MRP run will be procured. There are other Lot Size Procedures such as Weekly or Monthly, which bundle the requirements along the defined time period.
• Strategy Group: Standard ERP is supporting various planning strategies which result in different behavior of the MRP run and its results. Within SAP FMS only dedicated demand driven planning strategies are supported required for the typical needs of fashion business:

  • Strategy 40: Planning with final assembly.

  • Strategy 20: Make to Stock (Procure to Order), manufacturing not yet supported.

• Consumption Mode, Backward / Forward Consumption Period: Consumption Mode determines in which order the PIRs will be consumed. The consumption periods determine the number of workdays for backward and forward consumption.

The figure shows a screenshot of the MRP execution screen.

The following are further facts about MRP execution:

• The MRP Live Transaction can be executed by transaction: MD01N.
• The MRP is executed on plant level. The MRP Live supports execution for several plants.
• The MRP can be executed for generic materials (enter generic material number followed by *). Several materials or ranges of materials can be selected using the Entry help.
• The Regenerative Planning Flag triggers planning of all selected materials, no matter if changes since last planning run or not. If the flag is not set, the system automatically executes a net change planning.
• The Stock Transfer Materials flag defines, if Stock Transfers in supplying plants should be planned as well. Be aware, that segmentation is not supported for stores. However, the supplying plants may use segmentation. The requirement segment of the Stock Transport Requisition in the issuing plant can't be determined in the normal way based on segmentation strategy customization; instead, a default value must be provided. This default value can be set up in customization of the segmentation structure (transaction SGTS).
• With Planning Mode 3, all unfirmed procurement proposals are deleted and new procurement proposals are created to match the requirement situation.

• With Planning Mode 1 the system is reusing procurement proposals matching the requirements.

The following are properties of the fashion stock and requirement list:

• The Stock and Requirements List is used to evaluate the current situation of demand and stock within a plant. This report can be accessed via the transaction code: MD04P.
• This view allows to see an overall picture of a generic material with its variants (color/size combinations). A filter can be applied to focus on specific variants only.
• The list considers the segmentation strategy and maps the appropriate stock elements to the requirement elements and displays them in separate tabs according to the MRP statuses.

Explanations about the Fashion Stock and Requirement List:

• The MRP statuses help to understand the stock/requirement situation.
• Requirement shortages are displayed on variant level.
• Fixed planned orders and fixed purchase requisitions are identified with a padlock symbol. This helps to distinguish manually created procurement proposals from proposals generated by MRP. Fixed procurement proposals cannot be changed by MRP anymore.

The following are further features:

• Layout Options.
• information fields can be added or hidden.
• Sorting and filter options can be defined.
• Options for displaying totals and subtotals.
• List display options can be selected (colored blocks, etc.).
• The layout can be changed for the actual session, saved permanently or user dependent.
• Exception Messages indicate exceptional situations per variant, variant / segment combination.

The Planned Independent Requirements will be consumed by incoming sales orders. If segmentation is used, you can define in the segmentation strategy how sales orders should consume the Planned Independent Requirements regarding segmentation values.

Explanations about the statuses:

Status A

Unrestricted-use stock - supply that is not required by any demand will be shown in status A in MD04P.

Status B

Blocked stock status on MD04P list: no stock could be found for new requirements, MRP was not run yet. Blocked stock on MRP list: requirements which could not be taken into account during latest MRP run.

Status T

Temporary assignment of requirements to supply, the assignment is dynamically determined during MD04P execution and therefore is not a promise of how supply will be used.

Status O

"Supply Assignment: Ready for Release" after supply assignment run (ARun) status O is assigned if a release check is required

Status F

"Supply Assignment: Ready for Delivery"- release check was carried out, the defined minimum fulfilment was obtained.

Status H

"Supply Assignment: On Hold for Delivery"- release check was carried out, the defined minimum fulfilment was obtained but a (manual) release is required.

Status R

"Supply Assignment: On Reservation":

• Can be the result of a release check in which the minimum fulfilment was not possible.

• In general the ARun result for assignment against future supply.

• In general the result of fashion contract assignments.

Status I

Statistical overview of latest planning run, split in stock and requirements.

Status E

Sales order stock - make-to-order production (not yet supported) or

purchase-to-order procurement

Status N

Stock with account assignment but no requirement, e.g. Sales order (purchase to order) was rejected.

Status S

Third-party order processing.

Status K

Vendor consignment.

Status P

Requirements outside of the planning horizon.

Status 3

Consumed planned independent requirements.

Status W

Special Stock Customer Consignment.