Performing Replenishment Planning for Distribution Centers (‏3I8‏)

Objectives

After completing this lesson, you will be able to:

  • Execute Replenishment Planning for a Distribution Center

Replenishment Planning for Distribution Centers (3I8)

The parties involved in this unit are the distribution center and the external supplier. The intention is to regularly fill up the stocks in the distribution center (DC) with merchandise ordered from the external supplier. Automatic requirements planning is used to determine the relevant order quantities.

The 4 solution processes shown in the figure, Process Overview: Requirements Planning for a Distribution Center, forms this overall retail process with the intent of regularly filling up the stocks in a warehouse (distribution center). The process starts with the Replenishment Planning for Distribution Centers (solution process 3I8). As a result, purchase requisitions are created. Purchase requisitions are then used in the subsequent solution process, Procurement for Retail (5FM), as a basis for creating purchase orders for the external supplier. An inbound delivery (advanced shipping notification) from the supplier announces the delivery of the merchandise. Upon arrival, the goods receipt is posted (solution process 5FU). To complete the process, the Retailer posts the invoice received from the supplier (solution process 5FN).

Each solution process represents a lesson in this unit, and can be completed individually.

This lesson covers the solution process Replenishment Planning for Distribution Centers (3I8).

The terms Material Requirements Planning (MRP) or Requirements Planning (RP) can be used equally.

In the retail industry, specific terms differ from the standard terms used in other lines of business. The following terms are used synonymously in this document:

Standard Terms in Lines of BusinessSAP S/4HANA Cloud for Retail, Fashion, and Vertical Business
Material, ProductArticle
Material group, Product groupMerchandise category
Plant, LocationSite

The main purpose of automatic requirements planning for replenishable (reorderable) merchandise is to guarantee article availability in a retailer's sites, considering the need to optimize the service level, and to minimize costs and capital lockup. To calculate the optimal dates and quantities for the procurement of articles from suppliers, the system uses various forecast and requirements planning parameters, as well as real-time stock information. This minimizes manual efforts in the requirements planning process. Background jobs can be scheduled to automatically execute the relevant process steps. The requirements planning process is set up to automatically generate procurement proposals for purchasing. Requirements planning is regularly performed on article / site level.

Both a centralized purchasing policy, with ordering autonomy in the hands of the head office alone, and local purchasing autonomy (partial or complete) are supported by the system.

To set up requirements planning on article / site level, requirements planning and forecasting parameters are set in the logistics views (DC, store) of the article. Usually, Retailers procure articles externally, so they are purchased, not produced in-house. Therefore, Retailers typically use consumption-based requirements planning methods, instead of production-planning based methods.

The (material) requirements planning type (MRP type) plays a key role in requirements planning. For example, it controls whether a forecast is mandatory, optional, or not relevant. You also assign a lot-sizing procedure, and the responsible MRP controller (stock planner) among other settings. The system provides MRP types for consumption-based planning, as well as for production planning.

Forecast parameters are used to define the time interval of the forecast (period indicator), the number of historical values to be considered in the forecast run, the number of periods forecast, and so on. For consumption-based planning, the period indicator also determines the time interval for updating the consumption values in the system, for example daily, weekly, or monthly.

The following forecast models are typically used:

  • Constant model
  • Trend model
  • Seasonal model
  • Seasonal trend model

Each of these forecasting models requires a certain minimum number of consumption values. New articles can make use of the historical values of another article for a certain period of time, and for new sites, the historical values of another site can be referenced accordingly. The app Schedule Material Demand Forecast Runs (F2464) can be used to execute the forecast immediately as a single run, but also to define a regular recurrence pattern of the job for the selected articles and sites.

Once the forecast run determined the future demand based on the consumption history, the forecast data is copied to planned independent requirements (PIRs), using the Schedule Copy Total Forecast Runs (F2579) app. PIRs are created for flexibility. Instead of using forecast values as a basis to create PIRs, these could also be created and changed manually, or be created automatically. For example, by migration, or transfer from other systems. A PIR contains a planned (demand) quantity for an article in a site for a specific time period, for example, one week, depending on the period indicator.

Material requirements planning (MRP) is then executed to calculate the optimal quantities and dates for the procurement. The replenishment calculation considers the demand (PIRs), current stock situation, already planned goods receipts (as per the assigned availability check rule), and supplier parameters. The MRP types available to control consumption-based planning supports the time-phased planning method, and it can be combined with reorder-point planning. Time-phased planning uses a planning and a delivery calendar to define the relevant weekdays for procurement and delivery. In combination with reorder point planning, the forecast run determines the future demand, and also calculates the relevant reorder-point. In customizing (system configuration), you can also define if the forecast should also calculate a safety stock level. The MRP run creates purchase requisitions to store the calculated dates and quantities on article / site level. These are then handed over to operational procurement for generating purchase orders.

Consumption-based requirements planning

For the consumption-based Time-Phased Planning procedure, the following MRP types are available:

  • MRP Type: R1

    If a vendor always delivers or should deliver an article on a specific day, it makes sense to capture this day using a delivery calendar (delivery cycle). To define the relevant order day for the article / site combination, a planning calendar (planning cycle) has to be maintained.

  • MRP Type: R2

    Here, the same applies, which means, an order and delivery calendar is assigned on article / site level.

    Additionally, the forecast run also calculates the reorder point. This planning type is, for example, used for NOS (never-out-of-stock) articles, as the system creates a planning file entry regularly based on the order calendar. It is  also used when the stock falls below the reorder point level, for example, due to unexpected high sales volumes. This ensures that the article will always be ordered in time.

Note

As of release 2402, another MRP Type - R3 - will be available.

MRP Type R1:

In time-phased planning, a planning cycle (planning calendar) must be maintained. For the dates specified, the system then regularly calculates the requirement for the relevant article / site combination. If a vendor always delivers, or should deliver an article on a specific day, for example, each Friday, it makes sense to specify this in an additional delivery cycle (delivery calendar). Time-phased planning then considers both calendars.

To use time-phased planning for an article / site combination, the MRP type for time-phased planning, the planning cycle, and usually the delivery cycle, must be specified in the article master (logistics view).

You also define the planned delivery time, and the exact lot size as the MRP lot sizing procedure (EX: static procedure, lot-for-lot order quantity). For automatic requirements planning, an MRP Controller is also assigned to determine the responsible employee. This assignment can be used for selecting the articles / sites in the MRP related applications. Another important setting is the assignment of a suitable availability check rule to make sure that the relevant stock and demand elements will be considered.

Articles that are procured for the sites that use time-phased planning are automatically assigned a planning date in the planning file. This date is set when an article master record is created, and a relevant MRP type is assigned. The date is reset after each planning run. This date corresponds to the day on which requirements planning is to be carried out next for the article and site (MRP Area). It is calculated on the basis of the planning cycle (planning calendar) entered in the article master record.

This means that automatic requirements planning is scheduled to run for an article and site (MRP Area) on exactly those days.

MRP Type R2:

MRP type R2 combines MRP Type R1 with reorder point planning. With that, the site’s currently available stock is checked against the reorder point. If the stock available is less than the reorder point, the system generates an order proposal (purchase requisition).

The reorder point is calculated using safety stock (if that is set) and the expected average article consumption during the replenishment lead time. As a result, the safety stock (if that is set), existing consumption values, and the replenishment lead time are taken into consideration when the reorder point is calculated by the forecast run.

Safety stock is used to cover unexpectedly high demand during the replenishment lead time and the additional article requirements when deliveries are not on time. Previous consumption, future requirements, and vendor delivery reliability must therefore be taken into consideration when calculating safety stock.

The replenishment lead time is calculated using the following data:

  • Purchasing department processing time
  • Planned delivery time
  • Goods receipt processing time

The requirements planning run’s available-to-promise (ATP) check considers PIRs as demand elements, as well as the current stock and existing documents, for example, purchase orders, or sales orders, using them as planned goods receipts and issues.

A (material) requirements planning run generates a number of purchase requisitions. The requirements planning run for one or more sites and articles is typically scheduled as a background job, but can also be executed online for each article / site (MRP Area), by using the Material Requirements Planning (MRP) function. For background scheduling, the Schedule MRP Runs (F1339) app is available. For a selected article / site, the MRP run can be started manually by using the Check Material Coverage (F0251 or F0251A) app. The Monitor Stock / Requirements List (MD04) app can be used to get a detailed view of the current stock situation for the selected article / site. A feature comparison for the material coverage apps is available at help.sap.com → SAP S/4HANA Cloud → Manufacturing. Here, choose Production Planning and Control → Production Planning → Material Requirements Planning → Feature Comparison for Material Coverage Apps.

Summary

Execute Replenishment Planning for Distribution Centers

Watch the simulations Check Parameters & Schedule Forecast Run, Schedule Copying Total Forecast Run & Check Material Coverage and Schedule MRP Run & Display Results to learn more about the system-related activities.

Log in to track your progress & complete quizzes