1. Material Planning Process
Chapter 8
Material Planning Process
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2. Learning Objectives
Explain the master data associated with the material planning process.
Analyze the key concepts associated with material planning
Identify the basic steps in the material planning process and the data, documents, and information associated with them.
Effectively use SAP® ERP to execute the basic steps in the material planning process.
Extract and evaluate meaningful information about the material planning process using the SAP ERP system.
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3. Material Planning Answers three basic questions
What materials are required?
How many are required?
When are they required?
Main objective is to balance the demand for materials with the supply of materials.
Demand: fulfillment and production processes.
Supply: procurement and production processes.
Other processes -- asset management, project systems, warehouse management -- also affect demand and supply
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4. Material Planning
One of the most complex processes within an organization
Outcome is procurement proposals
Internal procurement: planned orders
External procurement: purchase requisitions
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5. A Basic Material Planning Process
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6. Organizational Data Client Company code Plant Storage location
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7. Material Master Views discussed for other processes
Basic data
Purchasing related
Sales related
Accounting related
Views highly relevant to material planning
MRP views – plant specific
Work scheduling – plant specific
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8. Material Master Data for Material Planning
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9. Material Master: Procurement Type
In house or internally (production process)
Externally (procurement process)
Both
None
GBI
Finished goods: both
Raw materials: externally
Semifinished goods: internally
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10. Material Master: MRP Type
Identifies which production planning technique to use
Consumption-based planning
Materials requirements planning (MRP)
Master production scheduling (MPS)
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11. Material Master: Consumption-Based Planning
Derives requirements based on historical consumption data
Reorder point planning
Replenishment lead time
Safety stock
Forecast-based planning
Time-phased planning
Use of low-value materials
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12. Consumption-Based Planning
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13. Reorder Point Planning Example
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14. Independent and Dependent Demand
Independent demand
Demand is based on customer (external) demand
Finished goods, trading goods
Calculated based on actual and forecasted sales
Actual sales orders = customer independent requirement (CIR)
Calculated demand = planned independent requirements (PIR)
Dependent demand
Demand is dependent on the demand for another material
Seimfinished goods, raw materials
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15. Material Master: MRP and MPS
Materials requirements planning (MRP)
Derives dependent requirements based on independent requirements
BOM explosion
Can plan for all levels in the BOM
Master production scheduling (MPS)
Optional step, similar to MRP
Derives dependent requirements only for the first level (component) in the BOM
Executed first for critical finished goods
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16. MRP vs. MPS
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17. Material Master: Lot Size Key
Procedure to determine the lot size of each procurement proposal generated by material planning
Static procedures: fixed quantity based on
Fixed lot size = predetermined fixed quantity
Lot-for-lot = exact quantity required
Replenishment up to maximum stock level
Period lot sizing procedures: combine requirements from multiple time periods
Optimum lot sizing procedures: EOQ, EPQ
GBI
All materials: lot-for-lot
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18. Material Master: Scheduling Times
Task is to estimate the time needed to procure the necessary materials.
Common estimates are:
In-house production time
Planned delivery time
GR (goods receipt) processing time
In-house production time is further divided into:
Setup time
Processing time
Interoperation time
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19. Material Master: Planning Time Fence
Used to prevent ERP systems from automatically changing procurement proposals during a specific period of time
Changes can be made manually
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20. Material Master: BOM Selection Method
A single material can have multiple BOMs.
The BOM selection method identifies the criteria the ERP system should use to select the BOM.
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21. Material Master: Availability Check Group
Defines the strategy the ERP system uses to determine whether a quantity of material will be available on a specific date
Most commonly applied method is available-to-promise (ATP)
Considers a broad range of elements (MRP elements) representing both supply and demand for the material
Supply elements: current inventory, requisitions, purchase orders, planned orders, production orders, etc.
Demand elements: sales orders, safety stock, material reservations, etc.
Availability check is used by many processes
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22. Material Master: Strategy Group
High-level strategy used in production
Make to stock (MTS)
Net requirements planning (Strategy 10): proposals based only on PIR without regard to CIR
Planning with final assembly (Strategy 40): similar to Strategy 10, but takes sales orders (CIR) into account via consumption
Make to order (MTO)
No inventory
Sales order (CIR)-based planning
Sales orders trigger production
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23. Material Master: Strategy Group
Assemble to order (ATO)
Planning without final assembly (Strategy 50) or subassembly planning
Finished product is made to order (CIR)
Components are made to stock (PIR)
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24. Consumption
When a strategy includes both PIRs and CIRs, the CIRs are said to consume the PIRs.
Proposals are not created by simply adding CIRs and PIRs
Before Consumption
After Consumption
PIR
CIR
Example 1 50 60
Example 2 40 10
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25. Consumption Mode Forward consumption Backward consumption
Consumption period
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26. Consumption Modes
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27. Demo 8.1 Review MRP and Scheduling Views for a Material
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28. Product Groups
Products with similar planning characteristics or similar manufacturing processes are placed into a product group.
Products are aggregated into groups from the lowest level to the highest level.
Lower-level groups can be nested within higher-level groups.
The lowest-level product group in any hierarchy consists of materials, either finished goods or trading goods.
Materials and product groups can be members of more than one group for different planning scenarios.
Each member of a product group is assigned a proportion factor.
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29. GBI Product Groups
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30. Product Groups at Apple Inc.
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31. Demo 8.2 Review GBI Product Groups
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32. The Material Planning Process
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33. Sales and Operations Planning
SOP is triggered when the organization wishes to revise its production plan.
SOP can also be triggered by unexpected events; for example, changes in the overall economic outlook.
SOP uses data from a variety of sources to produce a production plan.
SOP can generate several versions of the production plan based on assumptions concerning economic growth.
SOP can be either standard or flexible.
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34. Elements of the SOP Step
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35. Data in the SOP Step
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36. Tasks Tasks in the SOP step include: Creating the sales plan
Specifying inventory requirements
Creating operations (production) plans
Evaluating the feasibility of the operations plans
The interface to complete the tasks in SOP is the planning table, a simple-to-use spreadsheet-like tool.
The production plan that is generated from SOP is based on:
Synchronous to sales
Target stock level
Target day’s supply
Stock level = 0
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37. Standard SOP Planning Table
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38. GBI SOP Example
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39. Outcomes One or more versions of the production plan
No financial implications
No material movements
Therefore no FI, CO, or material documents are created.
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40. Demo 8.3 Create an SOP for the Bicycles Product Group
Review creating an SOP for the bicycles product group
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41. Disaggregation
The plans from SOP must be translated into plans for the finished product in the product hierarchy (disaggregation).
Disaggregation is triggered when a new production plan is created.
Organizational data (e.g., plant) and master data (e.g., product groups) from the production plan are used to calculate requirements for the materials in the product group.
These requirements are then transferred to the demand management step for further planning.
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42. Elements of the Disaggregation Step
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43. Data in the Disaggregation Step
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44. Tasks
The primary task in the disaggregation step is to translate the plans generated for product groups during the SOP step into plans for the materials contained in those groups.
Disaggregation can be completed for the entire product group hierarchy or for one or more levels of the hierarchy.
Either the production plan or the sales plan can be disaggregated.
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45. Tasks Disaggregate the production plan to the next level
Disaggregate the sales plan to the next level
This becomes the sales plan for the next level.
Then, calculate the production plan for that level.
Disaggregate the sales plan to the material level
Calculate the production plan for the materials.
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46. GBI Disaggregation Example
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47. Outcomes Calculate the PIRs for each planning period
These requirements are then transferred to demand management
No financial implications
No material movements
Therefore no FI, CO, or material documents are created.
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48. Transfer PIRs to Demand Management
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49. Demo 8.4 Disaggregate Production Plan and Transfer to Demand Management
Review disaggregate production plan and transfer to demand management.
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50. Demand Management
Demand management calculates revised PIRs for the materials using:
PIRs from SOP after disaggregation
Customer orders (CIRs) from the fulfillment process
Data regarding planning strategies from the material master
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51. Elements of the Demand Management Step
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52. Data in the Demand Management Step
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53. Tasks The primary task is to create revised PIRs for the materials.
Which procedure a company uses to calculate these requirements depends on the production planning strategy defined by the strategy group in the material master.
Demand management is carried out automatically by the ERP system.
The MRP controller monitors the results using a variety of reports and makes adjustments as needed.
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54. Outcomes PIRs for each material included in planning
PIRs represent requirements for the materials for specific quantities and specific dates.
No financial implications
No material movements
Therefore no FI, CO, or material documents are created.
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55. Materials Requirements Planning
SOP: plans at the product group level
Demand management: plans at the material level (FG, TG)
MRP: plans for materials (FG, TG), components (SFG), and raw materials (i.e., for all levels of the BOM)
MRP calculates the net requirements for the materials.
MRP creates procurement proposals - to make or buy the necessary materials.
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56. Materials Requirements Planning
Activities that affect material availability in different processes:
Procurement: purchase requisitions, purchase orders, and goods receipts
Fulfillment: sales orders, deliveries, and goods issues
Production: planned orders, production orders, material reservations, and goods receipts and goods issues
These activities, called MRP elements, are used by MRP for calculating net requirements and generating procurement proposals.
MRP can be executed for one plant, for multiple plants, or within MRP areas.
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57. Materials Requirements Planning
Master Production Schedule (MPS)
Optional
MPS items are high-impact items.
Materials planned by MPS are typically finished goods.
Materials are flagged as master schedule items.
After planning the master schedule items, MPS creates dependent requirements for the first-level components in the BOM of the MPS items.
After MPS, MRP plans for the remaining materials in the BOM.
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58. Elements of the MRP Step
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59. Data in the MRP Step
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60. MRP Procedure
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61. Check Planning File Determine which materials must be planned.
Any change to an MRP-relevant material generates an entry in the planning file.
Changes in material master (e.g, scheduling times, safety stock)
Changes to an MRP element
Finished goods are planned first, followed by BOM components and then raw materials.
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62. Calculate Net Requirements
Determine whether there is a need to procure material.
Net requirement calculation takes into account all of the relevant MRP elements to determine if a shortage of materials exists.
If the MRP type is consumption-based planning, then the formula is:
Available stock = Plant stock + Receipts
If the MRP type is MRP or MPS, then the formula is:
Available stock = Plant stock – Safety stock + Receipts – Issues
If available stock is negative, procurement proposals are generated.
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63. Determine Lot Size
Lot size procedure is used to determine the quantity to be included in the procurement proposals.
Data needed to calculate lot size are included in the material master: lot size key
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64. Scheduling
Determines whether the material can be procured by the required date
Two types:
Backward scheduling
Forward scheduling
Data needed for scheduling are included in the material master.
ERP systems initially use backward scheduling; if not successful, they then shift to forward scheduling.
In backward scheduling the MRP controller can manually adjust the schedule.
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65. Backward Scheduling
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66. Determine Procurement Proposal
Purpose is to determine the type of procurement proposal to generate
Internal : planned orders
External: three options
Create purchase requisitions
Create planned orders, which are converted to purchase requisitions
Create schedule lines
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67. Procurement Proposals
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68. Determine Dependent Requirements
For in-house procurement
MRP generates dependent requirements for the component by exploding the BOM
Single-level MRP: Process is terminated after this initial step.
Multilevel MRP: Calculations are performed for all levels.
Assemblies have their own BOMs, and MRP creates dependent requirements for the components in their BOMs.
Creating dependent requirements can also make entries in the planning file, which causes further processing.
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69. BOM Explosion
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70. BOM for Off-road Bikes
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71. MRP Control Parameters
Processing key
NETPL: Planning in planning horizon
All materials for which MRP-relevant changes have been made in the planning horizon
Least time consuming
NETCH: Net change to total horizon
Planning for all materials for which MRP-relevant changes have been made
NEUPL: Regenerative planning
Planning of all MRP-relevant items
Most time consuming
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72. MRP Control Parameters
Output of the MRP procedure
Creation of a purchase requisition
MRP (1) always creates a purchase requisition for externally procured materials
MRP (2) creates planned orders
MRP(3) creates purchase requisitions only in the opening period and creates planned orders after the opening period
Schedule lines applies to scheduling agreements
Option (1) not to create schedule lines
Option (2) to create them only during the opening period
Option (3) to create them only within the planning horizon
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73. MRP Control Parameters
Output of the MRP procedure
Create MRP list
Determines whether the system will create the MRP list
Creates the MRP list only for materials for which exception messages are generated
Planning mode
Determines how previously created procurement proposals will be handled
Adjusts the quantities and dates of existing proposals, or discards the existing proposals and creates new ones
Scheduling
Should the ERP system calculate only basic dates using the scheduling times in the material master?
Should the ERP system perform lead time scheduling using the more detailed times in the routing?
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74. Outcomes Procurement proposals No financial implications
Purchase requisitions
Planned orders
Both trigger procurement and production processes
No financial implications
No material movements
Therefore no FI, CO, or material documents are created.
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75. Demo 8.5 Run MRP Review run MRP
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76. Reporting
Reporting options for material planning are not as extensive as those in other areas.
Three very important tools for reporting the planning situation:
Stock/requirements list
MRP list
Planning result report
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77. Stock/Requirements List
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78. Exception Message
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79. Material Availability in the Stock/Requirements List
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80. Stock Statistics
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81. Demo 8.6 Review Stock/Requirements List and Related Reports
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82. Stock/Requirements List -- MRP List Comparison
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83. Demo 8.7 Review MRP List Review MRP list
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84. Planning Result Report
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85. Demo 8.8 Review Planning Result Report
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