The document provides an overview of MRP (Material Requirements Planning) processes in SAP, including: - Different levels of running MRP like plant, single item, project, and sale order levels - Parameters that govern the MRP run like processing key, whether to create purchase requisitions or schedules, and planning mode - The steps in the MRP process including net requirement calculation, lot sizing calculation, and procurement type determination - Consumption-based planning using reorder point or forecast-based approaches - Reorder point planning process where procurement is triggered when stock plus receipts fall below reorder point - Types of reorder point planning like manual or automatic - Lot sizing procedures for calculating

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Version 2008
SAP MM Training Material- Level 2

2. Planning Overview

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MRP Process

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MRP Process
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• There are different levels for running MRP
– MRP at Plant Level
– Single Item Single Level MRP
– Single Item Multilevel MRP
– Project MRP
– Sale Order MRP
• MRP Run is governed by parameters maintained in initial screen
– Processing Key
• NETCH – Planning for materials undergone changes in Total Horizon
• NETPL – Planning for materials undergone changes in Planning Horizon
• NEUPL – Planning for all the materials irrespective of changes relevant to MRP
– Create Purchase Requisition
• 1 – Create Purchase Requisitions only
• 2 – Create Purchase Requisitions in opening period only
• 3 – Create Planned Orders only
– Delivery Schedules
• 1 – Do not create Schedule Lines
• 2 – Create Schedule Lines in opening period only
• 3 – Create Schedule Lines

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MRP Process
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– Create MRP List
• 1 – MRP List
• 2 – Depending on exception message
• 3 – No MRP List
– Planning Mode
• 1 – Normal planning mode
• 2 – Re-explode BOM and Routing
• 3 – Delete and recreate planning data
– Scheduling
• Determine Basic dates
• Lead time scheduling and capacity planning

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MRP Process
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• MRP Process Steps
– Net Requirement calculation: A check performed by the system to determine whether
the requirements are covered by available warehouse stock and planned receipts from
the purchasing department or from production
• Requirement elements include: sales orders, planned independent requirements, material
reservations, dependent requirements from BOM explosion
• Receipt elements include: available stock, firm planned orders, purchase orders, production
orders, firm purchase requisitions
– Lot sizing calculation: Quantity to produce or procure
– Procurement type: A classification indicating whether a material is produced internally,
procured externally, or both
– BOM explosion to arrive at dependent requirements for components
– Additional requirements like unplanned consumption, excess consumption etc
– Repeat the above steps for the components

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Consumption-Based Planning
Consumption-Based Planning uses past consumption data (historical data) to
calculate future requirements with the help of the material forecast or statistical
planning procedures. The net requirements calculation is not hereby triggered by an
independent or dependent requirement, but is triggered either when stock levels fall
below a reorder point or by forecast requirements.
The MRP procedures supported in consumption-based planning are:
• Reorder Point Planning
• Forecast-Based Planning
• Time-phased planning
Only Reorder Point Planning will be discussed in this training session

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Reorder Point Planning Process
• Reorder Point Planning is a process where procurement is triggered when the sum
of plant stock and firmed receipts falls below the reorder point.
• Few Important Definition :
– Reorder Point : The reorder point is the quantity of stock that should cover
the average material requirements expected during the replenishment lead time.
– Safety Stock : The safety stock covers both excess material consumption
within the replenishment lead time and any additional requirements that may
occur due to delivery delays. Therefore, the safety stock is included in the
reorder level.
– Replenishment Lead Time : Time required to replenish a material after
requirement for the same is generated.

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Reorder Point Planning Process

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Reorder Point Planning Process
Net Requirements Calculation : The system then calculates the net requirements.
The system compares the available stock at plant level (including safety stock) plus the
firmed receipts that have already been planned (purchase orders, production orders,
firmed purchase requisitions and so on) with the reorder point. If the sum of the stock
plus receipts is less than the reorder point, a material shortage exists.
Procurement Quantity Calculation : The system then calculates the procurement
quantity according to the lot-sizing procedure defined in the material master.
Scheduling of Procurement Proposal : The system then schedules the
procurement proposal, i.e., the system calculates the dates on which the purchase
order has to be sent and the date on which the vendor has to deliver the goods or by
which consumer has to have the goods ready.

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Types of Reorder Point Planning
• Manual Reorder Point Planning : In manual reorder point planning, user define both the
reorder level and the safety stock level manually in the appropriate material master.
• Automatic Reorder Point Planning : In automatic reorder point planning, both the
reorder level and the safety stock level are determined by the integrated forecasting
program.
– The system uses past consumption data (historical data) to forecast future
requirements. The system then uses these forecast values to calculate the reorder
level and the safety stock level, taking the service level, which is specified by the MRP
controller, and the material's replenishment lead time into account, and transfers them
to the material master.
– Since the forecast is carried out at regular intervals, the reorder level and the safety
stock level are continually adapted to the current consumption and delivery situation.
This means that a contribution is made towards keeping stock levels low.

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Lot Sizing Procedure
Lot Size in Procurement : Unit of goods in a single purchase order of order acceptable to or
specified by the purchaser to buy which is also agreed by supplier.
Lot-sizing procedures serve to calculate the procurement quantities, that is, the purchase
order and production quantities.
Three groups of lot-sizing procedures are available:
• Static lot-sizing procedures : In static lot-sizing procedures, the procurement quantity is
calculated exclusively by means of the quantity specifications entered in the material master.
Eg. Lot-for-lot order quantity, Fixed lot size, Replenishment up to maximum stock level
• Period lot-sizing procedures : In period lot-sizing procedures, the system groups several
requirements within a time interval together to form a lot. Period can be defined as Day,
Week , Month etc
• Optimum lot-sizing procedures : In static and period lot-sizing procedures, the costs resulting
from stockkeeping, from the setup procedures or from purchasing are not taken into
consideration.
The aim of optimum lot-sizing procedures, on the other hand, is to group shortages together
in such a way that costs are minimized. These costs include lot size independent costs
(setup or order costs) and storage costs.

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MRP Process
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– Create MRP List
• 1 – Create MRP List
• 2 – Depending on exception message
• 3 – No MRP List
– Planning Mode
• 1 – Normal Planning mode
• 2 – Re-explode BOM and Routing
• 3 – Delete and recreate planning data
– Scheduling
• 1 – Determine basic dates of planned orders
• 2 – Lead time scheduling and capacity planning

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Lot Size = EX

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Procurement Type = F

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Reorder Point Planning
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• Manual Reorder Point Planning Process
– Select the Planning Type as “VB” in the material master
– Specify the reorder point in the material master
– When the stock level of the material falls below reorder point, system will plan the
material during MRP Run
– If Stock level < Reorder point, then system will plan for the material during MRP Run
– If Stock level ≥ Reorder point, then system would not plan for the material during MRP
Run

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MRP Type = VB (Reorder Point Planning)
Reorder Point = 100

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Stock Level = 16

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Safety Stock
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• The intent of safety stock is to cover up for unexpected surge in demand
• It is the buffer quantity kept by the planner to meet unforeseen requirements
• The quantity of stock that is always available in the warehouse to fulfill unexpectedly high
demand, or that can be used in production if there are time delays
• Safety Stock is generally not used in Production

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Safety Stock = 10

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MRP Evaluation
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• MRP List (MD05 / MD06)
– Output / result of MRP Run is available by MRP List
– Use MD05 to view for single item
– User MD06 to view for all the items in a plant
– It is a static list as of last MRP Run
• Stock Requirement List (MD04 / MD07)
– Up-to-date overview of the stock of a material
– Use MD04 to view for single item
– User MD07 to view for all the items in a plant
– It is a dynamic list gives up-to-date material situation whenever stock requirement list
is executed

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Thank You