When a sales order is created, it is confirmed as a planned order through transaction MD02. The planned order can then be converted into either a purchase requisition if acquiring the material from a vendor, or a production order if producing the material in-house. Production orders are created by converting planned orders, which transfers the component requirements and reservations. Sales forecasts entered in transaction MC94 are transferred to demand management and appear as VSF in MD04, which are then consumed by sales orders to start the planned order process. Integration between sales/distribution and other modules like materials management, production planning, and financial accounting ensures availability and cost checks, tax determination, and transfer of requirements from sales to production.

1. When you create a sales order the after taking the MRP run through transaction MD02
,your sales order will confirm into planned order.
Planned order will have 2 scenarios:
1) If you want to acquire the particular material from vendor then the Purchase
requisitions will be generated.
2) If you want to produce the material then the planned order will be converted into
production order.
((Converting Planned Orders into Production Orders
For in-house production, the planned order is converted into a production order. The
components required for production are contained as items in the planned order and are
transferred directly to the production order when the planned order is converted.
When planned orders are converted into production orders, the dependent requirements
of the components are automatically converted into reservations.
Operation data and production resources and tools data is taken as usual from the
routing of the material to be produced. The selection of the routing is described in more
detail in the SAP Documentation entitled, PP Production Orders.
If, when converting the planned order, you change the requirements quantity, or the
order finish date, a planning file entry is automatically created which causes the material
and its components to be planned with the regenerative planning procedure in the next
planning run.

2. Two possibilities exist for converting planned orders into production orders:
 individual conversion
 collective conversion
))
When the PP user will enter the sales forecast in the transaction MC94 then the same
will be transferred to demand management and after running MD02 ,it will start
appearing in MD04 in the form of VSF.
When you create a sales order then the VSF will be consumed by your sales order and
hence the same process of planned order will start.
Details:
1. From SD, via ATP and TOR (Transfer of requirements), the requirements from SD
are transferred to planning module. The requirements transfer will be activated in
your schedule line category in SD. Schedule Line category activation for ATP and
TOR is mandatory while Requirements class is the one to be activated first to have
this feature active and integrated between SD and PP. Requirement class is the
one that works like LIVER from configuration. This requirements class is
determined from MRP Strategy Group assigned to material master. MRP strategy
group tells the system how to plan the material in which situation. Say make to
order scenario, how the requirements form SO have to be transferred to PP etc.
2. Assuming that yours is Make To Order scenario, you have to run MD50. Before
that you have to ensure that for that material, all MRP views are maintained in
material master. On the other hand, if yours is Make To Stock, you can run MRP
via MD02
3. Yes ; you can run MRP against sales order. Pre-Requisites:-
The configuration and master data must be maintained according to the scenarion
for MRP strategy "Make to Order (MTO)", in Material Master --> MRP-3 view.
Execution:-
Trx. MD50.
(( Types of Demands in an Organization

3. The following are the various types of demands:
A) Planned independent Demand or Forecasted Demand:
An organization runs on external demands (visualized demands or forecasted
demands) for its products. When you talk of a product that is usually stocked and
delivered to the customer from their, it is a typical case of made-to-stock scenario.
Since the sales are from inventory, a company has to pile up only a certain quantity
enough to satisfy the demand, such type of organizations therefore forecast their
future demands based on historical sales, current market popularity of the product,
various environmental factors, seasons, etc. Production from such planned
independent requirement is a usual characteristic of a made-to-stock scenario.
SAP also offers tools for forecasting the future demand using the historical data and
playing various other fators on it. SOP (Sales and operation Planning) is one such tool
in SAP, where you can forecast future demand using past historical information for a
pre-selected organizational structure, for example, you could have the system pull in
the historical information for a given organizational segment llike Sales oragnization,
Sales Division, Distribution Channel, Material or for a Sales office, Sales division,
Material group. The forecast carried out the sales information from specially defined
sales information structure can be used as planned independent demand for
production over the forecasted period.
B) Demand from Sales order or Customer orders
On the other hand, you could also have the demand coming in from sales orders and
the production is initiated thereafter, such scenarios are typical make-to-order.
Manfuacturing after an Order is booked is carried out for products of high value or for
products whose design is supplied by the customer or as specified/requested by a
customer. For Example, Manufacturing of Jewelry, Aircrafts, Special Purpose Pumps.
Note that Made-to-Order can also be initiated for a typical Made-to-Stock Product, in
cases where a special customer places a huge order and the manufacturing is
triggered separately for them.
You should not be amazed to come across a product, which is manufactured as both
MTS and MTO.
All the above cases are typical make-to-order and such demands come in through
sales orders.

4. Note - The Sales orders demand coming in for a made-to-stock material is fulfilled
using the existing stock, whereas the sales order created for a make-to-order
material can never be satisfied using any existing inventory as the inventory created
for the material would have been produced for fulfilling other customer orders
Difference between Made-to-order and Made-to-stock
Made-to-stock Scenario:
If a material is defined as a made-to-stock material, i.e., materials which are not
marked with any strategy types or strategy groups in the SAP material master MRP 3
view or materials which are marked with collective requirements in the MRP 4 screen,
the system calculates the material requirements through the use of a pretty simple
algorithm; where it takes into account the stock in the storage locations, the receipts
expected for the materials through purchase or production and the incoming demands.
In a made-to-stock scenario, the incoming customer requests are fulfilled from the
inventory. The made-to-stock products are normally the consumer products or products
which have a monopoly market and are sold out of the existing inventory. Such products
are developed and produced continuously over the years till the product comes to the
end of its life cycle.
In such scenarios, the shop floor or the production team never knows, for whom the
product is being produced. The customer demands and the market situations can only
be forecasted and used as a basis for future production. In SAP the forecasted quantity
is evidently used in a form of planned-independent-requirement.
Made-to-stock production quantities are entered in SAP through the use of “Planned
independent requirements” (transaction code MD61) which are subsequently planned by
SAP MRP run. The planned independent requirements can be entered manually or the
requirement can be pulled in from forecast or it can be pulled in from the sales and
operation information structures (information structures which carry the sales
information at levels defined by the organization).
Made-to-order Scenario:
In cases where the material is defined as made-to-order, i.e., materials which are
marked with a made-to-order strategy in the MRP 3 view of the SAP material master and
marked with individual requirements in MRP 4 view, the system calculates the material
requirements through the use of an algorithm which takes in to consideration the
receipts expected for the material through purchase or production and the incoming
sales order demands. Here the system does not take into account the storage location
stock of the material (since the stock in the storage location for the material is always
tagged for a customer order and cannot be used anywhere else).

5. In a made-to-stock scenario, the incoming customer requests are accepted and
produced thereafter and ultimately delivered to the very customer. The example of such
a scenario can be high end products like jewelry or high end equipments or very costly
product. These products are normally configured by the customer and the order is
produced according to the customer requirements or by the design provided by the
customer. The Sales order is created or configured according to the customer
requirements and passed on to the production team.
In such a scenario, the tracking of the sales order from its creation to planning to
production to inventorying to delivery can be easily tracked unlike in made-to-stock
scenarios, where the incoming sales orders are not tracked in the plant, but are fulfilled
by the existing stocks.
Integration of PP with SD
1. Availability check
2.Variant configuration.
3. Make to order scenario
1. Whenever you create a delivery with reference to a sales order, goods movement
takes place in the bacgground. eg. In case of standard sales order, you create an
outbound goods delivery to the customer.
Here movement 601 takes place. This movement is configured in MM. Also, this
movement hits some G/L account in FI. Every such movement of good s hits some G/L
account.
2. The accounts posting in FI is done with reference to the billing documents (invoice,
debit note, credit note etc) created in SD. Thus this is a link between SD and FI
3. Tax determination: In case of a tax determination also, there is a direct link between
SD and MM
SD Integration points with other modules

6. SD module is highly integrated with the other modules in SAP.
Sales Order –
Integration Points Module
•Availability Check - MM
•Credit Check - FI
•Costing - CO/ MM
•Tax Determination - FI
•Transfer of Requirements - PP/ MM
Delivery & Goods Issue –
Integration Points Module
•Availability Check - MM
•Credit Check - FI
•Reduces stock - MM
•Reduces Inventory $ - FI/ CO
•Requirement Eliminated - PP/ MM
Billing -
Integration Points Module
•Debit A/R - FI/ CO
•Credit Revenue - FI/ CO
•Updates G/ L - FI/ CO
(Tax, discounts, surcharges, etc.)
•Milestone Billing - PS

7. Return Delivery & Credit Memo -
Integration Points Module
•Increases Inventory - MM
•Updates G/ L - FI
•Credit Memo - FI
•Adjustment to A/R - FI
•Reduces Revenue – FI))
((Planned orders are results of running MRP. Shortages of materials that are set to
internal procurement will create planned orders, which can be converted into production
orders. Production orders are like "hard copies", they cannot be adjusted by MRP
anymore. Well that's for a discrete environment, not sure about repetitive
manufacturing.
One we firm the planned order changes will be not reflected in the subsequent MRP,
correct. e.g. BOM change. New components will not be recommended for firm planned
order.
I'm assuming when you ask about when to use planned vs production orders you are
asking when to use Repetitive Mfg (with PE planned orders) vs Discrete Mfg (with
production orders). We use both and while we're not perfect in our approach yet we are
gaining a better appreciation for the two.
For repetitive, the planning is much simpler, you basically run MRP against your demand
and you get planned orders. You can change and firm these manually or you can use
time fence strategies, and you can have multiple operations running through multiple
work centres. They are very simple to maintain and use. Repetitive is normally run
against shorter lead time build, where we don't need a high level of control. If we have
the option we go with Repetitive.
Where we want a better level of control we go with discrete. Planned (LA) orders are
created from a run of MRP against your demand. These are converted to production
orders, released, and processed. There is a lot more control (and work) with this order
type than we see with Repetitive planned orders. We can link documents to the order,
we can change the routing and the BOM on the order, and we have better visibility of

8. the individual orders while they are in manufacturing. Costing is against the order as
opposed to Repetitive where the costs (and variances) are seen against the cost
collector. After everything is complete, you still have a record against the build. The
order stays intact, though it may be complete and closed, you still the retain history
))
((Material Requirements Planning in the Logistics Chain
Implementation Options
The main function of material requirements planning is to guarantee material
availability, that is, it is used to procure or produce the requirement quantities on time
both for internal purposes and for sales and distribution. This process involves the
monitoring of stocks and, in particular, the automatic creation of procurement
proposals forpurchasing and production.
Process Flow
requirements from
the market.
sales forecast.
The result is the independent requirement, that is, the requirement for the finished
product, tradable assemblies, trading goods and replacement parts. This result triggers
material requirements planning.
procurement
quantities and dates as well as plans the corresponding procurement elements. The
procurement element in the planning run is the planned order or, for external
procurement, the purchase requisition. Both procurement elements are internal planning
elements that can be changed, rescheduled or deleted at any time.
-house, the system also calculates the dependent
requirements, that is, the quantity of components required to produce the finished
product or the assembly, by exploding the BOM. If a material shortage exists, planned
orders are created at every BOM level to cover requirements.
en converts these planned procurement elements into exact
procurement elements: production orders for in-house production and purchase
orders for external procurement.
progress of the order for materials produced in-house is controlled by using
the production order. The production order contains its own scheduling procedures,
capacity planning and status management. Cost accounting is also carried out via the
individual production order.

9. purchasing procedure. In this
case, you must have chosen suitable vendors or you must have drawn up outline
agreements.
in stock and are managed by Inventory Management.
Various functions in the SAP System are planned, controlled and coordinated centrally
for several areas.
MRP Procedures
Use
The aim of material requirements planning is to tailor available capacities and receipts
on time to suit requirements quantities. You can use MRP or consumption-based
planning for this. A special form of MRP is master production scheduling.
Features
Material requirements planning is carried out using current and future sales figures.
The planned and the exact requirements quantities trigger the net requirements
calculation.
InMaster production scheduling, finished products and important assemblies, so-
called master schedule items, are planned separately and with extra attention. Only the
master schedule items are planned in this planning run. The system creates
dependent requirements for the BOM level directly below the planning level. It does not,
however, plan levels below this.
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

10. independent or dependent requirement, but is triggered either when stock levels fall
below a reorder point or by forecast requirements. ))