Consumption-based Planning

Material Planning

Material Planning(MRP Procedures)

Independent Demand(Consumption-based

Planning)

MRP-MaterialRequirements Planning

Reorder pointplanning

Forecast-basedplanning

Time-phasedplanning

Manual reorderpoint

Automatic reorderpoint

SAP Terms

SAP Exercise

Planning Process

External procurementIn-houseproduction Planning Run

Planned Order

Conversion

ProductionOrder

PurchaseRequisition

PurchaseOrder

ScheduleLine

Can be automatic

Planning Process

Planned Order: Recommendation by the MRP planning process

of quantity and timing of production or purchase order

Production Order: Actual order given to shop floor to commence

production. May be electronic or paper. Can include production details (routing, quality requirements, drawings, instructions, etc.)

Planning Process

Purchase Requisition: Request to purchasing to create purchase order

Purchase Order Request to vendor to supply materials

Schedule Line Direct request to vendor for materials, covered

by scheduling agreement (blanket PO)

Reorder Point Processing

Reorder Point

Safety Stock

TimeReplenishmentLead Time

Lot

Siz

e

Reorder Point Processing

When the inventory level for a product that is planned using consumption-based planning reaches the ROP, an order for the material is NOT created automatically

Consumption-based planning uses the Material Requirements Planning (MRP) planning process to create purchase orders

The MRP planning process is typically run overnight on a daily basis Historically, might have used weekly runs Time until MRP planning run is executed should be

considered in ROP calculation (daily runs, add 1 day to lead time)

Forward Scheduling forExternal Procurement

Tod

ay(R

elea

se D

ate)

Pur

chas

e O

rder

Dat

e

Goo

ds R

ecei

ptD

ate A

vaila

bilit

yD

ate

Processing TimeFor Purchasing Planned Delivery Time

Goods ReceiptProcessing Time

Replenishment Lead Time

MRP Planning Process

For a company with thousands of materials to plan, the computing resources needed to calculate material plans can be significant

To make sure that: Only those calculations that are necessary

are performed: Only on materials that need planning

Two “filters” are used: Planning Run Type Planning Horizon

Planning Run Types

NETCH: Net change in the total horizon In the MRP Planning Process, materials are

planned if there have been any:Changes in material stocks (receipts,

issues)Addition of purchase requisitions,

purchase orders, planned orders, dependent requirements

Changes in Material Master Data (Lot Size, ROP, etc.)

Planning Run Types

NETPL: Net change in the planning horizon Same at NETCH, EXCEPT:

Changes must occur within the planning horizon

Planning horizon keeps MRP planning process from making plans for future periods that: Do not impact current operations Will be made irrelevant through the dynamics

of business

Planning Run Types

Planning Horizon

NE

TC

H

Planning Horizon

NE

TP

L

Order/Requisition

RequirementTime

Plant Parameters: Planning Horizon

Planning Run Types

NETUPL: Regenerative Planning Plans all materials for total planning horizon

Good idea to run this option regularly (e.g. every weekend), even though it is more resource intensive Customizing changes don’t trigger planning

under NETCH or NETPL “Time passage” problem with NETPL

NETPL: Potential Problem

Planning Horizon

NE

TP

L

Today

Planning Horizon

NE

TP

L

Today

Solution: Run NETUPL

Passage of time is not an “event”Would require monitoring to detect

Planning File

A Planning File entry exists for each material Keeps track of changes that would require

material to be planned under NETCH or NETPL options

MRP Planning process looks at planning file entries for each material to see if it should be planned

Planning File

Low-levelCode

NETCHIndicator

NETPLIndicator

Planning Run Options

Planning Run Type:NETCHNETPLNETUPL

Create Purchase Req: 1 – Purchase Requisitions 2 – Purchase Requisitions in Opening Period 3 – Planned Orders

Defined by Schedule Margin KeyUsu. does not impact consumption-based planning

Planning Run Options

Planning mode: Determines how system deals with previous plans (planned order, purchase requisitions)

Create MRP List: 1 – Yes 2 – Depending on Exception Messages 3 – No

Scheduling: Determines level of detail in schedule calculation for production orders

Display results before they are saved Lets planner make changes before the results are saved

Planning Run Options

With consumption-based planning in practice: You would not run MRP for a single

material, but do it as part of a group (MRP Area based on storage location)

You would have it scheduled to run automatically

You would have it either:Create purchase requisitions automaticallyCreate schedule lines

Net Requirements CalculationR

eord

er P

oint

Stock

Firm PlannedOrders

PurchaseOrders

Order Proposalfor Lot SizeShortage

Fixed PurchaseRequisitions

How does safety stockfigure into this process?

Exercise: Material Master Data

MRP Type: VB sets consumption-based planning

Reorder point

Lot size: FX is fixed lot size

Fixed lot size: Quantity in an order

Exercise: Material Master Data

Plnd delivery time: Vendor part of lead time

SchedMargin key: Sets opening period, among other things

Safety stock: Desired stock level when replenishment order arrives

How does it work in SAP R/3?

Exercise: Stock/Requirements List

Stock/Requirements List: Your one-stop shopping location for all things material

Exercise: MRP Planning Run

MRP control parameters: Planning run parameters discussed previously

Exercise: MRP Planning Run

Planning run results displayed: Purchase requisition created

Exercise: Purchase Requisition

Can easily create purchase order from S/List

Exercise: Purchase Order

Purchase order screen is where the requisition is converted to a purchase order Vendors selected Price determined

Exercise: Receive Purchase Order

Goods Receipt Screen: In practice, could just be a bar-code scan Links receipt to purchase order Tell SAP R/3 system where goods have been stored

Exercise: Goods Issue

Goods Issue Screen: When goods are issued, something has to absorb costs (project, production order, cost center) In this case, we will charge costs to the warehouse cost center (P020) What is the downside to charging to a cost center?