A material is managed through SAP MRP, if it has:

1. MRP View created - (Check - http://www.sapsword.com/home/learn-sap-pp/sap-material-master)

2. MRP Type is assigned to the Material Master (MRP type explains the type of material planning that is required for the given material at a given plant

3. The MRP Type configuration is made. 

Check MRP Type Configuration in the following link https://sites.google.com/site/sapswords/home/learn-sap-pp/sap-mrp/sap-mrp-configuration 

4. It should also be noted that the MRP type “ND” would not trigger any Material requirement planning for the material, while MRP type “XO” carries out MRP in an external system like APO. 

5. A Material master should be extended for all the 4 MRP views) 

MRP Types can be categorized in to 2 major categories, namely Material Requirement planning and consumption based planning. In material requirement planning, the planning is based on the master plan designed for a material through planned independent requirements or through incoming sales order demands. In the case of Consumption based planning, the materials are planned on the basis of their consumption patterns, for example the 'reorder point planning' where procurement proposals are created once the stock is consumed below a certain reorder point level or the forecast based planning where the future consumption is based on the forecasted consumption, arrived at through the past historical consumption for the given materials. 

The Material requirement planning is mostly carried out for high value materials like the assemblies, sub-assemblies or the high value procurement materials whose procurement quantities are planned based on the incoming demands. For high value materials, the planning is monitored and production/procurement is ordered once the higher levels demands arrive. 

On the other hand, consumption based planning is carried out for low value materials whose planning methods can be restricted to consumption based methods like the reorder point planning (with putting in a lot of efforts in to planning strategies). 

The below screen shot shows the various MRP types which are offered by SAP: 

Material Requirement Planning – MRP Type “PD”  

• The planning is carried out for the quantities planned through planned independent requirement or quantities planned through incoming sales orders (made-to-order or made-to-stock). The planning is done with respect to the master plan

• The planning process does not consider any forecast information or historical consumption patterns. Material planning is done only for absolute requirements/demands on hand. 

• The available stock is determined by the planning run (that is required to meet the demands) by including the following in an equation as shown below –

     = (Plant stock (considered as receipt) + scheduled receipts from production and purchase) – all the demands from sales order, material              reservations and planned independent requirements. 

If the available stock does not satisfy the demand then procurement proposals are raised to cover the demands. Alternatively we can interpret it as – fulfillment of the incoming demands by the receipts. 

• The planning is carried out for the quantities planned through planned independent requirement or quantities planned through incoming sales orders (made-to-order or made-to-stock). The planning is done with respect to the master plan

• The planning process does not consider any forecast information or historical consumption patterns. Material planning is done only for absolute requirements/demands on hand

• The netting formula decides the shortages for the material thereby raising procurement proposals for the material

• The only difference in such types of planning is that the master plan is protected for any changes through the use of planning time fence in the material master or in the MRP configuration. To protect any changes to the planning situation in the fence, the MRP run firms the procurement proposals. The MRP type configuration in such cases would decide whether any new procurement proposals could be created outside the planning time fence, automatically or manually by the planner, for the new requirements placed in the time fence period. It would also decide whether the procurement proposals that already exists in the fence require automatic firming or manual firming

MRP Type VB - 

• Consumption based planning is a type of planning which is triggered based on consumption of stock. It can based on the past consumption history based on a forecasted value or it can be based on the current consumption levels

• The best example of consumption based planning can be Reorder Point Planning, where the planning for a given material is triggered when the stocks fall below a reorder point. On the other hand you can also have a forecast based planning where planning is carried out based on forecasted figures for the material (forecast based on historical data) 

• In the case of Manual Reorder Point Planning (MRP Type VB), when the Plant stock & firmed receipts for a given material fall below reorder point, the planning for the material is triggered (a planning file entry is created). For this to happen, you would have to enter the Reorder level manually in MRP 1 view of the material master (as in the case of manual Reorder Point Planning) or the reorder point can be automatically calculated by the system (as in automatic Reorder point planning)

• In the Reorder Point Planning, we usually maintains a “safety stock” (entered manually in MRP 1 View of the material master – though not mandatory) to use it as handy stock in the period when the order is placed with the vendor and the material is being transported to the plant – material is on its way to the plant or warehouse (this is called replenishment lead time). The Safety stock can also be calculated automatically by the system using the “Dynamic Safety Stock” concept. You should also maintain the replenishment lead time, as accurately as possible in the material master. 

• In Re-order point planning, the incoming demands are not considered as issues, in other words the incoming demand plays no role in planning or creation of procurement proposals. MRP waits for the cumulative of the “Stock + Firmed receipts” to fall below the re-order point so as to trigger creation of a procurement proposal. The procurement proposal is created for a quantity equal to the Reorder point or equal to a fixed lot size maintained in the material master. If a procurement proposal already exists for the material with quantities greater than the proposed quantity (a manually created one), the system would not create a new one

• It is always recommended to use fixed lot sizing procedure so that every time the stock falls below the reorder point, the system can procure the fixed lot size, instead of using its own planning brains and ordering the quantity mentioned in the reorder point

• For example, if for a given material which is set for reorder point planning, with a reorder point of 80 Units, the system would try to create a planned order once the stocks falls below 80 Units. Assuming that the current stock at any given point in time is 50 Units and the firmed receipts are 20 Units, making it 70 Units, which is still well below the 80 unit’s level, in which case the system would create a planned order of 10 more units to reach back to the level of 80 units. 

Now if you have a “Fixed Lot Sizing” procedure” set in the material master, for a 100 Units, the system would always create a planned order of 100 units. 

MRP Type VM:

• In the case of Automatic Reorder Point Planning (MRP Type VM), the system calculates the recorder point and the safety stock using the past historical consumption data to derive the future consumption patterns. In this case you would need to extend the material master for the forecast view with a valid forecasting method selected

• In the net requirement calculations, the available stock is determined as equal to the plant stock and the firmed receipts from purchase and production. Net requirement calculations do not consider the demand from sales order or from planned independent requirements or from material reservations. If the available stocks fall below the reorder point, procurement proposals are raised

MRP Type V1/V2:

• The only difference between the reorder point planning method and the reorder point planning methods with external requirements is that, the Sales order requirements and the requirements from manual reservations are also included in the formula that is used to calculate the available stock.

These external requirements can be considered for the period within the replenishment lead time or within the total horizon; this option can be configured in the configuration for MRP procedures.  

MRP Type VV:

•  Another form of Consumption based planning is “Forecast Based Planning”, in which the historical consumption data is used to extrapolate the future consumption patterns, which are directly used as requirement figures in the next planning run. The forecast is suggested by the system periodically, i.e., on a weekly, daily, monthly basis or as per accounting periods. 

• You can specify the number of historical periods and the future forecast horizon (periods) for each material. In the planning run, the forecasted requirements are made to be available at the start of the period specified (week, month or day etc) and then you have an option to further divide/split these requirements to a finer detailed period pattern through the use of splitting indicator in MRP 3 view. The splitting Indicator can be configured in the following path – Logistics > Production > MRP > Forecast > Define Splitting of forecast requirements for MRP. 

• The forecasted requirements should be covered by the plant stock + scheduled firmed goods receipts (from purchase or production). Net requirement calculations do not consider the demand from sales order or from planned independent requirements or from material reservations. Only demands from the forecasted figures are considered. If the available stocks fall below the forecasted requirements/demand, for the period, procurement proposals are raised. 

• Safety stock can be considered in the net requirement calculations 

• Available stock that is left over after the planning run calculations = plant stock – safety stock + firmed receipts from purchase or production – Forecasted requirements/demand. Another way of interpreting the same is that, the receipts should cover the demands from forecasts. If the receipts cannot cover the demands from forecast, then the system raises procurement proposals. 

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