SAP MRP1 View

The MRP 1 View is a place holder for defining the Planning methods and lot sizing procedures of a give material at a plant/storage location level. 

If you are going to have a particular material planned in SAP, then you can go ahead and create a MRP views (MRP 1, 2, 3, and 4) 

MRP Type Key determines whether and how the material is planned. You have the following options:

PD – Relevant for Material Requirement Planning

ND – No Planning in SAP

VB - Manual reorder point planning (Consumption based planning)

VM- Automatic reorder point planning (Consumption based planning)

VV - Forecast based Planning

X0 - External Planning i.e., APO or BAAN or I2 or MES or any other external planning system.

MRP types can also be configured to the requirements, but most of the times, standard MRP types are used.

Lateral Thinking:   

Step 1: As a consultant you have to decide whether a particular material needs to be planned in SAP.

Step 2: Then decide the type of planning. 

MRP Types can be classified into 2 Major Types or Leagues: 

a) Materials for Consumption based planning: 

For materials whose planning is based on consumption or for materials which are really not expensive or which are really not monitored by finance and the costing teams. 

This is mostly used for Raw Materials. 

This type of planning is for Materials which are procured based on their consumption. Methods like Reorder Point Planning, where procurement is triggered after the stock falls below certain levels is the most widely recognized consumption based planning.

The Following are consumption based MRP types: 

VB - Manual reorder point planning

VM- Automatic reorder point planning

b) Planning not based on Consumption: Planning Based on Demand:

For materials whose planning is not based on the consumption levels or materials who are to be procured on demand only. These materials are those whose consumption is monitored by the finance team and they are really important for the company. These materials are expensive materials.

This type of planning is mostly used for expensive and monitored Raw Materials and for planning of the manufactured products. 

Demands coming from Sales order or planned independent demand for semi-finished materials, finished materials or even the most expensive raw mtaerials are planned using Material Requriement Planning.

Illustrative Explanation of MRP Types:

See the table below:

The Material requirement planning is mostly carried out for high value materials like the assemblies, subassemblies 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:

• 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 all the receipts.

• 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

• In the case of Automatic Reorder Point Planning (MRP Type VM) - a type of consumption based planning, 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. 

• 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. 

• 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.

Using the MRP groups you can group materials which would have the same planning parameters. 

Use of planning parameters available at the plant level would have all the materials in the plant adopt to the same planning parameters. 

MRP Groups allows you to have different set of planning parameters, which once assigned to the materials helps these materials to get planned in varied specified ways as described below: 

These control parameters include, the planning strategy group, the consumption mode, the planning horizon, Rescheduling Horizon, Planning Time fence, determination strategies for issue storage location, Order type to be used for conversion of planned orders, availability checking rule, Safety Stock, whether start is allowed to be in the past etc.

Lateral Thinking:  

As a consultant you have to think whether the materials needs to be grouped in groups which define varied the planning parameters or you are happy with using the plant level planning parameters for all the materials.

If you don’t have MRP groups specifying grouping of materials with similar planning concepts, then the system assigns these materials with plant specific planning parameters.   

Re-order point planning is a special procedure in materials planning under the heading of consumption based planning.

 If the reorder point is greater than warehouse stock, an order proposal is created by materials planning.

Manual reorder point planning, the logic here is more attentive towards maintaining the stock levels rather than the (Net) requirements for the material. 

Example: 

i.e. for example you have a stock of 100 KG and the Reorder point value is say 150, then the system creates a proposal for the balance 50 kg even though there may / may not be requirements for this ordered qty. At the time of procurement the system would procure according to the lot sizing procures defined for the material, i.e., if the lot sizing procures suggests min lot quantity as 60 kg; the system would procure 60 kg, instead of 50 kg.

Illustration of the Reorder Point Planning:

It is a Configurable Field. It has to be configured in IMG.

MRP Controller specifies the absolute three digit code of the MRP controller responsible for material planning for the material. MRP controller is the person responsible for a group of materials in a plant or company. 

A material that takes part in material requirements planning must be allocated to an MRP controller. This allocation helps you to evaluate or run MRP for a controller.

 Lateral Thinking 

You can run or evaluate MRP for a plant or material at a plant using the standard SAP Transaction codes MD01 or MD02 (running MRP at Plant or Material-Plant level or MD04 (Evaluation at material plant level). But it would be interesting to know that you can also run a MRP run for a MRP controller activating a standard User-Exists in the system. 

It is a Configurable Field. It has to be configured in IMG in the MRP section of the Logistics Production area. 

Normally consultants avoid configuring this field and they use it as it is. 

Lot Sizing Key determines which lot-sizing procedure the system uses within materials planning to calculate the quantity to be procured or produced for the material. Lot Sizing procedure in material requirements planning is used to calculate the order and production quantities (lot sizes). 

Types of Lot sizes: 

A) Static Lot Sizing Procedure – Static Lot Sizing procedure means that the lot size is static and it is not be clubbed periodically or for optimum lot size calculations. 

EX is the most commonly used, which means lot for lot quantity. Which means the lot size is equal to the requirement quantity and it is not be clubbed periodically or for optimum lot size calculations.

FX is used for Fixed Lot Size and HB is used as a lot size to replenish stock to the maximum level. 

B) Period Lot Size Procedure – The clubbing of requirements on a daily basis or a weekly basis or on a decided periodic basis.

 For example - TB is used if you want to carry out Daily Lot Sizing; WB is used for Weekly,

Note: 

As per standard SAP, the material is always planned in the start of the period. For example if the material is planned with a weekly-lot-size, then the required planned start date will be in the start of the week. Nevertheless through configuration, you can have it starting in the end of the week if required. 

There are many other options of starting and ending of the dates for the lot size planning. 

It defines the scrap % that is allowed for the material. It is used to define the scrap % of the header material.

Examples:

If the scrap % is 10% and the requirement quantity is 100, the planned order will be created for 100 units and the system will add a column in the MRP screen to Mention that 10 is the scrap Quantity to be produced for that material.  

The components of the production order or process order are planned proportionately for manufacturing 110 units.  

It is the Minimum Procurement quantity for the material at the given plant and storage location defined.

 Examples: 

If the Minimum Lot size is 100 kg and the required Quantity is 80 kg, then the system will create one planned order of minimum 100 kg in number {if the Plant/Storage location stock for that material is Zero}. 

It is the maximum Lot size for a Procurement quantity. If the Maximum Lot size is 80 units, then the maximum planned order qty cannot be more than 80 units in any case. 

Examples: 

If the required quantity through a demand is 120 kg, then the system will create two planned orders of 80 kg & 40 kg {if the Plant/Storage location stock for that material is Zero} 

If the procurement qty is 140 kg, and the Maximum lot is 80 kg and minimum is 15 kg, then the system will create 2 planned orders of 80 kg & 60 kg. {if the Plant/Storage location stock for that material is Zero} 

If the procurement qty is 85 kg, and the Maximum lot is 80 kg and minimum is 15 kg, then the system will create 2 planned orders of 80 kg & 15 kg {if the Plant/Storage location stock for that material is Zero}.  

The Fixed Lot size defines a fixed procurement lot size quantity for the material. Which means that you will always procure or produce a material in a fixed quantity. 

Examples: 

If the required Quantity through demand/demands is 120 and the fixed lot size is 80, then the system will create 2 planned orders with one planned order of quantity 80 an the other planned order of Qty 80 {if the Plant/Storage location stock for that material is Zero}. 

Maximum Stock level is a Quantity of the material in this plant that may not be exceeded. In materials planning, the maximum stock level is used only if you have chosen Replenish to maximum stock level as the lot-sizing procedure; that is, you have entered HB as the lot size key. Enter a value if you have chosen Replenish to maximum stock level as the lot-sizing procedure. 

If you have chosen to work on Maximum stock level then the system procures for the maximum stock level quantity and then adds the Procurement quantity to that. 

Examples: 

a) If the Maximum Stock level is 500 and the demanded quantity is 45, then the system creates a planned order of 545, thereby first ensuring the 500 stock is filled up and then the demand quantity is added to that.

Examples: 

If the Rounding Value is 20, and the procurement quantity is 70, then the system will always round up the planned order to a multiple of 20. 

One more example would be, if we don’t consider the Min/Max Lot size and the procurement quantity is 70, then the system would create a planned order of 80 to round off to 20 {if the Plant/Storage location stock for that material is Zero}.

The static rounding value method may not satisfy all the business cases, where a given rounding value is used and the procurement proposals are rounding to that value. There may be situations where the rounding value may change according to the size of the procurement proposal; this is where the concept of rounding profile may help you.

Rounding Profile allows you to enter a procurement quantity and the corresponding rounded value that is applicable if the procurement quantities. You may configure the system to have a rounded value of 10 units, if the procurement quantity is at least 1 unit and a rounded value of 100 units, if the procurement quantity reaches 70 units. The transaction code to configure is OWD1. The Rounding profile configuration screen would look something as below. The Rounding Profile configured is named as Z001”.

 Explanation for the Rounding Profile – Z001 -  

Further discussing the above example, the rounding profile Z001, once created can be simulated by pressing the “Simulation” button in the configuration screen. The simulation carries a rounding 10 Units for a requirement quantity ranging from 1 unit to 69 Units (Rounding of 10 for requirement quantity of 1 to 10, 11 to 20, and 21 to 30 till 61 to 69) and starting from 70 Units to 100 Units we will round to 100 (i.e., if the requirement quantity from 70 onwards will be rounded to 100 units every time). This continues in the same pattern as shown by a rounding of 10 units from 101 to 110 till 161 to 169 and at 170 units it will round to 200 for the range of 170 to 200; so on and forth.  

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