The purpose of this document is to guide the most appropriate SAP

Planning Strategy(s) for each Material. It is intended to supplement (by

providing more detail and rational) the documentation for Determine
Strategy for Independent Requirements and Determine Strategy for
Dependent Requirements.

For each Planning Strategy, consideration will be given to:

The Business Environment best suited

The role of the forecast versus the Customer Order

Demand calculations within the system

Available to promise methodologies that apply

Through the selection of the best Planning Strategy(s), the user will
achieve the right balance between customer responsiveness and
manufacturing stability while maintaining up to date visibility of
customer needs. Forecasting, if performed for individual materials, will
be supported at the desired level(s) in the BOM.

Note: Most of the Planning Strategies described below have been used
as part of Business Scenario execution while a few have not. Regarding
the latter, the descriptions below are based on SAP documentation only.

Summary:

There are many Planning Strategies to choose from in SAP. It is

anticipated that most of the strategies will be used at one time or
another for at least one material. The strategies range from pure
make-to-stock to pure make-to-order including many hybrid
strategies. In most cases, the strategy will be associated with the
finished item, however the strategy can also be associated with a
Planning Material or an Assembly.

The strategy is assigned on the Material Master MRP 2 screen which

is a plant specific view. Some business locations will have finishing /
packaging / final assembly in a different SAP plant.

In this case, careful consideration must be given to the strategy of both

materials (i.e. at the Manufacturing Plant and the Distribution Plant).

Planning Strategies define how Planned Independent Requirements (i.e.

forecasts) and Customer Independent Requirements (i.e. sales orders)
interact and become visible to manufacturing planning and the
Planning Run (e.g. MPS and MRP). Additionally, they define whether
Availability Checking is permitted and where costs are ultimately
 settled. There are many Planning Strategies representing many (but
not all) combinations of the above.

SAP offers many Planning Strategies to choose from. Selecting the

right Planning Strategy is critical for the successful balance between
customer service, cycle time / inventory investment, and costs.

Outline:

1. Key Definitions

2. Planning Strategies
a Description of the Planning Strategies
b. Environment(s) where the strategy would fit
c. Characteristics that differentiate this strategy from others

3. Combining Planning Strategies within a BOM.

Planning Strategy and Requirements Types

 The above screen (SAP Transaction OPPS) shows the linkage between a
Planning Strategy and Requirements Types / Class. In this example,
Planning Strategy 10 will recognize Planned Independent Requirements
with a type LSF and Customer Requirements with a type KSL.
Additionally, notice that CONSUMPTION (of forecasts by orders) will not
occur. Strategy 10 is the make-to-stock strategy where forecasts only
are used in the planning run / planning process.

Once Master Data is established, SAP will propose the valid requirement
type for transaction data entry.

1. KEY DEFINITIONS

Availability Check In SAP, there are two different kinds of Availability

Checks. First there is the Available to Promise (ATP) check. Here
Customer Orders are compared to Available Stock and planned receipts
into stock. Specifics regarding which stock, receipts, and issues that are to
be considered are defined by the Checking Rule . Second there is the
Planned Independent Requirements (AKA forecast) check. Here Customer
Orders are compared to the previously received forecasts. The premise
behind this latter check is that previously received forecasts should have
been previously evaluated (material and capacity) and covered. As long
as orders do not exceed forecasts, material and capacity should be
available to satisfy the Sales Order. During the Availability Check,
regardless of the kind of check, if SAP determines there is an issue, a pop
up window will display for the person posting the Sales Order alerting
them of the situation. Neither kind of check can directly determine the
capacity situation.

MRP GROUP

The MRP group contains all the materials from the point of view of MRP for assigning
special control parameters for the total planning run. These control parameters
include, for example, the strategy group, the consumption mode, and the planning
horizon.

Use : For each MRP group, control parameters can be created for total planning in
Customizing for MRP which deviate from the plant parameters.

Note

If this field has not been maintained, the system uses the material type instead of the
MRP group. In this case, the material type has to be maintained as the MRP group in
Customizing.

Strategy Group In SAP, Strategy Groups are assigned to Materials. A

Strategy Group contains one or more Planning Strategies.
Planning Strategy In SAP, a Planning Strategy defines how
independent demand will be used by the Planning Run (i.e. MPS, MRP, etc.)
and other applications in SAP. Fundamentally, there are two different kinds
of independent demand. They are forecasts and customer orders.
Forecasts may be created for Product Groups or individual Materials. The
Materials may be end items / finished product or semi-finished product.
Examples of the latter include a key assembly, the core of a finished
product not specific with respect to variants or options, etc.

Requirements Type and Class In SAP, the two fundamental kinds of

independent demand (forecasts and customer orders) are further sub-
divided into specific Requirements Type and Classes. Requirements Types
and Classes are linked to specific Planning Strategies. In other words, a
given Planning Strategy will recognize at most one type of forecast and
one type of order from Demand management.

2. PLANNING STRATEGIES

SAP offers a wide range of Planning Strategies. The application of a

Planning Strategy(s) to a particular Material at a plant will determine its
Demand Program. In other words, the Planning Strategy will determine
which Demand Requirement Types will be considered by the Planning Run
for a Material and to what extent they are considered. It is highly
recommended that one of the SAP delivered strategies be chosen for each
Material. If a fit cannot be found, a new Planning Strategy should be
created in configuration by copying an existing strategy (then making
changes to the copy) rather than changing one of the as-delivered
strategies.

Planning Strategies can be assigned either by Plant Parameters, MRP

Group, or on the Material Master (MRP 2 screen) itself. If it is defined at
more than one level, the most detailed level will take precedence. The
Material Master is the most detailed level.

Make-to-Stock Production (10/11)

As the name implies, Make-to-Stock Production is a strategy that utilizes

forecasts as the basis to drive production of end items and components. It
is particularly useful for mass production environments where product
variants / options are at a minimum. One of the most important features of
this planning strategy is the smoothing of the demand program. As
customer orders are booked, they do not impact the demand as seen by
manufacturing planning. Therefore, the manufacturing plans, themselves,
will remain stable. Individual customer requirements play no role in a
make-to-stock production environment from the Manufacturing Planners
perspective. In other words, in this planning strategy, planned
independent requirements are not consumed by Sales Orders as Sales
Orders are booked. Planned Independent Requirements remain stable.
This strategy is very simple to use and is applicable for finished goods
where the finished good is forecastable and the forecast horizon is far
enough into the future to drive material planning via BOM explosion.
Planned Independent Requirements (i.e. forecasts) only are used by SAP
to determine the requirements for a Material. This is how stability is
achieved. Unpredictable Customer Orders, as received, do not change the
view as seen by the Manufacturing Planner.

Make-to-Stock Production is defined in SAP as two different Planning

Strategies, 10 and 11. They differ in the way they treat Available Stock.
Planning Strategy 10 will consider Stock (net requirements planning)
while Planning Strategy 11 will not (gross requirements planning). In
Planning Strategy 10, Stock will count towards the coverage of
requirements, in this case Planned Independent Requirements.

These strategies are best used when stability is important in Finishing /

Packaging as long as finished goods are forecastable with reasonable
accuracy and strategic safety stock of finished goods is in place to cover
forecast error and supply variability across the manufacturing lead time.
For businesses that cannot, or would prefer not, to forecast at the finished
goods level, this strategy is not appropriate.

The Availability Check performed as a Sales Order is posted is based on

ATP logic. Customer Requirements, while not used in the calculation of
demand, are displayed.

Choose this strategy if

the finished item will be forecasted across a horizon that supports

finishing manufacturing and component planning

customer service objectives can be achieved given the demonstrated

forecast accuracy and the finished goods inventory investment
permissible

manufacturing stability in the finishing / packaging operation is

important during periods of both soft and strong sales

Make-to-Order Production (20/ 21/ 25/ 26)

As the name implies, Make-to-Order Production are strategies that utilizes

Sales Orders as the basis to drive production of end items and
components. These strategies are applicable to finished goods as well as
materials in the BOM of the finished good, thus enabling cost settlement to
Sales Orders. These strategies are useful when production orders need to
be directly linked to sales orders. These strategies would be applied to a
finished good first, then to whatever direct children can / should be Make-
to-Order as well, then their children, etc. Once a material in the BOM is
not identified as Make-to-Order, its children in the BOM can not either.
Materials identified as MTO will have manufacturing orders created in a lot
for lot mode that pegs directly to the Sales Order. Since production
orders are linked to sales orders, finished goods are not inventoried. The
differences between the several MTO strategies are combinations of how
costs are settled (in all cases to Sales Orders versus stock) and the degree
with which configuration of the Sales Order (for a configurable material) is
required. Strategies 20 and 21 do not allow configuration, 25 requires it,
and 26 makes it optional.

The Individual / Collective requirements field on the MRP2 screen of the

Material Master should be set to Individual for this strategy.

Choose this strategy if

Finished item forecasting is impractical or too inaccurate

Another planning process exists that will provide enough demand

visibility into the future for components not identified as Make-to-Order

Customers are willing to wait for the total lead time of all materials
(finished item and optionally components) tagged as Make-to-Order

Finished goods inventory is not desired

Finishing manufacturing stability is not important

Linking of production orders to sales orders is desired / required

Settling product costs to sales orders is desired / required

At least one component of the finished item will be identified as Make-

to-Order (otherwise one of the Assembly-to-Order planning strategies
should be used (81 / 82)

Production by Lot Size for Sales and Stock Orders (30)

This strategy is particularly useful for companies that mainly produce for
major customers but who also require the option of selling smaller
requirements from stock. Several sales orders, depending on the dates,
can be grouped together to be produced in one single lot. Therefore, this
strategy is not make or assemble to order since production quantities are
not directly tied to sales quantities.

In addition to recognition of Sales Orders, this strategy will also plan to

cover Planned Independent Requirements like the Make-to-Stock Strategy.
Instead of Sales Orders consuming Planned Independent Requirements,
they are additive in nature. Therefore, the forecast represents just the
smaller customers whose orders are sold from stock. As with Planning
Strategies 10 and 11, this strategy is applicable for finished goods and
require forecasts at the finished good level for the portion of the business
that will be sold from Stock.
The Availability Check performed as a Sales Order is posted is based on
ATP logic.

Per SAP documentation, the Individual / Collective requirements field on

the MRP2 screen of the Material Master should be set to Collective for this
strategy.

Choose this strategy if

All finished items sold from stock will be forecasted across a horizon
that supports finishing manufacturing and Component planning, the
forecast represents just customers who buy from stock

Customer service objectives for customers who buy from stock can
be achieved given the demonstrated forecast accuracy and the finished
goods inventory investment permissible

Customer service objectives for customers whose sales orders

drive manufacturing can be achieved given the demonstrated lead
times of manufacturing

Planning with Final Assembly (40)

Planning Strategy 40 is useful when finished goods are somewhat

forecastable, some level of stability is important in Finishing / Packaging,
and customer service objectives cannot be achieved by the demonstrated
forecast accuracy and an acceptable level of strategic safety stock of
finished goods. Somewhat forecastable means that as dependent
demand is created for components of finished goods, they are accurate
but the forecasted mix of the finished goods requires less accuracy. As
opposed to make-to-stock production (Planning Strategy 10/11), planned
independent requirements are consumed by incoming sales orders. This
strategy, like others that allow consumption of forecasts, requires
maintenance of the Consumption Mode and Consumption Periods fields on
the Material Master to define the scope of consumption. If sales orders
exceed Planned Independent Requirements, this higher level of demand
will be recognized by the Planning run. Thus, the important feature of this
planning strategy is that you can quickly react to customers requirements
in excess of the forecast while sacrificing some stability. Manufacturing
stability is less important than customer service (or the additional
inventory required to achieve customer service goals) when sales are
strong.

If sales orders fall short of the forecast, production will cover the entire
forecast and temporarily increase finished goods inventory. Stability of
production schedules in Finishing / Packaging will be preserved and is
decided to be more important when Sales are soft than a temporary
increase in inventories.
As with Planning Strategies 10 and 11, this strategy is applicable for
finished goods and require forecasts at the finished good level.

The Availability Check performed as a Sales Order is posted is either

based on ATP logic or as a Planned Independent Requirement check. The
later is a check to determine if Planned Independent requirements have
been exceeded by Sales Orders.

Choose this strategy if

The finished item will be forecasted across a horizon that supports

finishing manufacturing and component planning

Manufacturing stability in the finishing / packaging operation is

important during periods of soft sales

Customer service is more important than finishing manufacturing

stability during periods of strong sales

Planning Without Final Assembly (50/ 51/ 52/ 54/ 55/ 56)

It makes sense to use these planning strategy when the main value added
process is final assembly or when forecasting is not accurate for finished
products. In the case of the later, these strategies assume that after a
BOM explosion, the dependent demand on components becomes fairly
accurate. In other words, while the finished good item mix might not be
accurately forecastable, the forecast error will diminish to an acceptable
level for the fewer, major components that go into the finished good.
Manufacturing stability in the final operation must be of lesser
importance. These strategies do still require finished goods forecasts if
the Planning Run is to create Dependent Demand on lower level
assemblies in the Bill of Material. Alternately, the components could be
forecasted separately which would eliminate the need to forecast the
finished item. Planned Orders for finished goods resulting from forecasts
are not used to determine Finishing / Packaging manufacturing schedules.

The assemblies are produced or procured before the creation of the sales
order. Production is not carried out for finished product level. Instead, the
material is produced up to one level below the finished product level and
the assemblies and components required for producing the finished
product are placed in stock to await the incoming sales order. Final
assembly is then triggered by the incoming sales order.

Typically, Planned Independent Requirements are entered at finished

product level. The system creates special planned orders at the finished
product level for these planned independent requirements that are only
relevant for production in finishing once a sales order for the finished
product is booked. These Planned Independent Requirements can trigger
the production and procurement of all the lower levels of the finished
product. Lower level materials must have the Individual /
Collective Requirements field (MRP2 screen of Material Master)
set to Collective for dependent demand to be generated on them.
In either case, when Sales Orders are booked for finished product,
dependent demand will be created for lower level materials after a
Planning Run. After dependent demand is created for lower level
materials, the Planning Run will then create manufacturing orders for
these materials.

These strategies provide even less manufacturing stability in finishing /

packaging than Planning Strategy 40. Manufacturing of the finished
product occurs only when a Customer Order exists. Unlike other strategies
that delay making assemblies until receipt of a sales order, this strategy
will trigger the stocking of assemblies prior to sales order receipt since
forecasts for the finished good are allowable. It is therefore very useful
when the lead time for assembly manufacturing is longer than customer
wait time and finished good stock is not desired. Final Assembly lead time
must be shorter than customer wait time otherwise a make-to-stock
strategy is the only strategy that will protect customer service.

The Availability Check performed as a Sales Order is posted can only be a

Planned Independent Requirement check of the finished good. The
differences between the several strategies are combinations of how costs
are settled, the degree with which configuration of the Sales Order (for a
configurable material) is required, and Availability Checking.

Strategy Cost Settlement Sales Order Configuration Availability

Check

50 to Sales Order not allowed no

51 to Sales Order not allowed yes

52 to Stock not allowed no

54 to Sales Order mandatory no

55 to Stock allowed no

56 to Sales Order allowed no

Choose this strategy if

 The finished item can be forecasted across a horizon that supports
finishing manufacturing and component planning (if not forecasted,
provisions must be made to provide demand visibility for lower level
components and finishing capacity planning)

Customer service objectives cannot be achieved given the

demonstrated forecast accuracy and the finished goods inventory
investment permissible, therefore if customer orders exceed forecasts,
they are used

Finishing manufacturing is flexible enough (material, labor, and

capacity) to react quickly to surges in customer orders that exceed
forecasts

Finishing manufacturing is flexible enough (material, labor, and

capacity) to react quickly to softness in customer orders that fall short
of forecasts

Manufacturing stability in the finishing / packaging operation is less

important than an unplanned build of finished goods inventory or
ignoring surges n customer orders during under and over under selling
periods

Planning with Planning Material (60/61/63/65)

These planning strategies are particularly useful for planning BOMs that
contain variant as well as common parts. Here, the common parts are
planned using the BOM of a so called planning material. In this instance,
the planning material is used purely for planning purposes. It is not
actually produced itself but is used to hold a forecast and pass on the
dependent requirements to the common parts. The variant parts can be
planned using the strategy Planning at assembly level or another
planning technique. The advantage of planning with a planning material is
that you can plan all the common parts included in several finished
products together.

You must create a separate Material Master record for the planning
material. You must enter the planning material in the Material Master
record (MRP 3 screen) of all finished products that are to be planned using
one of these planning strategies. The finished products and the planning
material are also assigned the strategy Planning with planning material
in the Material Master record.

Planned Independent Requirements are entered for the planning material

and not for the finished product. In the planning run, the Planned
Independent Requirements of the planning material trigger the production
and procurement of the components of the planning material. As the
planning material is not actually produced itself, the system automatically
creates a separate planning segment, Planning without assembly in the
planning run. The planned orders created for the planning material in the
planning run are given the order type VP and cannot be converted.
However, these planned orders pass on dependent requirements to the
components and assemblies which are then produced and procured. Sales
orders for the finished product consume the planned independent
requirements of the planning material. The availability check is based on
this consumption.

Assemblies and components that are maintained in the BOM of the

finished product and that are not contained in the BOM of the planning
material are only planned once a sales order exists. The differences
between the several strategies are combinations of how costs are settled
and the degree with which configuration of the Sales Order (for a
configurable material) is required.

Strategy Cost Settlement Sales Order

Configuration

60 to Sales Order not allowed

61 to Sales Order (different account not allowed

assignment category)

63 to Stock not allowed

65 to Sales Order allowed

Choose this strategy if

Forecasting will not be performed for finished materials, but rather for
a planning material

An availability check is required relative to the planning material

forecast

Another strategy should still be chosen for the variant parts.

Planning at Assembly Level (70) / Planning at Phantom Assembly

Level (59)

This Planning Strategy combines features of previously defined strategies

and is specific to non- finished items. This strategy fits best where it is
desired to delay manufacture of the finished good until Customer Order
receipt but components need to manufacture in advance of this time, like
Strategy 50. Unlike Strategy 50, this strategy moves the point of
forecasting from finished good to key assembly. This strategy therefore,
does not apply to a finished good. When using this strategy on an
assembly, several strategies could be used for the finished good.

This strategy should be used on assemblies when finished goods cannot or

should not be forecasted. Finished item forecast accuracy or forecasting
cost could drive a decision to use this strategy. Consideration needs to be
given to finished good planning strategies and other materials that are not
part of the manufacturing BOM of the assembly being forecasted.
Additionally, a method for the planning of finishing capacity needs to be
developed. The optional materials need to be quickly available since they
might have the same demand horizon as the finished good (i.e. short).
That being receipt of Sales order. Several strategies would be available for
the options when using strategy 70 on a major assembly. Instead of a
planning strategy, Forecast Based Planning or Order Point functionality
(MRP Types) within SAP could be used for these optional materials.

As Sales Orders are booked, and after the next Planning Run, dependent
demands result on the major assembly. These dependent demands
consume the forecasts. If the dependent demands exceed the forecasts,
they will be used otherwise the forecasts will be used. This strategy will
provide some stability for the major assembly. If sales are soft, we will still
build assemblies based on the forecast (i.e. stability) however if sales are
strong we will build more than the forecast (i.e. customer service more
important than stability).

The Mixed MRP field on the MRP2 screen of the Material Master must be
set to Assembly Planning for this strategy.

Planning Strategy 59 behaves very similarly to strategy 70. The difference

being that instead of forecasting a major assembly, a phantom material
could instead be forecasted. This material would sit directly below the
finished good in the BOM and would have buildable components below it.
These components would be produced like a kit. All components would
receive dependent demand. An application of this planning strategy would
be to plan both the major assembly and the variant / optional parts (using
planning factors) from a single forecast. Restructuring the BOM would be
necessary for this application. As stated above, there are other ways to
plan the variant / optional parts (i.e. forecast- based planning or re-order
point planning) if planning factors cannot be derived for the variants /
options.

Choose this strategy for components if

Forecasting will not be performed for finished materials, but rather at

the assembly level

An availability check is not required relative to the component forecast

Another strategy should still be chosen for the finished materials from the
recommendations above.

3. COMBINING PLANNING STRATEGIES

Many combinations of Strategies within a BOM are possible. Typically at

least one level of the BOM requires a forecast so selection of a strategy
should make sense from the perspective of the entire BOM. Below I will
outline some of the more widely applicable combinations.

Finished Components Strategy

Good
Strategy

10 or 11 None for all components

10 or 11 70 for major assembly

(short
range)

80 None for all components

(assembl
e to
order)

20s 20s for the MTO components

30 None

40 None

50 None

50 70 for major assembly

50 59 for phantom assembly

60s 60s for Planning Material

70 for materials not in BOM of planning material

 60s 60s for Planning Material

none for materials not in BOM of planning material (i.e. re-

order point)

As a final note, several other methods exist within SAP that will determine
a materials demand and or trigger production that are independent of
Planning Strategies. These methods do not rely on forecasts nor customer
orders. They are Consumption Planning, ReOrder Point Planning, and
KanBan.

Assumptions/Comments:

People will be impacted by the Planning Strategies chosen.

The Planning Strategy will determine how the forecasting process will take
place (if at all) and how many materials require a forecast.

The Planning Strategy will determine how responsive manufacturing

planning and scheduling must be.

The Planning Strategy will influence manufacturing order quantity and the
degree with which strategic safety stocks must exist throughout the
Supply Chain.

The Planning Strategy will influence manufacturing schedule stability.

The Planning Strategy will affect customer response time and therefore the
people dealing with our customers.

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