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WhatisSAPMRPMaterialRequirementPlanning


StudyMaterialContributedbyUlhasKavleSeniorSAP
Consultant



WhatisSAPMRP



SAPMRP



What is SAP MRP Material Requirement Planning
Overview


Material Requirement Planning (SAP MRP) is a tool which
helpsinplanningtherequirementquantitiesandschedulesofa

given material. It not only ensures availability of the material
forwhichMRPiscarriedout,butalsoensuresavailabilityofthe
components(ofalltheBOMlevels)belowintheBOMstructure.





Apart from assuring material availability, MRP also carries out
scheduling of the procurement proposals using the lead times
forthematerials/components.Whenthematerialisaninternally
manufactured material, it will use the lead times or operation
leadtimesfromtheroutings/recipesandwhenthematerialisan

externalprocuredmaterial,itwillfetchtheleadtimesordelivery
times for the material defined at an appropriate place in the
tool/system.Schedulingoftheprocurementproposalsnotonly
derivesthecapacityloadingoftheordersontheworkcenterbut
it also calculates the delivery dates of the components that
wouldberequriedformanufacturing(deliverydate=startdate
ofprocessing).


The output of MRP proposes procurement proposals (planned
order or purchase requests) so as to gaurantee material
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availability and at the same time schedule the procurement


proposals using delivery lead times for the
materials/components. Material requirement Planning can be
run for purchased materials or finished saleable materials or
subassemblies(semifinished)usedinproduction.


While the Material Requirement Planning in SAP ECC (SAP
MRP), derives a plan for the materials and helps the planners
and supervisors to purchase, produce or sell. It offers all the
possible planning methods available in the market like the
reorder point planning for the consumption based planned
materials, lot for lot MRP planning for the demand based
planning materials, forecast based planning methods which
uses the past historical figures to extrapolate the future
requirements(againaconsumptionbasedplanningmaterial).


SAP material requirement planning or SAP MRP, uses the
followingfactorsinitsplaningrun:


a)planningstrategiesmadetoorderormadetostockorits
variations

b) planning types type of the MRP run, i.e., consumption
based planning methods or demand based planning methods
andnetrequirementplaningorgrossrequirementplanning

c)lotsizingproceduressetforthematerial

d) master data such as BOM or Routings/Recipes, quota
arrangements, souce list, vendors, purchase info records.
customer masters etc, and transaction data such as sales
orders, forecast, planned independent demands (forecasted
demand)





PresentationoftheSAPMRPDocumentation


PresentationoftheSAPMRPDocumentation


TheSAPMRPDocumentationispresentedin11Simplesteps
whichwillbeexplainedin11differentLinksonthiswebsite.


UsethelinktoLearnSAPMRPin11Steps




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TypesofDemandsinanOrganization

TypesofDemandsinanOrganization


Thefollowingarethevarioustypesofdemands:


A)PlannedindepedentDemandorForecastedDemand:


Anorganizationrunsonexternaldemands(visualizeddemands
or forecasted demands) for its products. When you talk of a
product that is usually stocked and delivered to the customer
fromtheir,itisatypicalcaseofmadetostockscenario.Since
the sales are from inventory, a company has to pile up only a
certain quantity enough to satisfy the demand, such type of
organizationsthereforeforecasttheirfuturedemandsbasedon
historicalsales,currentmarketpopularityoftheproduct,various
environmental factors, seasons, etc. Production from such
plannedindependentrequirementisausualcharacteristicsofa
madetostockscenario.

SAP also offers tools for forecasting the future demand using
the historical data and playing various other fators on it. SOP
(SalesandoperationPlanning)isonesuchtoolinSAP,where
youcanforecastfuturedemandusingpasthistoricalinformation
for a preselected 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
productionovertheforecastedperiod.



B)DemandfromSalesorderorCustomerorders


Ontheotherhand,youcouldalsohavethedemandcomingin
fromsalesordersandtheproductionisinitiatedthereafter,such
scenarios are typical maketoorder. Manfuacturing after an
Orderisbookediscarriedoutforproductsofhighvalueorfor
products whose design is supplied by the customer or as
specified/requestedbyacustomer.ForExample,Manufacturing
ofJewelry,Aircrafts,SpecialPurposePumps.

Note that MadetoOrder can also be initiated for a typical
MadetoStock Product, in cases where a special customer
places a huge order and the manufacturing is triggered
seperatelyforthem.

You should not be amazed to come across a product which is
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manufacturedasbothMTSandMTO.

All the above cases are typical maketoorder and such
demandscomeinthroughsalesorders.


NoteTheSalesordersdemandcominginforamadetostock
material is fulfilled using the existing stock, whereas the sales
order created for a maketoorder material can never be
satisfied using any existing inventory as the inventory created
for the material would have been produced for fulfilling other
customerorders.





EvolutionofMRPMaterialRequirementPlanning

EvolutionofMRPMaterialRequirementPlanning


The concept of Material Requirement planning (MRP I) was
designed as a tool to help planners with the derivation of the
quantities of various material or components that would be
required for satisfying a demand and at the same time for
deriving the capacity based plan for loading the orders for
production on the shop floor. The concept which started as a
lessintegratedmainframetoolhasevolvedovertheyearssince
1960, from the time it was first designed, to now, where it is
tagged as Material Resource Planning (MRP II), a much
stronger integrated version of the first MRP, integrating it with
the finance, human resource, purchasing and production
modulesofabusiness.Italsohadmuchstrongerandcomplex
codestotakecareofafewconstraintsincapacityandmaterial
planning.


The MRP II jargon later took on to be called as ERP or
Enterpise resource planning with the greatest possible
integration with a central database server, storing all the
integrated data there for making the information and
data available across the business, across business modules
and across its vendors/suppliers and customers. With the
evolution of ERP (a superior clone of the evolved MRP
II) businesses took it as the most wildest tool that they could
havetomaketheirbusinessrunsmoothly,inamuchintegrated
fashionwithoutloosinganyinformationorspolingtheintension
oftheinformationwhenitflowsacrossthebusiness.

SAP came across as the very first few companies which
evolved the concept of MRP II in to ERP and earning for
themselves a growing business by selling this new concept.
Companiesandbusinessesacrosstheworldmadeuseofthis
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ERP tool and the standard processes offered to profit


themselves.




MaterialRequirementPlanninginSAPVsSAPSCM:


TheSAPR/3orECChasaMRPsystemthatplansformaterial
and capacity (schedules) without considering any
constraint and by assuming availability of infinite capacity for
theworkcenters.ThisgapofSAPECCwaslateronremoved
withthehelpofanaddonorapluginintroducedbySAPfor
the advanced planning of requirements it was called SCM
APO (Supply Chain Management Advanced Planning
Optimizer). This tool worked on much complex and much
supreme heuristics with the capability of planning based on
finite capacity and constraints. The SCM APO had modules
such as Demand planning which was a superlative version of
Sales and Operation Planning (SAP SOP) in SAP ECC,
SupplyNetworkPlanningwhichallowedplanningacrossplants
and across geographical locations and allowing businesses to
place orders for production or procurement across the global
based on time and cost contraints and the PPDS module
(Production planning and detail scheduling) which was a
detailedversionofSAPECCplantlevelMRPbasedProduction
planning with more brainy heuristics codes which could
considermultiplecontraintsandfinitebasedplanningsituations
inoneplanningrun.



DifferencebetweenMadetoorderandMadetostock

DifferencebetweenMadetoorderandMadetostock


MadetostockScenario:


If a material is defined as a madetostock 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
MRP4screen,thesystemcalculatesthematerialrequirements
throughtheuseofaprettysimplealgorithmwhereittakesinto
account the stock in the storage locations, the receipts
expectedforthematerialsthroughpurchaseorproductionand
theincomingdemands.

In a madetostock scenario, the incoming customer requests
arefulfilledfromtheinventory.Themadetostockproductsare
normally the consumer products or products which have a

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monopoly market and are sold out of the existing inventory.


Such products are developed and produced continuously over
theyearstilltheproductcomestotheendofitslifecycle.

Insuchscenarios,theshopfloorortheproductionteamnever
knows,forwhomtheproductisbeingproduced.Thecustomer
demandsandthemarketsituationscanonlybeforecastedand
used as a basis for future production. In SAP the forecasted
quantity is evidently used in a form of plannedindependent
requirement.

MadetostockproductionquantitiesareenteredinSAPthrough
the use of Planned independent requirements (transaction
codeMD61)whicharesubsequentlyplannedbySAPMRPrun.
The planned independent requirements can be entered
manuallyortherequirementcanbepulledinfromforecastorit
can be pulled in from the sales and operation information
structures (information structures which carry the sales
informationatlevelsdefinedbytheorganization).


MadetoorderScenario:

In cases where the material is defined as madetoorder, i.e.,
materialswhicharemarkedwithamadetoorderstrategyinthe
MRP 3 view of the SAP material master and marked with
individual requirements in MRP 4 view, the system calculates
thematerialrequirementsthroughtheuseofanalgorithmwhich
takesintoconsiderationthereceiptsexpectedforthematerial
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
storagelocationforthematerialisalwaystaggedforacustomer
orderandcannotbeusedanywhereelse).

In a madetostock 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
customerandtheorderisproducedaccordingtothecustomer
requirements or by the design provided by the customer. The
Salesorderiscreatedorconfiguredaccordingtothecustomer
requirementsandpassedontotheproductionteam.

In such a scenario, the tracking of the sales order from its
creationtoplanningtoproductiontoinventoryingtodeliverycan
beeasilytrackedunlikeinmadetostockscenarios,wherethe
incoming sales orders are not tracked in the plant, but are
fulfilledbytheexistingstocks.

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