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SAP MRP

Step - 1
 What is SAP MRP - Material Requirement Planning Overview
Material Requirement Planning (SAP MRP) is a tool which helps in planning the requirement
quantities and schedules of a given material. It not only ensures availability of the material for which
MRP is carried out, but also ensures availability of the components (of all the BOM levels) below in
the BOM structure.
Apart from assuring material availability, MRP also carries out scheduling of the procurement
proposals using the lead times for the materials/components. When the material is an internally
manufactured material, it will use the lead times or operation lead times from the routings/recipes
and when the material is an external procured material, it will fetch the lead times or delivery times
for the material defined at an appropriate place in the tool/system. Scheduling of the procurement
proposals not only derives the capacity loading of the orders on the workcenter but it also calculates
the delivery dates of the components that would be requried for manufacturing (delivery date = start
date of processing).
The output of MRP proposes procurement proposals (planned order or purchase requests) so as to
gaurantee material 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 (semi-finished) used in
production.
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 (again a
consumption based planning material).

SAP material requirement planning or SAP MRP, uses the following factors in its planing run:
a) Planning strategies - made to order or made to stock or its variations
b) Planning types - type of the MRP run, i.e., consumption based planning methods or demand based
planning methods and net requirement planing or gross requirement planning
c) Lot sizing procedures set for the material
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)
Step – 2
Create Material Master MRP Views and Assign MRP types (MRP Procedures)

Maintaining Material Master MRP Views:


To have a material managed through SAP MRP, it is mandatory that you would create the MRP
views for the materials. The MRP views for the material are explained in the Material Master section
of this website - http://www.sapsword.com/home/learn-sap-pp/sap-material-master

When you create the MRP views for the material, a MRP Type has to be assigned in the MRP 1
view. A MRP type designated to the material explains whether the material is allowed to go through
material requirement planning and if the MRP type allows material requirement planning, it explains
the type of material planning that is required for the given material at a given plant. The MRP Type
configuration can be checked in the following link
https://sites.google.com/site/sapswords/home/learn-sap-pp/sap-mrp/sap-mrp-configuration

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. (It
should be noted that you should extend the material 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, 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:
Material Master MRP Types:
Some of the above MRP types which are profusely used, are explained below –

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 all
the receipts.

Material Requirement Planning – MRP Types with the Planning type fence and Firming logics
 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.
0 1 2 3 4
Firming type

M0 P1 P2 P3 P4
MRP Types M1 M2 M3 M4

Firming Methods for Procurement Proposals in the Planning time fence

No Firming of Procurement Proposals within the X


planning time fence

Automatic Firming of Procurement Proposals within X X


the planning time fence

Manual Firming of Procurement within the planning X X


time fence (No Automatic Firming of the procurement
proposals )

Treatment with New Order Proposals in the Planning time Fence

Automatic Creation of New Procurement Proposals X X


to cover the shortages within the planning time
fence. But the dates of these new Procurement
Proposals are pushed outside the planning time
fence

No New Procurement Proposals created to Cover X X


the material shortages within the planning time fence
Manual Reorder Point Planning – MRP Type VB - Consumption Based Planning

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.
Automatic Reorder Point Planning – MRP Type VM - Consumption Based Planning

 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.
Manual/Automatic Reorder Point Planning with External Requirements – MRP Type V1/V2 -
Consumption Based Planning
 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.

Forecast Based Planning – MRP Type VV - Consumption Based Planning


 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.
Step 3
Planning File Entry and the Selection of Materials for Planning

SAP automatically adds the material in to the planning file list once the configuration is
complete and MRP types are assigned to the materials. Adding materials to be planning file
does not necessarily mean that the material will be/will not be considered in the planning run.
For the materials to be considered in the planning run, they should be marked on with either
“net change planning option”, “net change planning in the planning horizon option” or
“regenerative planning option”. These options are used to select the materials for the planning
run.
 Planning all the materials included in the list would tremendously reduce the system
performance and would stall it. Thus SAP provides an option to consider only those materials
which have undergone a net change like an incoming order or creation of a reservation, a
goods receipt for the material in a plant, or deletion of the orders or reversal/cancellation of
the stock etc. This is called “Net change Planning” concept.
 Though you always have an option to plan all the materials in the planning file which is
called as a regenerative planning. This is usually carried out when you go-live or implement
SAP for the first time.

All the entries in the planning file will have a “change indicator” specifying that a
material has undergone a change (change in receipts elements or issues elements). This
indicator will help you to choose only those materials that have undergone a change, through
the use of planning key called “Net Change Planning” when running MRP.
The planning file record for a material also has a “net change planning in the current
horizon” field which will be set if the change in the materials receipt or issue element is valid
in the planning horizon. This indicator will help you choose only those materials which have
undergone a change in the planning horizon; through the use of a planning key, in an MRP
run, called “Net change planning in the planning horizon”.
Step 4:

Defining Planning Control Parameters for the MRP Run


After going through this step, you would learn about the available planning control
parameters to choose when you run MRP using various transaction codes in SAP.
MRP can be run for a material or it can be run for a plant or it can be run for multiple
plants configured in a scope of planning run.
Planning is defined to run at single item level, i.e., for the header level materials only
(along with explosion of dependent requirements directly below the header material in the
BOM structure, levels below are neglected) or at multiple item level where planning is carried
out for the header level as well as for all the dependent BOM levels.
When you run the planning in SAP through the various available transaction codes, the
selection screen gives you an option for selecting values for the following parameters. The
selection screen shown below is a typical transaction code to run MRP. The Planning control
parameters would be the same in all the SAP MRP Run Transaction codes.
The following transaction code as shown in the screen shot below is MD01, which is
one of the transactions used for running MRP in SAP.

Processing Key
The Processing key decides the type of planning run that needs to be carried out for
the material – net change planning or net change planning in the planning horizon or
regenerative planning. You have to choose one of the given options, when running MRP.
 Selection of Materials for Planning - Method 1:
SAP MRP Run can use the NETCH planning or Regenerative Planning or the NETCH
in the planning horizon method, to evaluate which materials are to be considered for planning.
This is the recommended planning method.
Whenever there is a change in the situation of a material, i.e., any change relevant to
SAP MRP, the system creates a “planning file entry” in order to have SAP MRP consider it for
an MRP Run. This is called “Net change planning” (NETCH). The Net change method -
NETCH can be used for running MRP because planning all the materials regardless of a
change would overload the system. These changes are categorized as an introduction of a
demand put for the material or creation of reservation for the material or the material has a
sales order created, or the material is issued for production or the material is issued to the
sales order delivery or the material is received from a purchase order or production order or
the receipts or demands are deleted.
This is the recommended processing key, though when you start to use MRP for the
first time, it is always nice to use the method 3 called regenerative planning in which the
system plans all the materials in the plant or plans for all the materials in the scope of
planning run.
 Selection of Materials for Planning - Method 2:
Planning all the materials for a plant (all the materials included in the planning file) in an MRP
run is called “Regenerative Planning (NEUPL)” which is used when you go-live for the first
time and when you would be using the system for the first time.
 Selection of Materials for Planning - Method 3:
You can alternatively use the “Net change planning in the planning horizon – (NETPL)” where
the SAP MRP run takes place for only those materials which have undergone changes within
the predefined Planning Horizon.
Transaction code to Create Planning File Entry – MD20 / Transaction code to Display Planning File
Entry – MD21
Create Purchase Requisition Key

This planning control parameter can control, whether you want the procurement
proposal to be created as a purchase requisition rather than planned orders (Purchase
requisitions are created for the externally procured materials) in the planning horizon or in the
opening period. You also have an option to have the system always create planned orders
instead of purchase requisitions.
When the requirement lies in the opening period and you have an option of “creation of
purchase requisitions in the opening period, MRP would process creation of requisitions
instead of planned orders, though when the requirement lies outside the opening period, the
system would always create planned orders. Opening period is the number of workdays
before the order start date accounted as buffer time for the MRP controller to process the
planned orders in to purchase requisitions.
The procurement proposals can be created as purchase requisitions only if the
procurement type in MRP views is set as “X” (both external procured and in house
production) and “F” (externally procured)

Delivery Schedules

This control parameter is used for controlling the automatic creation of schedule lines (for
scheduling agreements).
You can control whether you want the schedule lines to be created in the planning horizon or
just in the opening period or you never want it to be created.
Creation of MRP List

The results of the planning run are included in the MRP list after the planning run. This
control parameter controls whether the system should create the MRP list for all the planned
order or whether it should not at all create MRP lists or whether it should create MRP list only
for the planned order which are in exception.
You determine for which exception messages the system should create MRP lists in
the configuration for MRP - Define and group exception messages.

Planning Mode

It is a known fact that the system plans the un-firmed planned order, purchase requisitions
and scheduling agreements, again in the next planning run. This control parameter controls
the very same thing.
You have an option to use the following planning modes:
Adopt Planning data – Whenever there is a change in requirement quantities or dates or
change in lot sizing procedure, for the un-firmed planned orders, the system re-explodes the
BOM for the new adjusted quantities in the MRP run.
Re-explode BOM and routing – For all the existing procurement proposals, which are un-
firmed regardless of whether they have been added with quantities or changed for dates, the
system re-explodes the BOM and Routing for them. The BOM is exploded if there has been a
change in the BOM master data, material classification or change in production versions or
BOM explosion numbers. The existing procurement proposals are not deleted but they are
worked upon.
Delete and Recreate Planning data – For all the existing procurement proposals, which are
un-firmed regardless of whether they have been added with quantities or changed for dates,
the system deletes the existing procurement proposals and re-explodes the BOM and Routing
for them, thereby creating new procurement proposals.
Scheduling types

For in-house manufactured materials, the system offers two types of scheduling:

Basic Date scheduling – where the lead times in the material master are used to calculate
the planned order start and end dates. You can use this scheduling type if the lead times are
pretty much constant for a product and the detailed scheduling is not what you seek for. In
such cases building of Routing/Recipe is not required and you can live with the timings set in
the material master.
Lead time Scheduling – where the addition of all the operation times in the
Routings/Recipes are used to calculate the planned order start and end dates. The capacity
requirements are also calculated for the planned order. This type of scheduling is used when
you are interested in detailed scheduling and capacity allocation on the work centers. In
organization where you have to build Routings/Recipes and carry out detailed time study so
as to create the task lists.
Step 5:
Types of planning runs in SAP
There are various types of planning runs available for execution; you can use any one of them
that suits your purpose. It is essential that you know all the available planning-run types in
SAP, so that you can use them to best of your purpose.
Various Methods to Run MRP: There are ways to run MRP in SAP, they are as follows:

Single Item Single Level


In this method, ran through transaction code MD03, the system only plans the single material
(at a plant) provided on the selection screen and one level below this material (suggesting
single level explosion). This method does not explode the BOM for subsequent levels.
One can use this type of planning run for a given material at a given plant, when you only
intend to plan one single material without disturbing the planning situation of all other
dependent materials.

Single Item Multi Level


The single item multi level type of plannning run is ran through the use of transaction code
MD02. Here the system plans the single material (at a plant) provided on the selection
screen.
This type of planning run plans for the higher level material (for which the planning run is
carried out) and also all the BOM levels below the material (suggesting multi level explosion).
In the planning process when the components are required to be planned or withdrawn from
another plant or they require transfer through a stock transfer order, the system plans that
material in that respective plant.
It is a great idea, to select the “display planning results" in the selection screen of the MRP
run, so that you get to see the planning results during an MRP run, enabling you to check and
save them. In this case, if a certain material has multiple BOM levels, the system offers you
an option (in a pop-up box) to check the results of each of the BOM levels and save each
level individually (proceed with stopping) as shown below.
If you select the “display material list” in the selection screen, the system displays the
planning run results –

 The number of materials that were planned


 The number of materials that were planned with exception
 The planning parameters that were used in the selection screen
 The number of planned orders created
 The start time of planning run
 The end time of planning run
 The list materials that were planned

If you then press the “Material Button” on the top of the screen, the system list all the
materials that were involved in the planning run and the provides a summary of each of these
materials, subsequently you can see the planning results of a selected materials from the list.
If you are using simulative planning indicator in the selection screen, the planning
results are not written to the database, but are held in the main memory, where you can test
and correct the results and then save them to the database.

Total Planning online


The total planning run carries out a multi level planning, for all the materials at a plant
or for all the materials for a set of plants or MRP areas defined through “scope of planning”
(available in the selection screen).
Total planning online is carried out using MD01 transaction code. Here you also have
an option to add in user exits offered by SAP, to carry out the MRP run for a set of MRP
controllers, or for a particular procurement types (E – In-house managed, F – Externally
procured, X – Both) or for a particular set of defined materials. The user exits are used over
and above the parameters selected in the selection screen. The name of the user exit
enhancement is M61X00001.

Total Planning background


In the total planning background option you can set the planning run in the background,
as carried out using transaction code MD01. Using the MDBT transaction code, you
can create a variant of the MD01 screen and schedule it in the background, on a periodic
basis or just execute it once (the program name of the transaction code MDBT, for which you
have to create the variant of is RMMRP000).
It is usual that consultants schedule the MRP run using "total planning run in the
background" (especially it is made to run in the night). It can take anywhere from a few
minutes to 8 hours depending upon the number of plants in the run, the number of material
involved and the density of incoming demands and receipts.
Planning at MRP Area Level
Long ago, SAP MRP was only at the plant level or at MRP controller level (activated through
a user exit) or at the material level. At the plant level, you had the options of running MRP at
single level or multiple BOM levels. Then SAP came up with the concept of running MRP at
MRP areas. You can define your own area for which you want to run MRP without disturbing
other areas. SAP offers a configuration, where you can define a MRP area, for a given set of
plant/s with a group of the storage locations included or a group of subcontractors included,
which means that the MRP run could be carried out for a specific set of storage locations or
for a specific set of subcontractors for a specific set of plants.
Running MRP for MRP Areas: For running MRP at a MRP area, you would have to create a
scope of planning in MRP configuration, which contain the MRP area or a set of MRP areas
arranged in sequence of planning.
Assigning MRP areas: To have the “MRP Areas” work, you have to activate the MRP areas
and then create them and then assign them to the material master MRP 1 view. If a MRP
area is not assigned to the material, then it will work as per the plant level MRP area.

Configuring MRP areas

Step 1: Activate MRP Area: Use the transaction path: SAP Customizing Implementation
Guide > Production > Material Requirements Planning > Master Data > MRP Areas > Activate
MRP for MRP Areas

Step 2: Define MRP Areas: Use transaction path: SAP Customizing Implementation Guide >
Production > Material Requirements Planning > Master Data > MRP Areas > Define MRP
Areas

Types of MRP Areas:

Plant MRP Areas: You can create one MRP area for several plants, so that when you run the
MRP for this MRP area, the run is for all the plants configured in the MRP area.

Storage Location MRP Areas: You can create MRP areas for several storage locations at a
plant. You cannot use one storage location in multiple MRP areas.

Subcontractors MRP Areas: You can create MRP areas for several subcontractors for a plant.
You cannot use one subcontractor in multiple MRP areas.

Outcome of this step: You are now ready for the MRP run and have selected all the selection
parameters on which MRP is required to run. The following step would start with the MRP run
and calculate the quantities required to satisfy the demands.
Step 6: SAP MRP Run - Calculation of Shortage Quantities and Creation of
Procurement Proposals

After using a particular planning run type and executing the MRP Run, the SAP MRP run
program goes through a fairly complex and huge algorithm. This algorithm would be
explained in the next few steps till the step 10. This is not a manual step, which one has to
carry out manually.

When SAP Starts the MRP Run for a given material, it first goes thorugh something called
as "net requirement planning" or "gross requirement planning", in which the receipts and
issues are compared and netted off to find out the available stock, thus calculating the
shortage quantities, which would ordered through creation of procurement proposals.

SAP planning can also be carried out using gross requirement planning which disregards the
plant stock in the planning formulas.

Before carrying out the netting, MRP checks the strategies used for the material in the MRP 3
view which helps in identifying whether it is dealing with a made-to-order (MTO) or a made-to-
stock (MTS) situation. MRP also checks the individual collective indicator which again helps it
to ascertain whether it is a MTO or a MTS situation.

Along with checking the strategies, the netting is carried out for each requirement date, to
ascertain whether the requirement is satisfied by the receipts. In case of shortages the
system issues procurement proposals. The netting is carried out using the formula.

The MRP Run programs analyses all the demand and all the receipts available for a given
material as shown below:

Add all the Receipts:


+ Stock in Inventory (Plant Stocks)
 In made-to-order scenario, only the storage location stocks are considered which belong to
the individual sales order line item in question
 Also note that “Stock in inventory” is not considered in Gross requirement planning method
 Unrestricted stock, Quality Inspection stock, and consignment stock is used as plant stock.
If you want to use blocked stock, stock in transfer or restricted stock you can configure the
same
+ Firmed Procurement Proposals – Firmed Planned order or Firmed Purchase requisition
 In made-to-order, the firmed receipts should necessarily be for the sales order line item
requirements, if the receipts are not for the individual requirements then they are not
considered as firmed receipts
+ Scheduled Firmed Receipts from Production

 In made-to-order, the receipts should necessarily be for the sales order line item
requirements, if the receipts are not for the individual requirements then they are not
considered as firmed receipts

+ Scheduled Firmed Receipts from Purchase

 In made-to-order, the receipts should necessarily be for the sales order line item
requirements, if the receipts are not for the individual requirements then they are not
considered as firmed receipts

Add all the Demands:

Demands are not considered in Manual/Automatic Reorder point planning.

+ Safety Stock included in the material master or as dynamically calculated


 In made-to-order scenario the safety stock is not considered
 In Re-order point Planning Safety stock is not considered in calculating shortage
quantities
+ Demand from Sales order
 Sales order Demand is not considered in reorder point planning
 Sales order Demand is not considered in Forecast Based planning
+ Demand from Planned Independent Requirements
 Made-to-order scenario will not consider the planned independent requirements
 Planned Independent Demand is not considered in reorder point planning
 Planned Independent Demand is not considered in Forecast Based planning
+ Demand from Material Reservation
 Made-to-order scenario will not consider the material reservations
 Material Reservations are not considered in reorder point planning
 Material Reservations are not considered in Forecast Based planning
+ Demand from forecasted figures
 Used only in any Forecast based planning
> If this Receipts > Demand = Then a requirement proposal is not raised and the existing
receipts are enough to cover the incoming demands.

> If this Receipts < Demand = Then a requirement proposal or a procurement proposal is
raised for the quantity in shortfall (shortage quantity) to cover the incoming demands.
See the above facts illustrated in a table below:
MRP MRP in Made to Order Reorder Forecast
in Point Based
Made Planning Planning
to
Stock
Receipts (X – Considered, Blank – Ignored)
+ Stock in Inventory X X X X
Inventory, only from, the sales
order line item is considered
Firmed Procurement X X X X
Proposals – Firmed Firmed Procurement Proposals
Planned order or Firmed for the Sales order line item is
Purchase requisition only considered. Other Firmed
Proposals for the material are
ignored
+ Scheduled Firmed X X X X
Receipts from Production receipts for the
Production concerned Sales order Line item
are only entertained. Receipts
from other Sales order Line item
are not considered
+ Scheduled Firmed X X X X
Receipts from Purchase Purchase receipts for the
concerned Sales order Line item
are only entertained. Receipts
from other Sales order Line item
are not considered
Issues (X – Considered, Blank – Ignored)
+ Safety Stock included in the material X X
master or as dynamically calculated as
Dynamic Safety Stock
+ Demand from Sales order X X Considered only in “reorder point
planning with External
requirements”
+ Demand from Planned Independent X Considered only in “reorder point
Requirements planning with External
requirements”
+ Demand from Material Reservation X X onsidered only in “reorder point
planning with External
requirements”
+ Demand from forecasted figures X
> If this Receipts > Demand = Then a requirement proposal is not raised and the existing
receipts are enough to cover the incoming demands.
> If this Receipts > Demand = Then a requirement proposal is not raised and the existing
receipts are enough to cover the incoming demands.

Stocks types considered in Plant Stock:

SAP is configured to use the unrestricted stock, quality inspection stock and consignment
stock in unrestricted and quality, for MRP. The system does not consider blocked stock or
restricted inventory or stock in transfer in an MRP run unless you want it to be considered
through configuration – Logistics > Production > Material Requirement Planning > MRP
Calculations > Stocks >Define Availability of stocks in transfer/blocked stock/restricted stock.
Here you have an option to choose the stock types for MRP run as required for your
organization.

Outcome of this step: After calculating the quantities required for satisfying the demand,
SAP MRP evaluates the lot sizes of these arrived at quantities. This can be explained in the
next step.
SAP MRP - Calculation of Dynamic Safety Stock (Range of coverage Profile)

SAP MRP Calculation and Configuration of Dynamic Safety Stock (Range of coverage
Profile)
The Range of coverage profile is configured for the use of Dynamic safety stock for a given
material. The range of coverage configuration contains the parameters for the calculation of
the dynamic safety stock. The dynamic safety stock is a stock calculated based on the
average daily requirements for a period rather than the actual requirements over the period,
therefore it is more statistical value rather than an absolute value.
Safety stock as we know is used to cover the fluctuations in the requirements, so is the
dynamic safety stock, the only difference being, the safety stock is an absolute value provided
directly for a material whereas the dynamic safety stock is calculated by the system on the
basis of the coverage period and average daily stock calculated internally by the system.

The Dynamic safety stock is calculated in every planning run.


The transaction path is: SAP Customizing Implementation Guide > Production > Material
Requirements Planning > Planning > MRP Calculations > Define Range of Coverage Profile
(Dynamic Safety Stock)
Range of coverage Configuration:

Fig MRP – Config. 12

Configuration for calculation of average daily requirement for a period

Period indicator - Indicate the type of period, whether week or month or according to PP
planning calendar. (Let’s say it is W – Week)

Number of Periods – Number of periods used to calculate the average daily requirements
(Let’s say it is 13 Weeks)
Type of Period length – It defines the number of days in the period, if the period length is in
terms of workdays, then the factory calendar work days are considered, if the period length is
in terms of calendar days then it is considered in terms of Gregorian calendar, and if it is
terms of standard days, then you would have to enter the number of days in a period in the
configuration (Let’s say that the configuration was done with workdays and the factory
calendar has 7 days per week)
Therefore Average daily requirement =
= Requirements in the period (Requirements in 13 Weeks – Lets say 910 Units) / (Number of
Periods – Lets say 13 Weeks) * (Number of days in the period – Lets say 7 days)

= 910 / (13*7)

= 10 Units

Configuration parameters for calculation of Dynamic Safety Stock for the Range of
Coverage
You can define 3 different range of coverage – minimum, maximum, and target range of
coverage, which is used to calculate 3 different stocks using the average daily requirements
(range of coverage multiplied by the period length). The Target range of coverage defined
here would be used to calculate the Dynamic Safety Stock for the period of the coverage.

The Period of the coverage is specified in the configuration. The coverage’s and the periods
for which they should work for, are defined for 2 separate period lengths and the 3 rd period
length is for the rest of horizon.

In the example, we have defined the safety stock to cover a period of 7 days (minimum, target
and the maximum range of coverage). The minimum, target and the maximum stock is
calculated for the average daily requirement over the respective coverage periods.

You can check the minimum, maximum, target stock levels, minimum range of coverage,
maximum range of coverage, target range of coverage in the MRP List or Stock requirements
list’s “Period Total Display” Section.

As per our example, for the first period of 13 weeks, all the 3 stocks levels – minimum,
maximum, and target stock levels would be 70 Units and for the next period of 26 weeks it will
be 70 units as well and for the rest of the horizon it will be 70 units again.

Normally when the available stock falls below the minimum stock level, SAP planning run,
would immediately create planned orders to suffice at least the target stock level. For
example if the minimum stock level is 30 and the maximum is 80 and the target stock is 50
units, then if the available stocks fall below the 30 units mark, SAP creates a procurement
proposal for 50 units to reach back to the target stock level. Whereas in the example below,
all the 3 stocks types are 70 units, therefore when the stocks fall below the 70 units, the
system will try to raise a procurement proposal to reach back to 70 units.
As per our example in the configuration screen shot –
Dynamic safety stock Dynamic safety Dynamic safety Dynamic safety
formula summarized stocks for the 1st stocks for the 2nd stocks for the rest
as = Average Daily period of 13 weeks period of 26 weeks of the Horizon
Stock * Range of
coverage
Minimum safety 70 Units 70 Units 70 Units
stock
Target safety stock 70 Units 70 Units 70 Units
Maximum safety 70 Units 70 Units 70 Units
stock

Another Example of Dynamic Safety Stock

Fig MRP – Config. 14

Step a) Demand for 8 Weeks = 800

Step b) Average Daily Requirements

= 896 Units of Demand for 8 Weeks / (8Weeks * 7 Days Per Week)


= 896/(8*7)
= 896/56
= 16 Units

Step c) Calculation of Safety Stock for the coverage period


As per our example in the configuration screen shot –

For the first period, when the stock falls below 32 units (minimum Stock Level), the SAP MRP
run would create the procurement proposals (Let’s Say planned order) for a quantity to suffice
at least the target safety stock level or the dynamic safety stock level = 8 Units.

Dynamic safety stock Dynamic safety Dynamic safety Dynamic safety


formula summarized stocks for the 1st stocks for the 2nd stocks for the rest
as = Average Daily period of 8 weeks period of 8 weeks of the Horizon
Stock * Range of
coverage

Minimum safety = 2 * 16 = 32 = 2 * 16 = 32 = 2 * 16 = 32
stock
Target safety stock = 5 * 16 = 80 = 5 * 16 = 80 = 5 * 16 = 80
Maximum safety = 7 * 16 = 112 = 7 * 16 = 112 = 7 * 16 = 112
stock

SAP MRP Planning time fence and Roll Forward Period

The transaction path to configure the planning time fence and roll forward period is: SAP
Customizing Implementation Guide > Production > Material Requirements Planning >
Planning > MRP Areas > MRP Calculation > Define Planning Time Fence and Roll Forward
Period

Planning Time Fence:


The planning time fence is the number of work days, within which you can protect the master
plan or in other words the procurement proposals of a master plan from being disturbed or
changed from any automatic changes to the master plan. The procurement proposals are
firmed so as to protect them from any changes. The firming of the procurement proposals
(planned orders, purchase requisitions, delivery schedules) in the planning time fence
prevents the proposals in the time fence from being adopted in the next planning run.

In other words, in the planning time fence, the system does not create or delete any
procurement proposals nor does it changes the existing proposals.

The system calculates the time fence from today’s date plus the “number of days mentioned
as planning time fence” in the material master or in the MRP configuration (where you can
define the planning time fence for plant or for a given MRP group). It is needless to say that
any new requirements are not included in this time period nor the existing requirements are
changed. MRP carries its usual planning outside this fence without interrupting this fenced
period.
Configure Planning Time fence and Roll Forward Period

Plant MRP Group Planning Time fence Roll forward Period


0001 0001 14 3-
0001 0002 14 2-

It is logical that any procurement proposal lying outside this fence would start moving in to the
fence one by one; when the fence moves ahead on the time scale. When they move in to this
fence, they are automatically firmed for protection.

Firming for automatically created procurement proposals:


The automatically created procurement proposals in the MRP Run are not firmed by the
system, so that they are available for adjusting dates and quantities in the next planning run,
in cases where there is change in BOM or task list.
You can though manually firm the planned orders individually or collectively using transaction
code MD19
Note - Automatically created planned orders in the planning time fence are only remain firm
till they are in the planning run.

Firming for manually created procurement proposals:


For manually created or changed procurement proposals or even when you reschedule the
planned order in the graphical planning table, the system always marks them with a firming
indicator. Though you can remove or delete this firming indicator.

Firming for component’s planned orders:


In case of a planned order, you can manually firm it by selecting the “firming planned order
Indicator” in the planned order header. And in order to make sure that the BOM levels below
are not exploded or changed in a planning run, you have to set the “firming components
indicator”
See the below Example – Planning time fence is 3 days.

Planning
Start
Date
Today – Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8
Day 1
Planning time fence
Planned Planned Planned Planned Planned Planned Planned Planned
Order 1 Order 2 Order 3 Order 4 Order 5 Order 5 Order 6 Order 7
Auto Auto Auto Not-firmed Firmed Not- Not- Not-
Firmed Firmed Firmed firmed firmed firmed
Next
Planning
Start Date
Planning time fence
Planned Planned Planned
Order 4 Order 5 Order 5
Auto Auto Auto
Firmed Firmed Firmed

Roll Forward Period


The Roll Forward Period adds the functionality of automatic deletion of firmed planned orders,
from the master plan. It also creates new proposals to cover any requirements pending during
the MRP run. This period can be defined for number of days in past or future. The system
deletes all the firmed planned orders that lie before the roll forward period.
Using the roll forward period, you can have the system delete all useless old firmed planned
orders, which otherwise the system would never had deleted, since they were firmed. This
allows for reorganizing the planned orders.
Step 7: Calculation of Lot Sizes for the Procurement Proposals

After analysing the shortage quantities (in the last step), SAP MRP run starts the process of
creation of the requirement proposal/procurement proposal for the shortage quantity (where
the available quantity is short).
When creating the procurement proposal, it has to be adhere to the lot sizing procedure set in
the material master MRP 1 view. This step explains the criteria on which the planning run
creates lot sizes for the created procurement proposals. Along with adhering to the lot sizing,
the MRP run also takes in to consideration all the other factors involved in the lot szing
procedures such as minimum lot size, maximum lot size, rounding values, fixed lot sizes,
safety stocks, dynamic safety stocks, service levels, scrap percentages, etc etc.
The Lot sizing procedures in SAP are categorized as static lot sizing procedures, periodic lot
sizing procedures and optimum lot sizing procedures. The most famous lot sizing procedures
are the static lot sizing procedures and periodic lot sizing procedures.

Static Lot Sizing Procedures

The static lot sizing procedures are namely – the ‘exact lot sizing’, fixed lot sizing and ‘replenish to
maximum stock level’.
When the lot size is “EX” or exact lot size, the system creates planned orders or procurement
proposals to cover the exact shortage requirement. The lot size is the whole shortage quantity
required to satisfy the demand. That is, if the requirement is for a quantity of 112 units, the proposal
will be created for an exact 112 units.
On the other hand if the lot sizing procedure is “fixed lot size”, then the total requirement quantity as
proposed by the system, to cover the shortages is divided in to the number of fixed quantities as
included in the material master (MRP 1 view), for example, if the lot size is fixed as 100 Units and the
shortage quantity is 500, then the system will create 5 planned orders to cover the shortages.
Similarly if the lot size of the material is “replenish to maximum stock level” (Lot Size – “HB” for
example oil tankers or barges) then on shortages of the requirement quantities the system creates
planned orders to fill it to the maximum stock level.

Periodic Lot Sizing Procedures


Periodic lot sizing procedures are namely - the ‘daily lot sizing’, ‘monthly lot sizing’ and ‘weekly lot
sizing’ (in fact you can decide the period of the lot size in lot sizing customizing). The requirements
that lie in a given period are clubbed together and the availability date for the procurement proposals
would be the start date of the first requirement in the period. The standard configuration of lot sizes
puts the requirements for periodic lot sizing at the start of the first requirement in the period, but you
can have it set to the end of the period also.
Availability Date = Start of the period or
Availability Date = End of the period
And if the lot sizing procedure is “weekly”, SAP MRP will consider all the demands for the week and
all the receipts for the week and place a weekly proposal (planned order or purchase requisition). The
weekly proposal can be put at the start of the week or at the end of the week as the configuration in
the lot sizing procedure.
Optimum Lot Sizing Procedures
Whereas there is a less famous procedure for lot sizing called the ‘optimum lot sizing procedures’
which deals with the concept of economical lot sizing, namely the ‘Groff lot sizing method’ and ‘part
period balancing’. These procedures take in to account the costs of the procurement and other
involved cost elements.
For example, if the lot sizing procedure is daily, then the system will consider all the demands Vs’ all
the receipts for that day and create a daily shortage proposal if shortages exist.

Other tools in lot sizing procedures


You can use the below listed tools along the lot sizing procedures selected in the MRP 1 view of the
material master. It should also be noted that not all the tools can be used along with all the lot sizing
procedures.

Minimum lot size


When the minimum lot size is 80 and the required quantity is 100, the system creates a requirement
proposal for a quantity of 100 Units, to cover the shortages.
This can be used with almost all the lot sizing procedures.

Maximum lot size


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}.
This can be used with almost all the lot sizing procedures.

Fixed Lot Size


In this procedure, the lot sizes are fixed and the procurement proposals are created for the given
fixed quantity.
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}.

Rounding Values
If the Rounding Value is 20 units, the procurement quantity is 70 units, and the minimum lot size is 15
units, then the system will always round up the planned order to a multiple of 20 units, specifying the
rounding to a quantity of 20 Units.
You would have already noticed that the minimum lot size, in the above example, really did not play
any role, but if the procurement quantity, for example, would have been 13 units, then the system
would have created one planned order of 20 units, which covers both the minimum lot size and the
rounding requirements.
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 just create one planned order of 80 to round off to 20 {if the
Plant/Storage location stock for that material is Zero}.
Again the rounding value tool in the MRP 1 view can be used with almost all the lot sizing procedures.
Rounding Profile
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.
Maximum stock level
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.

Assembly scrap
It defines the scrap % that is allowed for 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.

Outcome of this step: At the end of this step, SAP is ready with the procurement proposals and the
quantities required, though the procurement proposals are still not ready and they require order start
date and end date, in other words, they still require scheduling to be done on them.
Step 8: Scheduling of the Procurement Proposals in a SAP MRP run

The next task in the SAP MRP algorithm is to schedule the procurement proposals created in
the previous steps. You can expected to know how SAP MRP schedules the procurement
proposals so as to correctly evaluate them once they are created. There is no manual task
involved in this step.
To expect the MRP run to schedule the procurement proposals correctly, we have to maintain
the following in the master data properly:
a) In-house production times (for in house manufacturing, maintained in the material master
MRP 2 view as lot independent and as lot dependent in the work scheduling view),
b) Planned delivery times (for external procurement, maintained in the material master),
c) Schedule margin keys for float times (optional for In house Production, maintained in the
material master),
d) Interoperation times (optional for in house production, maintained in the material master or
Task lists such as routing or recipes),
e) Planned goods receipt times (optional for external and internal procurement)
f) Set up times and tear down times (optional for in house production, maintained in the
material master Work Scheduling view or in the task list such as routing or recipes)

Scheduling for externally procured materials:


For the externally procured materials, SAP uses the planned delivery time (lead times) and
goods receipt times in Material master to schedule the delivery & release dates for the
procurement proposals. You can either use forward scheduling or backward scheduling for
these materials. SAP uses the basic date scheduling in the case of externally procured
materials.
Scheduling for in-house manufactured materials:

For materials which are to be manufactured in house, as assemblies and subassemblies (in-house
produced materials), the scheduling is done according to the scheduling method selected in the
selection screen of the MRP run.

 If “Basic Date scheduling” is selected then the system considers the “in-house production
time” of the material in the MRP 2 view along with its goods receipt time. Please note that the
times in terms of days’ as included in the material master are not quantity dependant and MRP
uses them directly for scheduling regardless of whether it is planning for 1 unit or for a million
units. The Planning does not generate any capacity loading and operation dates are not derived.
The system generates the basic start date of the order and the basic finish date of the planned
order. This type of scheduling is best used when the lot sizes of the production and their timings
are usually fixed.

 It is also said that the system carries out Basic Date scheduling using quantity dependent
timings as included in the Work Scheduling views of the material master. Though I am really
doubtful whether the MRP run can really do this. You can really try this and include the set up
time (this is not quantity dependent), the processing machine time and the interoperation time for
a given base quantity. It is expected that the system calculates the total lead time for a planned
quantity.

 Alternately if the scheduling method selected is - “Lead time Scheduling” the scheduling for
the planned orders are done through the use of standard timings in the routings/recipes of the
material. The Standard values or the standard timings in the routings or recipes are for a base
quantity, which means that the scheduling carried out using the lead time method is an accurate
method of scheduling and gives the greatest results every time. It not only calculates the
operation lead time (operations start and finish times) but also cumulates them to arrive at a total
lead time with an order start date and order finish date.

 When you use the “lead time scheduling” method, the system uses the scheduling methods
configured; you can use either forward scheduling or backward scheduling method for the MRP
run. As a default scheduling type, the system uses backward scheduling but it also switches
automatically to forward scheduling if the determined start date lies in the past. Though if you do
not want the system to switch to forward scheduling automatically, you can specify per plant in
Customizing for MRP, in the IMG activity Parameters for determining the basic dates that the
system is to continue the backward scheduling calculation even if the resulting start date lies in
the past.

 Check the Lead time Scheduling example as shown below. Lead time scheduling uses the
floats in the schedule margin keys (if any) and the standard values in the operation along with the
operation’s interoperation times.

Order Lead time scheduling for In-house produced materials =

Opening Period from where the Planning opens as mentioned in Schedule Margin Key

[Order Start date] – ‘Order Floats before Production’ starts here – Floats mentioned in
Schedule Margin Key. If floats = 0 then Operation start date = order start date

Operation 0010 Start date – to – Operation 0010 Finish date (calculated through the standard
values in operations)

Operation 0020 Start date – to – Operation 0020 Finish Date (calculated through the standard
values in operations)

+
Operation 0030 Start date – to – Operation 0030 Finish Date (calculated through the standard
values in operations)

[Order Finish date] – ‘Order Floats after Production’ ends here – Floats mentioned in
Schedule Margin Key. If floats = 0 then Operation Finish date = order start date

 The selection of the Routing/Recipe is made through the “task list determination strategies
included in the configuration” or if the selection method for the BOM selection is through
‘production versions’ then the task list included in the version is used.

Outcome of this step: At the end of this step, SAP has a procurement proposal which has the
estimated quantities, dates. Though what is not known yet, is, whether the procurement proposal is
for external procurement or for internal production. The Procurement type for a material in MRP views
would decide that for the MRP program as explained below.