Material Requirements Planning (PP-MRP) April 2001 11

Material Requirements Planning (PP-MRP)

Implementation Options
The main function of material requirements planning is to guarantee material availability, that is, it is used to procure or produce the requirement quantities on time both for internal purposes and for sales and distribution. This process involves the monitoring of stocks and, in particular, the automatic creation of procurement proposals for purchasing and production. In doing so, MRP tries to strike the best balance possible between _ optimizing the service level and _ minimizing costs and capital lockup. The MRP component (PP-MRP) assists and relieves MRP controllers in their area of responsibility. The MRP controller is responsible for all activities related to specifying the type, quantity, and time of the requirements, in addition to calculating when and for what quantity an order proposal has to be created to cover these requirements. The MRP controller needs all the information on stocks, stock reservations, and stocks on order to calculate quantities, and also needs information on lead times and procurement times to calculate dates. The MRP controller defines a suitable MRP and lot-sizing procedure for each material to determine procurement proposals.

Integration

You must first create the master data to be able to work with the MRP component. To do this, you require the following components: _ material master (LO-MD-MM) _ bills of material (LO-MD-BOM) When you use MRP for in-house production, you also need the following components if you want to determine production dates: _ work center (PP-BD-WKC) _ routings (PP-BD-RTG) You also need the following components: _ demand management (PP-MD-DEM) You need the Demand Management component to define requirement quantities and requirements dates for finished products and important assemblies. Demand Management also determines the strategy you are to use for planning, procuring, or producing a certain finished product. _ sales and distribution, if necessary

Features
MRP at Plant or MRP Area Level You can plan material requirements at plant level or for different MRP areas. With MRP at plant level, the system adds together stocks from all of the individual storage locations, with the exception of individual customer stock, to determine total plant stock. The requirements are combined in the planning run and procurement elements are created for these pegged

requirements with unknown sources. Individual storage locations can be planned separately or be excluded from planning. In the case of material requirements planning on an MRP area level, only the stocks from the storage locations or subcontractor assigned to the respective MRP area are taken into account. Only the requirements in this MRP area are combined and procurement elements are created for them. This enables you to plan material requirements specifically for certain areas. Lot-Sizing and MRP Procedures The most common lot-sizing procedures are available in the system and you can easily integrate user-defined formulas. You can use MRP or consumption-based planning as the materials planning procedure. Automatic Planning Run The automatic planning run in MRP determines any shortages and creates the appropriate procurement elements. The system generates messages for critical parts and unusual situations so that you can rework the planning results in the specific area with problems.

Material Requirements Planning in the Logistics Chain

Implementation Options
The main function of material requirements planning is to guarantee material availability, that is, it is used to procure or produce the requirement quantities on time both for internal purposes and for sales and distribution. This process involves the monitoring of stocks and, in particular, the automatic creation of procurement proposals for purchasing and production.

Process Flow

1. Sales and Distribution take requirements as concrete customer requirements from the market. 2. In Demand Management, sales are planned in advance via a sales forecast. The result is the independent requirement, that is, the requirement for the finished product, tradable assemblies, trading goods and replacement parts. This result triggers material requirements planning. 3. In order to cover these requirements, MRP calculates procurement quantities and dates as well as plans the corresponding procurement elements. The procurement element in the planning run is the planned order or, for external procurement, the purchase requisition. Both procurement elements are internal planning elements that can be changed, rescheduled or deleted at any time. 4. If a material is produced in-house, the system also calculates the dependent requirements, that is, the quantity of components required to produce the finished product or the assembly, by exploding the BOM. If a material shortage exists, planned orders are created at every BOM level to cover requirements.

5. The system then converts these planned procurement elements into exact procurement elements: production orders for in-house production and purchase orders for external procurement. 6. The progress of the order for materials produced in-house is controlled by using the production order. The production order contains its own scheduling procedures, capacity planning and status management. Cost accounting is also carried out via the individual production order. 7. Materials that are procured externally trigger the purchasing procedure. In this case, you must have chosen suitable vendors or you must have drawn up outline agreements. 8. The quantities made available by production or by external procurement are placed in stock and are managed by Inventory Management. Various functions in the SAP System are planned, controlled and coordinated centrally for several areas.

Inquiry and Quotation Processing

Purpose
The aim of inquiry and quotation processing is to quickly hand over a binding quotation that is attractive for the customer and justifiable from a business point of view. An initial specification of the product is created in line with the customers requirements in the process. On receipt, the inquiry is checked for completeness, and any queries are raised to the customer. The inquiry is then checked for its commercial and technical feasibility, and the importance of the customer for the company is evaluated. Taking order probability into consideration and on the basis of the information gained from the checks and evaluations, the company decides whether to create a quotation. The next step is to process a technical solution. If required, the product can be configured with the help of existing variants and/or projects that have already been implemented. The technical solution is used in costing any manufacturer costs that might arise. Production and replenishment times are used to determine the delivery date. The quotation is completed by fixing the quotation price, which is determined on the basis of the price the company expects the customer will accept, or on estimated competitor prices. Legal terms and conditions are also part of the completed quotation. On completion of the quotation phase the quotation itself is created and sent to the customer. Quotation processing ends with either order placement or rejection of the quotation by the customer.

The scenario used here begins with a planning quotation. The quoted technical solution is based on estimated activity and function values, approximate measurements and weights, drawings, and brief descriptions of the main assemblies. The commercial contractual agreements indicate approximate delivery dates and general delivery terms. The quotation is created using a suggested retail price for the overall object, as well as assembly costs, and any services that might arise.

Process Flow
1. The process begins when you receive an inquiry for a turbine. Customer documents specifying the customers requirements in more detail may accompany this inquiry. You manage all of these documents together. 2. You expect costs to arise prior to quotation creation because of the complexity of the product and the special customer requirements. Therefore, you create an inquiry project, so that you can account assign the costs for inquiry processing. 3. You perform initial planning of dates and costs on project basis. 4. On the basis of the planned costs, you determine the sales price and transfer it to the quotation. Finally, you print the quotation and send it to the customer. The flow of inquiry and quotation processing as explained in this example is shown in the following graphic:

Result
On completion of inquiry and quotation processing, the customer receives a quotation that may have been revised several times over. In reality, the quotation process (quotation rejection recosting new quotation) is repeated several times over until both the customer and the tenderer reach a satisfactory compromise. This cyclical process is not illustrated in this example for reasons of simplicity.

SAP Sales and Distribution Processing Document Flow

Document Flow in Sales The sales documents you create are individual documents but they can also form part of a chain of inter-related documents. For example, you may record a customers telephone inquiry in the system. The customer next requests a quotation, which you then create by referring to the inquiry. The customer later places an order on the basis of the quotation and you create a sales order with reference to the quotation. You ship the goods and bill the customer. After delivery of the goods, the customer claims credit for some damaged goods and you create a free-of-charge delivery with reference to the sales order. The entire chain of documents the inquiry, the quotation, the sales order, the delivery, the invoice, and the subsequent delivery free of charge creates a document flow or history. The flow of data from one document into another reduces manual activity and makes problem resolution easier. Inquiry and quotation management in the Sales Information System help you to plan and control your sales. The following graphic shows how the various types of sales documents are inter-related and how data subsequently flows into shipping and billing documents.