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SAP MRP - Step 6 - Calculation of Shortage Quantities and Creation of Procurement proposals

 
Study Material Contributed by Ulhas Kavle - Senior SAP Consultant, Mahindra Satyam
 
 

Step 6:

 

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 procuremnet 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 in Made to Stock

MRP in Made to Order

Reorder Point Planning

Forecast Based Planning

 

Receipts  (X – Considered, Blank – Ignored)

 

+ Stock in Inventory

 

X

X

Inventory, only from, the sales order line item is considered

 

X

X

Firmed Procurement Proposals – Firmed Planned order or Firmed Purchase requisition

 

 

X

X

Firmed Procurement Proposals for the Sales order line item is only considered. Other Firmed Proposals for the material are ignored

 

X

X

+ Scheduled Firmed Receipts from Production

 

X

X

Production receipts for the concerned Sales order Line item are only entertained. Receipts from other Sales order Line item are not considered

 

X

X

+ Scheduled Firmed Receipts from Purchase

 

X

X

Purchase receipts for the concerned Sales order Line item are only entertained. Receipts from other Sales order Line item are not considered

 

X

X

 

Issues (X – Considered, Blank – Ignored)

 

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

 

X

 

 

 

X

+ Demand from Sales order

 

X

X

 

 

 

Considered only in “reorder point planning with External requirements”

 

 

+ Demand from Planned Independent Requirements

 

 

X

 

 

 

 

Considered only in “reorder point planning with External requirements”

 

 

+ Demand from Material Reservation

 

 

X

X

 

Considered 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 3rd 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 formula summarized as = Average Daily Stock * Range of coverage

 

Dynamic safety stocks for the 1st period of 13 weeks

Dynamic safety stocks for the 2nd period of 26 weeks

 

Dynamic safety stocks for the rest of the Horizon

 

Minimum safety stock

 

70 Units

70 Units

70 Units

 

Target safety stock

 

70 Units

70 Units

70 Units

 

Maximum safety stock

 

70 Units

70 Units

70 Units

 
 
   

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 formula summarized as = Average Daily Stock * Range of coverage

 

 

Dynamic safety stocks for the 1st period of 8 weeks

 

 

Dynamic safety stocks for the 2nd period of 8  weeks

 

Dynamic safety stocks for the rest of the Horizon

 

Minimum safety stock

 

= 2 * 16 = 32

= 2 * 16 = 32

= 2 * 16 = 32

 

Target safety stock

 

= 5 * 16 = 80

= 5 * 16 = 80

= 5 * 16 = 80

 

Maximum safety stock

 

= 7 * 16 = 112

= 7 * 16 = 112

= 7 * 16 = 112

 

 

 

SAP MRP Planning time fence and Roll Forward Period

 
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 1

Day 2

Day 3

Day 4

Day 5

Day 6

Day 7

Day 8

Planning time fence

 

 

 

 

 

Planned Order 1

Planned Order 2

Planned Order 3

Planned Order 4

Planned Order 5

Planned Order 5

Planned Order 6

Planned Order 7

Auto Firmed

Auto Firmed

Auto Firmed

Not-firmed

Firmed

Not-firmed

Not-firmed

Not-firmed

 

 

 

Next Planning Start Date

 

 

 

 

 

 

 

Planning time fence

 

 

 

 

 

Planned Order 4

Planned Order 5

Planned Order 5

 

 

 

 

 

Auto Firmed

Auto Firmed

Auto 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.

 

 
 
 
                                                                                                                                                                                                                                                                                                                                                

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