Run Material Replenishment Planning (MD01)

Purpose
Use this procedure to run the replenishment requirement of all materials at a plant. Each
plant will determine the frequency of running MRP - every other day, once a week. The
purpose of MRP is to ensure the right material arrives at the right place at the right time.
The MRP run is used to automatically generate planned orders or purchase requisitions
enabling the replenishment of materials depleted by consumption and the planning of
known requirements. The system tries to achieve a balance between optimizing needed
materials and minimizing costs by keeping inventory levels at a minimum and having no
stock outages.

Trigger
Perform this procedure when a plant has the need to restock materials on their shelves.
All plants will start with the reorder point planning method. In reorder point planning,
procurement is triggered when the sum of plant stock and firmed receipts falls below the
reorder point. The reorder point should cover the average material requirements expected
during the replenishment time. Safety stock exists to cover both excess material
consumption within the replenishment time and any additional requirements that may occur
due to delivery delays. Therefore, the safety stock is included in the reorder level.
In manual reorder point planning, both the reorder level and the safety stock level are
defined manually in the appropriate material master. The use of past consumption data
(historical data) can be used to set reorder point levels. The material master is where the
values for the reorder point (MRP 1 view) and for the safety stock (MRP 2 view) is
entered.
Every time a material is withdrawn from the warehouse, the system checks whether this
withdrawal has caused stock levels to fall below the reorder level. If this is the case, the
system makes an entry in the planning file for the next planning MRP run for the material
to be ordered.

Prerequisites
Before beginning this task, verify the following:
· Verify all inventory materials at the plant are set up correctly in the screen views of
MRP1, MRP2, and MRP3 tabs
· View transaction MM03 for this information on materials: reorder point levels,
maximum stock levels, safety stock

Menu Path
Use the following menu path to begin this transaction:

· Select SAP menu Logistics Materials Management Material

Requirements Planning MRP Planning Total Planning Online to get
to the MRP Run screen

Transaction
Code MD01

Helpful Hints
Review the following:
· Before running MRP, verify whether planned orders or purchase requisitions should be
created. Planned Orders are reviewed by warehouse personnel for quantity ordered
and delivery dates. After reviewing all planned orders, warehouse personnel have to
convert into a purchase requisition to forward to their purchasing agents
· Purchase requisitions created from MRP are sent directly to the Purchasing Agents for
processing. This 'skips' the planned order function and purchase requisitions are
directly created and directly forwarded to purchasing agents. Purchase Agents use
transaction ME57 to process
Procedure

1. Start the transaction using the menu path or transaction code.

MRP Run
 R/O/C/D indicates a field is required, optional, conditional (dependent upon
another selection) or the information defaults (based on previously entered
information or system configuration)

2. As required, complete/review the following fields:

Field Name R/O/C/ Descripti

D/ on
Scope of planning O Key with which a group of plants or MRP areas are
combined in a scope of planning. The plants or MRP
areas that are combined in a scope of planning are
planned together in a total planning run.

Leave blank. This field is used to combine a

GROUP of plants.

Plant R The agency organization unit number.

Example: 1500
Processing key R Indicator used by the system to identify the MPS or MRP
run type.

Always enter NETCH, for net change planning.

The only materials included in the planning run are
those which have undergone a change relevant to
MRP since the last planning run. (Example due to
changes of warehouse issues and receipts).
Example: NETCH
Create purchase req. R Create purchase requisition. Indicator used within MRP
to designate that purchase requisitions are to be created
automatically based on the planned orders.

Enter a 1 to create Purchase

requisitions. Enter a 3 to create Planned
Orders.
If creating requisitions, they will be available to
purchasing when the MRP run is executed.
Planned orders are not available to purchasing and
warehouse personnel can view quantities and dates
in planned orders before converting them to
purchase requisitions. A planned order is a Pre-
step to the purchase requisition.
 Field Name R/O/C/D/ Description

Schedule lines R Indicator which controls the system Automatic

Schedule Lines (Scheduling Agreements) during the
planning run.

Enter a 1. Schedule agreements are not used. They

are long term arrangements with a vendor to supply
materials at a certain time frame (hourly, daily,
weekly) and primarily used in production
planning/manufacturing.
Example: 1
Create MRP list R Indicator used within MRP to designate that an MRP list is
to be created based on planned orders.

Enter a 1 to create a listing for viewing.

Example: 1
Planning mode R Used to control the manner in which production planning
will occur.

Enter a 1 for un firmed orders/requisitions from

the past. This brings over quantities and dates to
the new requirements planning list.
Example: 1
Scheduling R Date upon which scheduled planning is to occur.

Enter a 1 to choose basic dates for

best performance.
Example: 1
Planning date R Date on which the planning run is to be carried out.

Defaults to today's date. Do not change.

Example: 06/28/2004
Parallel processing O Indicator that enables the system to process separate data
packets on different servers simultaneously.

Leave blank

Display material list O Indicator that instructs the system to create a list of the
planned materials after the planning run. Use the
material list to check which materials were planned in the
planning run.

Check this to display a listing of materials from

this planned run. This creates a listing of planned
materials.
 Field Name R/O/C/D/ Description

User exit key O Control key for user exit material selection - planning run.

Please see note below for entry into the User exit
key field.
Example: 001
User exit parameter O Used to provide additional information on the user exit.

Please see note below for entry into the User exit
parameter field.
Enter appropriate MRP Controller Number set up for
your plant for specific category of materials.
Example: 278

To run MRP for a 'select area of materials', the User exit key and User
exit parameter fields need to be filled in with appropriate data.

Plants have the capability to identify different areas within the plant and assign a
MRP Controller to each area. In many cases, personnel at the inventory plants
are only responsible for materials within their respective area. Personnel in the
dietary and kitchen only need to view and restock food items; maintenance area
has the need to only view restocking of maintenance items, janitorial personnel to
view janitorial supplies for restocking and so on.

That particular MRP controller will be assigned to only materials within their area
and those materials will be identified in the Material Master Record with their MRP
Controller number (MRP1 tab). In turn, they can execute the MRP run (MD01)
and enter their appropriate MRP controller to identify and only execute restocking
for materials in their perspective area.

User exit key: 001 will always be entered in this field.

User exit parameter: Enter appropriate MRP Controller number set up for
materials at your plant. (View the MRP Controller number for a material
using transaction MM03, under MRP1 tab and the MRP Controller number).

3. Select the ENTER icon.

MRP Run

A system message appears 'Please check input

parameters'. Verify all input data on the initial screen is

correct.
4. Select the ENTER icon.

Information

5. Select the ENTER icon.

MRP Run

View the Heading 'Database statistics'. This displays the amount of Planned
Orders created from the MRP run. In the above case there were 24 planned
orders created.
 To view and process the planned orders, go to transaction MD16.

If Purchase Requisitions were created from the MRP run, these orders
automatically forward to transaction ME57 for the Purchase Agent to
process.

The run-time statistics display running times for the planning file and are
technical related (no direct value to the planning file).

6. Select the EXIT icon until the SAP Easy Access Screen is displayed.

7. You have completed this transaction.

Result
You have successfully completed transaction Material Replenishment Planning (MD01).

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MRP Concept in SAP
This word is attached to PDF file

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Re-Order Point Procedure

The ‘Re-Order Point’ is the level of inventory that triggers material procurement. Once the inventory falls below this level, you need to create
the order proposal either manually or automatically by the system.

In the case of the manual re-order point procedure, you will define the reorder point and the safety stock in the material master. On the other
hand, in the automatic re-order point procedure, the system will calculate the re-order point and the safety stock based on the next period’s
consumption pattern

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Safety Stock Calculation

In normal materials management there are basically 2 basic inventory management systems, the P system and the Q system. 

P system is a system wherein replenishment is done keeping the quantity constant. The period becomes the variant. In other words you fix the
quantity you want the stock to dip, to trigger a requirement. As soon as the stock level is reached you replenish the stock. During a lean period
the time taken to reach the level will be longer and during an active period the time taken to reach that stock could drop.This normally relates
with your consumption based planning. 

Q system is a system wherein replenishment is done keeping the period constant. The quantity becomes the variant. In other words you will
check for the level of stock at fixed time intervals (daily, weekly, monthly etc.) compare it with the requirements on that day and trigger the
procurement process for replenishment.This normally relates with your MRP.

Now there are 4 more factors that could affect the idealistic procurement pattern:  
1. Ordering Lead-time.  
2. Manufacuring Lead-time  
3. Transporting Lead-time  
4. Stock conversion Lead-time (or Quality Inspection lead time) 

A delay in any or all of the above can have effect on the entire replenishment process and the stock. A buffer stock must be designed to take
into account the above coverage. Again the determination of your safety stock depends on the accuracy of your forecast. Higher your
accuracy, lower your safety stock. This relationship between forecast accuracy and service level  
is denoted by factor R. This also takes into account that the customer demand cannot be always satisfied 100% of the time. 

Hence what we have is:  

R = Relationship between forecast accuracy and service level (Service Factor)  
W = Delivery time (in days) / Forecast Period (in days)  
MAD = Mean absolute deviation (parameter for forecast accuracy) 

Now If replenishment lead time is greater than the forecast period by factor W then: 

Safety Stock = R x Sq.rt. W x MAD 

Else 

Safety Stock = R x W x MAD 

Now in SAP If the material is produced in-house, the delivery time is: opening period + in-house production time + goods receipt processing
time. It is expressed in workdays. The forecast period is taken from the material master record and is also expressed in workdays. 

If the material is procured externally, the delivery time is: Processing time for purchasing + planned delivery time + goods receipt processing
time. It is expressed in calendar days. The forecast period is taken from the material master record and is also expressed in calendar days. 

As a result of this you will have observed now that the safety stock must cover both the unplanned material excess consumption, as well as
the additional requirements caused by delayed deliveries. 

In SAP you can specify a minimum safety stock. If the result of the safety stock calulation by the system is lower than this limit, the safety
stock is automatically set to this value. You enter the minimum safety stock in the material master record (MRP 2 screen). 

Safety Stock: 

In IMG -> Materials Management -> consumption Based Planning -> Master Data -> Check MRP Types (transaction code OMDQ) you use the
indicator Calculate Safety Stock so that system calculates the safety stock automatically. 

The safety stock can be calculated automatically for materials planned with one of the consumption-based planning procedures if:  
1. The service level has been maintained in the material master record.  
2. Historical data exists  
3. The forecast has been carried out for the material. 

Dynamic Safety Stock: 

If the option Define Range of coverage profiles is chosen in IMG (Tr.Code OM1A) you can determine a safety stock level that takes into
account: 
1. Requirements.  
2. Range of coverage 

The limiting factors to the above are: 

1. Maximum and minimum range of coverage ( defined period , that is month, week or PPC planning calendar)  
2. Determination of various periods for the validity of the range of coverage. 

The system uses the formula: 

Dynamic safety stock = average daily requirements (ADR) x Range of coverage 

ADR = Requirements in the specific period / number of days in the total period length (defined period x standard days) 

Please note here that if you carry out the planning run even in the middle of the month the system will include even the requirements planned
at the beginning of the month. 

Please also note that you can determine the range of coverage for a maximum of 3 periods. 

1. Range of Coverage in the First Period  

2. Range of Coverage in the second period  
3. Range of coverage on the rest of the horizon 

However you have the option of maintaining different coverage for each of these periods. 

Based on your customization the system determines the number of days used for calculating your average daily requirement 

Minimum Stock Level (mSL) = ADR x minimum range of coverage  

Target Stock Level (Dynamic Safety Stock this is DSL) = ADR x Target range of coverage.  
Maximum Stock Level (MSL) = ADR x maximum range of coverage. 

Having confirmed the above, I will now try and explain through an example how the system calculates the Dynamic safety stock: 

Presume that the system has determined the ADR as 25 Kgs for a material. 

You have set the following in customizing: 

Minimum Range of coverage = 2 days  

Target Range of coverage = 6 days  
Maximum Range of coverage = 10 days 

Now the System determines the following; 

mSL = 2*25 = 50 KGs  

DSL = 6*25 = 150 KGs  
MSL = 10*25 = 250 KGs 
This is what happens for various levels of stock 

Case 1: 

Stock = 45 Kgs  
System Activity = DSL – stock  
Procurement Proposal = 105 Kgs 

Case 2: 

Stock = 60 Kgs  
System Activity = DSL – stock  
Procurement Proposal = 90 Kgs 

Case 3: 

Stock = 155 Kgs  

System Activity = none  
Procurement Proposal = none 

Case 4: 

Stock = 255 Kgs 

System Activity = System checks whether the procurement proposal is firmed and if yes it displays an exception message. 

Also note that in the case of Time Phased materials planning The range of coverage is calculated differently.

Dynamic Safety Stock Calculation

The dynamic safety stock is calculated in the planning run of the order proposal quantity. In the MRP evaluation, MD04 – you can check the
parameters used to calculate the dynamic safety stock in the period totals display.To set the dynamic safety stock themaster data
settingsrequired are,

1.      Maintain MRP view.

2.      In MRP 2 view enter the coverage profile which in configuration will carry the elements required as detailed below.

3.      Material master- you have MRP type PD.It is maintained in SPRO under the node->      

SPRO -Production-Material Requirements PlanningàPlanning-MRP CalculationàDefine Range of Coverage Profile (Dynamic Safety Stock).

It is maintained with respect to a plant as the calculation is plant specific.

The dynamic safety stock is calculated using the following formula: average daily requirements * range of coverage

The individual parameters are described below:

 Average daily requirements
The calculation of the average daily requirements is carried out using the following formula: requirements in the specified periods/number of
days in the total period lengthYou must maintain the following parameters for the calculation of the average daily requirements:

1.      Period indicator
You use this indicator to determine the calendar period for which you want to carry out the average daily requirements.
Here you can enter the following:

 weeks (W)
 months (M)
 periods according to the planned calendar (K)

2.      Type of period length -You use this indicator to determine the length of the individual periods in detail.
Here you can enter the following:

 workdays
 calendar days
 standard days- if you select standard days as a period length, you must determine the number of days per period in the field, “No.
standard days”
If you set standard days as the period length, you must enter the number of days per period in the “NO. standard days” field.
  

3.      Number of periods
Here, you define the number of periods you use to calculate the average daily requirements.

Determining the range of coverage

You can determine the range of coverage for a maximum of three periods and you can maintain different coverage for each period.
To do this, you must define the ranges of coverage and the periods in the screen section entitled, “Determine range of coverage”.
You also have the option of limiting the range of coverage in each of the three periods by entering a minimum and a maximum range of
coverage. The system checks whether the actual range of coverage ( available quantity / average daily requirements) lies below the minimum
range of coverage or above the maximum range of coverage. If this is the case, the dynamic safety stock level is recalculated using the
information for the target range of coverage.

Example – 1
Coverage profile – 001, with following settings assign in material master – MRP2 view,Period type = M
No of period =2
Type of length = 3 and days/period = 20.

Range of coverage for first period (target) = 3, no of periods= 2

Lets us say requirements areas below -
12.11.2007 – 1000
19.11.2007 – 2000No of days = 2*20 = 40
average Daily requirement = (1000+2000)/40 = 3000/40 = 750

Safety stock requirement = 750*3(target) = 225.Run MRP, result is as below

12.11.2007 – pl order qty- 1225 available qty  – 1225
12.11.2007 – VSF 1000- available qty  – 225
19.11.2007 – pl order qty - 2000 balance – 2225
19.11.2007 – VSF 2000-  available qty  – 225.

Example – 2

Coverage profile – 002, withfollowing settings, assign in material master – MRP2 view
Period = M
No of period = 1
Type period= 1 i.e. working days as per factory calendar, please check your factory calendar. it is taking form no of days of factory calendar,
remove the days which already passed, then remove holidays.
Example – In factory calendar -
 
2,3,9,10,16,17,23,24,30 are holiday.i,e 9 days in 30 days are holidays,
First, today is le us say 8th, hence from 30 days remove 7 days, ( as it is already passed), hence left with 23 days.
Holidays applicable are, 9,10,16,17,23,24,30 i.e. 7 days i.e. from 23 days I need to remove 7 days hence the working days are only 16 days.
 range of coverage = target 7, no of period = 1.
now my requirement is 3000 in that month
daily average consumption is 3000/16 = 187.5
safety stock = 187.5*7 = 1313.
 
12.11.2007 – pl order – 1 qty 2313 available qty  – 2313
12.11.2007 – VSF 1000- available qty  – 1313
19.11.2007 – pl order – 2000 available qty  – 3313
19.11.2007 – VSF 2000- available qty  - 1313.
  
I hope the above 2 examples clears the concept of dynamic safety stock calculation.

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NETCH, NETPL and NEUPL are three fundamentally different ways to schedule your MRP run:

 NETCH – Net Change Planning

 NETPL – Net Change Planning within Planning Horizon
 NEUPL – Regenerative Planning
SAP is keeping track of changes that are relevant for planning a material (like sales order entry, purchase order entry, stock release, etc.). A
planning relevant change signals to MRP that the material should run in the next NETCH or NETPL MRP run. MRP will thus only process
those materials that underwent some type of planning relevant change. This can decrease processing time of the MRP background run when
compared to processing ALL materials.
Keep reading this article @ SAP Mental Notes

MRP processing keys
7 Replies
NETCH, NETPL and NEUPL are three fundamentally different ways to schedule your MRP run:

 NETCH – Net Change Planning

 NETPL – Net Change Planning within Planning Horizon
 NEUPL – Regenerative Planning

MRP Processing Keys

I will elaborate on these three options and their workings:

SAP is keeping track of changes that are relevant for planning a material (like sales order
entry, purchase order entry, stock release, etc.). A planning relevant change signals to MRP
that the material should run in the next NETCH or NETPL MRP run. MRP will thus only process
those materials that underwent some type of planning relevant change. This can decrease
processing time of the MRP background run when compared to processing ALL materials.
The difference between NETCH and NETPL is the planning horizon. In NETPL, if a change
occurs outside the planning horizon (e.g. a sales order is entered 2 months away and your
planning horizon is 6 weeks), then the material is not included in MRP even though there is a
change. Be careful with this, because that same sales order is not recognized as a new
requirement when it will shift within the planning horizon as we move towards the future.

Regenerative planning (NEUPL) disregards the fact whether or not planning relevant changes
were made to the material. It will process ALL materials (with an MRP relevant planning type
in the material master’s MRP1 tab).

Another element worth mentioning is the processing indicator. You can use the processing
indicator in the stock/requirement list or MRP list to indicate that you checked the material.
You can use a filter in the collective access transaction MD06 so you only have to review
unprocessed materials (the materials that you didn’t check yet).

MD06 - Processing Indicator

MD06 Filter Processing Key

Planning background MRP jobs

Background scheduling of MRP jobs is done through program RMMRP000 (SE38). This screen
is similar to transaction MD01 that is used for foreground (on-line) processing. Alternatively to
RMMRP000 you can schedule variants through transaction MDBT. I usually plan two MRP jobs
for my customers:

1. Weekly MRP: MRP NEUPL on Monday morning: we start with a new week and all
materials are processed. All processing indicators are reset.
2. Daily MRP: MRP NETCH runs from Tuesday to Friday, early in the morning, only
materials that have undergone some type of planning relevant change are picked up
for MRP, safely assuming that all other materials are still OK. The processing indicator
of the materials in these runs are reset, the ones not included in MRP are untouched.

Note that in this MRP run setup there are two jobs: daily and weekly. This results in an MRP
run on every day except Saturday and Sunday. Obviously if weekends are working days for
your company’s planning department weekends needs to be included as well.
Also MRP runs in the morning and not before midnight. You want the stock date to be today’s
date. Even though there is only five minutes difference between before and after midnight:
yesterday’s stock date just looks as if you are using data that is not current.

I recommend staying away from NETPL. There is really no advantage using this procedure;
only risk.

Production Planning
Master Production Schedule (MPS) :
MPS operates within only one level of the BOM, While MRP can be utilized throughout all levels of a material?s BOM. If a MPS is run on a
material, the necessary orders are planned at that level. Dependent requirements (if any) are placed on the next BOM level down, and then
the process stops.

Main Idea : Master production scheduling (MPS) is a form of MRP that concentrates planning on the parts or products that have the great
influence on company profits or which dominate the entire production process by taking critical resources. These items are marked as ?A?
parts (MPS items) and are planned with extra attention. These items are selected for a separate MPS run that takes place before the MRP
run. The MPS run is conducted without a BOM explosion so that the MRP controller can ensure that the Master schedule items (MSI) are
correctly planned before the detailed MRP run takes place.

The master production schedule is a line on the master schedule grid that reflects the anticipated build schedule for those items assigned to
the master scheduler. The master scheduler maintains this schedule, and in turn, it becomes a set of planning numbers that drives material
requirements planning. It represents what the company plans to produce expressed in specific configurations, quantities, and dates. The
master production schedule is not a sales item forecast that represents a statement of demand. The master production schedule must take
into account the forecast, the production plan, and other important considerations such as backlog, availability of material, availability of
capacity, and management policies and goals. Syn: master schedule.

Material Requirements Planning (MRP) :

A set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials.
It makes recommendations to release replenishment orders for material. Further, because it is time-phased, it makes recommendations to
reschedule open orders when due dates and need dates are not in phase. Time-phased MRP begins with the items listed on the MPS and
determines

(1) the quantity of all components and materials required to fabricate those items and

(2) the date that the components and material are required. Time-phased MRP is accomplished by exploding the bill of material, adjusting for
inventory quantities on hand or on order, and offsetting the net requirements by the appropriate lead times.

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Different-planning-views
End-users can get confused about the difference between;

MD04 – Stock/requirement List and

MD05 – MRP List.

MD05 will show only the situation as it was since the last MRP run. This transaction is suitable for reviewing the MRP run. Without taking into
account new stock issues or receipts MD05 is ideal for evaluating your MRP parameters. Look at the stock date, this is the date of the last
MRP run.

MD04 will show you the current stock situation taking into account all requirements and planned receipts. The stock date is always current
(=today). This view is appropriate if you make procurement decisions in dynamic environments, i.e. requirement situation changed a lot since
the last MRP run.

Example: MRP has run for a material on Monday early morning. The planner will not evaluate the procurement proposals until Monday
afternoon. Customer service entered a large number of sales orders in the system, and the warehouse already shipped quantities. In this case
I suggest the planner uses MD04 to get the most up-to-date planning situation. On top of that I would actually recommend the planner gets out
 of bed early and does the planning evaluation first thing in the morning. If a planner allows a lot of changes to happen, the procurement
proposal out of MRP may not make sense anymore.

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Materials Management
MRP and Consumption-based planning are two fundamental SAP planning types that can be used to determine a product’s requirements. To
avoid any confusion on the subject: I am not talking about the MRP run that is executed through MD01 and MD02. I’m talking about planning
types that are set in the Material Master’s MRP1 tab. The MRP type is used in the MRP run to determine HOW procurement and/or production
quantities are calculated.
MRP

When you plan a material according to MRP logic it means that it’s requirements (i.e. how much of this product  do I need in the future) are
dependent on:

1. independent requirements determined by a Sales and Operations Planning process (S&OP or SOP), or;
2. dependent requirements coming from another material of which the material in question is a component (part of BOM).

The key-word here really is: dependency. The dependency of one material’s future demand to requirements determined elswhere. MRP is
commonly used in a production environment.

Consumption-based planning

When you plan a material according to Consumption-based planning logic, the future demand of the product is always determined by it’s
historical demand. In SAP there are two ways to approach this:

1. Forecast-based planning: on the basis of historical demand you estimate future requirements and you procure according to this
estimate. This is suitable for materials that are sold or produced with higher volume. Only then a decent statistical forecast makes sense.
2. Re-order point procedure: when your stock falls below a pre-determined stock level the system issues a procurement proposal.
This is generally applied to low-volume or bulk materials. Forecasting on low-volume materials is too error-prone. Forecasting low-volume
materials will result in unreasonably high safety stocks (I will blog on the relationship between forecasting and safety stock in the future).

The key-word here is: independency. The material’s requirements are determined independent of another material or process. Consumption-
based planning is commonly used in a wholesale environment, but also in a production environment for some raw materials, additives and
bulk materials.

Similarities

A Sales and Operations Planning process is, like forecast-based planning, also based on forecast. The fundamental difference in comparison
with forecast-based planning (a Consumption-based process) is that:

 in SOP a material’s sales forecast is based on aggregated historical demand for multiple materials in a product-group or a sales-
region. The aggregated sales forecast is then manipulated by the production department for capacity reasons. The final aggregated forecast is
then spread over the individual materials according to a distribution logic (10% to product X, 8% to product Y, etc.).
 in Consumption-based planning the forecast is always based on the material’s own historical demand. There is no-one in the
process that manipulates the numbers.