Material Requirement Planning Procedures

Working Principle of MRP

Results of MRP

Level at Which MRP Can be carried out

⮚ MRP run is always carried out at MRP area level. MRP area can be Plant, Storage Location or
Sub-contractor. If you want to run MRP at Plant level then you don’t need to activate MRP
area, system will automatically activate MRP area at Plant level. If you want to run MRP at
Storage Location or Sub-contractor then you have to activate the MRP area at those level

Pre-requisite of Running MRP

⮚ Activating Requirement Planning ( T-Code OMDU)

⮚ Maintain Plant Parameter ( T-Code OPPQ)

⮚ Maintain MRP relevant Master Data in the material master ( T-Code MM01/MM02)

Executing Material Requirement Planning (MRP )

⮚ MRP Run at Plant Level – T-Code MD01

⮚ MRP Run at Single Item Multi Level ( BOM Explosion) – T-Code MD02

⮚ MRP Run at Single Item Single Level ( No BOM Explosion ) – T-code MD03
MRP Control Parameters

Processing Key in MRP

 ❖ MRP Type

When you decide to plan a material using MRP, one of the very first parameters
That you define in the material master is the MRP type. A MRP type determines what type of MRP
Procedure will be carried out for that Material

⮚ MRP Type PD - MRP

This type of planning is carried out for the quantities planned against PIR or quantities planned against
incoming sales orders. The system doesn't consider nor ask for any forecast information or historical
Consumption values

⮚ MRP Type VB – Manual Reorder Point Planning

In manual reorder point planning (MRP type VB), when the plant stock and firmed receipts of a material
fall below the reorder point, the system triggers planning for the material

⮚ MRP Type VM – Automatic Reorder Point Planning

In automatic reorder point planning (MRP type VM), the system automatically calculates the recorder
point and the safety stock. The system uses historical consumption data to predict and arrive at future
consumption figures. You may also need to extend the forecasting view of the material master and also
select the relevant forecasting model

⮚ MRP Type VV – Forecast Based Planning

In forecast-based planning, you have to execute material forecasts first, and based on the results of the
forecast, the system calculates and plans future consumption quantities. You can select the forecasting
periods to be in days, weeks, months, or for the entire year

⮚ MRP Type ND – No Planning

If you want to exclude any material from the MRP then you have to assign MRP type ND in that
Material

⮚ MRP Type X0 – External Planning

No MRP run is carried out by any other 3rd party software then you have to assign MRP type X0 in
that Material

▪ Net Requirement Calculation for MRP Type PD –

In MRP net requirement calculation is executed in the planning run to determine whether a material
shortage exists for a certain material. In net requirement calculation the system determines the
available stock based on the following formula

Recipient = Plant stock -Safety stock + Open order quantity (purchase orders, production orders,
fixed procurement proposals)
Requirement = Requirement quantity (PIR, customer requirements,
Material reservations, forecast requirements for unplanned additional requirements)

Net Requirement = Requirement – Recipent

If Requirement is greater than recipient

Net Requirement – Procurement Quantity / Planned Quantity

Influencing Factors in Material Requirement Planning ( MRP )

There are large number of factors that you 'II define in the four different MRP views of the material
master to influence the planning results of MRP

⮚ Lot Sizes

⮚ Scrap

⮚ Safety Stock

⮚ Rounding
 ▪ Lot Size

When the system determines a material shortage after performing a net requirements
Calculation, it looks up to the lot-sizing information, maintained in the MRP 1 view of the material master.
The lot sizing specifies the quantity that the system should propose when it comes across a quantity
shortage of a material.

There are three different lot-sizing procedures in the SAP ERP system

● Static Lot-sizing Procedure

● Periodic Lot-sizing Procedure

● Optimum Lot-sizing Procedure

▪ Static Lot-sizing Procedure

⮚ Exact lot sizing (EX)

The system creates planned orders or procurement proposals to cover the exact shortage
requirement only. For example, if a new requirement quantity of a material is 110 units, the
system creates the procurement proposal for 110 units only.

⮚ Fixed lot sizing (FX)

The system proposes the total requirement in multiples of fixed lots. For exam- pie, if the lot size is fixed
as 50 units, and the shortage quantity is 250, then the system creates 5 planned orders to cover the
shortages

⮚ Replenish to maximum stock level (HB)

The system creates planned orders to fill it to the maximum stock level. You have to define the
maximum stock level in the relevant field of the MRP 1 view of the material master. For example, if
the maximum stock level is 300 units, and the demand quantity is 50 units, the system creates a
planned order of 350.1t first ensures that that the 300 units of stock fill up, and then the demand
quantity is added to it

▪ Periodic Lot-sizing Procedure

The periodic lot-sizing procedures are further categorized into daily lot sizing, weekly lot sizing, and
monthly lot sizing. For example, if the lot-sizing procedure is daily, then the system considers demand
with all of the receipts for that day and creates a daily shortage proposal in case a shortage exists. If
it's a weekly lot size, then the system combines all of the requirements for a week and comes up with
one procurement proposal

⮚ Monthly Lot Size ( MB )

⮚ Weekly Lot Size ( WB )

⮚ Daily Lot Size ( TB )

▪ Optimum Lot-Sizing Procedures

The optimum lot-sizing procedures attend to economical lot-sizing requirements
of the company and include the Groff lot-sizing method and part-period balancing.
In these kinds of procedures, the system takes into account the costs of the
Procurement as a well as storage costs. In the optimum lot-sizing procedure, the production or purchase
of materials entails fixed lot size costs such as setup costs for machines or purchase order costs and
variable costs, which are referred to as capital tie-up due to stockholding. To minimize the variable costs,
you need to ensure that you procure quantities as small as possible. To minimize the fixed costs, you
should procure quantities as large as possible. Optimum lot-sizing procedures consider variable and fixed
Costs, and based on these costs, it determines optimal lot sizes according to different procedures

▪ Scrap –

Companies are often faced with problems relating to materials they can't use, known as scrap, whether
from defective finished goods produced, excess consumption of raw material due to wastage in the
production process, or operational inefficiencies. The SAP ERP system offers several options to enter
scrap or waste details at every level-the assembly or the component (raw material) level-so that production
and procurement planning are closely synchronized with actual and practical situations

Based on historical data or practical experience, you can maintain assembly and component scrap as
master data, which subsequently facilitates production and procurement processes. Scrap is treated
differently in the SAP ERP system

⮚ Assembly Scrap –
Assembly Scrap is the scrap that occurs during the production of a material if the material is as assembly.
Due to generation of assembly scrap during the production, we will get less output than Planned output .
Now to get the actual production as the planned one we need to increase the planned quantity by the some
percentage (based on generation of assembly scrap percentage) so that we will get the output as per the
expectation.
 o Master Data Maintenance - Have to maintain the assembly scrap in the material master (MRP1
view) as percentage in the assembly scrap field for the assembly material

o Impact of Assembly Scrap in MRP Run - Assembly scrap increases the Planned Order Quantity for
the assembly material & dependent requirements of the component materials are therefore
increased correspondingly. For example the Planned Independent requirement quantity for the
material is 10,000 EA & assembly scrap maintained for the material is 5%, the Planned order
quantity generated by the system as a result of MRP run is of 10,500 EA
o Impact of Assembly scrap in Production Order - Assembly scrap increases the order quantity of the
header material & requirement quantity of the component materials are therefore increased
correspondingly.

⮚ Component Scrap –

Component Scrap is applicable only for the Component material. It is the scrap that occurs during the
production process, where the component material is getting consumed. Component scrap increases
the dependent requirement quantity or required quantity of that component material

o Master Data Maintenance - Component scrap can be maintained in the MRP4 view of the material
master. This Component scrap is relevant for all BOM where this Component will be used

o Component scrap can also be maintained in the BOM item details (Basic Data Screen ) as shown in
the below screen shot. This Component scrap is relevant for the individual BOM

o The Component scrap maintained in the BOM has higher priority than Component scrap
maintained in the material master

o If there is also assembly scrap for a higher- level assembly, the system adds together the assembly
scrap & component scrap

o Impact of Component Scrap in MRP - In Material Requirement Planning ( MRP ) Component

scrap is used to determine the quantities of component required. when exploding the Bill of
Material ( BOM ) during the MRP run the system increases the required quantities of the
Component by the calculated scrap quantity

o Impact of Component Scrap in Production Order - If Component Scrap is maintained, then During
Manual creation of Production Order, system increases the requirement quantity of the component
material by calculating the component scrap

▪ Safety Stock –

To cover unforeseen material shortages or unexpected high demand safety stock is maintained in SAP.
Safety Stock behaves like requirement in SAP & subtracts it from material availability calculation (net
requirement calculation)

▪ Rounding –

In some cases, it's useful to round the quantities of the procurement proposals. In the simplest business
scenario, you can use a rounding value. In this case, the order quantity of the requirement coverage
element always represents a multiple of the rounding value. In more complex scenarios where the rounding
value depends on the requirement quantity, you can use a rounding profile. The rounding
Profile enables you, for example, to model different pack sizes
 ▪ Prerequisites before Running MRP in SAP

The Following Prerequisites should be followed before executing MRP

⮚ Closing of all Open Purchase Requisition which are not required ( requirement element )

⮚ Closing of all Open Purchase Order which are not required (receipt element)

⮚ Closing of all Open Stock Transport Order (STO) which is not required

⮚ Technical Completion of all Open Process / Production Order which are not required (receipt
element)

⮚ Deletion of all Open Planned Orders which will not be used to create Process/Production Order
(receipt element)

⮚ Deletion of all unutilized Balance quantities of Planned Independent Requirements(PIR) of the

previous month ( requirement element)

⮚ Checking the MRP relevant Master Data ( BOM, Routing, Production Version) in the System
before executing the MRP

Importance of Planning files in MRP – With respect to the selection criteria ( NETCH/NETPL) you
take during MRP run system check for the materials which are having entries in the planning file with
the relevant indicators ( NETCH/NETPL) & system plans only for those materials. So in order to Plan a
material PLANNING FILE ENTRY is mandatory
Activate Planning File entry – In order to create (or to get the entry automatically) in planning file
the basic perquisite is that you need to activate the MRP for the required Plant (t-code OMDU). As
Soon as this is activated and you create any new material than the entry of this material is created
automatically in the planning file

Difference between Processing Key -NETCH / NETPL & NEUPL –

When you select NEUPL (Regenerative planning), the system plans for all the material which are in
the planning file. This is mostly used when you the first time or in case like after major changes of
master data or after mass upload of the materials

When you go for NETCH planning, MRP first check for this indicator in the planning file and plans
Those materials only

Changes like:
⮚ Changes in stock

⮚ Changes in purchase requisition, purchase order, sales order, reservations, dependent

requirement, forecast requirement
⮚ Deleting receipts and issue element
⮚ Changes in material master concerned to planning run

When you go for NETPL (net change planning in planning horizon), those materials are only planned
which has undergone changes for the planning specified horizon. This is mentioned in the planning
horizon

▪ Settings/Configuration needs to done to Run the MRP

⮚ Activate Material Requirement Planning for the Plant (T-Code OMDU )

⮚ Maintain Plant Parameters ( T-Code OPPQ)

⮚ Maintain Configuration for MRP Group ( Optional ) ( T-Code OPPR)

⮚ Maintain MRP views in the material master for which you to run the MRP ( T-Code
MM01/MM02)

⮚ Priority of Customizing & Material Master in MRP Run

❖ Maintain Plant Parameter

SAP MRP is run at plant level or at a group of plant

level (called as scope of planning), thus the MRP
configuration is done at Plant level.

Transaction code OPPQ takes you in to the SAP

MRP configuration called as – Plant Parameters
for Material Requirement Planning. The Path
which can be used is Logistics > Production >
Material Requirement Planning > Plant
Parameters > Carry out Overall Maintenance of
Plant Parameters
▪ MRP Group – A materials requirement planning (MRP) group is an object that you can use to
assign common control parameters to a group of materials to plan and organize

Use of MRP Group –

You can use MRP groups if planning per plant is too superficial for your business needs and
you want to assign control parameters to specific material groups that deviate from the plant
definition (for example, the creation indicator for purchase requisitions, schedule lines,
planning horizons and so on).

Advantage of Working with MRP Group –

Working with MRP groups can be convenient for a plant or an organization, since by
assigning the MRP groups to a set of materials, would allow planner to configure these
materials (through MRP Groups) to behave in a certain manner for planning purposes. In
other words, all the materials in the group would then have a unique planning method or
unique planning features. Thus the organization can device multiple MRP groups with their
own planning features and characteristics rather than having one set of planning features set
at the plant level. The group could have its own unique:

● Strategy group

● Conversion order types

● Planning horizon

● Planning time fence and roll forward periods

● BOM and task list selection ID’s

● Direct procurement parameters

● Planned order scheduling parameters

● Start number of days allowed in the past

● Availability checking groups

 Configuration of MRP Group –
MRP Group can be maintained using
transaction code OPPR or the transaction path
– Logistics > Production > MRP > MRP Groups

▪ MRP Area –
The MRP area represents an organizational unit for which material requirements planning is
carried out independently

Basically, there are three types of MRP area:

● Plant MRP Area

The plant MRP area initially contains the plant together with all its storage locations and stock with
subcontractors.

When you have defined MRP areas for storage locations and for subcontractors and you have
assigned the materials, the plant MRP area is reduced by exactly this number of subcontractors and
storage locations. This is because they are now to be planned separately.

● MRP Areas for Storage Locations

You can define an MRP area that consists of a particular storage location, by creating an MRP area
and assigning the storage location to it. Material requirements for this storage location are then
planned separately from the rest of the plant.

You can also group several storage locations into one MRP area, by creating an MRP area and
assigning the storage locations to it. These storage locations are then planned together.

● MRP Areas for Subcontractors

You can also define an MRP area for each subcontractor.

Features of MRP Area –

● You can carry out material requirements planning for MRP areas using all MRP procedures and all
lot-sizing procedures.

● You can also carry out an independent material forecast for MRP areas using your own parameters.

● The material consumption values are updated separately for each MRP area.

● A separate ATP check is carried out for each MRP area

▪ Scope of Planning in MRP Run –

SAP provides an option to plan multiple plants

together or multiple MRP areas in one planning
run in a sequence. Transaction code OM0E can be
used for configuration or the logical SAP path –
SAP Customizing Implementation Guide >
Production > MRP > Planning > Define Scope of
Planning

▪ Drawback of MRP

● During MRP run system consider infinite capacity

● If there are multiple active alt BOM of the FG or SFG material, then during BOM
explosion in MRP run system will take the first alt BOM

● If there are multiple active Production Version of FG or SFG then during MRP run
system will consider/pick up the first active Production Version

▪ Firmed Panned Order

● If Planned Order is manually created

● If any manual changes has been done in the MRP generated Planned Order

● If Partial Conversion of Planned Order has been done

▪ Firmed Purchase Requisition

● If Purchase Requisition is manually created

● If any manual changes has been done in the MRP generated Purchase Requisition