SAP. PRODUCTION DETAILED PLANNING Curs

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SAP.

PRODUCTION DETAILED PLANNING

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PP processes (continued from previous lecture)
 Master Production Scheduling (MPS) – Detailed Scheduling
 Material Requirement Planning (MRP)
Production Execution (based on production order)
Purchasing (based on purchase order/requirement)

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I. Master Production Scheduling (MPS) vs Material Requirements Planning (MRP)
Both MPS and MRP are related to material planning, but they have different
objectives.
In simple terms, MPS is the planning of critical products (materials that have a
strong influence on profit or use critical resources), while MRP is the planning
of all other (non-critical) materials.
MPS operates within only one level of the BOM (without a BOM explosion),
while MRP is utilized throughout all levels of a material's BOM.
For MPS materials planning does not change every day (like MRP can) but
typically after 2-3 months. Once there is a master production schedule then
we can plan the down material by MRP also.

To summarize: MPS is a form of MRP that concentrates planning on


the 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. This two stage strategy for
calculating the overall plan gives the production planner the
opportunity to evaluate any planned orders generated by the MPS
process prior to the calculation of the material requirements plan. This
is advantageous when the bill of material is very complex.

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The MPS prerequisites

Prerequisites:
 Set a MRP type for MPS in the material master (MRP 1 view) or in the MRP configuration.
 Enter a planning time fence in the material master.
The planning time fence is the number of work days, within which the master plan (or better say the
procurement proposals of a master plan) is protected from being disturbed or changed from any automatic
changes (of a MRP Run). The procurement proposals are firmed so as to protect them from any changes. In
other words, in the planning time fence, the system does not create, change or delete any procurement
proposal.
The system calculates the time fence from today’s date plus the “number of days mentioned as planning time
fence” in the material master (MRP1 view) or in the MRP configuration (where the planning time fence can be
defined for plant or 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 disturbing this fenced period).

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The MPS procedure

1. Start the total planning or single-item planning for master schedule items (MSI).
All changes to be made to the master plan are only proposed within the planning time
fence.
Logistics --> Production --> Production Planning --> MPS --> MPS --> Single-Item,
Multi-Level
(OR Single-Item, Single-Level used for planning run for one material only)

2. Start the total planning run for all dependent parts (work with the single-item,
multi-level planning in the menu for MPS or choose to run the MRP for the dependent
parts).

Transaction codes to run MPS: MD42: MRP Single-Item, Single-Level


MD41: MRP Single-Item, Multi-Level MD43: MRP Single-Item, Interactive

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MPS&MRP Planning Examples

Scenario 1. Finished material is A, which contain Components B,C and D. Component C has to be
planned for MPS because is a costly one and will be imported (ROH), the other Component B and D are
also ROH but are locally purchased.
Set MRP types to M1 - M4 (depending on the planning time fence) for A and C. Set PD for B and D. Run
MD41 (Single Item Multi Level MPS) for A first (because if C is MSI, then A should be treated as one),
and see how C look like. Adjust plan for A and C until satisfactory. Then later, run MRP for B and D.

Scenario 2. There is an assembly 'A' having component assembly 'B'. 'C' is the raw material for 'B'. Item
'A' is a MSI and is duly marked in Material Master. Item 'B' and 'C' are marked as 'PD'.
With MD42 is run only the top MPS item ('A' in this case).
Dependent requirements will be passed to MRP item ('B’): MRP run is required with MD02 (Single Item
Multi Level) to plan 'B' and all MRP items below (recte ‘C’).

As a general rule, the materials marked for MPS in Material Master will be picked when MD41 or MD42
are used, while MD02 will pick the material marked as PD in MRP type.

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II. Material Requirements Planning (MRP) – a popular planning system

MRP's popularity is largely due to its simplicity, both in concept and execution. The three objectives of a
MRP system are:
1. to maintain the least inventory required to adequately meet the job requirements;
2. to guarantee the finished products can be produced and delivered in a timely manner;
3. to efficiently plan purchasing, manufacturing, and delivery to flow without interruption or incident.
Failure to perform in any of these three areas will adversely affect the outcome of the entire system.
Traditionally, Material Requirements Planning is a system of increasing profits through improved planning
of production times, inventory needs, and final delivery of products. Remark that the MRP was
developed in 1964 by Joseph Orlicky and Black&Decker was the first company to implement this
system in the same year. The system is normally used as a software application, but it can also be
successfully implemented using pencil and paper. MRP software is regularly updated to meet the
changing needs of different companies and industries.
The Material Requirements Planning concept was developed in the 1960s and refined and enhanced
into the early 70s. By 1975, it was so successful that it had been implemented in about 150
companies in Europe and the United States. By 1981, around 8,000 companies had embraced the
MRP methodology. Less than ten years later, in 1989, approximately a third of all software sales in
America were MRP-based.

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Material Requirements Planning (MRP) – concepts and definition

Dependent demand and independent demand were also defined as MRP concepts: independent demand
as demand originating outside the plant or production system, and dependent demand as demand for
components. The same goes for the bill of materials (BOM) defined to specify the relationship between
the end product (independent demand) and the components (dependent demand). MRP take as input the
information contained in the BOM.

MRP software simplifies the process and can be adapted for any type of manufacturing or production
environment. It develops a plan based on information entered into the system regarding the production
type and characteristics. The software program then develops a manufacturing plan based on bills of
material, inventory status, master production schedules, open orders, and sales forecasts.

Definition: MRP is a production planning and inventory control system used to manage manufacturing
processes. It determines the quantity and timing of the production or purchase of subassemblies and raw
materials needed to support the production plan.

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MRP – Overview of related concepts and activities

In order to ensure the availability of materials based on the need generated by MPS and the Demand
Program, MRP includes and covers the following aspects:
 the system calculates the net requirements while considering available warehouse stock and
scheduled receipts from purchasing and production
 all levels of the bill of material are planned during MRP
 the output of MRP is a detailed production and/or purchasing plan
To overview the main steps in MRP, we identify 5 issues:
• Net Requirements Calculation
• Lot Size Calculation
• Procurement Type
• Scheduling
• BOM Explosion

MRP can be done at plant or area level.


MRP area planning is useful if want to
restrict the planning to certain storage
locations.

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 Net requirements calculation
Basically, the MRP process starts with the requirements given directly by customers and with those
planned in advance by Demand Management. In order to cover these independent requirements, MRP
runs and calculates procurement quantities and dates. 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 Bill of Materials (BOM). If a material shortage
exists, planned orders are created at every BOM level to cover requirements. These planned orders, will
be converted into Production Orders or Purchase Requisitions (PurReq). Normally, PurReq will generate
Purchase Orders (PO).
Based on total requirement that has to be covered, the net requirement for a material is calculated using
data about the existing stock, firmed receipts and firmed purchase orders. The calculated shortage
delivers a procurement proposal, as seen in the figure:
26
90
8

44

22
10

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 Lot sizing
Lot sizing refers to the process of determining production quantities (for materials produced in-house)
and order quantities (for purchased items). The calculation type may be:
1) Static - based on fixed values maintained in the Material Master
In static lot-sizing procedures, the procurement quantity is calculated exclusively by means of the
quantity specifications entered in the material master. The static lot sizing procedures are: ‘exact lot
sizing’, fixed lot sizing’ and ‘replenish to maximum stock level’.
For exact lot size (EX), 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 28 units, the proposal will be created for an
exact 28 units.
For “fixed lot size”, the total requirement quantity as proposed by the system to cover the shortages
is divided into the number of fixed quantities as included in the material master (MRP 1 view), for
example, if the lot size is fixed as 10 Units and the shortage quantity is 28, then the system will create
3 planned orders to cover the shortages.

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Lot sizing (cont.)
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.
2) Periodic lot sizing procedures are namely - the ‘daily lot sizing’,
‘monthly lot sizing’ and ‘weekly lot sizing’. 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. (this is the standard configuration of lot
sizes, but the end of the period can also be set).
For example, 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 is normally put at the start of the
week.
3) The optimum lot sizing procedures are not very popular. They
deal with the concept of economical lot sizing, namely the ‘Groff lot
sizing method’ and ‘part period balancing’. These procedures take
into account the costs of the procurement and other involved cost
elements. The requirements are grouped together in a way which will
reduce the costs.

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 Scheduling the procurement proposals

MRP schedules the procurement proposals (automatic task). To expect the MRP run to schedule the
procurement proposals correctly, following data in the masters have to be properly maintained:
a) In-house production times (for in house manufacturing, maintained in the material master MRP 2 view),
b) Planned delivery times (for external procurement, in the material master MRP 2 view),
c) Interoperation times, set up times and tear down times (optional for in house production, in the material
master or routing),
d) Planned goods receipt times (optional for external and internal procurement)
In scheduling, the element of calculation is the lead time. For example, if the material externally procured
is a make-to-stock item, the lead time is the sum of the time required for the supplier to receive and
process the order, take the material out of stock, package it, load it and deliver it to us. In addition, we
might want to add the time required to receive the material in the warehouse (unload, inspect, move).
Scheduling for externally procured materials: SAP uses the planned delivery time (lead times) and
goods receipt times in Material master (MRP2 view) to schedule the delivery & release dates for the
procurement proposals. Either forward scheduling or backward scheduling can be used for these
materials. SAP uses the basic date scheduling in the case of externally procured materials.

See MRP2 view on slide 10

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Scheduling the procurement proposals (cont.)

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.

1.Basic Date scheduling – where the lead


times in the material master (MRP2 view) are
used to calculate the planned order start and
end dates. It is used if the lead times are pretty
much constant for a product and the detailed
scheduling is not wanted. In such cases
building of Routing/Recipe is not required.

Since malfunctions and disturbances can never be


fully prevented in the course of a process,
additional floats can defined (in the master record
of the material to be produced). The float before
production can compensate for delays in the BS-Basic Start date BF-Basic Finish date
staging of material components, while the float
after production for disturbances in the production
process.

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Scheduling the procurement proposals (cont.)

2.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. It is used when detailed scheduling and capacity allocation on the work centers is necessary.

The production dates are determined using the routing. The system uses the floats that are allocated to the
material via the scheduling margin key in the material master. These floats include the float before
production and the float after production, as well as the extra time factors specified in the routing such as the
queue times, setup times, labor times, machine times, and so on.

The system calculates the float after


production using the order finish date and
thus determines the production finish
date. Starting from the production finish
date, the individual operations of the
routing are then scheduled backwards. The
starting date of the first operation is the
production start date. The float before
production is the number of workdays that
are planned as a buffer between the order
start date and the production start date. By
using this float, delays in material staging
do not cause delays in starting production.

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 Procurement Type
The MRP result in terms of purchase requirements or planned orders depends on the type of procurement that
is maintained in the material master (MRP2 view). Possible values for procurement type are:
 E for in-house (internal) production
 F for external procurement
 X for both procurement types
Having this information, the MRP knows how to deal with each material, unless there is X type (e.g. a material
usually produced in-house, but sometimes, due to lack of capacity reasons, is externally procured). In this case
the MRP will propose in-house production and create a planned order. If the controller wants an external
procurement, he may convert the planned order into a purchase requisition.
In relation with this step, there is a control parameter in the MRP run, indicating the type of conversion to be
done when procurement type is X. This planning control parameter controls whether the procurement proposal
to be created as a purchase requisition rather than planned orders in the planning horizon or in the opening
period. There is also an option to have the system always create planned orders instead of purchase
requisitions.

See MRP2 view on slide 10

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Procurement Type (cont.)
Summary:
 Planned Order or Purchase Requisition (planning documents) are requests created in the planning
run for a material in the future (converts to either a production or purchase order)
 Production Order (execution document) is an internal command to produce a specific product at a
specific time
 Purchase Order (execution document) is a request or instruction to a vendor for a material or service
at a specific time

E X

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 BOM explosion
In the process of planning for an in-house manufactured material, the system explodes its Bill of Material
(BOM) and identifies the components/subassemblies and their quantities required in the manufacturing.
The system plans all the dependent requirements as found in the BOM of the assembly or the subassembly.
Such kind of BOM explosion of all the levels below is only carried out in single item-multi level MRP run.
The BOM explosion automates the calculation of input products (raw materials and components) which are
necessary for a certain quantity of desired finished products. A simple example of multi-level planning and
scheduling is presented in the next figure.

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III. The MRP run

SAP MRP uses the following factors in its planning run:

a) Planning strategies - make-to-order, make-to-stock, or variations on these


b) Planning types - type of the MRP run, i.e.: consumption based planning
methods (like reorder point planning) or demand based planning methods (like
lot for lot MRP planning);
c) Lot sizing procedures set for the material
d) Master data such as BOM, Routings/Recipes, quota arrangements, source
list, vendors, purchase info records, customer masters etc., and transaction data
such as sales orders, forecast, planned independent demands (forecasted
demand)
The MRP controller is the person responsible for a group of materials in MRP
in a plant or company. Each material that takes part in the MRP run must be
assigned to a MRP controller.

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The SAP transaction codes to run MRP are:

MD02: MRP Single-Item, Multi-Level


MD03: MRP Single-Item, Single-Level

Planning is defined to run total (all materials


from a specified plant) or for a specific
material:
 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.

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MRP Run control parameters

All planning types have a selection screen to define the


control parameters. We have already discussed some
of them, but for the MRP run the most important is the
processing key.

Three types of processing key:


NETCH (Net change planning in total horizon): The
system considers those materials in the planning run
from their last MRP run in the total horizon. It
depends if there was any change in stock, PurReqs,
POs, etc.
NETPL (Net change planning in the planning
horizon): The system considers those materials in the
planning run which have undergone any change in
the planning horizon defined. Therefore, the number
of materials to be taken for MRP Run can be
restricted by defining the planning horizon.
NEUPL (Regenerative planning): It plans all the
materials for the MRP Run irrespective of the
changes they have undergone. This plan takes a long
time to obtain the final result.

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MRP Run control parameters (cont.)
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 possible changes are: (x) an introduction of a demand put for the
material or (x) creation of reservation for the material or (x) the material has a sales order created or (x) the
material is issued for production or (x) the material is issued to the sales order delivery or (x) the material is
received from a purchase order or production order or (x) the receipts or demands are deleted.
NETCH is the recommended processing key, though when MRP is used for the first time, it is always
nice to use the regenerative planning key in which the system plans all the materials in the plant or plans
for all the materials in the scope of planning run.

Planning mode parameter defines how to deal with procurement proposals from the last planning run:
1. The system reactivates unfirmed procurement proposals and, if necessary, adapts the quantity and date
to the new planning situation. The BOM is re-exploded only for procurement proposals that are to be
adapted.
2. The system reactivates unfirmed procurement proposals and, if necessary, adapts the quantity and date
to the new planning situation. The BOM is always re-exploded.
3. The system regenerates unfirmed procurement proposals completely.

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MRP run reports

When the MRP run is complete, evaluation follows. The main instrument used for evaluation and next for
carrying on the flow is the Stock/Requirements List (S/R List with transaction MD04).
Logistics --> Production --> MRP --> Evaluations --> Stock/Requirements List

SAP also offers a MRP list, which is displayed right after the planning is carried out for the material. MRP
list contains the results of the planning run and it is not a real time situation list of a given material or
materials.
Logistics --> Production --> MRP --> Evaluations --> MRP List

When accessing the MRP list after the planning run is carried out, using the transaction codes MD05
(individual material at a plant) or MD06 (collective display for multiples of a given MRP controller, product
groups, or vendors), it will display the planning situation as per the last MRP Run (it will mention the time
and date of the last planning run on the top of the screen).

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The MRP list

This list contains the planning


result information for the material
and it is the initial working
document for the MRP controller to
work from. It is a static list and
changes are not reflected on the
list until the next planning run.

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The S/R List

The S/R list is the most updated


report of a given material. Whenever
there is a receipt or issue added to
the material, the same is updated in
S/R list in real time. Also whenever
the material is planned and the
procurement proposals are added
for the material, the same is updated
in the S/R list immediately. It is a
dynamic list since it is updated each
time it is displayed, that is the
reason because we can see an
order which does not appear in the
MRP List.

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Standard Production Planning Reports
 Stock/Requirements List – lists the latest stock./requirement position of
a material in the plant (i.e. planned orders, production orders etc.)
 Production Plan – lists the monthly production plans – material and
plant wise
 Orders – lists the orders pending/completed for a material wise or a
work center wise
 Consumption – lists the consumption of a material for the period in
question
 Quantity produced – lists the quantity of the material produced during
the period in question
 Work center loads – lists the available capacities, the required
capacities, remaining available capacities and calculates the percentage
load for the selected work center
 Missing parts – lists the missing parts that are required but not available
for the production of a material

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Planned orders

A planned order is a MRP request for the procurement of a particular material at a determined time.
It specifies when the inward material movement should be made and the quantity of material that is
expected.

A planned order has the following characteristics:


It is a procurement proposal for requirements coverage, that is, an internal planning element. It
does not therefore trigger procurement directly, but serves for planning purposes.
It can be changed or deleted at any time (exceptions: firmed planned orders).
It specifies a material that will be produced in-house or procured externally.
For materials produced in-house, it represents the pegged requirement for dependent
requirements and can be used in the capacity calculation.
For materials produced in-house, it specifies the basic dates for production.

As already mentioned, planned orders are converted into production orders for in-house
production and into purchase requisitions for external procurement.

A planned order consists of:


• order data (quantities, dates, account assignment, material data, procurement data etc.)
• component overview

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