Overview
Materials Planning Procedures: Overview
Reorder Point Planning
Forecast-Based Planning
Time-Phased Planning
Lot-Sizing Procedures: Overview
Showing posts with label MRP and Lot-Sizing Procedures. Show all posts
Showing posts with label MRP and Lot-Sizing Procedures. Show all posts
Tuesday, August 5, 2008
MRP and Lot-Sizing Procedures Overview
The central role of material requirements planning is to monitor stocks and, in particular, to automatically generate order proposals for purchasing and production (planned orders, purchase requisitions, or delivery schedules). This target is achieved by using various materials planning methods which each cover different procedures.
Consumption-based planning procedures are straight forward materials planning procedures with which you can achieve set targets with relatively little effort. Therefore, these planning procedures are used in areas without in-house production and/or in production plants for planning both B- and C-parts and operating supplies.
The type of order proposal which is automatically generated during materials planning depends on the procurement type of the material. For materials that are produced internally, a planned order is always created. For materials procured externally, the MRP controller has the choice between creating a planned order or a purchase requisition. If he decides to create a planned order, he must then convert it into a purchase requisition and make it available for the purchasing department.
The advantage of creating a planned order is that the MRP controller has more control over the order proposals. It is only once he has checked the planned orders and then converted them into purchase requisitions that the purchasing department can order the material. If he creates a purchase requisition in the first instance then it is immediately made available to the purchasing department, which then takes over the responsibility for material availability and warehouse stocks.
Since requirements planning is usually carried out at plant level, all available stock in the plant (from now on described as available warehouse stock ) is taken into account during planning. However, stocks from individual storage locations can be excluded from requirements planning or they can be planned independently. Such stocks are then not included in material requirements planning at plant level. On the other hand, consignment stocks from the vendor are always included in MRP.
Materials Planning Procedures: Overview
The following procedures are supported in consumption-based planning:
MRP Reorder Point Planning
In the reorder point planning procedure, the system compares available warehouse stock with the reorder level. If available stock falls below the reorder level, an order proposal is generated.
The reorder level (also known as the reorder point) is made up of the sum of the safety stock plus the expected average material consumption within the replenishment lead time. Therefore, when determining the reorder level, you must take safety stock, previous consumption values or future requirements and the replenishment lead time into account.
Safety stock must be set at a level which covers both excess material consumption within the replenishment lead time and the additional requirements which may occur during delivery delays. You must, therefore, take previous consumption or future requirements, and the vendor's delivery timeliness or that of production into account when determining the safety stock level.
Consequently, the reorder level and the safety stock level are central control parameters within reorder point planning. They can be determined automatically by the system or manually by the MRP controller. Thus, a distinction is made between the two following procedures:
Manual Reorder Point Planning MRP Reorder Point Planning
If you choose the manual reorder point planning procedure, you must specify both the reorder level and the safety stock level yourself and enter them in the appropriate material master record.
About Reorder Point PlanningAutomatic Reorder Point Planning MRP Reorder Point Planning
If you choose the automatic reorder point planning procedure then both the reorder level and the safety stock level are determined by the integrated forecasting program.
The system determines the forecast values for future requirements by means of historical data. From these forecast values, the system then calculates the reorder level and the safety stock level, taking the service level, which is specified by the MRP controller, and the material's replenishment lead time into account. The system then records these two values in the appropriate material master record.
Since the forecast is carried out at regular intervals, the reorder level and the safety stock level are continually adapted to the current consumption and delivery situation. This means that a contribution is made towards keeping stock levels low.
About Reorder Point Planning MRP Reorder Point Planning
In the reorder point planning procedure, the system compares available warehouse stock at plant level with the reorder level. If stock falls below the reorder level, the system generates an order proposal. If, however, a purchase order or a production order covering the required quantity has already been planned by purchasing or production, then the system will not create another one.
The system calculates the quantity for the order proposal according to the lot-sizing procedure which you selected. There are several lot-sizing procedures from which you can choose. If you want, you can specify a different procedure for each material (see Lot-Sizing Procedures: Overview).
In addition, the order proposal is also scheduled; that means that the system calculates the date that the vendor or production must deliver the required quantity.
The continuous monitoring of available warehouse stock within reorder point planning is carried out via the inventory management program. 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, an entry is made in the planning file for the next planning run.
Exactly the same procedure is carried out if a material is returned to the warehouse; but this time, the system will check whether the available warehouse stock exceeds the reorder level again. If this is the case, an entry is made in the planning file which acts as an indicator for the planning run to delete any unnecessary order proposals.
If planned receipts are no longer required due to material returns, for example, then the system will suggest that these receipts should be cancelled. In this case, the MRP controller in co-operation with purchasing or production must check whether the purchase order or the production order can be cancelled.
In reorder point planning, an entry is only created in the planning file and the net requirements calculation is only carried out if stock levels fall below the reorder point. To avoid overplanning, sales orders, dependent requirements, reservations and so on are not usually included in the net requirements calculation as these future requirements are already planned with the reorder level. However, to guarantee that the MRP controller is informed of current issues, the system displays sales orders, dependent and manual reservations and so on.
In certain circumstances, however, it is necessary to include sales orders and/or manual reservations in the net requirements calculation for reorder point materials. Here, two further MRP types are provided in the standard system (an MRP type with manual reorder point planning and one with automatic reorder point planning). For these two MRP types you use the indicator Include external reqmts to indicate that sales orders and manual reservations in the replenishment lead time are to be included in planning. If you not only want these two requirement elements to be included in planning within the replenishment lead time, but over the total planning horizon, you must change the indicator Include external reqmts in Customizing for MRP to the appropriate MRP type. In release 4.0, it is possible to define which requirements, in addition to customer requirements and manual reservations, the system is to include in MRP. To define which requirements, select the appropriate fields in Customizing. You can choose from the following requirements:
- Stock transfer requirements based on purchase requisitions, purchase orders and scheduling agreements for stock transfers
- Dependent reservations based on production orders, maintenance orders and networks
Forecast-Based Planning MRP
Like reorder point planning, forecast-based planning operates using historical values and forecast values as future requirements are determined via the integrated forecasting program. However, in contrast to reorder point planning, these values then form the basis of the planning run in forecast-based planning.
The forecast, which calculates future requirements using historical data, is carried out at regular intervals. This offers the advantage that requirements, which are automatically determined, are continually adapted to suit current consumption needs. If, during the current period, material has already been withdrawn from stock, then the forecast requirement is reduced by the quantity of material that was withdrawn. This means that the quantity of the forecast requirement that has already been used is not included in the planning run again.
You can specify the period split for the forecast (daily, weekly, monthly or per accounting period) and the number of periods to be included in the forecast individually for each material. It is possible, however, that the forecast period split is not specific enough for planning purposes. Therefore, for each material, you can determine that the MRP forecast requirement values should be divided according to a finer period split. You can also determine how many forecast periods are to be taken into account during requirements planning.
For a monthly forecast, the requirements date would be set on the first workday of the month because, for planning, it is assumed that the total requirement must be available at the beginning of the period. You can then divide this monthly requirement into either daily or weekly requirements.
The requirements quantities forecast by the system are used in the planning run to carry out the net requirements calculation. During this calculation, every period is checked to make sure that the forecast requirements are covered either by available warehouse stock, by planned receipts from purchasing or by production. If the requirements forecast by the system are not met by these above mentioned possibilities, then an order proposal is generated.
The quantity stated in the order proposal is calculated by the system according to the lot-sizing procedure that you selected. Depending on the lot-sizing procedure, several requirement quantities are grouped together into one lot (see Lot-Sizing Procedures: Overview).
For each order proposal, the system calculates the date that it must be converted into either a purchase order or a production order so that the purchase order can be sent to the vendor on time or the production order can be transferred to production on time. Naturally, the vendor can only deliver the ordered quantity punctually if he receives the purchase order on time. The same applies to production - the ordered quantity can only be produced according to schedule if the production order is received on time.
Time-Phased Planning MRP
If a vendor always delivers a material on a particular day of the week, it makes sense to plan this material according to the same cycle in which it is delivered, but displaced by the delivery time. This is possible with the time-phased planning procedure.
If a particular material is to be planned using this procedure, you must set the MRP type for time-phased planning and you must enter the planning cycle in the material master record. You enter the planning cycle in the form of a planning calendar in the Planning cycle field. You must also define a planned delivery time and the Lot-for-lot order quantity as the lot-size key.
You can also use the optimum lot-sizing procedures for time-phased planning. They are used here in the same way as in Reorder Point Planning.
Materials that are planned using the time-phased planning technique are provided with an MPR date in the planning file. This date is set when creating a material master record and is re-set after each planning run. It represents the date on which the material is to be planned again and is calculated on the basis of the planning cycle entered in the material master record. For materials that are planned using the time-phased planning procedure, the two indicators, the total change indicator and the net change planning indicator are irrelevant. Therefore, they are not set by the system even if changes that are relevant to the planning run are made.
By using this planning technique, you can set the system so that it only plans materials on specific pre-defined days. For example, if you assign the same planning cycle to all the materials of a particular vendor, the system will always plan these materials on the same day. The purchase requisitions that are created in the planning run to cover material shortages can be processed, per vendor, by the MRP controller in the SAP purchasing system.
If you use the SAP Merchandise Management System, the system proposes the planning cycle from the vendor sub-range when you create a material master record. The vendor sub-range contains all the goods of a particular vendor that, from a logistical view, can be planned similarly.
You can also enter an MRP date during the planning run, meaning that you can bring the planning run forward to an earlier date, if necessary. For example, if the planning run is set for Monday, you can bring it forward to Saturday instead.
What Happens in the Planning Run?
The time-phased planning procedure has been developed as a consumption-based planning technique. Therefore, you must carry out the forecast run before you carry out the planning run. The forecast calculates the future sales (requirements) quantities. It also calculates the safety stock if this is defined in Customizing. Then, you can carry out the planning run.
Once you start the planning run, the system uses the MRP date recorded in the planning file to determine which materials are actually to be planned.
The system uses the interval between the MRP date and the availability date of the next MRP date for the requirements calculation in the planning run. Existing stocks must cover this interval. You must bear in mind that if nothing is ordered at the first MRP date, you have to wait for the next MRP date before you can plan and order this material again. Therefore, if an order proposal is created during this planning run, it will not be available until the end of the interval.
In the requirements calculation, the system compares the forecast requirement quantities with the actual stock and the firmed receipts in the interval in question and calculates how much more is to be ordered, if at all. The requirement quantities of the periods that lie completely within the interval in question are taken into accout in total. On the other hand, the requirement quantities of the periods that only partially fall within the interval in question are only partially taken into account. If you have specified a processing time required by the purchasing department, it is included in the requirements calculation.
The requirements are calculated using the following formula:
- forecast value for the interval (cycle + purchasing department processing time + planned delivery time + goods receipt processing time) + safety stock
The planned delivery time is included in the calculation in the calendar days and the purchasing department processing time and goods receipt processing time in workdays.
If, within the interval, the current stock plus the open order quantity (firmed receipts) is smaller than the requirement quantity, the system creates an order proposal for the difference.
In this calculation, the system presumes that the firmed receipts all lie within the interval in question. Whether the firmed receipt is available at either the beginning or at the end of the interval is not relevant. This means that a temporary shortage may occur; this is tolerated.
Delivery Cycle
Combination of Time-Phased Planning with Reorder Point Planning
Range of Coverage Profile in Time-Phased Planning
Delivery Cycle MRP Time-Phased Planning
If you have to deal with more complex situations, you can define a delivery cycle in the material master record in addition to the planning cycle. In so doing, you determine the days on which the vendor delivers his goods. The delivery cycle is entered in the material master record as a planning calendar in the Planning calendar field.
You enter a delivery cycle if the delivery date (or the goods receipt date) depends on the day on which you order the goods. For example, you carry out the planning run and place your orders on Mondays and Tuesdays. If you place the order on Monday, the delivery is made on Wednesday, if you wait until Tuesday to place the order, the delivery is not made until Friday.
If you use the SAP Merchandise Management System, the system proposes the delivery cycle from the vendor sub-range when you create a material master record. The vendor sub-range contains all the goods of a particular vendor that, from a logistical view, can be planned similarly.
What Happens in the Planning Run?
Once you start the planning run, the system uses the MRP date recorded in the planning file to check which materials are actually to be planned. The specification of a delivery cycle has no effect on the requirements calculation: the system uses the interval between the MRP date and the availability date for the next MRP date as a basis for calculating the requirements quantity. It also takes for granted that the vendor requires at least the planned delivery time before he can deliver his goods. This means the following (if no goods receipt processing time has been maintained):
- If the MRP date is a Monday, the interval used for the calculation is from Monday to Friday, as the Friday is the goods receipt date of the next MRP date (Tuesday).
- If the MRP date is a Tuesday, the interval used for the calculation is from Tuesday to the Wednesday of the following week, as the Wednesday is the goods receipt date of the next MRP date (Monday).
The material’s stocks (stock plus firmed receipts in the interval) must cover this interval. If a material shortage occurs, the system creates a new order proposal.
The system interprets the planned delivery time as the ‘minimum delivery time’. That is, it takes at least this number of days for the goods to be delivered from the time that the order was placed. Thus, the system recognizes in the example above that if the planning run is carried out on Tuesday, the material will not be delivered until Friday and not on Wednesday. (The processing time required for the purchasing department is taken into account: the planned delivery time plus the purchasing processing time must be smaller than the period between the date of the next planning run and the corresponding goods receipt date.)
Combination of Time-Phased Planning with Reorder Point Planning MRP
You also have the option of combining time-phased planning with reorder point planning. To do this, you enter the MRP type for time-phased planning in the material master record and you also define a reorder level. You can also use the forecast to calculate the reorder level automatically.
In this case, the material is not only planned on the MRP date recorded in the planning file, but it is also planned if stock falls below the reorder level due to a goods issue. When the stock level falls below the reorder level, the system automatically sets the net change planning indicator in the planning file which means that the material will be included in the next planning run.
During the extraordinary planning run, triggered by the stock levels falling below the reorder level the system carries out the requirements calculation as follows: it calculates the interval that starts from the moment that stocks fall below the reorder level to the availability date of the next regular MRP date and uses this for the requirements calculation. The ordered quantity must cover this interval. At the following MRP date, the material is planned as usual.
Range of Coverage Profile in Time-Phased Planning
If you enter a range of coverage profile in the material master record, you can determine a safety stock level that is based on actual requirement quantities. This safety stock level is calculated using the average daily requirements quantity.
The specification of a range of coverage profile has the following effect for materials planned using the time-phased planning technique:
For example, a material which has a planned delivery time of 2 days is always planned on Tuesdays. In the requirements calculation during the planning run, the system uses the interval between the MRP date and the availability date of the next MRP date. In this particular case, the interval starts on Tuesday and ends on Thursday of the following week (8 workdays).
In the requirements calculation, where no range of coverage profile has been specified, the system calculates a requirement of 160 pieces using the information from the forecast that was carried out previously. This means, an average daily requirement of 20 pieces. If the system does not take a range of coverage into account, it simply creates an order proposal for 160 pieces, if the stock level is equal to zero and no firmed receipts exist.
Now you have entered a range of coverage profile in the material master record for which the ranges of coverage listed below are defined in Customizing. The following values would result for the dynamic safety stock for an average daily requirement of 20 pieces:
Minimum range of coverage: 3 days
Dynamic minimum safety stock: 60 pieces
Target range of coverage: 5 days
Dynamic target safety stock: 100 pieces
Maximum range of coverage: 12 days
Dynamic maximum safety stock: 240 pieces
These ranges of coverage and safety stocks must be taken into account in the requirements calculation in the planning run:
- If warehouse stock is equal to zero, the system adds a further 100 pieces to the order proposal for 160 pieces mentioned above as the incoming order has to cover an extra 5 days. This means that the system creates an order proposal for 260 pieces.
- If warehouse stock is equal to 200 pieces, the system creates an order proposal for 60 pieces as the remaining 40 pieces would only cover a further 2 days and the stock should cover at least another 3 days. This means that if the minimum safety stock level is not fulfilled, the system replenishes up to the target safety stock level.
- If warehouse stock is equal to 220 pieces, the system creates no purchase requisitions, as the remaining 60 pieces will still cover the next 3 days requirements.
posts Lot-Sizing Procedures: Overview MRP
It is material requirements planning's role to generate an order proposal if a requirements shortage is determined during a planning run. The lot size for the order proposal is specified according to the lot-sizing procedure you entered in the material master record.
The SAP System supports the most up-to-date lot-sizing procedures. User-specific formulae can always be integrated with relatively little effort. The available lot-sizing procedures are divided into three groups:
- Static lot-sizing procedures
In static lot-sizing procedures, the lot size is calculated by means of the quantity specifications recorded in the material master record. There are three different criteria according to which the lot size can be calculated:
In period lot-sizing procedures, the requirement quantities from one or from several periods are grouped together to form a lot. The SAP System supports various periods. You can determine the number of periods which are to be grouped together into an order proposal. You have the choice between:
- daily lot size
- weekly lot size
- monthy lot size
- lot size according to flexible period lengths, depending on accounting periods (period lot size)
In optimum lot-sizing procedures, the requirement quantities for several periods are grouped together to form a lot, whereby an optimum cost ratio is determined between lot size independent costs and storage costs. The only differences between the various optimization procedures are the cost criteria. The following procedures exist:
The lot-sizing procedure that the system should use for calculating the lot size depends on the requirements planning procedure that has been chosen. If you selected the manual reorder point planning procedure, then you are limited to lot-sizing formulae from the static procedure. If you selected the automatic reorder point planning procedure or MRP, then you can select procedures from each of the three categories. In time-phased planning, you can use either the lot-for-lot order quantity or one of the optimum lot-sizing procedures.
You can influence the grouping of requirement quantities into lot sizes by using additional restrictions in the material master record:
- On the one hand by entering limit values (minimum and maximum lot sizes). These limit values will then be taken into account during the lot-size calculation. In other words, the lot size will either be rounded up to the minimum quantity or the system will avoid grouping together requirement quantities that exceed the maximum lot size.
Subscribe to:
Posts (Atom)
