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Implement SAP ERP

Consumption-Based
Planning Functionality
for Your Non-Critical
Production Materials
Isaac Mazliach
S.D.M. Consulting
2009 Wellesley Information Services. All rights reserved.

In This Session ...

The purpose of this session is to tackle Consumption-Based

Planning (CBP) from its business perspective as it pertains to
differing MRP methodologies. And then go through its
configuration settings.

What Well Cover

Main differences between MRP and CBP

Materials categorization the ABC approach
Reorder point planning; planning based on past consumption
Time-phased planning
Forecasting
Plant MRP and MRP areas
Illustration: Customizing plant parameters
Illustration: Customizing MRP types and lot sizes
Illustration: Customizing MRP areas
Wrap-up

General

CBP is a branch of MRP dealing with all those materials whose

planning is a function of their consumption, as opposed to how
much is currently needed for production or to fulfill customer
demand
In accordance with the above, we will use CBP for less expensive,
less critical components. That is, those less expensive
components that we usually purchase from external vendors (e.g.,
nuts and bolts).

MRP Process

MRP Procedures
Here you can
see the main
areas of CBP

A Word About SAP Supply Chain Management (SCM-APO)

When should you use CBP and
when should we use SCM-APO?

What Well Cover

Main differences between MRP and CBP

Materials categorization the ABC approach
Reorder point planning; planning based on past consumption
Time-phased planning
Forecasting
Plant MRP and MRP areas
Illustration: Customizing plant parameters
Illustration: Customizing MRP types and lot sizes
Illustration: Customizing MRP areas
Wrap-up

Categorization

Categorization of products is about defining the delivery time and

the delivery service for each of the products in the product
program. Categorization of the products is made from a
categorization of the customers and the products they buy.
Subsequently the categories for the finished products are then
linked to the semi-finished and the raw materials respectively, and
later also to suppliers
With categories at each level it is possible to create a very
efficient supply chain
Product Categorization gives a superb basis for implementing
Lean Manufacturing, by clearly showing the product priority when
it comes to flow, inventory, planning, etc.

ABC Approach

One of the common practices for categorizing materials is the

ABC approach
In principal, the ABC approach says: Categorize your materials
according to the following simple rule:
A A materials are the most expensive and critical materials
in your organization
B B materials are the less expensive, less critical materials
in your organization
C C materials are the non-expensive, non-critical materials
in your organization

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When to Use CBP

CBP deals primarily with the C materials that we purchase

One of the purposes of CBP is to create Purchase Orders as
automatically as possible in order to reduce manual intervention
in the purchase process
It is possible to use transaction MIBC (ABC Analysis for Cycle
Counting) as a basis for ABC categorization. However, it does not
take into account the criticality of the material, and therefore
manual work must still be performed.

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What Well Cover

Main differences between MRP and CBP

Materials categorization the ABC approach
Reorder point planning; planning based on past consumption
Time-phased planning
Forecasting
Plant MRP and MRP areas
Illustration: Customizing plant parameters
Illustration: Customizing MRP types and lot sizes
Illustration: Customizing MRP areas
Wrap-up

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General

Reorder point planning should be used with relatively constant

consumption materials
If the materials consumption is not constant over time, this
method might result in excess stock (the need to keep high safety
stock) or stock shortage (fluctuations)

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Methodology

Reorder point quantity

includes safety stock. The PO
quantity depends on the lot
size (e.g., fixed).
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Calculation
MRP
compares the
quantity in
stock + PRs
+ POs to the
reorder point.
There is a
shortage if
the total
quantity is
lower than
the reorder
point.

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Chart

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Forward Scheduling

CBP calculates the availability date depending on lead

times from todays date
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Add External Requirements to MRP calculation

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Planning Based on Past Consumption

Planning based on past consumption should be used for

materials whose future behavior can be predicted by their past
consumption
Materials with short life cycle would therefore probably not be a
good choice for planning using this method
Good candidates for planning using this method might be
materials with relatively many consumption periods

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What Well Cover

Main differences between MRP and CBP

Materials categorization the ABC approach
Reorder point planning; planning based on past consumption
Time-phased planning
Forecasting
Plant MRP and MRP areas
Illustration: Customizing plant parameters
Illustration: Customizing MRP types and lot sizes
Illustration: Customizing MRP areas
Wrap-up

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General

Time-phased planning should be used for materials that are

delivered on specific dates
This method works similarly to reorder point planning the
difference is that specific delivery dates are taken as parameter
To run this method, a specific calendar must be created and
maintained

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How Time-Phased Planning Works

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Methodology
Time-phased planning works almost the same way as reorder
point planning, only with specific GR dates

What Well Cover

Main differences between MRP and CBP

Materials categorization the ABC approach
Reorder point planning; planning based on past consumption
Time-phased planning
Forecasting
Plant MRP and MRP areas
Illustration: Customizing plant parameters
Illustration: Customizing MRP types and lot sizes
Illustration: Customizing MRP areas
Wrap-up

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General

Forecasting can be used to:

Predict future consumption values from old ones
Calculate safety stock
Calculate reorder points

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Forecasting Methods

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Selection of Forecasting Methods

Selection is done
in the Material
Master

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Uses of Forecasting

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How Forecasting Works

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How Forecasting Works (cont.)

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Backward Scheduling
Forecasting calculates the date when we should
start purchasing according to the requirement date

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Using Forecasting for Reorder Point Planning Calculation

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What Well Cover

Main differences between MRP and CBP

Materials categorization the ABC approach
Reorder point planning; planning based on past consumption
Time-phased planning
Forecasting
Plant MRP and MRP areas
Illustration: Customizing plant parameters
Illustration: Customizing MRP types and lot sizes
Illustration: Customizing MRP areas
Wrap-up

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Plant MRP and MRP Areas

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Example 1

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Example 2

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Example 3

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Types of MRP Areas

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What Well Cover

Main differences between MRP and CBP

Materials categorization the ABC approach
Reorder point planning; planning based on past consumption
Time-phased planning
Forecasting
Plant MRP and MRP areas
Illustration: Customizing plant parameters
Illustration: Customizing MRP types and lot sizes
Illustration: Customizing MRP areas
Wrap-up

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Configure CBP Forecast Views:

Start by Activating the Material Master MRP

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Configure CBP Forecast Views:

Start by Activating the Material Master MRP (cont.)

There are other

IMG activities for
all that is on the
screen, but all can
be configured in a
one-stop shop

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What Well Cover

Main differences between MRP and CBP

Materials categorization the ABC approach
Reorder point planning; planning based on past consumption
Time-phased planning
Forecasting
Plant MRP and MRP areas
Illustration: Customizing plant parameters
Illustration: Customizing MRP types and lot sizes
Illustration: Customizing MRP areas
Wrap-up

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Effect of MRP Types

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Effect of MRP Types (cont.)

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Effect of MRP Types (cont.)

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Effect of Lot-Sizing Procedures

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Effect of Lot-Sizing Procedures (cont.)

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Effect of Lot-Sizing Procedures (cont.)

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What Well Cover

Main differences between MRP and CBP

Materials categorization the ABC approach
Reorder point planning; planning based on past consumption
Time-phased planning
Forecasting
Plant MRP and MRP areas
Illustration: Customizing plant parameters
Illustration: Customizing MRP types and lot sizes
Illustration: Customizing MRP areas
Wrap-up

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Tasks to Perform When Activating MRP Areas

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Tasks to Perform When Activating MRP Areas (cont.)

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What Well Cover

Main differences between MRP and CBP

Materials categorization the ABC approach
Reorder point planning; planning based on past consumption
Time-phased planning
Forecasting
Plant MRP and MRP areas
Illustration: Customizing plant parameters
Illustration: Customizing MRP types and lot sizes
Illustration: Customizing MRP areas
Wrap-up

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Resources

SAP courses www.sap.com/usa/services/education/index.epx

SAPSCM - Supply Chain Management Solution Overview
SCM525 - Consumption-Based Planning and Forecasting
http://help.sap.com
Consumption-Based Planning (MM-CBP)
http://help.sap.com/saphelp_erp60_sp/helpdata/en/7d/c282
1c454011d182b40000e829fbfe/frameset.htm
Product Categorization (ABC categorization)
www.flexinfonet.com/setprice.asp?page=34

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7 Key Points to Take Home

Categorize your materials

Use CBP for your C components
Materials with relatively constant consumption should be planned
with reorder point planning
Materials with numerous consumption histories may make use of
forecasting to predict their future consumption
Materials with specified delivery dates may use time-phased
planning
Forecasting may be used also to calculate safety stock and
reorder points according to past consumption figures
Creating a new MRP type can be useful to control customized
planning methodology as combination of standard methods

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Your Turn!

How to contact me:

Isaac Mazliach
isaac@sdm-c.com
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Disclaimer
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well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All
other product and service names mentioned are the trademarks of their respective companies. Wellesley Information Services is neither owned nor
controlled by SAP.

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