SAP MRP

What is SAP MRP - Material Requirement Planning Overview

Material Requirement Planning (SAP MRP) is a tool which helps in planning the requirement quantities and schedules of a given material. It not only ensures availability of the material for which MRP is carried out, but also ensures availability of the components (of all the BOM levels) below in the BOM structure.

Apart from assuring material availability, MRP also carries out scheduling of the procurement proposals using the lead times for the materials/components. When the material is an internally manufactured material, it will use the lead times or operation lead times from the routings/recipes and when the material is an external procured material, it will fetch the lead times or delivery times for the material defined at an appropriate place in the tool/system. Scheduling of the procurement proposals not only derives the capacity loading of the orders on the workcenter but it also calculates the delivery dates of the components that would be requried for manufacturing (delivery date = start date of processing).

The output of MRP proposes procurement proposals (planned order or purchase requests) so as to gaurantee material availability and at the same time schedule the procurement proposals using delivery lead times for the materials/components. Material requirement Planning can be run for purchased materials or finished saleable materials or subassemblies (semi-finished) used in production.

While the Material Requirement Planning in SAP ECC (SAP MRP), derives a plan for the materials and helps the planners and supervisors to purchase, produce or sell. It offers all the possible planning methods available in the market like the reorder point planning for the consumption based planned materials, lot for lot MRP planning for the demand based planning materials, forecast based planning methods which uses the past historical figures to extrapolate the future requirements (again a consumption based planning material).

SAP material requirement planning or SAP MRP, uses the following factors in its planing run:

a) planning strategies - made to order or made to stock or its variations b) planning types - type of the MRP run, i.e., consumption based planning methods or demand based planning methods and net requirement planing or gross requirement planning c) lot sizing procedures set for the material d) master data such as BOM or Routings/Recipes, quota arrangements, souce list, vendors, purchase info records. customer masters etc, and transaction data such as sales orders, forecast, planned independent demands (forecasted demand)

Presentation of the SAP MRP Documentation

The SAP MRP Documentation is presented in 11 Simple steps which will be explained in 11 different Links on this website.

Use the link to Learn SAP MRP in 11 Steps

Types of Demands in an Organization

The following are the various types of demands:

B) Demand from Sales order or Customer orders On the other hand. such type of organizations therefore forecast their future demands based on historical sales. Distribution Channel. Manufacturing of Jewelry. it is a typical case of made-to-stock scenario. Special Purpose Pumps. current market popularity of the product. Note that Made-to-Order can also be initiated for a typical Made-to-Stock Product. for example. Material or for a Sales office. SAP also offers tools for forecasting the future demand using the historical data and playing various other fators on it. Manfuacturing after an Order is booked is carried out for products of high value or for products whose design is supplied by the customer or as specified/requested by a customer. When you talk of a product that is usually stocked and delivered to the customer from their. etc.A) Planned indepedent Demand or Forecasted Demand: An organization runs on external demands (visualized demands or forecasted demands) for its products. Since the sales are from inventory. For Example. SOP (Sales and operation Planning) is one such tool in SAP. a company has to pile up only a certain quantity enough to satisfy the demand. Sales Division. various environmental factors. . such scenarios are typical make-to-order. Material group. you could have the system pull in the historical information for a given organizational segment llike Sales oragnization. where you can forecast future demand using past historical information for a pre-selected organizational structure. you could also have the demand coming in from sales orders and the production is initiated thereafter. in cases where a special customer places a huge order and the manufacturing is triggered seperately for them. Production from such planned independent requirement is a usual characteristics of a made-to-stock scenario. Aircrafts. seasons. The forecast carried out the sales information from specially defined sales information structure can be used as planned independent demand for production over the forecasted period. Sales division.

to now.You should not be amazed to come across a product which is manufactured as both MTS and MTO. purchasing and production modules of a business. The MRP II jargon later took on to be called as ERP or Enterpise resource planning with the greatest possible integration with a central database server. whereas the sales order created for a make-to-order material can never be satisfied using any existing inventory as the inventory created for the material would have been produced for fulfilling other customer orders. Evolution of MRP . Note . With the evolution of ERP (a superior clone of the evolved MRP II) businesses took it as the most wildest tool that they could have to make their business run smoothly. human resource. across business modules and across its vendors/suppliers and customers. . from the time it was first designed.Material Requirement Planning The concept of Material Requirement planning (MRP I) was designed as a tool to help planners with the derivation of the quantities of various material or components that would be required for satisfying a demand and at the same time for deriving the capacity based plan for loading the orders for production on the shop floor. integrating it with the finance. storing all the integrated data there for making the information and data available across the business. where it is tagged as Material Resource Planning (MRP II).The Sales orders demand coming in for a made-to-stock material is fulfilled using the existing stock. in a much integrated fashion without loosing any information or spoling the intension of the information when it flows across the business. a much stronger integrated version of the first MRP. It also had much stronger and complex codes to take care of a few constraints in capacity and material planning. All the above cases are typical make-to-order and such demands come in through sales orders. The concept which started as a less integrated mainframe tool has evolved over the years since 1960.

Companies and businesses across the world made use of this ERP tool and the standard processes offered to profit themselves.. i. Supply Network Planning which allowed planning across plants and across geographical locations and allowing businesses to place orders for production or procurement across the global based on time and cost contraints and the PPDS module (Production planning and detail scheduling) which was a detailed version of SAP ECC plant level MRP based Production planning with more brainy heuristics codes which could consider multiple contraints and finite based planning situations in one planning run.e. materials which are not marked with any strategy types or strategy groups in the SAP material master MRP . This tool worked on much complex and much supreme heuristics with the capability of planning based on finite capacity and constraints. Difference between Made-to-order and Made-to-stock Made-to-stock Scenario: If a material is defined as a made-to-stock material. Material Requirement Planning in SAP Vs SAP SCM: The SAP R/3 or ECC has a MRP system that plans for material and capacity (schedules) without considering any constraint and by assuming availability of infinite capacity for the work centers. The SCM .SOP) in SAP ECC.APO had modules such as Demand planning which was a superlative version of Sales and Operation Planning (SAP . it was called SCM .SAP came across as the very first few companies which evolved the concept of MRP II in to ERP and earning for themselves a growing business by selling this new concept. This gap of SAP ECC was later-on removed with the help of an add-on or a plug-in introduced by SAP for the advanced planning of requirements.Advanced Planning Optimizer).APO (Supply Chain Management .

Made-to-order Scenario: In cases where the material is defined as made-to-order. In a made-to-stock scenario. Such products are developed and produced continuously over the years till the product comes to the end of its life cycle. the receipts expected for the materials through purchase or production and the incoming demands. In such scenarios. materials which are marked with a made-to-order strategy in the MRP 3 view of the SAP material master and marked with individual requirements in MRP 4 view. where it takes into account the stock in the storage locations.3 view or materials which are marked with collective requirements in the MRP 4 screen. The customer demands and the market situations can only be forecasted and used as a basis for future production.. In SAP the forecasted quantity is evidently used in a form of planned-independent-requirement.e. for whom the product is being produced. the shop floor or the production team never knows. the system calculates the material requirements through the use of an algorithm which takes in to consideration the receipts expected for the material through purchase or production and the incoming sales order demands. Made-to-stock production quantities are entered in SAP through the use of “Planned independent requirements” (transaction code MD61) which are subsequently planned by SAP MRP run. The made-to-stock products are normally the consumer products or products which have a monopoly market and are sold out of the existing inventory. In a made-to-stock scenario. the system calculates the material requirements through the use of a pretty simple algorithm. Here the system does not take into account the storage location stock of the material (since the stock in the storage location for the material is always tagged for a customer order and cannot be used anywhere else). The planned independent requirements can be entered manually or the requirement can be pulled in from forecast or it can be pulled in from the sales and operation information structures (information structures which carry the sales information at levels defined by the organization). the incoming customer requests are fulfilled from the inventory. The example of such a scenario can be high end products like jewelry or high end equipments or . i. the incoming customer requests are accepted and produced thereafter and ultimately delivered to the very customer.

very costly product. 2008 by Rizki Materials planning is one of the key of good inventory control systems. Materials Planning in SAP ERP. the tracking of the sales order from its creation to planning to production to inventorying to delivery can be easily tracked unlike in made-tostock scenarios. but are fulfilled by the existing stocks.Overview Posted on May 31. where the incoming sales orders are not tracked in the plant. In such a scenario. . The Sales order is created or configured according to the customer requirements and passed on to the production team. These products are normally configured by the customer and the order is produced according to the customer requirements or by the design provided by the customer. The objective of materials planning is to monitor stocks to ensure material availability.

If the requirement fulfillment will result in shortage of stocks . SAP will compare the requirements with finished goods current stock. An example of how SAP materials planning and other SAP functionalities can help company to excel its business. SAP will determine these dependent requirements by using the information from Bill of Materials (BOM) of finished goods. we can prevent lacking of materials when we need it. such as planned order. purchase requisitions or delivery schedules). the production order/planned order created will be considered as dependent requirement for their components and/or raw materials. The SO or sales forecast will be considered as an independent requirement in SAP. If the requirement fulfillment will result in shortage of stocks (according to certain calculation of materials planning procedure for the finished goods). By doing so. With materials planning in SAP. how many. materials planning can also create purchase requisition directly as a procurement proposal (no planned order). Sales department will create a sales order (SO) or sales forecast which contain the information of what. This requirement will trigger materials planning process for finished goods. SAP R/3 also has a special materials planning function that works like and even better than other inventory control software.As a leader in ERP software. we can determine automatically which material is required. Materials planning in SAP can automatically create procurement proposals for purchasing and production (planned orders. Planned order can be converted into production order (if finished goods are produced internally) or purchase requisition (if finished goods are procured externally). If the finished goods are produced internally. Sales and Distribution (SD) module of SAP receives demand from customer. SAP will compare the requirements with components/raw materials current stock. These dependent requirements will also trigger materials planning for the components and/or raw materials. In addition. materials planning will automatically create procurement proposal. This target is achieved by using various materials planning methods which each cover different procedures. and when Finished Goods are needed by the customer. the quantity required and when it is required.

Materials Planning Procedures in SAP (MRP & CBP) Posted on May 31.(according to certain calculation of materials planning procedure for the components/raw materials). If the finished goods/components/raw materials are procured externally. Production Order and Purchase Order will result in materials availability when we need them. The prerequisites for implementing all materials planning procedures is the Inventory Management must function well and should always be up-to-date. then materials planning will fail to achieve its objective to monitor stocks to ensure material availability. If this prerequisite is not met. materials planning will automatically create procurement proposal. so we can fulfill the customer demand on-time. Planned order can be converted into production order (if components are produced internally) or purchase requisition (if components/raw materials are procured externally). materials planning can also create purchase requisition directly as a procurement proposal (no planned order). In addition. the procurement/purchasing department will process the purchase requisition into Purchase Order (PO). 2008 by Rizki . such as planned order.

2. dependent requirements that are created by BOM explosion. There are no other requirement that can trigger a procurement proposal. which are: 1. This procedure is used in “PD-MRP” MRP Type in standard SAP R/3. The materials planning procedure will create procurement proposal only if these requirements will result in shortage of material stocks at a certain time. Traditional Material Requirements Planning (MRP) In traditional SAP MRP system. MRP is especially useful for the planning of finished products and important assemblies and components (A materials). sales order. Its basic concept is similar with other inventory control software. reservations. . but SAP R/3 has its own unique procedures for materials planning. In this article we will explain in detail about materials planning procedure in SAP R/3. planned independent requirements. Consumption Based Planning (CBP) Consumption-based planning (CBP) is a materials planning procedure based on past consumption values that determine future requirements by using forecast or other statistical procedures. Basically.You should read previous post about materials planning overview before reading this post. and so on are planned directly as requirements. there are two types of standard materials planning procedures in SAP.

The reorder point should cover the average material requirement/consumption expected during the replenishment lead time (procurement processing time + planned delivery time + GR processing time). we also should consider safety stock. If they are. The safety stock exists to cover both excess material consumption within the replenishment lead time and any additional requirements that may occur due to delivery delays. So. 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.Reorder point planning In reorder point planning. Therefore. There are three procedures in Consumption Based Planning (CBP). in CBP. Instead. the safety stock is included in the reorder level. which are: a. planned independent requirements or dependent requirement will not be considered in the net requirements calculation. all the planned independent or dependent requirements in a certain period of time should have been considered before (when set the reorder point or calculate the requirement forecast). SAP will create procurement proposal. The following values are important for defining the safety stock: . it is triggered when stock levels fall below a predefined reorder point or by forecast requirements calculated using past consumption values. SAP checks whether the available stocks are below the reorder point that has been set for the material. it can also be calculated automatically using the material forecast (“VM-Automatic reorder point planning” MRP Type in standard SAP R/3). Consumption-based planning procedures are simple materials planning procedures which we can use to achieve set targets with relatively little effort. Therefore. We can determine the reorder point manually (“VB-Manual reorder point planning” MRP Type in standard SAP R/3) or.Originally. Besides the average consumption.

historical data is also used in the material forecast to estimate future requirements.Time-phased materials planning In time-phased planning. These requirements are known as forecast requirements and are immediately available in planning. This procedure is used in “R1-Time-phased planning” MRP Type in standard SAP R/3. the deviation from the expected requirements In standard SAP R/3 system. Besides all procedures that have been explained above. historical data is used in the material forecast to estimate future requirements. that is. This procedure is used in “VV-Forecast-based planning” MRP Type in standard SAP R/3. which are automatically determined. there are also other MRP Types that have reorder point as its basis to calculate requirement with additional procedure which count external requirement (sales order and manual reservation) as a requirement. are continually adapted to suit current consumption needs. . The MRP Type are: “V1-Manual reorder point with external requirements” and “V2-Automatic reorder point with external requirements”. which calculates future requirements using historical data. c. If a vendor always delivers a material on a particular day of the week.Past consumption values (historical data) or future requirements  Vendor/production delivery timelines  Service level to be achieved  Forecast error.Forecast-based planning In forecast-based planning. We can do it through configuration with SPRO T-code. in this procedure. The forecast. besides “VB – Manual Reorder Point” and “VM – Automatic Reorder Point” MRP Type. However. the planning run is only carried out according to predefined intervals. in which it is delivered. This offers the advantage that requirements. it makes sense to plan this material according to the same cycle. is carried out at regular intervals.  b. in SAP R/3 system we can create other procedures according to our own needs.

If the requirement fulfillment will result in shortage of stocks (according to certain calculation of materials planning procedure for the finished goods). such as planned order. The SO or sales forecast will be considered as an independent requirement in SAP. SAP R/3 also has a special materials planning function that works like and even better than other inventory control software. Sales department will create a sales order (SO) or sales forecast which contain the information of what. SAP will compare the requirements with finished goods current stock. Sales and Distribution (SD) module of SAP receives demand from customer. This target is achieved by using various materials planning methods which each cover different procedures. we can determine automatically which material is required. purchase requisitions or delivery schedules). Please come back later. This requirement will trigger materials planning process for finished goods. and when Finished Goods are needed by the customer. we can prevent lacking of materials when we need it. Planned order can be converted into production order (if finished goods are . materials planning will automatically create procurement proposal. how many. Materials planning in SAP can automatically create procurement proposals for purchasing and production (planned orders.We will write another post about how to configure MRP in SAP R/3 System. An example of how SAP materials planning and other SAP functionalities can help company to excel its business. the quantity required and when it is required. With materials planning in SAP. The objective of materials planning is to monitor stocks to ensure material availability. By doing so. Materials planning is one of the key of good inventory control systems. As a leader in ERP software.

SAP will determine these dependent requirements by using the information from Bill of Materials (BOM) of finished goods.produced internally) or purchase requisition (if finished goods are procured externally). In addition. materials planning can also create purchase requisition directly as a procurement proposal (no planned order). such as planned order. the production order/planned order created will be considered as dependent requirement for their components and/or raw materials. materials planning will automatically create procurement proposal. If this prerequisite is not met. SAP will compare the requirements with components/raw materials current stock. If the finished goods/components/raw materials are procured externally. so we can fulfill the customer demand on-time. materials planning can also create purchase requisition directly as a procurement proposal (no planned order). The prerequisites for implementing all materials planning procedures is the Inventory Management must function well and should always be up-to-date. These dependent requirements will also trigger materials planning for the components and/or raw materials. the procurement/purchasing department will process the purchase requisition into Purchase Order (PO). If the finished goods are produced internally. Planned order can be converted into production order (if components are produced internally) or purchase requisition (if components/raw materials are procured externally). then materials planning will fail to achieve its objective to monitor stocks to ensure material availability. . If the requirement fulfillment will result in shortage of stocks (according to certain calculation of materials planning procedure for the components/raw materials). In addition. Production Order and Purchase Order will result in materials availability when we need them.

planned independent requirements.Materials Planning Procedures in SAP (MRP & CBP) Posted 1.2. in CBP. reservations. which are:a. all the planned independent or dependent requirements in a certain period of time should have been considered before (when set the reorder point or calculate the requirement forecast). dependent requirements that are created by BOM explosion.We can determine the reorder point manually (“VBManual reorder point planning” MRP Type in standard SAP R/3) or. Instead.Reorder point planningIn reorder point planning. planned independent requirements or dependent requirement will not be considered in the net requirements calculation. it is triggered when stock levels fall below a predefined reorder point or by forecast requirements calculated using past consumption values.There are three procedures in Consumption Based Planning (CBP).Consumption-based planning procedures are simple materials planning procedures which we can use to achieve set targets with relatively little effort. SAP will create procurement proposal. This procedure is used in “PD-MRP” MRP Type in standard SAP R/3.MRP is especially useful for the planning of finished products and important assemblies and components (A materials). Traditional Material Requirements Planning (MRP)In traditional Material Requirements Planning (MRP). sales order. it can also be calculated automatically using the material forecast (“VM-Automatic reorder point planning” MRP Type in standard SAP R/3). Consumption Based Planning (CBP)Consumption-based planning (CBP) is a materials planning procedure based on past consumption values that determine future requirements by using forecast or other statistical procedures.Originally. If they are. and so on are planned directly as requirements. The materials planning procedure will create procurement proposal only if these requirements will result in shortage of material stocks at a certain time. There are no other requirement that can trigger a procurement proposal. SAP checks whether the available stocks are below the reorder point that has been set for the material. Therefore.and Cparts and operating supplies. these planning procedures are used in areas without in-house production and/or in production plants for planning both B.The reorder point . So.

This offers the advantage that requirements. The safety stock exists to cover both excess material consumption within the replenishment lead time and any additional requirements that may occur due to delivery delays. the deviation from the expected requirementsIn standard SAP R/3 system.Besides all procedures that have been explained above. there are also other MRP Types that have reorder point as its basis to calculate requirement with additional procedure which count external requirement (sales order and manual reservation) as a requirement.b.This procedure is used in “R1-Time-phased planning” MRP Type in standard SAP R/3. which calculates future requirements using historical data. the planning run is only carried out according to predefined intervals. in this procedure.c. However.Time-phased materials planningIn time-phased planning. Therefore. historical data is used in the material forecast to estimate future requirements. which are automatically determined. These requirements are known as forecast requirements and are immediately available in planning. that is. in which it is delivered. If a vendor always delivers a material on a particular day of the week. in SAP R/3 system we can create other procedures according to our own needs. . are continually adapted to suit current consumption needs. We can do it through configuration with SPRO T-code. it makes sense to plan this material according to the same cycle. is carried out at regular intervals. historical data is also used in the material forecast to estimate future requirements.Forecast-based planningIn forecast-based planning.The following values are important for defining the safety stock: · Past consumption values (historical data) or future requirements · Vendor/production delivery timelines · Service level to be achieved · Forecast error. besides “VB – Manual Reorder Point” and “VM – Automatic Reorder Point” MRP Type. The MRP Type are: “V1-Manual reorder point with external requirements” and “V2-Automatic reorder point with external requirements”.We will write another post about how to configure MRP in SAP R/3 System.should cover the average material requirement/consumption expected during the replenishment lead time (procurement processing time + planned delivery time + GR processing time).This procedure is used in “VVForecast-based planning” MRP Type in standard SAP R/3. the safety stock is included in the reorder level. we also should consider safety stock. Besides the average consumption.The forecast.

reservations. dep explosion. Therefore. sales order. Originally. Consumption Based Planning (CBP) Consumption-based planning (CBP) is a materials planning procedure based on past consumptio using forecast or other statistical procedures. Traditional Material Requirements Planning (MRP) In traditional SAP MRP system. in CBP. 2010 2:09 AM by Sen Long [ updated Mar 15. these planning procedures are used in areas without in-house production and/or parts and operating supplies. planned independent requirements or dependent requirement will not be cons it is triggered when stock levels fall below a predefined reorder point or by forecast requirements the planned independent or dependent requirements in a certain period of time should have been calculate the requirement forecast). which are: 1. which are: a.Materials Planning Procedures in SAP (MRP & CBP) posted Jul 12. There are no other requir procedure is used in “PD-MRP” MRP Type in standard SAP R/3.Reorder point planning . and so on are planned directly as requirements. there are two types of standard materials planning procedures in SAP. Consumption-based planning procedures are simple materials planning procedures which we can effort. 2011 3:05 AM by Sap Team ] Basically. The materials planning procedure will requirements will result in shortage of material stocks at a certain time. MRP is especially useful for the planning of finished products and important assemblies and com 2. planned independent requirements. There are three procedures in Consumption Based Planning (CBP).

are continually adapted to suit current consum This procedure is used in “VV-Forecast-based planning” MRP Type in standard SAP R/3. The following values are important for defining the safety stock:     Past consumption values (historical data) or future requirements Vendor/production delivery timelines Service level to be achieved Forecast error. c. b. is carried out at regular i requirements. Besides the average consumption. We can determine the reorder point manually (“VB-Manual reorder point planning” MRP Type i automatically using the material forecast (“VM-Automatic reorder point planning” MRP Type in The reorder point should cover the average material requirement/consumption expected during th time + planned delivery time + GR processing time). SAP checks whether the available stocks are below the reorder point th will create procurement proposal. The forecast.In reorder point planning. the deviation from the expected requirements In standard SAP R/3 system. we also s to cover both excess material consumption within the replenishment lead time and any additional delays. which calculates future requirements using historical data. Therefore. besides “VB – Manual Reorder Point” and “VM – Automatic Reord Types that have reorder point as its basis to calculate requirement with additional procedure whic manual reservation) as a requirement. the safety stock is included in the reorder level. historical data is used in the material forecast to estimate future requi requirements and are immediately available in planning. that is. historical data is also used in the material forecast to estimate future req .Forecast-based planning In forecast-based planning.Time-phased materials planning In time-phased planning. The MRP Type are: “V1-Manual reorder point with extern with external requirements”. which are automatically determined.

MRP will create a planned order if the item is to be produced in house. MRP looks at current inventory. the automatic creation of procurement proposals for purchasing and production.    Planning Procedure MRP at Plant or MRP Area Level Reorder Point Planning . in which it is delivered. Besides all procedures that have been explained above. This process involves the monitoring of stocks and. This planned order can then be converted to a production order by the master scheduler. it is used to procure or produce the requirement quantities on time both for internal purposes and for sales and distribution. in SAP R/3 system we can create other p through configuration with SPRO T-code. If the item is to be procured. So if a material is required to satisfy a sales order and there is no inventory. the system is highly configurable and will do pretty much whatever you tell based on config and master data. This procedure is used in “R1-Time-phased planning” MRP Type in standard SAP R/3. MRP MRP is the planning tool in SAP which will look at all aspects of a material and is highly based upon the master data of the material. that is. The main function of material requirements planning is to guarantee material availability. in particular. We will write another post about how to configure MRP in SAP R/3 System. If a vendor always delivers a m sense to plan this material according to the same cycle.planning run is only carried out according to predefined intervals. This is just one scenario. then MRP will create a purchase requisition which the Buyer will convert to a purchase order. The following topics are covered in the rest of material. and open purchase requisition/orders and so on. current requirements.

   MRP Run Procecure Total Planning Total Planning Run With MRP Controller and much more… .

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