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MRP 1 View

MRP 1 View
The MRP 1 View is a place holder for defining the Planning
methods and lot sizing procedures of a give material at a
plant/storage location level.
If you are going to have a particular material planned in SAP, then
you can go ahead and create a MRP views (MRP 1, 2, 3, and 4)
MRP type
The MRP Type Key determines whether and how the material is
planned. You have the following options:
Contents
1. 1 Material
Requirement Planning
MRP Type PD
1. 1.1 Manual
Reorder Point
Planning
MRP Type
VB
1. 1.1.1
Foreca
st
Based
Planni
ng
MRP
Type
VV
2. 1.2 Rounding
Profile
PD Relevant for Material Requirement Planning
ND No Planning in SAP
VB - Manual reorder point planning (Consumption based
planning)
VM- Automatic reorder point planning (Consumption based
planning)
VV - Forecast based Planning
X0 - External Planning i.e., APO or BAAN or I2 or MES or any
other external planning system.
MRP types can also be configured to the requirements, but most of
the times, standard MRP types are used.
Lateral Thinking:
Step 1: As a consultant you have to decide whether a particular
material needs to be planned in SAP.
Step 2: Then decide the type of planning.
MRP Types can be classified into 2 Major Types or Leagues:
a) Materials for Consumption based planning:
For materials whose planning is based on consumption or for
materials which are really not expensive or which are really not
monitored by finance and the costing teams.
This is mostly used for Raw Materials.
This type of planning is for Materials which are procured based on
their consumption. Methods like Reorder Point Planning, where
procurement is triggered after the stock falls below certain levels
is the most widely recognized consumption based planning.
The Following are consumption based MRP types:
VB - Manual reorder point planning
VM- Automatic reorder point planning
b) Planning not based on Consumption: Planning Based on
Demand:
For materials whose planning is not based on the consumption
levels or materials who are to be procured on demand only. These
materials are those whose consumption is monitored by the
finance team and they are really important for the company. These
materials are expensive materials.

This type of planning is mostly used for expensive and monitored
Raw Materials and for planning of the manufactured products.
Demands coming from Sales order or planned independent
demand for semi-finished materials, finished materials or even the
most expensive raw mtaerials are planned using Material
Requriement Planning.
Illustrative Explaination of MRP Types:
See the table below:
Material
Category
Criteria
1
Criteria
2
Criteria 3 MRP Type
Preferred
Raw
Material
w/o
Consumabl
e based
Planning.
Expensiv
e or
purchase
is
monitore
d
Consum
ed lot by
lot
Purchase
or issue is
planned
Then Use
Normal
MRP or
MPS type
of planning
Raw
Material W/
Consumabl
e based
planning
Not
really
expensiv
e
Consum
ed
lavishly
Purchase
or
consumpti
on is not
really
planned
Then use a
Consumpti
on based
planning
like
Reorder
point
Planning or
forecast
based
planning
Manufactur
ed Material
w/ Lot by
Lot
Consumptio
n
Expensiv
e and
producti
on is
monitore
d
Consum
ed lot by
lot
Produced
on Made
to order or
Made to
Stock basis
Then Use
Normal
MRP or
MPS type
of planning
The Material requirement planning is mostly carried out for high
value materials like the assemblies, subassemblies or the high
value procurement materials whose procurement quantities are
planned based on the incoming demands. For high value materials,
the planning is monitored and production/procurement is ordered
once the higher levels demands arrive.
On the other hand, consumption based planning is carried out for
low value materials whose planning methods can be restricted to
consumption based methods like the reorder point planning (with
putting in a lot of efforts in to planning strategies).
The below screen shot shows the various MRP types which are
offered by SAP:
Material Requirement Planning MRP Type PD
The planning is carried out for the quantities planned
through planned independent requirement or quantities
planned through incoming sales orders (made-to-order or
made-to-stock). The planning is done with respect to the
master plan.
The planning process does not consider any forecast
information or historical consumption patterns. Material
planning is done only for absolute requirements/demands on
hand.
The available stock is determined by the planning run (that
is required to meet the demands) by including the following in
an equation as shown below
= Plant stock (considered as receipt) + scheduled receipts
from production and purchase all the demands from sales
order, material reservations and planned independent
requirements.
If the available stock does not satisfy the demand then
procurement proposals are raised to cover the demands.
Alternatively we can interpret it as fulfillment of the
incoming demands by all the receipts.
Manual Reorder Point Planning MRP Type VB
Consumption based planning is a type of planning which
is triggered based on consumption of stock. It can based on the
past consumption history based on a forecasted value or it can
be based on the current consumption levels.
The best example of consumption based planning can be
Reorder Point Planning, where the planning for a given
material is triggered when the stocks fall below a reorder
point. On the other hand you can also have a forecast based
planning where planning is carried out based on forecasted
figures for the material (forecast based on historical data)
In the case of Manual Reorder Point Planning (MRP
Type VB), when the Plant stock & firmed receipts for a given
material fall below reorder point, the planning for the material
is triggered (a planning file entry is created). For this to
happen, you would have to enter the Reorder level manually in
MRP 1 view of the material master (as in the case of manual
Reorder Point Planning) or the reorder point can be
automatically calculated by the system (as in automatic
Reorder point planning).
In the Reorder Point Planning, we usually maintains a
safety stock (entered manually in MRP 1 View of the
material master though not mandatory) to use it as handy
stock in the period when the order is placed with the vendor
and the material is being transported to the plant material is
on its way to the plant or warehouse (this is called
replenishment lead time). The Safety stock can also be
calculated automatically by the system using the Dynamic
Safety Stock concept. You should also maintain the
replenishment lead time, as accurately as possible in the
material master.
In Re-order point planning, the incoming demands are not
considered as issues, in other words the incoming demand
plays no role in planning or creation of procurement proposals.
MRP waits for the cumulative of the Stock + Firmed
receipts to fall below the re-order point so as to trigger
creation of a procurement proposal. The procurement proposal
is created for a quantity equal to the Reorder point or equal to
a fixed lot size maintained in the material master. If a
procurement proposal already exists for the material with
quantities greater than the proposed quantity (a manually
created one), the system would not create a new one.
It is always recommended to use fixed lot sizing
procedure so that every time the stock falls below the reorder
point, the system can procure the fixed lot size, instead of
using its own planning brains and ordering the quantity
mentioned in the reorder point.
For example, if for a given material which is set for
reorder point planning, with a reorder point of 80 Units, the
system would try to create a planned order once the stocks
falls below 80 Units. Assuming that the current stock at any
given point in time is 50 Units and the firmed receipts are 20
Units, making it 70 Units, which is still well below the 80
units level, in which case the system would create a planned
order of 10 more units to reach back to the level of 80 units.
Now if you have a Fixed Lot Sizing procedure set in the
material master, for a 100 Units, the system would always create a
planned order of 100 units.
Automatic Reorder Point Planning MRP Type VM
In the case of Automatic Reorder Point Planning (MRP
Type VM) - a type of consumption based planning, the system
calculates the recorder point and the safety stock using the past
historical consumption data to derive the future consumption
patterns. In this case you would need to extend the material
master for the forecast view with a valid forecasting method
selected.
In the net requirement calculations, the available stock is
determined as equal to the plant stock and the firmed receipts from
purchase and production. Net requirement calculations do not
consider the demand from sales order or from planned
independent requirements or from material reservations. If the
available stocks fall below the reorder point, procurement
proposals are raised.
Manual/Automatic Reorder Point Planning with External
Requirements MRP Type V1/V2
The only difference between the reorder point planning
method and the reorder point planning methods with external
requirements is that, the Sales order requirements and the
requirements from manual reservations are also included in
the formula that is used to calculate the available stock.
These external requirements can be considered for the period
within the replenishment lead time or within the total horizon;
this option can be configured in the configuration for MRP
procedures.
Forecast Based Planning MRP Type VV
Another form of Consumption based planning is Forecast
Based Planning, in which the historical consumption data is
used to extrapolate the future consumption patterns, which are
directly used as requirement figures in the next planning run.
The forecast is suggested by the system periodically, i.e., on a
weekly, daily, monthly basis or as per accounting periods.
You can specify the number of historical periods and the
future forecast horizon (periods) for each material. In the
planning run, the forecasted requirements are made to be
available at the start of the period specified (week, month or
day etc) and then you have an option to further divide/split
these requirements to a finer detailed period pattern through
the use of splitting indicator in MRP 3 view. The splitting
Indicator can be configured in the following path Logistics >
Production > MRP > Forecast > Define Splitting of forecast
requirements for MRP.
The forecasted requirements should be covered by the
plant stock + scheduled firmed goods receipts (from purchase
or production). Net requirement calculations do not consider
the demand from sales order or from planned independent
requirements or from material reservations. Only demands
from the forecasted figures are considered. If the available
stocks fall below the forecasted requirements/demand, for the
period, procurement proposals are raised.
Safety stock can be considered in the net requirement
calculations
Available stock that is left over after the planning run
calculations = plant stock safety stock + firmed receipts from
purchase or production Forecasted requirements/demand.
Another way of interpreting the same is that, the receipts
should cover the demands from forecasts. If the receipts
cannot cover the demands from forecast, then the system raises
procurement proposals.

MRP Group
Using the MRP groups you can group materials which would have
the same planning parameters.
Use of planning parameters available at the plant level would have
all the materials in the plant adopt to the same planning
parameters.
MRP Groups allows you to have different set of planning
parameters, which once assigned to the materials helps these
materials to get planned in varied specified ways as described
below:
These control parameters include, the planning strategy group, the
consumption mode, the planning horizon, Rescheduling Horizon,
Planning Time fence, determination strategies for issue storage
location, Order type to be used for conversion of planned orders,
availability checking rule, Safety Stock, whether start is allowed
to be in the past etc.
Lateral Thinking
As a consultant you have to think whether the materials needs to
be grouped in groups which define varied the planning parameters
or you are happy with using the plant level planning parameters
for all the materials.
If you dont have MRP groups specifying grouping of materials
with similar planning concepts, then the system assigns these
materials with plant specific planning parameters.
Reorder Point
Re-order point planning is a special procedure in materials
planning under the heading of consumption based planning.
If the reorder point is greater than warehouse stock, an order
proposal is created by materials planning.
Manual reorder point planning, the logic here is more attentive
towards maintaining the stock levels rather than the (Net)
requirements for the material.
Example:
i.e. for example you have a stock of 100 KG and the Reorder point
value is say 150, then the system creates a proposal for the balance
50 kg even though there may / may not be requirements for this
ordered qty. At the time of procurement the system would procure
according to the lot sizing procures defined for the material, i.e., if
the lot sizing procures suggests min lot quantity as 60 kg; the
system would procure 60 kg, instead of 50 kg.
Illustration of the Reorder Point Planning:
MRP Controller
It is a Configurable Field. It has to be configured in IMG.
MRP Controller specifies the absolute three digit code of the MRP
controller responsible for material planning for the material. MRP
controller is the person responsible for a group of materials in a
plant or company.
A material that takes part in material requirements planning must
be allocated to an MRP controller. This allocation helps you to
evaluate or run MRP for a controller.
Lateral Thinking
You can run or evaluate MRP for a plant or material at a plant
using the standard SAP Transaction codes MD01 or MD02
(running MRP at Plant or Material-Plant level or MD04
(Evaluation at material plant level). But it would be interesting to
know that you can also run a MRP run for a MRP controller
activating a standard User-Exists in the system.
Lot size (materials planning)
It is a Configurable Field. It has to be configured in IMG in the
MRP section of the Logistics Production area.
Normally consultants avoid configuring this field and they use it
as it is.
Lot Sizing Key determines which lot-sizing procedure the system
uses within materials planning to calculate the quantity to be
procured or produced for the material. Lot Sizing procedure in
material requirements planning is used to calculate the order and
production quantities (lot sizes).
Types of Lot sizes:
A) Static Lot Sizing Procedure Static Lot Sizing procedure
means that the lot size is static and it is not be clubbed periodically
or for optimum lot size calculations.
EX is the most commonly used, which means lot for lot quantity.
Which means the lot size is equal to the requirement quantity and
it is not be clubbed periodically or for optimum lot size
calculations.
FX is used for Fixed Lot Size and HB is used as a lot size to
replenish stock to the maximum level.
B) Period Lot Size Procedure The clubbing of requirements on a
daily basis or a weekly basis or on a decided periodic basis.
For example - TB is used if you want to carry out Daily Lot
Sizing; WB is used for Weekly,
Note:
As per standard SAP, the material is always planned in the start of
the period. For example if the material is planned with a weekly-
lot-size, then the required planned start date will be in the start of
the week. Nevertheless through configuration, you can have it
starting in the end of the week if required.
There are many other options of starting and ending of the dates
for the lot size planning.
Minimum lot size
It is the Minimum Procurement quantity for the material at the
given plant and storage location defined.
Examples:
If the Minimum Lot size is 100 kg and the required Quantity is 80
kg, then the system will create one planned order of minimum 100
kg in number {if the Plant/Storage location stock for that material
is Zero}.
Maximum lot size
It is the maximum Lot size for a Procurement quantity. If the
Maximum Lot size is 80 units, then the maximum planned order
qty cannot be more than 80 units in any case.
Examples:
If the required quantity through a demand is 120 kg, then the
system will create two planned orders of 80 kg & 40 kg {if the
Plant/Storage location stock for that material is Zero}
If the procurement qty is 140 kg, and the Maximum lot is 80 kg
and minimum is 15 kg, then the system will create 2 planned
orders of 80 kg & 60 kg. {if the Plant/Storage location stock for
that material is Zero}
If the procurement qty is 85 kg, and the Maximum lot is 80 kg and
minimum is 15 kg, then the system will create 2 planned orders of
80 kg & 15 kg {if the Plant/Storage location stock for that material
is Zero}.
Fixed lot size
The Fixed Lot size defines a fixed procurement lot size quantity
for the material. Which means that you will always procure or
produce a material in a fixed quantity.
Examples:
If the required Quantity through demand/demands is 120 and the
fixed lot size is 80, then the system will create 2 planned orders
with one planned order of quantity 80 an the other planned order
of Qty 80 {if the Plant/Storage location stock for that material is
Zero}.
Rounding Value
Examples:
If the Rounding Value is 20, and the procurement quantity is 70,
then the system will always round up the planned order to a
multiple of 20.
One more example would be, if we dont consider the Min/Max
Lot size and the procurement quantity is 70, then the system
would create a planned order of 80 to round off to 20 {if the
Plant/Storage location stock for that material is Zero}.
Rounding Profile
The static rounding value method may not satisfy all the business
cases, where a given rounding value is used and the procurement
proposals are rounding to that value. There may be situations
where the rounding value may change according to the size of the
procurement proposal; this is where the concept of rounding
profile may help you.
Rounding Profile allows you to enter a procurement quantity and
the corresponding rounded value that is applicable if the
procurement quantities. You may configure the system to have a
rounded value of 10 units, if the procurement quantity is at least 1
unit and a rounded value of 100 units, if the procurement quantity
reaches 70 units. The transaction code to configure is OWD1. The
Rounding profile configuration screen would look something as
below. The Rounding Profile configured is named as Z001.
Explanation for the Rounding Profile Z001 -
Further discussing the above example, the rounding profile Z001,
once created can be simulated by pressing the Simulation
button in the configuration screen. The simulation carries a
rounding 10 Units for a requirement quantity ranging from 1 unit
to 69 Units (Rounding of 10 for requirement quantity of 1 to 10,
11 to 20, and 21 to 30 till 61 to 69) and starting from 70 Units to
100 Units we will round to 100 (i.e., if the requirement quantity
from 70 onwards will be rounded to 100 units every time). This
continues in the same pattern as shown by a rounding of 10 units
from 101 to 110 till 161 to 169 and at 170 units it will round to
200 for the range of 170 to 200; so on and forth.
Assembly scrap
It defines the scrap % that is allowed for the material. It is used to
define the scrap % of the header material.
Examples:
If the scrap % is 10% and the requirement quantity is 100, the
planned order will be created for 100 units and the system will add
a column in the MRP screen to Mention that 10 is the scrap
Quantity to be produced for that material.
The components of the production order or process order are
planned proportionately for manufacturing 110 units.
Maximum stock level
Maximum Stock level is a Quantity of the material in this plant
that may not be exceeded. In materials planning, the maximum
stock level is used only if you have chosen Replenish to maximum
stock level as the lot-sizing procedure; that is, you have entered
HB as the lot size key. Enter a value if you have chosen Replenish
to maximum stock level as the lot-sizing procedure.
If you have chosen to work on Maximum stock level then the
system procures for the maximum stock level quantity and then
adds the Procurement quantity to that.
Examples:
a) If the Maximum Stock level is 500 and the demanded quantity
is 45, then the system creates a planned order of 545, thereby first
ensuring the 500 stock is filled up and then the demand quantity is
added to that.
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