Unit-5 Material Process Planning-Modified

Chapter 8
Material Planning Process
1 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Learning Objectives
1. Explain the master data associated with the material
planning process.
2. Analyze the key concepts associated with material
planning
3. Identify the basic steps in the material planning
process and the data, documents, and information
associated with them.
4. Effectively use SAP® ERP to execute the basic steps
in the material planning process.
5. Extract and evaluate meaningful information about
the material planning process using the SAP ERP
system.
Magal and Word | Integrated Business Processes with ERP Systems | © 2011
2
Material Planning
Answers three basic questions
What materials are required?
How many are required?
When are they required?
Main objective is to balance the demand for materials
with the supply of materials.
Demand: fulfillment and production processes.
Supply: procurement and production processes.
Other processes -- asset management, project systems,
warehouse management -- also affect demand and
supply
3
Material Planning
One of the most complex processes within an
organization
Outcome is procurement proposals
Internal procurement: planned orders
External procurement: purchase requisitions
4
A Basic Material Planning Process
5
Organizational Data
Client
Company code
Plant
Storage location
6
Material Master
Views discussed for other processes
Basic data
Purchasing related
Sales related
Accounting related
Views highly relevant to material planning
MRP views – plant specific
Work scheduling – plant specific
7
Material Master Data for Material
Planning
8
Material Master: Procurement Type
In house or internally (production process)
Externally (procurement process)
Both
None
GBI
Finished goods: both
Raw materials: externally
Semifinished goods: internally
9
Material Master: MRP Type
Identifies which production planning technique to use
Consumption-based planning
Materials requirements planning (MRP)
Master production scheduling (MPS)
10
Material Master: Consumption-
Based Planning
Derives requirements based on historical consumption
data
Reorder point planning
Replenishment lead time
Safety stock
Forecast-based planning
Time-phased planning
Use of low-value materials
11
Consumption-Based Planning
12
Reorder Point Planning Example
13
Independent and Dependent Demand
Independent demand
Demand is based on customer (external) demand
Finished goods, trading goods
Calculated based on actual and forecasted sales
Actual sales orders = customer independent requirement
(CIR)
Calculated demand = planned independent requirements
(PIR)
Dependent demand
Demand is dependent on the demand for another
material
Seimfinished goods, raw materials
14
Material Master: MRP and MPS
Materials requirements planning (MRP)
Derives dependent requirements based on independent
requirements
 BOM explosion
Can plan for all levels in the BOM
Master production scheduling (MPS)
Optional step, similar to MRP
Derives dependent requirements only for the first level
(component) in the BOM
Executed first for critical finished goods
15
MRP vs. MPS
16
Material Master: Lot Size Key
Procedure to determine the lot size of each
procurement proposal generated by material planning
Static procedures: fixed quantity based on
 Fixed lot size = predetermined fixed quantity
 Lot-for-lot = exact quantity required
 Replenishment up to maximum stock level
Period lot sizing procedures: combine requirements from
multiple time periods
Optimum lot sizing procedures: EOQ, EPQ
GBI
All materials: lot-for-lot
17
Material Master: Scheduling Times
Task is to estimate the time needed to procure the
necessary materials.
Common estimates are:
In-house production time
Planned delivery time
GR (goods receipt) processing time
In-house production time is further divided into:
Setup time
Processing time
Interoperation time
18
Material Master: Planning Time Fence
Used to prevent ERP systems from automatically
changing procurement proposals during a specific
period of time
Changes can be made manually
19
Material Master: BOM Selection Method
A single material can have multiple BOMs.
The BOM selection method identifies the criteria the
ERP system should use to select the BOM.
20
Material Master: Availability Check
Group
Defines the strategy the ERP system uses to determine
whether a quantity of material will be available on a
specific date
Most commonly applied method is available-to-promise
(ATP)
Considers a broad range of elements (MRP elements)
representing both supply and demand for the material
Supply elements: current inventory, requisitions, purchase
orders, planned orders, production orders, etc.
Demand elements: sales orders, safety stock, material
reservations, etc.
Availability check is used by many processes
21
Material Master: Strategy Group
High-level strategy used in production
Make to stock (MTS)
Net requirements planning (Strategy 10): proposals
based only on PIR without regard to CIR
Planning with final assembly (Strategy 40): similar to
Strategy 10, but takes sales orders (CIR) into account via
consumption
Make to order (MTO)
No inventory
Sales order (CIR)-based planning
Sales orders trigger production
22
Material Master: Strategy Group
Assemble to order (ATO)
Planning without final assembly (Strategy 50) or
subassembly planning
 Finished product is made to order (CIR)
 Components are made to stock (PIR)
23
Consumption
When a strategy includes both PIRs and CIRs, the
CIRs are said to consume the PIRs.
Proposals are not created by simply adding CIRs and
PIRs
Before Consumption After Consumption
PIR CIR PIR CIR
Example 1 50 60 0 60
Example 2 50 40 10 40
24
Consumption Mode
Forward consumption
Backward consumption
Consumption period
25
Consumption Modes
26
Product Groups
Products with similar planning characteristics or similar
manufacturing processes are placed into a product group.
Products are aggregated into groups from the lowest level
to the highest level.
Lower-level groups can be nested within higher-level
groups.
The lowest-level product group in any hierarchy consists
of materials, either finished goods or trading goods.
Materials and product groups can be members of more
than one group for different planning scenarios.
Each member of a product group is assigned a proportion
27
factor.
GBI Product Groups
28
Product Groups at Apple Inc .
29
The Material Planning Process
30
Sales and Operations Planning
SOP is triggered when the organization wishes to
revise its production plan.
SOP can also be triggered by unexpected events; for
example, changes in the overall economic outlook.
SOP uses data from a variety of sources to produce a
production plan.
SOP can generate several versions of the production
plan based on assumptions concerning economic
growth.
SOP can be either standard or flexible.
31
Elements of the SOP Step
32
Data in the SOP Step
33
Tasks
Tasks in the SOP step include:
Creating the sales plan
Specifying inventory requirements
Creating operations (production) plans
Evaluating the feasibility of the operations plans
 The interface to complete the tasks in SOP is the planning
table, a simple-to-use spreadsheet-like tool.
 The production plan that is generated from SOP is based
on:
Synchronous to sales
Target stock level
Target day’s supply
Stock level = 0
34
Standard SOP Planning Table
35
GBI SOP Example
36
Outcomes
One or more versions of the production plan
No financial implications
No material movements
Therefore no FI, CO, or material documents are
created.
37
Disaggregation
The plans from SOP must be translated into plans for the
finished product in the product hierarchy (disaggregation).
Disaggregation is triggered when a new production plan is
created.
Organizational data (e.g., plant) and master data (e.g.,
product groups) from the production plan are used to
calculate requirements for the materials in the product
group.
These requirements are then transferred to the demand
management step for further planning.
38
Elements of the Disaggregation Step
39
Data in the Disaggregation Step
40
Tasks
The primary task in the disaggregation step is to translate
the plans generated for product groups during the SOP step
into plans for the materials contained in those groups.
Disaggregation can be completed for the entire product
group hierarchy or for one or more levels of the hierarchy.
Either the production plan or the sales plan can be
disaggregated.
41
Tasks
Disaggregate the production plan to the next level
Disaggregate the sales plan to the next level
This becomes the sales plan for the next level.
Then, calculate the production plan for that level.
Disaggregate the sales plan to the material level
Calculate the production plan for the materials.
42
GBI Disaggregation Example
43
Outcomes
Calculate the PIRs for each planning period
These requirements are then transferred to demand
management
created.
44
Transfer PIRs to Demand Management
45
Demand Management
Demand management calculates revised PIRs for the
materials using:
PIRs from SOP after disaggregation
Customer orders (CIRs) from the fulfillment process
Data regarding planning strategies from the material master
46
Elements of the Demand Management
Step
47
Data in the Demand Management Step
48
Tasks
The primary task is to create revised PIRs for the materials.
Which procedure a company uses to calculate these
requirements depends on the production planning strategy
defined by the strategy group in the material master.
Demand management is carried out automatically by the
ERP system.
The MRP controller monitors the results using a variety of
reports and makes adjustments as needed.
49
Outcomes
PIRs for each material included in planning
PIRs represent requirements for the materials for
specific quantities and specific dates.
created.
50
Materials Requirements Planning
SOP: plans at the product group level
Demand management: plans at the material level (FG,
TG)
MRP: plans for materials (FG, TG), components (SFG),
and raw materials (i.e., for all levels of the BOM)
MRP calculates the net requirements for the materials.
MRP creates procurement proposals - to make or buy the
necessary materials.
51
Activities that affect material availability in different
processes:
Procurement: purchase requisitions, purchase orders, and
goods receipts
Fulfillment: sales orders, deliveries, and goods issues
Production: planned orders, production orders, material
reservations, and goods receipts and goods issues
These activities, called MRP elements, are used by MRP for
calculating net requirements and generating procurement
proposals.
MRP can be executed for one plant, for multiple plants, or
within MRP areas.
52
Master Production Schedule (MPS)
Optional
MPS items are high-impact items.
Materials planned by MPS are typically finished goods.
Materials are flagged as master schedule items.
After planning the master schedule items, MPS creates
dependent requirements for the first-level components in
the BOM of the MPS items.
After MPS, MRP plans for the remaining materials in the
BOM.
53
Elements of the MRP Step
54
Data in the MRP Step
55
MRP Procedure
56
Check Planning File
Determine which materials must be planned.
Any change to an MRP-relevant material generates an
entry in the planning file.
Changes in material master (e.g, scheduling times, safety
stock)
Changes to an MRP element
Finished goods are planned first, followed by BOM
components and then raw materials.
57
Calculate Net Requirements
Determine whether there is a need to procure material.
Net requirement calculation takes into account all of the
relevant MRP elements to determine if a shortage of
materials exists.
If the MRP type is consumption-based planning, then the
formula is:
Available stock = Plant stock + Receipts
If the MRP type is MRP or MPS, then the formula is:
Available stock = Plant stock – Safety stock + Receipts –
Issues
If available stock is negative, procurement proposals are
58 generated.
Determine Lot Size
Lot size procedure is used to determine the quantity to
be included in the procurement proposals.
Data needed to calculate lot size are included in the
material master: lot size key
59
Scheduling
Determines whether the material can be procured by the
required date
Two types:
Backward scheduling
Forward scheduling
Data needed for scheduling are included in the material
master.
ERP systems initially use backward scheduling; if not
successful, they then shift to forward scheduling.
In backward scheduling the MRP controller can
manually adjust the schedule.
60
Backward Scheduling
61
Determine Procurement Proposal
Purpose is to determine the type of procurement proposal to
generate
Internal : planned orders
External: three options
Create purchase requisitions
Create planned orders, which are converted to purchase
requisitions
Create schedule lines
62
Procurement Proposals
63
Determine Dependent Requirements
For in-house procurement
 MRP generates dependent requirements for the
component by exploding the BOM
Single-level MRP: Process is terminated after this initial
step.
Multilevel MRP: Calculations are performed for all
levels.
Assemblies have their own BOMs, and MRP creates
dependent requirements for the components in their
BOMs.
Creating dependent requirements can also make entries
inMagal
theandplanning file, which causes further processing.
Word | Integrated Business Processes with ERP Systems | © 2011
64
BOM Explosion
65
BOM for Off-road Bikes
66
MRP Control Parameters
Processing key
NETPL: Planning in planning horizon
 All materials for which MRP-relevant changes have been made in
the planning horizon
 Least time consuming
NETCH: Net change to total horizon
 Planning for all materials for which MRP-relevant changes have
been made
NEUPL: Regenerative planning
 Planning of all MRP-relevant items
 Most time consuming
67
Output of the MRP procedure
Creation of a purchase requisition
 MRP (1) always creates a purchase requisition for externally
procured materials
 MRP (2) creates planned orders
 MRP(3) creates purchase requisitions only in the opening period
and creates planned orders after the opening period
Schedule lines applies to scheduling agreements
 Option (1) not to create schedule lines
 Option (2) to create them only during the opening period
 Option (3) to create them only within the planning horizon
68
Output of the MRP procedure
Create MRP list
 Determines whether the system will create the MRP list
 Creates the MRP list only for materials for which exception messages
are generated
Planning mode
 Determines how previously created procurement proposals will be
handled
 Adjusts the quantities and dates of existing proposals, or discards the
existing proposals and creates new ones
Scheduling
 Should the ERP system calculate only basic dates using the
scheduling times in the material master?
 Should the ERP system perform lead time scheduling using the more
detailed times in the routing?
69
Outcomes
Procurement proposals
Purchase requisitions
Planned orders
Both trigger procurement and production processes
created.
70
Reporting
Reporting options for material planning are not as
extensive as those in other areas.
Three very important tools for reporting the planning
situation:
Stock/requirements list
MRP list
Planning result report
71
Stock/Requirements List
72
Exception Message
73
Material Availability in the
Stock/Requirements List
74
Stock Statistics
75
Stock/Requirements List -- MRP List
Comparison
76
Planning Result Report
77

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Chapter 8

Material Planning Process

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