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Material Requirement Planning

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Video 1: MRP: Steps and Processes
Having created the sales order and having seen the availability check. Now next step would be the material requirements planning. The sales order creates a demand, and that shall be covered. Let's get there. If you look at MRP. MRP is a functionality that somewhere is in-between the modules, PP for production, the planning and M M for material management. So it has both colors in here. MRP is a nightly job that runs, um, and that shell replenish materials by creation of plant orders for production or of purchasing requisitions. For purchasing it reacts on demands. The demands may come like an hour case from a customer order that we have here or any other, um, sales document that creates a demand. It may be a dependent requirement coming from a production order that explodes its bill of material. And so the components are required and there's a demand for the components. It may be an independent requirement coming, coming from planning. So this is entered kind of manually. It could be calculated. It could be manually entered. It's seen as simply a value you believe in itself, an a quantity of material you believe in that the system will need that it could come from production plants. It could come from other sources like manual reservations and so on. And once it gets to the, uh, MRP functionality and the nightly run, this is a job done step by step. First of all, for each and every of these, probably thousands of materials, the quantity calculation takes place, meaning to fulfill the demand coming from, um, for example, sales orders, or other sources to fulfill that demand. Which quantity is missing. So that's the calculation. If you have enough on stock, calculation would say, we do not miss anything. We don't have to do anything. If something is missing, it shall be replenished. Next step would be the lot size calculation, meaning, um, if seven are missing Shelby replenish seven, or do we always deplenish 10. Or do we always replenish to the, um, to the full capacity of our storage location? How do we do that? So there are different lot size strategies built in here. After that, after the lot size is known, the system has to find out about the procurement type that sits in the material master. There is one indicator and this main change power plant that it could be different plant by plant. If there isn't letter F it is the external procurement. If there's a legit E that is internal procurement, this is because of German. Every variation still use basis here. There could also be the letter X that both race are allowed. You could, uh, produce that, or you could purchase that. Okay. Once that is clear, the system knows which direction to go, whether to create a plant order for E or X or whether to, uh, create, um, a purchasing position for the F letter. Now, the system calculates the scheduling. The demand has a date, uh, to fulfill that date. The system has to calculate when we have to get that material like for a customer order. Uh, delivery takes time. It may be that that route is only troubled once a week and that packaging, uh, picking and what you have, um, takes another day or something like that. Then it may be that at the customers. Um, the unloading dock has a scheduled, has a certain calendar has days where it is not open. All that is taken into consideration for the replenishment. So we may need that material much earlier than the demand is, um, is positioned on the, on the calendar. Okay. If the material that is required is a finished goods. So it's produced in-house the system will explode the bill of material and thereby creating dependent requirements of that. So it's just so good process was depending on requirement, what we have. Okay. When that all is done, the system creates planned orders where required or purchase requisitions were required. And there's a neck. Another way to do that. If you have a purchasing scheduling agreement, the system could create scheduled blinds for that scheduling agreement. So no purchase order and or purchase or acquisition is necessary in that case. Okay. So, this is what we get here. And with the purchase and acquisition, we can turn that into a purchase order with a plant order, we can go to production and finally behalf all that on stock. And that means MIP has done its job.

Video 2: MRP Methods
In the MIP part of the system, you can find a different methods, how to handle SAP, and you can assign your materials to one of these methods. There are more than 20 of those. You can even create more methods using customizing, but all these methods are based on two global methods that I'm going to explain here. First of all, we have a planning based MRP. This is what our material is assigned to. And that depends on requirements. It checks the requirements and tries to fulfill whatever requirements are there. The other mez method is the consumption based method. That again has different detailed methods. Consumption-based method means that you do not look at requirements coming your way, but you look at the content of your stock. So you define a stock level and if your material sinks below that stock level, it's named the reorder point level. If the stock level sinks below that level, the system triggers replenishment instead of a reorder point level, you could also set a forecast based level, which then is a floating reorder point like here. But again, here system does, that's not recognized. Well requirements. It simply looks at the box. And if the box is not full enough, there will be a replenishment. So these second method, the consumption based methods are good for cheap products that you need in huge quantities, like nuts and bolts while the planning based MRP. Is good for more valuable items that you don't want to have in thousands in some boxes, just to fulfill possible requirements like our pump, which is an expensive item. You, you only react on requirements and do not react on any, um, empty boxes or something like that. Okay. Okay. If you look at requirements, there may be requirements coming from customer orders. And these requirements in this process will be turned into delivering requirements because once a customer order gets delivered, you create a delivery document. And before it is goods issued, the delivery document takes over the requirements from the customer order because it's more detailed. Uh, that the customer order in terms of which materials are required, similar dependent requirements coming from bomb explosions from bill of material, explosions will be turned into reservations. Once you have turned your plant production order into a real production audit, then you have order reservations for that production order. And of course there may be independent requirements that you individually. Probably even manually it to the system, all that requirements are, um, are counted by well by or replenishment. Um, your biggest source of material is the stock that you have. So the stock is not replenishment, but you have it. And what do you have on stock? You don't have to replenish if stock is missing or if your calculation goes for it will be missing and future a material could be purchased. You have a purchase acquisition. So you have a purchase requisition requirement that will be turned into a purchase order requirement. Once your purchase requisition is turned into a purchase order, same is true for plant orders and production orders. So. And as a source of material or finished goods, the plant order only is used as long as it is not to it into a production order. Once it's turned over into production order, plant order doesn't matter anymore, production order is the source of replenishment. Then we also talk about different lot size methods. If the system says, um, we have to replenish the exact blood size. That would be a static method. It's a lot for a lot order quantity. So seven are missing. Seven are replenished. There may be a fixed lot size. There may be the replenishment to maximum stock level. You already told me talk about that. These are static methods. There may be periodical methods, meaning that the system calculates the daily lot size. So it combines or requirements of a certain date. And then this is the lot size. So it only replenish with one, let's say purchase order or one production order, even if multiple, um, the requirements exist in the system, there could be weekly lot sizes, even monthly lot sizes or period blood sizes that you can, I can define. And then there are optimized methods, like dynamic, lots as creation. Like a graph reorder point procedure. There are mathematical formulas and the background that tried to calculate which lot size. Is the optimum and the balance between storage costs and handling costs in purchasing. So whenever you create a purchase order, that will cause costs. And whenever you have something on stock that also will create costs. So if you buy too much, you have too much on stock. If you buy two small lot sizes. You may have too many purchase orders to handle. So somewhere should be a mini moment. There are different methods, um, that are implemented in SAP to take care of that in the real life. In the companies that really use SAP optimized methods are not that often seen. They usually use periodical methods or static methods. Okay. That's about the theory behind MRP. And now let's get to the SAP system.

Video 3: MRP Planning using MDO4 Transaction
In SAP, there's one central transaction. It's a transaction M D zero for the close to the MIP situation of a material. I opened the transaction. You enter the material number, like in our case, it was the MK 100 material. Which is handled in plant 1000. If you want to, you can divide your plant into different MRP areas. We haven't done that here. So plant 1000 is sufficient of information. I hit enter to see the situation or that material. And here it is. So what I see here, today's stock is seven. So we have seven on stock. We have created an order. We have created an order. And that was the order. 17 three zero seven that we just saved and the sales module of the system. So that audit is about two pieces. So it will create a demand of two pieces, which we can clearly answer with the stock we have. So we have seven on stock. Two hour, well kind of reserved is not really a reservation, but kind of reserved for that sales order. Now what happened? Here's another serious order with a higher number. Our sales order is three Oh seven. This is three Oh eight. Meaning that sales order was created later. Even though it's an earlier date since SAP strictly goes for first, uh, first come first, serve our sales order, gut that quantity. And we had no issues when we created it. We had no issues with availability check. This sales order obviously had issues with availability check because this customer wants to have 15 pumps since we only have seven and off that seven tool are already reserved for our order. So we don't have enough of that pumps. So at the end of the day, we have missing pumps. We have 10 missing pumps. Okay. We have seven on stock and we have 17 in two different orders to be delivered. So we miss 10 MRP needs to do something about that. And this is what you can do, right from here. You can see the MIP situation of any material from here. This by the way is a training system. And this is a clear and easy overview in a real system. You may have dozens or even hundreds of lines where you see where requirements come from and you see all the replenishment, um, activities that were done. No replenishment activities were done yet. So the MRP run go, uh, it's a nightly job that covers all materials that are assigned to MIP. In a certain plant. If you want to carry out an MIP around for this material right now, we can do this. That would be a single item, multilevel, MIP, chop our material. It's a pump. And that pump is a produced pumps. So I suspect we have a bill of material behind that. So we better use multi single item, multilevel multilevel for that bill of material. If we had no bomb. It wouldn't matter, then there were no bomb to explode. It would work anyway. Okay. I go to the, um, to the starting transaction of that, um, single, single item around, I click that button. This is a different transaction. It looks very much like the nightly transaction does, but this is for only this material. You have some control parameters here. Since this system runs with the same control Mark power meter each and every night. And it does it sufficiently. I have no business in changing that parameters. I shouldn't do that. So I simply start that run, go to enter. It takes awhile. And then I see the statistics of that run. So what happened is that six materials were planned and to have new. Exceptions exceptions mean that MIP found out that something is not in order that something is missing, that something comes too early or too late or whatever happened. We will see that later now as for the plant orders, one plant order was created that is obviously for our pump, but we do not see that right here. We see that in, um, in the form of transaction, the MDs zero four. Uh, once we go back to that transaction and nine dependent requirements were created, meaning that obviously we have nine items of the bill of material. So for these dependent requirements were courageous. Okay. I go back to the MRP, uh, transaction to the MD zero four, simply using the back button. And here I am at nothing has happened. This screen is unchanged. Why is that? This is typical for SAP. Whenever you start an activity out of some reporting transaction, and you come back to it, the screen is not changed. The screenshot still shows the situation of when we started that. And that was at two o'clock and two minutes, 14 zero two. Okay. I have to refresh that screen. Here's a bunch of refresh as if he doesn't do it on its own. We have to do that. Okay. Refresh. I click that button and now you see that we have a planned order that was created by the MIP run and that plant audit exactly creates that. Or bill will create exactly that 10 pumps that were missing. So at the end of the day available quantity zero, and that means we have fulfilled all requirements. Once this plant audit is turned into a production order and production audit has carried out the production. Okay. I leave that screen again because now we have covered our requirements from a point of view of MRP. Get out of here, get out and get again, that wasn't, that.

Video 4: Checking Plant Order in SAP
So now we have a plant order for our pump that we are going to sell. Let's check that plant order. We can use the transaction MD zero for that MRP transaction to exactly do that. This is one of the most widely used transactions because you can see so much with it system still remembers or material that we've entered here. So I simply get in here. I see the situation. And here we see the plant or the, we have our sales order. Um, no, this is our sales order down here. This has all the sales order. We have the other sales order that in combination create requirements and we have the plant order that covers the difference between the available quantity on stock and the requirements that we have. Okay. And now I want to check this plant order if I highlight that line, or if I, if I click somewhere here with my, uh, with my cousin and then I go to the pencil symbol on the bottom, I can good get there and change if I want to this plant order, I'm not going to change that. Just wanted to make sure that we S that we see that plant audit. This is how a plant order looks like. It's about the quantity to be produced. It has an already planned basic start date, which would be well yesterday. And we have an end date, which would be at the 1st of October. So we may be able to do that. If we hurry up what we can do here in that plant order, and you don't have to do this manually and just be a I'm just here to show you the situation. I can check the components of other ability, ATPs that every variation for. Um, available to promise, and this is what we are going to check and critique that. And now I see the material numbers of the components, unfortunately, SAP, doesn't it. Give me the material text. I could change the layout of that reports or texts here, but in the standard it's not here. And what I see here, everything is green except of the last material. The last material is yellowish. Yellowish means we still have time to do something, but at the moment, there is some critical situation with that material, which are your number, MK 100 dash 800. Let's check that out. I get out of here again. I get out of the plant order again. I have not changed anything. So I say no. I'm back to that screen. Nothing has changed. And now I changed the material that I'm going to see here to MK 100 dash 800. If I click enter now I see the new material. As you can see this new material uses the MRP type VB and that's um, um, that's um, Um, MIP type that only looks at the stock level and does not take into account any kind of requests for the material. And so the dependent requirements coming from our plant orders is not shown here. The only situation that we see is that we have 532 somewhere in our plant and that we have a safety stock defined or 100, um, Which we cannot take into account for MRP. So it's only 422 that MRP believes in having, and that's all that we see. We do not see any requirements. Now we can check more details of that material. I don't have to go to the transaction. something like that. I simply can open them the header up here. And I see more details for the material doing that. I can see that the reorder point is 5,000 and both 532 and 432 both are far below the reorder point. So if we do a single item, multi-level kind of job, the system has to do something about that. Well, I doubt that, uh, um, um, Um, hexagon head screw, we'll have a bill of material. This is clearly a purchased material, but anyway, we used that because it works with or without bill of material. So I do that. I go here, I see the same screen I've seen before. I simply say, go on system does something. And here I see a purchase requisition was created coming back from here and updating that screen because nothing has changed here. Updating that screen. Now I see the purchase requisition. So I've created the purchase requisition and now I'm sure that we have enough, um, to carry on with our production. I get out of that again. Next chapter. We'll be purchasing.