Consumption-based Planning

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Consumption-based Planning
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Material Planning
Material Planning (MRP Procedures)
SAP Terms
Independent Demand (Consumption-based Planning)
MRP-Material Requirements Planning
Reorder point planning
Forecast-based planning
Time-phased planning
SAP Exercise
Manual reorder point
Automatic reorder point
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Planning Process
Can be automatic
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Planning Process

• Planned Order
• Recommendation by the MRP planning process of
  quantity and timing of production or purchase
  order
• Production Order
• Actual order given to shop floor to commence
  production. May be electronic or paper. Can
  include production details (routing, quality
  requirements, drawings, instructions, etc.)

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Planning Process

• Purchase Requisition
• Request to purchasing to create purchase order
• Purchase Order
• Request to vendor to supply materials
• Schedule Line
• Direct request to vendor for materials, covered
  by scheduling agreement (blanket PO)

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Reorder Point Processing
Lot Size
Reorder Point
Safety Stock
Time
Replenishment Lead Time
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Reorder Point Processing

• When the inventory level for a product that is
  planned using consumption-based planning reaches
  the ROP, an order for the material is NOT created
  automatically
• Consumption-based planning uses the Material
  Requirements Planning (MRP) planning process to
  create purchase orders
• The MRP planning process is typically run
  overnight on a daily basis
• Historically, might have used weekly runs
• Time until MRP planning run is executed should be
  considered in ROP calculation (daily runs, add 1
  day to lead time)

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Forward Scheduling forExternal Procurement
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MRP Planning Process

• For a company with thousands of materials to
  plan, the computing resources needed to calculate
  material plans can be significant
• To make sure that
• Only those calculations that are necessary are
  performed
• Only on materials that need planning
• Two filters are used
• Planning Run Type
• Planning Horizon

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Planning Run Types

• NETCH Net change in the total horizon
• In the MRP Planning Process, materials are
  planned if there have been any
• Changes in material stocks (receipts, issues)
• Addition of purchase requisitions, purchase
  orders, planned orders, dependent requirements
• Changes in Material Master Data (Lot Size, ROP,
  etc.)

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Planning Run Types

• NETPL Net change in the planning horizon
• Same at NETCH, EXCEPT
• Changes must occur within the planning horizon
• Planning horizon keeps MRP planning process from
  making plans for future periods that
• Do not impact current operations
• Will be made irrelevant through the dynamics of
  business

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Planning Run Types
Order/ Requisition
Requirement
Time
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Plant Parameters Planning Horizon
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Planning Run Types

• NETUPL Regenerative Planning
• Plans all materials for total planning horizon
• Good idea to run this option regularly (e.g.
  every weekend), even though it is more resource
  intensive
• Customizing changes dont trigger planning under
  NETCH or NETPL
• Time passage problem with NETPL

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NETPL Potential Problem
Planning Horizon
NETPL
Today
Passage of time is not an event Would require
monitoring to detect
Planning Horizon
NETPL
Today
Solution Run NETUPL
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Planning File

• A Planning File entry exists for each material
• Keeps track of changes that would require
  material to be planned under NETCH or NETPL
  options
• MRP Planning process looks at planning file
  entries for each material to see if it should be
  planned

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Planning File
Low-level Code
NETCH Indicator
NETPL Indicator
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Planning Run Options
Planning Run Type NETCH NETPL NETUPL
Create Purchase Req 1 Purchase
Requisitions 2 Purchase Requisitions in
Opening Period 3 Planned Orders
Defined by Schedule Margin Key Usu. does not
impact consumption-based planning
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Planning Run Options
Create MRP List 1 Yes 2 Depending on
Exception Messages 3 No
Planning mode Determines how system deals
with previous plans (planned order, purchase
requisitions)
Scheduling Determines level of detail in
schedule calculation for production orders
Display results before they are saved Lets
planner make changes before the results are
saved
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Planning Run Options

• With consumption-based planning in practice
• You would not run MRP for a single material, but
  do it as part of a group (MRP Area based on
  storage location)
• You would have it scheduled to run automatically
• You would have it either
• Create purchase requisitions automatically
• Create schedule lines

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Net Requirements Calculation
How does safety stock figure into this process?
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Exercise Material Master Data
MRP Type VB sets consumption-based
planning Reorder point Lot size FX is fixed
lot size Fixed lot size Quantity in an order
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Exercise Material Master Data
Plnd delivery time Vendor part of lead
time SchedMargin key Sets opening period,
among other things Safety stock Desired
stock level when replenishment order arrives
How does it work in SAP R/3?
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Exercise Stock/Requirements List
Stock/Requirements List Your one-stop
shopping location for all things material
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Exercise MRP Planning Run
MRP control parameters Planning run
parameters discussed previously
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Exercise MRP Planning Run
Planning run results displayed Purchase
requisition created
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Exercise Purchase Requisition
Can easily create purchase order from S/List
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Exercise Purchase Order
Purchase order screen is where the requisition is
converted to a purchase order Vendors
selected Price determined
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Exercise Receive Purchase Order
Goods Receipt Screen In practice, could just
be a bar-code scan Links receipt to purchase
order Tell SAP R/3 system where goods have
been stored
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Exercise Goods Issue
Goods Issue Screen When goods are issued,
something has to absorb costs (project,
production order, cost center) In this
case, we will charge costs to the warehouse
cost center (P020) What is the downside to
charging to a cost center?