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Slide 1
Material Planning Process Chapter 8 1 Magal and Word |
Integrated Business Processes with ERP Systems | 2011
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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. 2 Magal and Word |
Integrated Business Processes with ERP Systems | 2011
Slide 3
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 Magal and Word | Integrated Business Processes
with ERP Systems | 2011 3
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Material Planning One of the most complex processes within an
organization Outcome is procurement proposals Internal procurement:
planned orders External procurement: purchase requisitions Magal
and Word | Integrated Business Processes with ERP Systems | 2011
4
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A Basic Material Planning Process Magal and Word | Integrated
Business Processes with ERP Systems | 2011 5
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Organizational Data Client Company code Plant Storage location
Magal and Word | Integrated Business Processes with ERP Systems |
2011 6
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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 Magal and Word | Integrated Business
Processes with ERP Systems | 2011 7
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Material Master Data for Material Planning Magal and Word |
Integrated Business Processes with ERP Systems | 2011 8
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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 Magal and Word | Integrated Business Processes with ERP
Systems | 2011 9
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Material Master: MRP Type Identifies which production planning
technique to use Consumption-based planning Materials requirements
planning (MRP) Master production scheduling (MPS) Magal and Word |
Integrated Business Processes with ERP Systems | 2011 10
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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 Magal and
Word | Integrated Business Processes with ERP Systems | 2011
11
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Consumption-Based Planning Magal and Word | Integrated Business
Processes with ERP Systems | 2011 12
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Reorder Point Planning Example Magal and Word | Integrated
Business Processes with ERP Systems | 2011 13
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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 Magal and Word | Integrated Business Processes with
ERP Systems | 2011 14
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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 Magal and
Word | Integrated Business Processes with ERP Systems | 2011
15
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MRP vs. MPS Magal and Word | Integrated Business Processes with
ERP Systems | 2011 16
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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
Magal and Word | Integrated Business Processes with ERP Systems |
2011 17
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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 Magal and Word |
Integrated Business Processes with ERP Systems | 2011 18
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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 Magal and Word
| Integrated Business Processes with ERP Systems | 2011 19
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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. Magal and
Word | Integrated Business Processes with ERP Systems | 2011
20
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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 Magal and Word | Integrated
Business Processes with ERP Systems | 2011 21
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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 Magal and Word | Integrated Business Processes
with ERP Systems | 2011 22
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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) Magal and Word | Integrated Business Processes
with ERP Systems | 2011 23
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Magal and Word | Integrated Business Processes with ERP Systems
| 2011 24 Before ConsumptionAfter Consumption PIRCIRPIRCIR Example
150600 Example 250401040 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
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Consumption Mode Forward consumption Backward consumption
Consumption period Magal and Word | Integrated Business Processes
with ERP Systems | 2011 25
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Consumption Modes Magal and Word | Integrated Business
Processes with ERP Systems | 2011 26
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Demo 8.1 Review MRP and Scheduling Views for a Material Review
MRP and scheduling views for a material Magal and Word | Integrated
Business Processes with ERP Systems | 2011 27
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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 factor. Magal and Word | Integrated Business Processes
with ERP Systems | 2011 28
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GBI Product Groups Magal and Word | Integrated Business
Processes with ERP Systems | 2011 29
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Product Groups at Apple Inc. Magal and Word | Integrated
Business Processes with ERP Systems | 2011 30
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Demo 8.2 Review GBI Product Groups Review GBI product groups
Magal and Word | Integrated Business Processes with ERP Systems |
2011 31
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The Material Planning Process Magal and Word | Integrated
Business Processes with ERP Systems | 2011 32
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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. Magal and Word | Integrated
Business Processes with ERP Systems | 2011 33
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Elements of the SOP Step Magal and Word | Integrated Business
Processes with ERP Systems | 2011 34
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Data in the SOP Step Magal and Word | Integrated Business
Processes with ERP Systems | 2011 35
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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 days supply Stock level = 0 Magal and Word |
Integrated Business Processes with ERP Systems | 2011 36
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Standard SOP Planning Table Magal and Word | Integrated
Business Processes with ERP Systems | 2011 37
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GBI SOP Example Magal and Word | Integrated Business Processes
with ERP Systems | 2011 38
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Outcomes One or more versions of the production plan No
financial implications No material movements Therefore no FI, CO,
or material documents are created. Magal and Word | Integrated
Business Processes with ERP Systems | 2011 39
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Demo 8.3 Create an SOP for the Bicycles Product Group Review
creating an SOP for the bicycles product group Magal and Word |
Integrated Business Processes with ERP Systems | 2011 40
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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.
Magal and Word | Integrated Business Processes with ERP Systems |
2011 41
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Elements of the Disaggregation Step Magal and Word | Integrated
Business Processes with ERP Systems | 2011 42
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Data in the Disaggregation Step Magal and Word | Integrated
Business Processes with ERP Systems | 2011 43
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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. Magal and
Word | Integrated Business Processes with ERP Systems | 2011
44
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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. Magal and Word |
Integrated Business Processes with ERP Systems | 2011 45
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GBI Disaggregation Example Magal and Word | Integrated Business
Processes with ERP Systems | 2011 46
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Outcomes Calculate the PIRs for each planning period These
requirements are then transferred to demand management No financial
implications No material movements Therefore no FI, CO, or material
documents are created. Magal and Word | Integrated Business
Processes with ERP Systems | 2011 47
Slide 48
Transfer PIRs to Demand Management Magal and Word | Integrated
Business Processes with ERP Systems | 2011 48
Slide 49
Demo 8.4 Disaggregate Production Plan and Transfer to Demand
Management Review disaggregate production plan and transfer to
demand management. Magal and Word | Integrated Business Processes
with ERP Systems | 2011 49
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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 Magal and Word | Integrated
Business Processes with ERP Systems | 2011 50
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Elements of the Demand Management Step Magal and Word |
Integrated Business Processes with ERP Systems | 2011 51
Slide 52
Data in the Demand Management Step Magal and Word | Integrated
Business Processes with ERP Systems | 2011 52
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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. Magal and Word | Integrated Business
Processes with ERP Systems | 2011 53
Slide 54
Outcomes PIRs for each material included in planning PIRs
represent requirements for the materials for specific quantities
and specific dates. No financial implications No material movements
Therefore no FI, CO, or material documents are created. Magal and
Word | Integrated Business Processes with ERP Systems | 2011
54
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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. Magal and Word | Integrated
Business Processes with ERP Systems | 2011 55
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Materials Requirements Planning 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. Magal and Word | Integrated
Business Processes with ERP Systems | 2011 56
Slide 57
Materials Requirements Planning 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. Magal and Word | Integrated Business
Processes with ERP Systems | 2011 57
Slide 58
Elements of the MRP Step Magal and Word | Integrated Business
Processes with ERP Systems | 2011 58
Slide 59
Data in the MRP Step Magal and Word | Integrated Business
Processes with ERP Systems | 2011 59
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MRP Procedure Magal and Word | Integrated Business Processes
with ERP Systems | 2011 60
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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. Magal and
Word | Integrated Business Processes with ERP Systems | 2011
61
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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 generated. Magal and Word |
Integrated Business Processes with ERP Systems | 2011 62
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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 Magal and Word | Integrated Business Processes with ERP Systems
| 2011 63
Slide 64
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. Magal and Word |
Integrated Business Processes with ERP Systems | 2011 64
Slide 65
Backward Scheduling Magal and Word | Integrated Business
Processes with ERP Systems | 2011 65
Slide 66
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 Magal and Word | Integrated Business Processes with
ERP Systems | 2011 66
Slide 67
Procurement Proposals Magal and Word | Integrated Business
Processes with ERP Systems | 2011 67
Slide 68
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 in the planning file, which
causes further processing. Magal and Word | Integrated Business
Processes with ERP Systems | 2011 68
Slide 69
BOM Explosion Magal and Word | Integrated Business Processes
with ERP Systems | 2011 69
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BOM for Off-road Bikes Magal and Word | Integrated Business
Processes with ERP Systems | 2011 70
Slide 71
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 Magal and
Word | Integrated Business Processes with ERP Systems | 2011
71
Slide 72
MRP Control Parameters 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 Magal and Word | Integrated Business Processes with ERP
Systems | 2011 72
Slide 73
MRP Control Parameters 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? Magal and Word | Integrated Business
Processes with ERP Systems | 2011 73
Slide 74
Outcomes Procurement proposals Purchase requisitions Planned
orders Both trigger procurement and production processes No
financial implications No material movements Therefore no FI, CO,
or material documents are created. Magal and Word | Integrated
Business Processes with ERP Systems | 2011 74
Slide 75
Demo 8.5 Run MRP Review run MRP Magal and Word | Integrated
Business Processes with ERP Systems | 2011 75
Slide 76
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 Magal and Word | Integrated Business
Processes with ERP Systems | 2011 76
Slide 77
Stock/Requirements List Magal and Word | Integrated Business
Processes with ERP Systems | 2011 77
Slide 78
Exception Message Magal and Word | Integrated Business
Processes with ERP Systems | 2011 78
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Material Availability in the Stock/Requirements List Magal and
Word | Integrated Business Processes with ERP Systems | 2011
79
Slide 80
Stock Statistics Magal and Word | Integrated Business Processes
with ERP Systems | 2011 80
Slide 81
Demo 8.6 Review Stock/Requirements List and Related Reports
Review stock/requirements list and related reports Magal and Word |
Integrated Business Processes with ERP Systems | 2011 81
Slide 82
Stock/Requirements List -- MRP List Comparison Magal and Word |
Integrated Business Processes with ERP Systems | 2011 82
Slide 83
Demo 8.7 Review MRP List Review MRP list Magal and Word |
Integrated Business Processes with ERP Systems | 2011 83
Slide 84
Planning Result Report Magal and Word | Integrated Business
Processes with ERP Systems | 2011 84
Slide 85
Demo 8.8 Review Planning Result Report Review planning result
report Magal and Word | Integrated Business Processes with ERP
Systems | 2011 85