MM -Consumption-Based Planning Guide
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`The following Help Topics are available:
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`~ ..................................................
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`For Help on Help, Press F1
`Version
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`SAP-00007994
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`Version
`Prepared for R/3 Release 2.2.
`August 1994
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`SAP-00007995
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`Copyrights
`
`@1994 SAP AG. All rights reserved.
`Neither this documentation nor any part of it may be copied or reproduced in any form or by any
`means or translated into another language, without the prior consent of SAP AG.
`SAP AG makes no warranties or represenations with respect to the content hereof and specifically
`disclaims any implied warranties of merchantability or fitness for any particular purpose. SAP AG
`assumes no responsibility for any errors that may appear in this document. The information
`contained in this document is subject to change without notice. SAP AG reserves the right to
`make any such changes without obligation to notify any person of such revision or changes. SAP
`AG makes no commitment to keep the information contained herein up to date.
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`MRP and Lot-Sizing Procedures
`
`In this section we aim to provide you with an overview of the various procedures within
`consumption-based planning and also of the special function: material requirements planning
`without BOM explosion.
`Furthermore, an introduction is also given to the available lot-sizing procedures with which the
`optimum order quantities or the production quantities are determined.
`This section contains the following topics:
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`Klntroduction to MRP and Lot-Sizing Procedures
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`The central role of material requirements plannng is to monitor stocks and, in particular, to
`automatically generate order proposals for purchasing and production. This target is achieved by
`using various requirements planning methods which each cover different procedures.
`Note
`Order proposals are stored in the system as planned orders, purchase requisitions or as delivery
`schedules.
`Consumption-based planning procedures are straight forward requirements planning procedures
`with which you can achieve set targets with relatively little effort. Therefore, these planning
`procedures are used in areas without in-house production and/or in production plants for planning
`both B- and C-parts and operating supplies.
`In contrast to consumption-based planning, MRP without BOM explosion concentrates on the exact
`requirement quantities, which are entered in the system in the form of sales orders and material
`reservations. Any unplanned requirements can be determined by the forecast. MRP provides a
`good solution to planning finished products.
`The following is valid for both planning methods:
`The type of order proposal which is automatically generated during material requirements planning
`depends on the procurement type of the material. For materials that are produced internally, a
`planned order is always created. For materials procured externally, the MRP controller has the
`choice between creating a planned order or a purchase requisition. If he decides to create a
`planned order, he must then convert it into a purchase requisition and make it available for the
`purchasing department.
`The advantage of creating a planned order is that the MRP controller has more control over the
`order proposals. It is only once he has checked the planned orders and then converted them into
`purchase requisitions that the purchasing department can order the material. If he creates a
`purchase requisition in the first instance then it is immediately made available to the purchasing
`department, which then takes over the responsibility for material availability and warehouse stocks.
`Since requirements planning is usually carried out at plant level, all available stock in the plant
`(from now on described as available warehouse stock ) is taken into account during planning.
`However, stocks from individual storage locations can be excluded from requirements planning or
`they can be planned independently. Such stocks are then not included in material requirements
`planning at plant level. On the other hand, consignment stocks from the vendor are always
`included in MRP.
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`MRP Procedures: an Overview
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`There are two distinct procedures supported in consumption-based planning:
`¯
`reorder point planning
`¯
`forecast-based planning
`MRP without BOM explosion is also introduced in this section.
`
`Reorder Point Planning
`
`In the reorder point planning procedure, the system compares available warehouse stock with the
`reorder level. If available stock falls below the reorder level, an order proposal is generated.
`The reorder level (also known as the reorder point) is made up of the sum of the safety stock plus
`the expected average material consumption within the replenishment lead time. Therefore, when
`determining the reorder level, you must take safety stock, previous consumption values or future
`requirements and the replenishment lead time into account.
`Safety stock must be set at a level which covers both excess material consumption within the
`replenishment lead time and the additional requirements which may occur during delivery delays.
`You must, therefore, take previous consumption or future requirements, and the vendor’s delivery
`timeliness or that of production into account when determining the safety stock level.
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`Stock
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`Lot size
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`Reorder
`level
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`Safety
`stock
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`Reorder point
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`Delivery date
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`Time
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`J
`
`r
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`Reolenishment J
`lead time
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`Consequently, the reorder level and the safety stock level are central control parameters within
`reorder point planning. They can be determined automatically by the system or manually by the
`MRP controller. Thus, a distinction is made between the two following procedures:
`¯ manual reorder point planning
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`¯ automatic reorder point planning
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`Manual Reorder Point Planning
`
`If you choose the manual reorder point planning procedure, you must specify both the reorder level
`and the safety stock level yourself and enter them in the appropriate material master record.
`
`Automatic Reorder Point Planning
`
`If you choose the automatic reorder point planning procedure then both the reorder level and the
`safety stock level are determined by the integrated forecasting program.
`The system determines the forecast values for future requirements by means of historical data.
`From these forecast values, the system then calculates the reorder level and the safety stock level,
`taking the service level, which is specified by the MRP controller, and the material’s replenishment
`lead time into account. The system then records these two values in the appropriate material
`master record.
`Since the forecast is carried out at regular intervals, the reorder level and the safety stock level are
`continually adapted to the current consumption and delivery situation. This means that a
`contribution is made towards keeping stock levels low.
`
`About Reorder Point Planning
`
`In the reorder point planning procedure, the system compares available warehouse stock at plant
`level with the reorder level. If stock falls below the reorder level, the system generates an order
`proposal. If, however, a purchase order or a production order covering the required quantity has
`already been planned by purchasing or production, then the system will not create another one.
`The system calculates the quantity for the order proposal according to the lot-sizing procedure
`which you selected. There are several lot-sizing procedures from which you can choose. If you
`want, you can specify a different procedure for each material
`(see Lot-Sizing..~clures- an~=~iew )
`In addition, the order proposal is also scheduled; that means that the system calculates the date
`that the vendor or production must deliver the required quantity.
`The continuous monitoring of available warehouse stock within reorder point planning is carried out
`via the inventory management program. Every time a material is withdrawn from the warehouse,
`the system checks whether this withdrawal has caused stock levels to fall below the reorder level.
`If this is the case, an entry is made in the planning file for the next planning run.
`Exactly the same procedure is carried out if a material is returned to the warehouse; but this time,
`the system will check whether the available warehouse stock exceeds the reorder level again. If
`this is the case, an entry is made in the planning file which acts as an indicator for the planning run
`to delete any unnecessary order proposals.
`If planned receipts are no longer required due to material returns, for example, then the system will
`suggest that these receipts should be cancelled. In this case, the MRP controller in co-operation
`with purchasing or production must check whether the purchase order or the production order can
`be cancelled.
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`Forecast-Based Planning
`
`Like reorder point planning, forecast-based planning operates using historical values and forecast
`values as future requirements are determined via the integrated forecasting program. However, in
`contrast to reorder point planning, these values then form the basis of the planning run in
`forecast-based planning.
`The forecast, which calculates future requirements using historical data, is carried out at regular
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`intervals. This offers the advantage that requirements, which are automatically determined, are
`continually adapted to suit current consumption needs. If, during the current period, material has
`already been withdrawn from stock, then the forecast requirement is reduced by the quantity of
`material that was withdrawn. This means that the quantity of the forecast requirement that has
`already been used is not included in the planning run again.
`You can specify the period split for the forecast (daily, weekly, monthly or per accounting period)
`and the number of periods to be included in the forecast individually for each material. It is
`possible, however, that the forecast period split is not specific enough for planning purposes.
`Therefore, for each material, you can determine that the MRP forecast requirement values should
`be divided according to a finer period split. You can also determine how many forecast periods
`are to be taken into account during requirements planning.
`Example
`For a monthly forecast, the requirements date would be set on the first workday of the month
`because, for planning, it is assumed that the total requirement must be available at the beginning of
`the period. You can then divide this monthly requirement into either daily or weekly requirements.
`The requirements quantities forecast by the system are used in the planning run to carry out the net
`requirements calculation. During this calculation, every period is checked to make sure that the
`forecast requirements are covered either by available warehouse stock, by planned receipts from
`purchasing or by production. If the requirements forecast by the system are not met by these
`above mentioned possibilities, then an order proposal is generated.
`The quantity stated in the order proposal is calculated by the system according to the lot-sizing
`procedure that you selected. Depending on the lot-sizing procedure, several requirement
`quantities are grouped together into one lot (see Lot-Sizinq Procedures: an Overview )
`For each order proposal, the system calculates the date that it must be converted into either a
`purchase order or a production order so that the purchase order can be sent to the vendor on time
`or the production order can be transferred to production on time. Naturally, the vendor can only
`deliver the ordered quantity punctually if he receives the purchase order on time. The same
`applies to production - the ordered quantity can only be produced according to schedule if the
`production order is received on time.
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`Special Function: MRP Without BOM Explosion
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`In MRP, planned issues can be included in planning. Here, the exact requirement quantities along
`with the requirement elements, sales orders and material reservations, form the basis of the
`palnning run. In the case of material shortages the system generates order proposals.
`In MRP, the forecast can be used to determine unplanned requirements.
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`About MRP
`
`In MRP, the system compares available warehouse stock and the planned receipts from
`purchasing or production with the sales orders and material reservations during the net
`requirements calculation. If a shortage is identified, that is, available stock is less than the
`required quantity, then an order proposal is generated.
`The system calculates the quantity stated in the order proposal according to the lot-sizing
`procedure which you specified. As mentioned previously, you can specify a different lot-sizing
`procedure for each material (see Lot-Sizinq Procedures: an Overview )
`The order proposal is also scheduled, that means that the date that the vendor or production must
`deliver the required quantity is calculated.
`The unplanned requirement quantity (unplanned withdrawals, higher component consumption in
`production and so on) can be included in MRP by implementation of the forecast program. The
`time series of consumption for unplanned requirements forms the basis of the forecast calculation.
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`These unplanned requirements are taken into account along with the exact requirement quantities.
`In the following chapters, "MRP" is used as a synonym for MRP without BOM explosion.
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`Lot-Sizing Procedures" an Overview
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`It is material requirements planning’s role to generate an order proposal if a requirements shortage
`is determined during a planning run. The lot size for the order proposal is specified according to
`the lot-sizing procedure you entered in the material master record.
`The SAP System supports the most up-to-date lot-sizing procedures. User-specific formulae can
`always be integrated with relatively little effort. The available lot-sizing procedures are divided into
`three groups:
`¯ Static lot-sizing procedures
`In static lot-sizing procedures, the lot size is calculated by means of the quantity specifications
`recorded in the material master record. There are three different criteria according to which the
`lot size can be calculated:
`lot-for-lot order quantity
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`-
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`-
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`fixed lot size
`replenish up to maximum stock level
`-
`Period lot-sizing procedures
`In period lot-sizing procedures, the requirement quantities from one or from several periods are
`grouped together to form a lot. The SAP System supports various periods. You can
`determine the number of periods which are to be grouped together into an order proposal. You
`have the choice between:
`- daily lot size
`- weekly lot size
`- monthy lot size
`lot size according to flexible period lengths, depending on accounting periods (period lot size)
`-
`¯ Optimum lot-sizing procedures
`In optimum lot-sizing procedures, the requirement quantities for several periods are grouped
`together to form a lot, whereby an optimum cost ratio is determined between lot size
`independent costs and storage costs. The only differences between the various optimization
`procedures are the cost criteria. The following orocedures exist:
`part period procedure
`least unit cost procedure
`dynamic lot size creation
`Groff reorder procedure
`The individual lot-sizing procedures are described in more detail in M ate[j.aL.R.eq.uj.[.em...ents P.J.ann].nq
`The lot-sizing procedure that the system should use for calculating the lot size depends on the
`requirements planning procedure that has been chosen. If you selected the manual reorder point
`planning procedure, then you are limited to lot-sizing formulae from the static procedure. If you
`selected the automatic reorder point planning procedure or forecast-based planning, then you can
`select procedures from each of the three categories.
`You can influence the grouping of requirement quantities into lot sizes by using additional
`restrictions in the material master record:
`¯ On the one hand by entering limit values (minimum and maximum lot sizes). These limit values
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`will then be taken into account during the lot-size calculation. In other words, the lot size will
`either be rounded up to the minimum quantity or the system will avoid grouping together
`requirement quantities that exceed the maximum lot size.
`On the other hand by entering a rounding value. This value enables you to specify that during
`the lot-size calculation, the resulting lot is to cover a multiple of the order unit (for example, if the
`lot is to be adjusted to full packaging units, then the order unit is rounded accordingly).
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`KMRP Parameters
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`If you want to carry out material requirements planning for a material, then you first have to specify
`certain parameters for this material in the material master record. These MRP parameters can be
`divided into five areas:
`¯ general parameters which you can specify for materials that are to be planned
`¯ parameters which have to be entered depending on the chosen MRP procedure
`¯ parameters which have to be entered for scheduling
`¯ parameters which have to be entered for calculating the lot size
`¯ parameters required for storage location MRP
`This section contains the following topic:
`M.a.intaining..MRP.P..arame.t.e.rs.
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`Maintaining MRP Parameters
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`Before you can carry out material requirements planning for a material, you must first of all maintain
`the parameters in the material master record which the system requires in order to carry out this
`task. This is done as described below:
`
`1. Starting from the menu screen of the material master, select Material--> Create general.
`2. Enter the material type, allocate it to an industry sector and press ENTER.
`The pop-up window for Select View(s) appears on your screen.
`3. Select views MRP 1 and MRP 2 and MRP 3 and then press ENTER.
`The pop-up window for the Organizational Levels/Profiles now appears.
`4. Because material requirements are planned at plant level, you must enter the appropriate plant.
`You only have to enter the storage location, however, if you want to carry out storage location
`MRP. In so doing, the entered storage location is treated as an independent unit during
`planning.
`5. Press ENTER.
`The MRP 1 data screen now appears.
`6. Once you have filled in the required entries and pressed ENTER again, the MRP 2 data screen
`appears.
`7. Fill in the required entries in this screen as well, and then press ENTER.
`The MRP 3 data screen now appears.
`8. Fill in the required entries in this screen and then save your entries by selecting
`Material --> Save
`In the following section, a detailed description is given of all the MRP parameters that are available.
`For a more detailed description of the maintenance options in the material master record, please
`refer to MM Managing Material Master Data.
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`General Parameters
`
`There are parameters in the material master record that you can determine for every material,
`independent of MRP and lot-sizing procedures:
`Procurement type
`The procurement type is automatically suggested by the system depending on the material type.
`However, you can overwrite the default value. A material can be produced in-house, it can be
`externally procured or it can be partly produced in-house and partly procured externally. If both
`procurement types are possible for a material but you only want to specify one, then you must
`enter the appropriate indicator here.
`MRP group
`The MRP group, groups together materials from the planning point of view for allocating special
`control parameters for the planning run. The MRP group is defined in Customizing where it is
`also provided with the control parameters.
`Special procurement type
`Entering a special procurement type makes it possible for you to specify the procurement type
`"in-house production" or "external procurement" more exactly. For example, setting this
`indicator would make it possible for you to determine that an externally procured material should
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`be procured via consignment orders.
`MRP controller
`In this field, you must enter a key for a single MRP controller or for a group of MRP controllers
`who/which is responsible for the planning of a material. In the future, you can process the MRP
`results according to the MRP controller.
`Purchasing group
`In this field, you must enter a key for a buyer or for a group of buyers who/which is responsible
`for purchasing the material. As a result, during a planning run, order proposals for externally
`procured materials can immediately be allocated to the appropriate purchasing group.
`ABC indicator
`With the ABC indicator, you can classify the material according to its consumption value. This
`indicator is used within logistics controlling for analysis purposes. It can also be automatically
`specified by the system.
`PPC Planning calendar
`With the PPC planning calendar, you can define flexible period lengths for grouping
`requirements together and for determining procurement dates. To make this possible, you
`must select the lot-sizing procedure, "Period lot size according to planning calendar" and you
`must also specify a planning calendar. The requirements quantities are then grouped together
`into a lot according to the period that you determined in the planning calendar. The
`procurement date is copied from the planning calendar.
`Quota arrangement
`With this indicator, you can determine whether a material should participate in the quota
`arrangement and which transactions/events result in a quota arrangement. This means that
`you can determine, for example, that only purchase orders take part in quota arrangements or
`that order proposals, created by requirements planning take part in quota arrangements.
`Availability check
`With this indicator, you determine whether sales orders result in individual or collective
`requirements for requirements planning and also how the availability check for a material is
`carried out by the system. This indicator also controls:
`¯ whether the system creates individual or collective requirements when you create sales
`orders for this material
`which MRP elements (for example, purchase orders, or reservations) the system should take
`into account for the availability check
`whether the availability check should not be carried out until the end of the replenishment
`lead time or whether it should be carried out for the entire period in which MRP elements
`exist
`Total replenishment lead time
`Time that is needed for the complete production and procurement of a finished product or an
`assembly. This value is an estimate value and is used for the availability check.
`MM/PP status
`By allocating a material status from the view of materials management and production planning,
`you determine for which business transactions a material is used. If a material is not provided
`for a certain transaction, you specify whether a warning or an error message appears with this
`status.
`M ixed M RP
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`You use this indicator to provide the material for special planning types:
`To carry out assembly planning for a material, the respective indicator must be set here.
`To carry out gross requirements planning or dual planning for a material, the respective indicator
`must be set here.
`Individual/Collective
`This indicator controls whether individual customer requirements planning is allowed for
`dependent requirements.
`In individual planning, this indicator is used to display the dependent requirements of a
`component separately.
`In collective requirements, this indicator is used to display the dependent requirements of a
`component grouped together.
`Repetitive manufacturing
`You use this indicator to mark that a material is available for repetitive manufacturing.
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`Parameters: Dependent on the MRP Procedure
`
`As well as the general parameters described above, you must also determine the MRP procedure
`in the material master record according to which the material is to be planned. You do this by
`specifying the so-called MRP type. The following possibilities exist:
`VBreorder point planning procedure with manual calculation of the reorder point and safety stock
`(manual reorder point planning)
`VM reorder point planning procedure with automatic calculation of the reorder point and safety
`stock (automatic reorder point planning)
`VVforecast-based planning
`PD MRP
`Alter you have specified the MRP procedure, you enter the parameters dependent on the planning
`procedure that you selected. An overview of these parameters is provided in the following table.
`Parameters Dependent on the MRP Type
`MRP type VB
`
`VM
`
`VV
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`PD
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`+ + +
`
`+
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`+
`
`o
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`+
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`0
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`Safety stock
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`Reorder level
`
`Forecast data:
`- Period indicator
`- Fiscal year variant
`(Period indicator = P)
`- Service level
`- Splitting indicator
`
`Key to the table entries:
`+ Required entry
`*
`Optional entry
`Optional entry - it has, however, no connection with the MRP type
`O
`No entry required
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`

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`Safety stock
`The safety stock is used to prevent material shortfalls during the stocking-up period which may
`occur if consumption is unexpectedly high or if delivery dates are not kept. You have the
`choice between manually determining the safety stock or letting the system automatically
`determine it for you when carrying out the forecast. Safety stock forms a part of the reorder
`level and is not included in requirements planning.
`Service level
`If the safety stock level is to be calculated by the system then you must specify a service level.
`This level indicates the percentage of existing requirements which is to be covered by
`warehouse stock. The higher you specify the service level, the higher the system will calculate
`the safety stock level in order to compensate for additional consumption or delays in delivery.
`Reorder level
`The reorder level is only relevant for reorder point planning. In automatic reorder point
`planning, the system calculates the reorder level during forecasting. If a material master is
`recreated, the reorder level must always be entered manually even if it is overwritten again by
`the system as is the case in automatic reorder point planning. It is thus possible to plan a
`material even if no forecast has yet been carried out for it.
`The following fields are only significant if the forecast must be carried out because of the MRP type
`which was chosen. For example, this is the case for automatic reorder point planning and
`forecast-based planning.
`Period indicator
`The period indicator specifies the time period for which the system is to store historical or
`forecast values. You can define the period indicator when maintaining the MRP parameters as
`well as when you are maintaining the forecast parameters.
`Fiscal year variant
`You must enter the fiscal year variant if you want to create a flexible period length equal to the
`accounting period for the material.
`Splitting indicator
`If you specify a splitting indicator, the system will only take a certain number of periods into
`account for requirements planning and it will also split them into smaller time periods (as long as
`the period indicator is not set to daily quantities). The splitting indicator is irrelevant for reorder
`point planning.
`
`Parameters: for Scheduling
`
`In scheduling, the system determines the basic dates for all the order proposals that it created
`during material requirements planning. To be able to plan these order proposals exactly, the
`following parameters are important when you are maintaining the material master record:
`Scheduling margin key
`The scheduling margin key is used to allocate floats to the material for calcualating basic dates
`and for carrying out lead time scheduling for the planned order - for materials that are produced
`in-house. The float is the opening period for determining basic dates and the float before
`production and the float after production for lead time scheduling. You maintain the floats in
`Customizing and they are calculated in workdays.
`Planned delivery time
`The planned delivery time determines the time required to obtain a material by means of
`external procurement. You must only enter the planned delivery time if the material is
`externally procured.
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`In-house production time
`The in-house production time determines the length of time required to produce an assembly or
`a finished product. The in-house production time is independent of the order quantity. You
`must only enter this indicator if the material in question is to be produced in-house.
`Goods receipt processing time
`The goods receipt processing time specifies the time required to inspect the material and to
`transfer it to stock. It represents the time span (in workdays) between the receipt of the goods
`and the inward stock movement. The system also takes goods receipt processing time into
`account during scheduling.
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`Parameters: Required for Lot-Size Calculation
`
`Once you have specified an MRP procedure and the appropriate parameters for this particular
`procedure, you must also enter the procedure according to which the system is to calculate the lot
`size for material requirements planning. Depending on the selected lot-sizing procedure, you
`can/must specify either one or several of the parameters given in the following Table:
`Parameters Required for Lot-size Calculation
`Procedure Exact Fixed Replenish Periodical
`lot size
`lot size
`max. stck
`lot size
`lot size
`
`Optimum
`
`*
`
`*
`
`*
`
`Minimum
`lot size
`Maximum
`lot size
`Rounding-
`off value
`Fixed
`lot size
`Replenish to
`max.stock level
`Lot size
`indp. costs
`Storage costs
`indicator
`
`Key to the symbols as used above:
`Required entry
`+
`¯
`Optional entry
`
`Note
`Period and optimum lot-sizing procedures are irrelevant as far as manual reorder point planning is
`concerned as these two procedures need the future requirement values for lot-sizing which can
`only be determined by using the forecast. The lot-sizing procedure, "replenish up to maximum
`stock level" can only be used for reorder point planning.
`Minimum lot size
`By setting a minimum lot size, you are instructing the system (during lot-size calculation) to
`create an order proposal for at least the amount which is specified here even if a smaller
`quantity would have been sufficient.
`Maximum lot size
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`By entering a maximum lot size, you can determine that during the lot-size calculation, the
`system will not exceed the quantity specified here for order proposals.
`Rounding value
`By entering a rounding value, you are instructing the system to round up the receipt quantity to a
`multiple of the value specified here.
`For the "fixed lot size with splitting and overlapping" procedure, the rounding value is also used
`to determine the partial quantities into which the total quantity of the planned order (field fixed lot
`size) is split.
`Fixed lot size
`By entering a fixed lot size, you are instructing the system to create order proposals for the
`amount of the fixed lot size specified here. It only makes sense to use the fixed lot size if you
`selected either the "fixed lot-sizing procedure" or the "fixed lot size with splitting/overlapping".
`Cycle time
`If you select the lot-sizing procedure, "fixed lot size with splitting and overlapping", then you
`must also enter a cycle time. The cycle time specifies the time interval in which the planned
`orders, which are created using this lot-sizing procedure, may overlap.
`Maximum stock level
`In this case, the system will create an order proposal for the amount that results from
`subtracting the available stock from the maximum stock level during the lot-sizing procedure,
`"replenish up to maximum stock level".
`Lot size independent costs
`The system only requires the lot size independent costs for the optimum lot-sizing procedure.
`In this case, the most economical lot size is determined by means of the lot size independent
`costs and the storage costs
`Storage costs indicator
`The system only requires the storage costs indicator for optimum lot-sizing procedures. With
`this indicator, you can determine the storage cost percentage which the system uses during the
`lot size calculation.
`
`Parameters: for Storage Location MRP
`
`If you want the system to treat certain storage locations as independent units during a planning run,
`then you must specify this in the material master record for the storage locations in question. To
`do this, you must enter the storage Ioaction in question in the Organizational Levels/Profiles pop-up
`window and then you must enter the following parameters in the MRP 2 data screen:
`MRP indicator
`By determining the MRP indicator, you are instructing the system how to treat the storage
`location during requirements planning. You can exclude the storage location from MRP or it
`can be replenished with goods from the plant warehouse.
`Reorder level and repl