Material Requirement Planning (MRP) in SAP ensures efficient material availability by calculating demand and addressing shortages. MRP consolidates data from open sales orders, planned independent requirements (PIRs), and forecasts to determine total demand.
It then performs a stock availability check, factoring in current inventory and planned receipts like purchase requisitions and orders. If shortages are identified, SAP generates planned orders for in-house production or purchase requisitions for external procurement, ensuring timely fulfillment of customer demands.
| Parameter/Tool | Description |
|---|---|
| MRP Type | Defines how materials are planned (e.g., consumption-based or demand-based). |
| Lot Size | Determines the quantity of material to procure or produce in each planning cycle. |
| Planning Horizons | Specifies the time period for which materials are planned. |
| MD01 (Plant-Wide Run) | Executes MRP for all materials within a plant. |
| MD02 (Specific Material) | Runs MRP for a specific material within a plant. |
| MD05 (Static Reporting) | Displays a snapshot of MRP results at the time of execution. |
| MD04 (Dynamic Reporting) | Shows real-time updates of stock and requirement lists. |
| MRP Live | Leverages SAP HANA for real-time MRP runs, enhancing performance and reducing execution times. |
| Benefits | Minimizes costs, avoids stockouts, streamlines operations, and ensures customer satisfaction. |
How MRP Works in SAP?
Step 1: Demand Calculation
MRP calculates total demand by consolidating multiple sources.
Sources of Demand
- Open Sales Orders: Customer-placed orders.
- Planned Independent Requirements (PIRs): Forecasts based on historical or expected trends.
- Manual Forecasting: Demand estimates calculated outside the system.
| Example Demand Calculation |
|---|
| Customer orders: 600 units |
| Forecasted demand: 400 units |
| Total Demand: 1,000 units |
Step 2: Stock Availability Check
SAP evaluates available stock and considers incoming supplies to determine if there are shortages.
Stock Sources
- Available Stock: Current inventory in hand.
- Planned Receipts:
- Purchase Requisitions (PRs): Orders placed but not yet received.
- Purchase Orders (POs): Confirmed supplier orders.
| Example Stock Check |
|---|
| Available Stock: 500 units |
| Planned Receipts: 300 units |
| Total Supply: 800 units |
Step 3: Handling Shortages
If total demand exceeds available stock and planned receipts, the system identifies shortages and plans accordingly.
Shortage Scenarios
- Finished Goods Shortages:
- Generates Planned Orders for in-house production.
- Raw Material Shortages:
- Creates Purchase Requisitions for procurement.
| Example Shortage Calculation |
|---|
| Total Demand: 1,000 units |
| Total Supply: 800 units |
| Shortage: 200 units |
Step 4: MRP Execution
SAP provides specific T-Codes for running MRP, each with its own scope and functionality.
| T-Code | Function |
|---|---|
| MD01 | Execute MRP for all materials at the plant. |
| MD02 | Execute MRP for a specific material. |
| MD04 | Display Stock/Requirement List (dynamic). |
| MD05 | Display MRP List (static results). |
Dynamic vs. Static Reporting
- Stock/Requirement List (MD04): Updates dynamically based on real-time data.
- MRP List (MD05): Captures a snapshot of MRP results at the time of execution.
Step 5: Addressing Shortages
MRP suggests actions based on the type of shortage and material involved.
Types of Shortages
- In-House Production:
- The system generates Planned Orders.
- External Procurement:
- The system generates Purchase Requisitions (PRs).
MRP Calculation Formula
The system determines shortages using the following formula: Shortage=Total Demand−(Available Stock+Planned Receipts)\text{Shortage} = \text{Total Demand} – (\text{Available Stock} + \text{Planned Receipts})
| Example Calculation |
|---|
| Total Demand: 1,000 units |
| Available Stock: 500 units |
| Planned Receipts: 300 units |
| Shortage: 200 units |
MRP Workflow Example
Scenario: Order Fulfillment
A customer places an order for 150 units with a delivery date of October 20th, 2024.
| Step | Action Taken | Status |
|---|---|---|
| Check Stock | 100 units available. | Shortage: 50 |
| Check Planned Receipts | Open PO for 60 units, delivery on October 18th. | Stock OK. |
| Final Decision | Confirm delivery of 150 units on October 20th. | Fulfilled. |
Conclusion
MRP is a robust tool in SAP for ensuring material availability and efficient planning. By calculating demand, checking stock, and addressing shortages, it helps organizations meet customer needs while optimizing inventory levels.
In the next blog, we’ll explore SAP Availability Checks and how they influence the MRP process. Stay tuned!