Welcome to the Planning Process -ERP PP page.
The planning of the sales and production quantities can be carried out in different levels of detail. The graphic above and the next graphic provide an overview of the planning levels preceding production in the R/3 System. The purpose of sales and operations planning is to specify sales quantities and inventory plans for the long and medium term and to roughly plan the production activities necessary to achieve these objectives.
Sales and operations planning can either be carried out at material level or via product groups. Both materials and product groups can be used to form a product group, however any level within a product group consists of either all product groups or all materials. The lowest level in a product group always consists of materials. This aggregated product group planning is useful if the number of finished products makes it difficult to plan each one separately at the finished product level.
The starting point is to determine the sales quantities of future periods. This is done in different ways.
On the basis of your projected sales quantities, you then generate a production plan for long- and mid-term production quantities.
The sales and operations planning quantities can be broken down by individual product group members and passed on to demand management.
In demand management, requirement quantities and dates are determined for finished products and important assemblies. The demand program exists in the form of independent requirements. The MRP controller can either create it directly or use the planning results of previous planning levels. In addition, demand management is also used to specify the strategy to be used for planning or procuring a product. Examples of planning strategies are:
Make-to-stock production, Make-to-order production, and production by lot size for sales and stock orders. Apart from that, there are several higher-level planning strategies for manufacturing products.
In master production scheduling (MPS), important finished products or assemblies, which, for example, dominate large areas of the production process, are marked as master schedule items and are planned separately. Planned orders for the MPS items are created by master production scheduling.
The main task of material requirements planning is to determine which material is required in which quantity at what time and then to create the necessary planned orders. For a planned order, the material BOM is exploded and dependent requirements are created for the material components on the material staging date. Planned orders are also created to cover these dependent requirements in a multi-level MRP run.
In the case of in-house production, planned orders are converted to process orders (process manufacturing) or production orders (discrete manufacturing). In the case of external procurement, purchase requisitions are created.
Sales & Operations Planning
Sales and operations planning (SOP) is a generic planning and forecasting tool. Sales and operations planning (SOP) provides a convenient method for:
- Sales quantity planning
- Production quantity planning
- Feasibility estimates
- Medium- or long-term planning
- An SOP plan can be created for individual products or for product groups.
The feasibility estimates can be conducted for the capacities of resources, availability of material and costs. SOP's integrated functionality gives you a holistic picture of your company's activities. You can pool data from many different internal and external sources and use it as a basis for setting realistic operational targets. SOP supports aggregate planning and is an appropriate tool for long- and medium-term planning of sales, production, purchasing, inventory management, and so on.
Product groups are master data used in SOP. A product group is a grouping of other product groups and materials based on certain criteria that best meet the needs of your enterprise; for example, manufacturing procedure, product design, and so on.
Product groups can be multi-level or single level.
A product group is multi-level if it contains other product groups. However, the lowest level in a product group hierarchy always consists of materials.
A product group is single level if its members are materials only.
A material can be a member of different product groups. Typically the following steps are carried out in SOP:
Sales plans are first created for a product group. An appropriate production plan is created as a response to the sales plan.
The production plan for the product group is disaggregated and transferred to demand management where planned independent requirements are created. The SOP planning table resembles a spreadsheet in which you can run analyses and perform what-if simulations. There are different strategies available for creating the production plan. The planned sales values are entered in the sales field for a certain time bucket. You can either enter the planned production quantities directly or generate them with the aid of various different strategies. The target stock level and the target days' supply fields are used to support other strategies for planning production in the SOP table.
The sales plans can be created in several ways:
- By transferring data from the financial modules (CO/PA)
- By copying data from the sales information system (SIS)
- Using forecast
- Using distribution functions
CO/PA: Sales and operations planning is integrated with profitability analysis, and the quantities planned in CO/PA can be accessed from SOP.
Sales information system (SIS): Quantities planned in the sales information system can be copied into SOP.
Forecast: You can forecast the sales quantities in SOP based on the past usage of materials. You can modify the forecast quantities after you have copied them into the planning table.
Arithmetic distribution functions: This function allows you to distribute data horizontally across one or more lines in the planning table. This is particularly useful if you want to make entries or changes that apply to a large section of the planning horizon.
Direct-manual: You can enter the planned values directly in the sales fields in the SOP planning table.
The planning table for sales and operations planning has a spreadsheet-like format.
You can either enter the planned production quantities directly or generate them with the aid of various different strategies. Then the planned production values can be viewed in the Production line field for each time period.
The synchronous-to-sales strategy creates a production plan that is the same as the sales plan.
The opening stock level is not taken into account if you choose a stock level = zero strategy.
The target stock level and the target days' supply fields are used to support other strategies for planning production in the SOP table when future stock on hand quantities are to be considered.
It is important to check the production plan against available capacity of resources and any other relevant constraints such as material availability before you disaggregate and transfer to demand management.
The SOP resource leveling function enables you to take the resource load into account when planning and allows you to directly check how changes to your plans affect the resource situation.
You can adjust plans to make optimum use of available resources (resource, materials and costs) or look at options of increasing capacities, availability of materials and costs for the long term.
You use rough cut planning profiles to do the resource leveling. The rough cut planning profile is the sum of available resources (resources, materials, costs) needed to support a production plan over time. It is used to make the rough cut evaluation (above), which compares available resources over time to the production plan over time. It allows managers to decide what changes need to be made to meet demand.
Rough cut planning profiles are designed to give you an aggregate view on your resources by workdays rather than hours or minutes, and resource groups and product groups rather than individual resources or products.
Transfer to Demand Management
The results of the SOP can be transferred to Demand Management as planned independent requirements. These planned independent requirements for each product at specific time periods are used by MRP to carry out detailed planning. Hence it is critical that the results of the planning from higher levels be transferred to Demand Management to maintain consistent planning values across the different planning levels.
Demand management links top-level requirements planning (SOP sales plan, SOP production plan, customer requirements, and so on) with material planning (MRP and MPS). The function of demand management is to determine requirements quantities and delivery dates for finished products and important semi-finished products. The result of demand management is represented by the demand program. When a demand program is created for a material, the planning strategy of the material is taken into consideration. The planning strategies represent the various methods of planning for manufacturing or procuring a product.
The demand program distinguishes planned independent requirements and customer independent requirements. Customer requirements are created in sales order management and represent the sales orders in the system.
Planned independent requirements can be created as follows:
- Manually by entering quantities and dates
- Automatically by copying the material forecast
- Automatically by copying the results of sales and operations planning
Stock Requirement List
The demand program created can be viewed in the stock requirements list for the material. The stock/requirements list is an important inquiry which shows the most up-to-date view of stocks, receipts and requirements for a material. Each time the stock/requirements list is called up, the system reads the database for the appropriate information. Each stock/requirements list is divided into a header section and a section that lists information on each of the MRP elements for the specific material and plant.
The stock/requirements list header contains material data such as material number, plant, and MRP parameters. The stock/requirements list element lines contain date and quantity information on the individual MRP elements (independent requirements, planned orders, process orders, and so on).
We can branch to the detail record of an element on the stock/requirements list by double-clicking it.
MRP analyzes the demand from sales orders and forecasts. If stock is needed, a planned order is created. A planned order consists of a suggested order quantity, a start date and a finish date.
The bill of material of the planned order is exploded, creating dependent requirements. These are processed later by MRP to determine if planned orders are needed for the components. In order to procure stock, you must convert the planned order to a process order (if it is for a manufactured item), or to a purchase requisition (if it is for a purchased item). MRP can create purchase requisitions directly, depending on runtime settings.
We'll look at the MRP overview from the point of view of a bill of material.
MRP begins by calculating demand for the finished product. This consists of sales orders and forecasts. If we don't have enough available stock to cover this demand, MRP will create a planned order.
The bill of material of the planned order for the finished product is exploded. This creates dependent requirements for the semi-finished materials.
At the next level of the bill, MRP calculates demand for each semi-finished material. If we don't have enough available stock, MRP will create a planned order.
At the lowest level of the bill, MRP again calculates demand. If we don't have enough available stock, MRP will create a planned order (or a purchase requisition).
MRP Net Requirements Calculation
To determine whether stock is needed to satisfy the requirements, MRP compares the requirements, or the demand for a material item, with the supply.
The difference between the demand and the supply is called the shortage. When a shortage exists, MRP calculates the required quantity and creates an order proposal (planned order, purchase requisition, and so on) to satisfy the requirements.
The elements of supply and demand are configurable. For example, we could configure the system so that blocked stock is considered available (a supply). The MRP list displays the future stock/requirements situation at the time of the last planning run, that is the planning results for the material. It remains unchanged until the next MRP run. Therefore, changes that occur after the planning date are not included in the MRP list.
Each MRP list is divided into a header section and a section that lists information on each of the MRP elements for the specific material and plant.
The MRP list header contains material data such as material number, plant, and MRP parameters.
The MRP list element lines contain date and quantity information on the individual MRP elements (independent requirements, planned orders, process orders, and so on). The structure of the MRP list is similar to the structure of the stock/requirements list. The MRP list and the stock/requirements list are identical immediately after an MRP run.
The MRP list is the suitable tool for reworking a planning result with selection options. Using the MRP list, the planner is able to work within a stable situation. This would not be possible in the dynamically changing stock/requirements list. Exception messages indicate, for example, that an order should be postponed or that the safety stock quantity has been exceeded.
Planning procedures automatically generate order proposals to purchasing and to production. R/3 planning procedures can be divided into Material Requirements Planning and Consumption-based planning.
In MRP, the system compares available stock plus planned receipts with demand. If the available quantity is less than the required quantity at a point in time, then an order proposal is created.
Consumption-based planning procedures use past consumption data (history) to calculate future requirements. These procedures are sometimes used for externally procured materials or for low value / low demand items.
Consumption-based planning can be divided into forecast-based and reorder point planning. Reorder point planning can be divided into automatic and manual reorder point planning.
Forecast-based planning uses the SAP forecasting module to calculate future requirements from historical data.
Automatic reorder point planning uses the forecasting module to determine the reorder point quantity. A reorder proposal is generated when the stock falls below the reorder point.
In manual reorder point planning, you must specify the reorder point quantity in the material master record.
We'll look at the MRP overview from the point of view of a bill of material.
MRP begins by calculating demand for the finished product. This consists of sales orders and planned independent requirements. If we don't have enough supply to cover this demand, MRP will create a planned order.
The bill of material of the planned order for the finished product is exploded. This creates dependent requirements for the assemblies. A dependent requirement is demand that is derived from the bill of material structure.
At the next level of the bill, MRP calculates the requirement for each assembly. If we don't have enough supply, MRP will create a planned order.
The bill of material of the planned order for each assembly is exploded. This creates dependent requirements for the raw materials.
At the lowest level of the bill, MRP again calculates demand. If we don't have enough supply, MRP will create a planned order (or a purchase requisition).
After MRP calculates the planned order lot size, it must calculate the planned order finish date and the planned order start date. These dates are known as the basic dates of the planned order.
The order finish date of the finished product's planned order is based on the requirement date of the customer order or the planned independent requirement. To calculate the order start date, MRP backward schedules using lead-time information from either the material master or the routing.
The order finish date of planned orders of the assemblies is based on the order start date of the finished product's planned order. MRP backward schedules to determine the order start date of each.
This process continues for the purchase requisitions. This is done using the planned delivery time from the material master to determine the order start date.
Link to MRP relevant FAQs under PP FAQ
Production Planning Scenario
Useful OSS Notes