What is Materials Planning and Control?
Materials planning and control determines how much of which material, component, goods etc. is needed and when. This activity is the responsibility of the materials planner or controller.
Types of materials planning and control consists two forms of materials planning and control:
Deterministic materials planning (material requirements planning, or MRP) determines requirements on the basis of bills of material and outside demand. This procedure involves the development of a production plan directly from bills of material. This form of materials planning is a component of the SAP application Production Planning (PP).
Consumption-based planning forms part of the SAP application Materials Management (MM). It determines requirements on the basis of past consumption data. Note that in the SAP system both of the above may collectively be referred to as “MRP”.
Materials Planning and Control
Consumption-based planning,
The SAP component Consumption-Based Planning helps the responsible materials planner (or materials or inventory controller) to determine the following:
- which materials to order
- the quantity required
- when materials must be delivered to meet current and future requirements
It bases its decisions on what to order on past consumption. The system can generate requisitions automatically. These can be assigned to a purchasing group (buyer group) or a materials planner/controller. The materials planner/controller or buyer can then convert the requisition into a standard purchase order or a release order issued against a contract.
Identifying materials to order
The Consumption-Based Planning module identifies material shortages using one of the following methods:
- By reference to the reorder level (reorder point)
- By using a forecasting model
Whether requirements for a given material are determined by reference to the reorder level or using forecasting models is defined in the material master record.
Reorder level
Consumption-Based Planning can suggest orders based by reference to the reorder level of a material. The system compares the material’s reorder level with the sum of the available stock. If the available stock is less than the reorder level, the system flags the material for MRP. An order proposal is then generated during the next MRP run. The available stock is determined using the following formula:
Available stock = (stock on hand in the warehouse + current orders) – reserved stock
How is the reorder level determined?
The reorder level can either be set manually by the materials planner/controller or automatically by the system.
Manually,The planner/controller enters the reorder level in the material master record manually.
Automatically
The system regularly compares the reorder level with future requirements. If the reorder level is too high or too low, it can be corrected using the formula:
Reorder Level = safety stock + daily requirements * replenishment lead time where the replenishment lead time is in days. The daily requirements are determined using forecasting models.
Forecasting Model
Forecasting models identify a pattern of demand for a given material. Their purpose is to identify how much of a material is required at a given future date based on this pattern.
Examples of forecasting models:
Constant, Demand values are scattered around an average value.
Trend, Demand either rises or falls steadily over a period of time.
Seasonal,Demand peaks at regular time intervals. These and other forecasting procedures are described in more detail in the MM Consumption-Based Planning Guide.
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