What is Consumption based Planning in SAP MM?

The below sap mm tutorials (Material Management) will help to know more on the consumption based planning in sap mm. The central role of material requirements planning is to monitor stocks and, in particular, to automatically generate order proposals for purchasing and production (planned orders, purchase requisitions, or delivery schedules). This target is achieved by using various materials planning methods which each cover different procedures. Consumption based planning procedures are straight forward materials 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.

What is Consumption Based Planning?

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 materials 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. Also check what is Bill of Materials?(BOM)

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 are 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.

Also See: What is Materials Planning and Control?