Material Planning with SAP

With this comprehensive reference, you ll learn how to implement, optimize, and use SAP ERP and SAP APO for effective materials planning. Expert insights help you understand cross-component materials planning with SAP ERP and SAP SCM as well as modern materials planning procedures. Readers discover how to configure and use the different SAP ERP applications and how best to integrate them with an existing SAP system. In addition, the authors show you how to optimize the tools and determine which settings are useful, and how they affect other settings. Basic Principles and Processes of Materials Planning: Learn the tasks and goals of materials planning, along with the impact of various materials planning parameters on stock. Impact of Materials Planning Parameters in the SAP System: Benefit from a highly-detailed overview of the materials planning parameters in SAP ERP and SAP APO, and learn how to optimize your materials planning processes using these tools. Materials Planning Optimization: Get an in-depth look at the powerful tools and functions in SAP ERP and SAP APO to optimize your inventory controlling.Add-On Tools for SAP ERP Materials Planning: Find out about special add-on tools for materials planning that provide targeted support for effective inventory management, including the materials planning monitor, backlog monitor, and many more. Diagrams and Real-World Examples: Discover how SAP ERP and SAP APO are applied to materials planning with real-life business scenarios and examples throughout.

Table of Contents:
1 Basic Principles of Materials Planning 25 1.1 Goals and Tasks of Materials Planning 25 1.2 Core Functions of Materials Planning 26 1.3 Requirements Calculation 27 1.3.1 MRP (Deterministic) Determination of Requirements 28 1.3.2 Consumption-Oriented (Forecast-Based) Determination of Requirements 29 1.3.3 Order-Based Determination of Requirements 30 1.4 Accumulate Balances 30 1.5 Purchase Order Calculation 32 1.5.1 Reorder Cycle Method 33 1.5.2 Reorder Point Method 36 1.5.3 Mixed Procedure 38 1.5.4 Overview of Reorder Policies 39 1.6 Impact of Materials Planning on Inventory 40 1.6.1 Selecting the Production Type 41 1.6.2 Selecting the MRP Strategy/Determining the Stocking Level 42 1.6.3 Selecting Consumption Parameters 45 1.6.4 Selecting Lot-Sizing Parameters 45 1.6.5 Selecting the Safety Stock Procedure 46 1.6.6 Selecting the Forecast Strategies 47 1.6.7 Item Classification and Product Analysis 47 1.7 Conclusion 48 2 Strategic versus Operational Materials Planning 49 2.1 Tasks in Materials Planning 49 2.2 Organizational Integration of Materials Planning 51 2.3 Conclusion 54 3 Item Classification as the Basis for Materials Planning Decisions 55 3.1 Options Provided by Item Classification 56 3.1.1 ABC Analysis 56 3.1.2 XYZ Analysis 61 3.2 ABC Analysis with SAP 63 3.2.1 Outlining the Analysis Process 63 3.2.2 Determining the Analysis Goal 64 3.2.3 Defining the Area to Analyze 64 3.2.4 Calculating the Data Basis 67 3.2.5 Defining the ABC Strategy 69 3.2.6 Defining Class Limits 71 3.2.7 Assigning Classes 72 3.2.8 Evaluating ABC Analysis 74 3.2.9 Performing an ABC Segmentation 75 3.2.10 Case Scenario: ABC Analysis for Warehouse Optimization 77 3.2.11 Case Scenario: ABC Quantity Flow Analysis 79 3.3 XYZ Analysis in the SAP System 81 3.3.1 Running Analyses in SAP ERP 81 3.4 Combining ABC and XYZ Analyses 83 3.4.1 Optimization Using the ABC/XYZ Matrix 83 3.4.2 Using SAP ERP to Create an ABC/XYZ Matrix 90 3.5 Conclusion 96 4 Materials Planning Process in SAP 97 4.1 Business Overview 97 4.1.1 Program Planning 98 4.1.2 Quantity Planning 100 4.1.3 Scheduling and Capacity Requirements Planning 101 4.1.4 Order Conversion and Monitoring 102 4.2 Overview of the Materials Planning Process in the SAP System 102 4.3 Materials Planning Process in SAP ERP 104 4.3.1 Program Planning 104 4.3.2 Quantity Planning 108 4.3.3 Scheduling and Capacity Requirements Planning 110 4.3.4 Order Conversion and Monitoring 112 4.4 Materials Planning Process in SAP APO 114 4.4.1 Demand Planning 115 4.4.2 Supply Network Planning (SNP 117 4.4.3 Production Planning and Detailed Scheduling 119 4.5 Conclusion 124 5 General Materials Planning Master Data 127 5.1 Differences Between SAP ERP and SAP APO 127 5.2 Mass Maintenance of MRP Master Data 131 5.2.1 MRP Group 131 5.2.2 MRP Profile 132 5.2.3 Transaction MASSD 133 5.3 Special Materials 133 5.4 Conclusion 134 6 Planning Strategies and Requirements Consumption 135 6.1 System Settings in SAP ERP 135 6.1.1 Relationship Between the Strategy and Requirements Class 136 6.1.2 Assigning a Planning Strategy to a Material 139 6.1.3 Consumption Parameter 141 6.2 Planning Strategies in SAP ERP 142 6.2.1 Strategies for Make-to-Stock Production 143 6.2.2 Final Assembly by Sales Order 145 6.2.3 Make-to-Order Production 151 6.2.4 Planning with a Planning Material 152 6.2.5 Assembly Processing 155 6.2.6 Strategies for Configurable Materials 156 6.2.7 Reducing Planned Independent Requirements 159 6.2.8 Adjusting and Reorganizing Planned Independent Requirements 160 6.2.9 Table Summary of Planning Strategies 161 6.3 Planning Strategies in SAP APO 168 6.3.1 Requirements Class and Check Mode 168 6.3.2 Customizing of Planning Strategies 169 6.3.3 Planning Parameters in the Product Master 170 6.3.4 Planning Strategy Names in SAP ERP and SAP APO 170 6.4 Conclusion 171 7 Determination of Requirements Through Planning and Forecasts 173 7.1 Forecasts in SAP ERP and SAP APO 173 7.1.1 Forecast Methods 175 7.1.2 Forecast Parameters 187 7.2 Forecasting Accuracy 192 7.2.1 Error Total (ET 192 7.2.2 Mean Absolute Deviation (MAD) 193 7.2.3 Mean Square Error (MSE 193 7.2.4 Root of the Mean Square Error (RMSE) 194 7.2.5 Absolute Percentage Error (APE 194 7.2.6 Mean Absolute Percentage Error (MAPE 195 7.2.7 Median of the Absolute Percentage Error (MdAPE 196 7.2.8 Relative Absolute Error (RAE 196 7.3 Forecast Results and Demand Management 197 7.3.1 Adjusting Historical and Forecast Data and Other Influences 197 7.3.2 Guidelines for Materials with a High Forecast Error 199 7.3.3 Results Evaluation 200 7.4 Conclusion 201 8 Materials Planning Procedures 203 8.1 Materials Planning Procedures in SAP ERP 203 8.1.1 Consumption-Based Planning 204 8.1.2 Deterministic MRP 212 8.2 Materials Planning Procedures in SAP APO 214 8.2.1 PP Procedure 215 8.2.2 Heuristics 217 8.3 Conclusion 227 9 Procurement Quantity Calculation 229 9.1 Business Background 229 9.2 Procurement Quantity Calculation in SAP ERP 233 9.2.1 Static Lot-Sizing Procedures 234 9.2.2 Periodic Lot-Sizing Procedures 234 9.2.3 Optimum Lot-Sizing Procedures 235 9.2.4 Lot-Size Restrictions 237 9.2.5 Additional Lot-Size Options 238 9.2.6 Scrap Quantity Calculation 241 9.3 Procurement Quantity Calculation in SAP APO 242 9.3.1 Static Lot-Sizing Procedures 243 9.3.2 Periodic Lot-Sizing Procedures 244 9.3.3 Optimum Lot-Sizing Procedures 245 9.3.4 Lot-Size Restrictions 248 9.3.5 Additional Lot-Size Options 248 9.3.6 Origin of the Lot-Size Settings 248 9.3.7 Scrap Quantity Calculation 250 9.4 Conclusion 252 10 Safety Stock Planning 253 10.1 The Purpose of Safety Stock 253 10.2 Uncertainties in Materials Planning 254 10.3 Selecting and Defining the Service Level 255 10.3.1 Alpha Service Level 255 10.3.2 Beta Service Level 256 10.3.3 Defining the Service Level 257 10.4 Safety Stocks and Multilevel BOMs 258 10.5 Safety Stock Planning in SAP ERP 259 10.5.1 Manually Maintained Safety Stock 259 10.5.2 Automatically Calculated Safety Stock 260 10.5.3 Safety Time 263 10.5.4 Dynamic Safety Stock 265 10.6 Safety Stock Planning in SAP APO 268 10.6.1 Static Standard Methods 268 10.6.2 Dynamic Standard Methods and Extended Methods 271 10.6.3 Extended Methods 276 10.7 Conclusion 285 11 Determining Sources of Supply 287 11.1 Source Determination in SAP ERP 287 11.1.1 Overview of Procurement Types in SAP ERP 287 11.1.2 Types of Special Procurement 289 11.1.3 Sources of Supply for In-House Production 297 11.1.4 Sources of Supply for External Procurement 299 11.2 Source Determination in SAP APO 307 11.2.1 Overview of Procurement Types 307 11.2.2 Sources of Supply for In-House Production 308 11.2.3 Sources of Supply for External Procurement 311 11.2.4 Validity of Sources of Supply 313 11.2.5 The Source Determination Process 314 11.3 Conclusion 322 12 Scheduling Parameters 323 12.1 Scheduling in SAP ERP 324 12.1.1 Basic Date Scheduling for In-House Production 324 12.1.2 Lead-Time Scheduling 330 12.2 Scheduling in SAP APO 339 12.2.1 SAP APO Scheduling for In-House Production 339 12.2.2 SAP APO Scheduling for External Procurement 345 12.3 Conclusion 348 13 Interactions 349 13.1 Parameter Dependencies 349 13.2 Relationship Model of Parameter Optimization 353 13.3 Conclusion 356 14 Processing Materials Planning Results 359 14.1 Tasks of the MRP Controller and SAP System Support 359 14.1.1 Master Data Maintenance 360 14.1.2 Qualitative Versus Quantitative Materials Planning 360 14.2 Materials Planning Controlling 361 14.2.1 MRP List and Stock/Requirements List 362 14.2.2 Standard Analyses 363 14.3 Personal Settings 367 14.3.1 Filters 367 14.3.2 Navigation Profiles and Favorites 368 14.4 Exception Messages and Troubleshooting (Alert Monitoring 369 14.5 Conclusion 371 15 Availability Check 373 15.1 Availability Check in SAP ERP 373 15.1.1 Availability Check Against ATP Logic 373 15.1.2 Availability Check Against Planned Independent Requirements 379 15.1.3 Availability Check Against Product Allocations 380 15.1.4 Availability Check Against Capacity 380 15.2 Availability Check in SAP APO 381 15.2.1 Combination of Basic Methods 381 15.2.2 Rules-Based ATP Check 382 15.2.3 Capable to Promise (CTP 382 15.2.4 Multilevel ATP Check 384 15.3 Conclusion 385 16 Collaborative Materials Planning Procedures 387 16.1 Vendor-Managed Inventory (VMI) 388 16.1.1 The Traditional VMI Process with SAP ERP 391 16.1.2 The Extended VMI Process with SAP APO 392 16.1.3 The VMI Process with SAP SNC (Responsive Replenishment 394 16.1.4 Evaluation of VMI 397 16.2 Supplier-Managed Inventory (SMI 399 16.2.1 SMI with Scheduling Agreement Delivery Schedule Lines 399 16.2.2 SMI with Purchase Order Processing 401 16.2.3 Evaluation of SMI 403 16.3 Conclusion 404 17 Materials Planning with Kanban Control 405 17.1 The Pull Principle 405 17.2 Elements of Kanban Control 407 17.2.1 Kanban Control Cycle 408 17.2.2 Kanban Card 408 17.2.3 Kanban Board 409 17.2.4 Control Charts 409 17.2.5 Determining Priorities in the Working System 409 A Comparison of Kanban Control and Conventional Production Planning 409 17.4 Kanban Procedures 410 17.4.1 Classic Kanban 410 17.4.2 Event-Controlled Kanban 411 17.4.3 One-Card Kanban 411 17.4.4 Kanban with Quantity Signal 412 17.5 The Kanban Process 413 17.6 Automatic Kanban Calculation 416 17.7 Procedure for Selecting Products Suitable for Kanban 420 17.8 Conclusion 424 18 Inventory Controlling 425 18.1 Why Inventory Monitoring 425 18.2 Introduction to Logistics Controlling 426 18.2.1 Statistical Differentiation of Key Figures 427 18.2.2 Business-Related Differentiation of Key Figures 428 18.2.3 Logistics Costs and Costs of Materials Planning 431 18.3 Problems with Data Collection 434 18.4 Important Inventory Key Figures 435 18.4.1 Range of Coverage Key Figure 436 18.4.2 Inventory Turnover Key Figure 441 18.4.3 Slow-Moving Items Key Figure 442 18.4.4 Stock Value Key Figure 443 18.4.5 Dead Stock Key Figure 444 18.4.6 Average Stock, Consumption, and Range of Coverage Key Figures 445 18.4.7 Receipt Value of Valuated Stock Key Figure 447 18.4.8 Safety Stock Buffer Key Figure 447 18.4.9 Safety Stock Key Figure 448 18.4.10 Service Level Key Figure 450 18.4.11 Stock at Receipt Key Figure 456 18.4.12 Lot Size Key Figure 456 18.5 Tools for Inventory Analysis 457 18.5.1 LMN Analysis 457 18.5.2 Flowcharts for Material Flow Analysis 458 18.5.3 Procurement and Consumption Cycles 460 18.6 Inventory Monitoring in SAP ERP 461 18.7 Inventory Controlling with SAP APO and SAP NetWeaver BW 464 18.7.1 Options for Evaluating Inventory Information 465 18.7.2 Overview of SAP NetWeaver BW 467 18.7.3 Using Business Content 469 18.8 Conclusion 479 19 Materials Planning Optimization 481 19.1 Classic Problems and Optimization Potential 481 19.1.1 Lack of Knowledge and Insufficient Use of the Standard SAP System 481 19.1.2 Stock Problems Caused by Incorrect Order Progress Messages 482 19.1.3 Stock Problems Caused by Backlogs 484 19.1.4 Weaknesses of Parameterization in SAP ERP 485 19.2 Example of the Process Flow of an Optimization Project 486 19.2.1 Step 1: Master Data and Process Analysis According to ABC/XYZ 486 19.2.2 Step 2: MRP Training 487 19.2.3 Step 3: Classifying and Creating the Set of Rules 487 19.2.4 Step 4: Migration and Continuous Optimization 489 19.3 Product Classification 491 19.3.1 Decision-Making Support for MRP Controllers 491 19.3.2 MRP Matrix 504 19.3.3 Effects of Classification on Planning 508 19.4 Optimization Tools from SAP Consulting 510 19.4.1 MRP Monitor 510 19.4.2 Replenishment Lead Time Monitor (RLT Monitor 514 19.4.3 MRP Optimization Expert Tool 515 19.4.4 Forecast Monitor 517 19.5 Conclusion 519 20 Outlook 521 A Literature 527 B Materials Planning Parameters and Influencing Factors 529 B.1 Planning Strategy 529 B.1.1 Parameters Affected by the Planning Strategy 532 B.2 Materials Planning Type 534 B.2.1 Parameters Affected by the Materials Planning Type 535 B.3 Forecast Method 536 B.3.1 Parameters Affected by the Forecast Method 537 B.4 Lot-Size Procedure 540 B.4.1 Parameters Affected by the Forecast Method 542 B.5 Safety Stock 543 B.5.1 Parameters Affected by the Safety Stock 544 C Materials Planning Optimization Four Steps for Implementation with the Support of SAP Consulting 547 C.1 Introduction 547 C.2 Materials Planning Optimization Service Offering 547 C.3 Objectives of the Materials Planning Optimization Service Offering 549 C.4 Contents During the Implementation 549 C.5 Procedure When Implementing the Ser-vice Offering 550 C.6 Results of Service Offering 550 D Add-Ons for SAP ERP 551 D.1 Forecast Monitor 551 D.2 MRP Monitor 551 D.3 Replenishment Lead Time Monitor 551 D.4 Simulating Safety Stocks 551 D.5 Service Level Monitor 551 E The Authors 553

About the Author :
After finishing his studies in business administration at Fachhochschule Nordostniedersachsen in Luneburg, Germany, and at John Moores University in Liverpool, England, Marc Hoppe joined CAS AG, Germany as an SAP developer in the logistics and production planning areas. Later, he became a logistics consultant and was responsible for implementing national and international SAP R/3 projects. Since 1998, he has worked as a Supply Chain Management (SCM) consultant at SAP SI AG. Marc Hoppe is responsible for the business-relevant and IT-based implementation and optimization of SCM processes, as well as the re-engineering of entire supply chain processes. In 2001, he became Consulting Director for SCM, and since 2003, he has managed additionally the Supplier Relationship Management (SRM) unit. Marc Hoppe consults for large corporations such as Siemens, Unilever, Gillette, Philips, Deutsche Telekom, and Philip Morris, as well as medium-sized companies like G+H Isover or Fertiva. He has published numerous works on inventory optimization.