5 reasons to use subcontracting MRP areas in S/4HANA.

I have been in contact with several customers who are upgrading to SAP S/4HANA recently and I was really surprised when two of these customers decided to implement the subcontracting scenario without the use of subcontracting MRP areas. As I pointed earlier in my blog MRP: Simplification on S/4HANA, one of the major simplifications implemented in MRP is related to the subcontracting scenario.

As of the first release of S/4HANA, there is no separated planning stock segment for subcontracting without the use of subcontracting MRP areas. Of course that this is a big change for customers who were used with planning in the old scenario, but there are some advantages in planning with MRP areas and we will see them below.

1 – There is no separated stock segment for subcontracting without MRP areas in S/4HANA

The subcontracting planning segment which we were used to see in ECC (highlighted in the figure below) no longer exists in SAP S/4HANA. It means that, without using MRP areas, there will be no separation between the stock provided to the vendor and the plant stock, from a planning perspective, and MRP will not know how much stock we have already provided to the vendor.

Figure 1 – Special stock segment for subcontracting in ECC

With MRP areas, however, there is a complete separation between the stock provided to the vendor and the plant stock, while MRP can plan the subcontracting requirements accordingly. In figure below we can see the subcontracting requirements displayed at MRP area level in S/4HANA.

Figure 2 – Subcontracting requirements at MRP area level

2 – MRP will not plan the transference of components from the plant to the vendor stock

As I mentioned above, without MRP areas, there will be no separation between the plant stock and the stock provided to the vendor, which means that MRP will not know in advance how mush shortage of material we have in the vendor side and it will not plan to transfer the stock from the plant to the vendor.

It means that, without MRP areas, we will have additional manual steps, that is to manually transfer the stock from the plant to the vendor and we may even have delays, due to shortages in the vendor.

3 – Third-Party scenario does not work without MRP areas

This is not exactly something new in S/4HANA, since the third-party scenario in ECC was only possible with MRP areas, but it is a very important topic.

With the use of MRP areas, MRP can automatically plan the third-party scenario, that it the delivery of purchased components directly to the subcontractor. Without MRP areas, we will always receive the stock by default in the plant and then we have to manually transfer it to the subcontractor.

With the third-party scenario. we won’t need to receive the components in our plant and then send it to the vendor, which means less steps in the supply chain and less manual activities for planners.

4 – No need to assign MRP areas in the material master

If we want to use subcontracting MRP areas in SAP ECC, we need to first create the MRP areas in customizing and then assign them to the material master, so that MRP can plan at MRP area level.

In SAP S/4HANA, we only need to create the subcontracting MRP areas in customizing and MRP will automatically identify it and plan accordingly in a subcontracting scenario. It means that the master data maintenance is simpler when using MRP areas in S/4HANA.

5 – Possibility to define MRP area specific planning parameters

Even though it is not necessary to assign the subcontracting MRP area to the material master, I can still to that if I need to define planning parameters at MRP area level. Therefore, I can plan at the subcontractor level with a different MRP type, a different lot sizing or special procurement (such in the third-party scenario). I can also assign, for example, a different MRP Controller, if I want to have one MRP controller to take care of all the subcontractors.

In addition, we have a mass processing report (RMMDDIBE) to create and maintain MRP areas in the material master.