S/4HANA Demand Driven MRP (DDMRP) Functionality

This blog gives you an understanding of demand-driven MRP and how it works in SAP S/4HANA environment.

Material requirements planning (MRP) is a well-known planning tool. Material planning is a very critical and complex process due to complex supply chain networks and it is not easy to fulfill the requirements based on classical planning all the times.

MRP is a planning tool and available in SAP ERP (ECC) and Advanced Planning Optimization (APO) interface with Core Interface (CIF). SAP material requirements planning brings efficiency and optimization to production and procurement plans. Every planner dream to accurately plan materials timely available across the logistics and entire supply chain. Planner main goal is to ensure that enough stock available for sale to customers without escalating the inventory carrying cost or facing a shortage of raw or packing materials needed for production processes.

MRP planning runs generate purchase requisition or planned order is a proposal that a planner can interactively convert to purchase order or production order for external procurement or in-house production. SAP MRP creates a planned order or purchase requisitions based on a material’s net requirement quantity and its needed availability. The net requirement calculation takes into account existing warehouse stock, the quality of stock, existing or open purchase orders, or production orders to calculate the material’s shortage quantity. If the system finds that there is a material shortage, it creates a planned order or purchase requisition for the shortage quantity. MRP is not restricted to quantity planning it also takes timelines into account, such as the time it takes to procure a material (known as replenishment lead time or planned delivery time), the time required to process goods receipt in the warehouse or the quality inspection times (goods receipt processing time).

SAP Business Suite 4 SAP HANA is a business suite that is built on SAP’s proprietary operational database system and in-memory computing platform called SAP HANA. SAP S/4HANA is being called SAP’s biggest update to its ERP strategy and platform in over two decades that means S/4HANA is just a new transformation to an ERP system.

DDMRP available in the S/4HANA product offering consists of two editions: SAP S/4HANA On-Premise and SAP S/4HANA Cloud and Integrated Business Planning (IBP). If you look at the high-level earlier ECC and APO and now S/4HANA and IBP.

Demand Driven Material Requirements Planning (DDMRP) is an innovative multi-echelon pull methodology to plan inventories and materials. It enables a company to build more closely to actual market requirements and promotes better and quicker decisions and actions at the planning and execution level. DDMRP was introduced to the world in the book Orlicky’s Material Requirements Planning, Third Revised Edition by Carol Ptak and Chad Smith.

I am mainly focused on S/4HANA 1709 on-promise version Demand-Driven Replenishment process. Demand-Driven Replenishment helps you plan and manage supply chains efficiently based on customer demand, rather than through traditional MRP procedures. You do this by strategically decoupling material flows, becoming less vulnerable to disruptions in the supply chain, and by protecting the flow through dynamically-managed buffer (stock) levels for relevant products.

DDMRP uses strategic decoupling points to drive supply order generation and management throughout a supply chain.

1. Strategic decoupling: De-coupling the supply chain creates independence between processes or entities and is the only way to stop the bullwhip effect, mitigate variability and compress lead times.
2. Buffer sizing: Buffer sizing is the shock absorber to ease both supply and demand variability and reduce or eliminate the bullwhip effect.
3. Dynamic adjustments: A dynamic adjustment of the buffer profiles further calms the supply chain and smooths operating for all variabilities within a set period.
4. Demand-driven planning: Demand-driving planning comprises generating supply orders by evaluating actual inventory, stock that has been ordered but not received, and qualified sales order demand.
5. Visible and collaborative execution: When users have visibility into inventory through alerts that track usage, ordering lead times and material delivery can be synchronized.

To implement the DDMRP process following are the two steps.

1. Configuration and setup in fiori applications
2. Operational fiori applications

The first steps to identify the materials which are relevant for DDMRP planning (critical and long lead time) and update the MRP type D1 (planning procedure C) in material master MRP 1 view.

Schedule Product Classification (DD):

With this app, you can classify your products by systematically evaluating them based on their goods issue value (ABC classification), usage across BOMs (PQR classification) and variation in actual demand (XYZ classification) across a specified evaluation interval. Classifying your products will help identify whether they are relevant for Demand-Driven Replenishment, and will help define inputs for their buffer settings.

Once the application job opens click on “New” and classifies products and schedule job as below.

After job completed products classified and additional information messages also displayed.

Mass Maintenance of Products (DD)

Buffer (stock) level proposals help you manage the safety stock, reorder point and maximum stock for your products through the Manage Buffer Levels app. Several factors are taken under consideration when calculating buffer proposals for your Demand-Driven Replenishment-relevant products.

A buffer profile is one of the several factors taken under consideration when calculating buffer proposals for Demand-Driven Replenishment-relevant products.

SAP not provided the standard transaction code to maintain the buffer parameters. You can manage buffer profiles using the cluster table “PPH_DD_PROFILE_ASG_VC” in SM30 transaction code in S/4HANA 1709 on-premise version.

Manage Buffer Levels