Material Planning Strategies – Part 1
Material Planning Strategies – From Soup to Nuts
Following the success of our Transportation Management Soup to Nuts series, we are in this new series going to adopt the same – in-depth – format, but will this time, turn our attention to Manufacturing, and to be more specific, to Material Planning Strategies. This will be a multi-part blog series.
Planning Strategies are a crucial and critical piece of information that determines how a material is planned, manufactured (or procured), and sold. It therefore requires an enterprise-wide alignment in terms of process, understanding, and orchestration of system activities, and most importantly correct system and data setup.
Ultimately, the aim of planning is to better serve your customers, all the-whilst helping you to:
- Reduce or optimize storage costs
- Reduce lead times
- Address an aspect that has become top of mind in recent times, volatility
Before we get into the “meat” of this series, I would also recommend that you not blindly jump into wanting to setup planning strategies for your materials, without first having an understanding of what you have to work with. I.e take the time to analyze your materials (high value vs low value, volatility/variability, make to stock vs make to order, long vs short lead times, the criticality of the product, effect on service levels if there is a stock shortage, etc…). Doing your homework will make the selection of the most appropriate planning strategy that much easier. If you are unsure where to start, we would suggest performing an ABC–XYZ analysis.
As it is customary, we will first look at the theory, to make sure there is an understanding of the process, what it is we want to achieve and how to go about it.
Whilst the title of this series is “Planning Strategies”, if we only considered that topic, there would not be much to say! If we are going to talk about Planning Strategies, then we also need to consider the topics of Planned Independent Requirements (PIR’s) which together with Planning Strategies make up the topic of Demand Management, Material Requirements Planning, and Customer Requirements (Sales Orders).
The below diagram shows how these pieces are interconnected and the goal of demand management, which is to establish what quantities are to be produced at what times. This is done by creating planned independent requirements to trigger planning (MRP).
1 Product Planning Strategy
This obviously is a key object in this process, as the strategy will determine important settings pertaining to both the independent and customer requirement types (requirement type, consumption mode, MRP planning indicator, how the availability check is to be done, etc…) and how they work together.
The details of each planning strategy can be viewed in Manage your solution or CBC depending on your landscape, under the configuration entry “Display Planning Strategy”. Whilst the planning strategies are accessible, you should note that they are only there for viewing purposes. You cannot amend standard strategies or create your own strategies.
You will find this configuration point under ID 105662, or by following the Application Area Manufacturing and Sub Application Area Material Requirements Planning and configuration step Display Planning Strategies.
Once you open the Configuration step, you will be presented with a screen such as the one below, listing all available planning strategies.
Make no mistake, this screen is already presenting us with some very important information, namely the Demand Management (DM) requirement type and the Customer Requirement (Cu) type. As we will see later on, when we look at Comparison & Consumption, these two requirement types go hand in hand. You can read more about this in the SAP help here .
You can also select a planning strategy, and delve into the details of it, as shown below.
The planning strategy is then assigned to a strategy group. It is also a strategy group that is assigned to a product, not an individual planning strategy.
The strategy group is also a setting you will find in Manage your solution or CBC, depending on your setup, in Manufacturing / Material Requirements Planning, under configuration ID 105661 – Define Planning Strategy Groups.
A number of standard Strategy Groups are delivered with your system, as shown below, but you can also add your own should you need to.
For a given strategy group, you specify which strategies are to be grouped together into a strategy group. You determine a main strategy as well as a maximum of seven alternative strategies.
The main strategy is proposed in demand management or sales order management but it can be overwritten by another planning strategy defined in the strategy group, if necessary.
The next step is to assign a given strategy group to your products that you wish to plan via demand management. This is a setting that is assigned in the Plant / MRP Data view of your product, as shown below. Also, note that the strategy group is saved at the ‘Plant’ level – meaning that the same product code can have a different strategy group in different plants.
To assign a strategy group, you can either assign directly your chosen strategy group, or you can use a new guided procedure and go through a series of questions to narrow down your search to the most appropriate strategy group.
Pick and select your preferred strategy group.
Or leverage the new guided procedure.
I am also adding below the entire decision tree of questions/answers that are presented in the guided procedure and the strategies that can be determined.
2 Planned independent requirements
Planned Independent Requirements, often referred to by their acronym PIR can be created in the system in a variety of ways:
- Manually, one product at a time or several products at the same time
- En masse by leveraging an upload from spreadsheet capability (this method is nicely detailed in this blog https://blogs.sap.com/2022/03/25/creating-independent-requirements-from-a-spreadsheet/)
- Using an API (you can read more on this Odata API, on the SAP API hub (here –> https://api.sap.com/api/API_PLND_INDEP_RQMT_SRV/overview)
At this point, we will not worry about the method, but we will use the Fiori App “Maintain PIRs” available in the system to create some PIRs for one of our products. Our product will be a product that has been assigned the strategy group 10, which has the main planning strategy (10) Make-To-Stock Production. We will also in a subsequent blog go through the ins and outs of this planning strategy.
To be able to make a before/after comparison as we go through the process, let’s take a snapshot of the current planning situation of our material, via the “Manage Material Coverage” application, which is as below.
We can see that there is a stock of 15 and no requirements or replenishment elements.
We then go to “Maintain PIRs” to enter requirements.
Tip: If you do not see anything when you go into the app, make sure you have assigned the appropriate areas of responsibility to your user (which you can do from the Me menu and the menu item App Settings).
We click ‘Create’ to enter PIRs
Once we have done this, a popup is shown as below.
As you can see here, the LSF requirement type is automatically proposed as the default. The reason for this is because the product’s Main planning strategy is (10) Make to Stock, which has in configuration been defined as having a Demand Management requirement type of LSF.
Another important setting here is the ‘Version Active’ Indicator – Active meaning passed on to MRP or not (planned or not planned). You may want to keep your version as inactive whilst you refine your requirements.
We will enter the requirements as below and save them.
If we now go back to the Manage Material Coverage app and refresh our view, we now have the below.
We can see that our PIR’s have been transferred (because we set the version as active).
We also see that the monthly requirements we had entered are now appearing as requirements on the first working day of the month (i.e stock has to be available at the start of the month to cover my sales). We also see the MRP element description clearly saying that these requirements are Independent Requirements and are of type LSF (handy if your material can leverage multiple planning strategies).
3 – Materials Requirements Planning
The point of creating PIR’s is to trigger replenishment before your sales orders come in and you can create planned independent requirements for finished products, subassemblies, or components, depending on your needs – you can even combine several strategies at several levels of a product structure if that makes sense (making sure there is no double-up of requirements, which may lead to over stocking if left undetected).
Since the point is to trigger replenishment, the next logical step is to trigger the MRP for our products. In this case, if we look at the same product and run the MRP, we should now see that the planning situation of the material has changed – which as below, it has.
We can see that MRP has netted off the requirements against the opening stock and created replenishment proposals for each of our requirements. We could also have used a specific lot-sizing procedure, but clearly, we see the replenishment proposals cover exactly the requirement (EX – Exact Lot sizing procedure).
4 Consumption of – independent – requirements
So far we have seen how we can trigger replenishment of stock before sales orders arrive by creating planned independent requirements, but of course, what we do not want is for the sales order requirements to double up and be planned in addition to the planned independent requirements otherwise we will just end up with overstocks. So we need a method to reduce our planned independent requirements by our sales orders. Thankfully we have a consumption mechanism that automatically takes care of this reduction mechanism. You as a user, have control in deciding the direction of this consumption direction and horizon (i.e how far back in the past and / or forward in the future should the system look to reduce independent requirements).
These consumption adjustment settings live in the product master, and you can go about it in a couple of ways:
- Either by creating an MRP group in Manage your solution / CBC (look for configuration ID 102373 “Define MRP Groups”) and referencing the MRP group in the product master
- Or by maintaining these settings in the product master directly
Whilst the latter will allow you to be specific for a product, maintaining these settings individually in the product will represent a data maintenance overhead and if you are using the product master app to maintain your products you will need to perform some UI adaptation to add the required fields in the UI (or you will need to revert to using the Create/Change Material app to maintain these settings, but this is not recommended).
For the sake of this blog, I have modified the UI of my product masters and added the fields in question, which are highlighted below (they are also added to the MRP data view).
The consumption periods are expressed in Working Days.
The possible values for the consumption modes are as shown below:
Explanation of the consumption modes.
As said the consumption mode indicates how the system is to consume (or reduce) the PIRs when sales requirements start to appear.
As the term indicates the system will go backward in time, from the requirement date, to consume the planned independent requirements. This is illustrated below. We have a starting position (Before) where we have 4 identical requirements (100 pieces) for 4 periods, with one period in the middle with no PIRs.
Some time later (After), in that empty period, a sales order is recorded for a quantity of 150 Pieces. Because we have indicated a consumption mode of ‘Backward’, the system will go backward to consume the PIRs. We see here that the entire PIRs from period 2 have been consumed and 50 from period 1.
This time we switch directions and go forward, but the mechanism is the same and this is illustrated below.
We also have Forward then Backward, and Backward then Forward, consumption modes that combine reduction in both directions.
This is an interesting one. So far all the consumption modes we have cited can consume across periods depending on the date of the requirements and the duration of the consumption horizon. However, sometimes customers want to contain the consumption of PIRs to the same period as that of the sales requirement and only that period. I.e Sales from March should only consume PIRs from March. This consumption mode will provide this method of consumption.
Lastly, it could also happen that sales order requirements have consumed all available PIRs in the consumption period (subject to consumption parameters). In those cases, the excess quantity required to cover the sales order requirement will also be planned by MRP.
I hope this blog has helped you understand the basics of demand management and set you up for our next blog where we will look at individual planning strategies in detail. I will update this blog with the subsequent blogs as and when they are published. I do not intend to cover all the planning strategies, but if there is one that you would like to see included, then please leave it as a comment.