Akila Wedasinghe
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Material Requirements Planning (MRP) in SAP S/4HANA
A comprehensive guide to understanding and implementing MRP in SAP S/4HANA
Overview of MRP
Material Requirements Planning (MRP) is a planning engine used to ensure that the right materials are available at the right time, in the right place, and in the right quantity.
MRP is an engine which processes requirements, supplies, and stock levels to create procurement proposals (purchase requisitions) or production proposals (planned orders).
MRP analyses requirements coming from:
- Sales orders
- Stock transfer orders
- Reservations
- Forecast (Planned Independent Requirements)
- Production orders
- Plant maintenance orders
MRP evaluates:
- Current on-hand stock
- Purchase orders
- Production orders
- Planned orders
- Purchase requisitions
MRP calculates net requirements and identifies shortages over time, considering safety stock levels.
Based on the procurement type defined in material master:
- Purchase Requisitions - for materials to be procured externally
- Planned Orders - for materials to be produced in-house
Key MRP Transactions
| Transaction | Description | Usage |
|---|---|---|
| MD01 | MRP Run for Plant Level | Runs MRP for all materials in a plant |
| MD02 | Single Item, Multi-Level | Runs MRP for one material and all its components |
| MD03 | Single Item, Single Level | Runs MRP for one material only |
| MD01N | MRP Live (S/4HANA) | Improved performance with in-memory computing |
| MD04 | Display Stock/Requirements | Shows the current planning situation for a material |
Direct vs. Indirect Materials
- Materials used in production of finished goods
- Part of Bill of Materials (BOM)
- Can be planned through MRP based on finished good forecasts
- Structured procurement
- Example: Raw materials, components
- Supporting materials not in finished goods
- Not linked directly to production
- Often unstructured procurement
- Consumption-based planning
- Example: Office supplies, consumables, MRO items
MRP Types
MRP types define the planning strategy to be used for a material. The appropriate MRP type selection is crucial for effective planning.
The standard MRP type that plans based on requirements and consumption. It checks demands against stock and generates procurement proposals as needed.
Best for: Most direct materials, materials with predictable demand, items with accurate BOMs
Key characteristic: Demand-driven planning
Consumption-based planning that creates procurement proposals when stock falls below the reorder point, without considering future demands.
Best for: C-class items, consumables, items with stable consumption
Key characteristic: Stock-level triggered planning
No automatic planning by MRP. All procurement activities must be initiated manually.
Best for: Ad-hoc items, materials planned in external systems, obsolete items
Key characteristic: Manual planning only
Similar to PD but used for critical materials and finished goods. Allows separate processing before running MRP for all materials.
Best for: Key finished products, critical components, bottleneck resources
Key characteristic: Prioritized planning
The choice of MRP type should consider:
- Material value and criticality
- Demand pattern (stable vs. erratic)
- Supply lead time
- Position in the supply chain
Planning Parameters
Planning parameters control how MRP behaves and makes decisions during the planning process.
The Planning Time Fence (PTF) defines a period during which the production plan is frozen or has limited flexibility.
Planning Time Fence provides stability by preventing automatic changes to near-term production plans. Once machine and labor resources are committed, changing schedules becomes disruptive.
Key Characteristics:
- Defined in number of days from current date
- Typically set based on lead times and production cycles
- Within the PTF, changes require manual intervention
- Beyond the PTF, MRP can create/adjust planned orders freely
"Forming" is the process of marking a planned order or purchase requisition as confirmed, protecting it from automatic deletion by MRP.
The form indicator prevents MRP from automatically changing or deleting a planned order or purchase requisition during subsequent MRP runs.
When a document becomes formed:
- When manually changed by a planner
- When manually set by a planner
- When converted to a production order or purchase order
- When automatically formed by the system (based on settings)
Forming Types in MRP Configuration:
- Auto forming (1): Automatically forms all procurement proposals within the planning time fence
- Auto forming with rescheduling (2): Similar to 1, but allows some date adjustments
- Manual forming (3): No automatic forming, but system prevents new proposals within time fence
- Manual forming with rescheduling (4): Similar to 3, but allows date adjustments
The MRP Controller is a person or organizational unit responsible for planning certain materials.
Usage:
- Grouping materials for planning responsibility
- Filtering in MRP reports and planning runs
- Organizing planning activities by planner
Assignment:
MRP Controller is assigned in the MRP 1 view of the material master.
Assign MRP Controllers based on material categories, product lines, or physical areas in the plant to ensure clear planning responsibilities.
Scrap factors help MRP account for expected losses during production.
Accounts for finished goods that will be scrapped during production.
Example: If producing 100 units with 2% assembly scrap, MRP will create a planned order for 102 units.
Where to define: Material master MRP 1 view
Accounts for raw materials or components that will be scrapped during production.
Example: If a product needs 10 units of a component with 5% scrap, MRP will require 10.5 units.
Where to define: BOM component or Material master
Be careful with scrap factors for items counted in pieces (each). A 5% scrap for an item used in quantity 1 will round up to 2 pieces, resulting in 100% additional consumption.
MRP Area is an organizational unit that allows more granular planning than at plant level.
Types of MRP Areas:
- Plant MRP Area (Type 01): Default MRP area for each plant
- Storage Location MRP Area (Type 02): Planning at storage location level
- Subcontractor MRP Area (Type 03): Planning for specific vendor
In a plant with multiple production lines using the same material but stored in different locations, storage location MRP areas allow planning that material separately for each production line.
In S/4HANA, MRP always runs at MRP area level, with plant MRP areas created automatically.
An MRP Group allows certain planning parameters to be defined for a group of materials, overriding plant level settings.
Common uses:
- Defining special document types for purchase requisitions
- Controlling Planning Time Fence behavior
- Setting up roll-forward periods
- Determining safety stock usage for covering requirements
Use MRP Groups when you need a subset of materials to have different planning behavior than the standard plant settings. This is optional - many implementations don't use MRP Groups at all.
Lot Sizing Procedures
Lot sizing procedures determine how MRP calculates the quantity of planned orders or purchase requisitions.
| Procedure | Code | Description | Typical Use |
|---|---|---|---|
| Exact Lot Size | EX | Creates proposals exactly matching net requirements | Make-to-order production, expensive items |
| Fixed Lot Size | FX | Always creates proposals of predefined quantity | Items with fixed pack sizes, standard truck loads |
| Replenish to Maximum | H1 | Creates proposals to bring stock up to maximum level | Reorder point planning (VB), consumable items |
| Daily Lot Size | TB | Combines all requirements for a day into one proposal | Frequently used materials with multiple daily orders |
| Weekly Lot Size | WB | Combines all requirements for a week into one proposal | Regularly ordered materials with medium lead time |
| Monthly Lot Size | MB | Combines all requirements for a month into one proposal | Less frequently used items, items with quantity discounts |
Additional Lot Size Parameters
Ensures that procurement proposals are not created for quantities below a specified minimum.
Example: Vendor requires minimum order of 100 units
Limits the size of individual procurement proposals, splitting larger requirements into multiple proposals.
Example: Production capacity limit of 500 units per order
Rounds procurement quantities to multiples of a specified value.
Example: Material supplied in boxes of 25 units
Provides more complex rounding rules based on quantity ranges.
Example: Different pack sizes based on order quantity ranges
The right lot sizing strategy balances:
- Inventory costs - smaller lots mean less inventory
- Setup/order costs - larger lots mean fewer setups or orders
- Vendor constraints - minimum quantities, packaging units
- Production constraints - capacity limits, batch sizes
Time Elements in MRP
Time elements control scheduling and timing aspects of the planning process.
Time needed to convert a purchase requisition to an approved purchase order.
Configuration: Defined at plant level
Impact: Determines when purchase requisitions should be released
Time needed for a vendor to deliver after receiving a purchase order.
Configuration: Defined in material master or info record
Impact: Determines when purchase orders should be placed
Time needed to process received goods before they are available for use.
Configuration: Defined in material master
Impact: Accounts for inspection, quality checks, and warehousing
Time needed to produce a material internally.
Configuration: Defined in material master or routing
Impact: Determines when production orders should be released
MRP uses backward scheduling by default, calculating when to start activities based on when materials are needed:
- Starts with requirement date
- Subtracts GR processing time
- Subtracts planned delivery time
- Subtracts purchasing processing time
- Determines when purchase requisition should be released
Additional Time Parameters
Time between planned orders when they get split due to lot size constraints.
The past time period for which MRP will still plan and create proposals.
MRP Views in Material Master
Material master contains several MRP-related views that control planning behavior.
MRP 1 View - Basic Planning Data
| Field | Description | Impact |
|---|---|---|
| MRP Type | Planning procedure (PD, VB, ND, etc.) | Determines basic planning approach |
| MRP Controller | Person responsible for planning | Organizational assignment, reporting |
| Lot Size Procedure | How to calculate order quantities | Controls size of procurement proposals |
| Min. Lot Size | Minimum procurement quantity | Enforces vendor or production minimums |
| Max. Lot Size | Maximum procurement quantity | Limits individual order/production quantities |
| Assembly Scrap | Expected scrap percentage | Increases order quantities to account for scrap |
| Planning Time Fence | Frozen period for planning | Stabilizes short-term planning horizon |
| MRP Group | Group for special planning parameters | Allows deviation from plant parameters |
MRP 2 View - Procurement & Scheduling
| Field | Description | Impact |
|---|---|---|
| Procurement Type | How material is obtained (E, F, X) | Determines if planned orders or PRs are created |
| Special Procurement | Special sourcing methods | Enables subcontracting, stock transfer, etc. |
| Planned Delivery Time | Lead time for external procurement | Controls backward scheduling |
| GR Processing Time | Time for goods receipt processing | Accounts for inspection and handling time |
| In-house Production | Time for internal production | Used for production planning scheduling |
| SLoc for Ext. Proc. | Default storage location for receipts | Where purchased material is received |
| Bulk Material | Indicator for consumable materials | No dependent requirements generated |
MRP 3 View - Strategy & Availability
| Field | Description | Impact |
|---|---|---|
| Strategy Group | Planning strategy (e.g., make-to-stock) | Determines how material is planned and produced |
| Consumption Mode | How forecast is consumed by actual demand | Impacts forecast accuracy and planning |
| Period Indicator | Time bucket for consumption | Daily, weekly, monthly consumption |
| Availability Check | How availability is checked | Controls ATP (Available to Promise) behavior |
| Requirements Class | Priority for requirements | Controls which requirements are fulfilled first |
MRP 4 View - Forecasting & Production
| Field | Description | Impact |
|---|---|---|
| BOM Explosion | Controls when BOM is exploded | Impacts planning performance and timing |
| Production Scheduler | Person responsible for production | Organizational assignment |
| Production Scheduling Profile | Controls detailed scheduling | How production orders are scheduled |
| Production Storage Location | Default storage location for production | Where produced materials are stored |
| Repetitive Manufacturing | Profile for repetitive manufacturing | Enables rate-based planning instead of orders |
MRP Process Flow
The complete MRP process involves several steps, from preparation to execution.
Before running MRP, ensure:
- Master data is correct (materials, BOMs, routings)
- Current stock levels are accurate
- Open orders are up to date
- Forecast data is loaded (if applicable)
Execute MRP using appropriate transaction:
- MD01/MD01N: Complete plant MRP run
- MD02: Single material, multi-level planning
- MD03: Single material, single level planning
MRP can be run in background (MDBT) for large plants or scheduled as a regular job.
Analyze planning results using:
- MD04: Display Stock/Requirements list
- MD05: Collective display of MRP lists
- MD06/MD07: Exception reports
Focus on exceptions and resolve planning issues.
Convert planning results into actual orders:
- Convert purchase requisitions to purchase orders (ME21N)
- Convert planned orders to production orders (CO01)
- Manually adjust planning results if necessary
Continuously monitor:
- Stock levels
- Open orders
- Delivery dates
- Critical materials
Re-run MRP as needed to adjust to changing conditions.
Best Practices for MRP
Ensure accurate:
- Bill of Materials
- Lead times
- Safety stocks
- Lot sizes
Run MRP:
- Daily for critical materials
- Weekly for standard materials
- After major demand changes
Review and adjust:
- Safety stocks seasonally
- Lead times when vendor performance changes
- Planning time fences based on stability needs
Consider:
- MPS for critical items first
- Different MRP types for different material categories
- ABC analysis for planning focus
- Nervousness: Frequent changes to planned orders causing disruption
- Bullwhip Effect: Small demand changes causing large swings in upstream planning
- Excess Inventory: Overestimating requirements or safety stocks
- Stockouts: Underestimating lead times or requirements
These challenges can be addressed with proper MRP parameters, time fence planning, and regular review.