Material Requirements Planning (MRP) in SAP S/4HANA

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.

What MRP Does

MRP is an engine which processes requirements, supplies, and stock levels to create procurement proposals (purchase requisitions) or production proposals (planned orders).

1
Consider Requirements

MRP analyses requirements coming from:

  • Sales orders
  • Stock transfer orders
  • Reservations
  • Forecast (Planned Independent Requirements)
  • Production orders
  • Plant maintenance orders
2
Check Stock and Supplies

MRP evaluates:

  • Current on-hand stock
  • Purchase orders
  • Production orders
  • Planned orders
  • Purchase requisitions
3
Identify Shortages

MRP calculates net requirements and identifies shortages over time, considering safety stock levels.

4
Generate Proposals

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

Direct 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
Indirect Materials
  • 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.

PD - Material Requirements Planning PD

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

VB - Reorder Point Planning VB

Consumption-based planning that creates procurement proposals when stock falls below the reorder point, without considering future demands.

Maximum Stock Level (1000)
Reorder Point (500)
Safety Stock (100)
Replenishment
Purchase Requisition
Quantity: 500 units
To reach: Max. level

Best for: C-class items, consumables, items with stable consumption

Key characteristic: Stock-level triggered planning

ND - No Planning ND

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

M0/M1/M2/M3 - Master Production Scheduling M0

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

MRP Type Selection Considerations

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.

Planning Time Fence

The Planning Time Fence (PTF) defines a period during which the production plan is frozen or has limited flexibility.

Purpose

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.

Planning Time Fence Diagram

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 and Form Indicators

"Forming" is the process of marking a planned order or purchase requisition as confirmed, protecting it from automatic deletion by MRP.

Form Indicator

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:

  1. Auto forming (1): Automatically forms all procurement proposals within the planning time fence
  2. Auto forming with rescheduling (2): Similar to 1, but allows some date adjustments
  3. Manual forming (3): No automatic forming, but system prevents new proposals within time fence
  4. Manual forming with rescheduling (4): Similar to 3, but allows date adjustments
MRP Controller

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.

Best Practice

Assign MRP Controllers based on material categories, product lines, or physical areas in the plant to ensure clear planning responsibilities.

Assembly Scrap and Component Scrap

Scrap factors help MRP account for expected losses during production.

Assembly Scrap

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

Component Scrap

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

Important Consideration

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

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
Use Case Example

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.

MRP Group

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
When to Use MRP Groups

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

Minimum Lot Size

Ensures that procurement proposals are not created for quantities below a specified minimum.

Example: Vendor requires minimum order of 100 units

Maximum Lot Size

Limits the size of individual procurement proposals, splitting larger requirements into multiple proposals.

Example: Production capacity limit of 500 units per order

Rounding Value

Rounds procurement quantities to multiples of a specified value.

Example: Material supplied in boxes of 25 units

Rounding Profile

Provides more complex rounding rules based on quantity ranges.

Example: Different pack sizes based on order quantity ranges

Lot Sizing Strategy

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.

MRP Time Elements Diagram
Purchasing Processing Time

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

Planned Delivery Time

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

Goods Receipt Processing Time

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

In-house Production Time

Time needed to produce a material internally.

Configuration: Defined in material master or routing

Impact: Determines when production orders should be released

Backward Scheduling

MRP uses backward scheduling by default, calculating when to start activities based on when materials are needed:

  1. Starts with requirement date
  2. Subtracts GR processing time
  3. Subtracts planned delivery time
  4. Subtracts purchasing processing time
  5. Determines when purchase requisition should be released

Additional Time Parameters

Technical Float Time

Time between planned orders when they get split due to lot size constraints.

Opening Period

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
MRP 2
MRP 3
MRP 4

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.

1
Preparation

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)
2
MRP Run

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.

3
Review MRP Results

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.

4
Process Planning Results

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
5
Monitoring and Follow-up

Continuously monitor:

  • Stock levels
  • Open orders
  • Delivery dates
  • Critical materials

Re-run MRP as needed to adjust to changing conditions.

Best Practices for MRP

Master Data Quality

Ensure accurate:

  • Bill of Materials
  • Lead times
  • Safety stocks
  • Lot sizes
MRP Run Frequency

Run MRP:

  • Daily for critical materials
  • Weekly for standard materials
  • After major demand changes
MRP Parameters

Review and adjust:

  • Safety stocks seasonally
  • Lead times when vendor performance changes
  • Planning time fences based on stability needs
Planning Approach

Consider:

  • MPS for critical items first
  • Different MRP types for different material categories
  • ABC analysis for planning focus
Common MRP Challenges
  • 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.

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