In the reorder point planning procedure, the system compares available warehouse stock with the reorder level. If available stock falls below the reorder level, an order proposal is generated. The reorder level (also known as the reorder point) is made up of the sum of the safety stock plus the expected average material consumption within the replenishment lead time. Therefore, when determining the reorder level, you must take safety stock, previous consumption values or future requirements and the replenishment lead time into account.
Safety stock must be set at a level which covers both excess material consumption within the replenishment lead time and the additional requirements which may occur during delivery delays. You must, therefore, take previous consumption or future requirements, and the vendor’s delivery timeliness or that of production into account when determining the safety stock level.
Reorder Point Planning in SAP MM
Consequently, the reorder level and the safety stock level are central control parameters within reorder point planning. They can be determined automatically by the system or manually by the MRP controller.
Manual Reorder Point Planning
If you choose the manual reorder point planning procedure, you must specify both the reorder level and the safety stock level yourself and enter them in the appropriate material master record.
Automatic Reorder Point Planning
If you choose the automatic reorder point planning procedure then both the reorder level and the safety stock level are determined by the integrated forecasting program. The system determines the forecast values for future requirements by means of historical data. From these forecast values, the system then calculates the reorder level and the safety stock level, taking the service level, which is specified by the MRP controller, and the material’s replenishment lead time into account.
The system then records these two values in the appropriate material master record. Since the forecast is carried out at regular intervals, the reorder level and the safety stock level are continually adapted to the current consumption and delivery situation. This means that a contribution is made towards keeping stock levels low.
In the reorder point planning procedure, the system compares available warehouse stock at plant level with the reorder level. If stock falls below the reorder level, the system generates an order proposal. If, however, a purchase order or a production order covering the required quantity has already been planned by purchasing or production, then the system will not create another one. The system calculates the quantity for the order proposal according to the lot-sizing procedure which you selected. There are several lot-sizing procedures from which you can choose.
About Reorder Point Planning
In the reorder point planning procedure, the system compares available warehouse stock at plant level with the reorder level. If stock falls below the reorder level, the system generates an order proposal. If, however, a purchase order or a production order covering the required quantity has already been planned by purchasing or production, then the system will not create another one.
The system calculates the quantity for the order proposal according to the lot-sizing procedure which you selected. There are several lot-sizing procedures from which you can choose. If you want, you can specify a different procedure for each material.
The continuous monitoring of available warehouse stock within reorder point planning is carried out via the inventory management program. Every time a material is withdrawn from the warehouse, the system checks whether this withdrawal has caused stock levels to fall below the reorder level. If this is the case, an entry is made in the planning file for the next planning run.
Exactly the same procedure is carried out if a material is returned to the warehouse; but this time, the system will check whether the available warehouse stock exceeds the reorder level again. If this is the case, an entry is made in the planning file which acts as an indicator for the planning run to delete any unnecessary order proposals.
Like reorder point planning, forecast-based planning operates using historical values and forecast values as future requirements are determined via the integrated forecasting program. However, in contrast to reorder point planning, these values then form the basis of the planning run in forecast-based planning. The forecast, which calculates future requirements using historical data, is carried out at regular intervals.
This offers the advantage that requirements, which are automatically determined, are continually adapted to suit current consumption needs. If, during the current period, material has already been withdrawn from stock, then the forecast requirement is reduced by the quantity of material that was withdrawn. This means that the quantity of the forecast requirement that has already been used is not included in the planning run again. You can specify the period split for the forecast (daily, weekly, monthly or per accounting period) and the number of periods to be included in the forecast individually for each material.
It is possible, however, that the forecast period split is not specific enough for planning purposes. Therefore, for each material, you can determine that the MRP forecast requirement values should be divided according to a finer period split. You can also determine how many forecast periods are to be taken into account during requirements planning.
Also See: ERP beginning and its role in business an Overview
The requirements quantities forecast by the system are used in the planning run to carry out the net requirements calculation. During this calculation, every period is checked to make sure that the forecast requirements are covered either by available warehouse stock, by planned receipts from purchasing or by production.
If the requirements forecast by the system are not met by these above mentioned possibilities, then an order proposal is generated. The quantity stated in the order proposal is calculated by the system according to the lot-sizing procedure that you selected. Depending on the lot-sizing procedure, several requirement quantities are grouped together into one lot.
If a vendor always delivers a material on a particular day of the week, it makes sense to plan this material according to the same cycle in which it is delivered, but displaced by the delivery time.
This is possible with the time-phased planning procedure. If a particular material is to be planned using this procedure, you must set the MRP type for timephased planning and you must enter the planning cycle in the material master record. You enter the planning cycle in the form of a planning calendar in the Planning cycle field. You must also define a planned delivery time and the Lot-for-lot order quantity as the lot-size key.
Also See: Batch Management in SAP MM – Config Settings
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