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Former Member

Increase quantity of Planned Orders upon creation by MRP

Hello gurus.

We want to add a certain percentage to the quantity in Planned Orders when they are created by MRP. So that we can have a "cushion" for whatever waste we may have in Production.

We explored the "Assembly Scrap" field in the Material Master, but the problem is that this is added to the costing of the product. And we don't want to alter the standard price of the material.

What we are looking for is way that when MRP runs, and it creates Planned Orders for Production, it can automatically add certain percent (that we can maintain in a custom table).

They want this on the Planned Order so that this also drives component procurement.

Is there a way to this standard? Or perhaps a User Exit I could use so this is included when MRP creates these planned orders?

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    author's profile photo Former Member
    Former Member
    Posted on Dec 03, 2008 at 04:41 AM

    Fernando,

    The standard planning methodology to compensate for variable yield losses is some form of safety stock. With the info you have given, I can see no reason why you would want to use a non-standard method when a standard method should satisfy the business requirement.

    Regards,

    DB49

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    • Former Member Former Member

      Fernando,

      You are assuming that you need 'a little bit extra' for every planned order. Most people think that this approach is unnecessary and leads to creation of non-productive stock/wip.

      Assume one part number, with 10 weekly requirements, each for 100 pc, lot for lot, Make to stock, and you decide to implement a method that increases all of these planned orders by 10%. In your model, you will create 10 planned orders for 110 pcs each, or 1100 pcs; against your 10 requirements of 100pc (1000pc requirements total).

      I don't know how variable your production yields are, but let's assume normal (six-sigma) variation is between 90% and 110% of the target quantity (which is why you have inflated the output by 10%). Let's also assume normal distribution; that half of your execution orders will output bwtween 90% and 100%, and half will output between 100% and 110%. To cover the absolute shortages for each individual requirement, you don't really need 100 extra pieces in stock, you only need 10 extra piece in stock (and, of course, you must have planned this similarly in all of the dependent materials). Once the 10 'extra' pieces are in the planning supply chain, you will have covered all of your 'normal' shortages.

      In essence, you don't need to increase EACH order by 10%, you only need to cover some multiple of the standard deviation of the yield ONE TIME. This is the concept of safety stock. SAP, as you note, allows you to increase supply over demand by a fixed quantity (static safety stock), allows you to actively calculate the quantity of safety stock by using a moving time-based formula (so-called 'dynamic safety stock'), and also allows you to alter the supply so that it comes in earlier than you need it (safety lead time). These techniques are pretty much standard on any ERP system, not just SAP. They exist because people have tried lots of other methods to increase service level, and these standard methods work best, which means they give a known way to optimize the balance between cost and service. In addition, when you use these methods, you don't have to worry about the fact that SAP will not support your 'special' programs, both for today and also into the future when you do system upgrades.

      I WILL say that if the cost of the planned material is low, and the costs of the lower level materials are also low, and the service level required is high, then your non-standard method offers one advantage, that it is relatively easy for the users to understand. Just realize that you will be creating some stock down through your supply chain that will not add to your service level. In many companies, this is a good way for a planning manager to lose his job.

      Finally, regarding your proposal for a batch job that will inflate the qtys of the planned orders. If you are going to write a program that will do this, you can also write it to 'unfirm' the orders prior to saving. You should also not forget to consider your lot sizing techniques, should you decide to take this path.

      Regards,

      DB49

  • author's profile photo Former Member
    Former Member
    Posted on Dec 03, 2008 at 03:19 AM

    Hi Feranando ,

    As you don't want any financial implication due to the material increased qty you cannot use the scarp percentage functionality in SAP.

    As per my understanding there is no user exit available for the same & probably you need to add some code in the MRP calculation logic so when the MRP will be executed it will reference the Z-table and add the qty in the procurement proposals ....

    I believe that this will be very critical & there may be some unforseen effect of it ..

    Regards

    Kaushik

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  • author's profile photo Former Member
    Former Member
    Posted on Dec 03, 2008 at 05:30 AM

    Dear Fernando,

    Another method is to add Component Scrap in the BOM of the header material. The quantities of the components will then be increased by the percentage of component scrap mentioned. You can try this option.

    Regards,

    Subha.

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    • Former Member Former Member

      You are right Kaushik. We cannot use the Component Scrap because that would have the same effect as the Assembly scrap, it would add to the costing of the product.

      I guess there's no way to avoid getting these scrap percentages into the costing of the product so I should not go about this route.

  • author's profile photo Former Member
    Former Member
    Posted on Dec 10, 2008 at 08:54 PM

    Thanks DB49 for your throughout explanation.

    I will seek the Dynamic Safety Stock as a possibility; I've reconsidered adding any complications to the MRP run, so I'll discard any User Exits on that regard.

    IN this factory; the service level is high and the price of the material and components is low, so I don't believe that adding extra material will be a problem.

    Now, there's something else I discovered which I initially thought it would work. I've been investigating the Rounding Profiles; there's three kinds: Static, Dynamic and Qty to be added/Subtracted.

    The last one is the one I'm looking for. I found this documentation which explains how to configure and use it.

    http://help.sap.com/erp2005_ehp_04/helpdata/EN/4c/420d89470a11d1894a0000e8323352/frameset.htm

    It's exactly what I need. I want to have a Threshold value of 1 and 10% addition, so every planned order that MRP creates gets an extra 10%.

    The only problem is, I haven't been able to make it work. I created it as indicated; I assigned to a material, but it doesn't work. In my test, MRP suggests a planned order for 10 pieces which is exactly what I need, instead of 11 which is 10 plus 1 piece as the extra 10%.

    Anybody has any experience with this particular Rounding Profile? Is there anything that I should set up besides that in order to make it work?

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    • Former Member

      Fernando,

      I have never used rounding profiles. However, according to the SAP online help, the only time that MRP uses these profiles to prepare a procurement proposal is under Consumption-based planning, and for purchase requisitions. I believe your scenario was Demand-based planning, using planned orders.

      Rgds,

      DB49

  • author's profile photo Former Member
    Former Member
    Posted on Dec 18, 2008 at 06:25 AM

    HI,

    I think you can different product versions for different applications.

    for costing have a diffrent PV in which scrap functionality is not used.

    For planning the production, use another PV in shich scrap functionlity is used.

    This ways your std cost remains same and your planned order gets incremented by qty you require. and the compoenents are procured as planned order qty.

    However the variances will be high.

    Hope it suits your requirement.

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    • Former Member

      Ah yes. In fact I just checked the Help on the Rounding Profile field in the Material Master, it specifically says that only the Static Rounding Profile takes effect on Requirements Based Planning, which what I'm using.

      I'll go ahead and used the static one then. Should serve me well.

      OK; Case closed. Thanks everyone for your replies.

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