Question on planning for long lead time Consignment Stocks

[Former Member]

Hi,

We're trying to "turn on" MRP here. We have several customers that we currently keep supplied with consignment stocks. These are relatively long lead time items - from 2-6 months to produce. There is a sturdy SD process in place that fits. I am told that MRP does not do properly consider consignment stocks or safety stocks.

As an example, let's say we have 500,000 pieces in inventory. The customer sends us a forecast that says they plan to use roughly 100,000 pieces per week for the next 8 weeks plus about half that for the another 8 weeks and then another build up. Of course in real life the numbers are quite that constant.

We need to maintain 4 weeks of product at the customer's site ahead of their needs. We want to optimize the stock levels there so that we're not running out of stock but also not carrying too much inventory at the customer location.

I have been told by an old hand that MRP does not adequately consider the consignment stocks when it comes to maintaining stock levels, although I've not been able to get a clear picture of why this is. Is this an accurate assessment, or is this a misunderstanding of how MRP works?

Thanks,

Greg

[Former Member · Accepted solution]

I'd say this is a bit of a missunderstanding.

Sounds to me like you need to use something like SAP's coverage profiles to get your safety stocks to be as dynamic as possible. They can be a little tricky to set up so make sure you read the help and do a lot of testing before deploying this functionality to ensure it suits your business requirements

[Former Member]

So if we set the coverage profiles properly this should account for the lead time necessary to resupply the consignment stock. Does it also consider safety stock for the consignment material - that is, can I have a safety stock available at the consignment location?

[Former Member]

Hi,

Can you explain a little more of how the process is being carried out, also what you mean by MRP not considering consignment stocks & what is the expectation in terms of managing stock?

Have you defined a storage location specifically where you maintain these stocks at your customer site?

It would help if you explain with an example, would help for a better understanding.

Regards,

Vivek

[Former Member]

Hi Greg,

Plz have a look in following links

[http://help.sap.com/saphelp_erp60_sp/helpdata/en/f4/7d2ce544af11d182b40000e829fbfe/frameset.htm]

[http://wiki.sdn.sap.com/wiki/display/ERPLO/Dynamicsafetystock+calculation]

Regards

Ramesh