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Reorder Point with External requirements

Hello,

This question is more from a business scenario perspective than technical. Within reorder point planning, SAP allows for different methods that either do NOT consider external requirements (example MRP type "VB") and other methods do consider external reuqirements (example MRP type "V1")

In the SAP online help: it states: "In reorder point planning, an entry is only created in the planning file and the net requirements calculation is only carried out if stock levels fall below the reorder point. To avoid overplanning, sales orders, dependent requirements, reservations and so on are not usually included in the net requirements calculation as these future requirements are already planned with the reorder level. However, to guarantee that the MRP controller is informed of current issues, the system displays sales orders, dependent and manual reservations and so on. In certain circumstances, however, it is necessary to include such external requirements in the net requirements calculation for reorder point materials."

My question for this post is related to better understanding from the community what these "In Certain Circumstances" scenarios are.

From my understanding, a common Reorder Point definition is DDLT+SS (Demand During Lead time + Safety Stock) with SS being often calculated based on Demand variability and service levels (ie Z-factor method).

As the definition above implies, when setting the ROP, the demand is already considered (yes i understand that this implies a smooth, constant demand which is not always the case).

But the main question for the community is: What are the motivations/reasons for why companies would want to include External requirements during ROP when the ROP already includes the anticipated demand?

If including external requirements in the calculation, doesn't MRP try and not let the projected inventory go below ROP in fact treating ROP more like a "Target Stock level" which it doesn't want to go below vs the classic ROP approach which is designed for Inventory to go below until the next replenishment?

Thanks in advance for insights/perspective.

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3 Answers

  • May 03 at 03:54 PM

    Hi,

    The main reason of creating requirements based on ROP/Safety Stock/Demand Creation/Anything is to satisfy the external requirement oe customer needs/requirement. If organisation/companies tried to meet the customer expectation by implementing ROP functionality, there is nothing wrong if their requirements meet by the ROP.

    Customer needs can be satisfied with other functionality too. But if they are comfortable with ROP, then it is good to follow the process.

    The motivations and reasons for using ROP for external requirement will be to meet the requirement of the demand. The main function of MRP is to have target stock only. Finding the stock Qty and raising the requirement if it goes below the ROP is main function of MRP.

    Regards

    Mahe

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  • May 03 at 04:00 PM

    The requirement will be created if it is goes more than ROP that is known as the external requirement which is unexpected by the organisation. Or the another option provided by the SAP to satisfy the unexpected requirement which is suddenly raised. The main motivation to close the demand immediatly. System needs to react immediately once differences found or more procurement needs to be taken place. The reason is to automate without waiting to anything.

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  • May 03 at 07:16 PM

    Hello

    The main reason for adding the external requirements in the reorder point calculation is to have a dynamic buffer into the reorder point.

    Regards,

    Caetano

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