Consumption Based Planning Process in SAP MM

The below SAP Tutorials help to know the consumption based planning procedures in detail. These are used in areas without in-house production and/or in production plants for planning both B- and C-parts and operating supplies. The consumption based planning Includes Recorder Point Planning, Forecast based Planning, and Time Phased Planning,we can discuss below in detail.

Reorder Point Planning

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.

Forecast Based Planning

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 If, during the current period, material has already been withdrawn from stock, then the forecast requirement is reduced by the quantity of material that was withdrawn.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 mean 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.

For a monthly forecast, the requirements date would be set on the first workday of the month because, for planning, it is assumed that the total requirement must be available at the beginning of the period. You can then divide this monthly requirement into either daily or weekly requirements.

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.

Time Phased Planning

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 time-phased 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.

You can also use the optimum lot-sizing procedures for time-phased planning. They are used here in the same way as in Reorder Point Planning. Materials that are planned using the time-phased planning technique are provided with an MPR date in the planning file. This date is set when creating a material master record and is re-set after each planning run. It represents the date on which the material is to be planned again and is calculated on the basis of the planning cycle entered in the material master record. For materials that are planned using the time-phased planning procedure, the two indicators, the total change indicator and the net change planning indicator are irrelevant. Therefore, they are not set by the system even if changes that are relevant to the planning run are made.

By using this planning technique, you can set the system so that it only plans materials on specific pre-defined days. For example, if you assign the same planning cycle to all the materials of a particular vendor, the system will always plan these materials on the same day. The purchase requisitions that are created in the planning run to cover material shortages can be processed, per vendor, by the MRP controller in the SAP purchasing system.

If you use the SAP Merchandise Management System, the system proposes the planning cycle from the vendor sub-range when you create a material master record. The vendor sub-range contains all the goods of a particular vendor that, from a logistical view, can be planned similarly.

You can also enter an MRP date during the planning run, meaning that you can bring the planning run forward to an earlier date, if necessary. For example, if the planning run is set for Monday, you can bring it forward to Saturday instead

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SAP SD Online Training Tutorials

Free SAP SD (Sales and Distribution) Training Tutorials

SAP SD ( Sales and Distribution ) Training tutorials by the real time functional consultant and experts . The SAP SD module handles all the processes starting from an Order to delivery. The main operations of this SAP SD module handle Customer Sales Orders processing, pricing, Picking, packing, Shipping, billing and risk management etc.

Sales and Distribution (SD) is one of the core and most-used modules of SAP R/3 products beside Financial (FI), Controlling (CO), Material Management (MM), and Production Planning (PP) modules. The Sales & Distribution (SD) module consists of various components also called sub-modules. Which are follow as below,

(SD-BF) Basic Functions and Master Data in SD Processing. (Also subdivided in several components as: Pricing, Output…etc)
(SD-BF-PR) Pricing and Conditions
(SD-BF-EC) Extra Charge
(SD-BF-CM) Availability Check and Requirements in Sales and Distribution Credit and Risk Management
(SD-BF-AS) Material Sorting
(SD-BF-OC) Output Determination
(SD-SLS) Sales
(SD-SLS-OA) Scheduling Agreements for Component Supplierssap sd training tutorials
(SD-SLS-OA) Customer Service Processing
(SD-FT) Foreign Trade/Customs
(SD-BIL) Billing
(SD-BIL-IV) Payment Card Processing
(CAS) Sales Support: Computer-Aided Selling
(SD-EDI) Electronic Data Interchange/IDoc Interface
(LE-SHP) Shipping
(LE-TRA) Transportation
(SD-IS-REP) Reports and Analyses

SAP SD (Sales and Distribution) module and with the sub module are

• Pre-sales activities, including Inquiry and Quotation creation.
• Sales Order processing, including Sales Order (SO)
• Shipping, including Outbound Delivery document creation.
• Billing, including Billing document and invoice creation.

Sales and Distribution (SD) is a module highly integrated with other SAP Modules as FI, CO, MM, PP & more. This can make SAP SD complex module, so as part of this Introduction we will also try to detail a normal sales process and how the activities integrate and are covered by this module.

Pre-sales activities: It starts when a customer or a prospect requests information by any source about a product or service offered by the company. This request is processed through SAP and the first integration we have is by the creation of an Inquiry Document or a Quotation Document. At this point of the process we still haven’t effectively made a sale that’s why it is considered as a presale activity.

Sales Order processing: Our quotation document previously created is send to our customer so they can make effective their purchase procedure. At this point they may want to negotiate payment terms, price, dates or any adjustments to the original document created by us.

As soon as we receive a Purchase Order (PO) from our Customer we create a Sales Order (SO) which makes reference to the previously created Quotation Document. Now scenario  is adjusted based on the business requirements. In some cases depending on the business Sales Orders (SO) can be made without a previously created quotation document as also in other scenario this can be a requirement.

Inventory Sourcing: The product requirement from the Sales Order at the required date needs to be available by one of the following options:

To fulfill the products requirement from an SO at the required date, we can obtain them by one of these options:

• Taking from Available stock at warehouse. At this point the SD module may trigger stock transfers between warehouses.
• Triggering a production order to produce the products in-house.
• Triggering a purchasing order to purchase the products from vendor.

Here is where the integration between Production Planning (PP) and Material Management (MM) starts.

Shipping: When the product we sold is available at the warehouse, the sales personnel can start shipping activities by creating an outbound delivery document (Delivery Order/DO). Now this Deliver Order (DO) can be created by referring to our original Sales Order (SO). This will trigger the preparation of the product by the personnel of the warehouse. If the Warehouse Management (WM) module is integrated, a Deliver Order (DO) can trigger a Transfer Order. When the products are ready to be sent, the warehouse personnel will post the Goods Issue (GI) transaction that refers to the DO. The GI transaction will reduce the inventory level of products and then the warehouse personnel sends the products to the customer by transportation mode that has been determined in Sales Order (SO) document.

Billing: This whole process will be managed before the delivery date specified in the Sales Order (SO) document. The finance department will generate a billing document and send an invoice form to the customer. The invoice will request the customer to pay the products we have sent at the price condition and terms of payment we have agreed in SO document.

SAP Sales and Distribution consists of all business processes required in selling, shipping the goods, and final billing of the item. This SAP SD module is closely integrated with other SAP Modules.

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Material Ledger Closing in SAP Quick review

Movements for a material that is valuated with the material ledger are always carried out using the valuation price. If the price control indicator in the material master record is S, movements for the material are carried out with the standard price. If the price control indicator in the material master record is V, movements for the material are carried out with the periodic unit price.

When postings such as invoice receipts occur, the prices can differ from the valuation price. These differences are collected and totaled by the material ledger and taken into account during material ledger closing.

The Before Material Ledger Closing: The differences between the valuation price that occur when postings are made are collected the following categories:

GR/IR (goods receipt/invoice receipt): Differences between actual values and the valuation price that may occur due to invoice receipts are collected here. Differences can occur between a goods receipt and an invoice receipt, because the invoice price is unknown at the time of goods receipt. The values from invoice receipts are posted to a GR/IR clearing account and the offsetting entry is made in the vendor account.

Value Variances: Differences between actual values and the valuation price that can occur due the to the following are collected as,

1. The Goods receipts for the production order
2. Transfer postings
3. Goods issues
4. The Initial entries of inventory data with a specified amount
5. Deliveries free of charge
6. Inward movements from consignment inventory to the company’s own stock
7. Purchase order-related goods receipts

Values from goods receipts are posted to a GR/IR clearing account; the offsetting entry takes place in the material inventory account. If the the order price differs from the valuation price in the goods receipt, the system posts an offsetting entry to the material stock account and the price difference account (transaction key PRD). Such differences are totaled in the material ledger and indicated as to be closed. With goods receipts that are not based on a purchase order item, price difference are posted directly to the price difference accounts.

Posting to a Prior Period: Variances are collected here when a posting is made to the previous period using a valuation price other than the one in the current period.

At Material Ledger Closing: At material ledger closing, the system takes the differences arising in the above categories into account, depending on the price control of the material. If you carry out material ledger closing for a single material (without saving), you can display which postings the material ledger would make and with what amounts if you were to save the material ledger closing at this time

Materials with S price control (standard price): The system calculates for each material, the balance on the GR/IR clearing account and posts this amount to a price difference account (transaction key PRY). Differences that were collected in the Value variances category were posted to various price difference accounts before material ledger closing. These postings are not changed.

Differences that were collected in the Posting to a prior period category were posted to the revaluation account before material ledger closing. These postings are not changed. The new periodic unit price is calculated for statistical information.

Materials with V price control (periodic unit price): The system calculates the balance on the GR/IR clearing account and posts this amount to the material stock account in proportion to the current inventory quantity. The portion of the balances with which the material inventory cannot be debited are posted to a price difference account (transaction key PRY). Differences that were collected in the Value variances category were posted to various price difference accounts before material ledger closing. These postings are offset in total against a separate price difference account at material ledger closing (transaction key PRY).

The system calculates the balance and posts this amount to the material stock account in proportion to the current inventory quantity. The portion of the balances with which the material inventory cannot be debited are posted to a price difference account (transaction key PRY)

Differences that were collected in the Posting to a prior period category were posted to the revaluation account before material ledger closing. The system calculates the balance on this account and posts this amount to the material stock account in proportion to the current inventory quantity.

The portion of the balances with which the material inventory cannot be debited are posted to a price difference account (transaction key PRY). The postings to the material stock account result in a new periodic unit price for the material, found by dividing the inventory value by the inventory quantity.

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