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©2014- 2018 Orchestra Software® Vers 800-10
Material Requirements Planning
©2014- 2018 Orchestra Software® Vers 800-10
CONTENTS 1 The MRP Process ..................................................................... 3
1.1 What is MRP / Material Requirements Planning? .............................. 3
1.2 What will MRP do for you? ................................................................... 4
1.3 MRP Implementation Process ............................................................. 5
2 Prepare your Items for MRP ................................................... 6
2.1 Item Master Data ................................................................................... 6
2.2 Mass Item Updates Using the Planning Management Utility ........ 11
2.3 Forecast Demand Setting ................................................................... 13
2.4 Consume Forecast settings ................................................................ 14
3 Create a Forecast ................................................................... 16
3.1 About Forecasts ................................................................................... 16
3.2 SAP Manual Method ............................................................................ 18
3.3 SAP Automatic Method (Not recommended) .................................. 22
3.4 Forecast Examples by Business Size ................................................. 24
3.5 Forecasting with the Planning Management Utility ........................ 25
4 Run the MRP Wizard .............................................................. 27
4.1 Step: 1 of 6 – Scenario Selection ........................................................ 27
4.2 Step: 2 of 6 – Scenario Details............................................................ 28
4.3 Step: 3 of 6 – Item Selection ............................................................... 30
4.4 Step: 4 of 6 – Inventory Data Source................................................. 33
4.5 Step: 5 of 6 – Documents Data Source ............................................. 34
4.6 Step: 6 of 6 – Run MRP ........................................................................ 40
5 Results and Order Recommendations ................................ 41
5.1 Running a Simple Scenario on One Product .................................... 41
5.2 Results – Report Tab ........................................................................... 42
5.3 Results – Recommendations Tab ...................................................... 45
5.4 Save Recommendations ..................................................................... 45
5.5 Review Recommendations ................................................................. 46
5.6 Implementing Production Recommendations ................................ 47
5.7 Implementing Purchase Recommendations ................................... 48
3
1 The MRP Process
• What is MRP and how does it work?
• What factors influence MRP results?
1.1 What is MRP / Material Requirements Planning?
The simplest answer: Basic math applied to purchasing and managing inventory.
The MRP module within Orchestrated is a tool designed to answer 2 fundamental questions:
1. How much do I need to order or make?
2. When do I need it?
This is done by looking at the supply and demand factors that influence your inventory levels over time and
calculating what inventory is needed by what date, and taking into account whether you buy or produce that
inventory.
The Basic Calculation:
Starting Inventory
+ Supply
- Demand
= Ending Inventory
If ending inventory is projected to be less than zero that means you don’t have enough to meet demand.
Starting Inventory
• Current inventory on hand for every type of item involved in production:
o Raw materials & packaging materials
o Liquid in tanks
o Finished goods
Supply • Liquid to be produced by Production Orders
• Materials ordered by Purchase Orders
• Inventory Transfer Request (scheduled into a warehouse)
Demand
The Goal
• Product being sold by Sales Orders
• Forecasts for future sales or production volumes
• Materials consumed by Production Orders
• Minimum Stock Quantity required, by item
• Inventory Transfer Requests (scheduled out of a warehouse)
To keep inventory levels as low as necessary while always having enough.
4
1.2 What will MRP do for you?
Calculate how much you need to order or produce
• Account for all sources of upcoming supply and demand
• Consider order quantities (can’t order 15 lbs. if it only comes in 25 lb. bags)
• Consider minimum orders (can’t order less than your vendor’s minimum)
• Make sure minimum stock on-hand requirements are always met
• Account for supply and demand through each stage of production
Calculate when you need to order or produce
• Work backwards from a sales forecast to start producing the right product at
the right time
• Account for production time variances by stage for each brand you produce
• Utilize vendor lead times to account for actual shipment arrival date
• Consider how often you want to place orders with this vendor
• Help determine whether a delayed shipment needs to be expedited or not
Identify available inventory in other warehouses that can be transferred to the
warehouse where it is needed.
Recommend Transfers from other warehouses.
Create Purchase Orders and Inventory Transfer Requests based directly off MRP
recommendations: a real time-saver!
Calculate requirements for select groups of materials or all materials, one location or
all locations, and more.
5
1.3 MRP Implementation Process
This is an overview of the basic process for implementing MRP in your business.
Item Master Data Setup
Most of your early implementation time will revolve around entering data into MRP-related fields and continuing to
revise those data points over time. MRP by its nature is simple math applied to a very large data set. Success is
vitally dependent on proper preparation as a majority of MRP problems occur as a result of improper setup.
It’s recommended you take an honest evaluation of the state of the data in your database right from the beginning
to set your own expectations on how much work there is to do with your initial setup.
If your data is not thorough, accurate and complete, your MRP results will not be accurate.
The basic setup steps:
1. Make all your items ‘MRP Ready’
2. Check your settings
3. Create a valid forecast
Determine MRP Scenario Settings
When you actually run the MRP Wizard there are many options and settings, all of which can impact whether or not
you get the desired results. The good news is that we’ve helped identify which ones to pay the most attention to,
and which ones you may be able to ignore. As often as possible we’ll designate the recommended settings so that
there’s fewer that you’ll actually need to make decisions about.
Do test runs
Your final MRP implementation is an exercise in trust. When all is said and done, you click the Run button and know
that the results you get are what you expect. Before you reach that point, it’s essential to do test runs on small data
sets and walk through the results to verify that they are indeed what you expect.
This serves 2 vital purposes:
1. Weed out any problems with setup that you might have missed
2. Establish trust that the results are accurate and can be converted into actions
Go Live!
6
2 Prepare your Items for MRP
One of the biggest sources of problems and errors when running MRP is improper setup of your items. It is
critical that you do a thorough and complete setup before you attempt to run MRP.
2.1 Item Master Data
The necessary and optional item settings are detailed below with images from Orchestrated.
Note: We’ll show these settings in screenshots directly from Orchestrated, but many of the fields can be updated using
our Excel-based utilities like the Planning Management Utility and Item Master Utility – both are covered in section 2.2.
Item Master Data Header
There are a couple of things to check on the Item Master Data header:
1. For any item to be used in MRP, they need to be an Inventory Item
2. Any inventory item that you buy from a vendor (rather than produce yourself) must be marked as Purchase
Item so MRP can recommend to place orders for them. If an item could be either bought or produced, select
both Purchase Item and Inventory Item.
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Item Master: Purchasing Data tab
1. Preferred Vendor
Users can convert MRP Recommendations into
Purchase Orders and Production Orders. This
setting should be designated to create a
Purchase Order.
(often utilized in later stages of MRP)
2. Purchasing Unit of Measure
This should be the unit that the vendor uses to
price the item when they bill you on an invoice.
This may be different than the unit of measure
you prefer to use for inventory.
The field Items per Purchase Unit refers to the
ratio of inventory units to one purchasing unit.
Example:
You buy a raw material from a vendor in
kilograms (kg), but inventory in pounds (lb) for
use by the production team.
Setting up a Purchase Unit of Measures
Note: If you purchase in the same units as your
inventory, do not set up a purchasing unit.
Orchestrated defaults to the inventory units.
Purchasing UoM Name
Tip: Use a meaningful name. If you buy in
common units like ‘sacks’ or ‘bucket’ you should
differentiate between them with a size suffix like
‘25 kg sack’ or ‘5-gal bucket’.
Items Per Purchase Unit
This is how many INVENTORY units = (1) PURCHASE unit.
Example: If inventory is in grams, but you buy in kilograms:
Items per Purchase Unit = 1000
1000 grams (Inventory UoM) = 1 Kg. (Purchase UoM)
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Planning Data tab
1. Planning Method
Select MRP for every item you’ll ever want
MRP to help you buy or produce.
Select None for non-inventory items like
maintenance supplies.
2. Procurement Method
Make: All inventory items produced via a
BOM and PdO.
Buy: All inventory items you purchase from a
vendor.
Note:
Items like merchandise that you may resell (both a Purchase Item &
Sales Item) can be designated for MRP and Buy if they are planned
with a forecast or have a method of creating demand, like a
Minimum Inventory level.
3. Order Multiple
This is the quantity multiplier of Inventory
units that MRP will recommend should be
ordered.
Example:
You buy a raw material from a vendor that
only sells the item in 50 lb bags (and you
inventory that item in pounds), so your
Order Multiple would be 50 so MRP doesn’t
recommend ordering a quantity you can’t
actually order from the vendor.
The Order Multiple could also be useful if
you always order by the truckload or pallet,
setting the Order Multiple to the number of
inventory units per pallet or truckload.
Check your Purchase Unit of Measure!
If you stock in grams but buy in 1 Kg
packages, you should set the Order Multiple
to a number that easily converts to your
Purchase unit of measure.
4. Minimum Order Quantity
This is the smallest quantity of inventory units that MRP will
recommend to buy.
In the example for Order Multiple, if you would never order less
than one 50 lb bag at a time, use ‘50’ as the Minimum Order
Quantity.
9
Planning Data tab (continued)
5. Lead Time
Number of days between placing a purchase
(or production) order and when it’s available
in stock.
For produced items, it’s the time from the
start of the production stage until it’s
available to be consumed by the next
production stage. Only consider time to
make this item, not the time to make any
component items as they have their own lead
time.
For purchased items, this should include:
Vendor lead time
Transit time
Time to receive and process the item
Any buffer time for regular delays
Example:
Vendor lead time: 3 days
Transit time: 5 days or less
Receiving: 1 day
Contingency: 2 days*
*This vendor has frequent shipping delays
Total Lead time: 11 days
Note: Lead time hours & minutes are used in
production scheduling only. They are not used
by MRP.
6. Order Interval (optional)
This is how often you would like to place
orders for this item.
For example, if you set an order interval for 1
month, all the requirements for a 1-month
period will be combined into a single MRP
Purchase recommendation.
Tip: If using order intervals, consider setting
the same interval for items from the same
vendor so they can all be ordered at the
same time.
Impacts of settings 5, 6 and 7:
Often, the decisions around Lead Time, Order Interval and
Tolerance Days need to consider financial and storage capacity
impacts.
Adding extra days to Lead Time: Less likely to be impacted by a
vendor shipping late, but you’ll be carrying more inventory when it
arrives earlier than needed.
Using a predefined Order Interval can limit time and costs
associated with placing orders, but may increase inventory if the
interval is infrequent. That trade-off may be reasonable if the items
in question are lower value or use less warehouse space in bulk.
7. Tolerance Days (optional)
This is the number of days from the time you need the inventory
that incoming supply can arrive late but be close enough that
MRP should not generate additional recommendations for supply.
Examples:
Monday has demand for 60 bbls of wort to meet supply
requirements of green beer and bright beer in coming weeks.
Tuesday is when you currently have two turns of 30 bbls
scheduled for that brand.
Results:
No Tolerance (Zero days): MRP will recommend scheduling
production of 60 bbls for Monday. (This may tip you off to move
PdOs from Tuesday to Monday and re-run MRP)
1-day Tolerance: MRP makes no recommendations. Producing
one day later than demand suggests is within tolerance.
10
Inventory Data tab
1. Min. Inventory
The amount of stock you need to have on hand in
addition to what will be consumed to satisfy demand –
‘safety stock’.
Some items have shrinkage or waste so it’s often
necessary to have a little extra on hand just in case.
Occasionally there is a need to add production without
advance notice. Having some extra material on hand
could allow increased production when there is not
sufficient time to acquire additional material from your
suppliers.
2. Max. Inventory (optional)
The maximum amount of stock you can have for any
particular item. MRP will not recommend additional
supply if it will raise inventory levels beyond the
maximum.
Most companies do not use Max Inventory or Required
Inventory.
Note:
Both Min and Max Inventory are set at the warehouse
level.
The numbers above the warehouse details represent the
total minimum and maximum across all warehouses.
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2.2 Mass Item Updates Using the Planning Management Utility
When you use a lot of similar items many of the settings will be the same for that entire group of items and this is
especially true if a single vendor supplies them.
To help make updates to entire item groups faster and easier, use one of Orchestrated’s Excel utilities, like the
Planning Management Utility. This tool allows mass updates to your MRP-relevant Item Master fields into an Excel
workbook where you can easily adjust settings for large groups of items using dropdowns or simple copy/paste
operations.
1. Launch
Planning Management Utility from the Utilities
Menu
2. From the selections at the Top, select
Item Management > MRP Items then click Yes to
refresh your data
The utility will then bring in all your items, along with
their MRP-relevant fields, so you can begin reviewing
and updating your items in groups together.
12
Note: Column Headers in Gray show which columns have information you can update from the utility.
IMPORTANT!
1. Do not edit fields that do not have a Column Header in Gray
2. Fields with no value should remain empty or have a zero
Tip: Never use a <space> character for a blank field!
(Use the <Delete> key to clear values from a field)
3. When you are ready to send updates back into your database, click Send to Orchestrated at the Top to
update your Item Master Data with the new values.
Tip: If making many updates send the changes back to your database frequently!
4. Click Yes to make updates
This may take a couple minutes if you have a
large data set.
13
2.3 Forecast Demand Setting
We’ll get into creating forecasts in the next section, but there’s one setting to configure first relating to how the forecasts
create demand and how that demand gets satisfied moving forward.
Demand Starts with a Forecast
Before sales orders come in for your products, you’ll need a forecast to predict sales for each product. This is
typically created by month for each sales item. You can’t enter forecasts by quarter, however you can divide the
quarterly figures into months and enter those as necessary.
Most companies don’t have sales orders entered more than a month or two in advance, so the forecast acts as a
stand-in for the sales orders that have not been received. The forecast creates demand in MRP so that
recommendations for materials can be created to meet that demand beyond the date range for sales orders
received.
Here is a sample forecast before any sales have occurred:
Item Type of Demand Month 1 Month 2 Month 3
Portlandia Porter Case 4/6/12 Btl Initial Forecast 90 120 120
Once we start to enter orders for a forecasted month, we see a problem. We need to reduce the forecast by the
amount we have already sold so that we don’t duplicate the demand. In Month 1, we have a forecast for 90, but
we’re selling this pack type better than expected and have already entered orders totaling 95 cases.
Item Type of Demand Month 1 Month 2 Month 3
Portlandia Porter Case 4/6/12 Btl Initial Forecast 90 120 120
Sales Orders 95 40
The solution to this dilemma is called ‘Demand Consumption’.
The MRP system subtracts any sales orders (or blanket agreements) from the demand as you move forward. The
result is that your Total Demand = Sales + Remaining Forecast.
Item Type of Demand Month 1 Month 2 Month 3
Portlandia Porter Case 4/6/12 Btl Initial Forecast 90 120 120
Sales Orders 95 40 0
Remaining Forecast 0 80 120
Total Demand 95 120 120
The takeaway is that Total Demand should be the same figure as your Initial Forecast unless you have more Sales
Orders for the period than your Initial Forecast.
14
2.4 Consume Forecast settings
The settings for Consume Forecast can be controlled in 2 places.
1. Company level – This sets the default for all new sales documents to ‘Consume Forecast’.
2. Sales Order / Blanket Agreement line level – Individual lines can be set to Consume Forecast = ‘Yes’ or
‘No’
Company level
Check the box for Consume Forecast
(Recommended)
Consumption Method is selected if you
run MRP without specifying which forecast
to use. (Not recommended)
Always select a forecast when you run the
MRP Wizard. If you don’t, your results are
purely based on existing documents and
not any future predictions from your
forecast.
Sales Order / Blanket Agreement line level
Use the dropdown to choose individual rows that you do not wish to consume forecast, assuming you checked the
company-level Consume Forecast setting in the prior step. On a Sales Blanket Agreement, this setting is on the Row
Details pop-up. Double-click on any item row.
Example of when you might want this:
One of your customers has a big event and places a large order that is much greater than the amount that was
predicted when the forecast was made. You still intend to sell the amount you originally forecasted before this
especially large order came in so you need the forecast to show an increase in total demand.
By changing this line to ‘Consume Forecast = No’ your total demand will be:
Total Demand = Sales + Remaining Forecast + Big Event Order
This method should only be used for unforeseen or unusual situations. The goal of the original forecast is that it will
include the normal demand fluctuation that happens on a regular basis. If you are adding in orders in addition to
forecast every single month, then it’s likely your forecast is just too low.
15
Blanket Agreement Notes:
1. The ‘Consume Forecast’ setting for a Sales Order that is created from a Sales Blanket Agreement gets its
default value from the Company General Settings and NOT from the settings on the blanket agreement.
2. ‘Consume Forecast’ on a Sales Blanket Agreement only applies to any remaining open quantity on the
agreement after deducting the Sales Orders that have been created from it.
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3 Create a Forecast
3.1 About Forecasts
A Sales Forecast is a summary of each individual product with the total quantity expected to be sold in the time
period. There are a few ways to accomplish your forecasting, so we’ll go over the methods and components first,
then give some examples of different situations.
By definition, forecasts:
1. Do not group different packaging types together. (1 SKU = 1 forecast item)
2. Do not list sales to individual customers (although a list of projected sales by customer might be used to
calculate the total demand expected, it would not appear in the final forecast)
As we discussed in section 2.3, the Sales Forecast acts as a placeholder to create demand beyond the time when you
are likely to have sales orders entered. As sales orders come in, they take the place of the forecast as ‘firm’ demand.
From Section 2.3:
MRP subtracts sales orders (or blanket agreements) from the demand as you move forward. The result is:
Total Demand = Sales + Remaining Forecast
Item Type of Demand Month 1 Month 2 Month 3
Portlandia Porter Case 4/6/12 Btl Initial Forecast 90 120 120
Sales Orders 95 40 0
Remaining Forecast 0 80 120
Total Demand 95 120 120
Long-Range Forecast
Long Range Forecasts are typically created by month for each individual product sold. Most often they represent a
fiscal year’s worth of projected sales. Companies typically update them once a month or perhaps quarterly.
Short-Range Forecast
Primarily larger companies (but some smaller) might have a short-range forecast in addition to the long-range
forecast. Many smaller companies may not use a long-range forecast.
Short-range forecasts are often broken out by weeks or days and are really the ‘working’ or ‘production’ forecast.
The short-range forecast is used to schedule production and create the near-term demand for MRP. A short-range
forecast would typically only go out about 3-4 months depending on the lead times of your raw materials.
17
There are 2 different tools you can use to create and manage your forecasts. We’ll go over the advantages and
disadvantages of each and how to use them.
SAP / Orchestrated Forecast Planning Management Utility
Summary The built-in forecast generating utility in SAP
allows you to create forecasts in 2 different
ways.
1. Manual – For each item, you enter in
the number of units you expect to
sell in each time period
2. Automatic (Not recommended) –
For all selected items it looks at a
recent historical period that you
define and calculates a forecast.
Note the figures are based only on
outgoing sales and does not
consider returns.
The Excel-based utility provides a convenient
way to take forecast data created in other
Excel workbooks, consolidate them and
upload them into Orchestrated.
All the tools available in Excel can be used to
create and modify your data, but it cannot
generate a forecast automatically.
Execution Define the time period and the view size
(Day, Week, Month) and select the items
1. Manual – Type in quantities you
expect to sell in each period
2. Automatic – Choose your options
and let SAP create the numbers for
each period
Define the time period and the view size
(Day, Week, Month) and select the items
You can type in sales quantities, copy/paste
from other Excel workbooks or use lookup
functions
Pros & Cons 1. Manual – Similar to the Excel utility
but without the added benefit of
Excel functionality (formulas, sorting,
etc.)
2. Automatic – Could be useful as a
starting point to create your sales
forecast. Only works for sales
items/data (not raw materials or
packaging materials) and *only uses
gross sales figures, as it does not
account for returned items and
cancelled documents*.
Great if you enter manually or have an
existing schedule in Excel that you are
transitioning from.
Allows you to copy data from a prior
forecast.
If you want to create a forecast based on
recent history, you would need to run
historical data separately to create your
quantities and then paste/lookup to get it
into the forecast.
Note about weekends
If in the Holiday Dates window, the Set Weekends as Work Days checkbox is not selected, the MRP Wizard
schedules recommendations so that the demand is met on the last working day before the weekend.
Administration > System Initialization > Company Details > Accounting Data > Holidays (gold arrow)
18
3.2 SAP Manual Method
The SAP Forecast Tool is located in the MRP Module.
Open Forecasts and click the Add button of the main
tool ribbon.
1. Forecast Code & Name
We recommend that these start with a year-first date
with a descriptive name. Consider ‘2018 Weekly’ or
‘2018 Monthly Sales Forecast’
2. View
Choose Daily / Weekly / Monthly
3. Start and End Date
Select the date range that you want to be covered by
this forecast.
Note:
Once a forecast is created, you cannot change the view
to a different interval.
If you choose Weekly or Monthly, the start and end
dates may reset automatically.
Start Date: If the chosen start date is not the first day of
a week or month, it will automatically change to the first
day of the period prior to the day chosen.
End Date: If the chosen end date is not the last day of a
week or month, it will automatically change to the last
day of the period after the day chosen.
19
Click the Item No. box and
then the lookup icon.
Select a first item, hold
<shift> to select a range of
items.
Hold <ctrl> to select
multiple items.
Click Choose when done.
This will copy those items
onto your forecast.
Enter the forecasted sales
quantity in each cell. You
can copy/paste from Excel or
manually enter numbers into
the cells.
20
Comments with creating/editing forecasts
To make a copy of a forecast created using this method, it’s recommended you create a blank new forecast, then use
the Planning Management Utility to copy/paste the old forecast numbers into the new forecast. This would be a
good method to use when creating an adjusted forecast each month while saving the old forecast in your database.
However, some companies only have one primary forecast and can update and edit without creating a copy. You do
not need to move the start date forward since doing so drops all periods that fell before the new start date.
Note: Once you select the daily/monthly/weekly view, you cannot change that setting.
Forecast Quantity Adjustment
When viewing a forecast in the SAP Forecast window, note the Forecast Quantity Adjustment buttons in the Top
Right, with the (+) and (-) buttons. This allows the user to select a row (and only a row) and adjust every cell in that
row by the positive or negative percent shown in the Top Right.
To adjust an Item using Forecast Quantity Adjustment:
1. Select an item row by clicking the row number on the Far Left. (Hold <ctrl> for multiple items)
2. Type a positive number (or click the (+) sign) to increase all the forecast numbers in that row by that %
3. Type a negative number (or click the (-) sign) to decrease all the forecast numbers by that %
21
Tip: Add week numbers to Outlook
Weekly views show calendar week numbers without actual dates. Turn on Outlook week numbers for a handy
reference. Outlook Options > Calendar > Display Options
22
3.3 SAP Automatic Method (Not recommended)
The ‘Automatic’ method lets SAP calculate the forecast amount based on historical outgoing sales (returns not
considered) and some options you select. Due to not considering returns or cancelled A/R invoices, this option is not
recommended to create your forecast other than as a starting point. This is a two-part process:
1. Define what history to use
2. Determine if you predict sales to be more, less or about the same as your history range
Follow steps 1-3 in section 3.2 to add a new forecast with names and dates first.
1. Click Generate Forecast
button in the Bottom
Right of the Forecast
window.
2. Select Items By
Create a list of items through
ranges, Item Group selection or
Properties selection.
You can repeat this as many times
as needed to create your final list.
Click OK to add a selection to your
list.
Click Generate Forecast again to
return to this screen to select
more items.
23
Generate Forecast Settings
1. Select Base on Sales History
2. Select the type of history to use - Deliveries and A/R Invoice is recommended
3. Select Simple Average or History calculation method
Example: Create a monthly forecast for Apr, May, Jun based on the history of Jan, Feb, Mar.
Simple Average
The total sales for the item within the history dates is divided by the number of periods. In this method the simple
average is the same for every period.
History Forecast
JAN FEB MAR 3 mo.Total APR MAY JUN
100 120 140 360 120 120 120
History Total 360 units / 3 months = 120 / month forecast
Daily/Weekly/Monthly History
History is summed by the calendar unit (day, week, month). The history sum is populated from the history column to
the corresponding column in the forecast. The first month of forecast = the first month of history and so on.
History Forecast
JAN FEB MAR 3 mo.Total APR MAY JUN
100 120 140 360 100 120 140
Always make sure your entire history range is in the past and doesn’t overlap into the future.
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3.4 Forecast Examples by Business Size
These examples give you an idea of different ways to organize your production and material planning.
Size: Smaller
Buyers: 1
Planning: Short range and primarily based on current orders and recent history
A small operation that is growing rapidly and is running at near capacity with a steady rotation of core products.
They don’t plan a sales forecast for the entire year. Growth is currently running about 24% this year.
They create a weekly forecast using the SAP Automatic forecast generator for the next 4 months and have a meeting
on which brands and pack types may sell differently for the upcoming periods. They use the Forecast Quantity
Adjustment setting to add 8% to each item. At the beginning of a new month, they update the forecast so it’s based
on the most recent history.
They only have 1 buyer, so they run one MRP scenario for all of the purchased raw materials.
They schedule all their production orders based on capacity first and then run MRP to determine the raw materials
needed.
Size: Larger
Buyers: 2
Planning: 12-month sales forecast
A medium operation that has a booming business of core and specialty beverages with steady growth that is
reflected in the monthly sales forecast.
They use a daily forecast that is created from the monthly sales forecast for all of their near-term planning. The daily
forecast is necessary for planning containers since they only have room to store about 10 days stock at a time.
They use the daily forecast to run an MRP scenario for the BOM items and then use the PdO Creation Wizard to
create their Production Orders. Once the orders are created, they use the Orchestrated Scheduler to fine-tune
production dates and times to best utilize tank capacity and availability.
Once production is scheduled, they run 2 similar MRP scenarios for raw materials. One has expensive packaging
items ordered in large quantities by personnel in Logistics and the other has raw materials that arrive weekly,
managed by brewing management.
25
3.5 Forecasting with the Planning Management Utility
In Section 2.2, we learned how to use the Planning Management Utility to easily update all the planning fields in the
Item Master. This same utility can also be used to create and edit your forecasts.
1. Launch the Planning Management
Utility from the Utilities menu in
Orchestrated
2. At the Top, select Plan Management
> Demand Forecasts
3. Select an existing forecast from the
dropdown list and choose Load
Forecast
OR
Create a New Sales Forecast by
completing the fields. These are the
same fields you see in Orchestrated.
(Sec 3.2)
26
All cells under column headers in gray can now be edited for your forecast amounts.
All Excel editing functions are available, so you can copy and paste from other spreadsheets. You can also use an
Excel lookup formula to grab data from existing Excel workbooks, or use a formula to make the next column equal
the prior column + a percentage so you can plan growth on a month-by-month or week-by-week basis.
Only the cell value or formula result will be sent back to Orchestrated.
4. When you are done editing, click Send to Orchestrated at the Top to update your forecast in your database.
5. Click Yes on the dialog box to send
your data back into your database.
This may take a couple minutes if you
have a very large data set.
27
4 Run the MRP Wizard
4.1 Step: 1 of 6 – Scenario Selection
Create New Scenario
Give your scenario a meaningful name
and description that indicates the type of
materials being planned, or the term
being planned for.
Once you create a scenario and define its
settings, the settings are saved and you
can run the plan as often as needed.
Scenario Strategy
It’s easy to create all kinds of different scenarios for many different groups of products, but introducing a lot of
complexity when you first start is a recipe for failure.
The best strategy when you are setting up for the first time is to apply the KISs rule. (Keep It Simple!) This is a
complex process. If you bite off too much at the beginning it can be very hard to verify that everything is set up
properly and providing the expected results and you may get discouraged or burnt out quickly.
For beverage manufacturers, we suggest starting with 2 scenarios.
• Production Planning (WIP, or work-in-process items)
• Raw Material Planning
Set up the production planning first with just a couple items and verify that you are getting the expected results.
Next, try adding some packaging materials. It’s easy to trace since the materials are all discrete quantities. Once
you are satisfied with the results, then tackle the remaining raw materials.
Once things are running smoothly…
• Put all of the production items into a single scenario so production planning could use the results to
adjust production schedules.
• Long lead items could appear on a weekly scenario that runs for the next 52 weeks, but also be included
on a daily scenario that might only be run for the next 90 days.
• Use Item Properties (Section 4.3) to use a single scenario with several different combinations of items to
swap out.
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4.2 Step: 2 of 6 – Scenario Details
1. Start and End Dates
Define the period for the MRP run from the first day
of the first period to the last day of the last period.
MRP will consider all documents with a due date
between the start and end dates.
Start Date: This is the first day of the first period. For
weekly periods, SAP will move the date back to the start
of a period if the date entered is not the start of a
period. This cannot be a day in the future, but can be in
the past.
Start is usually the current date.
End Date: The last day of the last period. For weekly
periods, SAP will move the date to the end of the
period if the date entered is not the last day in a period.
Enter either an End date OR Planning Horizon Length.
(The other value will be calculated automatically.)
2. View Data in Periods of
Enter a quantity and choose Days, Weeks or Months
For any period longer than 1 day, all requirements and
calculations are grouped into the first day of the period.
The most commonly used options:
• 1 day
• 1 week
• 1 month (less common)
1 day will be the period for your near-term plan when
you have production activities already scheduled on a
daily basis.
Some companies might run a 1-week scenario for
planning longer lead items, but typically this is not
enough resolution once you start planning production
activities within 90 days. A small operation with flexible
capacity might find 1 week will work fine.
1 month might be used for planning hops or other
seasonal agricultural products that require a long
planning lead time. It is typically not used for any
activities that will happen in the next 90 days.
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3. Consider Holidays For
This tells MRP what type of items can be scheduled on a
Holiday. If the box is checked, the lead time will be
increased so the delivery or production will happen on
the first business day before the holiday.
Example:
Production runs 7 days/week, but Receiving is off for a
holiday.
In this case you might check Production Items and not
check Purchase Items.
Unless you work holidays, select both boxes.
4. Ignore Cumulative Lead Time
This setting only applies to BOM items with child BOMs.
Unselected: (Recommended)
MRP will consider the lead time of any consumed items
that need to be made before the produced item can be
made. Those lead times are combined to the lead time
of the produced item to determine the total lead time
needed to meet the requirement.
Selected: (Not recommended)
The lead time for a produced item comes from the Item
Master lead time. MRP will not consider whether any
consumed items needed to make the produced item
will be available on time or not.
5. Display Preferences
Sort By
• Assembly Sequence
• Item Number
• Item Description
• Item Group
Display Item with No Requirements: By default, MRP
only shows items where action needs to be taken.
Select this option to show all items even if no action is
needed.
Display Selected Items only:
Only show the items with checked boxes on the ‘Item
Selection’ screen, Step 3.
Simulation: A Simulation is just like a standard MRP run
but you cannot save recommendations or create
documents like Purchase Orders or Production Orders.
Use Simulation for testing scenarios and training only.
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4.3 Step: 3 of 6 – Item Selection
1. Item Selection
All Items: Adds all items with planning method of
MRP
Selected Items: Create a list using the Add Items
button
2. Add Items
Choose the items that you want to plan with this
scenario.
You can select by:
• Range by Item Code
• A single Item Group
• Item Properties (see next page)
• Or expanded criteria like:
o Preferred vendor
o Process Type
o Other UDFs
Note: If you are unable to add an item to the list, it’s
likely that the Item Master is not properly setup.
Verify that the item you are trying to add has the
planning method set to ‘MRP’ on the Planning Data
tab.
3. Update Selected Items (Not recommended)
Select this button to edit the planning fields for the items
that have checked boxes. This only affects the items on this
MRP run. It does not update Item Master Data.
Since this does not update the Item Master, we recommend
that you do not make changes here. The changes cannot be
reviewed so there is no way to verify what has been changed.
4. Save Scenario
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Tip: Use Item Properties to Select Items
There are times when you might want to select groups of
products that do not fall into your pre-defined Item Groups or
Item Code designations (RM or BB) think subsets of items.
Item Properties provides a great way to do this.
1. Define New Item Properties
Administration > Setup > Inventory > Item Properties
Give the property a descriptive name.
2. Assign items to each new Item Property: Two options
- Item Master Data > Properties tab OR
- Planning Management Utility > Item Management
Select either format to add items to your new Item Properties.
The Planning Management Utility will be a better resource for
mass updates.
Example:
All packaging items are in the Item Group ‘Packaging’ but we
want to find what labels need to be reordered, but not other
packaging materials. Depending on your database
configuration, it may make sense to create an Item Property
called ‘Labels’ to quickly and easily filter out other packaging
materials in the MRP Scenario.
Below the ‘Labels’ Item Property has been checked for a
specific label item in Item Master Data.
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Here is the format for assigning items to Item Properties using the Planning Management Utility.
Note: You cannot create new Item Properties from this utility – that must be done from the Setup screen in 1) above.
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4.4 Step: 4 of 6 – Inventory Data Source
1. Run by:
Company:
• Consolidates existing inventory, demand, and supply and makes recommendations to the default
warehouse
• No recommendations for Inventory Transfer Requests are made with this option
• Note: Default warehouses should be set for items when using this setting.
Warehouse:
• Calculates existing inventory, demand, and supply at the warehouse level and makes recommendations for
each warehouse separately
• Inventory Transfer Requests may be recommended if material is not in the warehouse with demand
If you’re not sure which setting to use, consider
aligning your MRP Scenario with types of items
based on how they’re managed within Item Master
Data: Inventory tab.
- For items designated as ‘Manage Inventory
By Warehouse’, start by using the
Warehouse setting.
- For items unchecked as ‘Manage Inventory
by Warehouse’, start by using the Company
setting.
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Example
You might have inventory of materials purchased specifically for contract production for a specific customer. You
might want to exclude the warehouse where those materials are stored so MRP will not consider them as available
for general in-house production.
Note: These settings are relevant regardless of whether you run MRP by company or by warehouse
2. Include Data Source
You can choose to exclude individual warehouses from being considered as a source of inventory, demand or
supply. You may want to exclude warehouses for quality control, barrel-aging, offsite inventory or other alternative
reasons.
4.5 Step: 5 of 6 – Documents Data Source
This is where all the supply and demand pieces come together.
1. Time Range:
Within Planning Horizon:
• Only the documents within the start and end dates of the planning horizon (Section 4.1) are considered in
MRP calculations and displayed in the report.
• If the horizon start date is earlier than the system date, consolidated data between the horizon start date
and the system date will appear in the Past Due Data column.
• The first period column will display data starting from today.
• This is usually ran with a horizon start date that is before today/current period/
For example, you have an open purchase order that was due last week and you are using today as the start of your
planning horizon. With this setting, the material on that order will not be considered available supply because it is
due before the start of the planning horizon. If you choose a date before last week as the start of your horizon,
then the order would be included in the Past Due Data column.
Include Historical Data (Recommended)
• All demands and supplies before the start date are considered in the MRP calculations.
• Recommendations are summed and displayed in the current (system) date column.
• The Historic Data field in the MRP report is visible only if this box is checked.
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Use Include Historical Data…
• If you want all supply and demand included, no matter how old the due date.
• You are diligent about closing old documents that may not be valid so they are not impacting MRP
Use Within Planning Horizon with a horizon start date…
• Before the current date: This will limit how old a due date must be before it will be ignored.
• Current date: This will ignore any document that has a due date prior to today. (Not recommended)
Tip: If your company has difficulty closing old or aged documents timely, consider starting with the setting Within
Planning Horizon to avoid bringing in inappropriate old data. However, using the setting Include Historical Data may
illuminate old documents to close, improving the quality of data in your database.
2. Sources of Demand and Supply to Be Included
The Left column is to select the sources that will be considered as available supply and demand.
The Right section allows you to restrict the documents to a specific selection or group.
The image above shows the Recommended selection for most companies, excluding document types that your
company may not use (Sales Quotations, Blanket Sales Agreements). When you check a box, you will include all
documents of that type unless ‘Restrict’ options are selected.
Comments
Sales Quotations: Only include this document type if most quotes are converted into orders without adjustments.
Purchase Quotations: If you quote multiple sources for the same item to compare prices, you would not want to
include those in your MRP Scenario.
Production Orders: MRP considers production orders with a status of Planned or Released. The produced item
being made is a source of supply. The consumed items are considered a source of demand.
Blanket Agreements: MRP considers only the blanket agreements of type Specific and Approved status.
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3. Restrict Sources of Demand and Supply
The right column is to choose selected documents to include as available supply and demand. Checking the box to
the Left of ‘Restrict…’ allows you to filter out documents to be excluded from your scenario.
This will bring up an empty Selected
Documents window. Click Add
Documents and choose the ranges
to create a list.
Checked documents are included in
MRP; any unchecked documents are
excluded on the screen below.
Example:
You have a quote to supply beverages for a large event, but other vendors have also quoted this event. You will
want to keep that document unchecked to exclude it from your MRP Scenario until you’ve confirmed you have
signed the large event.
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4. Inventory Level
Choose a value from the dropdown list to include inventory level
requirements as a source of demand in MRP.
Minimum – MRP will suggest additional supply so that the ending
balance for each period is at or above the minimum inventory level
set. (Most common)
Required – MRP will suggest supply when inventory is below the
‘Required’ level as defined on the Item Master Data: Inventory tab.
This is similar to ‘Minimum’ but is in Purchase UoM. (uncommon)
Maximum – MRP will not suggest additional supply if that supply
results in an on-hand balance above the maximum. (uncommon)
Min – Max – Both Minimum and Maximum options. (uncommon)
Comments On Inventory Level Demand
The option selected for Manage Inventory by Warehouse (defined in the Item Master) will impact the way that
MRP handles the demand created with Minimum/Maximum/Required.
Running MRP by ‘Company’: (from Step 4: Inventory Data Source)
• MRP consolidates the inventory level requirements as one demand for the default warehouse.
• For items that are ‘Manage Inventory by Warehouse’ MRP will use the sum of all the values for the
default warehouse in the MRP run.
Example: WH-A has a min level of 10 ea. WH-B has a min level of 15. The total min level for MRP is 25, so MRP
will recommend supply so that the default warehouse has at least 25 units at the end of every period.
Running MRP by ‘Warehouse’ (Recommended with ‘Manage Inventory by Warehouse’ checked for each item)
• MRP considers each Min/Max/Required value by each warehouse and each warehouse will have their own
inventory demand.
• For items that are not ‘Manage Inventory by Warehouse' MRP will use the company level
Min/Max/Required for every warehouse included in the MRP run. (Not recommended)
Example: Item# 1001 is not managed by warehouse, but it has a minimum of 10 pc. An MRP run that includes 3
warehouses will recommend supply so that all 3 warehouses have at least 10 pcs at the end of each period.
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5. Forecast
Choose a forecast to use for this MRP run. (Recommended)
It is possible to run MRP without a forecast, but you will only get results based on current documents in the system
and minimum inventory levels. This will impact any items will longer lead items too.
When you choose a forecast in the MRP Scenario, the system assigns the forecast demand to a single warehouse:
• If you select only one warehouse for the run, all demands occur in that warehouse
• If you select multiple warehouses that includes the default warehouse, all demands occur in the default
warehouse. (Recommended)
• If you select multiple warehouse and you DO NOT include the default warehouse, all demands occur in the first
warehouse code in ascending order
The consumption of forecasted amount by sales orders and blanket sales agreements does not correspond to the
warehouse of the sales orders or the blanket sales agreements.
6. Purchase Recommendations
Choose the type of purchasing document you want MRP to
suggest in the results.
Purchase Requests (Less common)
If your firm uses requests for all purchases and they need to
go through an approval process.
Purchase Orders (Most common)
The person running MRP has the authority to place orders
directly or your firm does not typically use Purchase
Requests.
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7. Inventory Transfer Requests
You must be running MRP by Warehouse (not Company)
to see these requests suggested in the recommendations.
Selected (Recommended for multi-location production)
MRP will recommend available supply in one warehouse
that can be transferred to meet the demand in a different
warehouse.
Note: Inventory Transfer Request recommendations ignore all lead times, order intervals and multiples.
The transfer request will be dated the day the demand is needed and only for the amount of that day’s demand.
When running with daily periods, you could see the same demand repeated every day. If less frequent transfers
are more desirable, it pays to look ahead a couple days ahead and make one large transfer to cover several days of
demand.
8. Generate to…
Only available when running MRP by Warehouse.
Default Warehouse for Item (More common)
Warehouse with the demand (Less common)
Example:
You might ship stock from 2 different warehouses, but all
of your production goes to the default warehouse first.
Tip: Don’t forget to Save Scenario on each step!
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4.6 Step: 6 of 6 – Run MRP
At the beginning of this guide it was stressed how important it is to have everything properly setup to make sure that
the results you get are both accurate and predictable. Now that you’re ready to run your scenario in the MRP
Wizard, we should review a couple things that could throw off your numbers before clicking to Run.
All items on the Pre-Run Checklist can impact the MRP Scenario and make your results less accurate.
• Actions that are finished in reality (production, product shipped, raw materials arrived, etc.) but have not
been completed in Orchestrated yet.
• Open documents like Purchase Orders or Sales Orders where there is still a partial quantity open because the
vendor could not fill the order completely at the time. If these are old and only a small portion remains,
sometimes the best course is to close the document, and let new sales/purchase documents be created.
• Inventory that has been transferred, moved or consumed is not yet reflected in the system.
Pre-Run Check List
1. Close all finished Production Orders
2. Close all Sales/Purchase Orders that are no longer valid
3. Ensure Sales Orders are up-to-date and fully entered
4. Receive into your database any incoming deliveries that have arrived
5. Complete and close any open Inventory Counts
Click Save Scenario and Run in the Lower Right!
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5 Results and Order Recommendations
We’ll start with the simplest possible example to verify that we are getting the results we are expecting. Then we’ll
add a few things to make it more realistic.
5.1 Running a Simple Scenario on One Product
For this example, we’ll run by Company using all the recommended settings with Weekly Periods.
On Step 2, we select Display Selected Items only, so we will only see the items chosen.
Items: Select only 2 items – the finished good item and its associated body label
Click Run!
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5.2 Results – Report Tab
Item Row Color Codes
1. Black Text/Off-White Background: There is more supply than demand, providing recommendations are
executed on time. Likely caused by Minimum Order Quantity exceeding demand.
2. Black Text/Light Gray: There are order recommendations and there is sufficient time to receive supply to
meet demand.
3. Red Text/Dark Gray: There is insufficient lead time to acquire enough supply to meet demand on the date
requested. Note that any item with a potential problem will also have the Item No. in red.
Interpreting Results for the Top Level Item
In the column to the Left of the Item Code, if you click the ‘expand’ arrow you can see the details for that item.
This will show the Initial Inventory, Supply, Demand and the Final Inventory for each period.
1. On Week 25, Supply will not be able to meet Demand.
2. Since Week 25 and 26 are in Red, we know that cumulative lead times dictate that we don’t have enough
time to buy or produce enough Supply to meet Demand in that period.
3. Since the recommendation in Week 27 is Black/Light Gray we know that placing orders for materials and
production now will result in that demand being met.
Does this mean we will not be able to sell this item in Week 25 or 26?
Answer: Not necessarily.
Since the inability to meet the requirement is based on cumulative lead time, there may be an ability to expedite raw
materials or reschedule production.
In this case, we know our cumulative production lead time is about 17 days, so the limiting factor is likely the
unavailability of one or more consumed items. Note that we are also running MRP by week, so all supply and demand
falls into the first day of the period. Once production is scheduled, you might find that a production run later in the week
will gain a couple extra days lead time.
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Interpreting Results for the Component Item
Click the expand arrow in the column to the Left of the Item Number to see the details for that item.
1. In Week 25, supply will not meet demand.
2. There is a recommendation in Week 21 to place an order for 46,900 units. Since this is in white, we know that
once this arrives our supply will exceed demand.
Why is the recommended quantity in Week 21 for a quantity of 46,900?
By looking at the Item Master: Planning Data tab for the
item, we see our labels from this vendor are set to an
Order Interval on the 15th of each month.
With this setting, the requirements for labels from this
vendor will show up on the period that contains the
15th of the month.
This way, we can place one Purchase Order per month
for all our different labels and the recommended supply
quantity will be enough to meet demand for the
following month.
View the Pegging Information
The pegging information is the factors that are driving supply and demand. As an example, they could be sales or
purchasing documents, forecasted demand or requirements from MRP to make produced items.
Pegging Information for a Component Recommendation
By clicking on the off-white box with ‘46,900’ the underlying pegging information for this recommendation is
displayed.
The recommended action is to place a Purchase Order for 46,900 with a due date of 6/13.
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Sources of pegging information for Recommendations
• Purchase Order or Purchase Request (as defined in Step 5)
• Production Order
• Inventory Transfer Request
Pegging Information for a Component Demand or Supply
By clicking on the light gray box with ‘8,856’ for the body labels in Week 25, we see the pegging information for this
demand.
The type of demand is ‘MRP Requirement’, which means MRP has also recommended additional supply of
item 1002-B46 (Source column on the Far Left) and that is causing a demand of 8,856 units of this particular item on
6/14.
Sources of Pegging Information for Supply
• Production Order (for produced items)
• Purchase Order or Request
• Blanket Purchase Agreement
• Incoming Inventory Transfer Request
• MRP Recommendation
Sources of pegging Information for Demand
• Production order (for consumed items)
• Sales Order or Quote
• Blanket Sales Agreement
• Outgoing Inventory Transfer Request
• MRP Recommendation
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5.3 Results – Recommendations Tab
The Recommendations tab lists the collective recommendations for the MRP Scenario’s Results. This is a collection of
each of the individual recommendations you would see by looking at the recommendation pegging for each item in
the Results.
In our simple example, we show 5 production recommendations, and one purchase recommendation.
Due Dates in Red are past due, meaning the cumulative lead time is longer than the time from today till the due date.
5.4 Save Recommendations
Once you are happy with the results, you will need to save the recommendations.
Click Save Recommendations at the Bottom of the Results window.
Note: You can only save one list of recommendations per MRP Scenario at a time.
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5.5 Review Recommendations
There are 2 ways you can bring up the Order Recommendations screen:
1. If you are still in the MRP Results window, right-click the header and select Order Recommendations.
(Make sure you clicked ‘Save Recommendations’ first.)
2. If you have closed the MRP Wizard screen, you can open it directly from the MRP module menu.
When you open from the menu, you are
presented with the option to filter the
recommendations by a number of different
factors.
This can be very helpful if your MRP run
includes a larger set of items, but today you
are only interested in taking action on a
small subset.
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5.6 Implementing Production Recommendations
Production MRP Process
1. Follow the Pre-Run Check list in section 4.6.
2. Run MRP
3. Create production orders and schedule them as appropriate per recommendations.
4. Re-run the same MRP Scenario once production has been scheduled to see revised recommendations
5. Implement purchasing recommendations
**An option here is to run 1 scenario with all of your BOM items and another with all of the non-BOM items.
Consider capacity issues
Capacity will need to be considered when scheduling your production. In our examples, MRP is not considering
capacity of your facilities, tanks and equipment. MRP could suggest to start production on 4 new items next week,
but if you have already scheduled all available capacity for that week, it will not be possible however this provides
insight that your Sales Orders or sales forecast are outstripping your production capabilities for that time frame. You
can schedule the additional production the following week and adjust sales expectations accordingly.
Again, MRP could suggest scheduling production next week where there is no capacity, however you were not able
to get one of the specialty materials needed for an item on this week’s production schedule. Now there is capacity to
produce the item a week early.
Both these scenarios would entail scheduling production in a period other than the one recommended, so all of the
raw material requirements for that production shift either earlier or later. That is why you want to schedule
production first, and then re-run MRP to determine the real raw material requirements. Otherwise, you will
requirements due in weeks where that production will no longer be made.
Does demand exceed capacity?
Even if you go through the steps above, if the forecast/demand is greater than your available capacity, then MRP will
continue to suggest production beyond capacity and the purchase of the raw materials for that production.
The solution is that you must reduce the demand to be in line with your maximum capacity. This may be a reduction
in forecast, or if your demand is driven entirely by sales orders, it could be rescheduling delivery dates to a date when
product will realistically be available.
Watch your yields!
Production yields built into your BOMs can cause some unintended consequences in MRP. If you start a 50-unit
batch, you will always have less than 50 units by the time you are ready to package the liquid. If you schedule 50
units of packed product, but only have 48 units of liquid, MRP will recommend that you make another full batch
because you are 2 units short. We recommend that you set your production yields conservatively, so you consistently
produce at or above the amount planned.
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5.7 Implementing Purchase Recommendations
For this example we’ve added another label to our simple example to illustrate how purchase recommendations can
be combined. We know from our Item Master set up, that these two labels have the same vendor and the same
planning information.
Here is the MRP Recommendations:
To create combined Purchase Recommendations for items from the same vendor, you need to verify one setting on
the Order Recommendations window.
1. Open the Order Recommendations window (Section 5.1)
2. Click the Form Settings icon in the Top Icon bar
3. Check the box for Consolidate Recommendations
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To create the Purchase Orders for these items:
1. Check the box in the Left column to create Purchase Orders for rows 6 and 7.
2. Then click Update and a dialog box confirms that 1 Purchase Order was created
Here is the new Purchase Order:
Notes:
• The vendor, Inland Label & Mktg, is the Preferred Vendor indicated on the Item Master: Purchasing Data tab.
• The price is from the Price List set on the Business Partner Master. You must have a price for this item on the
preferred vendor’s price list.
When we run MRP after creating this Purchase Order, we see that the recommendation is now gone from Week 21
and the demand is met with adequate supply.
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Review the Pegging for the new Purchase Order
By clicking the Week 25 box on the Supply row for ‘46,900’ for the label body, we can view the Pegging Information
The pegging information now shows that the supply on Week 25 comes from the new Purchase Order created.
