SAP MM: March 2008

Formula for Calculating the Reorder Level Forecast Formulae

The reorder level is defined as the sum of the safety stock plus the requirement forecast within the replenishment lead time (see formula (17)).

A forecast was carried out on a monthly basis. A month has 30 days in the case of external procurement.

Safety stock		100
Forecast	1st subsequent period	200
	2nd subsequent periode	00
	3rd subsequent period	400
Replenishment lead time	40 days	0/30
		30/30 + 10/30

(an entire monthly requirement + a part of the the following month)

Reorder level = 100 + 30/30 * 200 + 10/30 * 300 = 400

Formula for Calculating the Safety Stock Forecast Formulae

The safety stock depends on the service level that you specified in the MRP II view of the material master record and on the accuracy of the forecast. The more accurate the forecast, the smaller your safety stock can be.

The following figure shows that, without safety stock, customer demand can be satisfied by 50%. It also shows that it is almost impossible to satisfy customer demand 100% of the time. Factor R describes the relationship between forecast accuracy and service level (SL).

If replenishment lead time is greater than the forecast period by factor W, then the mean absolute deviation (MAD) is recalculated for this period (formula 17). The MAD is a parameter of forecast accuracy. Otherwise, see formula 18.

Safety Stock (SS) Formulas

If the material is produced in-house, the delivery time is: opening period + in-house production time + goods receipt processing time. It is expressed in workdays. The forecast period is taken from the material master record and is also expressed in workdays.

If the material is procured externally, the delivery time is: goods receipt processing time + planned delivery time + goods receipt processing time. It is expressed in calendar days. The forecast period is taken from the material master record and is also expressed in calendar days.

The safety stock calculation may lead to rounding effects.

Formula for Evaluating the Forecast

Every forecast should provide a basis for a decision in some form. So that changes in a time series pattern can be recognized early, the following parameters are calculated in the SAP System for the evaluating quality of the forecast:

the error total

the mean absolute deviation (MAD)

the tracking signal

the Theil coefficient

Model: Second-Order Exponential Smoothing Forecast Formulae

If, over several periods, a time series shows a change of the average value which corresponds to the trend model, the forecast values always lag behind the actual values by one or several periods in the first-order exponential smoothing procedure. You can achieve a more efficient adjustment of the forecast to the actual consumption values pattern by using the second-order exponential smoothing procedure.

The second-order exponential smoothing model is based on a linear trend and consists of two equations (see formulae (11) below). The first equation corresponds to that of first-order exponential smoothing except for the indices in brackets. In the second equation, the values calculated in the first equation are used in the second equation as initial values and are smoothed again.

General Formula for First-Order Exponential Smoothing Forecast Formulae

Using the basic formula derived above (6), the general formula for first-order exponential smoothing (7) is determined by taking both trend and seasonal variations into account. Here, the basic value, the trend value and the seasonal index are calculated as displayed in formulae (8) - (10).

Below is a legend for the formulae.

Model: Constant Forecast Formulae

From these two points mentioned above, the constant model of exponential smoothing can be derived (see formula (5)). In this case, the formula is used for calculating the basic value. A straight forward derivation produces the basic formula for exponential smoothing (see formula (6)).

To determine the forecast value, you only require the preceding forecast value, the last past consumption value and the so-called smoothing factor, alpha. This smoothing factor is responsible for weighting the most recent consumption values more than the past values so that they have a stronger influence on the forecast.

How quickly the forecast should react to a change in consumption pattern depends on your choice of smoothing factor. If you select 0 for alpha then the new average will be equal to the old one. In this case, the basic value calculated previously remains, that is, the forecast does not react to current consumption data. If you select 1 for the alpha value, the the new average will equal the last consumption value.

The most common values for alpha lie, therefore, between 0.1 and 0.5. An alpha value of 0.5 weights past consumption values as follows:

1st past value : 50%

2nd past value : 25%

3rd past value : 12,5%

4th past value : 6,25%

and so on.

The weightings of past consumption data can be changed by one single parameter. Therefore, it is relatively easy to respond to changes in the time series.

The constant model of first-order exponential smoothing derived above is applicable to time series that do not have trend-like patterns or seasonal-like variations.

Model: First-Order Exponential Smoothing Forecast Formulae

The ideas behind this model are:

The older the time series values, the less important they become for the calculation of the forecast.

The present forecast error is taken into account for the following forecasts.

Model: Weighted Moving Average Forecast Formulae

You achieve better results than those received from the moving average model by introducing weighting factors for each past value. This means that every past value is weighted with the factor R. The sum of the weighting factors is 1 (see formulae (3) and (4) below).

If the time series to be forecast contains trend-like variations you will receive better results by using the weighted moving average model rather than the moving average model. The reason for this is that more weight is given to more recent data when determining the average than to older data, that is, if you selected appropriate weighting factors. Therefore, the system will be able to react more quickly to a change in level.

This model, however, depends strongly on your choice of weighting factors. If the time series pattern changes, you must also adapt the weighting factors.

Model: Moving Average Forecast Formulae

This model is used to exclude irregularities in the time series pattern. In order to this, the average of the n last time series values is calculated. The average can always be calculated from n values according to formula (1).

Therefore, the new average is calculated from the previous average and the current consumption value weighted with 1/n, minus the oldest consumption value weighted with 1/n.

It is only worth using this procedure for time series which are constant, that is, for time series with no trend-like or season-like patterns. As all historical data is equally weighted with the factor 1/n, it takes precisely n periods until the forecast can adapt to a possible level change.

Forecast Formulae Overview

In this section, a description is given of the formulae which form the basis of the forecast. The following formulae are displayed in detail:

formula for the forecast models

formula for the evaluation of the forecast

formula for calculating the reorder level and safety stock

Planning File: Consistency Check

Since the entries in the planning file are permanent, they must be examined regularly for their MRP relevancy. If, for example, a plant is excluded from material requirements planning at some point, its materials will still be contained in the planning file. The same applies to materials which are later excluded from MRP. The entries in the planning file are no longer needed and should be deleted. To do this, proceed as follows:

Starting from the menu screen of material requirements planning , select Planning file entry

Batch consistcy chck

The initial screen for batch request appears.

Here, by using a selection variant, you can either plan the consistency check of the planning file entries to take place at a later date or you can or start the process immediately. Please refer to ABAP/4: Generating and Printing Reports for more detailed information on the background request procedure.

Once the consistency check has started, the system checks each entry for the following information:

Does the material still exist, that is, does a material master record still exist for the material?

Is material requirements planning activated for the plant?

Does the material have a valid MRP type in the material master record?

Does the low-level code still match the one in the material master record?

If one of these criteria no longer applies, the respective entry is deleted from the planning file.

If the low-level code no longer corresponds to the one in the material master record, the entry is deleted from the planning file and a new one is created with the current low-level code.

Creating Entries in the Planning File Automatically

Setting up planning file entries and creating them manually are exceptions. Planning file entries are usually made automatically by the system for all materials that have undergone a change relevant to MRP since the last planning run. The following are examples of activities which lead to a material being marked for planning:

Changes to stock which affect the material's stock/requirements situation.

goods receipt posting with no reference to a purchase order or goods issue posting.

Creating purchase requisitions, purchase orders, planned orders, sales requirements, forecast requirements, dependent requirements or reservations (referred to as "objects" below).

Changes to these objects' fields which are relevant to MRP or changes to the material master record.

Deleting these objects.

Creating Entries in the Planning File Manually

Planning file entries are usually carried out automatically by the system. In some exceptional cases, however, you may find it necessary to make an entry in the planning file manually. To do this, proceed as follows:

Starting from the menu screen of material requirements planning, select Planning file entry

Create.

The screen for creating a planning file entry now appears.

Enter the material number and the plant.

You can also manually set the total change indicator, the net change planning indicator as well as the reset indicator and the BOM explosion indicator.

Press

ENTER

The system checks the relevancy of the entered material for MRP. If the entry is to be included in the planning file, the following message appears:

The material was marked for MRP.

Setting up Planning File Entries

If material requirements planning is activated for a plant, it is necessary to generate an entry in the planning file for all materials relevant to MRP in this plant. You can only carry out this function in background mode. To do this, proceed as follows:

Starting from the menu screen of material requirements planning, select Planning file entry

Bckgrnd processing

The initial screen for the background processing now appears.

Here, by using a selection variant, you can either plan the creation of a planning file entry to take place at a later date or you can or start the process immediately.

Please refer to ABAP/4: Generating and Printing Reports for more detailed information on the background processing procedure.

Once you have started the process, the system checks each material in this plant to see whether it is relevant for MRP. If a material fulfills the prerequisites which were mentioned above, it is included in the planning file, and both the total change indicator and the net change planning indicator are set.

These materials are then included in the following MRP run.

Creating Entries in the Planning File

There are three different ways of making an entry in the planning file:

Setting up Planning File Entries

Creating Entries in the Planning File Manually

Creating Entries in the Planning File Automatically

Planning File: Consistency Check
Creating Entries in the Planning File Automaticall...
Creating Entries in the Planning File Manually
Setting up Planning File Entries
Creating Entries in the Planning File
Displaying Entries in the Planning File
Maintaining the Planning File Overview

Displaying Entries in the Planning File

If you want to display the entries in a planning file for a plant, proceed as follows:

Starting from the menu screen of material requirements planning, select Planning file entry

Display

The initial screen for displaying the planning file entries now appears.

Enter your selection criteria:

– If you want to display a particular material in the planning file, enter the material number. If you leave this field blank then the system displays all materials.

– If you specify a plant, the system displays all the materials in this plant. If you leave this field blank then the system displays all plants where material requirements planning is active along with the materials relevant to MRP. In the example, all planning file entries are to be displayed for plant 0001.

– If you want to limit your selection to certain low-level codes, enter the corresponding values in the fields Low-level code from and to. (The low-level code is stored for every material in the material master record.)

– If you select the field Additional mat. data (additional material data), the material short text and the MRP controller are also displayed.

Press

ENTER

The list of all planning file entries which correspond to your selection criteria now appears.

The individual columns mean the following:

– The record type of the planning file entry is given in column RT. MRP materials are automatically provided with a B and MPS materials with an M.

– In the material master record, each material is allocated one low-level code (field L.Lvl Code) which is determined by the bill of material (BOM) management program. It is the lowest level at which the material appears in a BOM, which is recorded in the material master record and, therefore, also in the planning file. This level, thus represents the longest route from the end product to the material in question. In an MRP run, the materials are processed in sequence according to their low-level codes. By using this method of low-level codes, you can be certain that the total net requirements of a material is recorded during its requirements explosion.

If a material does not appear in a bill of material, the system will automatically allocate the highest level (999).

– If the Total change indicator is set for a material then it is included in net change planning. The material is automatically provided with this indicator if it has undergone a change relevant to MRP (for example, outward stock movements or a change of date in a purchase order). Once the the planning run has been carried out, the system deletes the total change indicator (and also the net change planning indicator).

– If the Net change planning indicator is set for a material then this material is included in the net change planning in the planning horizon. The system automatically sets this indicator for a material if it has undergone a change relevant to MRP within the planning horizon. Once the the planning run has been carried out, the system deletes the net change planning indicator. The total change indicator remains.

– If you set the Reset indicator then planning dates which may be available (order proposals) are not reactivated even if the dates and quantities suit the planning situation. The system always creates new order proposals.

– If you set the BOM explosion indicator, then available planned orders are taken over but the BOM is re-exploded.

Press

You branch into a pop-up window with statistical data on:

how many materials were selected

how many of the selected materials are marked for a total planning run

how many of the selected materials are marked for a planning run in the planning horizon

for how many materials the reset indicator is set

for how many materials the BOM explosion indicator is set

Maintaining the Planning File Overview

The planning file basically contains all materials that may be relevant for a planning run. If a change is made which is relevant to planning, (for example, the creation of a purchase order), the material is automatically provided with a total change indicator in the planning file. If a change within the planning horizon occurs (for example, the creation of a purchase order within the planning horizon), then the material is automatically provided with another indicator, that is, the net change planning indicator.

The material is included in the next planning run and the respective indicator is deleted once the planning run is completed:

Both the total change indicator and the net change planning indicator are deleted in regenerative planning and in net change planning.

Only the net change planning indicator is deleted in net change planning in the planning horizon.

Prerequisites for successful entries in the planning file include the following two points:

material requirements planning must be activated for the corresponding plant

the materials must have a valid MRP type

Displaying Entries in the Planning File

Creating Entries in the Planning File

Planning File: Consistency Check

Collective Conversion in the Background Converting Planned Orders into Purchase Requisitions

As of release 4.0 you can also convert planned orders into purchase requisitions in the background. This is particularly useful if you use the creation indicator (2) Purchase requisitions in opening period in the planning run. The system creates purchase requisitions in the opening period but outside the opening period, the system creates planned orders. The planned orders must be converted into purchase requisitions in time so that purchasing receives the purchase requisitions in time. To ensure that this occurs you can use conversion in background.

To do this proceed as follows:

To access the screen, Convert Planned Orders into Pur. Reqs in Background, choose Planned order

Convert -> pur. req.

In background from the MRP screen.

The screen, Convert Planned Orders into Pur. Reqs in Background: Variations, appears.

Choose

Create variant

and create a variant.

In the variant, you define the plant, MRP controller and until which opening date conversion is to occur.

Complete the necessary attributes for the variant.

Choose

Schedule job

. Set whether scheduling is to occur once or periodically and enter the dates. Scheduling once means the scheduling occurs once on a certain date.Periodic scheduling means the scheduling occurs regularly on set dates.

The system automatically converts planned orders into purchase requisitions on the set dates.

Collective Conversion Converting Planned Orders into Purchase Requisitions

If you use the collective conversion function, you can convert several planned orders into purchase requisitions in one step. To to this, proceed as follows:

Starting from the menu screen of material requirements planning, select Planned order

Convert

pur

.req.

Collective

conversion.

The initial screen for collective conversion now appears.

Enter the MRP controller number and the plant.

If you want to narrow down the selection further, you can also enter the planned opening date in the Planned opening field and/or the procurement type in the Procurement field.

Press

ENTER

A list of all the planned orders which correspond to your selection criteria now appears.

Mark the planned orders you want to convert.

The planned orders are marked for conversion and marked with a check mark in the selection column.

Then to convert the selected planned orders into purchase requisitions, select Planned orders

Save

If necessary information is missing for the creation of a purchase requisition, the system interrupts the conversion and branches off into the details screen for individual conversion. Here, you can then add the missing data. After pressing ENTER again, the system will then continue with the conversion of the remaining planned orders.

To avoid the conversion being interrupted, you can predefine proposed dates for the purchase requisition. To do this, proceed as follows:

a. Select Edit ® Pur.req.default data in the screen with the list of the marked planned orders.

A pop-up window now appears where you must enter the default data.

b. Enter the data to be taken over into the purchase requisitions. This data applies to all purchase requisitions created during conversion.

c. Press ENTER .

The entered data is taken over and you then return to the list of planned orders.

d. To convert the planned orders, select Planned orders ® Save.

From the list of all selected planned orders you can also call up individual planned orders in sequence and then convert them individually.

All purchase requisitions created as described above are regarded as being fixed for material requirements planning and they are not affected by the following planning runs.

On the subject of displaying, changing and converting planned orders, please also read "Displaying, Changing and Converting MRP Elements" in Displaying, Changing, or Converting MRP Elements.

Partial Conversion Converting Planned Orders into Purchase Requisitions

If you do not want to convert the total planned order quantity into a purchase requisition either because the requirements situation has changed or you want to produce a part of the quantity in-house, you have the option of partially converting the planned order.

If you opt for a partial conversion, only a part of the amount quoted in the planned order is recorded in the purchase requisiti

Individual Conversion Converting Planned Orders into Purchase Requisitions

If you select individual conversion, you can only convert one planned order into a purchase requisition. Proceed as follows:

Starting from the menu screen of material requirements planning, select Planned order

Convert

pur

.req.

Individ

. conversion.

The initial screen for the individual conversion of planned orders now appears.

Enter the number of the planned order you want to convert into a purchase requisition and press

ENTER

The details screen for individual conversion of planned orders now appears.

The top part of the screen shows the planned order data and the lower part of the screen shows the purchase requisition data. The data partly comes from the planned order and partly from the material master record. The information is displayed here but, if necessary, you can overwrite the entries.

– You can enter a purchase requisition number in the Purchase requisition field (external number assignment). Otherwise, the system automatically assigns a number when the information is being saved (internal number assignment).

– Enter the Supplying plant in the case of a transport order.

– In addition, you can specify the Storage location here where goods receipt is to take place.

– Specify whether a Goods receipt and an Invoice receipt are required for the material by selecting corresponding fields.

From the details screen, you can also specify vendor data for the purchase requisition. To do this, proceed as follows:

a. Select Environment ® Vendor data.

A pop-up window for entering the vendor data now appears.

b. Enter the vendor data.

c. Press ENTER .

You return to the details screen.

To convert the planned order into a purchase requisition, select Planned order

Save

You return to the initial screen and receive the message Planned order was converted into a purchase requisition.

Converting Planned Orders into Purchase Requisitions

If the start date of a planned order lies in the opening period, this is an indicator for the MRP controller that procurement must be arranged. For external procurement, the planned order should, therefore, be converted into a purchase requisition.

There are various possibilities available to you for converting planned orders into purchase requisitions:

Individual Conversion

Partial Conversion

Collective Conversion

Collective Display Displaying Planned Orders

With the collective display, all planned orders which correspond to the specified selection criteria are displayed; for example, all planned orders of a certain MRP controller. To do this, proceed as follows:

Starting from the menu screen of mateiral requirements planning, select Planned order

Display

Collective display

The initial screen for the collective display now appears.

You have the option to search for planned orders by MRP controller, material, run schedule header, version or production line.

The following procedure uses Search for planned orders via MRP controller.

Select an MRP controller number and choose

A dialog box appears.

Enter the plant and MRP contoller number.

If you want to narrow down the selection further, enter an end date, that is a date up until which the planned orders are to be displayed.

Press ENTER.

The system displays an overview of the all planned orders which correspond to your selection criteria.

From this overview, you have various options for processing the planned orders:

To display additional data for a particular planned order, select the appropriate planned order and choose

Display planned ord

A dialog box with additional data now appears.

If you want to change a particular planned order, select the appropriate planned order and choose

Change planned order

The details screen now appears in the change mode.

If you want to delete a particular planned order or planned orders, select the appropriate planned order or planned orders and choose

Delete

A dialog box appears in which you confirm that the system is to delete the planned orders.

If you want to display a pegged requirement for a particular planned order, select the appropriate planned order and choose

Pegged requirements

The pegged requirement screen now appears.

If you want to display an order report for a particular planned order, select the appropriate planned order and choose

Order report

The order report screen appears.

If you want to sort the planned orders differently, position the cursor in the column with the criteria by which you want to sort, such as the order start date, and choose

Sort

The system sorts the planned orders according to the sorting criteria chosen, according to the order start date, for example.

If you want to convert a certain planned order into a purchase requisition, select the appropriate planned order and choose

Convert -> planned ordpur. req.

If you changed or converted a planned order in this overview, it will then be recorded as being firmed (X in the Firmed column).

Individual Display Displaying Planned Orders

If you use the individual display, the system will only display one planned order. To do this, proceed as follows:

Starting from the menu screen of material requirements planning, select Planned order

Display

Individual display

The initial screen for the planned order display now appears.

Enter the number of the planned order you are interested in and press

ENTER

The planned order details screen is now displayed.

Displaying Planned Orders

There are two different ways to display planned orders:

Individual Display

In the individual display, you display one specific planned order.

Collective Display

In the collective display, several planned orders are displayed that correspond to your selection criteria, for example, all planned orders of a specific MRP controller.

Deleting Planned Orders

It may be necessary to delete a planned order. This can occur, for example, if the planned order in question has been firmed but it no longer matches the requirements situation.

If you want to delete a planned order, proceed as follows:

Starting from the menu screen of material requirements planning, select Planned order

Change

The initial screen for changing a planned order now appears.

Enter the planned order number and press

ENTER

You now reach the details screen for the planned order.

Select Planned order

Delete

A pop-up window appears to confirm that you really want to delete the planned order.

Verify the deletion by a double click of the mouse on Yes.

The system returns to the initial screen and reports that the Planned order was deleted.

Changing Planned Orders

It may be necessary to make changes to an existing planned order. This can occur, for example, if the planned order in question has been firmed but if it then received a rescheduling proposal during the planning run.

If you want to change a planned order, proceed as follows:

Starting from the menu screen of material requirements planning, select Planned order

Change

The initial screen for changing a planned order now appears.

Enter the number of the planned order to be changed and press

ENTER

The details screen now appears.

Make the necessary changes.

Save the changes with Planned order

Save.

If you have made changes to a planned order, it is then treated as firm for material requirements planning - exactly as was the case for a manually created planned order. Therefore, it will not be changed during the following planning runs.

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Formula for Calculating the Reorder Level Forecast Formulae

Formula for Calculating the Safety Stock Forecast Formulae

Formula for Evaluating the Forecast

Model: Second-Order Exponential Smoothing Forecast Formulae

General Formula for First-Order Exponential Smoothing Forecast Formulae

Model: Constant Forecast Formulae

Model: First-Order Exponential Smoothing Forecast Formulae

Model: Weighted Moving Average Forecast Formulae

Model: Moving Average Forecast Formulae

Forecast Formulae Overview

Planning File: Consistency Check

Creating Entries in the Planning File Automatically

Creating Entries in the Planning File Manually

Setting up Planning File Entries

Creating Entries in the Planning File

Displaying Entries in the Planning File

Maintaining the Planning File Overview

Collective Conversion in the Background Converting Planned Orders into Purchase Requisitions

Collective Conversion Converting Planned Orders into Purchase Requisitions

Partial Conversion Converting Planned Orders into Purchase Requisitions

Individual Conversion Converting Planned Orders into Purchase Requisitions

Converting Planned Orders into Purchase Requisitions

Collective Display Displaying Planned Orders

Individual Display Displaying Planned Orders

Displaying Planned Orders

Deleting Planned Orders

Changing Planned Orders

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