SAP MM: Forecast Parameters

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Splitting the MRP Forecast Requirements

For material requirements planning, it is possible to split the period requirements into smaller periods. For example, monthly forecast values can be split into weekly or daily quantities.

You set the splitting indicators in the material master record in the Splitting indicator field.

If you have selected a daily split, the system distributes the forecast requirement, which has been reduced by the actual consumption values, over the remaining workdays in the month.

The requirements split is identical for both the consumption-based planning procedure and the MRP procedure.

Effects on Consumption-Based MRP Planning Procedures

A forecast run has different effects on the different MRP procedures which support the forecast:

In the automatic reorder point planning procedure, the reorder level and the safety stock are automatically determined during the forecast run.

In forecast-based planning, the results of the forecast are copied into material requirements planning as forecast requirements and the safety stock level is calculated.

In both of the above cases, the statistical total consumption fields of the material master data is the basis for forecasting. You can find more precise information on this subject in Overview.

Reducing MRP Forecast Requirements

Forecast requirement values created during the forecast run are displayed on the time axis as issues:

When calculating the current stock/requirements situation (displayed in the stock/requirements list), the system reduces the current period's forecast requirements by the consumption figures from the same period which have already been posted.

The same procedure is also used for calculating material requirements, that is, the system successively consumes forecast requirements with withdrawal postings.

In MRP, the reduction of forecast requirements only differs in two aspects:

the results of the forecast are available for planning as forecast requirements for unplanned consumption.

forecast requirements are reduced by unplanned consumption from the same period which has already been posted.

The results of the forecast are transferred to material requirements planning as forecast requirements and are displayed on the time axis. In the following example, the reduction of forecast requirement quantities is shown by consumption.

Reduction of forecast requirement quantities

	Forecast reqmt	Available for plng	Withdr. posting	Reduction	After reduction
Period 1	1000	1000	400	400	600
Period 2	1000	1000	0	0	1000
Period 1	1000	1000	1200	1000	0
Period 2	1000	1000	0	200	800

Goods issue results in a withdrawal posting and reduces the current period's forecast requirement by the amount withdrawn. If the goods issue was higher than the corresponding forecast requirement, the remaining amount is subtracted from the following period's forecast requirement.

In this example, a goods issue of 400 pieces was posted in the first period. As a result, the forecast requirement of 1000 pieces was reduced by 400 pieces. In the first period, 600 pieces are still available for planning.

If consumption (that is, the goods issue) (1200) in the first period is higher than the original forecast requirement (1000) then the forecast requirement for the following period (1000) is reduced by the remaining amount (1200 - 1000 = 200). That means that in the first period, 0 pieces are still available for planning and in the second period, 800 pieces.

Material MRP Forecast

The results of the material forecast are frequently used as a basis for SOP. In MRP, the forecast values calculated during the forecast run result in purchase requisitions or in planned orders and they can also be used for determining safety stock and reorder levels.

Significance of the Material MRP Forecast for Materials Planning

Changing the Forecast Result

You cannot directly change the forecast values which were calculated by the system. You can only do this by means of a corrected value. This is necessary in the following cases:

if less will be produced than was forecast, due to forthcoming company holidays

if higher consumption is expected than was forecast due to a forthcoming advertising campaign

To change the forecast values, follow the steps as described below:

Either start from the menu screen of the forecast:

Select Individual forecast ® Change, then enter the material number and the plant and press ENTER . The Parameter Overview screen now appears.

Alternatively, you can start from the reprocessing list:

In this case, you select the material you want by selecting, Choose . In this way you also arrive at the Parameter Overview screen.

To call up the forecast values calculated by the system, select Goto

Forecast

values.

The Forecast Values screen then appears.

You make the changes to the forecast values calculated by the system here. To do this, you enter the corrected values in the Corrected value field for each period which the system is then to use in a future planning run .

After you press ENTER , the system sets an indicator in the Fx field which specifies that the forecast values are fixed and will no longer be automatically changed during subsequent forecast runs.

If you want to fix the forecast values without entering corrected values, then you must manually select the Fx column. Once again, the values will no longer be changed during subsequent forecast runs.

Save the changed values with Forecast

Save

It is also possible to store correction factors for different periods in Customizing. The system uses these correction factors to weight the forecast values as well as the past consumption values.

Checking the MRP Forecast Result in Online Mode

Errors or exceptional situations which appear during the total forecast are recorded in the exception messages and are allocated to a certain error class. If an error occurs in a material forecast, then the system marks the material for which the error occurs for reprocessing.

If you want to check the forecast result in online mode and reprocess the marked materials, proceed as follows:

Starting from the menu screen of the forecast, select Forecast

Total forecast

Reprocess.

The initial screen for Forecast Reprocessing appears.

Enter the plant and the MRP controller number.

If you want to limit the selection to a certain interval, you must enter the appropriate period indicator.

Furthermore, you can limit the selection of exception messages to one particular error class by selecting various error classes. The following Table shows which types of exception messages exist and to which error class they are allocated.

Description of error classes

Exception message	Error class
Reorder level and safety stock	1
Model selection and test	2
Initialization	3
Parameter optimization	4
Difficulties during the forecast	5
Forecast not calculated	6
Missing table entries	7
Terminations	8

Press

ENTER

A list of materials now appears displaying those materials for which one or more forecast errors occurred and which correspond to your selection.

Position the cursor on one of the materials and select,

Choose

The Parameter Overview for the selected material now appears.

To display the exception message, select Details

Messages

A screen with the corresponding exception message appears. You can now see what caused the error during the forecast.

Example:

The MRP controller did not enter any historical values when creating the material master record. You must now respond to this situation with manual initialization.

Change the material master record by setting the initialization indicator to

Then, select the material to be reprocessed from the reprocessing list and branch into the Forecast Parameter screen.

Carry out an individual forecast for the material. A pop-up window appears, in which you can maintain the parameters corresponding to the forecast model.

Press

ENTER

The system carries out the forecast and displays the forecast value with the message:

Forecast calculation was carried out.

Check the forecast values and then save the result via Forecast

Save

. The system returns to the overview screen and displays the message:

The forecast values were saved.

By saving the new forecast result, the system then records that the material in question has been reprocessed and this material will automatically be deleted from the list of materials to be reprocessed.

Checking the MRP Forecast Result Using a List

In order to print out a list of materials from a certain plant which were included in a forecast run and which you want to use for checking the forecast results, follow the procedures described below:

Starting from the menu screen of the forecast, select Forecast

Total forecast

Print

The initial screen for Material Forecast Printing appears.

Enter the plant, for which you want to print out the forecast result, as well as a period indicator if you want to limit the selection to a certain time interval.

If you also want a printout of the process and exception messages which were created during the forecast, select the Log field.

Press

ENTER

The Print Parameters screen now appears.

Specify the print parameters, for example, the printer on which the list is to be printed, and then select the Print button.

For more detailed information on printing procedures, see Getting Started With the R/3 System.

After the system has created the list of all the material forecasts, the screen with the list of results appears and you can see exactly how many material forecasts the printed list contains.

Printing the list in background mode

If the forecast was carried out in background mode, it is also possible to print out the list in background mode. You do this as is described below:

Starting from the menu screen of the forecast select Forecast

Total forecast

Print (background)

The Background Request screen appears.

Using a background request means that you can plan the print for a later date and you can start it for a certain variant.

You can read more about background request procedures in ABAP/4: Generating and Printing Reports.

MRP Forecast Result Index

How Does the System Optimize the Smoothing Factors MRP Forecast Parameters

The process of the ex-post forecast described above is used for parameter optimization in order to optimize the smoothing factors. In the article master, you can store whether parameter optimization is to take place during the forecast and if it is to take place, the degree of optimization you want to select.

When a forecast is carried out with parameter optimization, the system will start from an initial value and then gradually increase the increment of the smoothing factors in every simulation run. (This constitutes the first stage of the ex-post forecast.) The increment in this case is specified in the article master record by the optimization level. The system then further analyzes the situation for the parameter combination with the smallest MAD (second stage). The optimum parameter combination is the combination which has the lowest possible MAD.

Monitoring the Selected MRP Forecast Model

In the course of time, the characteristics of a consumption series can change. In order to be able to react to this in time, the system calculates a so-called tracking signal during every forecast. The tracking signal links the error total (FS) and the mean absolute devialtion (MAD) in the following manner:

Tracking signal = │ FS/MAD │

The forecast error is the difference between actual consumption values and the forecast values from the same period whereas the error total is the sum of all the forecast errors in a consumption series.

The error total is used to check the validity of the forecast model in operation.

If a model is still valid, that is, if the consumption series has not changed, then you can assume that the error total is distributed normally and has an average of zero.

If the consumption pattern has changed, however, the error total will no longer be equal to zero. You must standardize the calculated forecast error in order to set boundaries. Therefore, in addition to the error total, the system also calculates the mean absolute deviation (MAD) as a second value. The system then adds the errors (irrespective of the plus or minus sign) and divides them by the number of consumption values. The first-order exponential smoothing procedure is used to calculate the MAD. The smoothing factor used for this is the delta factor.

Using the quotient from the error total and the MAD, the system can now define a warning limit, the tracking signal which it then compares with the tracking limit specified in the article master. When the tracking signal is greater than the tracking limit, the RP controller receives a message stating that the forecast model should be checked.

After a model change or a forecast model initialization, the error total is automatically reset to zero and the MAD to its initial value.

The system automatically sets the tracking limit (the default value is 4.00). You can change it, however, when maintaining the article master record.

Ex-Post Forecast MRP Forecast Parameters

The system carries out an ex-post forecast for the initial forecast if more past values are available than are required/are to be used for initialization. It also carries out the ex-post forecast during parameter optimization, model initialization and for evaluating the accuracy of the forecast.

The system only carries out the ex-post forecast for subsequent forecasts when there is a gap of more than one forecast period between the last forecast date and the current forecast date. For technical reasons, the series of forecast values must be recalculated for every period. Since this requires a lot of time and effort for articles which are forecast daily or weekly, you can now make up for periods which you have "omitted" from the forecast. This means that it is no longer necessary to carry out the forecast for each period as the missing values can be provided by a later forecast. This is then achieved with the help of the ex-post forecast.

Calculating the Safety Stock and the Reorder Level MRP Forecast Parameters

If a warehouse that stores article has to be ready for delivery at all times, then there has to be a high level of safety stock in this warehouse, as forecasting error cannot always be ruled out. This would also entail a high level of warehousing costs. The level of safety stock depends on the service level you select, on the replenishment lead time and on the accuracy of the forecast.

In order to keep the safety stock and therefore the storage costs as low as possible, the RP controller usually specifies a service level for each article. From a mathematical point of view, the service level represents an organization's ability to avoid a shortfall occurring during replenishment lead time.

If you opt for a relatively high service level, then the safety stock level calculated by the system will also be high. If you opt for a low service level, then the safety stock level will also be low.

The replenishment lead time refers to the in-house production time for in-house production and the planned delivery time for external procurement. It represents the time between the initiation of a procurement procedure and transferring the article into the warehouse. The replenishment lead time is stored at site level in the article master record by the RP controller. Since the probability of a shortfall is higher in a longer period, the safety stock level must also be set higher for long replenishment lead times.

Finally, the safety stock level also depends on the accuracy of the forecast . If the forecast deviates greatly from the actual consumption values, then the safety stock level will also be unusually high.

In addition to the safety stock level, the system recalculates the reorder level for articles which are subject to automatic reorder level adjustment. The reorder level is the sum of the safety stock and the forecast requirement within the replenishment lead time or the overall lead time for articles produced in-house.

The system compares "static" availability during article withdrawal; that is current availability, without taking future requirements into consideration, with the reorder level. In other words, it compares the remaining stock with the reorder level. If remaining stock falls below the reorder level, then the system marks the article for the planning run by making an entry in the planning file. During the next planning run, the system automatically generates a purchase requisition or a planned order for the article.

You can find a list of the various formulae for calculating the safety stock level and the reorder level in Overview

Calculating the MRP Forecast Values

The forecast calculates the forecast values by using various mathematical formulae which evaluate historical data. The accuracy of the forecast basically depends on the extent and quality of the data that is available.

You only enter historical values when you create a new article master record or when the system creates a new article master record via batch input. The system then generates these values using withdrawal postings.

The system recalculates the basic value and the trend value for each forecast by using the smoothing factors and the most recent consumption values. The smoothing factors are the weighting factors used for historical data, with the values from the most recent period playing a more important role in the forecast than the values from previous periods. The greater the smoothing factors you select in the article master, the faster the forecast values are adapted to the actual past consumption values.

For more details on the forecast formulae see Overview

If your system is set so that the forecast values are to be taken into account for a planning run, then a so-called planning file entry is automatically made by creating a forecast requirement independent of the forecast result. In turn, this planning file entry initiates a new planning run for the articles affected.

For articles planned by reorder point planning, however, a requirements planning run is only initiated if the new reorder level, recalculated during the forecast, differs from the old level.

Carrying Out the Total MRP Forecast in Background Mode

To start the total forecast in background mode, from the menu screen of the forecast, select Forecast ® Total forecast ® Execute (background).

The initial screen for Background Request appears.

Here, you can either start the forecast run immediately or you can plan it to start at a later date by means of a selection variant. The forecast is then carried out in background mode. More detailed information on background request procedures can be found in the SAP document ABAP/4: Generating and Printing Reports.

A repeat forecast (that is, the forecast is carried out again for a certain period) is not possible for the total forecast either in online or in background mode.

Carrying Out the Total MRP Forecast

If you want to carry out the forecast for all the articles in one certain site or in all sites, then you must carry out a total forecast. A description of how to do this is given in the following paragraphs:

From the menu screen of the forecast, select Forecast

Total

forecast

Execute

The initial Forecast screen appears for carrying out the total forecast.

Enter the required data:

Site

Enter the site for which the total forecast is to be started. If you do not enter a site here, the forecast is carried out for all sites.

Period indicator

This indicator specifies the time period for which the forecast values are managed in the system. The options given mean the following:

M - Monthly

W - Weekly

T - Daily

P - Period according to fiscal year variant

All those articles which have the same period indicator in the article master record as the indicator you enter here are included in the forecast.

Forecast execution

Indicator A means that the forecast will be carried out for the current period and indicator F means that the forecast will be carried out for the following period.

Save

Select this field if you want the forecast result to be stored in the system.

Log record

If you select this field, a list is displayed after the forecast run of all the articles for which forecast values were created. The list also contains the process and exception messages.

To start the forecast run, press

ENTER

The corresponding texts for the entries now appear and you are requested to check your entries.

Press

ENTER

The following message will appear:

Total forecast to be started. Please press ENTER .

Press

ENTER

again.

When the forecast run is complete, you receive a list of all the articles which were included in the forecast if you filled in the Log record field. If not, then no list will appear.

The total forecast must be carried out periodically. The time intervals available are; monthly, weekly, daily, or per accounting period. If you carry out the forecast on a daily basis, then, for articles that are planned using time-phased planning, the system only includes the articles whose turn it is according to the RP date.

If past consumption values are known at the end of a period, the system will use them as a basis for carrying out the forecast for the next period.

Subsequently, the forecast results can be printed out. The print program prints the forecast results which have automatically been sorted according to company code, site, RP controller and highest error number. For more information on this subject, see Overview.

Carrying Out the Individual MRP Forecast

Carrying out the forecast for a particular article in a particular site is known as the individual forecast. You carry out an individual forecast as is described below:

From the menu screen of the forecast, select Forecast

Individual

forecast

Execute

The initial Forecast screen appears.

Enter the article number and the site for which you want to carry out the forecast and press

ENTER

The Parameter Overview screen now appears. This screen displays the following information:

– the last forecast date

– data, copied from the article master record

– parameter values, which were calculated as a result of the previous forecast

If no forecast has yet been carried out for this article, the Last forecast field is empty and the message Until now no forecast values were saved appears.

From this screen you can display the historical values by selecting Goto ® Historical values and if a forecast has already been carried out, you can display the forecast values by selecting Goto ® Forecast values.

To carry out the forecast for the article, select

Proceed

A pop-up window now appears where the date of the first day of the period is suggested.

If you choose to overwrite the forecast date, please note that the date you enter must lie within the current or the following period.

Select

ENTER

The forecast is carried out. The Forecast Values screen then appears and the following message appears:

Forecast calculation was carried out.

Check the individual values.

You now have the option of manually changing the forecast values calculated by the system by entering new values in the Corrected value column.

The system then uses these new values as a basis for the future planning run.

Return to the Parameter Overview screen, and select, Details

Addtl

parameter.

A pop-up window appears with the additional parameters.

Select

Cancel

to return to the Parameter Overview screen. Here you can check the exception messages which were created during the forecast with Details

Messages

Return to the Parameter Overview screen and save the forecast values by selecting Forecast

Save

If you manually change a forecast value, then you should check the actual consumption value that results for this period later and correct it, if necessary.

MRP Forecast Options

There are several possibilities available to you for carrying out the article forecast:

You can carry out the individual forecast. This means that you carry out the forecast for a certain article in a certain site.

Carrying Out the Individual Forecast

You can carry out the total forecast. This means that you carry out the forecast for all articles of one particular site or for all sites.

Carrying Out the Total Forecast

To improve performance, it is advisable to carry out the total forecast in background mode.

Carrying Out the Total Forecast in Background Mode

You can also carry out the article forecast from the forecast screen of the customized article master. Depending on the forecast parameters maintained here, you can carry out the forecast in simulative mode in several online steps. The functionality used for this is that of the single-item forecast for an article.

The forecast values are posted when you save the article master record. This also automatically adjusts the two RP parameters, the reorder level and the safety stock level.

Things to Think About Before Carrying out the MRP Forecast

Before you can carry out the forecast for an article, the following prerequisites must be fulfilled:

You must have maintained the forecast parameters in the article master.

You must have determined the period for which the system is to carry out the forecast. You do this by defining the period indicator in the article master. For each article, the forecast can be carried out on either a daily, weekly, or monthly basis, or alternatively, according to accounting period.

You must already have determined how the system is to select the forecast model. This can either be done manually by the RP controller or automatically by the system. In the case of automatic model selection, you must make sure that the required number of historical values are available; the number required varies depending on the forecast model selected.

If no historical values were entered when creating the article master, you must carry out manual model initialization.

For a more detailed description of these prerequisites, see Overview

Before carrying out the forecast, you also have the possibility of revising an article's historical values which are normally automatically updated by the system during withdrawal postings. On the one hand, you can achieve this by doing one of the following;

manually changing the values in the article master by means of the correction values

correcting the weighting factor for the historical values in customizing - for the weighted moving average model.

On the other hand, you can reduce the number of periods to be taken into consideration by limiting the number of historical values in the article master. This means that not all of the historical values are used for the forecast, and instead, only the number of values that you enter.

If a structural interruption appears in the time series of past values stored in the article master record, and if for the next forecast you only want the system to take those values into account which lie after the interruption, then you do this by entering the appropriate number of past time periods in the Historical values field.

Consumption values not determined by the SAP System can be maintained directly with the following exception.

Consumption values for the period in which the article was created as well as in the previous period. These periods can only be influenced by consumption postings for the respective period.

Carrying Out the Forecast Overview

This section provides a description of the article forecast in the SAP System. The following topics are covered:

Things to Think About Before Carrying out the Forecast

Forecast Options

You will also learn the various procedures that are carried out in the system during subsequent forecasts. This includes the following:

Calculating the Forecast Values

Calculating the Safety Stock and the Reorder Level

Ex-Post Forecast

Monitoring the Selected Forecast Model

During the first forecast run, the system also carries out the following procedures:

Model Initialization

How Does the System Optimize the Smoothing Factors

Model Selection

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Splitting the MRP Forecast Requirements

Effects on Consumption-Based MRP Planning Procedures

Reducing MRP Forecast Requirements

Material MRP Forecast

Significance of the Material MRP Forecast for Materials Planning

Changing the Forecast Result

Checking the MRP Forecast Result in Online Mode

Checking the MRP Forecast Result Using a List

MRP Forecast Result Index

How Does the System Optimize the Smoothing Factors MRP Forecast Parameters

Monitoring the Selected MRP Forecast Model

Ex-Post Forecast MRP Forecast Parameters

Calculating the Safety Stock and the Reorder Level MRP Forecast Parameters

Calculating the MRP Forecast Values

Carrying Out the Total MRP Forecast in Background Mode

Carrying Out the Total MRP Forecast

Carrying Out the Individual MRP Forecast

MRP Forecast Options

Things to Think About Before Carrying out the MRP Forecast

Carrying Out the Forecast Overview

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