The document describes the integrated material planning process within ERP systems. It involves four main steps: (1) sales and operations planning (SOP) where a production plan is created at the product group level, (2) disaggregation where product group requirements are translated to individual material requirements, (3) demand management where customer orders are incorporated to revise material requirements, and (4) material requirements planning (MRP) where procurement proposals are created to ensure sufficient material availability. Reporting tools provide information on the planning situation including a stock/requirements list, MRP list, and planning result report. The overall goal of material planning is to balance supply and demand of materials so the right quantity is available when needed.
2. INTRODUCTION
Material planning is concerned
with answering three basic
questions:
(1) What materials are required
(2) How many are required
(3) When are they required?
Objective:
To balance the demand for materials
with the supply of materials so that an
appropriate quantity of materials is
available when they are needed.
Figure 8-1: A basic material planning process
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3. MASTER DATA
Master data includes:
• Bill of material
• Product routing
• Material master
• Product group.
Procurement Type - indicates whether a material is
produced in-house via the production process or
obtained externally via the procurement process,
both, or none.
Figure 8-2: Material master data for material planning
Figure 8-3: Consumption-based planning
MRP type specifies the production control
technique used in planning.
• Consumption-based planning,
• Materials requirement planning2 (MRP)
• Master production scheduling (MPS).
MATERIAL MASTER
Data related to MRP
and work scheduling
divided into four
views.
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4. Master production scheduling (MPS),
which utilizes a process similar to MRP but
focuses exclusively on the requirements
for the top-level items in the BOM.
Figure 8-5: MRP vs. MPS
Scheduling Times
• In-house production time
• Setup time
• Processing time
• Interoperation time
• Planned delivery time
• GR (goods receipt) processing time.
Planning Time Fence
Companies establish a period of time in
which the ERP system is not allowed to
automatically change procurement
proposals.
Lot Size Key- A lot size is the quantity of
material that is specified in the
procurement proposals generated by the
material planning process.
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5. • Bill of Material(BOM) identifies the materials needed to produce a finished good.
• Availability check group defines the strategy the system uses to determine whether a
quantity of material will be available on a specific date. The most common method, called
available-to-promise (ATP)
• Strategy group specifies the high-level planning strategy used in production. Production
planning strategies fall into three broad categories: make-to-stock, make-to-order, and
assemble-to-order.
• Consumption Mode
o When a CIR consumes PIRs, it reduces the quantity of PIRs by the quantity of the CIR.
This process is called consumption.
o In backward consumption, customer requirements consume PIRs that are dated prior to
the time of the customer requirements.
o In forward consumption, customer requirements consume PIRs that occur after the date
of the CIR.
o The consumption period indicates the number of days, before or after, from the CIR that
PIRs can be consumed.
• PRODUCT GROUPS- products are aggregated into groups. A proportion factor is a measure
of how much the item influences the product group.
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6. Figure 8-7: GBI product groups
Figure 8-9: The material planning process
• The first step in the process is sales and
operations planning (SOP).
• SOP is a forecasting and planning tool
that businesses use to enter or
generate a sales forecast.
• SOP creates a production plan at the
product group level.
• Requirements must be translated
into PIRs for the individual materials
in the product group
(Disaggregation).
• The PIRs for the individual materials
are then transferred to demand
management, where they are revised
and refined.
• MRP, creates specific procurement
proposals.
MATERIAL PLANNING PROCESS
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7. STEP ONE: SALES AND OPERATIONS PLANNING
Figure 8-10: Elements of the SOP step
Figure 8-11: Data in the SOP step
• SOP is triggered when the organization
wishes to revise its production plan.
• In standard planning a company uses
predefined planning models.
• With flexible planning a company uses
tools to develop more complex planning
models that contain far greater levels of
detail.
Data
Most critical data are a sales plan,
existing inventory levels, and
inventory requirements.
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8. Tasks
• The tasks in the sales and operations planning step include creating the sales
plan, specifying inventory requirements, and creating a production plan.
• The interface to complete the tasks in SOP is a simple-to-use spreadsheet-like
tool.
Figure 8-12: Standard SOP planning table
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9. STEP TWO : DISAGGREGATION
• This step translates the plans into the plans for the finished
goods in the product group hierarchy.
Figure 8.13 ELEMENTS OF THE DISAGGREGATION STEP
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10. STEP THREE : DEMAND MANAGEMENT
It calculates revised PIRs for the materials using the PIRs from SOP (after
disaggregation), actual customer orders (CIRs) from the fulfillment process,
and data from the material master regarding planning strategies.
Figure 8.14 ELEMENTS OF THE DEMAND MANAGEMENT STEP
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11. STEP FOUR : MATERIAL REQUIREMENT PLANNING
• It calculates the net requirements for materials and creates
procurement proposals—to make or buy the necessary materials—that
ensure that the organization will have sufficient material available to
cover its requirements.
Figure 8.15 ELEMENTS OF THE MATERIAL REQUIREMENT
PLANNING STEP
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12. Tasks in the MRP step. These steps are
performed automatically by MRP.
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13. REPORTING
Important tools that convey information about the
planning situation:
• the stock/requirements list,
• the MRP list, and
• the planning result report.
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14. CHAPTER SUMMARY
Material planning is one of the most complex processes in an organization. The main
objective of material planning is to balance the supply of materials with the demand so that
a sufficient supply of materials are available when they are needed. Material planning is
concerned with answering three basic questions:
(1) What materials are required;
(2) how many are required; and
(3) when are they required?
Material Planning Process
a) SOP
b) Disaggregation
c) Demand Management
d) Material Planning Process
Reporting in material planning is limited to relatively few reports but includes three
important tools to obtain information about the planning situation: the stock/requirements
list, the MRP list, and the planning result report.
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