MRP - Material Requirements Planning in SAP Business One

MRP (Material Requirements Planning) and ERP are a pair of siblings in which it is not quite clear which of the two is the older. Even the latest ERP variants cannot deny their roots, which go right back to requirements planning. It's basically about determining what is needed, how much is needed and when.

Material requirements planning is still easy to master for the production of lower vertical integration and/or smaller quantities. For complex products and larger production quantities, correspondingly more complex calculations are required. Planned production is an essential building block for the scheduling of equipment and skilled labour. Inventories are generally a significant cost factor for the company's operations and one of the biggest factors influencing the manufacturer's profitability.

MRP for different types of companies

Although we tend to think of MRP as a function exclusive to manufacturers, it is important to realise that the term "manufacturer" can be defined very broadly. In MRP terms, a manufacturer is any company that acquires components or materials and transforms them in some way. These companies can pursue very different tasks:

Retailers who pack goods or assemble collections of items into "sets" or combinations for resale as a unit
Dealers who assemble customised product configurations to order (stocking of main and optional additional components and subsequent assembly of the customised product for shipping)
Service providers who assemble packages of documents, equipment, supplies or other physical items that they provide to customers/clients/patients
Management of commercial buildings, clinics, public authorities, housing administrations, etc.- for the management of stocks and equipment based on expected use
Catering businesses that use a specific form of MRP to manage ingredient and stock levels and replenishment

The process of material requirements planning

A modern MRP system is a highly integrated, self-contained system that covers the entire company. It registers all processes in material requirements planning and ERP, a pair of siblings in which it is not quite clear which of the two is the older one, and communicates continuously with the planning and scheduling systems. It follows the following steps:

Precise definition of what needs to be manufactured. The design department is responsible for creating and managing the bill of materials for all end products and sub-assemblies. The end product can consist of several sub-assemblies. Each sub-assembly can consist of two or more components, and each component can contain several parts. A bill of materials therefore describes the order in which the material is required, which parts are dependent on other parts and how many of each are required.
The system calculates the required quantity and date for the end products needed to meet demand. The calculation is based on customer orders and forecasts from the sales department, minus the expected stock level. Some companies focus more on customer orders, while others use a mixture of orders and forecasts to plan future production.
Based on Parts list and production planning for all products, the MRP run determines step by step the assemblies, components and materials that need to be produced or purchased during the planning period. The required quantities are then compared with the available stock levels to determine the shortfall for each component. With the help of previously defined parameters, such as the batch size, the correct "make or buy" quantity is determined for each item. The correct start date for procurement is then calculated, using either the purchasing or production lead time as required,

The MRP processes in SAP Business One

Set up from base data

The prerequisite for carrying out MRP is the definition of planning data. The most important data is defined in the article master record (referred to as the material master record in SAP ECC / S/4 Hana) or at the level of the article group and then inherited in the data records of the articles belonging to this group. When an item is produced, the associated bill of materials (list of components) is also considered a planning element.

Forecasts for material requirements planning

A forecast for the expected demand can also be added. This can be a basic forecast
or a so-called intelligent forecast.

In the basic forecast, the user defines the forecast period and selects the frequency with which the item quantity is managed. The user then enters the quantities manually. After saving, the user can adjust the quantities freely and easily at the touch of a button, but the frequency cannot be changed.

With intelligent forecasting, the system offers various algorithms that predict future sales based on historical data. The user can select the intelligent forecast by supplier, warehouse or product range. The forecasts can be revised if the user changes the dependent data. Customised calculation methods can also be used to meet the desired requirements.

MRP Assistant

Replenishment is carried out with the help of the replenishment assistant. Its task is to analyse stock levels, supply and demand and to generate recommendations for internal (production, stock transfer) or external (purchasing) procurement based on the figures determined. In practice, supply and demand refers to open documents such as purchase requisitions, purchase orders, orders, production orders, sales offers and order forecasts. Of course, the figures are influenced by various factors such as minimum/maximum stock, batch size, lead time for receipt, etc.

Taking all these factors into account, MRP generates as many recommendations as necessary to satisfy demand at the time it is due. At the same time, the quantity that needs to be kept in stock is minimised. The MRP assistant runs in the following steps:

Select a scenario from the list, or create a new scenario
Definition of the planning horizon for the scheduling recommendations and setting the lead time calculation
Selection of items relevant for the MRP run
Selection of run scope (company level or warehouse level)
Determination of the document sources relevant for the supply and demand calculation
Generation of disposition recommendations

Display of MRP results in SAP Business One

Once the MRP wizard has run, a window with the MRP results appears. There, the user can check information about the opening stock, supply and demand as well as the closing stock. It is also possible to click on a cell to see the details of the information and thus understand how this quantity was calculated.

Conversion of material requirements planning

The user can convert the recommendations issued into actual orders (either for internal or external procurement) by using the Order Recommendation function. This includes a separate window that contains the data displayed in the MRP recommendation. The user can enter all the necessary adjustments The user can make adjustments to the order, such as changing the supplier/quantity/date, selecting the document type, etc. Via the context menu, he also has access to specific reports that can help him make decisions about necessary adjustments. Consolidation of documents for the same supplier to achieve economies of scale.

SAP B1 blog