Saturday, October 13, 2012

Tools for strategic materials planning in SAP

There is a dilemma with materials planning in SAP! I even go as far as saying "if you have more than 500 materials, it is impossible to perform effective materials planning with standard SAP ERP - unless you hire 20 materials planners".

Before I can give weight to this statement, we will have to take a few steps back and explore what constitutes 'effective materials planning'. I believe that any materials planner's activities should include a thorough classification or segmentation of their portfolio. This segmentation needs to be carried out periodically (monthly, quarterly, yearly depending on the type of business you are in) since the world is changing and what was consistent yesterday might be inconsistent tomorrow.

This segmentation should at least include an ABC analysis for value and an XYZ analysis for variability but an 'effective materials planning' tool should also include EFG (for lead times), UVW (for price and cost), LMN (for volume or size) and LRODI (life cycle classification). After you perform these types of analysis, you have now segmented your portfolio into classes. That means you have now a subset of materials in the AXF class whereas others are classified in the CXW class. SAP standard has an ABC analysis but does not provide for any of the other ones.

Next, the planner would assign a policy to each class. A policy is a set of parameter combinations which drive automation and follow a certain strategy to handle the materials. PD is not a policy! But in combination with a coverage profile, lot size indicator 'WB' and strategy group '40', it becomes one. In fact every materials planner should have a set of policies to choose from when performing effective materials planning. In standard SAP there is unfortunately no routine that could possibly check on the consistency of a value combination for a policy. That would be an impossible task since the possible combinations are endless.

Now the biggest problem with policy setting is the work that is involved when manually updating one material at a time. A lot of people would argue that you have to update one at a time because that helps the planner to understand the various settings. I agree wholeheartedly that the planner has to understand every field in MRP 1, 2,3 and 4, but, to make them update every material every quarter with the appropriate policy is an impossible task.

So what should you do? Build yourself a library of policies. If done right, this is a process of better understanding what each parameter does, but more importantly, what these parameters do when used in combination - as a policy. Once a library of policies exist, perform a segmentation and break your portfolio down into classes. Then assign to each class (and their respective materials) an appropriate policy - as a mass update so that you can perform this task periodically without having to spend an impossible amount of time updating individual materials. After you are finished, you use the exception monitor to perform your daily tactical planning.

As I mentioned before, standard SAP ERP only provides for an ABC analysis and to mass update a policy is not really possible (I know there is the MRP profile but it's cumbersome to use and does not provide all the parameters necessary)

A very effective solution is the Add-On tool 'MRP Monitor' by SAP Consulting. The MRP Monitor provides all the required analysis and has a function to select a specific class and update all the materials within that class with a respective parameter combination or policy

the screenshot above details the results screen of the MRP Monitor. In section (1) you can select various analysis strategies, in section (2) you can see the classification and a graphical representation in section (3). Section (4) provides a list of all materials within a specific class. You can now, as an example, select all AXF items and update these materials with a specific policy as shown below


using these tools - all developed by SAP, within the SAP namespace - your materials planners are now enabled to maintain ALL materials in their portfolio. But not only that - they can now also adjust the policy periodically when things are changing.

How can anyone with a portfolio of thousands of materials do without it?