Saturday, April 26, 2014

Effective Materials Planning with the MRP Monitor

The outcome of Materials Planning depends to a very large part on the policies you set for the individual materials. Supply chain optimizers in SAP teach a lot about policy... should you use a reorder point procedure, a PD pr maybe a material forecast to tell MRP when to order how much? They also go into what lot size procedure is fitting and how to determine a safety stock and in some other cases they suggest a dynamic safety stock calculation with a range of coverage profile.

Those are all valid and absolute necessary teachings, but the question is: what do you do with your portfolio once you understand all that and know what to set up? If someone tells you to go to the LIS to find out - for each material individually - if there is consistency in consumption, go to document evaluations to run a dead stock report that takes up hours, look in the material master what the replenishment lead time is and expects you to then set up policy for every one of your 5,000 materials... run! You should certainly not pay for that because as soon as they're gone you will find out that the materials controllers will give up on that impossible task.

Unfortunately, in SAP you can not perform an XYZ analysis for consumption consistency or a life cycle classification. And unfortunately, in SAP you can not update a group of materials with a common policy (except with the MRP Group on the MRP1 screen. But that record has only a limited amount of fields available and does not allow for the setting of a complete policy). So you would have to go to many different transactions to carry out your analysis and some things you would have to do in Excel.

The solution is the SAP-developed MRP Monitor. It doesn't come with the standard sofware, but it is developed within SAP by SAP. The MRP Monitor runs every month and classifies your entire portfolio into six dimensions - ABC for consumption value, XYZ for consumption consistency, EFG for lead time, UVW for price, LMN for volume or size and life cycle class. Once the segmentation / classification is done, you hit a button and the class is saved in every material.

What a materials planner can do now, is to pick all the materials in one class and give it a fitting policy - to all of them at once. You can do that manually by filling in the according fields in MRP1 to MRP4, the work scheduling screen and the forecasting screen, or you save the policy in the provided table and let the system do the work. Following you can see the table with pre-configured policies that the MRP Monitor uses to update entire groups of materials

Now, you'll have to go slow with this type of mass update and make sure you understand everything that's happening here. In my engagements I sometimes suggest to break down the portfolio into three buckets:
- XX3 where you can put all materials with no consumption over the past 12 months - I then update these with the policy "PD with no safety stock" so that we don't hold inventory on any of them
- then there is bucket 2 - XX2 - in which all active items remain. You can the run the MRP Monitor and pick a class for which you know the policy. as an example pick all C (low risk), X (high consistency in the past) and E (short lead times) and provide all of them with the policy "V2 (auto reorder), FX (fixed lot size), forecast data (for reorder and saftey stock calculation) and MRP Controller XX1". That will update all these materials with a fitting policy and puts all of them into the bucket XX1
- now you can update the policy for the XX1 bucket automatically by saving previously mentioned "V2" policy in the table. as long as the criteria remains the same - C,X, E - we can calmy watch how the automatic policy update does its magic.

This way you can gradually move from manual activity (without the MRP Monitor), to focused analysis and  manual policy updates for groups (in bucket XX2) to fully automated and effective materials planning in bucket XX1.