Segmentation for Replenishment Strategies

Your materials should be categorized into product portfolios the material planners have responsibilities for. And the most common object to do this with in SAP is the MRP controller on the MRP1 field in the material master. If you do that, you can monitor your portfolio in MD06 and MD07, the collective MRP or stock / requirements lists.

And you can also use a variety of standard reports in the LIS to perform inventory analysis, determine a purchasing effectiveness or classify your portfolio for a replenishment strategy segmentation. This segmentation will help you to group your purchased parts into classes and assign replenishment strategies, the way you want to trigger replenishment (which quantities and when) for your materials.

In an effort to determine the best strategy for every purchased part, you can use three buffers to reach two conflicting goals which you must balance to the best of your abilities, using the method of segmentation:

There are many parameters you can use to perform an ABC / XYZ classification. I would suggest to use purchase value for ABZ and consumption value or volume for XYZ segmentation. The ABC analysis can be executed within standard SAP ERP; for the XYZ analysis you need Excel (export 12 months of consumption and determine average and standard deviation. Then divide one by the other and you will get a Coefficient of Variation) or you use an Add-On tool by SAP Consulting like the MRP Monitor. (The MRP Monitor allows you to perform an XYZ and ABC analysis and also allows you to update your material master records en masses after each analysis – drop me an email if you need more info on SAP Consultings Add-On tools for ERP and APO)

After you performed the analysis you have segmented your portfolio and can now assign your strategies. It is important to understand that a replenishment strategy is not just PD or V2, but rather a combination of MRP type, lot sizing strategy, safety stock procedure, forecast settings and more.

Here is an example of how your segmentation could look like. As your materials fall into a certain class, you can pick form the various strategies…