cleaning your materials portfolio with the Add-On Tool MRP Monitor

Since I have come across the SAP Add On Tools last spring, we have rolled out many of these tools at 5 very happy customers, whose supply chain runs on SAP. At the center of it all is the MRP Monitor with its invaluable capabilities of segmentation and policy stratification. But there is so much more you can do with it and I wonder every day:

"How can anyone perform effective materials planning without it?"

So let me first address and explain my definition of effective materials planning:

"Effective Materials Planning is the process of maintaining the basic data of a materials portfolio so that it supports automation to keep optimal inventories that provide great service levels at any time under changing conditions"

To perform effective materials management with SAP you should perform tasks in four areas

- Portfolio Management where the planner needs to set up 'swimming lanes' and keep transparency and manageability
- Policy Setting which I consider the heart and soul of any planning system. Maintaining the right policy drives automation and the right inventory levels with optimized replenishment.
- Exception Monitoring to counter variability and the Unforeseeable.
- inventory Optimization to constantly capitalize on opportunities for lowering of cost and increase of availability and service level.

...and without the MRP Monitor

You can’t do selective portfolio management

You can’t set policy for more than one material at a time

Exceptions are not meaningful without good policy and selective portfolio management

Inventory optimization becomes an impossible undertaking

So here I am... In a very cold state, building an effective materials planning system with a client who installed MRP Monitor, Lot Size Simulator, Inventory Controlling Cockpit and the Service Level Monitor... All SAP native Add-On Tools.

The client runs their supply chain on SAP since the mid 90s and has undergone various optimization efforts with various degrees of success. The last one had cost them the price of a Learjet and delivered the value of a holiday trip to Elizabeth, NJ in January. The consulting company promoted and taught exception management with MD06 and a subsequent 'rule' setup in the material master... One item at a time! The fact that each materials controller had to manage about 5000 items didn't deter the 'thought leaders' from the opportunity to run a 6 months, revenue generating 'value' project (value for whom?).

To make a long story short... There were endless workshops on MRP types, lot sizes, safety stocks and various other fields in the MMR - all very important stuff - but nothing that helped managing a large portfolio and setting policy for optimized inventories or great service levels.

Then the client acquired the MRP Monitor! Now we're in the position to get the materials planners to take control over their parts. The first thing we did was to use the MRP Monitor and it's valuable KPIs to sort out the more important parts from the lesser to the least important parts to watch on a daily basis.  First we utilized the Monitors Life Cycle classification to list all items marked for deletion and moved those items into the MRP Controller bucket 'obsolete'. The MRP Monitor has a function with which you can update policy for many materials at the same time. You can also use that function to mass change a large number of materials - as an example: to move all items marked for deletion into the MRP Controller OBS.

the portfolio already shrunk from over 5000 parts to less than 2000.

Then we took one planner's MRP Controller key, listed all items and selected those which did not have one single movement over the past 12 months. (number of movements is a KPI in the MRP Monitor). Out of this list we excluded the 'new parts (again... this is a class provided in the Life Cycle analysis of the MRP Monitor). These non-movers we moved into an MRP Controller bucket "least important items to look at".

Then we moved all items with movements less than 80 per year into another MRP Controller bucket "less important items to look at" and everything else was left in the "important" MRP controller bucket, which by now included less than 500 items.

Now the fun began: Policy Setting! First we called up the MRP Monitor for  the "least important item" - about 3000 parts that had no consumption over the last 12 months. No need for overthinking on policy. Take everything of consumption driven policies to a PD and scratch all safety stocks. As mentioned before, the MRP Monitor allows for mass updates and we simply selected all items in that bucket, set PD, initialized (meaning we set that field to zero) the fields safety stock, safety time and Range of Coverage and so updated 3000 materials with a policy that instantly eliminated all exception messages and plans them only if there is demand. The Materials Planner will look at that bucket only once in a while and more is really not necessary.

Now we went into the bucket "less important items" that contained about 1500 items. Still a lot but manageable. What's of note here is that all the items that can not be classified (and had no movements) are out of the way, so whats left here is not super important but needs to be looked at. Good news is that all these materials have movements and are classified, which means we can set policy by class and segmentation.

And that we did. Now you take your high consumption value, consistent consumption, short lead time items and update them with a reorder policy and a fixed lot size - easily updated with the policy update functionality ion the MRP Monitor. Within hours we updated over 1500 materials with a fitting policy before we directed our attention to the 500 most important parts for that specific Materials Planner.

Again we called up the MRP Monitor Result, this time for the 500 most important parts, parts that have a lot of movement and are classified according to ABC for consumption value, XYZ for consumption consistency, EFG for lengths of replenishment item, UVW for price, LMN for volume or size and a life cycle classification (New, Regular, Obsolete, slow mover, marked for deletion, or dying). Now we will have to pay more attention, these are our movers and shakers and we can look at one segment at a time... and update any policy we'd like. to keep these parts optimized will take longer than before. But that's ok since these are the important parts. we'll also check on these more often and that's ok too. Because they are important.

And that is what Effective materials Planning is all about: separating the important movers and shakers from the bulk that can be set up with a policy that automatically takes care of them. These important 500 materials we need to tweak and pay attention to. they will make our planning or break it.

isn't this so much better than having to look at 5000 items every day? in MD06 or MD07? by the way... when those 'thought leaders' had finally optimized 300 materials after 6 months, the policy didn't fit anymore, the parts were discontinued and there were still 4700 materials left to be optimized.

effective Materials Planning without the MRP Monitor is not possible ! No matter how much money you spend on 'thought leaders'...