Lot Size calculations for the Procurement Proposals in an SAP MRP Run

Calculation of Lot Sizes for the Procurement Proposals

 

After analysing the shortage quantities (in the last step), SAP MRP run starts the process of creation of the requirement proposal/procurement proposal for the shortage quantity (where the available quantity is short). 

 

When creating the procurement proposal, it has to be adhere to the lot sizing procedure set in the material master MRP 1 view. This step explains the criteria on which the planning run creates lot sizes for the created procurement proposals. Along with adhering to the lot sizing, the MRP run also takes in to consideration all the other factors involved in the lot szing procedures such as minimum lot size, maximum lot size, rounding values, fixed lot sizes, safety stocks, dynamic safety stocks, service levels, scrap percentages, etc etc.

 

The Lot sizing procedures in SAP are categorized as static lot sizing procedures, periodic lot sizing procedures and optimum lot sizing procedures. The most famous lot sizing procedures are the static lot sizing procedures and periodic lot sizing procedures.

 

Static Lot Sizing Procedures

 

The static lot sizing procedures are namely – the ‘exact lot sizing’, fixed lot sizing and ‘replenish to maximum stock level’.

 

When the lot size is “EX” or exact lot size, the system creates planned orders or procurement proposals to cover the exact shortage requirement. The lot size is the whole shortage quantity required to satisfy the demand. That is, if the requirement is for a quantity of 112 units, the proposal will be created for an exact 112 units.       

 

On the other hand if the lot sizing procedure is “fixed lot size”, then the total requirement quantity as proposed by the system, to cover the shortages is divided in to the number of fixed quantities as included in the material master (MRP 1 view), for example, if the lot size is fixed as 100 Units and the shortage quantity is 500, then the system will create 5 planned orders to cover the shortages.

 

Similarly if the lot size of the material is “replenish to maximum stock level” (Lot Size – “HB” for example oil tankers or barges) then on shortages of the requirement quantities the system creates planned orders to fill it to the maximum stock level.

 

 

 

Periodic Lot Sizing Procedures

 

Periodic lot sizing procedures are namely - the ‘daily lot sizing’, ‘monthly lot sizing’ and ‘weekly lot sizing’ (in fact you can decide the period of the lot size in lot sizing customizing). The requirements that lie in a given period are clubbed together and the availability date for the procurement proposals would be the start date of the first requirement in the period. The standard configuration of lot sizes puts the requirements for periodic lot sizing at the start of the first requirement in the period, but you can have it set to the end of the period also.

 

Availability Date = Start of the period or

Availability Date = End of the period

 

And if the lot sizing procedure is “weekly”, SAP MRP will consider all the demands for the week and all the receipts for the week and place a weekly proposal (planned order or purchase requisition). The weekly proposal can be put at the start of the week or at the end of the week as the configuration in the lot sizing procedure.

 

Optimum Lot Sizing Procedures

 

 Whereas there is a less famous procedure for lot sizing called the ‘optimum lot sizing procedures’ which deals with the concept of economical lot sizing, namely the ‘Groff lot sizing method’ and ‘part period balancing’. These procedures take in to account the costs of the procurement and other involved cost elements.

 

For example, if the lot sizing procedure is daily, then the system will consider all the demands Vs’ all the receipts for that day and create a daily shortage proposal if shortages exist.

 

Other tools in lot sizing procedures

 

You can use the below listed tools along the lot sizing procedures selected in the MRP 1 view of the material master. It should also be noted that not all the tools can be used along with all the lot sizing procedures.

 

Minimum lot size

 

When the minimum lot size is 80 and the required quantity is 100, the system creates a requirement proposal for a quantity of 100 Units, to cover the shortages.

 

This can be used with almost all the lot sizing procedures.

 

Maximum lot size

 

 

If the required quantity through a demand is 120 kg, then the system will create two planned orders of 80 kg & 40 kg {if the Plant/Storage location stock for that material is Zero}

 

If the procurement qty is 140 kg, and the Maximum lot is 80 kg and minimum is 15 kg, then the system will create 2 planned orders of 80 kg & 60 kg. {If the Plant/Storage location stock for that material is Zero}

 

If the procurement qty is 85 kg, and the Maximum lot is 80 kg and minimum is 15 kg, then the system will create 2 planned orders of 80 kg & 15 kg {if the Plant/Storage location stock for that material is Zero}.  

 

This can be used with almost all the lot sizing procedures.

 

Fixed Lot Size

 

In this procedure, the lot sizes are fixed and the procurement proposals are created for the given fixed quantity.

If the required Quantity through demand/demands is 120 and the fixed lot size is 80, then the system will create 2 planned orders with one planned order of quantity 80 an the other planned order of Qty 80 {if the Plant/Storage location stock for that material is Zero}.

 

Rounding Values

 

 

If the Rounding Value is 20 units, the procurement quantity is 70 units, and the minimum lot size is 15 units, then the system will always round up the planned order to a multiple of 20 units, specifying the rounding to a quantity of 20 Units.

 

You would have already noticed that the minimum lot size, in the above example, really did not play any role, but if the procurement quantity, for example, would have been 13 units, then the system would have created one planned order of 20 units, which covers both the minimum lot size and the rounding requirements.

 

One more example would be, if we don’t consider the Min/Max Lot size and the procurement quantity is 70, then the system would just create one planned order of 80 to round off to 20 {if the Plant/Storage location stock for that material is Zero}.

 

Again the rounding value tool in the MRP 1 view can be used with almost all the lot sizing procedures.

 

Rounding Profile

 

The static rounding value method may not satisfy all the business cases, where a given rounding value is used and the procurement proposals are rounding to that value. There may be situations where the rounding value may change according to the size of the procurement proposal; this is where the concept of rounding profile may help you.

 

Rounding Profile allows you to enter a procurement quantity and the corresponding rounded value that is applicable if the procurement quantities. You may configure the system to have a rounded value of 10 units, if the procurement quantity is at least 1 unit and a rounded value of 100 units, if the procurement quantity reaches 70 units. The transaction code to configure is OWD1. The Rounding profile configuration screen would look something as below. The Rounding Profile configured is named as Z001”.

 

 

 

 

Explanation for the Rounding Profile – Z001 -

 

Further discussing the above example, the rounding profile Z001, once created can be simulated by pressing the “Simulation” button in the configuration screen. The simulation carries a rounding 10 Units for a requirement quantity ranging from 1 unit to 69 Units (Rounding of 10 for requirement quantity of 1 to 10, 11 to 20, and 21 to 30 till 61 to 69) and starting from 70 Units to 100 Units we will round to 100 (i.e., if the requirement quantity from 70 onwards will be rounded to 100 units every time). This continues in the same pattern as shown by a rounding of 10 units from 101 to 110 till 161 to 169 and at 170 units it will round to 200 for the range of 170 to 200; so on and forth.

 

Maximum stock level

 

 

Maximum Stock level is a Quantity of the material in this plant that may not be exceeded. In materials planning, the maximum stock level is used only if you have chosen Replenish to maximum stock level as the lot-sizing procedure; that is, you have entered HB as the lot size key. Enter a value if you have chosen Replenish to maximum stock level as the lot-sizing procedure.

 

If you have chosen to work on Maximum stock level then the system procures for the maximum stock level quantity and then adds the Procurement quantity to that.

 

Examples:

 

a) If the Maximum Stock level is 500 and the demanded quantity is 45, then the system creates a planned order of 545, thereby first ensuring the 500 stock is filled up and then the demand quantity is added to that.

 

 

 

Assembly scrap

 

 

It defines the scrap % that is allowed for the header material.

 

 

Examples:

 

If the scrap % is 10% and the requirement quantity is 100, the planned order will be created for 100 units and the system will add a column in the MRP screen to Mention that 10 is the scrap Quantity to be produced for that material.  

 

The components of the production order or process order are planned proportionately for manufacturing 110 units.

 

Outcome of this step: At the end of this step, SAP is ready with the procurement proposals and the quantities required, though the procurement proposals are still not ready and they require order start date and end date, in other words, they still require scheduling to be done on them.

 

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