Demand management

Demand management deals with the administration of the so-called independent requirements (independent requirements are quantities of finished products, needed according to sales forecasts or customer orders). The way in which independent requirements behave in MRP (e.g. if they affect requirements or consume other requirements), is determined by their requirement type or planning strategy.

Planned independent requirements are warehouse requirements, i.e. independent requirements derived from a forecast of future requirements.

Example: In make-to-stock production, you want to initiate the procurement of the required materials without waiting for concrete sales orders. Thus, you can shorten delivery times on the one hand, and on the other hand, you can debit your own production resources by foresighted planning. One option to realize this for a product is to set the planning strategy in the material master correspondingly (cf. Chapter 3.1).

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Dipl.-Wirt.-Inf. Taymaz Khatami

Sales orders (customer independent requirements) can be transferred directly to MRP, independently of their assigned requirements type. This is necessary for customer-specific planning.

Sales orders can serve as exclusive requirements sources, for which then specific procurement is initiated (make-to-order production), or they can create the total demand together with the planned independent requirements. Moreover, consumption with planned independent requirements is also possible.

Figure 23: Demand management

3.1.2.1 The demand planning process

In the following figure, you can see the circular demand planning process:

Figure 24: The demand planning process

Historical sales order quantities are the foundation for the forecast of future demands.

Additionally, market information or one-off events (e.g. trade fairs) can be integrated in the forecast. The demand plan is released as a result of forecasting as the planned independent requirement. The planned independent requirements are the foundation of procurement and

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Dipl.-Wirt.-Inf. Taymaz Khatami

production planning and can for example consume current sales orders. Thereby, planned independent requirements are not concrete requirements of a material. They are merely based on forecasts and estimates. Usually (if not make-to-stock production is the case), planned independent requirements consume concrete sales orders (their quantities and occurrence should be predicted in demand management) at the time of occurrence.

3.1.2.2 Sales orders and planned independent requirements

Sales order management is an element of the logistical component sales and distribution (SD).

Correspondingly, sales orders are created in SD. They are the order of a customer demanding a particular quantity of a certain product at a particular date. Sales orders are a requirement in the supplying plant.

Conversely, Make-to-stock planning is managed in a DC or in a production plant via planned independent requirements. Thus, the planned consumption is forecasted. Due to this planning and forecasting, procurement takes place. Later, if concrete requirements are on hand (e.g. sales orders), they can ideally be covered from the warehouse.

Figure 25: Sales orders and planned independent requirements

3.1.2.3 Planning strategies

The SAP ERP system features various options for planning production with planned independent requirements. The different effects of planned independent requirements are controlled by the planning strategy.

In case of make-to-stock production, production is based on planning without reference to present sales orders. If strategies for make-to-stock production are applied, production can be carried out without concrete sales orders for the particular material. If then sales orders are received, they can be covered by warehouse stock to shorten delivery times.

Moreover, make-to-stock production allows for a preferably consistent production process, independent of current demand.

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Dipl.-Wirt.-Inf. Taymaz Khatami

Assembly planning is consistent with make-to-stock production, but for assemblies.

Correspondingly, make-to-stock production for assemblies can be executed. Consequently, not the finished products themselves are produced to stock, but merely the required assemblies. A sales order for a finished product can thus be met quickly as only the final assembly needs to be carried out since the assemblies themselves are already available.

Sales-order based production is not planned ahead; procurement is only carried out when a concrete sales order has been received. Often, sales-order based production is combined with assembly planning to maintain short delivery times.

3.1.2.4 Planning with final assembly

Planning with final assembly aims at flexible and immediate reactions to customer requests, as well as a consistent production flow. Sales orders thereby affect requirements and consume planned independent requirements.

Before sales orders arrive, procurement and production of all components and assemblies, including final assembly, are initiated by planned independent requirements.

The planned independent requirements for the finished product are entered in demand management. Incoming sales orders consumed these planned independent requirements.

In case the sales order quantity exceeds the planned independent requirements quantity, a planned order is automatically created in the next MRP run for the unplanned quantity (thus, sales orders affect requirements). Availability checks can be carried out from a sales order using ATP logic.

If and how customer requirements consume planned independent requirements is dependent on the settings defined for consumption and the consumption periods. Both characteristics are set in the respective material master.

Figure 26: Planning with final assembly

Consumption

The consumption mode determines, in which direction of the time axis consumption of the incoming sales orders with the planned independent requirements is carried out.

Backward consumption (consumption mode 1) consumes customer requirements with planned independent requirements lying before the customer requirements.

Forward consumption (consumption mode 3) consumes customer requirements with planned independent requirements lying after the customer requirements.

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Dipl.-Wirt.-Inf. Taymaz Khatami

You can also combine backward and forward consumption if you pay attention to the respective periods (consumption mode 2 or 4).

The consumption mode and the consumption periods can be set either in the material master or for the MRP group. If you do not enter a vale for the two characteristics, the default setting, i.e. backward consumption for 999 days, is applicable.

Note: If you enter a consumption mode but no consumption period, only requirements of the same day are consumed.

Figure 27: Consumption

3.1.2.5 Master production scheduling (MPS)

Master production scheduling (MPS) and material requirements planning (MRP) guarantee material availability using a two-step planning process. Thereby, MPS is an optional step in the planning process.

Master schedule items are materials that usually influence company profits on a large scale or that are important components of the production procedure. MPS aims at planning products initially to avoid any kind of capacity issues, etc., and then continue by carrying out MRP for the remaining product levels. SAP features different functions to enhance MPS, amongst others a planning table and multiple analyses functions.

MPS results are planned orders for the master schedule items and dependent requirements; i.e.

on the component and assembly levels required for the production of the master schedule item, no planned order but only dependent requirements are created.

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Dipl.-Wirt.-Inf. Taymaz Khatami