Reorder Point Planning

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Use

In reorder point planning, procurement is triggered when the sum of plant stock and firmed receipts falls below the reorder point.

Features

The reorder point should cover the average material requirements expected during the replenishment lead time.

The safety stock exists to cover both excess material consumption within the replenishment lead time and any additional requirements that may occur due to delivery delays. Therefore, the safety stock is included in the reorder level.
The following values are important for defining the reorder point:

• Safety stock
• Average consumption
• Replenishment lead time

The following values are important for defining the safety stock:

• Past consumption values (historical data) or future requirements
• Vendor/production delivery timelines
• Service level to be achieved
• Forecast error, that is, the deviation from the expected requirements

Manual Reorder Point Planning
In manual reorder point planning, you define both the reorder level and the safety stock level manually in the appropriate material master.

Automatic Reorder Point Planning
In automatic reorder point planning, both the reorder level and the safety stock level are determined by the integrated forecasting program.

The system uses past consumption data (historical data) to forecast future requirements. The system then uses these forecast values to calculate the reorder level and the safety stock level, taking the service level, which is specified by the MRP controller, and the material's replenishment lead time into account, and transfers them to the material master.

Since the forecast is carried out at regular intervals, the reorder level and the safety stock level are continually adapted to the current consumption and delivery situation. This means that a contribution is made towards keeping stock levels low.

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Prerequisites

• You have set an MRP type for reorder point planning in the material master (MRP 1 view).

You define MRP types in Customizing for MRP in the IMG activity Check MRP types.

• In the material master, you have entered or let the system automatically calculate and enter the values for the reorder point (MRP 1 view) and for the safety stock (MRP 2 view).

Process Flow

2. The continuous monitoring of available warehouse stock within reorder point planning is carried out in Inventory Management.
3. Every time a material is withdrawn from the warehouse, the system checks whether this withdrawal has caused stock levels to fall below the reorder level. If this is the case, the system makes an entry in the planning file for the next planning run.
   
   
   
   If a material is returned to the warehouse, the system checks in exactly the same way whether the available warehouse stock exceeds the reorder level again. If this is the case, an entry is made in the planning file, which acts as an indicator for the planning run to delete any unnecessary procurement proposals.
   If planned receipts are no longer required due to material returns, for example, then the system will suggest that these receipts should be cancelled. In this case, the MRP controller in cooperation with Purchasing or Production must check whether the purchase order or the production order can be cancelled.
   
   
   
4. The system then calculates the net requirements. The system compares the available stock at plant level (including safety stock) plus the firmed receipts that have already been planned (purchase orders, production orders, firmed purchase requisitions and so on) with the reorder point. If the sum of the stock plus receipts is less than the reorder point, a material shortage exists.
   
5. The system then calculates the procurement quantity according to the lot-sizing procedure defined in the material master. For reorder point planning, the system supports the Fixed lot size and Replenish up to maximum stock level lot-sizing procedures.
   
   
   
   You can also use period or optimum lot-sizing procedures for reorder point materials. In this case, you must calculate future requirements using the forecasting functions. The forecast values are then interpreted as requirements.
   
6. The system then schedules the procurement proposal, that is, the system calculates the dates on which the purchase order has to be sent, or when production has to begin and the date on which the vendor has to deliver the goods or by which production has to have the goods ready.

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Use

In reorder point planning, an entry is only created in the planning file and the net requirements calculation is only carried out if stock levels fall below the reorder point. To avoid overplanning, sales orders, dependent requirements, reservations and so on are not usually included in the net requirements calculation as these future requirements are already planned with the reorder level. However, to guarantee that the MRP controller is informed of current issues, the system displays sales orders, dependent and manual reservations and so on.

In certain circumstances, however, it is necessary to include such external requirements in the net requirements calculation for reorder point materials.

Integration

The indicator for taking external requirements into account is set in Customizing in the IMG activity Check MRP type for the individual time-phased MRP procedure.

Features

Sales orders and manual reservations are included in planning during the replenishment lead time. In Customizing you can also enter settings for the respective MRP type, so that

• Sales orders and manual reservations are included in planning not just during the replenishment lead time but during the whole horizon.
• Alongside sales orders and manual reservations various other requirements are taken into account in the material requirements planning.