SAP PP Tutorial

Welcome to SAP PP Tutorial. The objective of this tutorial is to provide an in-depth understanding of SAP PP. In addition to the free SAP PP Tutorial, we will cover common interview questions, issues, and how-to of SAP PP.

SAP PP Tutorial - Table of Contents

SAP Production Planning What is R/3? Three-Tiered Architecture Network System Landscape Three System Landscape SAP modules Types of Data Production Planning Overview Objectives of Production Planning PP-PI SAP Material Master Material Master Views for Production Planning Direct production (for Collective order processing)

SAP Production Planning

SAP AG is a German enterprise multinational software company, that makes enterprise software to manage business operations, and customer relations, and providing business solutions for almost four decades. SAP stands for Systems, Applications, and Products in data processing.

• Imperial Chemical Industries (ICI) was SAP's first-ever customer in 1972.
• In 1973, SAP R/1 was launched. Six years later, in 1979, SAP launched SAP R/2.
• SAP developed and released several versions of R/3 from 1992 through 1995.

When you encounter the world of SAP, you come across many jargons like my SAP ERP, ECC, SAP Business Suite, etc.

SAP AG, the world's leading business software provider, offers a range of enterprise application software covering almost all business areas.

SAP R/3 was officially launched on 6 July 1992. It was renamed SAP ERP.

SAP ERP is a comprehensive Enterprise Resource Planning solution from SAP. SAP ERP is powered by SAP Netweaver technology and includes the full suite of applications for Financials, Human Resources, Operations Management, Corporate Services, and Analytics. and later again renamed ECC (ERP Central Component). The package and launched as SAP ECC 6.0 in 2005. ECC stands for Enterprise Central Component.

What is R/3? Three-Tiered Architecture

SAP software uses a three-tiered architecture. In a three-tiered architecture there are three nodes:

• Presentation Layer or Client
• Business Logic or Application Server
• Database Server

Presentation Layer

Various devices could be used to access SAP business software. For example, desktops, mobile devices, laptops, and so run. This device would be called a presentation layer. You might have to install a piece of software on these devices so that they could talk to the application server (computer running the actual SAP software). You could also use your web browser to access the SAP application. Whatever the case may be, the front-end device would communicate with the application server. The device would simply display a presentation layer while the application is actually running on the application server. The device is also called a "client".

Application Server

The actual SAP software runs on an application server. The client node simply displays the image of the screen that is actually being produced on the application server. It is important to note the application server only runs SAP software. Data is not stored in the application server

Database Server

Data is stored on a separate machine called a database server. The presentation layer communicates with the application server to retrieve the screen image to be displayed to the user. The application server in turn communicates with the database server to write data to the database and retrieve data from the database. The database server would be hosting a database management system like Oracle. Oracle is the most popular choice of database to be used with SAP software. Other databases could be used as well e.g. SQL Server (from Microsoft) and DB2 (from IBM).

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Network

The network is an important part of a three-tiered architecture. The client computer would connect to the application server through the internet, or company-specific intranet, local area, network, a dial-up line, etc. Similar media is used by the application server to communicate with the database server. This way users can run business applications virtually from anywhere.

System Landscape

The landscape is the arrangement for the servers or like a layout of the servers or some may even call it the architecture of the servers viz. SAP is divided into three different landscapes Development, Quality, and Production. It again depends on the organization's requirements. Depending upon the client's requirement we can extend the Quality Systems & Production Systems to more than one.

Three System Landscape

• The development would have multiple clients for ex: 100- Golden for only configuration, 110- Sandbox, and 120- ABAP Development. it is where the consultants do the customization/ configuration as per the company's requirement.
• Quality may again have multiple clients for ex: 200 - Integration Test, 210 - for training. it is where the core team members and other members test the customization/ configuration.
• Production may have something like a 300 Production. The live data of the company is recorded.

A request will flow from Dev->Qual->Prod and not backward.

Copy from 100 clients to 110 clients in SCC1 T. Code Unit Test will be done in this test client within the module scenarios.

Login to the Development server and in the Test client and configure SPRO settings based on Blue Print save all these settings in customizing request. After configuring all SPRO settings then do the Unit Test at the end-user side within the module in the same development server. That is in the test client. Later move all these requests from the test client to the golden client within the development server as follows.

• Login in Golden client: 100
• Go to “SCC1” T. Code
• Source Client: 110
• Transport Request No: Select your Request
• Select Including request Sub-task checkbox
• Click the Start Immediately button
• Click the Yes button.
• Observe in this golden client whether all SPRO settings are copied or not.
• Now Release all these Requests from Development Serve golden client to “Target” as follows:
• Go to SE10 or SE09 or SE01
• Go to SE10
• User: Give User Name or ID
• Select customizing Request checkbox
• Click the display button
• Select our request and open the Tree
• And first, select Task
• Click the Release Directly button (Symbol of Lorry)
• Then select the Main Request
• Again click Release Directly button
• Now all the request settings reach Target.
• Now import this request setting into Quality Server as follows:
• Login Quality Server in Quality client
• Go to “STMS” T. Code
• Select the required request no.
• Click Import button
• Then customized request settings will be updated in the quality clients. Again perform the integration at the end-user side that is across modules in the quality client.

Ex: Test MM& FI, MM & SD, and MM & PP Integration areas correctly working or not.

In quality, clients upload the data that is master data and transaction data for trial and error before originally uploading it into the production server. Now move this same customizing request number from Target to the Production server by login in Production client and in STMS T. Code Again re-upload the data into the production client.

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SAP modules

SAP R/3 is arranged into distinct functional modules, covering the typical functions in place in an organization. The most widely used modules are Financials and Controlling (FICO), Human Resources (HR), Materials Management (MM), Sales & Distribution (SD), and Production Planning (PP). Those modules, as well as the additional components of SAP R/3, are detailed in the next section.

Each module handles specific business tasks on its own but is linked to the others where applicable. For instance, an invoice from the Billing transaction of Sales & Distribution will pass through to accounting, where it will appear in accounts receivable and cost of goods sold.

Types of Data

MASTER DATA: Master Data is a source of basic business data used across multiple systems, applications, or processes in the industry. This key business information may include data about customers, products, employees, materials, suppliers, etc. Master data remains unchanged over a long period of time and can be reused in transaction processing.

TRANSACTION DATA: Transaction data is the data relating to the day to day activities.

Production Planning Overview

Production planning means fixing the production goals and estimating the resources which are required to achieve these goals. It prepares a detailed plan for achieving the production goals economically, efficiently, and on time. It forecasts each step in the production process. It forecasts the problems, which may arise in the production process. It tries to remove these problems. It also tries to remove the causes of wastage.

Production planning provides answers for two major questions, viz.,

• What work should be done?
• How much time will be taken to perform the work?

So, production planning decides the ways and means of production. It shows the direction. It is based on sales forecasting. It is a prerequisite of production control.

Definition of Production Planning

Production Planning is concerned with the determination, acquisition, and arrangement of all facilities necessary for future operations.

Objectives of Production Planning

The need, main functions, or objectives of production planning are as follows:

• Effective utilization of resources.
• A steady flow of production.
• Estimate the resources.
• Ensures optimum inventory.
• Coordinates activities of departments.
• Minimize wastage of raw materials.
• Improves labour productivity.
• Helps to capture the market.
• Provides a better work environment.
• Facilitates quality improvement.
• Results in consumer satisfaction.
• Reduces production costs.

Now let's discuss each objective of production planning one by one.

Effective Utilization of Resources

Production planning results in the effective utilization of resources, plant capacity, and equipment. This results in low-cost and high returns for the organization.

The Steady Flow of Production

Production planning ensures a regular and steady flow of production. Here, all the machines are put to maximum use. This results in regular production, which helps to give a routine supply to customers.

Estimate the Resources

Production planning helps to estimate resources like men, materials, etc. The estimate is made based on the sales forecasts. So production is planned to meet sales requirements.

Ensures Optimum Inventory

Production planning ensures optimum inventory. It prevents over-stocking and under-stocking. Necessary stocks are maintained. The stock of raw materials is maintained at a proper level in order to meet the production demands. The stock of finished goods is also maintained to meet regular demands from customers.

Co-ordinates Activities of Departments

Production planning helps to coordinate the activities of different departments. For e.g. the marketing department co-ordinates with the production department to sell the goods. This results in profit for the organization.

Minimize Wastage of Raw Materials

Production planning minimizes the wastage of raw materials. It ensures a proper inventory of raw materials and materials handling. This helps to minimize the wastage of raw materials. It also ensures the production of quality goods. This results in a minimum of rejection. So proper production planning and control results in minimum wastage.

Improves Labour Productivity

Production planning improves labour productivity. Here, there is maximum utilization of manpower. Training is provided to the workers. The profits are shared with the workers in the form of increased wages and other incentives. Workers are motivated to perform their best. This results in improved labour efficiency.

Helps to Capture the Market

Production planning helps to give delivery of goods to customers on time. This is because of the regular flow of quality production. So the company can face competition effectively, and it can capture the market.

Provides a Better Work Environment

Production planning provides a better work environment for the workers. Workers get improved working conditions, proper working hours, leave and holidays, increased wages and other incentives. This is because the company is working very efficiently.

Facilitates Quality Improvement

Production planning facilitates quality improvement because the production is checked regularly. Quality consciousness is developed among employees through training, suggestion schemes, quality circles, etc.

Results in Consumer Satisfaction

Production planning helps to give a regular supply of goods and services to consumers at fair prices. It results in consumer satisfaction.

Reduces the Production Costs

Production planning makes optimum utilization of resources, and it minimizes wastage. It also maintains the optimum size of inventories. All this reduces the production costs.

PP-PI

Process- Production planning

• This function is responsible for a manufacturing enterprise for efficient planning, scheduling, and coordination of all production activities.
• With the component PP-PI (Production Planning for Process Industries), SAP provides an integrated planning tool for batch-oriented process manufacturing.
• It is primarily designed for the chemical, pharmaceutical, food, and beverage industries as well as the batch-oriented electronics industry.

The main Topics in Production Planning are:

• Discrete Manufacturing
• Master Production Scheduling (MPS)
• Long Term Planning (LTP)
• Configurable Materials
• Production Resources tools

SAP Material Master

The SAP Material Master is an SAP object which is not only used to name a material but also to hold a lot of other material-related parameters such as:

• The material's production-related parameters (if the material is an in-house produced material)
• The material's planning-related parameters (if the materials are to be planned using MRP)
• The material's sales-related parameters (if the material is a saleable material)
• The material's purchase-related parameters (if the material is an externally procured material)
• The material's storage or inventorizing related parameters and warehousing parameters (if the material is warehouse managed)
• The material's accounting-related parameters (if it is a valuated material)
• The material's costing-related parameter (if the material is to be costed for activities)
• It also holds the materials classification system used for carrying the material features and specifications, materials batch specifications.

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SAP Material Master Views

To hold the above parameters, SAP has offered various views for each of the business functionality, such as production views or work scheduling views, sales views, plant storage views, material warehousing views, material classification views, purchasing views, or even foreign trade-related control parameters in the foreign trade views.

Other SAP Material Master Parameters

The SAP Material Master also holds the following uses:

• Material's Naming Convention
• Material's Unit of Measure - base unit and alternate units
• Material's Short text, description, and Long elaborated texts
• Material's UPC codes
• Material's Packaging Methods
• Material's Batch Management strategies (if the material is batch managed)

Material Master Views for Production Planning

• MRP1 View
• MRP2 View
• MRP3View
• MRP4 View

Work Scheduling View

MRP 1 View:

The MRP 1 View is a placeholder for defining the Planning methods and lot-sizing procedures of a given material at a plant/storage location level.

If you are going to have a particular material planned in SAP, then you can go ahead and create an MRP view (MRP 1, 2, 3, and 4)

MRP Type

The MRP Type Key determines whether and how the material is planned. You have the following options:

PD – Relevant for Material Requirement Planning ND – No Planning in SAP

VB - Manual reorder point planning (Consumption-based planning) VM- Automatic reorder point planning (Consumption-based planning) VV - Forecast-based Planning

X0 - External Planning i.e., APO or BAAN or I2 or MES or any other external planning system.

MRP types can also be configured to the requirements, but most of the time, standard MRP types are used.

Lateral Thinking:

Step 1: As a consultant, you have to decide whether a particular material needs to be planned in SAP.

Step 2: Then decide the type of planning.

MRP Types can be classified into 2 Major Types or Leagues:

Materials for Consumption-based planning:

For materials whose planning is based on consumption or for materials that are really not expensive or which are really not monitored by finance and the costing teams.

This is mostly used for Raw Materials.

This type of planning is for Materials that are procured based on their consumption. Methods like Reorder Point Planning, where procurement is triggered after the stock falls below certain levels is the most widely recognized consumption-based planning.

The Following are consumption-based MRP types:

VB - Manual reorder point planning

VM- Automatic reorder point planning

Planning not based on Consumption: Planning Based on Demand:

For materials whose planning is not based on the consumption levels or materials that are to be procured on-demand only. These materials are those whose consumption is monitored by the finance team and they are really important for the company. These materials are expensive materials.

This type of planning is mostly used for expensive and monitored Raw Materials and for the planning of manufactured products.

Demands coming from a Sales Order or planned independent demand for semi-finished materials, finished materials, or even the most expensive raw materials are planned using Material Requirement Planning.

Illustrative Explanation of MRP Types:

Material requirement planning is mostly carried out for high-value materials like assemblies, subassemblies, or high-value procurement materials whose procurement quantities are planned based on the incoming demands. For high-value materials, the planning is monitored and production/procurement is ordered once higher levels demand to arrive.

On the other hand, consumption-based planning is carried out for low-value materials whose planning methods can be restricted to consumption-based methods like reorder point planning (putting a lot of effort into planning strategies).

The below screenshot shows the various MRP types which are offered by SAP:

Material Requirement Planning – MRP Type “PD”

The planning is carried out for the quantities planned through planned independent requirements or quantities planned through incoming sales orders (made-to-order or made-to-stock). The planning is done with respect to the master plan.

The planning process does not consider any forecast information or historical consumption patterns. Material planning is done only for absolute requirements/demands on hand.

The available stock is determined by the planning run (that is required to meet the demands) by including the following in an equation as shown below –= Plant stock (considered as a receipt) + scheduled receipts from production and purchase – all the demands from the sales order, material reservations and planned independent requirements.

If the available stock does not satisfy the demand then procurement proposals are raised to cover the demand. Alternatively, we can interpret it as – fulfilment of the incoming demands by all the receipts.

Manual Reorder Point Planning – MRP Type VB

Consumption-based planning is a type of planning which is triggered based on the consumption of stock. It can be based on the past consumption history based on a forecasted value or it can be based on the current consumption levels.

The best example of consumption-based planning can be Reorder Point Planning, where the planning for a given material is triggered when the stocks fall below a reorder point. On the other hand, you can also have a forecast based planning where planning is carried out based on forecasted figures for the material (forecast based on historical data)

In the case of Manual Reorder Point Planning (MRP Type VB), when the Plant stock & firmed receipts for a given material fall below the reorder point, the planning for the material is triggered (a planning file entry is created). For this to happen, you would have to enter the Reorder level manually in MRP 1 view of the material master (as in the case of manual Reorder Point Planning) or the reorder point can be automatically calculated by the system (as in automatic Reorder point planning).

In the Reorder Point Planning, we usually maintain a “safety stock” (entered manually in MRP 1 view of the material master – though not mandatory) to use it as handy stock in the period when the order is placed with the vendor and the material is being transported to the plant – material is on its way to the plant or warehouse (this is called replenishment lead time). The Safety stock can also be calculated automatically by the system using the “Dynamic Safety Stock” concept. You should also maintain the replenishment lead time, as accurately as possible in the material master.

In Re-order point planning, the incoming demands are not considered as issues, in other words, the incoming demand plays no role in the planning or creation of procurement proposals. MRP waits for the cumulative of the “Stock + Firmed receipts” to fall below the re-order point so as to trigger the creation of a procurement proposal. The procurement proposal is created for a quantity equal to the Reorder point or equal to a fixed lot size maintained in the material master. If a procurement proposal already exists for the material with quantities greater than the proposed quantity (a manually created one), the system would not create a new one.

It is always recommended to use a fixed lot-sizing procedure so that every time the stock falls below the reorder point, the system can procure the fixed lot size, instead of using its own planning brains and ordering the quantity mentioned in the reorder point.

For example, if for a given material that is set for reorder point planning, with a reorder point of 80 Units, the system would try to create a planned order once the stocks fall below 80 Units. Assuming that the current stock at any given point in time is 50 Units and the firmed receipts are 20 Units, making it 70 Units, which is still well below the 80 unit’s level, in which case the system would create a planned order of 10 more units to reach back to the level of 80 units.

Now if you have a “Fixed Lot Sizing” procedure” set in the material master, for 100 Units, the system would always create a planned order of 100 units.

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Automatic Reorder Point Planning – MRP Type VM

In the case of Automatic Reorder Point Planning (MRP Type VM) - a type of consumption-based planning, the system calculates the recorder point and the safety stock using the past historical consumption data to derive future consumption patterns. In this case, you would need to extend the material master for the forecast view with a valid forecasting method selected.

In the net requirement calculations, the available stock is determined as equal to the plant stock and the firmed receipts from purchase and production. Net requirement calculations do not consider the demand from a sales order or planned independent requirements or from material reservations. If the available stocks fall below the reorder point, procurement proposals are raised.

Manual/Automatic Reorder Point Planning with External Requirements – MRP Type V1/V2

The only difference between the reorder point planning method and the reorder point planning methods with external requirements is that the Sales order requirements and the requirements from manual reservations are also included in the formula that is used to calculate the available stock.

These external requirements can be considered for the period within the replenishment lead time or within the total horizon; this option can be configured in the configuration for MRP procedures.

Forecast-Based Planning – MRP Type VV

Another form of Consumption-based planning is “Forecast Based Planning”, in which the historical consumption data is used to extrapolate the future consumption patterns, which are directly used as requirement figures in the next planning run. The forecast is suggested by the system periodically, i.e., on a weekly, daily, monthly basis or as per accounting periods.

You can specify the number of historical periods and the future forecast horizon (periods) for each material. In the planning run, the forecasted requirements are made to be available at the start of the period specified (week, month or day, etc) and then you have an option to further divide/split these requirements to a finer detailed period pattern through the use of splitting indicator in MRP 3 view. The splitting Indicator can be configured in the following path – Logistics > Production > MRP > Forecast > Define Splitting of forecast requirements for MRP.

The forecasted requirements should be covered by the plant stock + scheduled firmed goods receipts (from purchase or production). Net requirement calculations do not consider the demand from sales order or from planned independent requirements or from material reservations. Only demands from the forecasted figures are considered. If the available stocks fall below the forecasted requirements/demand, for the period, procurement proposals are raised.

Safety stock can be considered in the net requirement calculations.

An available stock that is left over after the planning run calculations = plant stock – safety stock + firmed receipts from purchase or production – Forecasted requirements/demand. Another way of interpreting the same is that the receipts should cover the demands from forecasts. If the receipts cannot cover the demands from forecast, then the system raises procurement proposals.

Illustration of the Reorder Point Planning:

MRP Controller

It is a Configurable Field. It has to be configured in IMG. MRP Controller specifies the absolute three-digit code of the MRP controller responsible for material planning for the material. MRP controller is the person responsible for a group of materials in a plant or company.

A material that takes part in material requirements planning must be allocated to an MRP controller. This allocation helps you to evaluate or run MRP for a controller.

Lot size (materials planning)

It is a Configurable Field. It has to be configured in IMG in the MRP section of the Logistics Production area.

Normally consultants avoid configuring this field and they use it as it is.

Lot Sizing Key determines which lot-sizing procedure the system uses within materials planning to calculate the quantity to be procured or produced for the material. Lot Sizing procedure in material requirements planning is used to calculate the order and production quantities (lot sizes).

Types of Lot sizes:

1. Static Lot Sizing Procedure: Static Lot Sizing procedure means that the lot size is static and it is not be clubbed periodically or for optimum lot size calculations.

EX is the most commonly used, which means a lot for lot quantity. This means the lot size is equal to the required quantity and it is not be clubbed periodically or for optimum lot size calculations.

FX is used for Fixed Lot Size and HB is used as a lot size to replenish stock to the maximum level.

2. Period Lot Size Procedure: The clubbing of requirements on a daily basis or a weekly basis or on a decided periodic basis.

For example - TB is used if you want to carry out Daily Lot Sizing; WB is used for Weekly,

Note: As per standard SAP, the material is always planned at the start of the period. For example, if the material is planned with a weekly lot size, then the required planned start date will be at the start of the week. Nevertheless, through configuration, you can have it starting at the end of the week if required. There are many other options for starting and ending the dates for the lot size planning.

3. Minimum lot size: It is the Minimum Procurement quantity for the material at the given plant and storage location defined.

Examples: If the Minimum Lot size is 100 kg and the required Quantity is 80 kg, then the system will create one planned order of a minimum of 100 kg in number {if the Plant/Storage location stock for that material is Zero}.

4. Maximum lot size: It is the maximum Lot size for a Procurement quantity. If the Maximum Lot size is 80 units, then the maximum planned order qty cannot be more than 80 units in any case.

Examples: If the required quantity through 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 the 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 the 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}.

5. Fixed lot size: The Fixed Lot size defines a fixed procurement lot size quantity for the material. Which means that you will always procure or produce material in a fixed quantity.

Examples: 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 Value

Examples: If the Rounding Value is 20, and the procurement quantity is 70, then the system will always round up the planned order to a multiple of 20.

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 create a planned order of 80 to round off to 20 {if the Plant/Storage location stock for that material is Zero}.

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”.

The 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 on 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 the required 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 required quantity from 70 onwards will be rounded to 100 units every time). This continues in the same pattern as shown by 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.

Assembly scrap: It defines the scrap % that is allowed for the material. It is used to define the scrap % of the header material.

Examples: If the scrap % is 10% and the required 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.

Maximum stock level: The 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 to Replenish to the 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 to Replenish to the maximum stock level as the lot-sizing procedure.

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

Examples: 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

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SAP MRP 2 View:

 

Procurement Type (Plant Specific):

The procurement type indicator defines how the material is procured.

The following procurements types are possible.

E = material is produced in-house, F = material is procured externally, X = material can be both produced in-house and procured externally X (to be used as an exception)

E.g. A material in Plant A will have this field as “E” (being produced in-house), whereas the same material in Plant B will have “F” if it is being externally procured.

You cannot change the configuration for this field.

Note:    Every Material needs to have a Procurement type.

Special Procurement Type (at Plant level):

Special procurement type is used for allocating a material for special procurements functions such as:

Withdrawal from another plant:

For manufacturing a product in Plant 0001, you can withdraw a component directly from Plant 0002 (called a planning plant or the issuing plant). Dependent requirements for these components are directly created in the issuing plant.

You can use withdrawal from an alternative plant for both components produced in-house and procured externally. A special procurement key is defined for both procedures and the issuing plant is entered there. This special procurement key is assigned to that component that is to be withdrawn from plant 0002.

Dependent requirements for the component are created in plant 0001 as well as plant 0002 and when the planned order for manufacturing is converted to a production order these dependent requirements are converted to dependent reservations in both the plants.

MRP will show the dependent requirements with an MRP element called as “Withdrawal from alternate Plant”

Production in the alternate plant:

The planning of the product is carried out in the planning plant but it is actually produced in the production plant. The product's BOM is created in the production plant.

The special procurement key has to be created in the configuration.

The special procurement key has to be assigned to the assembly’s material master of the planning plant

(MRP 2 view).

Production in Alternate Plant:

Planning Plant	Producing Plant
The special procurement key has to be assigned to the assembly’s material master of the planning plant (MRP 2 view).
Step a) Material requirement planning is carried out for the assembly in the planning plant.
Step b) Planned order created in planning plant
Step c) Routing of the production plant can be used for scheduling this planned order.	Step c) BOM explosion can be carried out in a production plant for material requirement planning.
Step d)  Planned  order à Production  order  in Planning Plant
	Step e) Dependent Requirements are created in production Plant
	Step f) Dependent Requirements are converted à Dependent Reservations in Production Plant
	Step g) Production is started in Producing Plant
Step h)  Goods  Receipt  is  created for  the production  order  of  the producing  plant  in the Planning Plant

Planned Stock transfer

Values predefined are used to identify the unique route from the requesting to the supplying plant in the same company code (which will be used for the Stock transport orders between two plants)

It should be noted that the Special procurement type of this category has to be entered for the material in the requesting or demanding plant.

In Customizing, when you would create a special procurement type for the requesting plant, you would have to enter “U” for the fields – Special Procurement and enter the supplying plant in the plant field.

Planned stock transfers are MRP driven. A Shortage in the receiving plant creates a Stock Transport requisition or planned order in the receiving plant with a Purchase requisition raised on the Supplying plant for the release of these materials to the demanding plant for the required date.

Example - Z1 is the Special Procurement type predefined for materials requested by Plant X from Plant Y (Plant Y à Plant X).

This value Z1 is maintained for the material in the requesting or demanding plant and not in the Supplying Plant.

The below table explains the step-by-step methodology of stock transfers:

Planned Stock Transfer

Planet X	Plant Y
Step a) Requirement for -200 Units raised in Plant X through MRP.
Step b) Stock Transport requisition or planned order of type “NB” is raised in Plant X to cover these 200 Units.
	Step c) Purchase requisition or planned order is raised in plant Y for -200.
	Step d) Goods are procured or manufactured in Plant Y to meet the 200 Units as per the Procurement type indicator for the material there.
Step e) The Stock Transport Requisition is converted to a Stock Transport order in Plant X or the planned order is converted to Purchase requisition (PR) and then the PR is converted to a Purchase order in Plant X.
Step g) At Receiving Plant X, you have to create a Goods receipt for the STO through MIGO against the Stock transport Purchase order.

Phantom Item:

If a material is to be identified as the Phantom material, you have to enter a standard special procurement type – “50” in the material master of the plant where the material is defined as a Phantom.

Direct production (for Collective order processing)

Definition: In a direct production scenario, the whole assembly is collectively produced and the cost of production is collectively calculated and booked on the highest level order. Along with the cost of production, the scheduling is also carried out jointly for all the products in the hierarchy.

All the levels are connected to each other in a multi-level collective order.