Life and MRP are more than the sum of their parts. In SAP Business One: Production and logistics, I introduced MRP and gave you the fundamentals to use MRP. However, I glazed over some subtleties that come into play with mass production. You can ask it with one question:
What happens when you have parts that you buy in one multiple and produce in another?
For this example, suppose you have a company that makes bite-sized pizzas. They are 1” x 3” (25mm x 75mm) pizza crackers with cheese and sauce, applied on a production line and heated enough to melt the cheese and fix the sauce in the cheese, then packaged. A basic process diagram would be this.
The Bill of Materials reads like this to make a single pizza bite:
For simplicity in this example, I’m leaving out labor and packaging.
Pizza bites sell in packages of 144, not individually as this Bill or Materials indicates. Therefore, to better reflect a single order of Pizza bites, I’d want to make 144 bites at one time and multiply out all the ingredients’ quantities, yielding this:
The quantity column uses an inventory unit of measure. We set the name of that unit in the Item Master data. For the pizza bites, we say that is 1 gross of Pizza Bites.
We do not buy a single gram of cheese. I’d have to order cheese by the gram, and buying 2000 grams seems silly. A Purchase order lie item would look like this:
Instead, we buy 2-kilogram bags of cheese. We tell SAP that in the Purchasing Data tab.
The units should match here for the 2000 gr to make a 1 Kg bag. Now I talk in terms a 1 unit is a 2KG bag, and My quantity is 1.
I’ll buy this bag and put it into inventory, seeing 2000 gr in stock.
The same is true on the Sales side. For example, if I were to sell the Cheese, I’d need to set the sales units of measurement to sell in units of one bag.
MRP and Units of Measure
Suppose we had an order for 2 packages of pizza bites. If we had an MRP scenario for Pizza bites, we would get an initial report like this:
Expanding the pizza Bites, we see the demand is 3 units.
Those three orders are based on two sales orders due on the 16th.
If I look at my raw materials from the BoM, I see this on the MRP Report:
Since it is calculating from the BoM, it uses inventory units for the raw materials. I have no crackers in inventory, so supply and demand match. I just bought 2,000 grams of cheese, and I have a Demand of 1296 grams, leaving an inventory of 704. I have 1 ml of tomato sauce in inventory, so I have a Supply of 863 against my demand of 864.
MRP creates the following recommendations:
We have a production order for 3 gross pizza bites and a purchase order for 3 packages of slide crackers, which is 3 gross. The tomato sauce, however, is a little odd. It wants a purchase order of 0.096 ml of Tomato sauce.
In terms of inventory units, the order is correct. 0.096 x 3000 = 288ml for the order. To calculate correctly, we need to tell MRP that there is an order multiple of 3000ml to make up one sauce order. We do that in planning data for the inventory item:
Changing this, the MRP reports the 3000ml of pizza sauce
I the recommendations, there is an order for 3 liters of pizza sauce, which shows as a quantity of 1.
We, therefore, have 4 measures to concern ourselves with:
· Inventory – the units that the Bill of Materials works in.
· Purchasing – a multiplier to the Inventory UoM to adjust for the UoM we buy-in
· Sales – a multiplier to the Inventory UoM to adjust for the UoM we sell in
· Order Multiple – a value to round up to, measured in inventory units to make a full single unit for purchasing.
For MRP to work, you need to have this configuration for raw materials and finished goods.
If sales units are 1 of the units produced from the BoM, the finished good does not need a purchasing multiple or can have a purchasing multiple of 1.
This leaves us with a need for reports to ensure these units for raw materials and BoMs are correct. For Raw materials, the Inventory, purchasing, and order multiples must have values that accurately describe the inventory item.
Once you have all of this organized correctly, you’ll get far more accurate numbers out of MRP.
BizOneness 