Material Requirement Planning (MRP) in SAP | MM-PP-SD Integration Explained with end to end SAP Demo

Main ideas, concepts, and lessons

• Purpose of MRP (Material Requirement Planning)

  • MRP is presented as a central SAP planning concept that coordinates end-to-end logistics across major areas: MM, PP, and SD.
  • It exists to solve a coordination problem where departments work “in silos”:
    • Sales needs fulfillment
    • Warehouse has stock (or not)
    • Production needs the right materials to start
    • Procurement needs to buy missing raw materials
  • Key outcome: ensure the right material / component is available at the right time in the right quantity to fulfill demand and avoid delivery delays.

• How MRP works conceptually (business flow)

  • Customer demand triggers sales orders.
  • If finished goods are not in warehouse stock, production must produce them.
  • Production needs component/raw materials.
  • If components/raw materials are not in stock, procurement must buy them from vendors.
  • MRP acts as the “binding element” that monitors stock and demand and automatically generates the planning documents that drive procurement and production.

• MRP’s core technical jobs in SAP

  • Collect demand (from different “demand elements”).
  • Check material availability against existing stock.
  • If short, generate:
    • Planned orders (for in-house production items)
    • Purchase requisitions (for externally procured items)
  • Those proposals are then processed by respective departments:
    • Planned order → production order → goods receipt → stock updated
    • Purchase requisition → purchase order → goods receipt → stock updated

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Demand-based planning (deterministic MRP / “MRP”)

Meaning

• Planning is driven by explicit demand elements that exist in SAP.
• The MRP run looks at those demand records and generates proposals to fulfill them.

Common demand elements described

• Sales order (demand from customer)
• Planned independent requirement (PIR) (forecast-based demand)
• Dependent requirement (derived from the product structure/component list via MRP for the finished good)
• Safety stock (buffer requirement; treated as additional demand)
• Reservation (explicit reservation of material)

Safety stock and reservation are described as ways to create demand when it’s not tied directly to SD/PIR.

End-to-end instruction-style cycle (as described)

For make-to-order (customer-specific production)

• Create sales order (T-code: VA01)
• Run MRP (T-code: MD03)
• If shortage: system creates planned order
• Convert planned order → production order
  • from MD04 planned order view
• Create/release production execution artifacts
• Post goods receipt to update warehouse stock (T-code: MIGO)
• Deliver to customer:
  • Post delivery / goods issue for sales order (T-code: VL01N)
• Result: sales order fulfilled by stock created via MRP-driven production.

For make-to-stock (forecast-driven production)

• Create planned independent requirement (PIR) (T-code: MD61)
  • Using a planning horizon (e.g., 2 months)
• Ensure a requirement type exists for the material/plant (example shown: LSF)
• Run MRP (T-code: MD03)
• If shortage: system creates planned orders against PIR
• Convert planned order → production order
• Produce and post goods receipt (T-code: MIGO)
• Material remains in warehouse stock, later used to fulfill customer sales orders when they arrive.

Safety stock as demand (buffering)

• Enter safety stock in the material master (T-code: MM02 → MRP 2 view)
• Run MRP (MD03)
• If available stock < safety stock requirement: MRP creates a planned order to replenish up to the safety stock level.

Dependent requirements (component list logic)

• When MRP runs for a finished product (e.g., bicycle), the system automatically creates:
  • Dependent requirement for semi-finished goods (e.g., frame)
  • Dependent requirement for raw materials (e.g., steel sheet)
• The process repeats at each level:
  • Dependent requirement → planned order for manufactured item
  • Dependent requirement → purchase requisition for procured item
  • Planned orders → production orders → goods receipts
  • Purchase requisitions → purchase orders → goods receipts

Important lesson

• Demand-based planning requires a demand element to exist in the system.
• Without a demand element, MRP will not generate production/purchase proposals (in the demand-based philosophy).

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Consumption-based planning (CBP / for low-value items)

Meaning

• Planning is not driven by current/future demand elements.
• Instead, it is based on past consumption patterns (historical usage), because the items have:
  • low value
  • relatively stable consumption
• Goal shifts from “fulfill demand” to “replenish stock.”

Planning procedures mentioned

• Reorder point planning
• Forecast-based planning
• Time-phased planning (mentioned as part of consumption-based planning)

Instruction-style cycle (as demonstrated: reorder point planning)

• Create a consumption-based material master:
  • Set MRP type = VB in MM01
  • Set a reorder point value (manually calculated externally in the demo)
  • Procurement type is implied as external for consumables/raw materials
• Ensure no external demand elements are required (no sales orders/PIR needed).
• Run MRP live for the material (T-code: MD01N)
• If available stock < reorder point: MRP generates purchase requisition
• Convert PR → purchase order (from stock requirement context)
• Post goods receipt (T-code: MIGO)
• Result: stock replenished according to reorder-point logic, independent of sales order timing.

Important lesson

• Consumption-based planning uses past consumption (or derived reorder/forecast data), not demand elements like sales orders or PIR.
• The demo highlights that there may be no requirement records in the system, yet MRP still triggers replenishment proposals due to reorder-point settings.

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Comparison: Demand-based vs Consumption-based (as stated)

• Demand-based planning

  • Driven by demand elements:
    • sales orders, planned independent requirements, dependent requirements, reservations, safety stock
  • Focus: fulfill demand
  • MRP run generates:
    • planned orders + purchase requisitions (if shortage)

• Consumption-based planning

  • Driven by replenishment logic based on:
    • reorder point / forecast-based / time-phased methods
  • Focus: replenish stock
  • MRP run generates purchase proposals (e.g., purchase requisitions) even without explicit demand records

• Acronyms:

  • Demand-based planning called deterministic MRP
  • Consumption-based planning called CBP

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SAP demo: what was shown (end-to-end)

Demo case 1: Demand-based planning using a sales order (make-to-order)

1. Create material master for finished good:
   • MM01 with MRP type PD
2. Create sales order:
   • VA01
3. View requirement and stock requirement list:
   • MD04 (shows demand = sales order quantity, stock nil, shortage shown)
4. Run MRP:
   • MD03
5. Planned order created:
   • visible in MD04
6. Convert planned order to production order:
   • from MD04 via conversion action/button
7. Release/save production order
8. Post goods receipt:
   • MIGO (against production order)
9. Deliver/issue to fulfill sales order:
   • VL01N
10. End state:
    • stock updated then depleted through delivery; sales order cleared.

Demo case 2: Demand-based planning using PIR (make-to-stock)

1. Create planned independent requirement:
   • MD61
   • Enter planning horizon (e.g., 2 months) and quantities
   • Handle requirement type setup (LSF make-to-stock)
2. View PIR in MD04
3. Run MRP:
   • MD03
4. Planned orders created from PIR
5. Convert planned order → production order
6. Goods receipt:
   • MIGO
7. End state:
   • finished goods stored; PIR fulfilled.

Demo case 3: Demand-based safety stock

1. Enter safety stock in material master:
   • MM02 (MRP 2 view)
2. Run MRP:
   • MD03
3. Planned order created for safety stock deficit.

Demo case 4: Consumption-based planning (reorder point)

1. Create material for consumption-based planning:
   • MM01 with MRP type VB
   • Enter reorder point (manually, based on past consumption)
2. Execute consumption-based MRP:
   • MD01N
3. System creates purchase requisition for reorder-point deficit
4. Create purchase order and post goods receipt:
   • Purchase order creation then MIGO goods receipt
5. Stock replenished accordingly.

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Speakers / sources featured

• Single speaker: the video author/host (“Hey everyone… Welcome back to my channel…”), with no other named individuals or external sources mentioned.