What is a planned independent requirement?

Independent requirements and dependent requirements are the two main types of requirements
you encounter when configuring SAP planning. This is what they are:

Planned Independent Requirements (PIR)

Planned Independent Requirements are planned production or sales quantities that are based on
some sort of forecast procedure (e.g. Material Forecast or S&OP procedure). These numbers are
used in MRP to calculate procurement and/or production quantities for a material.

(Planned) dependent requirements

Dependent requirements is demand that is dependent on another material. E.g. components of a

bill of material are often planned on the basis of the demand for the material of which it is a part.

Example

You plan to sell 200 bikes in the month of January 2009 based on sales in the same month of
2008. These 200 bikes is a Planned Independent Requirement for 01/2009.

Since every bike is produced using two pedals the 200 bikes you plan to sell in January 2009
results in 400 pedals you need to procure. These 400 pedals is a planned dependent
requirement for 01/2009.

On the basis of these numbers MRP can calculate including current stock levels how much bikes
and pedals you actually need to produce/procure.

More

Sometimes “old” planned independent requirements can negatively affect your MRP planning
leading to an overstatement of procurement quantities. How you can get rid of these
requirements is posted here.

Read about PIRs and Consumption-based Planning here.

Planned independent requirement reorganization

You can use the reorganization function to get rid of outdated and/or obsolete planned
independent requirements. Furthermore you can delete histories of the requirements from the
database.

In these transactions you work with a key date. Requirements before this date are impacted by
the transactions. It is possible that a Reorganization Period is set for your plant:
IMG > >Production>Production planning>Planned independent requirements > Define the
reorganization interval
You enter here the number of days that the system subtracts from the system date to fix the key
date. This setting overrides any manual key date that you enter in the transactions!
Consumption-based planning and MRP

MRP and Consumption-based planning are two fundamental SAP planning types that can be
used to determine a product’s requirements. To avoid any confusion on the subject: I am not
talking about the MRP run that is executed through MD01 and MD02. I’m talking about planning
types that are set in the Material Master’s MRP1 tab. The MRP type is used in the MRP run to
determine HOW procurement and/or production quantities are calculated.

MRP

When you plan a material according to MRP logic it means that it’s requirements (i.e. how much
of this product do I need in the future) are dependent on:

1. independent requirements determined by a Sales and Operations Planning process

(S&OP or SOP), or;
2. dependent requirements coming from another material of which the material in question
is a component (part of BOM).

The key-word here really is: dependency. The dependency of one material’s future demand to
requirements determined elswhere. MRP is commonly used in a production environment.

Consumption-based planning

When you plan a material according to Consumption-based planning logic, the future demand of
the product is always determined by it’s historical demand. In SAP there are two ways to
approach this:

1. Forecast-based planning: on the basis of historical demand you estimate future

requirements and you procure according to this estimate. This is suitable for materials
that are sold or produced with higher volume. Only then a decent statistical forecast
makes sense.
2. Re-order point procedure: when your stock falls below a pre-determined stock level the
system issues a procurement proposal. This is generally applied to low-volume or bulk
materials. Forecasting on low-volume materials is too error-prone. Forecasting low-
volume materials will result in unreasonably high safety stocks (I will blog on the
relationship between forecasting and safety stock in the future).

The key-word here is: independency. The material’s requirements are determined independent of
another material or process. Consumption-based planning is commonly used in a wholesale
environment, but also in a production environment for some raw materials, additives and bulk
materials.
Similarities

A Sales and Operations Planning process is, like forecast-based planning, also based on
forecast. The fundamental difference in comparison with forecast-based planning (a
Consumption-based process) is that:

 in SOP a material’s sales forecast is based on aggregated historical demand for multiple
materials in a product-group or a sales-region. The aggregated sales forecast is then
manipulated by the production department for capacity reasons. The final aggregated
forecast is then spread over the individual materials according to a distribution logic (10%
to product X, 8% to product Y, etc.).
 in Consumption-based planning the forecast is always based on the material’s own
historical demand. There is no-one in the process that manipulates the numbers.
Distribution of Planned Independent Requirements
in MRP

Distribution of planned independent requirements can be key in getting your MRP results exactly
right. This post is about how to break down your Sales and Operations Plan and schedule it for
MRP. E.g. Assume your SOP is planned in monthly buckets, but you plan your production in
weekly buckets and you use forward scheduling for your production orders. In this case you want
independent requirement quantities show on the first day of the week. Another example: since
you plan production on a daily basis you want your monthly forecast spread out on a daily basis
throughout the month. Distribution of planned independent requirements can help you achieve
this.

First you define the distribution function itself.

Production > Production Planning > Demand Management > Planned Independent
Requirements > Automatic Split > Distribution Function for Automatic Split > Define Distribution
Function

Distribution function

Here you specify the percentage of the quantity that needs to be available or released after a
certain percentage of time. You can e.g. determine that total quantity should be available at the
beginning, at the end or spread over 5 time points (like work days). To reach the goal of the first
example you determine that after 0% of time has passed, 100% of quantity should be available
(see below function S10).

Next step is to define the distribution strategy.

Production > Production Planning > Demand Management > Planned Idnependent
Requirements > Automatic Split > Distribution Function for Automatic Split > Define Distribution
Strategy
Distribution strategy

This let’s you determine either of two things:

1. spread the quantities exactly over the points in time defined in the previous step, or;

2. smooth the quantities along the time axis according to your function.

Imagine 2 time points in a month (20 working days) where 80% is available after 20% of
production time and 100% after 100%. Using the second strategy you can spread the 80% over
the first 4 days of production. Using the first strategy the total 80% will become available only
after four days. To achieve this you also need to determine the period split for the strategy.

Production > Production Planning > Demand Management > Planned Independent
Requirements > Automatic Split > Define period split for automatic split

Automatic split

Here you define how many of the first few weeks need to be split into daily quantities and/or how
many of the first few months need to be split into weekly quantities. You then decide how you are
going to spread your quantities. You decide whether your distribution strategy applies to the
weeks and/or to the months by assigning the strategy two the last two columns.

The only thing that is required as a last step is to assign the period split to an MRP group or
independent requirement version. When you opt for the last the periods will be split at the time of
copying the demand plan from SOP or Flexible Planning to the Demand Management tables
(MD61).

IMG paths for assigning split

You may need to try different settings in order to achieve what you need, especially if your
require more complex distributions.
What is Discrete Manufacturing, REM and Demand
Management?
1. What is Discrete Manufacturing?
2. What is REM?
3. What is Demand Management?

Here are difference between Discrete and REM and small explanation about
discrete and repetitive manufacturing:

- A typical characteristic of discrete manufacturing is the frequent switching from

one manufactured product to another. The products are typically manufactured in
individually defined lots, the sequence of work centers through production
varying for each one of these. Costs are calculated on the basis of orders and
individual lots.

- In Repetitive Manufacturing, products remain unchanged over a longer period

and are not manufactured in individually defined lots. Instead, a total quantity is
produced over a certain period at a certain rate.

- Discrete manufacturing typically involves varying the sequence of work centers

through which the products can pass during production. The order of work
centers is determined in routings, which can often be very complex. There can be
waiting times between the individual work centers. Also, semi-finished products
are frequently placed in interim storage prior to further processing.

- Repetitive Manufacturing, on the other hand, normally involves a relatively

constant flow on production lines. Semi-finished products are usually processed
further immediately without being put in interim storage. Routings tend to be
relatively simple.

- In discrete manufacturing, component materials are staged with specific

reference to the individual production lots. Completion confirmations for the
various steps and processes document the work progress and enable fine-tune
controlling.

- In Repetitive Manufacturing, components are often staged at the production line

without reference to a particular order. Completion confirmations are less
detailed, and the recording of actual data is simplified.

- The function of Demand Management is to determine requirement quantities

and delivery dates for finished products assemblies. Customer requirements are
created in sales order management. To create a demand program, Demand
Management uses planned independent requirements and customer requirements.
To create the demand program, you must define the planning strategy for a product.
Planning strategies represent the methods of production for planning and
manufacturing or procuring a product.

Using these strategies, you can decide if production is triggered by sales orders
(make-to-order production), or if it is not triggered by sales orders (make-to-stock
production). You can have sales orders and stock orders in the demand program. If
the production time is long in relation to the standard market delivery time, you
can produce the product or certain assemblies before there are sales orders. In this
case, sales quantities are planned, for example, with the aid of a sales forecast.