Demand Management in SAP

Demand Management in SAPDemand management in SAP is an important function of a planner. It is important to anticipate the demand from the customers and satisfy that demand by ensuring the availability of materials in a timely manner. Demand management mainly focuses on forecasting the demand and balancing it. Forecasting tools are important for demand management. In today’s business environment, sales, production, procurement, and distribution play a vital role. Managing the above areas will determine how effective and efficient an organization can respond to demand.

When it comes to demand management in SAP, planning strategies and planned independent requirements play a vital role. We will look at each of these areas in the next sections.

Planning Strategies in SAP Demand Management

A planning strategy is a unique identifier that is used to determine how a product is manufactured and the manufacturing process it follows. At a higher level, there are two main planning strategies in SAP.

The make-to-order (MTO) strategy is based on the customer demand which is received through a sales order. Production, procurement, and inventory management will be done against the sales order. This is useful if you want to track your production process individually for each order. After completing the production, finish good stocks will be delivered against the sales order.

The make-to-stock (MTS) strategy is based on the process where manufacturing is done for a forecasted demand and the production is done for stock. There is no specific sales order requirement at the production starting point. When the customer order is received, it will be fulfilled with the available stock.

A planning strategy group is used to maintain the planning strategy for a material. Follow the below steps to maintain the planning strategy group:

  1. Execute the transaction MM03 to view the material master.
  2. Enter the material and the plant.
  3. Select the MRP 3 tab of the material master and locate the planning strategy group field.

Below are the most commonly used planning strategies.

  • 10 – MTS production
  • 20 – MTO production
  • 40 – Planning with final assembly
  • 50 – Planning without final assembly
  • 60 – Planning with planning material

Strategy Group

A planning strategy group can be used to define alternative planning strategies for a material. The system will always use the main strategy by default in the planning run. An alternative strategy needs to be manually selected.

E.g., if a material must follow both make-to-order and make-to-stock processes, we can define one strategy as the main strategy and define the other as the alternative strategy. When the sales order is received, we can determine the required type and the planning strategy will be picked for the material.

It is possible to assign a strategy group to an MRP group. This is useful if we want to use the same strategy group for multiple materials which share a common method of production planning. If there are any exceptions, they can be maintained in the MRP 3 view of the material master, and the settings in the MRP 3 view will have priority over the MRP group. Follow the below SPRO path to assign a strategy group to an MRP group.

SAP IMG -> Production -> Production Planning -> Demand Management -> Planned Independent Requirement -> Planning Strategy -> Assign MRP Group to Strategy Group

Planned Independent Requirements (PIR)

The PIR is an important planning method when it comes to demand management in SAP. During the MRP run, the system will check for the active version of the PIR, and procurement proposals will be generated. The PIR can be created independently. Follow the below menu path to create a PIR.

SAP Menu -> Logistics -> Production -> Production Planning -> Demand Management -> Planned Independent Requirements -> Create

The MD61 transaction code can be used to directly call the PIR creation program. PIR can be maintained based on different time intervals such as days, weeks, and months. PIR quantities can be entered manually or be copied from other planning tools. It can be copied from sales plans, production plans, or even from a simulative plan. By using the version function, it is possible to have multiple plans and make them active or inactive. It is possible to maintain simulative plans and simulate the MRP.

PIR is automatically reduced in the system. But it is important to check the PIR status in the system and remove or reduce the PIR. This ensures that non-relevant PIRs are not considered during the planning run. To reduce the PIR, follow the below menu path or execute the transaction MD74.

SAP Menu -> Logistics -> Production -> Production Planning -> Demand Management -> Environment -> Independent Requirement Reorganization -> Adjust Requirements.

Planned Independent Requirement Reduction

PIR is reduced during the goods issue rather than being consumed. During the make-to-order strategy 10, the oldest PIR is reduced first. PIR reduction can be used in planning strategies such as 40, 50, and 60.

During the planning strategy 40, PIR can be reduced when a sales order is placed. If the strategy is configured correctly and when the VSF requirement type is used, PIR is reduced. Consumption mode in the material master MRP view can also be used to further control the reduction. By maintaining the consumption mode, we can give a time limit. If a sales order is placed within this time limit, it will reduce the PIR. This suggests that PIR has a direct link with the planning strategy used.

Production Execution in SAP Demand Management

The demand management process ends with the production execution process. Once the demand is created in the system, it will be captured through a production order or purchase order. Plan orders will be converted into production orders. Purchase requisitions will be converted into purchase orders.

Production orders will be used to carry out production-related activities. A production order confirmation will create inventory in the system. Once the inventory is built into the system, PIR will be reduced, marking the completion of demand fulfillment. The delivery of manufactured items to the customer marks the completion of a successful demand management cycle in SAP.

Did you like this tutorial? Have any questions or comments? We would love to hear your feedback in the comments section below. It’d be a big help for us, and hopefully, it’s something we can address for you in the improvement of our free SAP PP tutorials.

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