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.

Related posts:

1. What is a planned independent requirement?
2. Planned independent requirement reorganization
3. Lot-size for continuous production and process industry

When you go to transaction MC44 you will see the below screen:

Transaction MC44 - Inventory Turnover

Like I said, most settings are easy to understand since they mostly concern filters on organisational unit (Sales Organisation, Purchasing Organisation, etc.) or filters on materials (material group, material type, etc). Of specifc importance is the setting “Daily usage” in the section Analysis period.

Daily usage unchecked: the report will use consumption quantitiesper period as registered in the material master. This means that if you use period Month for a material you can not analyze in shorter period intervals than Month. This should be no issue since Inventory Turover should be calculated over longer periods of time (minimum 6 – 12 months).

Daily usage checked: instead of the consumption values in the previous option the daily consumption values are used as you see them in report MB51 – Material Documents. I recommend this setting if you want to analyze the calculation of SAP  and to find out what movement type are included. The runtime of the report is increased.

So what movement types are included? You can find the included movement types in the movement type configuration in MBJJ. Here you can toggle the consumption parameter. This is a fundamental setting that also influences forecasting. Forecasting will use consumption values of a material. When you decide you do want to use goods issue to production order for forecasting, but not for calculation of inventory turnover, you have a problem. This cannot be done. You should calculate either value manually.

Conclusion: calculate Inventory Turnover over a longer period of time 6 to 12 months. Daily values are not relevant, unless you want to analyze results for your understanding.

Related posts:

1. MC44 – Inventory Turnover (1)
2. Dead stock report – MC50
3. Stock in previous periods: MC.9

Formula

Inventory Turnover = Cost of Goods Sold (COGS) / Average Inventory at value

If you are not familiar with the term Cost of Goods Sold, this is the cost of your revenues.

Average Inventory is measured in value and not in volume.

If you divide both elements you know how often you sold you’re average inventory.  “So what?” you ask. I will explain next.

Concept and use

I will present you with two business scenario’s to point out the significance of the Inventory Turnover ratio.

Scenario 1

You sell one product. You invest 10.000 EUR as starting stock. You run your business for one year and at then end of the year you are completely sold out. Your revenue accumulates to 12.500 EUR.  For simplicity sake your gross profit is 2.500 EUR (12.500 – 10.000).

Revenue = 12.500

COGS = 10.000

Average Inventory = 5.000 (10.000 starting stock + 0 end stock / 2 = 5.000 average stock)

Inventory Turnover = 2 (10.000 / 5.000)

ROI = 50% > 2.500 (R-C) earned out of 5.000 (A)

Scenario 2

Again you sell one product. But this time you invest 5.000 EUR in starting stock. After 6 months you sold your stock and you replenish your stock again for 5.000 EUR. After another 6 months you’re sold out. Your revenue is again 12.500 EUR. Your gross profit is 2.500 EUR (12.500 – 5000 – 5000).

Revenue = 12.500

COGS = 10.000

Average Inventory = 2.500 (5.000 starting stock + 0 end stock / 2 = 2.500 average stock)

Inventory Turnover = 4 (10.000 / 2.500)

ROI = 100% > 2.500 (R-C) earned out of 2.500 (A)

Conclusion

Looking at the two scenarios the increased inventory turnover means increased operating efficiency: your ROI increased from 50% to 100%! Obviously you invested half the money in scenario 2 to achieve the same profits.

This doesn’t mean businesses should try to achieve a maximum inventory turnover per se. Achievable ratios differ per material type (finished goods, semi or raw), but also per moving speed (ABC class). Last but not least the type of industry very much determines what ratio you can achieve: process industries typically have higher inventory turns than, say, heavy equipment manufacturers.

You can find out what the industry standards are by purchasing metrics from data suppliers like Reuters or Gartner. This will give you an idea how well you are doing compared to your competitors. Or you can just use inventory turnover as an internal benchmark. In this case you periodically review the inventory turnover for different sets of materials and set targets that you wish to achieve.

Inventory turnover is typically a financial measurement (see relation to ROI). In order to improve the ratio, close cooperation with procurement/production planning is required, since they directly influence the stock levels.

Again, as with many KPIs and reports don’t judge based on this value alone, but use other stock controlling reports to minimize your inventory and still have a sound service level.

Finally you can read an interesting business case on how inventory turns made Dell a leader in it’s business.

Related posts:

1. MC44 – Inventory Turnover (2)
2. Inventory Information System
3. Stock in previous periods: MC.9

MD04 - Variable Print

Immediately a new overview opens up that may look less attractive than the overview you are used to. On the screen ‘Print list – variable’ you can change the lay-out and save it as a variant like you are used to in standard SAP reporting.

MD04 printlist lay-out

To get the best Excel results export the report directly to an Excel table, as opposed to first store it as a local file and then open it in Excel. This way the lay-out is optimized for direct filtering and sorting.

This is all there is to it. Sometimes SAP life is that easy.

Related posts:

1. Different planning views
2. MRP processing keys
3. Consumption-based planning and MRP

1. For this we will be using standard IM search strategy ME001 – Standard Search Procedure.

IMG > Logistics > Batch Management > Batch Determination and Batch Check > Batch Search Procedure Definition > Define Inventory Management Search Procedure

IM Search Procedure

The search procedure consists of three condition types that is plenty to us. We want the determination rule to be activated when we use Movement type 311 (Mvt from SLoc to SLoc) in Plant X for only a specific material. ME01 condition seems to fit this purpose.

2. Now we need to activate the search procedure for the movement type, otherwise it will not even begin to look for a determination procedure in the first place.

IMG > Logistics > Batch Management > Batch Determination and Batch Check > Batch Search Procedure Activation and Check Activation > Allocate IM Search Procedure/Activate Check

Activate procedure

We add the Search procedure to movement type 311 and check the check box so that manually entered batch codes are validated as well.

3.  Next we need a sort rule to be able to sort batches on SLED.

IMG > Logistics > Batch Management > Batch Determination and Batch Check > Define Sort Rule

Sort rule

For the rule we use standard Batch Characteristic LOBM_VFDAT. This is the SLED. We need earliest batches first so we choose ‘Ascending’.

Now we did all necessary customizing. It may be necessary to create batch classes with classifications if you are not already using this. If your products are batch managed already, your materials should already be assigned a batch class in the material master. This class we will also be using in the batch determination.

4. The last step is to create a search strategy, much like message determination for document output (if you never did this, then never mind this comparison).

SAP Menu > Logistics > Central Functions > Batch Management > Batch Determination > Batch Search Strategy > For Inventory Management > MBC1 – Create

We will use strategy type ME01 and key combination Movement Type/ Plant and Material. Remember that we want the search procedure only to work for one material at time of goods transfer in one plant. If you want you can extend the procedure to all materials for movement type 311. In this case choose key combination: Movement Type/Plant. It’s that easy.

MBC1 - Create Search Strategy

Here we actually enter the criteria when the batch determination should be activated: movement 311, material MRP and plant 3000. You can choose settings with regards to batch splits and whether determination should occur in dialogue mode or background. For details F1 your way through these options.

Last but not least: enter Selection criteria and Sort rule by pressing the buttons in the task bar. For selection criteria you can e.g. say SLED > 01.01.2009. It is a minimum requirement that the procedure needs. Be selecting a SLED date in the past I’m assuming that all batches are in scope (at the same I assume that expired products are taken off the shelf in time so I will not use it in my delivery process).

I will use the sort rule I created in the previous step: sort by SLED.

That should do it.

Related posts:

1. Distribution of Planned Independent Requirements in MRP
2. Dead stock report – MC50
3. Stock in previous periods: MC.9

1) The easiest way to turn source list into a mandatory requirement is to set this in customizing per plant. Go to IMG > Materials Management  > Purchasing > Source List > Define source List at Plant Level. In this transaction set the indicator for the plant that is going to be moved under the tighter procurement regime.

Define source list requirement at plant level

Alternatively, you can set the source list requirement in the material master’s Purchasing tab. The advantage of this is that you only put certain materials under tight procurement rules.

Material Master - Purchasing tab

2) Now it is important that all inforecords and contracts are up-to-date: update inforecords and contracts where you can and remove any obsolete ones. This is not a one time exercise: when using mandatory source lists it is an absolute condition that inforecords, contracts and subsequently the source list itself is up-to-date at all times. Outdated and incorrect source lists will lead to frustration where purchase orders cannot be created and procurement lead time will increase. Embed this new responsibility properly to a master data person in the procurement department.

3) Now that all inforecords and contracts are up-to-date you can mass create source lists using transaction ME05. In the opening screen of the transaction enter the data for the materials for which you wish to create a source list (If you have multiple sources for a material do not set the MRP indicator. Only one source with MRP indicator makes sense.). No worries, no actual source lists are created when you execute the execution button (F8).  Actual creation of source lists is done when you save in the next screen of the report results. When you are in the report overview you also set a fixed or blocked vendor by selecting lines and using the menu.

Generate source list

If you are not happy running a mass transaction you can still use ME01 for material-by-material source list creation.

4) Last thing is to check that authorization for end-users is tight enough. Users should only be able to procure for their own purchasing organization, purchasing group and plant. If this is not the case, you run the risk of material being procured from the correct vendor but by the wrong people. Taking care of the above steps should make your organization rogue-buying proof from a SAP perspective. Unfortunately SAP cannot prevent users from printing their own Purchase Orders in MS Word and faxing this to the vendor or ordering on-line.

Related posts:

1. Purchase order pricing date
2. MRP vendor selection
3. Different planning views

MC.9 stock in previous periods

MC.9 can present you with multiple historical stock levels and values at the end of each period. Important tables for this report are S031 – Statistics: Movements for current stocks, S032 – Statistics: Current Stock and Grouping Terms and S034 – Statistics: Movements for current stocks.

The stock level and value of the previous period is also displayed in the material master’s Accounting 1 tab:

Accounting tab 1 - Stock previous period

Important tables here are MBEW and MBEWH, MARD and MARDH or MCHB and MCHBH. The ‘H’-tables represent historical records. If there is not a historical record in the H table, but there is one in the ‘current’  table, the historical value is the same as the current value.

Comparison of stock levels between MC.9 and the material master is rather straightforward. These should match. Comparison of stock value is more complicated. MC.9 offers four valuation methods to choose from. Material master offers another. As a rule of thumb: on plant level the standard value in MC.9 can be compared with the stock value in the material master, accounting view. SAP note 506077 provides some background on stock controlling valuation.

If the values in the material master and MC.9 don’t match, then check the update rules (e.g. for infostructure S031 and S034). How are your periods defined there? This can be found at IMG > Logistics General > LIS > Logistics Data Warehouse > Updating > Updating Control > Activate Update. This is just a pointer, there may be other reasons.

Update period for Inventory Controlling

Update week 7/09

The total of LIS structures and its valuation methods for Inventory Controlling is rather complex. I recommend the following SAP notes if you really need to get acquainted with the workings and get guidance on how to update the structures

SAP Note 64636 – Procedure for statistical data setup in LIS : here

SAP Note 79083 – Setup of statistical data in BCO: Additional information : here

SAP Note 111691 -Material related statistical setup Inventory Controlling : here

SAP Note 456106 – Standard analyses : Display of values : here

SAP Note 512416 – LIS Stock in the past : here

SAP Note 551630 – FAQ : Questions on Inventory Controlling: here

Related posts:

1. Maintain posting periods
2. MC44 – Inventory Turnover (2)
3. Allow Posting in Previous Period

Label settings in Material Master

Here I can specify a label type and a label form. What these do exactly you can read further on. Before I move on to the customizing settings involved in label printing, let me warn you that this functionality does not go together with labels designed in SmartForm at all! Also we chose for SapScript label since we want to print on Avery A4 label pages. SmartForm does not support this. For this example I will set up label printing for goods receipt in MIRO.

Step 0 – Print Label ‘dashboard’

IMG > Material Management > Inventory Management and Physical Inventory > Print Control > Set label printout

Print Label Dashboard

The screenshot clearly shows the five step approach to setting this function up. No need repeating the button names. Let’s start with the first step.

Step 1 – Application Object

Application Object

In this screen you set up three variables. Best would be to start with copying the standard object to a new object starting with a Z. Oh blasphemy, I didn’t do this for my example! For the sake of it, we’ll move on:

Text ID: If you can, stick to the standard text ID.

Text Name: You can enter a free text in here. When you create a text in the next step the text will be given the name entered here.

Form: Let the developer copy the standard form and enter the new name in here.

Save and return to the dashboard. Onwards to the second step.

Step 2 – Maintain label text

Here you maintain the data that should be passed on to the label form. The Text Object name is the name of the object in the previous step (in this case MM07ET). This is not the Text Name or the Text ID!

Label text

The text itself can be fixed texts, but also variable data like material number (entered as &MATNR&) or batchnumber (&CHARG&). Make sure your editor is set to SapScript editor. If this is not the case switch to this mode through the menu.

SapScript Label text

The form is designed such that it knows where to place these data elements. This is developer’s work.

Step 3 – Label Type

Label type is an indicator to how the materials are created. There is no controlling behind the indicator itself. You can define it freely. This is one of the two variables that you assign to the material master’s Plant date 1 tab.

Step 4 – Label Form

This is meant to distinguish between sizes and layout of the labels. Just check if one of the three standard settings look applicable to you. As in step 3, the variables themselves do not determine anything. In combination with the label type it will determine how label quantities are determined. See next step.

Step 5 – Determine quantities

This is an interesting feature. Here you can set for any combination of Label Type and Label Form how the label quantities are determined: procurement quantities (e.g. pallets), stock keeping quantities (e.g. boxes) or manual determined. In this example I picked the manual determined, configured through Number of GR/GI slips to be printed (MSEG-WEANZ). You can display this field in transaction MIGO and enter any number for the number of copies you like.

Label quantities

Now your label control is set up.

Output type

Last thing to check is the Output Type. Standard Output Type for Label Printing is WEE1 (GR Label Vers 1).

Output Type WEE1

There is no need to change anything here. It shows here that label printing is a two step approach with regards to output determination. First Output Type WEE1 refers to Form MM07ET. MM07ET is the Object Name from step 1. Second Object MM07ET links to the Form as copied by the developer and set up in step 1.

Other settings

Make sure that Output Determination is set up for printing the labels (MN21).

Finally the Material Master should include the Label Type and Label Form as set up in the Customizing steps.

Happy label printing!

Related posts:

1. Printing barcode labels in SAP R/3

MMRV - Allow Posting in Previous Period

If you ran into this post because you got the message that posting is only allowed in a previous fiscal period, you’re posting periods were not updated in time. To solve this issue you go here.

Related posts:

1. Maintain posting periods
2. Stock in previous periods: MC.9
3. MC44 – Inventory Turnover (2)

1. Material Master Settings

Make sure your material is relevant for MRP planning (MM02). This post is focusing on the vendor selection and I assume you can take care of making the correct settings to include a material in an MRP run.

On the MRP3 tab select procurement type F for External Procurement. Also select the special procurement type for external procurement.

2.Purchasing Inforecord

Enter a Purchasing Inforecord (ME11) or Contract (ME31K) for the vendor and the material that you are setting up. The inforecord is generally used for storing the catalogue price of a material. The contract is more suited for storing a quantity-based or value-based commitment with a vendor.

In a procurement environment with a release strategy the contract is also suitable for allowing a department to procure a material from a vendor up to a pre-defined value or quantity. The thought behind this is that the central procurement department gives a one-time approval (= contract release) for procurement of material RAW from vendor DIFOT for EUR 2.500.000. The production department can make multiple call-offs, without going through a release procedure, until the ceiling of the contract is reached. This shortens the procurement lead-time by delegation while still centrally controlling the budget.

3. Source list

The source list (ME01) is used to send the message to MRP what the preferred source for a material is. If you entered an inforecord or contract, this wil be automatically picked up by the source list when you press the red-and-white button. It is possible that multiple sources are shown. Enter ’1′ for MRP relevant in the last field of your preferred source. You can also set the fixed vendor indicator. Whenever a end-user tries to use a different vendor when creating a purchase order (ME21N), the system will issue a warning or error.

Having maintained the material master, inforecord and source list correctly, MRP is now able to suggest the correct vendor. The vendor can be displayed in MD04/MD05 by pressing the vendor button at the bottom of the screen. The vendor is also displayed when you press the magnifying glass for the purchase requisition MRP element. You can limit authorization for users so that they cannot change the vendor or price in the purchase requisition or purchase order. How to do this exactly I will post some time later.

Related posts:

1. Source list benefits
2. Purchase order pricing date
3. MRP processing keys