There is a critical raw material that is not available in the production warehouse and a production team has to put together a production run. The supplier has not sent the order and the purchasing team should make arrangements for the material urgently. A slight shortage is not a big story, but can cause a big story problem in production, customer commitments and operating costs.
That is where the power of inventory planning in manufacturing and supply chain management processes can be used. Businesses must be aware of the available materials, how much they need and when it is required.
An effective way for students to gain insight into inventory planning is to know how purchasing, material management and warehouse function in relation to one another in ERP. Learners will not only recognize purchasing as a series of individual transactions, but they will also learn to identify how the requirements for materials impact purchasing decisions and their business activities on a daily basis.
What makes inventory planning important to any business?
It is not only about storing more stock in the warehouses. Too much stock not only consumes storage space, but it also keeps money tied up in the company, while not having enough on hand can halt production or even cause late deliveries.
Suppose a company that makes electrical equipment. It requires copper wire, connectors, plastic parts and packaging materials to manufacture its products. The consumption rate and the supplier lead time varies with each item.
When the purchasing team purchases all the items in bulk, the company could have surplus inventory. If it orders too late, the production may be halted until the employees receive their orders.
Effective inventory planning can help balance these two situations. It provides buying teams with greater visibility of stock and future demand and replenishment.
How SAP MM is supporting material planning
In ERP, SAP Materials Management (SAP MM) is utilized to aid in purchasing and inventory procedures. It enables companies to keep track of material information, manage procurement documents, track goods movements and monitor stock.
Other activities in business are also related to inventory planning. For instance, production requirements can affect purchase, stocks are updated with goods receipts and then further material availability can be performed.
A learner should know these connections, rather than the transaction codes by themselves.
The areas to explore are:
- Data from material master and purchase information
- Stocks and stocks movements
- Purchase Requisitions & Purchase Orders
- Goods receipts and goods issues
- Supplier lead times
- Material requirements planning (MRP)
- Correction: Reorder points and safety stock
- Putting up stock reports and inventory value accounts.
The specific technique to be used for planning will vary according to the setup of the organization and the SAP system used.
Knowing Material Requirements Planning
Material Requirements Planning (MRP) is a process that is used to help identify the materials required and when to order or manufacture them.
Suppose a furniture company places an order for 500 tables. Production team verifies the wood panels needed, screws, metal fittings and finishing materials on the bill of materials.
Some of these items are already available in the warehouse but may not be sufficient. MRP can take into account pertinent demand, stock, existing receipts, and planning parameters in order to determine the material requirements.
Based on the material and configuration, the system can create procurement proposals like planned orders and/or purchase requisitions.
The purchasing team can then go through the requirements and engage in the relevant procurement process.
This is a good illustration on how material planning goes beyond merely confirming the current stock levels. In addition, businesses should also take into account future demand and expected supply.
The role of Reorder points and Safety stocks
Every organization has its own planning processes in place. There are some materials that are used on a regular basis and can be planned to reorder point, and others that are to be planned based on the production schedule or the predicted demand.
The Reorder Point is the time at which to make a stock replenishment decision based on the planning method and settings.
For instance, a firm uses packing supplies on a frequent basis. The planning process can determine when the stock is at the maintained reorder point and thus when additional stock needs to be ordered.
Safety stock is for other use. It helps mitigate risk, like a sudden surge of orders or delivery issues.
But safety stock that is too high may result in higher inventory costs. If set too low, the company could be subject to shortages.
The key skill for those learning SAP MM is knowing the reason for these planning values and their impact on procurement.
The use of planning results at the Purchasing Teams level.
Planning information becomes useful because it can be used for procurement action by the planning information on the purchase team.
If MRP indicates that the component should be purchased for the following month, but they are not able to obtain it, The purchasing professional should review the requirement and develop a suitable supplier, review purchasing conditions and develop the required purchasing documents.
The purchase order records the agreed material, volume, price, delivery date and supplier information.
The receiving team records the goods receipt when the goods are delivered by the supplier. The stock position moves based on the movement and the appropriate system parameters.
When the delivery quantity is not equal to the order quantity, the team should look into the difference and deal with it in line with company procedures.
This sequence is a linkage between planning and purchasing and inventory management. It also shows why SAP MM learners should focus on complete business scenarios, instead of just screens.
What if Material Planning fails?
This does not always mean a lack of stock, because some inventories have inventory issues even if they are not in stock. The planning outcomes of the system can be wrong due to incompleteness or out-of-date information.
For instance, there can be an inappropriate planning parameter in the material master. The expected delivery date of a supplier may have been changed or a purchase order may not be up to date with the latest requirement.
An expert person investigating the matter may need to check:
- The information in the material master data is accurate
- Whether stock levels are related to goods movements recorded.
- If they are in dispute:If the open purchase orders and expected receipts are in dispute:
- The planning parameters are suitable or not
- Whether or not the requirements are covered in planning
- The need for further review of procurement proposals.
The approach of this investigation provides an opportunity for the practical development of problem-solving skills. It also helps students understand that a planning outcome may not be a mistake, but instead indicates the reason for that outcome.
A Practical Example for SAP MM Learners
Suppose you have a manufacturing company that makes water pumps. One model requires a particular motor that has to be sourced from an external company.
At the beginning of the week, the warehouse has 120 motors. They have a requirement for 100 motors for production and will soon have a further requirement for 80 motors. Meanwhile, the subsequent shipment of suppliers is scheduled to be shipped at a later time.
The purchasing team needs to establish if the stock on hand and planned receipts will satisfy their requirements.
A practical activity may involve learners reviewing the facts, understanding what is required, looking at the plans, and determining what action they should take in procurement.
They might then follow the process of creating a purchase requisition, processing a purchase order, goods receipt and stock verification.
The goal is not just to check off each step. Learners should be able to describe the reasons why more material was needed, what information led to this decision, and what may occur if it is not delivered?
What Skills to Acquire in SAP MM Training in Pune?
It is important that the lesson ideas in a useful course should relate with the practical lesson. Students shall seek to get a clear understanding of material master records, purchasing documents, inventory movements, supplier information and basic planning processes.
They should also inquire if the course provides concepts on MRP, stock monitoring, procurement scenarios, and troubleshooting exercises.
Students can reach out to Version IT with any questions about the SAP MM course, practice sessions, and can explore any procurement-related business scenarios without a commitment before they enroll.
The format of learning also is important. It is useful to see a trainer do a transaction, but a person cannot get as much out of the transaction if he or she does it on his or her own. The process can be repeated and errors can be explored to make the learner more comfortable with the system.
Who would benefit from learning inventory planning?
SAP MM can be relevant to graduates, aspiring ERP consultants, purchasing professionals, inventory coordinators, and people working in supply chain operations.
Students with no SAP experience can start at the very beginning with some of the basics of procurement and then work their way up to system processes. People who are already involved in purchasing or inventory may be more able to relate the lessons to their job situation.
Some business purchasing experience and knowledge of stock control and spreadsheets may be beneficial, depending on the course.
Conclusion
Inventory planning allows businesses to anticipate their inventory needs and avoid disruptions caused by stockouts. SAP MM facilitates this by offering various tools and features, such as material information, purchasing activities, inventory management and planning capabilities like MRP and reorder-point planning.
If students are thinking about doing training in SAP MM Training Course Pune, it is better to know how these processes interrelate rather than just the transaction codes and so on.
When selecting a course at Version IT or another institute, please consult the course syllabus, inquire what type of SAP system is utilized for practicing the course, and whether there is hands-on experience provided in the course. It is a valuable skill to understand what constitutes a material shortage, determine the reasons for it, and describe what to do about it when implementing a materials management solution that is based on ERP.
