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Production Planning (PP): MRP & BOM

Material Requirements Planning, Bills of Material, and routings that drive production order creation in SAP PP.

MRP decides what to make or buy, how much, and by when. It is arithmetic, and the interview question is whether you can do the arithmetic rather than name the transaction.

MRP is like a recipe-scaling assistant for a restaurant chain - given how many meals (finished goods) are ordered or forecast, it automatically works out how much of every ingredient (component) needs to be bought or prepped, accounting for what's already in the pantry (stock) and what's already on order from suppliers (open POs).

Key Concepts

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The master data it needs.Bill of material (CS01) — the components for one unit, often several levels deep:
CS01
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    bicycle
      +-- frame        1
      +-- wheel        2
      |     +-- rim    1
      |     +-- spoke 32
      +-- chain        1
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Routing (CA01) — the operations, work centres and times to build it. BOM says what goes in, routing says how it is made. Costing needs both.
CA01
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What MRP calculates. For each material it nets supply against demand:
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    demand      sales orders, forecast, and dependent requirements
                exploded from the BOM of a higher-level material
    supply      stock on hand, purchase orders, production orders
                already running
    net         demand - supply
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If the net requirement is positive, MRP creates a proposal: a planned order for something made in-house, a purchase requisition for something bought.
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Work it through. 100 bicycles needed, 30 in stock, so 70 to build. The BOM explodes that downwards:
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    bicycles needed      70
    -> frames            70    (less 10 in stock = 60 to procure)
    -> wheels           140    (2 per bicycle)
    -> spokes         4,480    (32 per wheel)
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That cascade is why a small change at the top moves thousands of units at the bottom, and why MRP is run as a batch rather than calculated by hand.
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Planning strategy decides whether you wait for an order.
    make-to-stock   plan against a forecast; build before the order
                    arrives. Short lead time, inventory risk.
    make-to-order   plan only against a real sales order.
                    No inventory risk, the customer waits.
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That single setting is the trade between having stock nobody bought and making customers wait, and it is a favourite question because there is no universally right answer.
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Lot sizing decides how the requirement becomes orders.
    lot-for-lot    make exactly what is needed, when needed
    fixed lot      always a fixed quantity, e.g. 500
    periodic       one order per week or month
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Every order has a setup cost and every unit held has a holding cost. Lot sizing is where you balance them.
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Closing the loop. A planned order is converted into a production order (CO01), components are consumed — by backflushing or manual goods issue — operations are confirmed, and a goods receipt puts the finished material into stock.
CO01
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In S/4HANA, MRP Live replaced several separate background steps with one HANA-optimised run. On a large multi-level BOM structure that is the difference between a planning run measured in hours and one measured in minutes, which in turn means planning can be run more often than overnight.
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What the interviewer is probing.1. "What does MRP actually compute?" Probing: the core. Stalls: "What to produce." *Moves up:* net requirements from demand less available stock and receipts, exploded through the BOM and offset by lead times into planned orders.
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2. "What is the role of the MRP type?" Probing: the configuration. Stalls: "Nothing." *Moves up:* it decides whether a material is planned deterministically, by reorder point, or not at all — the usual cause of unexpected planning results.
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3. "What is the difference between a planned order and a production order?" Probing: the sequence. Stalls: "None." Moves up: a planned order is a planning proposal; converting it creates a production order with capacity, costs and material reservations.
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4. "Why would MRP not create a requirement you expect?" Probing: troubleshooting. Stalls: "A bug." Moves up: the MRP type, planning time fence, lot size settings, or the material not being included in the planning run scope.
Use cases:ppmrpbomproduction-planning