Reducing Forecast Requirements

[Former Member]

Good evening.

I need your help in order to understand the issue of the forecast requirements reduction. Although I have searched and i have read from various resources, I am still not confident enough that I have really understood it. Fore example, at the "SAP Material Requirements Planning (PP-MRP)"

book I am reading (page 29):

"Features:

The forecast, which calculates future requirements using historical data, is carried out at regular intervals. This offers the advantage that requirements,  which are automatically determined, are continually adapted to suit current consumption needs. The forecast requirement is reduced by the material  withdrawal so that the forecast requirement quantity that has already been produced is not included in the planning run again."

So far, so good. What i understand is that system compares actual consumption with the forecast requirement and it adjust the requirement's

quantity accordingly. But, immediately bellow, at the same page, it reads:

"Reducing Forecast Requirements:  

Reducing forecast requirements by consumption:

If consumption is higher than the forecast requirements in the current month, then the system also  reduces future forecast requirements. 

Reducing current forecast requirements by consumption:

If consumption is higher than the forecast requirements  in the current month, then the system does not reduce future forecast requirements."

At this point, i am completely lost. Shouldn't be the other way round? If consumption in this month is higher than the requirements, shouldn't

system increase next month's forecast requirement? Why next month's forecasting requirement should be reduced?

I would really appreciate it if you could also point me to any further resources regarding requirements consumption you think would be useful to me,

since so far i had no luck in understanding it.

Best personal regards to all,

Nikos

[Former Member · Accepted solution]

Hi Nikos,

I totally agree with DB49 on MRP type control on Forecast consumption. It explains the reduction of forecast as per SAP.

Are you referring to SAP library on forecasting ? I have found similar content there also and believe me its very confusing. After going through it again times I could understand the meaning.

The whole purpose of forecast is to predict future requirements. There are always fluctuations on demand (or consumption) and that's the reason we have smoothning of forecast so that our systems can adjust to change in demand. In SAP we have different forecast models (e.g moving average, trend, seasonal etc... and different control parameters / factors to calculate forecast. Again, historical data (consumption values) are the base of these calculations.

Now, when consumption is higher in current month, then new forecast "values" should increase for next month to cover the excess demand. otherwise demand will keep on increasing and forecast values for future months will keep on decreasing resulting in chaos in planning. Till here we both are in sync, now coming to your point,

Nikos Giannopoulos wrote:


"Reducing Forecast Requirements:
Reducing forecast requirements by consumption:
If consumption is higher than the forecast requirements in the current month, then the system also  reduces future forecast requirements.
Reducing current forecast requirements by consumption:
If consumption is higher than the forecast requirements  in the current month, then the system does not reduce future forecast requirements."

Here author is not talking about calculating new forecast "values" but the forecast "requirements" that are already created. For example lets say forecast run creates 50 for current month and 100 for next month. Now if the actual consumption happens for 80 quantity, then system will consume 50 from current forecast and 30 from next months forecast requirement, leaving on 70 for next month. Similar to consumption of PIRs.

This is just my understanding and could be different from author's or other users in community. Hope it helps.

Best Regards,

Rohit

[Former Member · Accepted solution]

Hello Rohit!

Many thanks for your answer (DB you too).

I am reading the SAP Library book on PP-MRP (see attached picture).

Αnd yes, the "reduction" issue is part of Forecasting (whenever forecasting is referred

at). I need some time to go through your replies, in order to ensure i have a correct understanding. However, I have to say very openly, that reduction is something i can not

understand 100%. However, let me go through your answers and if i have any further queries, i will get back to you.

Best personal regards,

Nikos

[Former Member · Accepted solution]

Nikos,

Aha, seeing your screenshot invokes a bit of nostalgia for me.

The document you displayed is one of the old 'Printfiles' (PDF format) that SAP released during R/3 4.6.

I was very disappointed that SAP chose not to continue releasing new versions of these files with each new release of R/3 (and the follow-on ECC 6.X).  IMHO, those were great docs for users who wanted to do studying offline.  Those files remained available in help.sap.com until just a year or two ago, even though R/3 is no longer covered by SAP's standard support.  I don't believe SAP currently has these PDFs publicly available any more in help.sap.com.

Those docs were mostly just re-writes of data found within SAP 4.6C online help.  As implied by expert Rohit, some of the data has been revised a bit since R/3 was removed from active support by SAP.  However, at least the PP PDF is reasonably accurate, since ECC PP hasn't really changed much since 2000.

Best Regards,

DB49

[Former Member]

Rohit AND DB,

reduction is only applicable to Forecast requirements? Or it is also applicable to PIRS???

If, for example, i transfer the forecast values as PIR (let's say through MD61 or similar),

is reduction still valid? And, is it relevant with the backward/forward consumption issue

in MRP3 screen (+strategy)?

Best personal regards,

Nikos

[Former Member]

Nikos,

reduction is only applicable to Forecast requirements? Or it is also applicable to PIRS???
If, for example, i transfer the forecast values as PIR (let's say through MD61 or similar),
is reduction still valid? And, is it relevant with the backward/forward consumption issue
in MRP3 screen (+strategy)?

Before we begin to answer, tell us which MRP type and which strategy you wish to discuss.  They all work differently.

Best Regards,

DB49

[Former Member]

I do not have something specific in mind. I just need to better understand the concept. In my company, we now run Forecasting based MRP, but in an external system and we want to transfer it to SAP. So, i was thinking of (a) run total forecast (MP38) and then run MRP of MRP type PD (or a copy of it, where i will use TOTAL consumption). Or, i can create PIRs where i will copy the forecasted values and again, use MRP of MRP type PD (or a copy of it, where i will use TOTAL consumption and leave the "Relevant to planning" indicator blank, so they are not doubled by PIRs).

This is why i am trying to understand both concepts (reduction and consumption).I do not know if i helped you at all and if i have answered your requirement... If not, i will be happy to provide any further info you may need.

Best personal regards,

Nikos

[Former Member]

Nikos,

Reduction and consumption are variously applicable to both Consumption Based planning and also to Planned Independent Requirements based planning.  As I mentioned earlier, each flavor is different; with different advantages and different drawbacks.

SCN is not really a good vehicle to conduct a tutorial on forecasting/reduction/consumption; the topic is substantial.   I couldn't possibly point you in a single direction without knowing many more details of your business requirements  

The document you have in your possession will give you insights into most of SAP's 'standard' forecast and PIR technology.  For a more modern version, you can consult SAP online help.  Try these links

For Forecasts

Reducing Forecast Requirements - Forecasting (LO-PR) - SAP Library

For Planned independent requirements you should probably review ALL Planning strategies.  Each strategy has different combinations of PIR consumption and PIR reduction.

Table of Planning Strategy Assignments - Demand Management (PP-MP-DEM) - SAP Library

is a good starting point; in this general area of SAP help there is much to be learned.

If you finally settle on a method, but you run into problems with implementation of that method, come back with the detailed problem, maybe we can help.

Best Regards & good luck,

DB49

[Former Member]

Many many thanks and please accept my apologies for the late reply!

[Former Member]

Nikos,

Please refer to the latest revised content:

[Former Member]

Thank you Rohit, once again.

However, what i see in this picture is the same with my initial question. Please allow me some time to go through your previous explanation and let's see if i can get it right:)

Best regards,

Nikos

[Former Member]

Nikos

Well, I don't really know anything about the book you are reading.  However, if I had to guess, I would say that these words refer to the configuration possible for one type of consumption based planning called 'Forecast Based Planning" (OMDQ).

Within this MRP type (VV), you have options about how the forecast should be reduced by consumption.  These sentences you have highlighted

Reducing forecast requirements by consumption:
If consumption is higher than the forecast requirements in the current month, then the system also  reduces future forecast requirements.

Reducing current forecast requirements by consumption:
If consumption is higher than the forecast requirements in the current month, then the system does not reduce future forecast requirements."

represent two of the three different options available.  See all 3 options, below.

Best Regards,

DB49