5 Tips for Planners

and Buyers in SAP

Material Management

Matt Johnson
Martin-Baker America, Inc. © 2014 ERP Corp. All rights reserved.
 Introduction

• Material buyers and planners are at the front line of materials

management
• SAP provides the necessary tools to allow buyers and planners
to make a significant impact on lowering the cost of goods sold
• This is accomplished by properly managing the SAP Material
Master and supporting functions
• Here are 5 tips that will help you succeed!

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 But first….. a question for the attendees!

• How many of you have authorization to make changes to the

material master?

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 5 Great Materials Management Tips

• Buyers
• Tip #1 PO Unit of Measure Conversion – Economies of Scale

• Tip #2 Quota Arrangements – Split Material Sourcing

• Planners
• Tip #3 Reorder Point Planning – Lead Time Reduction

• Tip #4 Lot Sizing – Accurate Cost Estimates

• Team Environment
• Tip #5 Materials Management as a Team

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 Buyers: Tip #1 Buying on Economies of Scale

• The Order Unit field is used to buy materials in UoM that differ
from the Base UoM
• A great tool for buying in bulk to reduce inventory costs
• Set the Order Unit field in the Material Master to your supplier’s
UoM where price breaks are given

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 Buyers: Tip #1 Buying on Economies of Scale (cont.)

• A conversion factor between the Base UoM and the Order UoM
must be set
• Upon entering any alternative unit of measure, like the Order
UoM, a pop-up screen will appear for you to complete the
conversion factor

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 5 Great Materials Management Tips

• Buyers
• Tip #1 PO Unit of Measure Conversion – Economies of Scale

• Tip #2 Quota Arrangements – Split Material Sourcing

• Planners
• Tip #3 Reorder Point Planning – Lead Time Reduction

• Tip #4 Lot Sizing – Accurate Cost Estimates

• Team Environment
• Tip #5 Materials Management as a Team

8
 Buyers: Tip #2 Split Material Sourcing

• A quota arrangement is a way of allocating work among several

sources of supply for the same material
• You must select which business processes are to be
considered for quota arrangements in the Purchasing screen of
the Material Master (for example: planned orders and purchase
requisitions)
• You must also maintain a source list of vendors to be included
in the quota arrangement

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 Buyers: Tip #2 Split Material Sourcing (cont.)

• In the quota arrangement, you must define the percentage to be

allocated to each vendor
• There are refinements available to customize lot sizing

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 Buyer / Planner Question

• How many of you are performing a joint buyer / planner role?

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 5 Great Materials Management Tips

• Buyers
• Tip #1 PO Unit of Measure Conversion – Economies of Scale

• Tip #2 Quota Arrangements – Split Material Sourcing

• Planners
• Tip #3 Reorder Point Planning – Lead Time Reduction

• Tip #4 Lot Sizing – Accurate Cost Estimates

• Team Environment
• Tip #5 Materials Management as a Team

12
 Planners: Tip #3 Lead time reduction

• Reorder point planning is a method of ensuring continuous

inventory supply
• You must use one of the Reorder point planning MRP Types in
the MRP 1 screen of the material master
• If you are using a manual reorder point, you must calculate your
reorder point based on consumption during the vendor’s lead
time

13
 Planners: Tip #3 Lead time reduction (cont.)

• There are two significant benefits to reorder point planning

• 1) You can reduce the overall lead time of an assembly by
placing long lead time components of the critical path on
reorder point planning
• 2) By placing common hardware, such as nuts, bolts and
rivets on reorder point planning, and allowing production
technicians to make material reservations from inventory,
you will provide employee empowerment to the shop floor

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 5 Great Materials Management Tips

• Buyers
• Tip #1 PO Unit of Measure Conversion – Economies of Scale

• Tip #2 Quota Arrangements – Split Material Sourcing

• Planners
• Tip #3 Reorder Point Planning – Lead Time Reduction

• Tip #4 Lot Sizing – Accurate Cost Estimates

• Team Environment
• Tip #5 Materials Management as a Team

15
 Planners: Tip #4 Accurate Costing

• The costing lot size, defined in the Costing 1 screen of the

Material Master, is the lot size used as a basis for your cost
estimates
• Setting this lot size equal to your normal production lot size will
help you to provide accurate cost estimates
• This is particularly critical when using standard setup times in
your production routers

16
 5 Great Materials Management Tips

• Buyers
• Tip #1 PO Unit of Measure Conversion – Economies of Scale

• Tip #2 Quota Arrangements – Split Material Sourcing

• Planners
• Tip #3 Reorder Point Planning – Lead Time Reduction

• Tip #4 Lot Sizing – Accurate Cost Estimates

• Team Environment
• Tip #5 Materials Management as a Team

17
 Buyers / Planners: Tip #5 Teamwork

• The SAP Material Master requires inputs from both buyers and
planners
• Make sure that responsibilities are clearly defined
• Educate one another on the various settings for each party’s
responsibilities
• Communicate openly with each other, as well as inventory
control personnel, on Material Master settings and activities

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 Buyers / Planners: Tip #5 Teamwork (cont.)

• Example: The planned delivery time is maintained in the MRP 2

screen
• This screen is traditionally maintained by a material planner
• However, I recommend that buyers maintain the planned
delivery time field, as they are more in sync with lead times in
the vendor source list

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 Five Key Ideas

• Material buyers should use a PO unit of measure that is aligned

with the most economic lot size that is available or allowed
• Quota arrangements facilitate long term and strategic
partnerships at the buyer level
• Reorder point planning is an excellent source for lead time
reduction and employee empowerment
• Aligning procurement and production lot sizes with costing lot
sizes will help to make cost estimates more accurate and
meaningful
• Team work is critical amongst buyer / planner / inventory
management roles

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 A gift for the attendees

• All attendees of today’s webinar are entitled to a $5 voucher

towards my book, SAP Material Master – A Practical Guide

• Please visit the following link:

https://www.createspace.com/4548187

• Apply the discount code: DBSM3T3M to receive $5 off of your

purchase

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 Resources

• Matthew Johnson, SAP Material Master – A Practical Guide

(Espresso Tutorials, 2013).
• ISBN-10: 1-4943-1859-8 ISBN-13: 978-1-4943-1859-8
• www.amazon.com/SAP-Material-Master-Practical-
Guide/dp/1494318598/ref=sr_1_1?ie=UTF8&qid=1388430123&
sr=8-1&keywords=sap+material+master
• www.amazon.com/SAP-Material-Master-Practical-Guide-
ebook/dp/B00H8SPI8G/ref=sr_1_2?ie=UTF8&qid=1388430419
&sr=8-2&keywords=sap+material+master

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 Questions

• Now:
• Ask questions now for immediate answers

• Later:
• mjohnson122@verizon.net

Q&A
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Disclaimer
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trademarks of their respective companies. ERP Corp is neither owned nor controlled by SAP.