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These are included on an organizational level between the plant and the storage location in order to carry out separate requirements planning and procurement.

Without MRP Areas

MRP would take place at a plant level. This means that all requirements for a product (such as dependent requirements, planned independent requirements, customer requirements) are combined at plant level and transferred together to requirements planning.

With MRP Areas

This allows a larger degree of differentiation in MRP. Planning takes place separately for each MRP area. It is possible to plan the requirements separately for different production lines.

In storage location MRP areas, one or more storage locations are grouped together in on organizational unit. This unit is planned separately from the remaining plant and MRP areas. A storage location can be assigned to one MRP area only. Storage location MRP areas are entered in SAP ECC and transferred from there to SAP SCM.

For each MRP area, various MRP parameters are assigned, so that requirements planning can be specifically tailored to the needs of the individual MRP areas.

When to Use?

They should be used to carry out separate planning from materials that are required in different production areas or storage locations.

Different Types of MRP Areas

There are three types of MRP areas in SAP ERP.

1. Plant
2. Storage Location
3. Subcontractor (used in planning the requirements of material provided by a subcontractor, not transferred to APO)

What is Assigned to a Sales Order

Dependent requirements are assigned to an MRP area depending upon their production or issue storage location. The requirement elements are covered following the assignment to an MRP Area.

Stock Transfer

If the stock transfer is set from the plant, a stock transfer reservation is carried out at the MRP area level and a reservation is generated at plant level with reference to this stock transfer reservation. When the procurement in the plant is complete, the transfer posting is carried out in the MRP area in Inventory Management with reference to the stock transfer reservation. This processing is then transferred accordingly to APO by means of a transportation.

There is more on MRP areas in page 451 of SCM 250 PP/DS.

What Is It?

I am sometimes asked to describe the frozen period and the benefits and costs to setting it at certain durations. At some companies setting a real frozen period can be a challenge and often times they want to know why should use any frozen period at all. The previous article describes how the frozen period can be set by matching to the industry.

http://www.scmfocus.com/sapplanning/2010/02/27/the-planning-cadence-industry-continuum/

Hartmut Stradtler

In the excellent book Supply Chain Management and Advanced Planning, Hartmut Stradtler points out the following.

Planning on a rolling horizon basis is an implementation of this plan control revision interaction. The planning horizon is divided into months. At the beginning of January a plan is made that covers January to December. But only the first period, the so-called frozen period is actually put into practice. At the beginning of the second period, a new plan is made considering the actual developments during the first frozen period and updated forecasts for the future periods. This procedure is a common way of coping with the uncertainty in operational planning both in classical planning systems and in APS.

A more efficient way of updating the plans is event driven planning. A new plan is not drawn up in regular intervals but in case of an important event, e.g. unexpected sales, major changes in customer orders, breakdown of a machine, etc. This procedure requires that all data which are necessary for planning e. g. stocks, progress of work etc., are updated continuously so they are available at any arbitrary event time. – Hartmut Stradtler

Here Hartmut seems to be differentiating event based planning vs. a frozen period. In theory a true frozen period would mean that you did not make changes to the plan within the frozen period so alerts would not be necessary. I would say that I had always thought of using both frozen periods and alerts, but the text from Hartmut represents them as two different methods of setting up the planning system, and I think they have a point.

Demarcation Between Planning Groups and Execution

I had generally thought a frozen period helps differentiate between different planning groups (demand planning and supply planning, supply planning and execution.). I have this described in the graphic below.

However, I think that Hartmut’s explanation is a good way of describing frozen periods that augments my initial explanation.

Customized The Frozen Period

One of the most important considerations is the cadence of the system. Standard planning philosophy states that the minimum frozen period should be the review time plus the lead-time of the product (a difficult concept to implement since many of the products have different lead times, however a limited number of frozen periods must eventually be selected.)

Some naturally low cadence industries like aerospace and defense (A&D), can be set with long frozen periods. This is an industry marked by long lead times and long manufacturing lead times. A&D is also one of the few examples of a true make to order environment, even though many different companies claim to be make to order, which are actually assemble or package to order. However, when one moves towards faster cadence industries the question becomes what type of frozen period to accept.

For people with a significant orientation on planning, the desire can be to attempt to implement a relatively long frozen period to essentially demarcate planning from operations. The very selection of a frozen period determines whether SCM is used only for planning or for both planning and execution – at least for the planning oriented components of SCM. However, this is only one way to peel the onion.

Planning and Execution in SCM

While the official story from SAP is that SAP ERP is for execution, while SAP SCM is for planning, the actual story is more complex than that. In fact, SCM has a number of execution elements to it. SCM may never get to the point of cutting purchase orders, but a lot of it does can be classified if not executional then at least tactical. The graphic below provides a synopsis of this.

The Actual Practice of the Frozen Period

Generally a frozen period of a week or two is recommended and is considered the standard way of controlling a planning system at least according to textbooks. However, in actual fact, frozen periods are not all that commonly used in real deployments of planning software. There are several reasons for this:

• For industries with a fast cadence, perhaps the best way to meet their planning needs is to dispense with the frozen period and instead allow changes that come within lead time to be observed and reacted to by both planners and operators who each use the SCM system.
• Secondly, while “planning” systems were originally intended to be used for planning exclusively, in fact companies tend to use planning systems for operations, short term to mid term planning, and very little long term planning. In fact the most long term planning that occurs is in the S&OP process, which is a disaster area at most companies.

This brings up an extremely important point related to how planning systems are actually used in practice, which is quite a bit different from how vendors designed them to be used. One way to improve the planning systems ability to manage both operations and planning is to create differentiated alerts. The alert monitor allows alerts to be flexibly sent to different individuals that have different responsibilities.

Conclusion

Upon analysis of SAP SCM it is apparent that there are several ways of dealing with the changes that arrive within the planning system that are outside of the planning period. One way is to deal with the changes only in SAP ERP. Another is to use SAP SCM and simply control the within lead-time changes by creating alerts that a specialized group which, are more execution and expediting oriented than planning oriented, manage.