S4525 · Consumption-Based Planning and Forecasting in SAP S/4HANA · Unit 5

Unit 5: Source Determination

Once MRP knows how much is needed and when, it tries to say from whom. Requisitions with an assigned source can flow straight into purchase orders. This unit explains the default source priority, scheduling agreement schedule lines, and how source lists and quota arrangements override the default logic.

Lesson 1 · Explaining Source Determination in Material Requirements Planning

After this lesson you can

Describe where source determination fits into the planning run
Explain the default priority of sources
Use scheduling agreements, source lists and quota arrangements to control automatic source determination
Convert assigned requisitions into purchase orders

Key concepts

The planning run works in a fixed order: shortages first, then lot sizes, then sources of supply. Lot sizing may merge several shortages into one receipt or split one shortage into several. After that, quantities and dates of the planned receipts are known, and source determination first decides between in-house production and external procurement. For external procurement it tries to attach a valid source of supply – a contract, a scheduling agreement or a purchasing info record – to the requisition. In SAP S/4HANA this happens automatically in every planning run.

An assigned requisition needs no manual source assignment and can be converted into a PO automatically. If no source is found, the requisition stays unassigned and a source must be entered during conversion or assigned collectively.

Process flow

Net requirements→Lot size→Source determination→Assigned PR / schedule line→Automatic PO (ME59N)

System steps

Automatic PO creation from assigned requisitions: ME59N, or Fiori Schedule Purchasing Jobs with the template for automatic creation of purchase orders from requisitions.
Assign sources afterwards to unassigned requisitions: ME57 (Assign and Process) – automatic assignment for selected items, choice dialog when several sources exist, price simulation to find the best supplier, then conversion into POs.
Fiori alternative: Process Purchase Requisitions – all available sources are displayed per item and assigned manually; if none exist, RFQ processing can be started.

Default priority (no source list, no quota arrangement)

Priority	Source	Result in MRP
1	Scheduling agreement	Schedule lines (MRP Live always; classic per creation indicator)
2	Contract	Requisition assigned to the contract
3	Purchasing info record with Relevant for Automatic Sourcing indicator	Requisition filled with supplier, purchasing organization, planned delivery time etc.

Scheduling agreements and automatic schedule lines

A scheduling agreement is an outline agreement for materials procured regularly over a period. Schedule lines split the total quantity into partial deliveries with dates and communicate them to the supplier; MRP can generate them automatically. Benefits: shorter processing times and less paperwork (one agreement replaces many POs or release orders), lower stock because suppliers can deliver at shorter notice, and non-fixed schedule lines are updated with every run.

Document type	Release documentation	Use
`LP`	Without	Schedule lines are sent to the supplier as they are
`LPA`	With	Many schedule lines; they are turned into forecast (FRC) and just-in-time (JIT) delivery schedules sent to the supplier

Create scheduling agreements with ME31L and maintain schedule lines manually with ME38; contracts are created with ME31K and info records with ME11.

Source lists

Source lists and quota arrangements override the default priority; a quota arrangement has higher priority than a source list. A source list (ME01) holds, per material and plant, time-dependent source list records. It can:

Define a fixed source (used everywhere except in the planning run).
Block a source.
Make a source MRP-relevant, overriding the standard logic.

MRP indicator in source list	Effect
blank	Source not considered by MRP – even an info record with "Relevant for Automatic Sourcing" is ignored
`1`	Source assigned to requisitions in the planning run – an info record is used even without the automatic sourcing indicator
`2`	For scheduling agreement items: MRP also creates schedule lines

Quota arrangements

When several sources should be used at the same time, a quota arrangement (MEQ1, or the corresponding Fiori app) assigns each source a quota for a validity period. MRP always considers existing quota arrangements.

Procedure	How it distributes
Allocation quota arrangement	Each lot goes completely to one source; over the validity period the lots are distributed according to the quotas (the source with the lowest quota rating is chosen)
Splitting quota arrangement	Each proposal is split among several sources according to the quota; controlled by the lot-sizing procedure (splitting quota) in the material master

Refinements include a maximum release quantity to reflect a supplier's capacity limits. The quota arrangement usage key in the material master (Purchasing view) controls which processes, including MRP, use the quota.

Quota rating = (quota allocated quantity + quota base quantity) ÷ quota. The source with the lowest rating gets the next lot.

Configuration (IMG)

SPRO › Materials Management › Purchasing › Source List › Define Source List Requirement at Plant Level SPRO › Materials Management › Purchasing › Quota Arrangement › Define Quota Arrangement Usage

S/4HANA and newer releases

The Relevant for Automatic Sourcing indicator in the purchasing info record is an S/4HANA innovation: info records can be found by MRP without maintaining a source list. Fiori apps such as Manage Source Lists, Manage Purchase Requisitions and Process Purchase Requisitions complement the GUI transactions, and requisition approval can use flexible workflow. Suppliers are Business Partners maintained with BP.

Exam focus

MRP sources: info record, contract, scheduling agreement (not sales order or means of transport).
Default priority: scheduling agreement → contract → info record with automatic sourcing.
Quota arrangement > source list > default logic.
Source list MRP indicator: blank / 1 / 2 (schedule lines); it overrides the info record indicator.
Splitting quota is controlled by the lot-sizing procedure.
LP without, LPA with release documentation (FRC/JIT).
Assigned requisitions → POs automatically via ME59N; unassigned via ME57.

Unit summary & exam focus

Source determination runs automatically after lot sizing. Without source lists or quotas, MRP prefers scheduling agreements, then contracts, then info records flagged for automatic sourcing. Source lists can include, block or fix sources; quota arrangements (allocation or splitting) distribute demand across sources and take priority. Assigned requisitions can be converted automatically into purchase orders.

T-codes in this unit

T-code	Purpose
ME59N	Automatic creation of POs from requisitions
ME57	Assign and process purchase requisitions
ME31L	Create scheduling agreement
ME38	Maintain scheduling agreement schedule lines
ME31K	Create contract
ME11	Create purchasing info record
ME01	Maintain source list
MEQ1	Maintain quota arrangement
BP	Maintain business partner (supplier)

Self-check questions

In which order does the planning run determine shortages, lot sizes and sources?
Answer
Shortages (net requirements) → lot sizes → sources of supply.
Without source list or quota arrangement, which source does MRP prefer?
Answer
Scheduling agreement, then contract, then info record with "Relevant for Automatic Sourcing".
An info record is flagged for automatic sourcing, but the source list entry has a blank MRP indicator. Is it used by MRP?
Answer
No – the source list overrides the info record indicator.
Which has higher priority: source list or quota arrangement?
Answer
Quota arrangement.
What controls whether a requirement is split across several sources?
Answer
The lot-sizing procedure in the material master (splitting quota).
What is the difference between LP and LPA?
Answer
LP sends schedule lines as they are; LPA uses release documentation and sends forecast and JIT delivery schedules.