You have set an MRP type for forecast-based planning in the material master (MRP 1 view).
You define MRP types in Customizing for MRP in the IMG activity Check MRP types.
Process Flow
The system copies the requirements quantities that it has forecast in the requirements planning run and calculates net requirements. During this calculation, every period is checked to make sure that the forecast requirements are covered either by available stock, by planned receipts from purchasing or by production. If a material shortage occurs, the system generates a procurement proposal.
The system calculates the quantity recorded in the procurement proposal according to the lot-sizing procedure that you specified in the material master. Depending on the lot-sizing procedure, several forecast requirements are grouped together into one lot.
For every procurement proposal, the system calculates the date on which it must be converted into a purchase order or a production order.