MRP: Balance Supply to Meet Demand in 2022
There are two kinds of supply. Independent demand and which relates to your sales orders and forecasts. Then there is dependent demand which speaks to your purchase orders and production orders. Finding a balance between the two through your Material Requirements Planning system is key to the success of your business. In this guide, we discuss how to balance supply to meet demand in 2022.
Key questions to ask yourself
- What components do we need?
- How many of each component do we need?
- When do we need the components?
The purpose of MRP
The goals of your Material Requirements Planning (MRP) are to make sure that the inventory level is at a minimum, but high enough to provide for the customer needs. While planning all the activities, including delivery, purchasing, and manufacturing simultaneously.
Basic Steps of Manufacturing Requirements Planning
Identifying the Quantity Requirements – Determine what quantity is on hand, in an open purchase order, planned for manufacturing, already committed to existing orders, and forecasted.
Company, Location, and Date specific.
Running the MRP Calculations – Create suggestions for materials that you consider critical, expedited, and delayed.
Complete the Orders – Delineate the materials for the manufacturing orders, purchase orders, and other reporting requirements.
What are your MRP outputs?
Purchase Orders – This is the recommended purchasing schedule that includes the order you give to suppliers to send the materials. The PO includes a schedule with quantities and start and finish dates to meet the MPS.
Material Plan – This details the raw materials, assembly items, and component needs to make the end products with quantities and dates. We recommend that you use attribute settings to set the time fences and to firm orders.
Work Orders – This details the work that goes into producing the end product, including which departments are responsible for what part, what materials are necessary, and what the start and end dates are
Reports – MRP generates primary and secondary reports. The primary reports include all three of the above — those that deal with production and inventory planning and control. Secondary reports are those that detail things, such as performance control, exception data (e.g., errors or late orders), deviations, and predictors of future inventories and contracts.
The right MRP software is an invaluable asset to any manufacturing business. It will empower you to carefully screen inventory data, maintain accurate lead times, use barcode scanning or a pull system to replace stock, and enter products into inventory.
The benefits are limitless.