MRP stands for "material requirements planning." DBA is an MRP system that uses common sense item settings to generate jobs and POs on a just in time basis within a coordinated master schedule.
MRP gives you all the tools you need to achieve lean manufacturing - which is to deliver on time using less inventory and WIP.
MRP generation is driven by four common sense item settings - the Reorder Level, Minimum Order, Job Days, and Lead Days, which are maintained here in the MRP Settings screen. Focus on and refine these four settings over time and you can eliminate chronic shortages and over-stocking and shorten delivery times.
The four common sense item settings address all the fundamental issues that every planner deals with, including:
Let's review how these common sense settings are established.
The first of our four common sense item settings is the Reorder Level.
Some items with long lead times need to be made or purchased to stock so that they are immediately available when needed by jobs or sales orders. To make or purchase an item to stock, it must be given a Reorder Level. MRP will generate a job whenever net demand within the item's planning period falls below its Reorder Level.
The Reorder Level amount is established using the Reorder Calculator. The Reorder Level must be sufficient to cover projected demand within the item's planning period. Projected demand consists of three elements:
Here you enter estimated monthly unit sales for the item. Down here you can review past sales history with monthly and quarterly averages to help determine your estimate.
Here you enter estimated monthly usage for the item, meaning its use as a subassembly or purchased component in jobs. Down here you can review past usage history with monthly and quarterly averages to help determine your estimate.
If the sales or usage for this item varies greatly from month to month, you can enter a safety stock amount to cover possible spikes in demand that could result in stock shortages. Down here you can review past deviations in monthly sales or usage that can help you determine an appropriate safety stock amount.
Here we see the item's Planning Period, which is the number of days allocated by MRP to make or buy the item.
The program translates the sum of these three amounts into a daily average that is then multiplied by the item's planning period days to arrive at a calculated Reorder Level.
The second of our four common sense item settings is the Minimum Order, which provides control over job and PO quantities. When MRP generates a job or PO, the quantity will be equal or greater than the Minimum Order amount, no matter how little the actual net demand may be.
The Minimum Order can be used as an economical order quantity. With manufactured items, it generates job quantities sufficiently large enough to justify machine setups or to match quantities with machine sizes. With purchased items, it can be used to take advantage of supplier price breaks and to reduce unit shipping and handling costs that are typically higher with smaller orders.
Here we are looking at the Reorder Calculator once again. The Reorder Calculator can also be used to calculate a Minimum Order, based on entering a Supply Days amount.
The Supply Days represents the number of days of projected demand you wish to be covered by each PO. Projected monthly demand is entered over here in the form of estimated monthly sales, monthly usage, plus a safety stock factor. The program takes projected monthly demand, converts that amount into a daily average, then multiplies it by the Supply Days to generate a calculated Minimum Order amount.
Using the Supply Days in combination with a Reorder Level solves two common purchasing issues - how to purchase items with extremely long lead times, and how to generate blanket purchases at regular intervals.
When an item has an extremely long lead time, the Minimum Order can be used to create a series of staggered POs. For example, let's take an item with a six month lead time. Here in the Supply Days field, we are specifying that the Minimum Order will cover 30 days of projected demand. MRP will generate a PO approximately every 30 days. So in the case of our six month lead time item, at any given time, six POs would be in progress, each due to arrive in 30 day intervals.
The Supply Days setting can also be used for blanket purchasing. If you give a supplier an annual volume commitment in exchange for a fixed price and you wish to issue POs at regular intervals, such as once a month, set the Supply Days for 30 days and MRP will generate POs in approximate 30 day intervals.
The third of our four common sense item settings is the Job Days, which is the number of shop days allocated by MRP for making the item. Note that the Job Days amount is an "allocation" and is not the literal time it takes to manufacture the item. For example, on paper an item may only take so many hours to make the typical job quantity, but in reality, jobs spend much more time moving from work center to work center and waiting in queues than they do in actual production.
The best way to set the Job Days allocation is to give it a common sense value based on your past experience. Two tools are provided to help you make the allocation.
You can use the Production inquiry to get a listing of the actual shop days associated with past jobs.
The fourth and final common sense item setting is the Lead Days, which is used differently for purchased and manufactured items.
In the case of purchased items, the Lead Days is the number of days allocated by MRP for procuring the item from its default supplier.
To help you make this allocation, you can review the Delivery inquiry to get a listing of actual delivery days associated with past PO receipts.
In the case of manufactured items, the Lead Days is used by MRP to allocate sufficient time prior to starting the job for material procurement or making subassemblies. The Lead Days amount is automatically calculated in real time by the Lead Days Generator and is made equal to the longest lead time of any component for this item that is made or purchased to order.
The Lead Days plus the item's Job Days determines the time it takes to make the item and establishes sales order required dates when you enter orders for make to order items.
The Lead Days inquiry enables you to review the components that contribute to the calculated Lead Days amount. The inquiry displays a multi-level view in cases where a chain of subassemblies must be made to order before a job for this item can be started.
If you note that a particular component in the chain contributes more to the calculated Lead Days than you consider acceptable, you have the option of making or purchasing that item to stock instead of to order, in which case the component will be removed as a contributor to the calculated amount.
This gives you the ability to shorten delivery times by removing problematic components that make more sense to make or buy to stock.
That completes our review of the four common sense item settings - the Reorder Level, Minimum Order, Job Days, and Lead Days - and the tools that support them - the Reorder Calculator, Production Inquiry, Delivery Inquiry, Lead Days Generator, and Lead Days Inquiry.
One final setting of note is the ability to designate an item as CTO, which stands for "custom to order." A CTO item is one that is altered or customized in some manner for each customer order such that it cannot be stocked or sold to other customers. Jobs for CTO items are generated by MRP directly from sales order lines in the exact quantity ordered.
If you make items to order, we provide common sense settings that enable you to quote customer realistic delivery dates that are achievable by the MRP system.
Here we are looking at the Sales Order Defaults screen. When a sales order line is created for a make to order item, the line item Required date is forward scheduled from the current date by the item's Lead Days + Job Days allocations.
This is the same formula used by MRP when it backward schedules planned jobs from required dates and insures that sales order and MRP dates are synchronized.
Another commons sense setting is the Extra Shop days amount, which can be used for three purposes:
First, you can pad required dates to quote conservative shipping dates as standard policy, knowing that you have room to move dates up for special customer orders.
Second, if your make to order jobs need additional time for advance preparation, such as to refine custom job details, you can specify extra Shop Days to provide additional time before job start dates are scheduled.
You can specify extra Shop Days at times when shop capacity is temporarily constrained and jobs are to be delayed because they must wait longer than normal before they can be released to the shop.
Jobs and POs are generated within the MRP screen. Each MRP run is a three step process.
The first step is to generate jobs directly from sales order lines for CTO, custom to order items.
The second step is to generate jobs for non-customized items and lower level subassemblies in response to each item's net demand.
The third step in each MRP run is to generate POs in response to each item's net demand.
What is "net demand?" Within the item's planning period, it is the item's stock on hand, plus expected supply from open jobs or POs, less demand from sales orders and other jobs.
Jobs and POs are generated only in response to the net demand within each item's planning period, which is the number of days allocated by MRP to make or buy the item. Any demand outside the planning period is responded to in a future MRP run. This makes the master schedule easier to manage because scheduling dates are short term and the number of jobs and POs is kept to a minimum.
Here we are looking at a set of planned jobs that was generated in response to net demand. Each planned job can be reviewed by clicking the Demand icon. This launches the Projected tab of the Stock Status screen, which displays all the supply and demand details within the items planning period. In this lower grid, you see any demand that exists beyond the planning period that will be responded to in a future MRP run.
The Stock Status inquiry tells you everything you need to know about the planning for this item. Here on the summary tab you can see the item's MRP settings that drive MRP generation.
Based on your review, you have the option of bumping the planned job quantity or expediting the finish date for special situations. You can also click the Links button to link to the MRP Settings screen if you wish to refine this item's settings.
As you finish each review, select the Convert checkbox to flag the planned job for conversion. After all planned jobs are flagged for conversion, click the Convert checkbox to convert the planned jobs into actual jobs.
After each set of planned jobs is converted, the program examines manufactured components within the newly created jobs and automatically generates additional planned jobs for lower-level subassemblies as needed. This process continues, level by level, until no more net demand is detected. The Lead Days Generator insures that each subassembly job is properly offset to meet the required dates of higher level jobs.
A major source of inefficiency with manual planning is treating each make to order product structure as an independent chain of multi-level jobs. In actuality, much of your demand is "interdependent", meaning that it is shared in a one-to-many relationship instead of one-to-one.
So instead of having separate sets of subassembly jobs for each top level job, MRP generates one subassembly job for multiple jobs whenever it is warranted. MRP does the same thing with purchased items where all the demand within the item's planning period is covered by one PO.
By combining interdependent demand into fewer jobs and POs, MRP generates a more efficient master schedule that is easier to manage and execute and helps keep work in process to a minimum.
Here we are looking at a set of planned POs. Just as we saw with planned jobs, you can click the Demand icon to view the Stock Status Inquiry to view all the supply and demand detail, as well as the item's MRP settings.
Here you see the item's default supplier. You can change suppliers on an exception basis, if you wish, by selecting an alternate supplier from the lookup.
As each PO is reviewed, it is selected for conversion. After all POs are flagged for conversion, you click the Convert button to convert the POs into actual POs.
MRP generates a coordinated master schedule that properly aligns jobs and POs so that materials, components, and subassemblies are time-phased to be available when needed so that jobs can be started and finished on time.
The master schedule can be viewed in two screens. Here we are looking at the Job Schedule. Within this screen you can see which jobs have been released to the shop and whether those jobs are running ahead or behind schedule and which ones are late.
Here we are looking at the PO schedule.
Once MRP generates the master schedule, the system provides two screens that enable the master schedule to be executed as planned out in the shop:
The Job Control Panel is used to release jobs to the shop floor on their scheduled start dates, provided that material is available and open capacity exists in the job's first work center.
After jobs are released, the Shop Control Panel is used to create a daily schedule within each work center so that all jobs are prioritized in a coordinated fashion to meet their planned finish dates.
That completes our look at MRP. We hope you have seen how the four common sense MRP item settings generate a coordinated master schedule on a just in time basis that helps you deliver on time using less inventory and work in process.