Purchase Materials in Anticipation of Future Demand
This post is for small and medium-sized manufacturers that are vetting new manufacturing software systems. We hope you find it useful.
PBS™ Manufacturing Master Scheduling and MRP (Material Requirements Planning) provides important planning assistance to manufacturers that produce components, products, or purchase materials in anticipation of future demand.
While some order material planning functions are provided by PBS Manufacturing Inventory Management, Master Scheduling and MRP performs comparisons of current supply and demand schedules and alerts you to required order actions.
Master Scheduling and MRP is appropriate for operations that require many different materials or have many sub-assemblies. It is also useful for both “ship from stock” and some “make to order” manufacturers.
An effective MRP system for small businesses facilitates efficient production planning and better inventory control:
· Plan manufacturing activities, delivery schedules, and purchasing activities.
· Ensure materials and products are available for production and delivery to customers.
· Maintain the lowest possible level of inventory.
“Time-phased planning” delays the release of orders for components until they are needed based on the lead time required for the item. Time-phasing helps match the quantities of components ordered with anticipated item demands.
The bill of materials is exploded into parent items and related components in order to plan shop (production/work) orders and purchase orders. This procedure is repeated until all orders have been planned for the net item and gross component requirements.
The lead time needed for the parent item is built into order planning for the needed components. Planning may include lot sizing, meaning the item quantity ordered for a specific delivery date or manufactured in a single production run. This can involve several items planned with a single due date.
Master Scheduling and MRP determines when to issue new or releases, reschedules, or cancellations for items based on the most recently defined product demands.
Benefits of MRP for Small Businesses
PBS Manufacturing Master Scheduling and MRP provides planning functions for sales, production, and material requirements. It is useful for planning in response to actual demand as well as sales forecasting or a combination of the two.
· Improve delivery times, reduce inventory, and ensure that you have materials on hand when you need them.
· Shipment forecasting offers several options including planning for individual or groups of similar items.
· Develop the production plan for products and major subassemblies. Define firm planned orders and time fence controls to specify the types of changes that are allowed for the order.
· Plan or replan top level requirements with gross to net planning for components and material requirements for orders.
· In-depth reporting and displays, including exceptions, for better planning and visibility.
Supply and Demand Orders
The Master Scheduling and MRP module is based on two order categories, “supply orders” and “demand orders.” Demand orders, such as sales orders, impose a demand on the system. If there is a sufficient amount of inventory on hand, the demand is met.
If not, then a supply order must be placed to offset the demand. Purchase orders and shop orders are examples of supply orders that replenish inventory to offset the demand. The MRP module provides “order action” reports with suggestions to align supply and demand by placing new orders or rescheduling existing orders.
MRP order action reports may also suggest canceling supply orders when there is no demand. For example, when a customer cancels an order, the report may suggest an order cancellation. Other forms of demand include safety stock, reorder points to maintain optimal inventory levels, and forecasting.
The PBS Manufacturing Shipment Forecast Enter program allows you to enter an estimated forecast for customer demand of your finished goods. Finished goods are typically the items forecasted, though you can forecast for demand on components or parts. The forecast is generally based on past demand but can be adjusted at any time.
PBS Manufacturing MRP for small businesses will plan to have the materials on hand to produce items based on specified forecast time periods. If the actual demand exceeds your forecast, the MRP tool will plan for your actual demand.
If you make specific products for specific customers, these companies may be willing to supply their forecast. The Vendor Purchase Actions report may be provided to your vendors to plan for better supply chain efficiency.
The PBS Manufacturing MRP tool facilitates “just in time” planning, on-time shipping, and allows you to:
· Set planning rules such as safety stock level, order minimum, maximum, and more
· Set lead times to have materials on hand and ship orders on time
· Create concise reporting with order suggestions to act accordingly
If set up and used properly, Master Scheduling and MRP can help reduce inventory and increase on-time deliveries. This may be difficult if you are trying to do it manually.