Key Concepts
Time to Shipment targets generate sales order line item Required Dates to provide the demand that drives daily MRP generation. Jobs and POs are generated and converted level by level in response to current net demand within item planning periods relative to Reorder Points and Min Order quantities. Job and PO dates are derived and aligned from standard lead times with coordinated system target dates.
Demand Dates |
Supply Dates |
SO Line Required Date |
Job Finish Date |
Job Planned Start Date |
PO Line Expected Date |
React to the firm - MRP Action Windows
Instead of reacting to tentative demand, MRP will only react to firm demand. Each item has its own “action window”, which covers the time it takes to make or buy the item. MRP only reacts to demand within the action window, which is firm demand. Any demand outside the action window is tentative demand that is incomplete and highly likely to change as it firms over time.
Reacting to the firm yields miraculous benefits. Planned supply is always aligned with firm demand, which eliminates the misalignments that are the root cause of shortages, overstocking, and the need for constant job and PO revisions. Each item is planned individually, which eliminates the bullwhip effect from BOM explosions and job linking that amplifies misalignments at lower levels.
Protect for the future - Demand Driven Order Policy
Instead of using inventory to cover tentative demand projections, inventory is used to protect against future demand. Each item (other than to order items) is given a value that covers potential monthly demand. The monthly potential demand is applied to the item’s replenish time to calculate a dynamic reorder point. Whenever net demand within the item action window falls below the reorder point, MRP triggers a job or PO early enough to replenish stock before it runs out.
Overstocking is eliminated because new supply only gets triggered by firm demand and cannot keep accumulating. Throughput increases with consistent and efficient order quantities and run sizes. Even though the majority of items are planned for stocking, most companies experience a dramatic reduction in overall inventory.
MRP
(MRP Menu)
PO Generation is performed in MRP after you have generated and converted all levels of production Jobs
PO generation and conversion
Jobs are always generated first
Jobs and POs are generated in a single, multi-level process. Jobs are generated and converted for all levels of production. MRP then aligns the purchased materials with the planned start of Jobs ensuring that all demand is properly covered and dates are aligned. The Planned Start date of Jobs provides the demand for subassemblies and purchased components and establishes the target date for job release.
POs are triggered by actual net demand
A PO is generated whenever current net demand (stock on hand + all inbound POs - actual demand within the item’s planning period) falls below the item’s Reorder Point. The PO quantity will be equal to actual net demand or the item’s Min Order quantity, whichever is greater. POs are aligned with the target job release date (planned start date) to ensure material is available for production.
Long-term tentative demand is not included
Any long-term demand outside the item’s planning period action window is not included in the net demand calculation. This is because there is ample time to generate a PO later when the demand becomes current and firmly set. Demand driven planning takes no action against long-term demand because it is often tentative, incomplete, and subject to scheduling and specification changes and order cancellations.
If you prefer a larger action window:
Item planning periods keep inventory lean because they prevent POs from being generated prematurely before they are needed. That being said, if you feel more comfortable with longer planning periods, never pad or inflate Lead Days settings, which has harmful consequences. Instead, go to the MRP - MRP Defaults screen and use the Planning Period - Extra Days for P Items setting to expand all P item planning periods by a set number of days.
Interdependent demand is consolidated into single POs
Because the PO schedule is limited to short-term demand that is firmly set, there is no need to isolate demand into separate POs for each job. Consequently, interdependent (shared) demand for each item is consolidated into a single PO for more efficient scheduling and optimal pricing.
Verify that each PO has a valid Supplier Price
The integrity of the costing system depends on each PO having a realistic DBA Unit Cost, which is derived from the Supp Price. When the PO is received, the DBA Unit Cost updates the item’s unit Inventory Cost, which is the cost that gets applied to job issue transactions. Therefore your most important responsibility with PO conversion is to make sure that each planned PO has a valid Supp Price.
Verify Supplier selection
When generated, each planned PO is assigned to the item’s Default Supplier. You can freely change the Supplier to any of the item’s alternate suppliers and you can also create a new supplier line card record for the item, which includes the supplier part number, unit of measure, conversion multiplier, and supplier price.
Verify Mfgr Part No availability
If a Mfgr Part No is specified against the item, make sure it is available. If not, you can freely change the Mfgr Part No to any of the item’s alternate manufacturer part numbers. You can also create a manufacturer and manufacturer part number record for the item.
Use Review Notes for special situations
Unlike planned job conversion, which is largely a completely automated process, planned POs often require active intervention prior to conversion. For example, some items may require a price quote with each purchase. Other items may require price comparison among multiple suppliers to find the best current price. Other items may require verification of manufacturer part number availability.
A formal means for conveying special purchasing instructions is to document them in a Review Note that is assigned to the item in the MRP Settings screen. During MRP generation the planned PO cannot be converted until the Review Note has been read and confirmed as completed.
POs can be converted by supplier
Planned POs can be converted incrementally by supplier. This enables you to focus on one supplier at a time to verify prices and supplier and manufacturer part numbers. Each set of planned POs for a supplier is converted into a single, multi-line purchase order.
Augment converted POs if needed
Each planned PO is a minimum action profile. After the PO has been converted, the PO can be augmented manually within the Purchase Orders screen to accommodate special situations. For example, to fill a truck or container you may wish to increase the PO quantity or add extra items. Or you may wish to increase the PO quantity to meet a volume level commitment with a supplier.
Review actual POs and send to suppliers
After PO conversion is completed, the final task is to go to the Purchase Orders screen to conduct a final review of each Opened status PO, which is a PO that has not yet been sent to the supplier. After each such PO has been reviewed and finalized, click the Print button to Email or print the PO, which changes the PO status to Printed to indicate that it has been sent to the supplier.
Screen Details
Planned PO Generation
Planned PO generation works as follows:
•All purchased items are examined in succession for potential planned PO generation. If net demand is less than the item’s Reorder Point and the shortfall occurs within the item’s planning period, a planned PO is generated. The PO Plan Qty is the net demand shortfall or the item’s Min Order quantity, whichever is greater. If the item has a Multiple setting, the Plan Qty is rounded up to the nearest increment divisible by the Multiple amount.
oNet Demand: This is stock on hand, plus supply from all pending POs, less demand from all jobs and sales orders.
oPlanning Period: This is the total number of calendar days allocated by MRP for assessing net demand. It is comprised of the following elements:
MRP Interval Days
+ Item Lead Days
+ Extra Planning Period Days
+ Non-Shop Days
--------------------------
= Planning Period
•The planned PO’s Required date is equal to the earliest date within the item’s planning period when projected stock goes negative. If projected stock does not go negative, it is equal to the planning period end date.
•The planned PO is forward scheduled from the current date by the item’s Lead Days allocation and is rounded forward, if needed, so that receipt occurs on a shop day.
Review each planned PO and click OK
Review each planned PO and take any of the allowable actions listed below. After each PO has been reviewed, select its OK checkbox.
Filtering the grid by supplier
When planned POs are converted into actual POs, all selected lines assigned to the same supplier are included in a single multi-line PO to that supplier. In the upper panel you have the option of filtering the grid by Supplier so that you can focus on reviewing and converting one set of related items at a time.
Allowable actions
Any of the following actions may be taken with a planned PO:
Read the Review note
If an icon is displayed in the Review field, the item has a review note that must be read before you are allowed to select the PO’s OK checkbox. The review note provides a means for conveying special instructions pertaining to planned POs for this item.
Increase the PO Qty
The PO Qty is the minimum quantity dictated by the item’s MRP settings and is normally not subject to change. If wish to increase the quantity, you can do so through direct entry within the PO Qty field.
Select an alternate Supplier
Click the left button in the Supplier field to select an alternate supplier from a list of this item’s allowable suppliers.
Add or edit the Supplier line card
Click the right button in the Supplier field to add, edit, or clear a supplier line card record, including the Default flag, Supp Part No, supplier Description, supplier UM, conversion Multiplier, and supplier Price.
Override the Supplier Price
The Supp Price field displays the price that will flow through to the actual PO. The Price Origin field to its right indicates the origin of the price, which can be ‘Item Source’ when a supplier price record exists, ‘Last Cost’ when there is no supplier price record and the item has a Last Cost value, or ‘Estimated Cost’ when there is no supplier price record and the item does not have a Last Cost value. If you wish to change the Supp Price on a one time basis just for this MRP run, select the Override checkbox and enter the new price directly in the Supp Price field. The Price Origin changes to ‘Override’.
Select an alternate Manufacturer
Click the left button in the Manufacturer field to select an alternate manufacturer from a list of this item’s allowable manufacturers.
Add or edit the Manufacturer line card
Click the right button in the Manufacturer field to add a manufacturer line card record, edit the Mfgr Part No within the line card record, or clear the manufacturer line card record.
