In this task you will plan a standard Order Policy for all manufactured and purchased items.
MRP Settings is a super task set!
You must enter:
1.Reasonable Lead Days on 100% of your purchased items
2.Reasonable Job Days on 100% of your manufactured items
3.A clear cut item Order Policy based on lead day contribution
Do not skip or partially complete
Item MRP settings -- along with BOM routings and locations -- is a "super task" set. Item MRP settings are required for MRP and shop control and cannot be skipped or partially completed.
Links:
MRP Guide - Time to Shipment Planning
Video - Guideline Item Order Policy
Plan a standard Order Policy for all items
(MRP - MRP Settings)
In this task you will plan a standard Order Policy for all manufactured and purchased items. Placing a Demand Driven stocking order policy on an item will remove it as a lead day contributor in the Jobs where it is used.
Order Policy Panel
MRP > MRP Settings > Order Policy Screen
The order policy screen can be accessed from the MRP Settings screen by selecting the icon to the right of the Order Policy column in the grid for M or P items.
Order Policy Types
Demand Driven
Assign the Demand Driven order policy when you intend to maintain stock on hand for immediate use in Jobs and SOs. You will enter a Monthly Potential Demand value and a Supply Days target and the system will dynamically calculate the Reorder Point and Min Order quantity that are used to generate demand-driven jobs or purchase orders. Because your planning intent is to have stock on hand readily available, these items are not lead day contributors in the jobs and SOs where they are used.
To Order
Only assign the To Order policy when a component item is always ordered before parent jobs can be started or when a sell item is always made for each sales order. These items are always lead day contributors where they are used.
NOTE: It is important that To Order policy items remain strictly To Order. If you intend to sometimes carry extra stock or if you want a minimum quantity for price break reasons, the Demand Driven order policy is recommended. You can go to the MRP > Order Policy Review screen to audit your To Order items.
Manual Reorder Point (not recommended)
This setting is for manual planners that do not use MRP for jobs or purchase orders. The planning assumption the software makes is that you intend to have stock on hand for all demand scenarios. Because your planning intent is to have stock on hand readily available, these items are not lead day contributors in the jobs and SOs where they are used.
A standard Order Policy is a required MRP setting
A standard Order Policy for each item is an integral element of Demand Driven MRP and is a required setting that cannot be ignored or conflict with your actual planning behavior. Without exception a clear and consistent Order Policy must be assigned to each and every P and M item.
The item Order Policy is for lead time planning
The item Order Policy is for lead time planning and determines whether the item is a lead time contributor or not.
Any item with a To Order policy is a lead time contributor
A job that uses a component item with a To Order policy must wait until the item is procured or manufactured before the job can be started. When several To Order policy components exist, the one with the longest lead time determines the auto-calculated parent item's pre-job Lead Days allocation. Therefore any P item or lower level M item with a To Order policy is a lead time contributor to higher-level items.
Any top level item with a To Order policy is planned to be made to order, in which case the item's standard Lead Days and Job Days contribute to the item's Time to Shipment target. Therefore any top level M item is a lead time contributor to its own time to shipment.
Any item with a Demand Driven or Manual Reorder Point order policy does not contribute to lead time
Any component item with a Demand Driven or Manual Reorder Point order policy will not delay the start of any jobs because the item is planned for immediate availability from stock. Therefore the lead time of any P item or lower level M item with a Demand Driven or Manual Reorder Point order policy does not contribute to higher-level item lead times. Changing an item's order policy from To Order to Demand Driven removes the item from higher-level item lead time calculations.
Any top level M item with a Demand Driven order policy is planned for immediate shipment from stock and therefore its lead time does not contribute to its own Time to Shipment target.
The item Order Policy is a binary choice
The item Order Policy is a binary choice, meaning that the item is either planned to order or for stocking, but not both. It is an "either or" decision.
▪If you plan the item with a To Order policy, all lead time calculations are based on the item always being purchased or made to order and not having stock on hand.
▪If you plan the item with a stocking (Demand Driven or Manual Reorder Point) order policy, all lead time calculations are based on the item always being available from stock on hand.
If the item has never been previously stocked
When an item has never been previously stocked, do not immediately assign a Demand Driven or Manual Reorder Point order policy because there will be a delay before stock is actually on hand as planned. Instead, create a manual job or PO for the item to establish an initial stock quantity. After the job or PO is received to inventory, then assign the item an appropriate Demand Driven order policy.
Avoid CTO job linking with standard items
When a top level M item is flagged for CTO job linking it is assigned a To Order policy and jobs are linked to and generated directly from sales order lines for the exact quantity ordered. CTO linking is ideally suited for one-off, custom items that are made to order and never stocked. For standard items, however, CTO linking is counter-productive and should be avoided because such items are interchangeable from order to order and subject to stocking. There is no ability to adjust CTO jobs to account for stock on hand or to consolidate demand into more efficient job sizes. Furthermore, CTO linking forces items to be made to order, even in cases where items with frequent orders could be planned with a Demand Driven order policy to enable immediate shipment from stock.
