Step 1 – Plan a strategic inventory for sell items
Review all your sell items and assign a Demand Driven order policy against any item that should be made to stock for immediate shipment. Accompany the order policy with a Potential Monthly Demand and Supply Days target.
Make sell items with consistent demand to stock
When a standard sell item has consistent and predictable demand, it should be made to stock so that it is available for immediate shipment.
Make sell items with inconsistent demand to stock when needed
When a standard sell item has inconsistent and unpredictable demand, it is a judgment call as follows:
When to make to order:
If the time it takes to make the item to order is acceptable to customers and poses no harm to your market competiveness, the item can be made to order.
When to make to stock:
If the time it takes to make the item to order is not acceptable to customers or poses harm to your market competiveness, the item should be made to stock so that it is available for immediate shipment. In this case the sales benefits outweigh the inventory investment.
One-off custom items are always made to order
When a one-off item is customized from a model BOM or engineered from scratch, it is always made to order. One-off items are automatically assigned an order policy of To Order.
Step 2 – Plan a strategic inventory for most commonly used subassemblies
Review all your subassembly M items and assign a Demand Driven order policy against any item that should be made to stock for immediate issuing to higher-level jobs. Accompany the order policy with a Potential Monthly Demand value and Supply Days target.
Make sub items with consistent demand to stock
When a subassembly item has consistent and predictable demand, it should be made to stock so that it is available for immediate issuing to higher-level jobs.
Make sub items with inconsistent demand to stock when needed
When a subassembly item has inconsistent and unpredictable demand, it is a judgment call as follows:
When to make to order:
If the time it takes to make the item to order does not pose an unacceptable delay in starting higher-level jobs, the item can be made to order.
When to make to stock:
If the time it takes to make the item to order poses an unacceptable delay in starting higher-level jobs, the item should be made to stock. In this case the benefits in reducing time to shipment for top level items outweigh the inventory investment.
Step 3 - Plan a strategic inventory for most commonly used Purchased items
Review all your P items and assign a Demand Driven order policy against any item that should be purchased to stock for immediate issuing to higher-level jobs. Accompany the order policy with a Potential Monthly Demand value and Supply Days target.
Consider a gradual transition
If you are transitioning from a completely To Order policy environment, it is consider introducing Demand Driven order policies on a gradual basis, limiting the initial change to your most significant Lead Days contributors. This way you avoid abruptly generating a large number of POs all at once as you establish initial stock quantities.
Purchase items with consistent demand to stock
When a P item has consistent and predictable demand, it should be purchased to stock so that it is available for immediate issuing to associated jobs.
Purchase items with inconsistent demand to stock when needed
When a P item has inconsistent and unpredictable demand, it is a judgment call as follows:
When to purchase to order:
If the time it takes to purchase the item to order does not pose an unacceptable delay in starting associated jobs, the item can be purchased to order.
When to purchase to stock:
If the time it takes to purchase the item to order poses an unacceptable delay in starting associated jobs, the item should be purchased to stock. In this case the benefits in reducing time to shipment for top level items outweigh the inventory investment.
Long Lead Days items must be purchased to stock
When a purchased item has an extremely long Lead Days allocation, it should be purchased to stock to avoid unacceptable delays in starting associated jobs. In such cases the Monthly Demand and Supply Days target is used to create a pipeline of staggered POs.
Step 4 – Review Manufactured item Lead Days allocations
After all the previous steps are completed, review the Lead Days allocations against all your M items to make sure they reflect your time to shipment objectives. If a Lead Days allocation is greater than desired, use the Lead Days Inquiry to view the contributor components so that you can apply Demand Driven order policies where needed to remove contributor components from the allocation.
How the Lead Days allocation works
Each M item has an automatically calculated Lead Days allocation that is equal to the longest lead time among its to-order BOM components. MRP uses the Lead Days to allocate sufficient time prior to the job start date for buying components and making subassemblies.
Review all Lead Days allocations among your M items. When a Lead Days allocation is longer than desired, the remedy is to remove components with long replenish times as contributors to the calculated amount. This is done by changing each such component’s order policy from To Order to Demand Driven.
You can use the Lead Days Inquiry, which is accessed from the icon to the right of the Lead Days field, to view the contributor components.
