How can MRP reduce my overall inventory?
Traditional inventory planning methods typically result in over-stocking, which ties up working capital and scarce storage space. Time to Shipment MRP keeps inventory lean with supply pipeline planning and can dramatically reduce overall inventory.
What causes over-stocking?
Traditional planning methods cause over-stocking in the following ways:
•Manual planning from static shortage reports fails to account for the time-phased nature of demand and often results in jobs and purchase orders being created prematurely before they are actually needed.
•Future jobs used as forecasts to explode lower level demand can result in severe over-stocking at all levels when forecast demand is greater than actual demand.
•Blanket purchase orders can result in severe over-stocking when scheduled deliveries are greater than actual demand.
•Manual reorder points without logical basis in monthly demand and replenish time result in over-stocking.
Supply pipelines keep inventory lean
You can dramatically reduce over-stocking by replacing all your traditional inventory planning methods with supply pipeline planning.
With supply pipeline planning, replenishment is triggered by actual demand at regular intervals using a dynamic Reorder Point and Min Order quantity. A monthly Sales or Usage rate and Safety Factor buffer are incorporated into the Reorder Point and a Supply Days interval is incorporated into the Min Order quantity.
Supply pipelines are self-adjusting
Unlike future jobs and blanket purchase orders, supply pipelines are self-adjusting in response to actual demand. \\\
•When actual demand for an item is greater than the monthly demand rate and safety buffer, replenishment is triggered earlier than the supply days interval, which minimizes the duration of any shortage that may occur.
•When demand is less than the monthly demand rate and safety buffer, replenishment is delayed until it is needed, which automatically caps stock on hand and prevents over-stocking.
