Now that you are more familiar with the Material Requirement Planning concept, it’s time to move on to the next step. Which MRP system is right for your business? In the following article, we explore the possibility of implementing MRP within Rootstock Software.
How is MRP implemented in Rootstock?
Rootstock maintains a common data structure called “Requirements” between all its demands and supplies. The requirements can be reported on to have a real-time view on upcoming demands and supplies. Also, when a user launches the MRP process, Rootstock can use this common structure to compare demands and supplies when current stock levels aren’t sufficient to cover demands for a certain item.
- Each time a new sales order line is firmed*, a new requirement record gets tied to it to hold the demand information (item, project, outstanding quantity, due date). If a firmed sales order line is updated, its related requirement record is updated accordingly.
- Same goes for sales forecasts, work order components, subcontracted purchase order line components and subcontracted inventory requisition components.
- Each time a new inventory requisition is firmed, a new requirement record gets tied to it to hold the supply information (item, project, outstanding quantity, expected receipt date).
- Same goes for new purchase order lines and work orders.
A closer look…
If stock levels are insufficient and matching supplies are found, Rootstock’s MRP will then evaluate if the supplies’ dates match the demands’ date, and unless there is an exact match, it will write an ‘MRP Action Message’. These messages list demands ordered by dates and associates them first to the current stock (if any). Then when all current stock has been associated with the earliest demands, the next demands are associated with the earliest supplies available to meet each of them. Then, it will suggest 3 possible actions.
Supply expected receipt date is BEFORE the demand due date
- When the supply expected receipt date is before the demand due date, the MRP action message will suggest to ‘reschedule out’. This means the supply is planned to be received too soon, which could result in payments for supplies before they are actually used or sold. Another thing to consider is whether the item would occupy significant storage space that could have been used in a more profitable manner. When we see ‘reschedule out’ messages, different use cases may apply:
- We do… nothing: There isn’t a big delay between dates, or items aren’t very expensive or voluminous, so it would be more costly to reschedule out. Therefore, we do nothing.
- We reschedule to merge separate orders of supplies: Rescheduling just for the sake of rescheduling may not be very appealing, however if there are other supplies scheduled around that time too, maybe we could rearrange the schedule to merge them together, and save on setup times or shipping fees.
- We reschedule to another day: There is a big delay, or items are expensive and/or voluminous, so it’s worth postponing the supply.
Supply expected receipt date is AFTER the demand due date
- When the supply expected receipt date is after the demand due date, the MRP action message will suggest to ‘reschedule in’. These messages are critical. Action must be taken to help avoid unhappy customers, since they wouldn’t receive all of their orders by the promised dates. The possible actions are:
- Reschedule supplies: Ask the production scheduler to prioritize this job over others, arrange overtime, or ask the supplier to expedite the purchase order.
- Notify customer about postponed due date.
More supplies exist than demands
Rootstock MRP also considers a third case: more supplies exist than demands. In this case, the MRP action messages will list the supplies with a suggestion saying ‘Excess Quantity’. These orders can be cancelled or delayed until a demand actually needs them (unless the lead time is relatively long and stock levels have to be maintained to meet customer service requirements). Also if current stock has no matching demand, they would show up as excess quantity.
What about if there is insufficient stock?
If stock levels are insufficient and no matching supplies can be found, Rootstock’s MRP will generate new supplies (work orders for manufactured items and inventory requisitions for purchased and subcontracted items) in ‘Planned’ status. The user must then analyze the planned supplies to see which ones should be firmed. Firming a supply means you take ownership of it. You will now maintain it manually, and the MRP system is no longer allowed to manipulate this supply — it can only deliver action messages about it.
To firm or not to firm?
If you don’t firm the planned supply, the MRP will overwrite it on its next launch. Not all supplies should be firmed, even if a demand exists for them. Consider the following examples:
- A customer placed a sales order for an item due in 3 months, but you can procure it in only 2 weeks. You may prefer to wait until later to firm the supply in case the customer calls back in the meantime to modify or cancel the order. As long as the supply isn’t firmed, if the MRP is launched again after the sales order has been updated, then the MRP will generate a new planned supply with the updated information.
- The sales manager has entered the sales forecasts for the upcoming year. Your various items take between 2 and 12 weeks to procure. In that case, it is best if you don’t start firming supplies for the whole year…
Data volume considerations
Now depending on the volume of your business activities, the MRP could generate a lot of suggested supplies. Analyzing, firming and updating them one by one could be quite time-consuming. To ease this process, Rootstock comes with several workbenches:
- Work Orders Workbench: allows you to mass firm planned work orders. Additional work order management can be done in the Capacity Workbench (which will be the topic of another post).
- Requisition Workbench: allows you to mass firm, approve and convert requisitions into purchase orders. It usually considers the primary vendor of an item for the conversion, but it also allows for mass vendor assignments to override primary vendors when needed.
Rootstock’s endless possibilities will allow you to streamline your processes and make sure your manufacturing business is operating at its full potential. If you would like to learn more about Rootstock Cloud ERP or find out if it is the right solution for you, reach out to our experts! We’ll be happy to give your business a free assessment.
*Firming a sales order means it’s been accepted to impact production/procurement. Firming a supply has a slightly different meaning detailed later on this blog post
Note: Rootstock also supports a disassembly process which can be considered by the MRP but, for simplicity, we limited this article only to the forward supply chain processes.