The Algorithm Blog

Material Requirements Planning: Can it Help Me?

Material Requirements Planning (MRP) can be a daunting concept to discuss for implementation at your company.  Many companies have software that has the capabilities to facilitate MRP but the users simply don’t have the knowledge on how to set it up properly.  The larger MRP challenge beyond the lack of setup knowledge is how to actually utilize the information the system provides to support “make” and “buy” decisions.

It is a common misconception that I can turn MRP on in my system, set up the fields and flags correctly, and then expect to see the system provide me with requirements and replenishments.  The reality is that you can’t have a good replenishment plan with out a better requirements plan

The companies that are the most successful in using MRP have a solid sales forecast that drives their replenishments but this is not the only solution.  If your customer orders have a lead time that exceeds your replenishment lead time, then you can also make use of your MRP capabilities.

The primary challenge most often arises with long lead-time purchasing cycles and short lead-time sales cycles.  For example—a company would experience this challenge if it takes them 6 weeks to get in the parts they need but their  customer requires a 2-week turnaround on sales orders.  This can be overcome with a large safety stock to account for the 4-week gap in lead times or with a sales forecast that will drive demand.

This leads us back to our original question, "Can MRP help me?"  Yes, it can absolutely help a company that is struggling to have the right materials on hand to make what they need and to make it on time.  The first question you should ask the team is, "how does the sales lead time compare to the purchasing lead time and what tools do we have to overcome the difference?" 

Once you understand how you are going to handle the lead time gap, you can start setting up the system to handle the items and vendors on a case-by-case basis.  The key data points in any system are going to be lead times, minimum order quantitiy, reorder points, maximum order quantities, and planning methodology.  The result should be a requirements planning report that tells you what and when you need to make or buy your materials.

Do you have questions about developing a MRP strategy for your company? Let's find time to chat

Subscribe to Our Blog

Recent Posts