Material Requirements Planning is one of the most underutilised and misunderstood modules in the modern business system. I went through three companies in a row where MRP was either not turned on (2) or not used (because it wasn’t trusted). The gains when used correctly are mind-bogglingly massive.
Here is my effort to show a path from wet behind the ears newbie, to get a big raise cause your boss just got a raise because of the excellent MRP work you did SUPERSTAR.
A quick note: I’m writing this to work in any system including SAP to Epicor to Netsuite to Microsoft Dynamics NAV/GP/AX/365. I’ll do my best to point out some of the areas where the platforms may differ and where you may need to do your research.
Turn Material Requirements Planning On!
Wait, Mike isn’t this a given?!? It should be, and yet I keep ending up in businesses where the decision has been made (often by extremely talented individuals) to leave MRP turned off.
There is a black box kind of fear factor and a lot of misinformation that surrounds MRP. Let’s clear up some of those misunderstandings:
- MRP doesn’t take months to turn on – The process is less than one day and often less than 30 minutes. (Assuming you have the required software licenses)
- Nothing will happen without user intervention – Volcanos will not erupt, a sinkhole will not open in the middle of your shop. Do make sure you don’t have automatic purchasing/production orders turned on before you do this.
Learn the definition of a Planned Order
Planned Order is the term SAP uses. Epicor uses the terms Purchasing Suggestion and Manufacturing Suggestion.
A planned order is a suggestion created to fulfil demand in the system as calculated by MRP. It includes (primarily) the Material (Part), the suggested method (make vs. buy), quantity, and a series of dates to ensure timely fulfilment.
I could spend a whole article on the definition so let me say this. If you want to be superb at MRP, you need to understand this concept. There are a lot of good articles on the web covering this particular element.
Find your Planning Dashboard and Stock Requirements screens
We need to find two primary transactions in your ERP/MRP system.
The Planners dashboard / Workbench
What we are ultimately looking for is the list of planned orders created by the system. Each system will have a version, and often I see businesses create a customised transaction that meets their specific requirements. Some allow you to filter by specific fields such as vendor, planner, make vs. buy, etc.
Here is SAP’s transaction MD16 to as an example. Some systems like Epicor break this process up into separate processes for Purchasing vs. Production.
The Stock Requirements or Time Phase screens
One of the first transactions I learned in SAP is MD04. Epicor calls this Time Phase which kind of makes sense. What we’re looking for is a list that shows all of the future ins and outs for a given material. Everyone in the business can find use in this transaction so make it known.
Master your Master Data
The number one cause of MRP failure is not managing Master data. Material masters drive nearly all of the decision making within an MRP system.
When your controller calls and asks “Why are we ordering $3 Million dollars of material that are obsolete?” I suggest nine times out of 10 the reason lives in the part master for that item.
Examples of fields that will impact MRP greatly include:
- Procurement type: Do we typically make or buy the part? It the part subcontracted?
- Purchasing Lead Time: Typically in calendar days.
- Manufacturing Lead Time: Be careful, MLT often has a different calendar such as working days.
- Receiving time: How long does it take your organisation to receive this item?
- Safety Stock: How many do you always want to carry in inventory on top of your demand?
That’s five, depending on the complexity of your system there may be 50 that directly affect the planning process.
Bills of material and Routeings are also part of the material master which affect planning. Learn how they work and how they affect the process.
Learn about MRP Exception Messages
When MRP runs, it generates a list of messages based on the calculations it performs. Again each system will call this something different. Dynamics NAV calls it a warning.
Example: When MRP finds a purchase order for 7000 Furby dolls yet can’t find any demand it will create a cancellation message.
Other exception messages include push date out, pull date in, etc.
Want to save your company money and improve cash flow! Start reviewing MRP exception messages.
Find your system’s black holes
Most systems have conditions which will cause planning to fail. These black holes can cause very quick loss of confidence in the business system and a lot of finger pointing.
Ok, let’s back up. We’re not going to need Stephen Hawking’s help for this. I’m not talking about those kinds of black holes. MRP black holes are my reference to settings or activities that cause Material Requirments Planning to fail.
In SAP the biggest “black hole” event resulted from an individual who decided that instead of updating standards for a standard cost roll that he/she would add deletion flags to a list of over 2000 materials that he/she felt were obsolete. This decision was made without checking demand and on a highly customised product causing hundreds of orders to have materials not purchased. Oops.
On tier 2 ERP systems the potential for problems is sometimes greater. I once did an exercise on Epicor Version 9 and found a list of 7 settings and activities that could cause either failure or duplicate requirements in the Epicor Purchasing Suggestion module.
Let me be clear that these are not bugs (some could be debated). These are often missing master data elements (one that springs to mind is that Epicor 9 allowed the purchase delivery time to be blank) that cause MRP to be unable to produce a result.
Set up your Planner field / MRP controller
MRP systems come with a Planner or in the case of SAP, an MRP controller field. The planner is the field that categorises who is responsible for the planning of each material. It is extremely common to see a default “999” entered in this field for every single material. Don’t do it. Figure out how you want this setup, it will save a lot of time as you progress.
Create MRP Settings Lists / Queries
It’s my opinion that having a list of all of the settings for all of the materials in a facility is very powerful. Taken further, if built with a query screen so that you can look at a specific list of materials you can quickly zoom in on where you may have problems with settings. Without these lists, you will need to look at materials/parts individually which isn’t much fun.
Once you’ve identified the issues, I also suggest understanding the mass change function for your system. In SAP this is MM17 while some other systems use external data tools for this change. If you’re making five changes, it’s not a big deal, but if you want to change 1000 material masters, you’re going to want to have this tool available.
Build Planning Reports / Dashboards
Take the above lists to the next level with planning reports and dashboards. My suggestion is to build these in a tool like Power BI, Qlik Sense, PowerPivot or any of the 50+ self-service business intelligence tools available.
PS. The image above is a terrible example but the only ones I had at the time of writing this were for customers which I can’t share….sorry.
The idea is to zone in on problems areas in the dashboard. For example, if you’ve identified that a blank delivery time is a black hole, create a count in your dashboard of all of the materials with blank delivery days and a corresponding list. The possibilities here really are endless and can accelerate productivity.
When you start an MRP project, you should have goals. Examples include: Improve On-Time Delivery time by XX%, Reduce individuals purchasing components from 13 to 2, reduce inventory on hand by XX%.
Summary: Material Requirements Planning
Don’t fall into the MRP doesn’t work camp. If you learn to use these ten tips, you will quickly be on the way to saving costs and driving improvements in your organisation.
If you have questions or need help getting MRP working in your business give NFORM a call, we’d love to hear from you.