Material requirements planning
Material requirements planning (MRP) is a planning process designed to match supply with demand. MRP does this by creating supply (purchase/work/transfer) orders to meet or exceed the demand, according to the MRP parameters.
Some information could be obtained from here:
https://en.wikipedia.org/wiki/Material_requirements_planning
The MRP process in ERP.net is an implementation which mostly follows the general theory. However, in order to use MRP, you need to do the ERP.net-specific setup.
Document types and routes setup
The document routes should be properly set-up. The main input parameter for MRP is demand. It is calculated based entirely on store orders with state Planned. Therefore, the document routes for sales orders, purchase orders, work orders, etc. should be adequately designed to generate store orders with a planned state.
If a store order is generated solely for the purposes of MRP demand management, it can be set with the Planning_Only attribute. This attribute does not allow the setting of Firm Planned (or higher) states.
Simplified description of a single MRP run
When MRP is run for a warehouse (store), it does the following to each product:
Calculates demand.
Determines whether a supply action is needed.
Determines the required quantity.
Creates a purchase/work/transfer order for the desired quantity.
When MRP is run for multiple warehouses (stores), the system tries to prioritize the supply order of the warehouses. This might not always be successful, especially in cases of circular supply orders.
Terms
There are many terms used in MRP. We will try to provide simple descriptions for some of them:
Projected Available Balance (PAB)- An inventory balance projected into the future. It is the sum of on-hand inventory minus requirements plus scheduled receipts and planned orders.
Planning Bucket - the smallest period whose demand and supply are planned as a single unit. In ERP.net, it is fixed as 1 day. In theory, it could be a day, week, month or some mixed system (for example, days in the near future, weeks in the far future, etc.).
Planning Horizon - the period of time in the future for which demand is matched with supply. In ERP.net, it is currently fixed to 180 days.
The Planning Buckets (also known as "buckets") exist only within the time frame specified by the Planning Horizon. When we say "bucket", it is a Planning Bucket in the future, but within the Planning Horizon.
Time fences
Time fences are boundaries between different periods in the planning horizon.
From today to Demand Time Fence (DTF) - the time period in the (near) future for which actual demand is considered accurate, and forecasts - inaccurate. The planning process considers only demand.
From DTF to Planning Time Fence (PTF) - the time period between the DTF and PTF for which it is unknown whether the demand or the forecast is more accurate. The planning process considers bigger either the demand or forecast for each bucket.
After PTF - only the forecasts are considered accurate. The planning process considers only forecasts.
Product supply definitions
The MRP process is set-up through the product supply definitions. Each definition contains the planning parameters for one product and one warehouse (store).
Every warehouse (store) needs to create a separate product supply definition for each product, which will be planned for this warehouse.
The product supply definitions parametrize the when, how much, and how of the MRP planning system.
Procurement type
Procurement type specifies what to do when a supply order needs to be created. The options are:
Buy - Create a purchase order
Make - Create a work order
Transfer - Create a transfer order
Order policy
The order policy specifies when the supply is not enough and a supply order needs to be created. The options are:
MRP - a supply order is created for:
- any demand for a bucket
OR
- if the Projected Available Balance for any bucket is less than the Planning Safety Stock.
OPS - a supply order is created if the PAB for any bucket is less than the specified Order Point.
OPT - a supply order is created if by the time of expected arrival of the ordered goods, the PAB is less than the specified Order Point.
PRS - a supply order is created unconditionally on each order cycle. Planning Order Cycle Days specifies the number of days in the order cycle.
Lot sizing method
The lot sizing method specifies how much should be ordered. It is divided in two separate calculations:
Algorithm calculations.
Order modifiers
The selected algorithm calculates some order quantity. Then, order modifiers adjust the quantity with minimum, maximum, and lot-size modifiers.
The algorithms are:
FOQ - Fixed Order Quantity - orders unconditionally what is specified in the Fixed Order Quantity.
EOQ - Economic Order Quantity - orders the specified period in an efficient way, balancing between order-fixed and holding costs. For more information, see https://en.wikipedia.org/wiki/Economic_order_quantity.
LFL - Lot For Lot - orders the calculated demand for the bucket.
LFP - Lot For Period - orders the required quantity for the bucket but adds enough quantity for the specified period ahead.
ROP - Reorder Point - orders up to the specified Planning Maximum Inventory.
ROT - Reorder Point with Time Planning - orders up to the specified Planning Maximum Inventory but also adjusts the quantity with the expected usage for the time the goods are in transit.