MRP - Overview
The purpose of the MRP (Materials Resource Plan) system is to forecast inventory demand. The KPIs involved (average usage, turns, and lead time) can help lead to better management of inventory levels with regard to over/under stocking and cash investment. By analyzing historical and current data for inventory adds, draws and demand we can provide real time information for decision-making regarding purchasing and production. AcctVantage ERP takes it a step further by also providing tools to generate Purchase Orders to Vendors and internal production Work Orders.
In AcctVantage ERP, the MRP system consists of a number of interrelated features that can be used as stand-alone tools or as a complete demand forecasting system. Below we will describe each element and provide links to more specific ‘how-to’ type articles in the knowledge base. This article is intended to provide an holistic overview of the MRP system.
The MRP screen
This screen is found on the MRP tab of every inventory-type Product record in AcctVantage. This is the culmination of ‘crunching the numbers’ for every bit of inventory activity in the system for the Product. Each column in the lower part of the screen represents the anticipated activity for the product within that specific time period, including the expected ending availability for the Product.
Below we define each element of the screen.
In this area, you can define a BOM Level and Period along with initiating a recalculation of the MRP data.
BOM Level: Inventory items that are components of finished good Assembly Products can consider the demand associated with those assemblies when forecasting demand for the Product.
- Level 0 indicates this Product is a final finished good. There is no ‘upstream’ demand that needs to be considered when forecasting demand for this Product.
Level 1 indicates that the Product is (or could be) a component of an Assembly item. As such, when calculating demand the system would first need to forecast demand for the ‘upstream’ Assembly.
- For example, consider something like a bicycle tire. A bicycle tire could have its own demand for direct sales as well as demand for production of a bicycle. The bicycle would be Level 0 and the tire would be level 1.
Level 2 items would be components of sub-assembly Products ... demand for a Level 2 item would be calculated after Level 0 and Level 1 products.
- Taking the previous example a step further ... let's say the bicycle tire is a component of a wheel and the wheel is a component of the bicycle. The tire is level 2, the wheel is level 1 and the bicycle is level 0.
- Level x ... AcctVantage ERP supports as many BOM Levels as you may require.
- Period: The demand forecast can be calculated by Week (typical) or by Month. Set the preference prior to selecting Recalc.
- Recalc: This button triggers the recalculation of all forecast data. Note that groups of Products may be recalculated together via the Product List View’s Action Menu (gear icon).
To use the BOM Level feature effectively, you'll need to change a setting in System Configuration -> See instructions here.
The Last Run Date and Last Run Time indicate when the demand forecast was last updated. Because your inventory numbers are constantly changing, we lock in the values from the last update to allow for snapshot reporting. Clicking the Recalc button in the Calculate area will update the demand schedule and the Run Date/Time values.
Both of the values for lead time can be automatically calculated or can be entered manually (see below for details.) You will find the entry fields for these values in the warehouse columns on the Inventory tab of the Product record.
- Std Lead Time: The Standard Lead Time indicates the number of days typically required from the date the Purchase Order issued to the date when inventory is received.
- Rush Lead Time: The Rush Lead Time indicates the number of days from PO Date to Receive Date for Purchase Orders that are marked “Rush”. In other words, if you pay for quicker delivery (or otherwise expedite the PO) this is how quickly you can expect to receive the Product from your vendor.
In the Inventory area you will select the Warehouse to view (and Recalc). Demand forecasting is done per warehouse.
- Warehouse: Use the drop-down menu to select the Warehouse to view/recalc.
- Qty On Hand: This is the Real-Time Qty On Hand as reported on the Inventory Tab of the Product record. This value represents the quantity physically ‘on the shelf’ without regard to any Qty Reserve allocations.
- Current Consumption %: Consumption percentage compares open (unfilled) sales forecasts against shipments.
- Minimum Stock: This is the ‘safety’ or minimum stock level desired for the indicated warehouse. This quantity is subracted from the Qty On Hand to calculate the Beginning Availability for the MRP calculations. In other words, we don’t consider the ‘safety’ stock to be available at all when calculating demand.
Levels, is where the real action is! In the Levels area we can see what the demand forecast is for each time period and start to understand how we are positioned to meet that demand!
The columns here represent Weeks or Months, depending on the selection in the Calculate area. Every inventory related document in AcctVantage ERP (Sales Orders, Purchase Orders, Work Orders, Sales Forecasts) has an ETA date associated; that ETA date determines which time period the document should impact for the schedule.
Transactions do not need to be Posted to impact the schedule; MRP is all about forecasting and making our best guess for demand.
- PP1/PP2: Past Period 1 & 2 represent activity from last week/month and the prior week/month. Recognizing that plans are never perfectly executed, our demand schedule anticipates this activity will still occur and is considered in our forecast.
- Week/Month Ending Columns: The first dated column represents the current week/month. For week based forecasts, the columns are “Friday ending” dates.
Begin Avail. (Unadjusted): This value represents the anticipated Qty On-Hand for the time period INCLUDING the safety/Minimum Stock Level quantity.
- This value is for reference only and is not included in the calculations.
- For PP1, this value will always equal the Qty Real-time On Hand.
Begin Avail. (+): This is the ‘base’ quantity for each time period when calculating the overage/shortage for each time period.
- In essence, this value is the anticipated Qty On-Hand minus the Minimum Stock Level (i.e. safety).
Example (see the screenshots above):
- Qty Real Time On Hand = 33 units
- Minimum Stock = 8 units
- Begin Avail. (Unadjusted) for the PP1/PP2 = 33
- Begin Avail. (+) = 25
- Purchase Orders (+): How many units are on Purchase Orders for this time period? This value is added to the expected Ending Available for the time period.
- Work Orders (+): For Assembly items only, how many units are on Work Orders with Required Date in the period. This value is added to the expected Ending Available for the time period.
- Total Forecast: The sum of Forecasted sales for the time period. See Sales Forecast for in-depth discussion of Forecasts. This value itself does not factor into the Ending Available calculation, the Open Forecast below is the relevant factor.
Open Forecast (-): Open Forecast accumulates actual and expected shipments leading up to the forecasted sales date then subtracts this quantity from the Total Forecast.
- For example, if you enter sales forecasts for a month end, AcctVantage will accumulate shipments and expected shipments throughout the month to ‘count against’ the monthly forecast. Or, if you forecast sales weekly, we’ll accumulate throughout the week. The critical factor here is that the accumulation ‘resets’ for each Forecast period. This value reduces the Ending Availability.
- Anticipated Work Orders (-): If the Product is a component of any Assembly item AND you have set the BOM Level to “1” or greater, AcctVantage will look at forecasted shortages for upstream Assembly items, assume Work Orders will be created and plan for the component demand. See above discussion of BOM Level. This value reduces the Ending Availability.
- Parent Assy Open Sales (-): There is a System Configuration preference (MRP, Calculate Parent Assy Open Sales) to turn this calculation on/off system wide. If “on”, then the system will assume that any pending Sales of an upstream Assembly will require a Work Order and will anticipate the demand for the component item. This value reduces the Ending Availability.
- Work Orders (-): If the Product is a component of any Assembly items AND you have set the BOM Level to “1” or greater -- unlike the above Anticipated Work Orders -- this entry looks to Work Order records that have already been created to calculate production demand. This value reduces the Ending Availability.
- Sales Orders (-): This value accounts for unshipped Sales Orders and Backorders that have Required Ship Dates within the period. This value reduces the Ending Availability.
- Shipped Qty (-): This value represents units from Sales Orders that have been posted, or are marked Ready To Post with Invoice Dates in the time period. Because these units have already been drawn, they are already accounted for in the Beginning Availability and are not double-counted in the Ending Availability.
- End Avail. (Unadjusted) (=): Take the Beginning Available, add and subtract all of the anticipated activity to arrive at the Ending Available. This is the quantity that AcctVantage ERP anticipates you’ll have On-Hand at the end of the period (includes the Minimum Stock quantity.)
- End Avail. (=): Take the Beginning Available, add and subtract all of the anticipated activity to arrive at the Ending Available. This is the quantity that AcctVantage ERP anticipates you’ll have On-Hand at the end of the period (does not include the Minimum Stock quantity.)
- Planned Orders (+): Planned Orders represents the suggested Purchasing or Work Order activity that AcctVantage calculates for the period. See further discussion of MRP Items.
Action Items are the suggested Purchase or Work Order quantities based on forecasted shortages. When AcctVantage calculates a shortage for a period, an Action Item will be created to prompt you to create a Purchase Order or Work Order to fill the demand. Follow the link for more information on processing MRP Action Items.
Action Items can be:
- Order: This is a prompt to create a Purchase Order with normal delivery.
- Increase: This is a prompt to add to an existing Purchase Order for the Vendor.
- Expedite: This prompt indicates the PO is required within the Rush Lead Time window.
- Defer: In the case of an overage, if you have an unnecessary PO yet-to-be-received, the defer action prompts you to cancel the PO.
- Work Order: Indicates a requirement for production via the Work Order system.
- Clicking on an Action Item here will change its Status to Pending.
- You can also mark (or clear) the Pending status for batches of MRP Action Items via the MRP Items list view.
Once you have MRP Action Items marked as Pending they will then be included in the Inventory Shortages process for easy creation of Purchase Orders and Work Orders.
Related Features & Processes
The MRP Screen pulls data from a number of sources in AcctVantage. Each of these is useful as a stand-alone feature. Combining these data inputs into a single ‘eagle’s eye view’ of your inventory situation is an invaluable management tool.