(MRP – MRP Settings - Order Policy Screen)
The item’s Order Policy and associated settings are maintained within the Order Policy screen, which is accessed by clicking the icon to the right of the Order Policy field.
Recommended Reading:
MRP Guide - Phase 1 - Plan Times to Shipment
Educational Video:
MRP Settings Overview
DBA requires the “Big 3” lead time settings
Whether you run MRP or not, the DBA workflow requires the “Big 3” lead time settings – a realistic Lead Days target for each P item, a realistic Job Days target for each M item, and the correct item Order Policy based on lead day contribution.
DBA auto-calculates the following:
Pre-Job Lead Days for your manufactured items
The pre-Job Lead Days for each M item is calculated based on the longest Lead Days + Jobs Days among its To Order policy components. Pre-Job Lead Days set the job Planned Start date for Jobs to ensure that you have time to produce To Order subassembly Jobs and procure To Order purchased components.
A Time to Shipment target for your for-sale manufactured items
A Time to Shipment target for your top level for-sale manufactured items is calculated based on the item's own pre-Job Lead Days + Job Days + SO Default Extra Days.. The Time to Shipment target is used to establish SO line Required Dates that drive the MRP system demand, priorities, and material allocations.
MRP Replenishment Time Action Windows
The MRP “action window” refers to each item’s planning period replenishment time. For Manufactured items, replenish time is comprised of the item’s pre-Job Lead Days + Job Days allocations (+ MRP Interval + Non-Shop Days + Extra Shop Days). For Purchased items, replenish time is comprised of the item’s Lead Days allocation (+ MRP Interval + Non-Shop Days + Extra Shop Days). MRP only reacts to demand within the action window, which is firm demand. Any demand outside the action window is tentative demand that is incomplete and highly likely to change as it firms over time. Any requirements outside the action window will be responded to in a future MRP run.
System wide settings: The MRP Interval reflects the typical number of shop days between MRP sessions specified in MRP Defaults The Non-Shop Days accounts for non-shop days such as weekends when the shop is not in production specified in the Shop Calendar. The Extra Shop Days are extra planning period shop days specified in MRP Defaults.
Replenishment Time Reorder Points
For items that you choose to stock using the Demand Driven order policy, a Monthly Potential Demand rate is translated to daily rate and it is multiplied to by the Item's Replenishment Time to come up with a dynamically calculated Reorder Point. The basic principle of Demand Driven stocking is that you trigger an order with enough time to replenish the stock before you run out. This aligns your inventory with your firm demand.
DBA Innovation - Dynamic Calculations
When you change any one of the Big 3 MRP Settings, or if you make system wide changes to your MRP Interval, MRP Defaults Extra Days or change your Shop Calendar work days, the system will automatically perform calculations for all items through all levels of production via system triggers. This is an incredibly powerful innovation that is unique to the DBA system.
For example, if you change a long lead day purchased item order policy from To Order to Demand Driven stocking it would remove that component as a lead day contributor in all places it is used. Now imagine that item was used in 100 different bills of material at several different BOM levels. The trigger automatically applies changes from lowest level BOM order to top level manufactured items. There would be an immediate change in M item Lead Days, Time to Shipment targets, Replenishment Times, and Reorder Points for all impacted items.
Order Policy Overview
How to assign the correct Order Policy
To assign the correct Order Policy for inventory planning and lead time contribution, follow this simple guideline:
▪If you intend for the item to be on hand for immediate use in Jobs and SOs, assign the Demand Driven order policy and plan for a Potential Demand rate and Supply Days interval.
▪If you intend to always buy or make the item prior to each parent job or sales order, assign the To Order policy.
NOTE: To verify that To Order items match your actual planning behavior, run the MRP - Order Policy Review.
Reducing lead times
A To Order policy item is removed as a lead time contributor by reassigning it to the Demand Driven order policy. You can reduce pre-job Lead Days by selectively removing contributor components, which enables jobs to be started earlier. Reassigning top-level M items to the Demand Driven order policy eliminates Time to Shipment altogether.
Target dates sequence and prioritize system activities
The “Big 3” lead time settings and two dynamic settings for lead time contribution determine your PO, job, and SO dates, which are perfectly aligned in the correct order of assembly. Take note that these are target dates, not literal dates, that sequence and prioritize system activities.
When items have highly unpredictable demand:
The Demand Driven order policy does not require a reliable or consistent demand pattern to be effective. When unexpected demand causes a shortage, MRP immediately generates new supply and prioritizes dependent jobs to get them back on schedule. When an unusually large sales order necessitates making the item to order, the Late Supply screen provides feedback from production, which helps sales establish a realistic Estimated Ship date for communication to the customer.
How to get your inventory under control
All material planning methods incur inventory because it is not practical to buy and make everything to order. The best inventory planning method, by far, is demand driven MRP, which is the basis of the Demand Driven order policy, a unique DBA innovation for smaller manufacturers. This simple planning method provides efficient ordering, rapid response to shortages, and eliminates overstocking.
The root cause of inventory problems
Other planning methods drive lower-level requirements from sales forecasts using linked jobs or BOM explosions. Top-down explosions cause the “bullwhip effect” where forecast errors amplify exponentially at each lower level whenever component quantities are multiples of the parent. Like the power of a bullwhip, minor planning errors at the top quickly grow into major errors at the bottom and inventory easily gets out of control.
Breaking the bullwhip effect
Demand driven planning has no bullwhip effect because lower-level items are planned individually instead of from a top-down explosion. New supply for any given item is triggered by total net demand instead of being linked to specific jobs or sales orders.
Each item is planned for potential demand
Demand driven planning does not forecast or explode future requirements. Instead, each item is planned for a Potential Demand rate, aided by a monthly usage graph, which is simply a possible demand scenario, not a forecast or prediction. It is entered as a monthly amount that gets translated into a daily rate.
The Potential Demand rate is applied to the item’s Replenishment Time (Lead Days + Job Days + MRP Interval) to calculate a dynamic Reorder Point, and a Supply Days interval is specified to calculate a dynamic Min Order quantity.
NOTE: Make sure that item Lead Days and/or Job Days targets are realistic. Padded or inflated lead times cause high Reorder Points that trigger excessive inventory.
New supply is triggered by firm demand
Demand driven planning never takes action on tentative demand from forecasts or explosions, which constantly changes over time. Instead, new supply is triggered solely by firm demand from sales orders.
During each MRP session, items are evaluated in a multi-level progression so that new jobs generated at each level create demand for components at subsequent levels. Whenever net demand (on hand + inbound supply - planning period demand) falls below an item’s Reorder Point, MRP generates a new job or PO for the item’s Min Order quantity or actual demand amount, whichever is greater.
Reordering is timely and efficient
Demand driven planning solves the universal problems of when to order and in what quantity. New supply is ordered early enough so that remaining supply covers daily Potential Demand over the item’s Replenishment Time. The Min Order quantity ensures efficient order sizes at consistent intervals.
You are pre-ordering for the next Supply Days interval
Like to order planning, new supply is only triggered by firm demand from jobs or sales orders. Instead of ordering for the job or sales order, however, you are pre-ordering for the next Supply Days interval, which eliminates lead time with relatively little inventory.
The item’s Potential Demand rate does not require precision or constant adjustments. When actual demand is greater than the Potential Demand rate, the item will be reordered sooner than its planned Supply Days interval. Conversely, when actual demand is less than the Potential Demand rate, the item will be reordered later than its planned Supply Days interval.
Nothing can fall through the cracks
Because each item is planned individually, there is no need for SO/job linking or BOM explosions to ensure that material requirements are fully covered. Each item’s Reorder Point makes it impossible for any demand to somehow get missed or fall through the cracks.
Overstocking is eliminated
When inventory is “pushed” onto the system with top-down explosions or blanket POs, stock continues to accumulate unless constant adjustments are made to realign supply with actual demand. By contrast, demand driven planning “pulls” inventory into the system, triggered solely by firm demand from sales orders. Inventory for any given item can never exceed one Supply Days interval.
It’s the best way to plan P items with long lead times
Demand driven planning takes the risk and guesswork out of planning P items with extremely long lead times. Instead of less frequent, larger orders with high inventory cost and risk of lengthy shortages, the item Lead Days, Potential Demand, and Supply Days settings cause multiple POs to be triggered in demand driven intervals, which moderates inventory swings and minimizes the duration of any shortages.
KB - How do I handle long lead day purchasing?
It’s a lot easier!
Demand driven MRP replaces lengthy and intermittent planning sessions with daily job and PO generation for rapid response to new demand. With only three item settings – the Potential Demand rate, Supply Days interval, and Lead Days or Job Days target – demand driven planning is the easiest and most effective way to get your inventory under control.
Order Policy Panel
Three Order Policy selection options are available in this panel.
Demand Driven
Assign the Demand Driven order policy when you intend to maintain stock on hand for immediate use in Jobs and SOs. You will enter a Monthly Potential Demand value and a Supply Days target and the system will dynamically calculate the Reorder Point and Min Order quantity that are used to generate demand-driven jobs or purchase orders. Because your planning intent is to have stock on hand readily available, these items are not lead day contributors in the jobs and SOs where they are used.
To Order
Only assign the To Order policy when a component item is always ordered before parent jobs can be started or when a sell item is always made for each sales order. These items are always lead day contributors where they are used.
NOTE: It is important that To Order policy items remain strictly To Order. If you intend to sometimes carry extra stock or if you want a minimum quantity for price break reasons, the Demand Driven order policy is recommended. You can go to the MRP > Order Policy Review screen to audit your To Order items.
Manual Reorder Point (not recommended)
This setting is for manual planners that do not use MRP for jobs or purchase orders. The planning assumption the software makes is that you intend to have stock on hand for all demand scenarios. Because your planning intent is to have stock on hand readily available, these items are not lead day contributors in the jobs and SOs where they are used.
A standard Order Policy is a required MRP setting
A standard Order Policy for each item is an integral element of Demand Driven MRP and is a required setting that cannot be ignored or conflict with your actual planning behavior. Without exception a clear and consistent Order Policy must be assigned to each and every P and M item.
The item Order Policy is for lead time planning
The item Order Policy is for lead time planning and determines whether the item is a lead time contributor or not.
Any item with a To Order policy is a lead time contributor
A job that uses a component item with a To Order policy must wait until the item is procured or manufactured before the job can be started. When several To Order policy components exist, the one with the longest lead time determines the parent item's pre-job Lead Days allocation. Therefore any P item or lower level M item with a To Order policy is a lead time contributor to higher-level items.
Any top level item with a To Order policy is planned to be made to order, in which case the item's standard Lead Days and Job Days contribute to the item's Time to Shipment target. Therefore any top level M item is a lead time contributor to its own time to shipment.
Any item with a Demand Driven or Manual Reorder Point order policy does not contribute to lead time
Any component item with a Demand Driven or Manual Reorder Point order policy will not delay the start of any jobs because the item is planned for immediate availability from stock. Therefore the lead time of any P item or lower level M item with a Demand Driven or Manual Reorder Point order policy does not contribute to higher-level item lead times. Changing an item's order policy from To Order to Demand Driven removes the item from higher-level item lead time calculations.
Any top level M item with a Demand Driven order policy is planned for immediate shipment from stock and therefore its lead time does not contribute to its own Time to Shipment target.
The item Order Policy is a binary choice
The item Order Policy is a binary choice, meaning that the item is either planned to order or for stocking, but not both. It is an "either or" decision.
▪If you plan the item with a To Order policy, all lead time calculations are based on the item always being purchased or made to order and not having stock on hand.
▪If you plan the item with a stocking (Demand Driven or Manual Reorder Point) order policy, all lead time calculations are based on the item always being available from stock on hand.
If the item has never been previously stocked
When an item has never been previously stocked, do not immediately assign a Demand Driven or Manual Reorder Point order policy because there will be a delay before stock is actually on hand as planned. Instead, create a manual job or PO for the item to establish an initial stock quantity. After the job or PO is received to inventory, then assign the item an appropriate Demand Driven order policy.
Avoid CTO job linking with standard items
When a top level M item is flagged for CTO job linking it is assigned a To Order policy and jobs are linked to and generated directly from sales order lines for the exact quantity ordered. CTO linking is ideally suited for one-off, custom items that are made to order and never stocked. For standard items, however, CTO linking is counter-productive and should be avoided because such items are interchangeable from order to order and subject to stocking. There is no ability to adjust CTO jobs to account for stock on hand or to consolidate demand into more efficient job sizes. Furthermore, CTO linking forces items to be made to order, even in cases where items with frequent orders could be planned with a Demand Driven order policy to enable immediate shipment from stock.
Order Policy Assignment
To Order
Select this order policy when you intend to always buy or make the item to order and do not expect it to be available from stock.
NOTE: It is important that To Order policy items remain strictly To Order. If you intend to sometimes carry extra stock or if you want a minimum quantity for price break reasons, the Demand Driven order policy is recommended. You can go to the MRP > Order Policy Review screen to audit your To Order items.
How it works
All jobs and purchase orders are triggered by actual demand. Whenever net demand (stock on hand + all inbound supply - actual demand within the item's planning period action window) materializes, MRP generates a job or purchase order with a supply quantity equal to net demand or the Min Order quantity, whichever is greater.
To Order Settings
Select the 'To Order' option
In the Order Policy panel, select the To Order option
Reorder Point
No entry needed - for To Order items the Reorder Point is always zero
Spare Stock
Use this setting to maintain a small stock quantity against a To Order item to cover demand for spares and exchanges. Whenever a To Order job or PO is generated, the quantity will be increased as needed to replenish the Spare Stock target. Do not enter a large value in the Spare Stock field. If you feel you need for a large Spare Stock quantity, we recommend using the Demand Driven order policy instead.
Min Order - Manual
To Order items should typically not have a significant Min Order because this introduces supply in excess of demand. If a To Order item has a significant Min Order requirement, we recommend the Demand Driven order policy instead.
Demand Driven
Select this order policy when you intend to maintain stock on hand sufficient to cover a high probability of your potential demand scenarios. You will enter a Monthly Potential Demand value and a Supply Days target and the system will dynamically calculate the Reorder Point and Min Order quantity values that are used to generate demand-driven jobs or purchase orders.
How it works
The goal of the demand driven system is to trigger a new job or purchase order with enough time to replenish the stock before you run out. The Monthly Potential Demand value covers a high probability of anticipated demand scenarios. The Supply Days target helps govern the amount of time between your jobs and purchase orders.
You enter a Monthly Potential Demand value and a Supply Days target. The system will convert your Monthly Potential Demand value into a daily rate. The daily rate is multiplied by the item's Replenishment Time to come up with the Reorder Point and the daily rate is multiplied by the Supply Days value to come up with the Min Order quantity.
All jobs and purchase orders are triggered by actual demand. Whenever net demand (stock on hand + all inbound supply - actual demand within the item's planning period action window) falls below the item's Reorder Point, MRP generates a job or purchase order with a supply quantity equal to net demand or the Min Order quantity, whichever is greater.
What happens when actual demand differs from my Monthly Potential Demand entry
The item’s Potential Demand rate does not require precision or constant adjustments. When the actual demand (sales + job issues) is exactly equal to the Monthly Potential Demand rate then you would expect the time between jobs or purchase orders to exactly equal your Supply Days interval target. When actual sales/usage exceed your Potential Demand rate, the item will be reordered sooner than its planned Supply Days interval. Conversely, when sales/usage is less than the Potential Demand rate, your supply will last a bit longer than your Supply Days interval target. When you are fortunate enough to get sales that exceed your plan and you run out of stock for that item, MRP immediately generates new supply and auto-prioritizes dependent jobs to get them back on schedule. When an unusually large sales order necessitates making the item to order, the Late Supply screen provides feedback from production, which helps sales establish a realistic Estimated Ship date for communication to the customer.
When to use
Use for lean inventory planning
Use this order policy for lean inventory planning to achieve efficient utilization of inventory without shortages or over-stocking.
Use for most purchased components and subassemblies
You will want to place the Demand Driven order policy on all commonly used purchased components and subassemblies to have them on hand for immediate use in jobs.
Use for standard sale items
Assign a Demand Driven order policy to any top level M item where immediate shipment is a desirable marketing strategy or the item has frequent demand that makes it more efficient to replenish stocking at demand-driven intervals instead of making the item to each order.
Use for P items with long lead times
Assign this order policy to P items with long lead times. The monthly Usage rate, long standard Lead Days, and Supply Days interval calculate a Reorder Point and Min Order quantity that generate a supply pipeline of overlapping POs, each due to arrive at staggered intervals. A demand-driven PO pipeline is far more efficient than large and infrequent POs because more frequent replenishment eliminates the risk of lengthy shortages and excessive stock on hand.
Replace blanket POs with a supply pipeline
If you are using blanket POs with a set of scheduled deliveries, each such item should be assigned the Demand Driven order policy and the blanket purchase order should be replaced with a supply pipeline so that future POs are generated by MRP. Blanket POs are counter-productive because they require constant adjustments to avoid shortages and over-stocking when scheduled supply inevitably differs from actual demand. By contrast, MRP generates demand-driven purchase orders at self-adjusting intervals governed by our Supply Days target.
LInk:
MRP Guide - Long Lead Time Planning
Demand Driven Settings
Select the 'Demand Driven' option
In the Order Policy panel, select the Demand Driven option.
If you receive a Projected Shortage warning:
When you change an item’s order policy from To Order to Demand Driven, upon saving the program checks if stock on hand is sufficient to cover one planning period of forecast demand. If not, you receive a Projected Shortage warning that displays the projected shortage amount. This means that you will be unable to immediately begin issuing the item from stock. You are presented with two options:
Cancel Changes
With this option you leave the order policy as To Order for the time being and you create a manual job to cover the projected shortage. After the manual job is completed, change the order policy to Demand Driven.
Ignore Suggestion and Save Changes
With this option the order policy is changed to Demand Driven, even though initial shortages may occur. MRP will generate an immediate job to cover the projected shortage, but that job will be late relative to its required date if any current demand exists or materializes in the near future.
1. Enter a Monthly Potential Demand value
Enter a Monthly Potential Demand value, which reflects monthly sales + usage in jobs. You can use past history for reference by reviewing recent trends in the Average Monthly Trend panel at left, view the Monthly Trend graph, or by reviewing monthly averages in the Monthly Historical tab in the lower panel. For items that do not have consistent usage, you can choose a target monthly value you wish to cover. The goal is to have sufficient stock on hand to meet a high probability of your potential demand scenarios.
The monthly rate is a general trend, not a precise forecast
Unlike a forecast, which is a precise prediction of future demand, the Monthly Potential Demand rate represents a general trend in demand and does not need the precision of a forecast. Enter a "ball park" monthly demand rate that covers a high probability of your potential demand scenarios.
Historical data does not always reflect your future needs
Be aware that planning is always forward thinking. Past performance does not always represent your future usage. Choose a Monthly Potential Demand value that protects against your future demand. An aspirational "ball park" target value is often a good choice.
Include built in safety for mission critical items
For items that are very critical to your organization and it is essential that you do not run out of stock, make sure to include a fair amount of safety buffer built into your Monthly Potential Demand value.
General Guidelines
Items with consistent usage - review your historical performance
•For items with a fairly consistent usage pattern, you can review the Monthly Trend graph and choose a Monthly Demand value that covers most historical scenarios. When you enter a Monthly Demand value, you will see a horizontal line in the graph.
NOTE: You do not necessarily have to cover 100% of all potential scenarios. The system will automatically handle shortages with elevated priority in all work centers and provide late supply feedback.
•The Monthly Trend data panel provides averages, standard deviations, and peak usage for trailing 90, 180, and 360 Days. The average + 1 standard deviation covers 84% and the average + 2 standard deviations covers 97.5% of scenarios for the date ranges specified. The peak value represents the highest 30 day bucket within the 3 date range columns. You can use the selection arrow to the right of any numeric value to auto-fill the Monthly Demand entry field. To review your Monthly Trend data across multiple items you can use the Inventory Analysis > Inventory Transactions screen.
NOTE: The averages and standard deviation calculations are only valid on items with very regular usage patterns. Ignore these calculations for items with infrequent or highly unpredictable usage.
Items with inconsistent historical usage - choose a monthly target value
•If the item does not have a consistent pattern of usage, yet you still want to carry inventory, choose a target monthly value that you wish to cover.
•For critical items, you may set a peak value target that represents a usage that is on the very high end of your likely usage probabilities.
•If the item is new and does not have any historical data, apply a common sense monthly value that is consistent with your usage of similar items.
The Reorder Point is dynamically calculated
The item's Reorder Point is dynamically calculated as follows:
Variables
Monthly Potential Demand / 30 = Daily Demand
Replenishment Time = Lead Days + Job Days + MRP Interval + Non-Shop Days
Formula
Daily Demand * Replenishment Time = Reorder Point
If the item’s Monthly Potential Demand, Lead Days, or Job Days gets changed, the Reorder Point is automatically recalculated so that it always reflects your current planning settings.
The Reorder Point is a trigger point, not a stocking level
The Reorder Point is a trigger point for job or PO generation and is not a stocking level. The basic principle of Demand Driven stocking is that you trigger an order (when the projected demand falls below the Reorder Point) with enough time to replenish the stock before you run out. This aligns your inventory with your firm demand. Your actual on hand quantity is trending towards zero as you reach the end of the item's planning period.
A trigger point value has no obvious meaning in itself and should not be of concern when it has a high value. An item with an extremely long lead time, for example, will have a high Reorder Point value, but job or PO quantities are determined by actual demand and the Min Order quantity and will be a much lower amount. DBA dynamically calculates the lead days for your manufactured items and this will automatically adjust your Reorder Point triggers across all levels of production.
Efficient inventory relies on the "Big 3" lead time settings
The auto-calculated replenishment times are a key component of your inventory efficiency. Since orders are triggered when firm demand drops below the dynamic Reorder Point, the accuracy of your "Big 3" lead time settings cannot be overstated. Always stay focused on the “Big 3” lead time settings – a realistic Lead Days target for each P item, a realistic Job Days target for each M item, and the correct item Order Policy based on lead day contribution. Padded values or inaccurate Order Policy designations can lead to overstocking and tying up valuable capital. If your settings are reasonably accurate, your replenishment times and stocking levels will better match your company objectives and will always be triggered by firm demand.
2. Enter a Supply Days interval (Calculated Min Order)
Supply Days entry
In the Min Order panel, select the Calculated option. Enter a Supply Days interval, which is the planned number of days to be supplied by each replenishment job or PO
For example, if you plan for a job or PO to be generated twice a month, enter a Supply Days interval of ‘15’. If you plan for a job or PO to be generated once a month, enter a Supply Days of ‘30’.
Use smaller intervals for lean inventory
The Supply Days interval is a powerful tool for lean inventory planning. To keep inventory as lean as possible, use smaller Supply Days intervals to generate smaller and more frequent jobs or POs. Smaller and more frequent replenishment minimizes stock on hand and reduces the duration of shortages.
The Min Order quantity is dynamically calculated
The item’s Min Order quantity is calculated as follows:
Variables
Potential Monthly Demand / 30 = Daily Demand
Formula
Daily Demand * Supply Days = Min Order
If the item’s Monthly Potential Demand or Supply Days gets changed, the Min Order quantity is automatically recalculated so that it always reflects your current planning settings.
Generates a PO pipeline for P items with long Lead Days
The Supply Days interval is ideally suited for P items with long lead times when combined with the Demand Driven order policy. The Monthly Potential Demand, long standard Lead Days, and Supply Days interval calculate a Reorder Point and Min Order quantity that generate a supply pipeline of overlapping POs, each due to arrive at staggered intervals. A demand-driven PO pipeline is far more efficient than large and infrequent POs because more frequent replenishment eliminates the risk of lengthy shortages and excessive stock on hand.
LInk:
MRP Guide - Long Lead Time Planning
Settings provide planning logic transparency
The big benefit of a calculated Min Order quantity is that the settings from which it is derived – the item’s Monthly Potential Demand and its Supply Days interval – are visible and transparent. This enables the planner and others in the company to be fully aware of the logic being used for inventory planning.
Review Demand Driven settings on a periodic basis
Review Demand Driven settings on a periodic basis to ensure that monthly potential demand rates remain valid. You can use the MRP - MRP Analysis Codes screen to assign and schedule sets of items for periodic review. See the following chapter for reference.
MRP Guide - Using MRP Analysis Codes
2B. Manual Min Order entry option
As an alternative to the Calculated option, you can select Manual and enter a value directly in the Min Order quantity field to determine the minimum job or purchase order quantity.
•With M items a manual entry is typically used as an economical order quantity to generate job quantities sufficiently large enough to justify machine setups or to match quantities In with machine sizes.
•With P items a manual Min Order quantity may be needed when the default supplier has a minimum order policy or offers a significant quantity price break. A minimum order size can also reduce unit shipping and handling costs and can reduce the frequency and number of POs that get generated.
Manual Reorder Point
This Manual Reorder Point order policy enables you to manually enter a Reorder Point.
A manual Reorder Point is not recommended
This setting is typically for manual planners that do not use MRP to generate jobs or purchase orders. The Manual Reorder Point order policy is not recommended because a manually entered Reorder Point has no logical basis for its value.and can easily result in over-stocking and conflicts with system allocations and priorities. We recommend the Demand Driven order policy instead. The planning assumption the software makes is that you intend to have stock on hand for all demand scenarios. Because your planning intent is to have stock on hand readily available, these items are not lead day contributors in the jobs and SOs where they are used.
How it works
The system treats Manual Reorder Point items in the same manner as the Demand Driven order policy, but without the benefit of a dynamic Reorder Point and calculated Min Order. With the Manual Reorder Point order policy all MRP jobs and purchase orders are triggered by actual demand. Whenever net demand (stock on hand + all inbound supply - actual demand within the item's planning period action window) falls below the item's Reorder Point, MRP generates a job or purchase order with a supply quantity equal to net demand or the Min Order quantity, whichever is greater.
Manual Reorder Point Settings
Select the 'Manual Reorder Point' option
In the Order Policy panel, select the Manual Reorder Point option.
If you receive a Projected Shortage warning:
When you change an item’s order policy from To Order to Manual Reorder Point, upon saving the program checks if stock on hand is sufficient to cover one planning period of forecast demand. If not, you receive a Projected Shortage warning that displays the projected shortage amount. This means that you will be unable to immediately begin issuing the item from stock. You are presented with two options:
Cancel Changes
With this option you leave the order policy as To Order for the time being and you create a manual job to cover the projected shortage. After the manual job is completed, change the order policy to Manual Reorder Point.
Ignore Suggestion and Save Changes
With this option the order policy is changed to Stocking (Monthly Demand), even though initial shortages may occur. MRP will generate an immediate job to cover the projected shortage, but that job will be late relative to its required date if any current demand exists or materializes in the near future.
Enter a Reorder Point
Enter a value in the Reorder Point field.
Enter a Min Order quantity
Enter a value in the Min Order quantity field to determine the minimum job or purchase order quantity.
▪With M items a manual entry is typically used as an economical order quantity to generate job quantities sufficiently large enough to justify machine setups or to match quantities In with machine sizes.
▪With P items a manual Min Order quantity may be needed when the default supplier has a minimum order policy or offers a significant quantity price break. A minimum order size can also reduce unit shipping and handling costs and can reduce the frequency and number of POs that get generated.
Screen Details - All Order Policy Types
Upper Panel
For Sale
This read-only checkbox is selected when the item has a Base Price.
M/P, Item ID, Description, UM
These fields identify the item.
Monthly Trend
This panel provides statistics on average monthly trends.
NOTE: The averages and standard deviation calculations are only valid on items with very regular usage patterns. Ignore these calculations for items with infrequent or highly unpredictable usage.
360 Days, 180 Days, 90 Days
Monthly trends are averaged for the trailing 360 days, 180 days, and 90 days from the current date. Click the down arrow next to each title for a breakdown of usage by 30-day buckets.
Avg Total Usage
Average total usage includes all job issue and order picking transactions for the indicated time period.
NOTE: If the item’s first transaction occurred after the start of the indicated time period, an average is not calculated because the trailing time period is incomplete.
Avg + 1 Std Dev
This is the monthly average plus one standard deviation above the average, which is a statistical measure of the variability within a data set. This total covered 84% of the 30-day time buckets within the indicated time period. Click the right arrow to insert this value into the Potential Demand - Monthly field associated with the Demand Driven order policy.
NOTE: A value is not calculated for the 90 day time period because it is insufficient time for statistical validity.
Avg + 2 Std Dev
This is the monthly average plus two standard deviations above the average. This total covered 97.5% of the 30-day time buckets within the indicated time period. Click the right arrow to insert this value into the Potential Demand - Monthly field associated with the Demand Driven order policy.
Peak Usage
This is the highest monthly usage among the 30-day buckets in the indicated time period. Click the right arrow to insert this value into the Potential Demand - Monthly field associated with the Demand Driven order policy.
Replenishment Time Inquiry
The item’s Replenishment Time is the total number of calendar days allocated by MRP for replenishing stock. It is the sum of the following allocations. The actual amounts can be viewed by clicking the down arrow in this field. The Replenishment Time is a dynamically calculated and will automatically update the Reorder Point for Demand Driven items if any of the below elements change.
Lead Days
For M items this is the standard pre-job Lead Days for making subassemblies or buying materials to order prior to job start, expressed in calendar days. For P items this is the standard Lead Days for expected procurement time, expressed in calendar days. .
Job Days
For M items this is the standard Job Days for expected production time, expressed in shop days.
MRP Interval
This system setting is the number of days allocated to account for time that may elapse between MRP sessions.
Non-Shop Days
The is the number of days allocated by the program to account for non-shop days such as weekends. It is a factor based on the percentage of non-shop days defined in the Weekly Pattern panel within the Shop Calendar.
Monthly Trend Tab
This tab provides a graph of your Sales (blue) + Usage (red) in 30 day increments or by month. Sales are based on Order Picking transactions and Usage is based on Job Issues transactions. There will be a horizontal line displayed with the stored or updated value in the Monthly Potential Demand field. To review Monthly Trend data across multiple items, you can use the Inventory > Analysis > Inventory Transactions > Monthly Trend series of columns.
Inventory Analysis Inventory Transactions
Bucket Type
30 Day
This will provide trailing 30 Day buckets of your sales order picks (blue) + usage job issues (red) that will match the 360 Days Monthly Trend values in the upper grid.
Monthly
This will provide trailing Monthly values for your sales order picks (blue) + usage job issues (red). There is an option to show the current month or not.
QOH Trend Tab
This tab provides a daily snapshot of your Quantity on Hand. This graph is particularly useful for Demand Driven items to visualize the inventory levels over time and give you an idea of your true Supply Days interval between jobs or purchase orders.
Classic Sawtooth Pattern
For items that you carry inventory, you should see a sawtooth pattern to your graph. In the example screenshot above, you can see the green lines representing purchase order receipts and you can see steady sales/usage over time. You can see that the quantity on hand trends toward zero toward the back end of the item's planning period. The distances between your green supply lines represent the true Supply Days interval between POs for this item.
NOTE: The QOH graph will include stock adjustments and stock counts. The sales + usage graphs and history are based only on order picks and job issues.
Monthly Historical Tab
This tab presents monthly historical data of sales (order picks) and usage (job issues) in monthly, quarterly, and annual buckets.
