Material Planning

Definition

Organizational process of creating and maintaining a plan and the psychological process of thinking about the activities required to create a desired goal on some scale.

A plan should be a realistic view of the expectations. Depending upon the activities, a plan can be long range, intermediate range or short range.

Purpose of Planning

Helps management to clarify, focus, and research their businesses or project's development and prospects.

Provides a considered and logical framework within which a business can develop and pursue business strategies over the next three to five years.

Offers a benchmark against which actual performance can be measured and reviewed.

MPS – Master Production schedule

MPS is an extremely important planning tool and forms the basis for communication between sales and manufacturing.

The MPS is a balancing act. A balance of supply and demand puts everything in proper proportion.

Objective of MPS

Maintain the desired level of customer service by maintaining finished-goods inventory levels or by scheduling to meet customer delivery requirements.

Make the best use of material, labor and equipment.

Maintain inventory investment at the required levels.

Benefits of Master Scheduling

Improved Customer Service

Improved Order Promising

Reduced Inventory / Increased Turns

Improved Productivity

Reduced Costs

i. Reduced Idle Time
ii. Reduced Overtime
iii. Reduced Expediting

Reduced Inventory Carrying Costs

Ability to Manage Growth

Information needed to develop MPS

Production plan

Forecast for end items

Inventory level for end items

MRP- Material requirement planning

A material requirements plan is a statement of all items the company expects to utilize throughout the production and distribution system. It includes:

All component requirements that support the parent’s demand.

Time-phased recommendations for replenishment orders:

Offset by appropriate lead times and the bill of material. Adjusted for inventory quantities on-hand or on-order.

Material Planning Metrics

Material requirements’ planning requires:Master schedule accuracy = 95+%
Bill of material accuracy = 98+%
Inventory accuracy = 95+%
Valid lead times

Information needed by MRP

MPS

Inventory

BOM

Capacity planning

Capacity is the amount of work that can be done in a specified time period.

Capacity planning is the process of converting the material requirements plan into requirements for resources, which includes:

Labor
Machines
Warehouse space
Supplier capabilities
Money

Objectives of Capacity Requirements Planning

Determine the work centers and resources.

Calculate the rated capacity of work centers.

Calculate the material requirements planning load on work centers and resources.

Compare the rated capacity to the load.

Validate the material requirements planning or make adjustments.

Rough cut capacity planning - RCCP

The process of converting the master production schedule into requirements for key resources, which includes:

Labor

Machines

Warehouse space

Supplier capabilities

Money

Objectives of RCCP:

Determine the critical work centers and resources.

Calculate the rated capacity of critical work centers.

Calculate the master production schedule load on the critical work centers and critical resources.

Compare the rated capacity to the load.

Validate the master production schedule or make adjustments.

RCCP checks whether critical resources are available to support the preliminary master production schedules. A critical resource includes bottleneck operations, labor and long lead time materials.