ERP Functions: Planning 5

With the hot summer starting in India we continue with our journey on ERP Functions. Last week we have started understanding synchronization of all the planning processes. We have arrived the capacity planning for the Production Qty from adding back log, rejections etc.

Capacity planning gave the process sequences for the production and the date and time of the operations. Now we need to do the MRP for this capacity planning. We need the To Be Produced Qty for the MRP. This is arrived by following steps.

1. We have the Capacity planning of Products To Be Produced with details of processes for each products and the date and time and the Production Qty.
2. From BOM of the Products To be Produced, the Material, Qty and the Processes which requires materials is listed.

3. By Combining both these we get the To be Produced Qty for BOM along with the date of its requirement. From which we can arrive the material wise Qty required and also delivery schedule for the material.

Now we got the Material wise Qty and Date requirement. Any continuously production running industry will have some material in their inventory as stock. Also there will be purchase orders placed for the Material and the material may not have received yet. Thirdly Planning department might already have requested for the material but Purchase department might not have released the Purchase order for the material. So in order to arrive the Material wise Qty requirement which is to be given to purchase department all these have to be considered. 

Lets see how this is arrived in following steps

1. From the Total Required Qty minus the Stock in the inventory.

2. Divide this result material wise and delivery date wise qty.

3. From the result of above step minus the pending delivery Purchase Order qty that are having delivery date before the delivery requirement date of the material.

4. From the above result minus the pending Purchase Requisition qty that are having requisition date before the delivery requirement date of the material.

5. This final arrived material wise date wise qty requirement is the New Material Requirement for the production plan.

In formula

Final Required Qty = Total Requirement - Stock Qty - Pending Purchase Delivery Qty before Delivery schedule - Pending Purchase Requisition Qty before schedule

There will be some material which requires Minimum stock to be maintained. In that case Final Required Qty will be the Final Required Qty arrived from above formula + Minimum Stock of the material.

So Finally we get the Material Requirement Qty with delivery dates. We already have the Capacity Planning which gives the schedule for each processes for the production of products. This is the synchronization of the planning processes by which the Final Production Plan is prepared and circulated to respective departments.

1. Capacity Planning is broken to department wise and process wise and circulated to production department and the process owners.

2. Material Requirement Planning for the Capacity Planning is issued to Stores Department to keep the material ready on the requirement dates. 

3. Material Requirement Planning with the Final required Qty and Delivery Dates is circulated to Purchase Department for placing Purchase Order.

With this we complete the long journey of Planning Department functions. In the coming week you shall get the knowledge about the Main Course of Supply Chain Management (SCM). Keep watching this space..